Varada Mercantile Pvt. Ltd. Vs PCIT (ITAT Mumbai)
Summary: Areassessment accepted the assessee’s explanation for its loans. The PCIT then sought to revise it for inadequate enquiry. But the Mumbai ITAT found a more basic defect: the reopening itself lacked approval from the authority specified by section 151.
In Varada Mercantile Pvt. Ltd. v. PCIT-4, ITA Nos. 6608 and 6609/Mum/2026, decided on 23 September 2026, the Mumbai Bench examined revision orders passed under section 263 for AYs 2016–17 and 2017–18. The case illustrates why a proposed addition cannot be considered in isolation from the jurisdiction under which the assessment was made.
The assessee had received loans from Aneri Fincap Ltd., formerly Farry Industries Ltd. Information received after a search in the One World Group suggested that the lender was engaged in providing accommodation entries. On that basis, the Department reopened both assessments. The transactions examined were ₹42.45 lakh for AY 2016–17 and ₹3,37,23,177 for AY 2017–18, the latter figure including interest of ₹5,78,177.
During reassessment, the assessee furnished loan agreements, confirmations, ledger accounts, bank statements, cash-flow statements, the lender’s financial statements and income-tax particulars, its RBI registration certificate, disbursement letters and evidence of subsequent repayment. The AO recorded that he had verified the relevant documents, including receipt of the loans through banking channels and their repayment. He accepted the returned income in both reassessments dated 22 May 2023.
