Bajaj International Realty Pvt. Ltd. Vs CIT (ITAT Mumbai)
Wrong Section (69A vs 68) Not Fatal – Accommodation Entry Addition Sustained by ITAT
Assessee received loan of ₹20.52 lakh from Aneri Fincap Ltd.. AO treated it as unexplained u/s 69A based on investigation linking lender to accommodation entries. CIT(A) upheld addition along with commission u/s 69C & interest disallowance u/s 37.
ITAT held:
- Loan was recorded in books → proper section is 68 (not 69A)
- However, wrong section does not invalidate addition if substance is clear
- Entire enquiry revolved around identity, creditworthiness & genuineness → squarely falls u/s 68
- Lender admitted to being paper company providing accommodation entries
- Assessee failed to prove creditworthiness despite bank entries & documents
- Mere routing through banking channel not sufficient
Other findings:
- No cross-examination not fatal since addition based on failure of assessee to discharge burden
- Reopening u/s 148A upheld as based on tangible material
- Commission @0.54% & interest disallowance justified once loan held bogus
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against order dated 10.06.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2018-19, raising following grounds:
1. Addition made under section 69A of the Income Tax Act, 1961 (‘the Act’) (Rs. 20,52,866/-)
1.1 On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (hereinafter referred as ‘Ld. CIT(A)’) erred in upholding the receipt of loan from M/s. Aneri Fincap Limited aggregating to Rs.20,00,000/ – as “unexplained money” and taxing an amount of Rs. 20,52,866/- under section 69A of the Act.
1.2 On the facts and circumstances of the case and in law, the Id. CIT(A) erred in upholding the addition under section 69A when the assessee was not found to be the owner of any unexplained money which has not been recorded in the books of account.
1.3 On the facts and circumstances of the case and in law, the Id. CIT(A) erred in overlooking that in the statement on oath given by Mr. Rajesh Mehta, he has stated that the accommodation entries were provided by him on persuasion of Mr. Urvil Jani to One World group entities and to the Pittie Group, and nowhere has he quoted the name of the appellant, nor is the appellant related to any of the entities quoted by him.
1.4 On the facts and circumstances of the case and in law, the Id. CIT(A) erred in not appreciating that the Ld. Assessing Officer [‘Ld. AO’] has disregarded all the relevant evidence including the details of all bank accounts, ledger copy of Aneri Fincorp Limited, bank statements highlighting the receipt and repayment of loan and interest and financial statements of Aneri Fincorp Ltd filed with Registrar, without bringing on record any substantial contrary piece of evidence.
1.5 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the Ld. AO had neither independently applied his mind to the information received from the Investigation Wing; nor he conducted his own inquiry to record reasons as to on what basis and material, he came to conclusion that the appellant was indeed involved into accommodation entries.
1.6 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that no opportunity was given to the appellant to cross-examine Mr. Rajesh Mehta leading to gross violation of principle of natural justice.
2. Unwarranted addition under section 69C of the Act [Rs. 11,085/-]
2.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the addition made by the Ld. AO of Rs.11,085/- under section 69C as unexplained expenditure.
2.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the addition made by the Ld. AO relying on the statement of Mr. Rajesh Mehta and without any corroborative evidence whatsoever to foist on the assessee the alleged commission calculated at Rs. 11,085/ -.
2.3 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) is grossly unjustified in confirming the addition of Rs.11,085/- which is based purely on conjecture and surmises.
2.4 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the appellant had not incurred any expenditure in the nature of commission and there was no question of treating it as unexplained and confirming the disallowance.
3. Disallowance of interest under section 37 of the Act [Rs. 43,940/ -]
3.1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance of the actual interest paid of Rs. 43,940/ – to Aneri Fincap Limited as expenses not for business purpose.
3.2 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the disallowance solely on the ground that since the loan is non–genuine consequently the interest paid on bogus loan is not allowable under section 37 of the Act.
The appellant reserves the right to add to, alter or amplify the above grounds of appeal, at any time before or at the time of appeal, to enable the Hon’ble Tribunal to decide the appeal in accordance with law.
2. Briefly stated, facts of the case are that the assessee filed its return of income on 31.10.2018 declaring Nil income under the normal provisions of the Income-tax Act, 1961 (“the Act”) and book profit of ₹2,31,37,524/ – under section 115JB of the Act. The assessment under section 143(3) was completed on 20.02.2021 assessing total income at ₹2,60,29,692/-.
