Income Tax Appellate Tribunal - Mumbai
M/S. Vikalp Properties Private Limited ... vs Income Tax Officer 11(3)(3), Mumbai on 27 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" BENCH MUMBAI
BEFORE HON'BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER &
HON'BLE SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER
ITA No.7157/Mum/2025
(Assessment Year: 2010-11)
M/s. Vikalp Properties Vs. Income Tax Officer
Private Limited 11(3)(3)
Office No. 101/102, Aayakar Bhavan
Sagarika, 89, Juhu Road, Maharshi Karve Road
Opp. Palm Grove Hotel, Mumbai - 400200
Santacruz - West,
Mumbai
PAN/GIR No. AACCV7795E
(Applicant) (Respondent)
Assessee by Shri Vimal Punmiya a/w Shri Rahul
Punmiya
Revenue by Shri Akhtar H. Ansari - Sr. DR.
Date of Hearing 26.02.2026
Date of Pronouncement 27.04.2026
आदे श / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order dated 16.09.2025 passed u/s 250 of the Income Tax Act, 1961 ('the Act'), by the National Faceless Appeal Centre, Delhi (N FAC) for the assessment year 2010-11. The following grounds are reproduced below:
2 ITA No. 7157/Mum/ 2025"ASSESSMENT YEAR 2010-2011.
GROUNDS OF APPEAL The appellant has preferred an appeal against the order dated 16.09.2025 passed by Id. CIT(A) National Faceless Appeal Centre (NFAC) u/s. 250 of the Income Tax Act 1961, in pursuance of appeal filed against assessment order dated 22.03.2016 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, Following are the grounds of appeal without prejudice to one another:-
Reopening of Assessment Bad in Law I. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in upholding the validity of re - assessment proceedings initiated under Section 147 of the Income-tax Act, 1961, without any fresh tangible material and based merely on borrowed satisfaction, rendering the reassessment proceedings bad in law, void ab initio, and without jurisdiction.
Addition under Section 68-Share Application Money II. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs.46,00,000/- under Section 68 of the Act, 1961 towards share application money received from Atharv Business Pvt. Ltd. and Casper Enterprises Pvt. Ltd, disregarding the voluminous doc umentary evidences produced establishing the identity. creditworthiness, and genuineness of the investors.
Addition under Section 69C-Alleged Commission III. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs. 92,000/- under Section 69C of the Act 1961 towards alleged commission @2% on the alleged accommodation entries, without any material evidence or corroboration and merely on 3 ITA No. 7157/Mum/ 2025 presumptions and general statements of third parties.
.
Computation of Short-Term Capital Gain IV. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the action of the Assessing Officer in computing Short-Term Capital Gain on sale of commercial property without allowing deduction for the incidental and legal expenditure of Rs. 3,51,809/incurred wholly and exclusively in connection with the transfer, as allowable under Section 48 of the Act.
Non-grant of Cross-Examination and Violation of Natural Justice V. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the additions made by the Assessing Officer without ensuring that the appellant was granted the opportunity to cross - examine Shri Pravin Kumar Jain or any other third party whose statements were relied upon thereby violating the principles of natural justice.
Failure to Consider Evidence and Judicial
Precedents
VI. On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) failed to appreciate and consider the detailed evidences, confirmations, audited financials, bank statements, ROC records and judicial precedents furnished by the appellant in support of the genuineness of the transactions.
VII. The appellant craves to add, amend or alter the grounds of appeal at the time of or before the hearing of appeal. "4 ITA No. 7157/Mum/ 2025
2. Ground No. 1 is not being pressed by the assessee, therefore, the same stands dismissed as not pressed.
3. Ground No. 2 raised by the assessee relates to challenging the order of the Ld. CIT(A) in confirming the addition of Rs.46,00,000/- made by the AO under Section 68 of the Act.
4. The Ld. AR, appearing on behalf of the assessee, reiterated the same arguments as were raised before the Revenue Authorities and also relied upon the written submissions, which is reproduced herein below:
1. The Assessee Company has e-filed it's declaration return of income is Rs.97,450/-on 17.09.2010 under Section 139(1) of the Act.
2. The Assessee is a Company and the nature of source of a holding Company is a Private Limited that holds promoters with ample voting shares formerly known as "M/s. VIKALP PROPERTIES PRIVATE LIMITED" and it is the non-government company holding ROC-Mumbai of CIN no. U70102MH2008PTC183422.
3. In the first instance, the Assessee Company carried out business for distribution of commercial and industrial machinery & equipment on rental and leasing, pertaining to the paid-up share capital from the return for allotment of the equity shares holding in the name that of, "Casper Enterprises Pvt. Ltd. and Atharv Business Pvt. Ltd.".
4. At the outset, the main object of the company is to carry on the businesses of development and sale of land and cemetery lots, and operating of apartments and redevelopment, and the assessee company is registered as per the Registrar of the Companies Act, 1956.
5. The Assessee Company issued application for shares to the investors/ promoters from the paid up share capital of 4,60,000 equity shares of Rs.46,00,000/- against the allotment of share capital money @ Rs.10/- per share and unlisted and also forgone of the share premium.
6. The Assessee Company being a Limited Company by shares entered into the rights for its investors surplus towards share capital has received Rs.46,00,000/- entered during the Special General Meeting held on 25.09.2009 with due compliances in Form 5 authorized share capital of 5,00,000 equity shares and Form 2 for allotment of shares to the investors/promoters passed on 15.10.2009 with respect submitted by the assessee the debit note for purchases of Share application money.5 ITA No. 7157/Mum/ 2025
7. The Assessee Company is limited by shares through the return of allotment with holding for the paid-up share capital amounting to Rs.46,00,000 and authorized share capital of Rs.50,00,000/-. Thus, based on analysis, subject to the buy-back of the shares at the fair market value of shares of the assessee company having same face value of Rs.10/- each share proposed under DFCF methodology and same been anonymously decided in the special general body of meeting on 15.10.2009 here under concluded in the 2nd Annual General Meeting.
8. Thereafter, the Assessee Company has taken over controlling interest in the paid-up shares of Rs.10/- each per share having total turnover of Rs.46,00,000/- and authorized Share Capital of Rs.50,00,000/-.
9. In due course, the Ld. Assessing Officer followed with the scrutiny through CASS for its unaccounted concealment in the accommodation entries of SCNs Submissions are misleading and the third party named of "Shri. Pravin Kumar Jain" is related under Section 133(6) to the Annexure 3 being beneficiaries for the Investor ("Casper Enterprises Pvt.
Ltd. & Atharv Business Pvt. Ltd.") for buy-back of the shares at fair market value by the Assessee Company for the F.Y. 2013-14.
10. It raised doubts about the disallowance of the assessee company Ledger Account, ITR, Balance Sheet, Profit & Loss account through Investor's Casper Enterprises Pvt. Ltd. and Atharv Business Pvt. Ltd., engage in providing the accommodation entries and irrelevance web of assessee's company as well as its original promoters to the facts and concerns.
11. Subsequently, the case was selected by obtaining statutory approvals and clarifications were submitted with the details by the assessee company authorized representatives.
12. During the course of assessment proceedings, the Ld. AO raised doubts, about the genuineness of the exempt income from share application money received by the assessee company purely amounted to Rs.46,00,000/- towards share capital from share application money of the cash credits from the Investors Company.
The process of accounting under Annual Information Report 13. Transaction General Accepted Accounting Process (GAAP) through the statistical method & same was clarified to the Ld. AO that as per the regular method of accounting followed by the Assessee Company with disallowance of share application at Rs.46,00,000/-for A.Y. 2010-11.
14. Further LD. AO added commission on the said share capital of Rs.92,000 to the income of the assessee as unexplained expenditure.
15. Further the AO has also disallowed certain incidental and legal charges on sale of property amounting to Rs.3,51,809/-
16. BY HON'BLE NATIONAL FACELESS APPEAL CENTRE, DELHI
17. The Appeal u/sec. 250 of the Act, is dismissed and passed vide order ITBA/NFAC/S/250/2025-26/1080786018(1) dated 16.09.2025.
18. Being aggrieved by the order passed from the objection to the re- opening of assessment u/sec. 143(3) on 22.03.2016 by the ITO, Ward- 11(3)(3), at Mumbai.
6 ITA No. 7157/Mum/ 202519. The Appellant has filed an Appeal against the amount disputed in the Appeal of Rs. 50,43,807/-. Thus, Appellant has preferred an Appeal before the Hon'ble ITAT, at Mumbai
20. The Ld. AO made an addition for aggregate share application money and share application money amounting to Rs.46,00,000/- and also 2% as commission income amounting to Rs.92,000/- are added from the source of business and profession income, treating the same as unaccounted Funds in the guise of application for share application of Rs.46,00,000/-.
THE SUMMARY OF DETAILS, FACTS, AND EXPLANATIONS IN THE CHRONOLOGICAL ORDER OF THE TRANSACTION EXEMPT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 ARE AS:-
i) The Assessee Company is regular in filing Returns of Income i.e. (Copy of ITR acknowledgment & Computation of Income and Audited Balance Sheet and P&L account with Annexures & 2nd Annual Report & Compliances) for A.Y. 2010-11. (Refer page no. 01-14 of the Paper Book).
ii) The Assessee Company hereby submits the Form-5 & 2 reflected with the acknowledgement of the Investors Company for allotted of the share application. (Refer to page no. 15-23 of the Paper Book)
iii) The Assessee Company maintained Ledger Account retracted from Investors details summary and details of share allotment along with share buy-back of Rs.46,00,000/- on total receipts and enclosed with Form-2 (return of allotment) and Form -5 (contract relating to share allotted other than in cash) by the Assessee Company along with the share application and also confirmation of the ledger account for its receipts and payments.
iv) The Ld. AO is silent on cross verification and abeyance to conduct the proceeding that dealt during assessment proceedings for unsecured cash credits to the investors/promoters with reconciled.
In the light of the decision of the Honorable Bombay High Court in the case of Smt. Prabhavati S. Shah vs CIT [[1998] 100 ΤΑΧΜΑΝ 404 (BOM.)], WITHOUT PREJUDICE TO THE ABOVE: WHY THE LD.CIT (A) ERRED:
Rule 46-A(4) of the Income Tax Rules, 1962 is reproduced as under:
(4) Nothing contained in this rule shall affect the power of the Deputy Commissioner (Appeals) or, as the case may be, the Commissioner (Appeals) to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the Assessing Officer) under clause (a) of sub-section (1) of section 251 or the imposition of penalty under section 271.] From the above, it is clear that nothing affects the power of the Ld. CIT(A) to direct further production of evidence in order to dispose of an appeal. Therefore, in the circumstances of the case, the Ld. CIT(A) erred 7 ITA No. 7157/Mum/ 2025 in not exercising such powers. The Ld. CIT(A) should have exercised his powers under section 250(4) is reproduced hereunder for ease of reference: "(4) The [***] [Commissioner (Appeals)] may, before disposing of any appeal, make such further inquiry as he thinks fit, or may direct the [Assessing] Officer to make further inquiry and report the result of the same to the [***] [Commissioner (Appeals)]. "The relevant extracts from the paragraphs of the above-mentioned judgment are reproduced for reference:
"3..... Under sub-section (4) of section 250, the AAC is empowered to make such further inquiries as he thinks fit or to direct the ITO to make further inquiries and to report the result of the same to him. Sub-section (5) of section 250 empowers the AAC to allow the appellant, at the hearing of the appeal, to go into any ground of appeal not specified in the grounds of appeal, on his being satisfied that the omission of the ground from the form of appeal was not wilful. It is clear from the above provisions that the powers of the AAC are much wider than the powers of an ordinary court of appeal. The scope of his powers is coterminous with that of the ITO. The power conferred on the AAC under sub-section (4) of section 250 being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify
4. On a conjoint reading of Section 250 and Rule 46A, it is clear that the restrictions placed on the appellant to produce evidence do not affect the powers of the AAC under sub-section (4) of Section 250. The purpose of rule 46A appears to be to ensure that evidence is primarily led before the ITO."
In lieu of the aforesaid facts we now proceed to submit our written submission before Your Honor following grounds. We hereby now furnish our Written Submissions against the Grounds of Appeals raised are as follows:
1. Reopening of Assessment Bad in Law On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) has erred in upholding the validity of re-assessment proceedings initiated under Section 147 of the Income-tax Act, 1961, without any fresh tangible material and based merely on borrowed satisfaction, rendering the reassessment proceedings bad in law, void ab initio, and without jurisdiction.
2. Addition under Section 68-Share Application Money On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs. 46,00,000/- under Section 68 of the Act, 1961 towards share application money received from Atharv Business Pvt. Ltd. and Casper Enterprises Pvt. Ltd, disregarding the voluminous documentary evidences produced establishing the identity, creditworthiness, and genuineness of the investors.
3. Addition under Section 69C-Alleged Commission 8 ITA No. 7157/Mum/ 2025 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the addition of Rs. 92,000/- under Section 69C of the Act 1961 towards alleged commission @2% on the alleged accommodation entries, without any material evidence or corroboration and merely on presumptions and general statements of third parties
4. Computation of Short-Term Capital Gain On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the action of the Assessing Officer in computing Short-Term Capital Gain on sale of commercial property without allowing deduction for the incidental and legal expenditure of Rs. 3,51,809/-incurred wholly and exclusively in connection with the transfer, as allowable under Section 48 of the Act.
5. Non-grant of Cross-Examination and Violation of Natural Justice On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the additions made by the Assessing Officer without ensuring that the appellant was granted the opportunity to cross-examine Shri Pravin Kumar Jain or any other third party whose statements were relied upon thereby violating the principles of natural justice.
6. Failure to Consider Evidence and Judicial Precedents On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) failed to appreciate and consider the detailed evidences, confirmations, audited financials, bank statements, ROC records and judicial precedents furnished by the appellant in support of the genuineness of the transactions.
7. The appellant craves to add, amend or alter the grounds of appeal at the time of or before the hearing of appeal.
ASSESSING OFFICER'S CONTENTION FOR MAKING ADDITION:
1. The Investors/Shareholders of the Assessee's Company have shown confirmation for Statement of Income with deposited Credit to the Assessee Company for the F.Y. 2009-10 and Buy-back of Shares at FMV.
2. The DIT (Inv.)-II, Mumbai has provided information regarding beneficiaries of accommodation entries, and search action was conducted on Pravin Kumar Jain & Group Companies.
3. On perusal of details regarding beneficiaries, it was issued notice under section 142(1) served upon the assessee company on 19.02.2015 and replies to the statutory notices by Assesse CA and authorized representatives (AR) with confirmation of statements holding paid-up 9 ITA No. 7157/Mum/ 2025 share capital of the investors/shareholders of the assessee company before any compliance required to be cross-verified in the assessment proceedings by the Ward-11(3)(3) Mumbai.
4. Whereas, it may be noted that the Ld. AO on Assumption & Presumption treated Rs.46,00,000/- being paid-up share capital consisting of 4,60,000 equity share of Rs.10/- per share. And for ad-hoc amounting of Rs.92,000/- @2% as commission of the total receipts being discounting rate effective on equity share capital of the Investors Company.
5. The Ld. AO erred in considering the Assessee's unaccounted and unexplained cash credits generated through book activities and had received information from the DIT(Inv.)-II Mumbai for completion of the enquiry on search action carried out on 01.10.2013, in the case of Pravin Kumar Jain & Group companies and without confirming the additions of the share application, that the Assessee company has been taking accommodation entries of unsecured cash credits pertaining through the Investors/Shareholders.
6. The Ld. AO accumulated share application money from accommodation entries for consecutive three years towards unsecured cash credits for Α.Υ. 2010-11.
7. The availability of such paid-up Share Capital i.e. summary details of Share Capital of the Investors Co. by the Assessee Company as per table:
S Name of Share
r Promoters/Shareholder Capit
. s al
Amt.
n
o
.
1 Casper Enterprises Pvt. 23,00,
. Ltd. (Formerly Ostwal 000/-
Trading (1) Pvt. Ltd.)
2 Atharv Business Pvt. Ltd. 23,00,
. (Formerly Faststone 000/-
Trading Pvt. Ltd.)
Total 46,00,
000/-
APPELLANT SUBMISSION:
In this view of the aforementioned, the Assessee would like to state as under:
1. The Assessee Company is incorporated with share subscribed and paid-up capital from the Investors with the respective sum of Rs.46,00,000/- from the authorized share capital of Rs.50,00,000/-
consisting of 5,00,000 equity shares of Rs.10/- each were unlisted.
10 ITA No. 7157/Mum/ 20252. In view of the information, the details filed by the Assessee Company like the Statement of Income of the Investors Company showing unsecured loan transactions with the creditors/beneficiaries parties, the Allotment of Shares with weighted average cost of capital from Six years free cash flow.
3. In addition, to the future allotment of shares decided in the 2nd annual general meeting rate allotted to Casper Enterprises Pvt. Ltd. & Atharv Business Pvt. Ltd. for (Rs.46,00,000/- for F.Y.2009-10) shares @ Rs.10/- per share of the paid-up authorized share capital of 5,00,000 equity shares with the copies of return of income of the Assessee Company, etc. is not found to be acceptable by Ld. AO from SCN claimed its genuineness by the third party entry provider of Pravin Kumar Jain & Group Companies.
4. The Ld. AO erred in considering, that the Assesse Company accounted for unsecured cash credits by a third party of Rs.46,00,000/- for the A.Y. 2010-11. The Assessee's Company with respect to the Investors Company paid as per availability for its recognition to relocate the requirements for allotment of shares from time-to-time basis.
5. The Ld. AO, erred in considering the ROC-CIN no. of the Assessee Company have misleading investment only in shares/securities explained from the DFCF methodology executed to the valuation of shares been justified in proof of the providing accommodation entries.
6. It can, therefore, be stated that the provisions of Section 68 of the Act exempt and cannot be applied in respect of cash credits which have been duly recorded in the books of account and have already been considered as income in the return of income filed by the Assessee.
7. In the Assessee's Company case, the books of account considered it as income in the return of income and taxes have also been paid on the said amount. The onus now shifts on the department to prove that cash credits on commission @ 2% income from the accommodation entries are not part of the share application consideration. Thus as per the above explanation, the provisions of Section 68 are not applicable to the Assessee and the issue of applicability of the Act also does not arise.
That, Assessee's Company interest in the nature of business of clothes and yarns has claimed the same to be the unsecured cash credit consideration for the peak period upto 31st March 2015.
The provision of Section 68 is reproduced as under, SECTION 68 OF THE INCOME TAX ACT, 1961:-
Under the Income Tax Act, "if an amount is credited into the books of account held by the assessee and no explanation is given or where such explanation given by the assessee for the amount credited is not 11 ITA No. 7157/Mum/ 2025 acceptable or satisfactory in the opinion of the Assessing Officer, the amount is deemed to be an undisclosed income which would form part of the total income chargeable under the Income Tax Act."
Applicability of Section 68 of the Act can be made applicable in the following cases:-
a. When the Assessee fails to prove the genuineness of the transaction that has entered into his book of accounts.
b. When there is no satisfactory explanation provided on the part of the Assessee to the assessing officer with respect to the amount credited into the accounts.
c. When there is documentary evidences required to support the validity of the amount credited but there are no such documents furnished by the Assessee.
d. The unexplained interest on expenditure from accommodation entries has been shown income in the P & L account for the AY 2009-10.
WHY ADDITION IS NOT SUSTAINABLE:
An addition made on the basis of information not disclosed to the Appellant & not providing the opportunity for cross- examination is a violation of the principles of natural justice
1. The Ld. AO has relied on a statement made by third party Pravin Kumar Jain & Group Companies. However, these statements have not been supplied to the Appellant for cross-examination. The Ld. AO without providing an opportunity for cross-examination has passed the assessment order without considering the evidences submitted by the Assessee Company. Hence, this is in violation of fundamental rules of justice.
2. The assessee has substantiated by giving necessary evidence based on its books of accounts, stock register, and other relevant record that the amount deposited by the assessee was sale proceeds, all evidences are part of Paper Book, the assessee has discharged his onus and thereafter onus will be on the department to prove that amount was representing unaccounted cash credits and not offered for taxation income.
3. In the confirmation of statement for the year under consideration, it can be noted that there was an opening balance, monthly inward and outward along with a closing balance, and in post-period the paid-up share capital balance allotted in Form -2 & Form-5 of the Casper Enterprises & Duke Business Pvt. Ltd.
4. The trend of unexplained cash credits in this business has been followed for years and on analysis of unsecured cash credits on which 12 ITA No. 7157/Mum/ 2025 share premium was received on accommodation entries, it can be noted that whatever cash credits for its Form-2 (return of allotment) and Form- 5 (Contract relating to the shares allotted as fully/partly paid-up other than in cash) were recorded by the Assessee Company in the books of account and taxes have been paid on it.
OUR SUBMISSION WITH RESPECT TO UNEXPLAINED INCOME IS AS UNDER:
On this basis the Assessee's case was brought under assessment without any tangible material on record and on the basis of information and statement of third party are fructuous and bad in Law...
During the course of assessment proceedings, the appellant submitted the following documents to substantiate his claim of unsecured loans on which the assessee has paid taxes according to the Act:-
(i) Copy of Bank statement;
(ii) Copy of Confirmation of Accounts;
(iii) Copy of PAN details of the Investors;
(iv) Copy of ITR-V of the Investors;
(v) Copy of Confirmation Ledger account retracted with Payment & Receipts;
(vi) Copy of return of allotment, ROC-Ahd, & Form no. 2 & 5;
(vii) Copy of Affidavit of Entities holding by Casper Enterprises Pvt. Ltd.
and Atharv Business Pvt. Ltd.
The Ld. AO denied the claim of unsecured loans on Investors Company segments treating it as unexplained cash credits and made an addition of total income by accommodation entries.
Thus, possession of the unsecured cash credits on the premium of shares was not in doubt at all because the same was also reflected in the confirmation of account.
1. All payments are made through the account payee cheque and reconciled with the Assessee's Firm.
2. Shareholder provided all identity to the allotment of Shares of Assessee's Company following Confirmation for statement of Income.
3. All Confirmation of Accounts of the Assessee's Company with the premium on shares were accepted.
13 ITA No. 7157/Mum/ 20254. Assessee Company accounts duly audited by the Confirmation of Accounts and ITR Acknowledgement.
5. Promoters with unsecured cash credits are lying as closing balances with the paid-up capital of the shareholders.
6. The Bank Statement reconciled the Ledger Account identity, Creditworthiness, and Genuineness of the Assessee Company transaction.
a. From the perusal of the above, the Assessee has discharged its primary onus by providing information regarding the, i. Identity of the Creditor/Promoter (Permanent Account Number (PAN)/CIN/Income Tax Return Acknowledgment, wherever possible.) ii. Creditworthiness/ capacity of the Promoters/Shareholders (Copy of Audited Balance Sheet of the Lender Company/Relevant Bank Statement/Copy of Ledger Account).
Genuineness of the transaction through Account Payee Cheque /Bank Statement of the Appellant and Service provider of Promoters Firms/Proprietor Confirmation).
Therefore, no addition of receipts and payments of unsecured cash credits If identity, creditworthiness, and genuineness of same proved. If the Assessee proved identity, creditworthiness as well, and genuineness of transactions then the Assessee had discharged its primary onus on providing complete details in respect of loan transactions, and if Ld. AO failed to carry out any fruitful investigation then no addition could be made towards unexplained unsecured loans.
THIS HAS ALSO BEEN UPHELD BY VARIOUS JUDICIAL PRONOUNCEMENTS AND RELIANCE IS PLACED ON THE FOLLOWING:
1. Hon'ble ITAT Mumbai in an identical case of CIT (A), Central Circle 18 and 19, Mum Vs. Nitin Fire Protection Ind. Ltd. on 09/02/2016 ITA No. 757/Mum/2015.
The case has discharged the said primary responsibility. Now, it is the turn of the AO to disprove the claim of the Assessee. In this regard, the AO has placed reliance on the general statement given by Mr. Mukesh Choksi. There is no dispute with regard to the fact that the statement of Mr. Mukesh Choksi does not contain anything against the loans taken by the Assessee. Further, the Hon'ble Rajasthan High Court has held in the case of A.L. Lalpuria Construction Pvt. Ltd (supra) that the addition u/s 68 of the Act cannot be made merely on the basis of the statement given by somebody when the Assessee has otherwise discharged the initial burden of proof placed upon him u/s 68 of the Act. Accordingly, 14 ITA No. 7157/Mum/ 2025 we are of the view that the assessing officer has failed to discharge the burden shifted to his shoulders, in which case, the addition made by him u/sec. 68 of the Act is liable to be deleted."
"In view of the foregoing discussions, we set aside the order of Ld. CIT (A) and direct the AO to delete the impugned addition of Rs.30.00 lakhs.
As a result, the appeal filed by the Assessee is allowed.
Hence as per the above-mentioned judicial ruling, it's crystal clear that the Appellant has discharged the initial burden of proof and thus the burden was shifted to the learned Assessing Officer to disapprove the documents/submissions submitted.
2. Komal Agrotech Pvt. Ltd. Vs. ITO 2(1), Hyderabad The recent landmark decision by the transaction. The addition is made merely on surmises and conjectures. The statement recorded at the back of the appellant cannot be utilized ignoring other verifiable evidences. The Ld. Assessing officer has made the addition of Rs.75,00,000/-disregarding the evidences on record and without discharging her onus and without establishing anything contrary to the agreement of the Appellant and without verifying the Bank Account, the existence of the Investor and without making fruitful investigation, thus the demand was directed to be deleted."
3. Hon'ble ITAT, Mumbai for an identical case i.e. Income Tax Officer, M/s Shree Laxmi Estate Pvt. Ltd. V/s. 15(3)(3) On 29.12.2017 ITA-5954/Mum/2016 "We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO made an addition towards unsecured loans received from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Pvt. Ltd. on the basis of information received from the Investigation Wing which revealed that the Assessee is a beneficiary of bogus accommodation entries. Provided by Shri. Praveen kumar Jain through his bogus Companies. The Assessing Officer (AO) has brought out facts in the light of the statement of Shri. Praveen Kumar Jain was deposed before the Investigation Wing to make an addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transaction from Josh Trading Company Pvt. Ltd. and Viraj Mercantile Pvt. Ltd. On the other hand, the Assessee has furnished various details including confirmation letters from the parties, their bank statements with their financial statements to prove the identity, genuineness of the transactions, and creditworthiness of the parties.
The Assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO filing various details"
........It is a well-settled legal position that the Assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. 15 ITA No. 7157/Mum/ 2025 the identity of the Creditor, the genuineness of the transaction, and creditworthiness of the creditors. Once the Assessee discharges the initial burden placed upon him, then the burden to disprove the said claim shifts upon the AO".
Equivalent Case: M/s. Unideep Food Processing (P) Ltd. vs. ITAT, Cuttack & Ors. ITA/50/2022/ Ori -High Court Order passed on 14/02/2023.
4. Shri Munir V. Mehta vs ACIT, Cir-11, Ahd Ahd, ITA (1/7/2011) (ITAT 'A' BENCH No.1194/Ahd/2009 - Α. Υ.: 1990-91) Considering the facts of the case and the above discussions, confirmation of giving of amount was filed by the Assessee. The statement of Shri Hasmukh Patel on oath was recorded by the then AO in which he confirmed to have given the amount in question to the assessee. Therefore, the Assessee is able to prove that he has received the amount in question genuinely for the booking of the tickets, and the amount was refunded on cancellation of the booking being the trip to foreign country was not materialized. The assessee disclosed all the facts before the authorities below and proved the same through reliable and cogent evidences. Therefore, in our opinion, it is not a fit case for levy of penalty irrespective of the addition maintained finally by the order of the Tribunal. We accordingly, set aside the orders of the authorities below and cancel the penalty. We may clarify here the findings given in this order shall not affect the findings given on quantum and shall have no bearing on the quantum proceedings. As a result, the appeal of the assessee is allowed.
5. CIT v/s. Tania Investments (P) Ltd. (2010) 322 ITR 394 (Bom- HC) "Held that Tribunal was right in deleting the addition made by the LD. AO towards unexplained cash credits as the books of accounts itself indicate the capacity to advance loan, the parties are identified and there is no further need to prove the creditworthiness of the Creditors."
6. Aravali Trading Co. v/s. ITO (2008) 220 CTR (Raj) 622.
"It has been held that once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the Assessee's onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him and, therefore, additions under section 68 cannot be sustained in the absence of anything to establish that the sources of the creditor's deposits flew from the assessee itself."
Mere suspicion, no matter how strong, is not sufficient to treat the unsecured loans as unexplained. Reliance is placed on the following judgments:
16 ITA No. 7157/Mum/ 2025Case Details Held: Babulal C. The Assessee has recorded Borana v. ITO the transation relating to 50 (2006) 282 ITR M.Ts. of HDPE in the 251 (Bom)(HC) regularly maintained books of account and the Assessee has offered an explanation regarding the nature and source of investment but the same was not accepted. However, books of account were not rejected. The identity of the vendor was disclosed, source of investment was explained. Held, amounts could not be added as unexplained investments only because the vendor denied the transaction. The Court held that though the Assessee's contention that he had no bank account was found to be false, the disallowance was not justified. The fact that Sales Tax was not paid by the party who sold the goods does not affect the genuineness of the transaction. ACIT v. Kishan The Assessee while Lal Jewels (P.) furnishing necessary Ltd. (2012) information regarding the 147 TTJ 308 transactions & the aforesaid (Del.)(Trib.) parties like purchase bills issued against goods purchased, sales-tax registration numbers of the parties, PANs, their confirmations and Bank statements showing the debit of the amount paid through Account payee Cheques to them had discharged its primary onus, thereafter, the onus shifted on the department to rebut the same. Addition u/s 68 was held to be not justified. Dy. CIT v. During assessment 17 ITA No. 7157/Mum/ 2025 Kirtilal proceedings, the Assessing Kalidas Officer found that some of Jewellers (P.) purchases affected by Ltd. (2012) 54 Assessee, no details or SOT 529 addresses of vendors were (Chennai)(Trib.) available in purchase vouchers. He, therefore, considered such purchases to be no-genuine and an addition was made on that account. Since purchases were recorded in the books of account of Assessee and were also shown in its stock, in such circumstances merely because those purchases did not carry full addresses of vendors, could not be a reason to treat the said purchases as unexplained. Therefore, the impugned addition made by the Assessing Officer was to be deleted.
On perusal of the return of income filed by the Assessee Company, it is seen that the Assessee Company has paid up Share Capital and Share application of Rs.46,00,000/- showing aggregate valuation of shares on 4,60,000 equity shares with total receipts during the year for amounting to Rs.50,00,000/- from the authorized share capital. The total source of addition through unexplained cash credits from share application money by Ld. AO at Rs.46,00,000/- as unexplained cash credits in entry providing business. It is crystal clear that the Assessee Company has received that source of income which was not disclosed.
Hence, the amount of addition towards Investors represented in the form of requisition for return of income chargeable to be tax which has been objection on re-assessment for its compliances.
However, the Ld. AO on mere suspicious addition & without making any concrete inquiry made the addition which is against the Law of Land i.e. "Suspicious Addition" however strong cannot take place the evidence.
18 ITA No. 7157/Mum/ 20251. The Assessee further submits that there are three (3) stages involved in every assessment:
a. Disclosure of all primary facts;
b. Inferences of facts to be drawn from the primary facts disclosed;
C. Legal inferences are to be drawn from the primary facts disclosed and the inferences of facts drawn therefrom.
2. The first part, viz, the disclosure of primary facts, alone is the duty of the Assessee. The duty of finding inferential facts from the primary facts disclosed as well as the duty of drawing inferences of law from facts found are both on the assessing authority. Only the omission or failure on the part of the Assessee to disclose primary facts and particulars, which under law the Assessee is under an obligation to furnish, gives jurisdiction to the assessing authority to reopen and reassess the income of the Assessee. If the conclusion drawn by the assessing authority from these primary facts disclosed by the Assessee is erroneous, the assessing authority cannot have a ground for scrutiny an assessment under section 133(6) of the Act, merely on conjunctions and surmises. In the present case, there is absolutely no allegation that there was a failure to disclose any primary facts.
3. The Assessee submits that now it is a very well-settled legal position that power u/s. 131 cannot be exercised mechanically or arbitrarily. The expression "reason to believe" that any income chargeable to tax has escaped assessment" means entertaining a reasonable belief that a particular income went unnoticed by the Assessing Officer.
4. The Principles of Natural Justice have been grossly violated. The alleged statements of the third party / entry provider - Pravin Kumar Jain & Group Companies" said concerns not provided to the Assessee, if any recorded. Any documents or material or evidence which the Ld. AO wishes to rely on for the purpose of making an assessment must be provided to the Assessee so that the Assessee can present an argument against the same, if any, thus giving a reasonable opportunity of being heard.
5. Therefore, the above addition made by the Ld. AO is not justified and the same is required to be deleted from the present order thus is bad in law and requires to be quashed.
Further reliance is placed on the following:
The Ld. AO made an addition without providing the opportunity for cross-examination. Therefore, the same cannot be relied on in the present case on the basis of "Principal of Natural Justice as held by SC. Ref.
Marneedi Satyam V/s Masimukkula Venkataswami [AIR 1949 Mad 6891 19 ITA No. 7157/Mum/ 2025 The statements or even the affidavits of the sellers named above cannot be utilized against the assessee as no opportunity was given to this assessee to confront the above sellers.
ACIT V/s Tristar Jewellery I.T.A. No. 7593/Mum/2011 It remains undisputed that the assessee was never provided any opportunity to cross-examine Shri. Hiten L. Rawal, though he specifically asked for such cross-examination. On the other hand, the burden was sought to be shifted on the assessee by the A.O., by asking him to produce Shri Rawal, even though it was the A.O. who had relled on the statement of Shri Rawal, without either confronting this statement to the assessee or providing the opportunity to the assessee to cross-examine Shri Rawal. Therefore, the reassessment order is a result of the violation of the natural principle of audi alteram partem. A statement recorded at the back of a party cannot be used against such party without confronting such a statement to the party. Hence, on this score alone, the reassessment order is unsustainable in the eye of the law and we hereby cancel the same. As a consequence, the order of the Ld. CIT(A) is also cancelled in total.
All the provisions of the Act shall apply as if the returns were required to be furnished under section 139. Thereafter, the Assessing Officer shall assessed or confirm from the past assessment years.
Thereby, the Assessee Company will have to file separate returns for each of the years in the prescribed form within the time limit specified in the notice. Thus, no return is required to be filed under section 143(3) for the year in which the scrutiny was initiated. The regular return under Section 139 is to be filed.
Thus, based on the above discussion and judicial precedents no addition can be made to the account and thereupon received by the Assessee's Company and it is upon the revenue to prove that the addition of unexplained cash credits amounting to Rs.46,00,000/- with addition of 2% commission on total receipts amounting to Rs.92,000/- through only paid-up authorized share capital and share premium in respect of average cost of capital of the Investors/Shareholder of the Assessee Company and explained.
GROUND NO. 4. Computation of Short-Term Capital Gain On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeal) erred in confirming the action of the Assessing Officer in computing Short-Term Capital Gain on sale of commercial property without allowing deduction for the incidental and legal expenditure of Rs. 3,51,809/-incurred wholly and 20 ITA No. 7157/Mum/ 2025 exclusively in connection with the transfer, as allowable under Section 48 of the Act.
At the outset, it is submitted that the assessee is engaged in regular business activities and the expenditure of Rs. 3,51,809 was incurred during the normal course of business operations. The said expenses are duly recorded in the books of account, supported by proper vouchers and documentary evidences, and have been reflected in the audited financial statements. The books of account have neither been rejected nor has any specific defect been pointed out by the Assessing Officer. In the absence of rejection of books of account, an adhoc disallowance of genuine business expenditure is not sustainable. Out of the above expenses relating to Sr. No.2,5,6,7 and9 have been disallowed by the AO.
The Assessing Officer has made the disallowance merely on presumptions and surmises without identifying any specific instance of non business expenditure. It is a settled principle of law that no disallowance can be made on an arbitrary or adhoc basis without bringing cogent material on record.
21 ITA No. 7157/Mum/ 2025The expenditure incurred by the assessee satisfies the test laid down under section 37 of the Income Tax Act, as the same was incurred wholly and exclusively for the purpose of business and was neither capital in nature nor personal in nature.
It is further submitted that the turnover and scale of operations of the assessee justify the quantum of expenditure incurred. The amount disallowed is nominal in comparison to the overall business activity carried out during the year. There is no finding by the Assessing Officer that the expenditure is excessive, unreasonable, bogus, or not verifiable. In fact, the disallowance has been made without any independent enquiry or verification from third parties.
The Learned Commissioner of Income Tax Appeals has erred in confirming the disallowance without dealing with the detailed submissions and evidences placed on record. The order does not demonstrate any finding that the expenditure was not incurred for business purposes. The confirmation of disallowance is therefore contrary to settled legal principles and liable to be deleted.
In view of the above facts and circumstances, it is respectfully submitted that the disallowance of Rs. 3,51,809 is arbitrary, unjustified and bad in law. The same deserves to be deleted in full. The assessee therefore prays that the addition made by the Assessing Officer and sustained by the Learned Commissioner of Income Tax Appeals be kindly deleted and the appeal of the assessee be allowed.
On the other hand, the Ld. DR relied upon the orders passed by the Revenue Authorities.
5. We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that the assessee company had received total share application money of Rs.46,00,000/-, i.e., Rs.23,00,000/- each from two investor companies, namely Casper Enterprises Pvt. Ltd. and Atharv Business Pvt. Ltd. During the assessment proceedings, the AO relied upon information received from the 22 ITA No. 7157/Mum/ 2025 office of the DGIT (Investigation), Mumbai, wherein it was stated that one Praveen Kumar Jain had admitted before the Income Tax Authorities that he was engaged in the business of providing accommodation entries in the form of share capital, loans, sale and purchase, etc. On the basis of the said information, the addition was made in the case of the assessee under Section 68 of the Act.
6. In this regard, it was submitted by the Ld. AR that the AO had relied upon the statements of third parties, and thus, on the basis of such third-party admission, the addition was made in the hands of the assessee. Our attention was also drawn to the fact that the AO had not independently analyzed the documents placed on record by the assessee during the assessment proceedings to prove the identity of the investors, their creditworthiness, and the genuineness of the transactions.
7. It was further submitted that the net worth of both the companies, namely Casper Enterprises Pvt. Ltd. and Atharv Business Pvt. Ltd., was Rs.1.65 crore and Rs.1.41 crore respectively, as per the audited balance sheets for the financial year ending on 31.03.2010. It was also submitted that the assessee had received only Rs.23,00,000/- from each of the investor companies, which is negligible as compared to their substantial net worth.
8. We also noticed that, in order to prove the genuineness of the transaction, the identity of the investors, and their 23 ITA No. 7157/Mum/ 2025 creditworthiness, the assessee had placed on record the relevant documents, which are as follows:
PAN Card copy of Investors Copy of Certified Ledger Accounts Copy of Investment confirmation by the Investors stating about the Share Application money, Cheques No., Bank Name and branch etc. Copy of Share Application forms.
Form No. 2 of the ROC (Allotment of shares to the investor companies).
Details of Share Application money received during the year Copy of Relevant Bank Statement of the Investors. Copy of ITR Acknowledgement of the Investors. Copy of full set of audited Balance Sheet/Capital Account/Personal Balance sheet of all the said Investor for the F. Y. 2009-10 (Α.Υ. 2010-11) showing prominently the investment made in the Assesee Company's equity shares.
Copy of Affidavit given by Director's of the said Investor Companies Form 5 of ROC (Increase in Authorised Capital of the Assessee Company) Stamp Duty paid challan of Form 5 of ROC Memorandum and Association of all the Investor Companies.
9. It is pertinent to mention that the share application money received by the assessee was entirely through account payee cheques, and that the AO merely relied upon the statement of a third party, i.e., Praveen Kumar Jain, which was admittedly 24 ITA No. 7157/Mum/ 2025 recorded behind the back of the assessee. No opportunity for cross-examination of the said Praveen Kumar Jain was ever provided to the assessee, despite repeated requests.
10. We also noticed that Praveen Kumar Jain was never a Director or shareholder of Casper Enterprises Pvt. Ltd. or Atharv Business Pvt. Ltd. at any point in time. He also did not hold any managerial position or ownership interest in either of the said companies.
11. Although, in order to prove the creditworthiness of the transaction, the assessee had submitted copies of PAN and CIN of the investor companies, as well as the ITR acknowledgments of the investors, to further establish the creditworthiness of the creditors and the genuineness of the transactions, the assessee also furnished copies of the audited balance sheets of the investors, their bank statements, certified copies of ledger accounts, and details of the net worth of the investor companies.
12. In order to prove the genuineness of the transactions, it was also submitted that the entire transactions had taken place through account payee cheques. To substantiate this fact, the assessee also furnished the bank statements of both the assessee and the investors, share application forms, copies of investment confirmations from the investors, affidavits given by the directors of the investor companies, Form No. 2 25 ITA No. 7157/Mum/ 2025 and Form No. 5 filed with the ROC (for allotment of shares to the investors), and stamp duty paid challans.
13. It is important to mention here that the AO, during the course of the assessment proceedings, could not controvert the factual material and documentary evidence submitted by the assessee, and nothing has been brought on record to contradict or rebut the said independent documentary evidence.
14. The only reason mentioned for making additions in the case of the assessee was merely reliance on information received from the office of DGIT (Investigation), Mumbai. We find that both these investor companies were subject matter of additions in similar, cases, and the Coordinate Benches of the ITAT, after thoroughly discussing the financial status and capacity of the investor companies, deleted the respective additions. The Coordinate Bench of the ITAT, Mumbai, in the case of Sandesh Projects Pvt. Ltd. vs. ITO in ITA No. 1734/Mum/2024, dealt with the investor company Casper Enterprises Pvt. Ltd. and deleted the additions that were made on the basis of the same statement of the same person, i.e., Praveen Kumar Jain. The operative portion of the Coordinate Bench's order is contained in Paras 20-31, the same is reproduced herein below:
20. We have carefully considered the rival contention and perused the orders of the learned lower authorities. In this case the assessee was stated to be engaged in the business of 26 ITA No. 7157/Mum/ 2025 developer and real estate. It filed its return of income which was accepted as it is. Subsequently on account of information received by the learned assessing officer from investigation Wing that based on the search operation carried out by the income tax Department on an accommodation entry provider, the name of two companies were found which have invested Rs. 23 lakhs each in the assessee company. Investor in assessee company was found to be operated by those accommodation entry providers. In their statement also he confirmed that the above 2 companies which has invested in the assessee company are merely paper companies and the amount of investment made by these companies are only accommodation entries. Based on this the case of the assessee was reopened.
21. During the course of assessment proceedings, the learned assessing officer asked the assessee to prove the identity, creditworthiness and genuineness of the transaction of the above sum of Rs. 46 lakhs received by the assessee company from about two companies as share capital.
22. The assessee submitted that it has received Rs. 23 lakhs each from Casper Enterprises private limited and Duke business private limited. To prove the identity and creditworthiness of the above parties as well as the genuineness of the transaction assessee submitted the complete address of the shareholders and their permanent account numbers. Assessee also submitted the income tax jurisdiction of those companies along with the income tax return filed by these investor companies. Assessee produced the share application made by the above investor company;
allotment made through allotment advice issuedby the assessee to show that the investment is in the form of share capital. To 27 ITA No. 7157/Mum/ 2025 prove the creditworthiness, assessee submitted the directors report, audit report, profit and loss account and balance sheet of the investor companies along with the copies of the bank statement and the confirmation of the investor. To show the sources of the funds, assessee submitted that it has received total payment of Rs. 23 lakhs from each of the above company for which the share capital is issued at the face value only. These investors have their own share capital and reserves and surplus. It was submitted that in case of Casper Enterprises private limited to whom shares at the face value of Rs. 23 Lacs were issued has share capital of Rs. 4,611,500 and reserves and surplus of Rs. 1,19,12,733 which makes the net worth of the investor at Rs. 1,65,24,233/- and net investment in the assessee company of the shareholder is merely 13.92%. With respect to the investment made by Duke business private limited to whom the share capital of Rs. 23 lakhs were issued, assessee submitted that that company has share capital of Rs. 4,592,000 and reserves and surplus of Rs. 14,387,184/- making the net worth of the investor at Rs. 18,979,184 and the investment made by the investor in the assessee company is merely 12.12% of its net worth. Assessee has also submitted that these are two investors have already sold the investment in the assessee company to other parties. The assessee has also given the name that the new shareholders are Surajbhan Rajkumar private limited and Navkiran developers private limited. If, the above investment would not have been genuine, at least the other parties would not have purchased the above shares in the assessee company from those investors. It is not the case of the learned assessing officer that those parties are also bogus and are merely accommodation entry providers. With respect to the observation of the learned CITA that assessee has not paid any dividend to the shareholders 28 ITA No. 7157/Mum/ 2025 despite holding the share capital in the assessee company by those investors for substantially long time, we do not find any reason that if an assessee company does not declare a dividend, the investment of the share capital by the investors can be considered as nongenuine. Further it is also the claim of the learned CITA that there is no transaction between the assessee and these investors over and above the investment originally made of Rs. 23 lakhs each, therefore the above sum invested by these companies are merely accommodation entry. We do not find any reason to subscribe to the view of the learned CITA because the shareholders does not have any other financial transactions with the investee company after they make investment in the share capital of the assessee company. Even otherwise the learned assessing officer has categorically noted that assessee has stated that these investments have been sold by these companies to the other companies, therefore naturally, the finding of the learned CIT A does not help the case of the revenue.
23. In this present case the assessee has explained the nature of the above investment as share capital invested by the two companies in the assessee wherein assessee as well as the investors have confirmed the transaction. In the books of account of the assessee the amount is shown as share capital and in the books of the investor same is shown as an investment in the assessee company. With respect to the source of the funds, the assessee has produced the bank account of the investor company along with the audited annual accounts and income tax return. The funds have been invested in the assessee company by the investors through account payee cheque. Therefore, the assessee has also explained the source of the funds. Thus assessee has 29 ITA No. 7157/Mum/ 2025 explained the nature and source of the credit in the books of account of the assessee.
24. The learned CIT A questioned that how these companies have such a huge reserve and surplus, these answer could not have been provided by the assessee because assessee is not required to prove the source of source of the cash credit and share capital for the impugned assessment year. The only onus cast upon the assessee is to show the identity, creditworthiness of the investor as well as the genuineness of the transaction. This has been fulfilled by the assessee.
25. With respect to the genuineness of the transaction assessee has submitted all the requisite details as are available with it and also provided all the details by the investor to show that there are transaction in the assessee company of investment in share capital is genuine. The only reason why the learned assessing officer and the learned CIT A has considered the above investment as nongenuine is because of the statement made by an accommodation entry provider. The assessee has categorically stated that such accommodation entry provider has retracted his statement This has come to the notice through several decisions of the coordinate benches wherein the addition in respect of the above two companies were made under section 68 when these companies have made investment in other assesses, the coordinate benches, have deleted the addition. It was categorically noted that the accommodation entry provider has retracted the statement. When retraction happens, the reliance on the original statement as well as the retracted statements should not have been made by the either parties. As the request of the assessee for cross-examination of the accommodation entry 30 ITA No. 7157/Mum/ 2025 provider was rejected, similarly he should not have considered and relied upon the statement of the accommodation entry provider.
26. In fact, the learned assessing officer should have further carried out the enquiry of the investors on the basis of details furnished by the assessee. The learned that assessing officer was also informed by the assessee that those investors have sold their share in the assessee company to the other companies and the names and addresses were provided. But the learned that assessing officer did not make any enquiry either with the existing shareholders or with the old shareholders.
27. The learned assessing officer is duty-bound to throw the onus back to the assessee by making an investigation of the evidences produced before him, the learned assessing officer should have summoned those parties or ask the assessee to produce them or issued notices under section 133 (6) of the act to the investors. In absence of any enquiry but merely considering the statement of third-party which was found to be retracted subsequently, the addition could not be made in the hands of the assessee. It is to be noted that assessee has produced overwhelming evidence before him which remained uninvestigated by the learned AO.
28. It is the claim of the learned authorised representative that in case of both these investor companies, the matters have reached to the coordinate benches, where these companies have made investment in other companies and addition in those other companies were same investor are also involved. The claim in all these cases of the revenue was that this is an accommodation entry and the coordinate benches have deleted such addition.
31 ITA No. 7157/Mum/ 2025Therefore, on the merits of the case this issue is covered in favour of the assessee by all these above decisions.
29. In view of the above facts, we direct the learned assessing officer to delete the addition of Rs. 46 lakhs made under section 68 of the income tax act with respect to the above 2 companies for the reason that assessee has discharged its initial onus by producing overwhelming evidence before the learned assessing officer but the learned assessing officer has made the addition only on the basis of the statement of accommodation entry provider without making any enquiry on the evidences produced. Accordingly ground number 25 of the appeal are allowed.
30. On the issue of the reopening of the assessment we do not find any merit in the arguments of the assessee that the reopening is not valid. we find that the reopening has been made on the basis of the tangible information received by the learned assessing officer wherein assessee was found to be a beneficiary of the accommodation entry provided by an accommodation entry provider who was searched. The companies which have invested in the assessee were found to have been operated by the same person. Therefore, the assessing officer has tangible material to reopen the case. Further at the time of reopening of the assessment, the learned assessing officer is required to made under section 68 of the act on the similar basis, were deleted by the coordinate benches holding that the assessee has proven the identity and creditworthiness of the investor as well as the genuineness of the transaction. First such case was put before us in case of Bharati lifestyle private limited in ITA number 2416/M/2021 for assessment year 2014 15 wherein based on the decision of the coordinate bench in case of Nisarg life space 32 ITA No. 7157/Mum/ 2025 IIp ITA number 629/M/2020 dated 11 June 2021, where, the identical addition was deleted as per paragraph number 15 of that decision wherein Caspar Enterprises private limited was one of the party and the same accommodation entry provider was also involved. Further in case of Shri Lakshmi estate private limited in ITA number 6557/M/2017 for assessment year 2013 14 as per order dated 3/5/2019 wherein both the above parties were considered at paragraph number 3 of that order and the addition was deleted. This is also the same assessment year for which the appeal is filed before us. Further in case of ITA number 1477/M/2017 for assessment year 2008 09 where both the parties namely Casper Enterprises private limited and Duke business private limited were considered. Similarly, both these parties were also considered in ITA number 193 and 232/M/2018 and further in ITA number 1680/M/2020 for assessment year 2012 13. Therefore, in the series of the decision of the coordinate benches, where the statement of the same accommodation entry provider was considered and the merely form a prima facie opinion about escapement of income. He need not show that there is escapement of income.in view of this all the arguments of the learned authorised representative are dismissed. Accordingly ground number 1 is dismissed.
31. In the result appeal of the assessee is partly allowed.
Another Coordinate Bench of the ITAT, Mumbai, in the case of ITO vs. Varad Vinayak Estates Pvt. Ltd., deleted identical additions made on the basis of the statement of Praveen Kumar Jain, which related to Atharv Business Pvt. Ltd. (previously known as Faststone Trading Co. Pvt. Ltd.), the operative portion of 33 ITA No. 7157/Mum/ 2025 the same is contained in Paras 8-11, which is reproduced herein below:
8. After hearing both the parties and perused the materials on record, we observe that the undisputed facts are that the assessee was incorporated on 19th September 2008 and this was the first year of operation. The company was having authorized share capital of 6,00,000 equity shares out of which the assessee issued 5,60,000 equity shares at face value of Rs.10/- at a premium of Rs.40/- per share. These shares were allowed to 20 persons/parties out of which two are the directors of the company and the remaining 18 are other parties. The case of the assessee was reopened u/s 147 of the Act after receiving information from the Investigation wing of Income Tax Department, Mumbai that the assessee is one of the beneficiaries hawala rockets of providing accommodation entries by entities belonging to Shri Praveen Kumar Jain and associates. The assessee has filed various evidences such as PAN cards, confirmation letters, Income Tax Returns, bank statements, applications for allotment of shares, balance sheets of investors showing investments made by the subscribers with the assessee, memorandum of Association of the investor companies, etc. Thereafter, the AO issued notices u/s 133(6) of the Act to verify the identity, creditworthiness of the investors and genuineness of the transactions of the investors which were duly served and were duly complied with by filing details/evidences as called for by the AO. We note that instead carrying out further investigation, the AO has relied primarily on the statement of Shri Pravin Kumar Jain which has been retracted since then. Finally, the AO made addition u/s 68 of the Act on account of bogus share premium and share application money.
The Id. CIT(A) deleted the addition after taking into account the 34 ITA No. 7157/Mum/ 2025 various facts and ratio laid by the various judicial forums as reproduced above in CIT(A)'s order. In the present case, the AO has not made any further investigations to find out the truth but relied on the statement of Shri Praveen Kumar Jain and therefore has no basis. In our opinion, the assessee has sufficiently discharged its onus by filing the necessary evidences and the onus shifted to the AO to make further investigation as has held in the case of Haresh D Mehta (supra). The Hon'ble Apex Court in the case of Lovely Export (supra) has held that whereas the assessee has received application money from alleged bogus shareholders whose names are given to the AO, then the Revenue is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of the assessee. Similarly, in the recent case of Gagandeep Infrastructure Pvt. Ltd. (supra) the Hon'ble Bombay High Court has adjudicated the identical issue by upholding the order of the Tribunal wherein the Hon'ble Tribunal had deleted the addition made u/s 68 of the Act on account of share capital and share premium which was made by AO as unexplained cash credit. In this case, the assessee has filed list of shareholders, copy of share application for, copy of share certificates and form no.2 filed with the Registrar of Companies and also the justification for charging the premium on the basis of the future prospect of the respondent company. But by not accepting the explanation, the AO made addition u/s 68 of the Act. The Hon'ble Bombay High Court by relying the decision of Lovely Exports (P) Ltd. upheld the findings of the ITAT that respondent assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to the shares. Similarly in the case of CIT vs. Dwarkadhish Capital Market Pvt. Ltd. (supra) it was held that once the identity of the share applicant has been 35 ITA No. 7157/Mum/ 2025 established by either furnishing PAN or income tax assessment number and proved the genuineness of transactions by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue which has all the powers to trace any person. Moreover the addition made by the AO u/s 68 was wrong on the ground that the proviso to section 68 was added by Finance Act 2012 w.e.f. 01.04.2013 which comes in operation from A.Y 2013-14 and on this account also, the addition cannot be sustained. We have also perused the decisions relied upon by the Revenue and found the same as distinguishable on facts. We note that the Id. CIT(A) has taken all the aspects and issues into account while passing his order and, thus we do not find any infirmity or illegality in the order of ld. CIT(A). Accordingly, we uphold the same by dismissing the appeal of the Revenue.
9. Now, we come to ITA No.5133/Mum/2017. The issue involved in this appeal is identical as decided by us above in ITA No.5820/mum/2016 wherein we have upheld the order of Id. CIT(A) by dismissing the appeal of the Revenue. The assessee has issued share premium and capital of Rs.2,50,00,000/- which were treated by the AO as bogus and made addition u/s 68 of the Act. Therefore, our finding in ITA No.5820/Mum2016 will, mutatis mutandis, apply to this appeal as well. Accordingly, we affirm the order of CIT(A) by dismissing the appeal of the Revenue.
10. Now we come to C.O Nos. 166&167/Mum/2019. In both these cross objections, the assessee has challenged the order of CIT(A) dismissing the appeals of the assessee on jurisdiction under section 147 r.w.s. 148 of the Act.
36 ITA No. 7157/Mum/ 202511. At the outset, we find that the COs of the assessee have been late. There is a delay of 490 days in A.Y 2009-10 and 211 days in A.Y 2010-11 in filing. After hearing both the parties, we find that the explanation offered by the counsel of the assessee for condonation of delay, is not tenable as the only plea put forth before us is that since the ld. CIT(A) has allowed the appeal of the assessee on merits, the assessee was not aware of whether there lies any appeal against the order of CIT(A) on dismissal of jurisdictional issue. However when the case came up for hearing, the assessee approached the advocate and only after the advice of the Id. Counsel, these two cross objections were filed. In these cross-objections, the assessee has challenged the reopening of the assessment in both the years. The Id. DR opposed the condonation of delay as the reasons stated for condonation are not germane and sufficient reasons. Therefore, we are of the view that the cross-objections filed by the assessee are not maintainable as the same are barred by limitation and the assessee has failed to explain the reasons for the delay. The said cross-objections of the assessee are accordingly dismissed.
11. In the result, the appeals of the Revenue and cross-objections of the assessee are dismissed.
15. Considering the totality of facts and circumstances as discussed above, and also considering that the Coordinate Bench of the ITAT, Mumbai, in the cases of Sandesh Projects Pvt. Ltd. (supra) and Varad Vinayak Estates Pvt. Ltd. (supra) had deleted the additions concerning the same investors, and also independently considering the unrebutted documents placed on record by the assessee to prove the identity, 37 ITA No. 7157/Mum/ 2025 creditworthiness, and genuineness of the transaction, and also keeping in view the decisions of the Coordinate Benches of the ITAT, therefore adhering to the principles of binding precedents and judicial consistency, we delete the additions made and upheld by the Ld. CIT(A) and consequently allow Ground No. 2 raised by the assessee.
16. In view of our decision on Ground No. 2, the other grounds raised by the assessee are consequential in nature and therefore does not require any separate adjudication.
17. In the result, the appeal filed by the assessee stands allowed with no order as to cost.
Order pronounced in the open court on 27.04.2026 Sd/- Sd/-
(BIJAYANANDA PRUSETH) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated 27/04/2026
RY, Sr. PS
आदे श की प्रतितिति अग्रेतिि/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. सं बंधित आयकर आयु क्त / The CIT(A)
4. आयकर आयु क्त(अपील) / Concerned CIT
5. धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मु म्बई/ DR, ITAT, Mumbai
6. गार्ड फाईल / Guard file.
/ आदे शानुसार BY ORDER, 38 ITA No. 7157/Mum/ 2025 सत्याधपत प्रधत //True Copy// उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai