ACIT, CENTRAL CIRCLE -2, VADODARA, VADODARA, GUJARAT V. M/S K 10 DEVELOPERS, VADODARA, GUJARAT

ITSSA 72/AHD/2025

AI Insights

The case involves two appeals by the Revenue against the decisions of the CIT(A) for the assessment years 2013-14 and 2014-15, where additions were made under section 68 of the Income Tax Act, 1961, on account of unsecured loans received by the assessee, M/s K-10 Developers. The Assessing Officer treated these loans as accommodation entries based on materials and statements from related entities involved in similar transactions. The CIT(A) reversed the Assessing Officer's decision, finding that the assessee had provided adequate evidence to substantiate the genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778330 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 07-10-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 31-05-2025
• Other Referred Cases: Sinhgad Technical Education Society v. CIT, CIT v. Saumya Construction Pvt. Ltd., CIT v. Rohini Builders, CIT v. Dharamdev Finance Pvt. Ltd., PCIT v. Ambe Tradecorp (P.) Ltd., CIT v. Ayachi Chandrashekhar Narsangji, DCIT v. Rohini Builders, CIT v. Durga Prasad More
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALPESH RUPAVATIA
• Assessee Lawyers: HEMANT SUTHAR
• Keywords: Unexplained cash credit; Document seized; Documents seized; Bogus purchase; Capital Gains; Third party statement; TDS; Sham transactions; Accommodation entries; Source of fund; Bogus Share capital; Opportunity of cross examination; Penny stocks; Bogus
• Section: 143(3); 271(1)(c); 11; 132; 153A; 68

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘D’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ]BEFORE S/SHRI SANJAY GARG, JUDICIAL MEMBER AND MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER IT(SS)A No.71/Ahd/2025 WITH CO No.72/Ahd/2025 Asstt.Year : 2013-2014 AND IT(SS)A No.72/Ahd/2025 WITH CO No.73/Ahd/2025 Asstt.Year : 2014-2015 ACIT, Cent.Cir.2 Vadodara Vs. M/s.K-10 Developers R.S.54, Swagat Petrol Pump Sarabhai Main Road Vadi Vadi, Vadodara. PAN : AAMFK 1523 G (Applicant) (Responent) Assessee by : Shri Hemant Suthar, AR Revenue by : Shri Kalpesh Rupavatia, Sr.DR सुनवाई क तारीख/Date of Hearing : 29/09/2025 घोषणा क तारीख /Date of Pronouncement: 07/10/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: These two appeals filed by the Revenue and the cross objections preferred by the assessee arise out of the orders of the Commissioner of Income Tax (Appeals) – 12, Ahmedabad [hereinafter referred to as “CIT(A)”] passed under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] for the assessment years 2013-14 and 2014-15. These appeals are arising out of assessments framed under section 153A r.w.s. Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 2 143(3) of the Act by the Deputy Commissioner of Income Tax, Central Circle – 2, Baroda [hereinafter referred to as “Assessing Officer or AO”]. Since common issues are involved, both appeals of the Revenue along with the cross objections of the assessee are disposed of by this consolidated order for the sake of convenience and brevity. 2. Facts of the Case: 2.1 The assessee is a partnership firm engaged in the business of real estate development and construction. A search action under section 132 of the Act was carried out on 22.08.2017 in the K-10 group cases, of which the assessee is one of the entities. Consequent to such search, notices under section 153A of the Act were issued to the assessee for the years under consideration. In compliance thereto, for the assessment year 2013- 14, the assessee filed its return of income on 26.11.2018 declaring income at Rs. Nil, whereas for assessment year 2014-15, the return of income was filed declaring total income of Rs. 2,37,46,490/-. The assessments were thereafter framed under section 153A read with section 143(3) of the Act. 2.2 During the course of assessment proceedings for A.Y. 2013-14, the Assessing Officer noticed that the assessee had reflected unsecured loans aggregating to Rs. 1,00,00,000/- in its books of account. These comprised of a sum of Rs. 50,00,000/- from M/s Nakshatra Business Pvt. Ltd. and Rs.50,00,000/- from M/s Duke Business Pvt. Ltd., both received on 19.01.2013. On examination of the confirmations furnished, the Assessing Officer found them to be unsigned and incomplete. Further, from the bank statements it was noticed that the lenders had received funds from M/s Jahnavi Gems Pvt. Ltd. on the very same day, and the amounts were transferred to the assessee immediately thereafter. 2.3 The Assessing Officer relied on the material unearthed in the course of search in the case of Shri Pravin Jain group at Mumbai, wherein it was admitted in the statement recorded under section 132(4) that a large number of concerns including Nakshatra Business Pvt. Ltd. and Duke Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 3 Business Pvt. Ltd. were paper entities indulging in the activity of providing accommodation entries by way of unsecured loans, share capital, long term capital gain etc. Relying further on the seized Annexure A-3 (page 24), which contained reference to various expenses incurred by the Ketan B. Shah, partner in the assessee firm. 2.4 The Assessing Officer issued a show cause notice dated 18.12.2019 as to why the unsecured loans taken by the firm should not be considered as non-genuine transactions. The assessee, in response, contended that no incriminating material was found in the search at its premises and therefore no addition could be made under section 153A, relying on the judgments of the Hon’ble Supreme Court in Sinhgad Technical Education Society v. CIT 84 taxmann.com 290 and the Hon’ble Gujarat High Court in CIT v. Saumya Construction Pvt. Ltd. 81 taxmann.com 292. Without prejudice, the assessee also sought to establish genuineness by producing bank statements, ITR acknowledgements, audited accounts of lenders, details of interest paid, and relied upon judicial precedents such as CIT v. Rohini Builders 127 Taxman 523 and CIT v. Dharamdev Finance Pvt. Ltd. 43 taxmann.com 395 (Guj.). 2.5 The Assessing Officer, however, rejected the contentions, held the loans to be non-genuine accommodation entries, and made an addition of Rs.1,00,00,000/- under section 68 of the Act. Reliance was placed on the statement of Shri Pravin Jain recorded on oath under section 132(4) of the Act, wherein he categorically admitted that entities like Nakshatra Business Pvt. Ltd., Duke Business Pvt. Ltd. and Atharv Business Pvt. Ltd. were mere paper companies, with no actual operations, and were engaged solely in providing accommodation entries in the form of unsecured loans, bogus purchases, bogus share capital, and similar transactions. In his reply to Question Nos. 66 and 67, Shri Pravin Jain explained the modus operandi of routing accommodation entries for consideration. The Assessing Officer also referred to the statement of Shri Sanat Bharat Kumar Upadhyay, accountant of the Pravin Jain group companies, recorded under section Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 4 131(1A), wherein it was admitted that no real business was being carried on by such concerns for the past 5-6 years. 2.6 Similarly, in A.Y. 2014-15, the Assessing Officer observed that the assessee had received an unsecured loan of Rs. 25,00,000/- from M/s Nikita Gems Pvt. Ltd. on 11.09.2013. The confirmation was unsigned, and the bank statement revealed that the lender had received Rs. 30,00,000/- from Atharva Business Pvt. Ltd. on 10.09.2013, out of which Rs.25,00,000/- was transferred to the assessee on the very next day. The Assessing Officer referred to the statement of Shri Pravin Jain, wherein Atharva Business Pvt. Ltd. was admitted to be one of the paper companies engaged in providing accommodation entries. The survey action at the premises of such concerns also revealed absence of any real business activity. The assessee raised objections similar to those in the preceding year, relying on absence of incriminating material and filing confirmations, bank statements, ITRs, audited accounts, as well as proof of repayment and interest payment. Judicial precedents including CIT v. Rohini Builders, CIT v. Ayachi Chandrashekhar Narsangji 42 taxmann.com 251 (Guj.), and CIT v. Dharamdev Finance Pvt. Ltd. 43 taxmann.com 395 (Guj.) were relied upon. The Assessing Officer, however, rejected the explanations holding that the seized Annexure A-3 (page 24) clearly referred to the transaction with Nikita Gems Pvt. Ltd. and that the surrounding material established the transaction as nothing but an accommodation entry. Accordingly, addition of Rs. 25,00,000/- was made under section 68. 2.7 Being aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) recorded that the assessment stemmed from a search conducted on 22.08.2017 in the K-10 Group and that, during assessment, the AO treated the above loans as accommodation entries on the basis of (i) statements in Pravin Jain group proceedings, (ii) survey results at lender locations on 22.08.2017, and (iii) a seized paper marked Annexure A-3, page 24, reflecting the impugned transactions. At the same time, the CIT(A) noted the assessee’s consistent case that the loans stood entered in regular books, Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 5 were supported by confirmations, PANs, ITR acknowledgements, audited financials and bank statements of the lenders, and were repaid to the same parties through banking channels with interest after TDS. The assessee also stressed that no incriminating document was found at its own premises in the course of the search. 2.8 On the evidentiary appreciation, the CIT(A) recorded that the AO had not brought any cogent material to demonstrate that cash had moved from the assessee to the alleged entry providers in exchange for cheques, and that even an extensive search at the assessee’s premises did not yield any document supporting the allegation of cash-backed accommodation entry. The seized page relied upon emanated from third-party premises and the transactions recorded therein were already reflected in the assessee’s audited books; the AO mainly proceeded on third-party statements without providing effective opportunity for cross-examination. 2.9 The CIT(A) underscored that, at the relevant point of time, section 68 did not oblige the assessee to prove “source of the source,” and that the primary onus stood discharged by filing confirmations, identity particulars, income-tax records and bank statements, which the AO did not effectively impeach by any independent enquiry. Reliance was placed, inter alia, on DCIT v. Rohini Builders 256 ITR 36 (Guj.) and CIT v. Ayachi Chandrashekhar Narsangji 42 taxmann.com 251 (Guj.), the extracts whereof were discussed to emphasize that once identity and capacity are shown and monies move through banking channels, mere suspicion or general statements cannot sustain an addition, particularly when the Department itself has accepted interest payments and the subsequent repayments through account-payee cheques. 2.10 The CIT(A) also recorded a factual finding that both impugned loans were repaid by account-payee cheques in the immediately succeeding years, prior to the date of search, and that the AO did not doubt either the repayments or the TDS compliance on interest paid. Having found that the assessee had furnished complete primary evidence and the AO had not Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 6 brought any clinching rebuttal, the CIT(A) held that the addition of Rs. 1,00,00,000/- under section 68 was unsustainable on facts as well as in law and directed deletion. 2.11 In case of A.Y. 2014-15, the sole substantive dispute before the CIT(A) was the addition of Rs. 25,00,000/- under section 68 in respect of an unsecured loan from M/s Nikita Gems Pvt. Ltd., which the AO had branded as an accommodation entry linked to the Pravin Jain group and supported only by third-party statements and the same set of search/survey material not found at the assessee’s premises. The CIT(A) recorded the assessee’s evidentiary set i.e. confirmations, PANs, ITR acknowledgements, audited accounts and the bank trail, together with the specific fact that the entire loan had been repaid within the same assessment year through account- payee cheques, which position was not doubted anywhere in the assessment order. 2.12 On appraisal of facts, the CIT(A) reiterated that no incriminating document was unearthed in the assessee’s search to support the AO’s allegation that cash had been exchanged for cheques; the allegation rested substantially on third-party statements recorded in other proceedings. Stressing that repayments were by banking channels before the date of search and that interest payments stood subjected to TDS, the CIT(A) held that the assessee had discharged the primary onus under section 68 by establishing identity of the lender, genuineness of the transaction and capacity through contemporaneous records. The AO, instead of conducting meaningful, case-specific enquiries, proceeded on general investigation material relating to alleged entry operators; such generalized material, absent a live nexus to the assessee’s transaction, was held insufficient to justify an adverse finding. In this backdrop, the CIT(A) drew support from decisions discussed in the order, including PCIT v. Ambe Tradecorp (P.) Ltd. [145 taxmann.com 27], CIT v. Ayachi Chandrashekhar Narsangji (supra), and coordinate-bench rulings referred to therein, to hold that where primary evidences and bank-routed repayments are on record and are not rebutted Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 7 by the Department, an addition cannot rest on suspicion or third-party statements alone. 2.13 Consequently, the CIT(A) deleted the addition of Rs.25,00,000/- under section 68. As in the earlier year, the ground on initiation of penalty under section 271(1)(c) was dismissed as premature and the residuary ground was rejected, leading to the assessee’s first-appeal result being partly allowed. 3. Being aggrieved by the relief granted by the CIT(A), the Revenue has preferred the present appeals for both years, raising following grounds of appeal: In IT(SS)A No. 71/Ahd/2025 1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.1,00,00,000/- made by the AO u/s 68 of the I.T. Act on account of unexplained cash credit in the form of accommodation entries observing that the appellant had repaid the entire loans in the subsequent years which is not disputed by the AO and under the circumstances, such unsecured loans cannot be added u/s 68 of the I.T. Act despite the fact that the loan were claimed to be received from the persons in which name income tax records were artificially created by Shri Pravin Jain and such creditors having minimal incomes, and having no Genuine Business Transactions in their Return of Income filed. 2. In addition to the ground no. 1 above, on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.1,00,00,000/- made by the AO u/s 68 of the I.T Act observing that without any direct or even corroborative evidence, it is incorrect to make addition without appreciating the facts that the seized documents contains the details of unsecured loan of Rs.50,00,000/- from Nakashatra business Pvt. Ltd. Mumbai on 19.01.2013 and Rs. 50,00,000/- from M/s Duke Business Pvt. Ltd. Mumbai on 19.01.2113 and payment of loan is sham transaction which has been done in lieu of cash given and received back after payment of interest/ commission. 3. On The facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer ignoring the principle of \"Human Probability Test\" i.e. preponderance of probability which is applicable to Income Tax proceedings as laid down in Sumati Dayal vs. CIT (1995) 214 ITR 801: 80 Taxmon 89 (SC) and CIT v. Durga Prasad More (1971) 82 ITR 540. 4. The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 8 before or during the course of the hearing of the appeal on the basis of submissions to be made. In IT(SS)A No. 72/Ahd/2025 1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 25,00,000/- made by the AO u/s 68 of the I.T. Act on account of unexplained cash credit camouflaged as an unsecured loan received from another company despite the fact that the said entity was one of the many shell companies managed and admitted u/s 132(4) of the Act to be so by Shri Pravin Jain, an accommodation entry giver. 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs.25,00,000/- made by the AO u/s 68 of the I.T. Act on account of unexplained cash credit in the form of accommodation entry of unsecured loan ignoring the fact that the modus operandi of providing accommodation entries was admitted and corroborated by statement of Shri Pravin Jain and his accountant and also the fact that the receipt and immediately disbursal of the said managed transaction in the relevant bank statement was on the same date and the source thereof was not from the third party but from the another related entity of the lender. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer ignoring the principle of \"Human Probability Test\" i.e. preponderance of probability which is applicable to Income Tax proceedings as laid down in Sumati Dayal vs. CIT (1995) 214 ITR 801: 80 Taxman 89 (SC) and CIT v. Durga Prasad More (1971) 82 ITR 540. 4. The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made. Ground of Cross Objections in CO 72/Ahd/2025 in IT(SS)A No. 71/Ahd/2025 1. The Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld.AO in exceeding his jurisdiction in the assessment of the amount of unsecured loans received from Nakshatra Business Pvt. Ltd., Mumbai and Duke Business Pvt. Ltd.; Mumbai of Rs. 50,00,000/- each in absence of any incriminating material found in the course of search proceedings at the premises of the appellant firm. The impugned addition of Rs. 1,00,00,000/- being bad in law and in facts is prayed to be deleted. 2. Without prejudice to the above ground, the Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld. A.O. in passing the order u/s. 153A of the Act ignoring the fact that the documentary evidences were found in the course of survey proceeding at the premises of third party and not in search proceedings. Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 9 Ground of Cross Objections in CO 73/Ahd/2025 in IT(SS)A No. 72/Ahd/2025 1. The Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld.AO in exceeding his jurisdiction in the assessment of the amount of unsecured loans received from Nikita Gems Pvt. Ltd.; Mumbai of Rs.25,00,000/- in absence of any incriminating material found in the course of search proceedings at the premises of the appellant firm. The impugned addition of Rs. 25,00,000/-being bad in law and in facts is prayed to be deleted. 2. Without prejudice to the above ground, the Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld. A.O. in passing the order u/s. 153A of the Act ignoring the fact that the documentary evidences were found in the course of survey proceeding at the premises of third party and not in search proceedings. 4. During the course of hearing before us, the Departmental Representative (DR) strongly supported the order of the Assessing Officer and submitted that the addition made under section 68 of the Act was based on cogent evidence and credible statements recorded during the course of search and survey. It was contended that the Assessing Officer had relied upon the statement of Shri Pravin Jain recorded on oath under section 132(4) of the Act, wherein he categorically admitted that the companies controlled and managed by him were merely paper entities engaged in the business of providing accommodation entries in the nature of bogus unsecured loans, bogus purchases, bogus share capital and bogus long- term capital gains in penny stocks. The DR pointed out that in the said statement, Shri Pravin Jain elaborated the modus operandi of routing unaccounted cash in the guise of unsecured loans and other forms of accommodation entries. It was emphasised by the DR that the seized material, along with the corroborative statements of Shri Pravin Jain and his accountant, clearly establish that the unsecured loans reflected in the books of the assessee were sham transactions. The DR, therefore, submitted that the learned CIT(A) was not justified in deleting the addition made by the Assessing Officer under section 68 of the Act 5. The learned Authorised Representative (AR) of the assessee supported the order passed by the learned CIT(A) and submitted that no incriminating material whatsoever was found during the course of search in the case of Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 10 the assessee and the addition made by the AO is solely on the basis of statement of Shri Ketan B. Shah, partner of the assessee firm, and more particularly on the basis of third party statements recorded in the course of proceedings in the case of Shri Pravin Kumar Jain and his group concerns. It was contended that in the absence of any seized material relatable to the assessee, no addition could be validly made under section 153A of the Act. 5.1 The AR argued that the AO has relied upon the statement of Shri Pravin Kumar Jain recorded under section 132(4) of the Act, wherein he admitted to be an accommodation entry provider. It was emphasised that such statement was recorded in third party proceedings and not in the case of the assessee. In the absence of any opportunity of cross-examination having been afforded to the assessee, the same cannot be used against the assessee. It was further submitted that even otherwise, no incriminating document linking the assessee to such accommodation entries was seized from the premises of the assessee. 5.2 The AR drew our attention to page No. 131 of the Paper Book, which was the only document relied upon by the AO. It was submitted that the transactions recorded therein are duly accounted for in the regular books of account of the assessee firm. These entries, being mere interest payments duly reflected in the books, cannot be treated as unexplained cash credits under section 68 of the Act. 6. We have carefully considered the rival submissions of both the sides, perused the orders of the lower authorities and the material placed on record. We find that the core controversy in both years relates to the addition made by the Assessing Officer under section 68 of the Act on account of unsecured loans received by the assessee, which according to the Assessing Officer were nothing but accommodation entries arranged through entities controlled by Shri Pravin Kumar Jain, an admitted entry operator. Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 11 6.1 In so far as A.Y. 2013-14 is concerned, the Assessing Officer noticed that the assessee had received unsecured loans aggregating to Rs.1,00,00,000/- from M/s Nakshatra Business Pvt. Ltd. and M/s Duke Business Pvt. Ltd. The Assessing Officer drew adverse inference relying upon the statement of Shri Pravin Jain recorded under section 132(4) of the Act, wherein he had admitted that such concerns were paper companies engaged in the business of providing accommodation entries. The Assessing Officer also placed reliance on the statement of Shri Sanat Upadhyay, accountant of Pravin Jain group companies, and on seized Annexure A-3 (page 24). On this basis, he treated the impugned loans as non-genuine and added the same under section 68 of the Act. Similarly, for A.Y. 2014-15, the Assessing Officer held that the loan of Rs. 25,00,000/- received from M/s Nikita Gems Pvt. Ltd. was an accommodation entry, since the lender had received funds from another Pravin Jain group entity on the preceding date and transferred the amount to the assessee immediately thereafter. 6.2 The learned CIT(A), after examining the material on record, reversed the findings of the Assessing Officer. It was noted that the assessee had duly discharged its initial onus by filing confirmations, PAN details, ITR acknowledgements, audited financial statements, and bank statements of the lenders. The transactions were routed through banking channels, interest was paid after deduction of tax at source, and, more importantly, the entire loans were repaid through account payee cheques in subsequent years, all before the date of search. The learned CIT(A) further recorded that no incriminating material was found or seized from the premises of the assessee in the course of search. The seized papers relied upon by the Assessing Officer emanated from third party premises and were not shown to contain any evidence of cash having been exchanged between the assessee and the alleged entry providers. The learned CIT(A) also observed that no opportunity of cross-examination of Shri Pravin Jain or his associates was afforded to the assessee, despite reliance being placed on their statements, which itself vitiates the addition in law. Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 12 6.3 We find considerable force in the reasoning of the learned CIT(A). It is an undisputed position of fact that the loans in question were repaid in full by account payee cheques prior to the date of search, and that the interest thereon was subjected to TDS. These aspects were not disputed by the Assessing Officer. It is also not in dispute that no material was found in the course of search at the assessee’s premises to indicate that cash had moved from the assessee to the lenders in lieu of cheques. The entire addition is based upon third party statements and general investigation reports in the case of Pravin Jain group, which, in the absence of a live nexus with the assessee, cannot by itself constitute incriminating material for the purposes of section 153A. 6.4 The Hon’ble Supreme Court in Sinhgad Technical Education Society v. CIT (84 taxmann.com 290) and the Hon’ble Gujarat High Court in CIT v. Saumya Construction Pvt. Ltd. (81 taxmann.com 292) have laid down in clear terms that in an assessment framed under section 153A, no addition can be made in respect of unabated assessments unless based on incriminating material found during the course of search. In the present case, both the assessment years under appeal, namely A.Y. 2013-14 and A.Y. 2014-15, had already attained finality on the date of search conducted on 22.08.2017 and were therefore unabated. In the present case, the Department has not brought on record any such incriminating material unearthed during the assessee’s search. It is also undisputed that no incriminating document was found from the premises of the assessee; the additions made by the Assessing Officer rest entirely upon statements recorded in the case of third parties and on a loose paper seized from outside the assessee’s premises, which in any event only reflected transactions already accounted for in the regular books. Reliance solely on such third- party statements, without affording cross-examination and without discovery of any incriminating material relatable to the assessee, cannot satisfy the statutory requirement under section 153A of the Act. Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 13 6.5 The contention of the Department that the additions were justified on the principle of “human probability” as enunciated in CIT v. Durga Prasad More (82 ITR 540) and Sumati Dayal v. CIT (214 ITR 801) is also misplaced. The said principle applies to appreciation of surrounding circumstances where some material exists to doubt the genuineness of a transaction. However, it cannot override the settled requirement that additions under section 68 must be founded on cogent evidence. In the present case, the assessee has produced primary evidence establishing identity of lenders, genuineness of transactions and repayment through banking channels, which have not been rebutted by any positive material. Mere suspicion or generalised statements cannot, therefore, justify the impugned additions. 6.6 We also take note of the categorical finding recorded by the learned CIT(A) that, at the relevant point of time, section 68 of the Act did not impose any statutory obligation upon the assessee to prove the “source of the source.” The assessee’s onus was confined to establishing the identity of the creditors, their creditworthiness, and the genuineness of the transactions. This initial burden stood discharged by furnishing confirmations, PAN details, ITR acknowledgements, audited financial statements and contemporaneous bank statements of the lender companies. Once such primary evidences were placed on record and the transactions were routed through banking channels, the assessee could not be compelled to go beyond its obligation and prove the source of funds in the hands of the lenders. In the absence of any contrary material brought on record by the Assessing Officer to impeach such evidences, the addition made merely on the ground that the lenders were identified as entry providers in some other proceedings cannot be sustained. 6.7 In the light of the foregoing discussion, we find no merit in the appeals preferred by the Revenue. The orders passed by the learned CIT(A) deleting the additions of Rs.1,00,00,000/- in A.Y. 2013-14 and Rs. 25,00,000/- in A.Y. 2014-15 are confirmed and the grounds raised by the Revenue are dismissed. Printed from counselvise.com IT(SS)A No.71 and 72/Ahd/2025 with CO 14 6.8 As regards the cross objections filed by the assessee challenging the jurisdiction of the Assessing Officer in making the impugned additions in the absence of incriminating material, we note that no arguments were advanced by the learned AR at the time of hearing. Since we have already upheld the order of CIT(A) and dismissed the Revenue’s appeals on merits, the cross objections filed by the assessee do not survive for separate adjudication and are rendered infructuous. Accordingly, the same are dismissed as infructuous. 7. In the result, the appeals of the Revenue are dismissed and Cross Objections of the assessee are allowed. Order pronounced in the Court on 7th October, 2025 at Ahmedabad. Sd/- Sd/- (SANJAY GARG) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 07/10/2025 Printed from counselvise.com "