ACIT, CIRCLE-1, BHAVNAGAR, BHAVNAGAR V. MAHADEV SHIPBREAKERS PVT LTD., BHAVNAGAR

ITA 724/AHD/2025

AI Insights

The case revolves around an appeal by the Revenue against Mahadev Shipbreakers Pvt. Ltd., concerning an addition of Rs.80,94,875 made under Section 69A of the Income-tax Act, 1961, which was later deleted by the Ld. CIT(A). The Revenue contended that the assessee had availed accommodation entries through transactions with M/s. Kasturi Commodities Pvt Ltd, which were not substantiated by the assessee. However, the Ld. CIT(A) found that the assessee had provided a genuine loan to Kasturi Commodities Pvt. Ltd., which was repaid with interest and TDS deductions, supported by bank statements and ledgers. The Tribunal upheld the Ld. CIT(A)'s decision, noting the lack of contrary evidence from the Revenue and the proper documentation provided by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792909 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 03-04-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT
• Assessee Lawyers: TUSHAR HEMANI; KUSHAL FOFARIA
• Keywords: TDS; Accommodation entries
• Section: 148

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.724/Ahd/2025 (Assessment Year: 2017-18) The Assistant Commissioner of Income Tax, Circle-1, Bhavnagar Vs. Mahadev Shipbreakers Pvt. Ltd., Office No. 213/216, 2nd Floor, Samved Complex, Opp. Jail Road, Bhavnagar-364001 [PAN :AAECM 8398 J] (Appellant) .. (Respondent) Appellant by : Shri Abhijit, Sr. DR Respondent by: Shri Tushar Hemani, Sr. Advocate & Shri Kushal Fofaria, AR Date of Hearing 17.09.2025 Date of Pronouncement 22.09.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal has been filed by the Revenue against the order dated 13.02.2025 passed by the Ld. Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre, Delhi (“Ld. CIT(A)” for short), under Section 250 of the Income-tax Act, 1961 (“the Act” for short), relating to the Assessment Year 2017- 18. 2. The Revenue has raised the following grounds of appeal: “1. Whether on facts and circumstances and in law, the Ld. CIT(A) has erred in deleting addition of Rs.80,94,875/- u/s 69A of the Act without appreciating the facts of the case. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee has transacted with M/s. Kasturi Commodities Pvt Ltd, Bhavnagar, through which the assessee has availed accommodation entry?” 3. The brief facts of the case, as culled out from the records, are that the assessee, who is engaged in ship recycling at Alang, filed its return of income for the year under consideration on 24.10.2017, in response to notice u/s 148 of the Printed from counselvise.com ITA No. 724/Ahd/2025 ACIT Vs Mahadev Shipbreakers Pvt Ltd Asst. Year : 2017-18 - 2– Act, declaring income of Rs.90.84 lakhs and turnover of Rs.60 crores. A notice under Section 148A(b) was issued based on a search at Kasturi Commodities Pvt. Ltd., alleging the assessee received accommodation entries of Rs.80.94 lakhs. The assessee clarified that it had only granted a genuine loan of Rs.80 lakhs to KCPL, repaid through banking channels with interest and TDS, supported by ledgers, bank statements, and confirmation from group concern M/s Shiv Corporation. Despite no incriminating evidence found, the Assessing Officer reopened the case, ignored submissions and video conference requests, and made an addition of Rs.80.94 lakhs under Section 69A, taxing it under Section 115BBE and raising a demand of Rs.1.13 crores. The Assessing Officer also wrongly initiated penalty under Section 270A(9), incorrectly stating no ROI was filed and misreporting turnover as Rs.2.25 lakhs, though records clearly showed otherwise. 4. Aggrieved by the order of the Assessing Officer, assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) deleted the addition made by the Assessing Officer u/s 69A of the Act of Rs.80,94,875/- by observing as under:- “5.2 On perusal of the Assessment order, it is observed that the AO has made the addition of Rs. 80,94,875/- under Section 69A and has also invoked the special rate of taxation under Section 115BBE. The basic facts of the case are that the appellant filed the return of income on 24/10/2017 declaring returned income at Rs. 90,84,971/-The case of the appellant was reopened under Section 148 vide notice dated 16.04.2021. The reopening of the assessment has been done on the basis of information collected during the course of search in the case of Jignesh Shah Group. A search action was conducted on the said group on 11.09.2018 and information was received that Shri Jignesh Shah was operating a number of companies through which accommodation entries were being provided in the market. It was also reported that one such company, namely, Kasturi Commodities Pvt. Ltd. had provided accommodation entry amounting of Rs. 80,94,875/- to the assessee company during the relevant previous year. On perusal of the Assessment Order, it is observed that the AO has discussed the said fact on para 4.5.1 of the order which is reproduced as follows: Printed from counselvise.com ITA No. 724/Ahd/2025 ACIT Vs Mahadev Shipbreakers Pvt Ltd Asst. Year : 2017-18 - 3– \"4.5.1 Transaction of Rs. 80,94,875/- with M/s Kasturi Commodities Private Limited. The assessee submitted in the reply that the assessee company had given unsecured loans of Rs. 80,00,000/- to the M/s. Kasturi Commodities Private Limited during the F.Y. 2016-17. Payment was made through RTGS on 08.07.2016, 08.07.2016 & 10.08.2016. The debit entry of Rs. 20,00,057.25, Rs.30,00,057.25 and Rs.30,00,057.25 (57.25 being RTGS charges) is reflected in the bank account. The assessee attached bank account statement. The assessee also submitted that the loan amount was returned to it vide RTGS on 12.08.2016 from the SBI account of M/s. Kasturi Commodities Private Limited along with interest of Rs.29,167 (less TDS of Rs.2,917). Credit of Rs. 20,00,000/- + Rs. 26,250/- Rs. 20,26,250/- is seen in the bank account statement on 12.08.2016. Further amount was returned vide RTGS on 24.08.2016 along with interest of Rs.58,750 (less TDS of Rs.5875) and Rs. 17,500 (less TDS Rs.1750). Credit of Rs.30,00,000 + 52,875 = Rs.30,52,878/- & Rs.30,00,000/- + 15,750 = Rs. 30, 15,750/- also is seen in bank statement on 24.08.2016.\" 5.3 It is, therefore, observed that the basic facts regarding the transaction was duly disclosed before the AO. It has been clarified by the appellant that they had given an unsecured loan of Rs. 80,94,875/- to Kasturi Commodities Pvt. Ltd. during the financial year 2016-17. The said payment was made by RTGS on 08/07/2016 & 10/08/2016 and the corresponding entry in the bank statement is also reflected. The assessee has attached the copy of the bank account before the AO. The assessee submitted that the loan amount given to Kasturi Commodities Pvt. Ltd. was returned via RTGS on 12/08/2016 & 24/08/2016. An interest of Rs. 105,417/- was paid on the said loan by Kasturi Commodities Pvt. Ltd. and total TDS of Rs. 10,542/- was deducted by them on the interest amount paid. Therefore, the remittance received in the bank account of the appellant on 12/08/2016 & 24/08/2016 was Rs. 80,94,875/-The AO however issued a show cause to the appellant. The appellant in reply more or less filed a similar reply. The said reply of the appellant, the AO after considering the response of the appellant has stated that the reply of the assessee is not acceptable. The reasons for not accepting the reply of the assessee has been given by the AO in Para 4.8.3 is as follows: “4.8.3 The advance/loan to M/s. Kasturi Commodities Pvt. Ltd. through bank account against charging of interest and deduction of TDS is only superficial and just a device to give the transaction the colour of genuineness. In view of the fact that the counter party had Printed from counselvise.com ITA No. 724/Ahd/2025 ACIT Vs Mahadev Shipbreakers Pvt Ltd Asst. Year : 2017-18 - 4– been proved to have engaged in providing accommodation entries, the contention of the assessee is not acceptable. The assessee did not prove the genuineness of the transaction satisfactorily, therefore, a show cause notice was issued to the assessee as to why the amount of Rs. 80,94,875/- should not be treated as unexplained money of the assessee as per provisions of Section 69A of the Income Tax Act, 1961 and to be taxed u/s. 115BBE of the Income Tax Act, 1961,\" 5.4 On going through the observations of the AO, it is seen that the AO has stated the transaction to be of superficial nature and a colorful device, to give the said transaction, a look of genuineness. To comprehend the statement it would mean that the transaction is not otherwise what it appears to be. To put it more simply, it is being stated by the AO that the FORM and SUBSTANCE of the transaction are quite different, rather to put it more succinctly, they are diametrically opposite. In short, the contention is that the FORM of the transaction is clothed in legality, however the SUBSTANCE or the CONTENT is non genuine i.e. it is an accommodation entry. The AO has made a bland observation that this is a accommodation entry transaction, however, the actual nature of the accommodation or the modus operandi thereof, in this transaction has not been explained or brought on record by the AO. It has simply been stated by the AO that Kasturi Commodities Pvt. Ltd. has been proved to have been engaged in accommodation entries. Such sweeping statement cannot be accepted as evidence. Moreover, in this case, Kasturi Commodities Pvt. Ltd. is the recipient of the loan and not a provider of the loan. If it is alleged, that this transaction is an accommodation entry which has been clothed in genuineness then the onus lies on the AO to pierce the veil and to prove the actual nature of the transaction which lies behind the veil. However, nothing adverse against this transaction has been brought on record. Merely, because Kasturi Commodities Pvt. Ltd. has been found to be engaged in the giving accommodation entries cannot be a ground for making the addition of the loan amount given by the appellant to M/s Kasturi Commodities Pvt. Ltd. In this case it is not the appellant who is receiving the loan from Kasturi Commodities Pvt. Ltd. In fact, it is the other way that the appellant is giving the loan to Kasturi Commodities Pvt. Ltd. The said transaction has been undertaken through banking channels. In the said loan the appellant has charged an interest of 105,417/-. TDS has been deducted on the interest amount paid by Kasturi Commodities Pvt. Ltd. Confirmation letter has been filed by Kasturi Commodities Pvt. Ltd. regarding the loan received and the interest paid. Bank statement of the appellant has been filed before the AO as an evidence to corroborate the contentions made. 5.5 Therefore, in my considered opinion this is not a case of Kasturi Commodities Pvt. Ltd. providing any accommodation entry to the appellant. Printed from counselvise.com ITA No. 724/Ahd/2025 ACIT Vs Mahadev Shipbreakers Pvt Ltd Asst. Year : 2017-18 - 5– The transaction has not been proof to be a superficial transaction. This is a case of loan given by the appellant and received back during the same year along with interest of Rs. 105,417/- which has already been offered to tax. Therefore, the addition made by the AO under Section 69A of Rs. 80,94,875/- is hereby deleted.” 5. Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before the Tribunal. 6. Before us, the Ld. DR relied upon the order of the Assessing Officer, whereas the Ld. AR supported the order of the Ld. CIT(A). 7. We have heard both the parties and perused the material available on record. We find that the Ld. CIT(A) has passed a reasoned and detailed order, examining the nature of the transaction in the context of evidences submitted by the assessee. The Assessing Officer has failed to bring on record any contrary material to disprove the genuineness of the transaction, other than relying on generalised allegations. The transaction in question i.e. the loan given by the assessee and repaid along with interest through banking channels, is duly reflected in the assessee's books. The interest has been offered to tax, and TDS has been deducted. These facts are not disputed by the Revenue. We, therefore, find that, as rightly pointed out by the Ld. CIT(A), the Assessing Officer failed to establish any nexus between the alleged accommodation entries and the impugned transaction. In view of the detailed findings recorded by the Ld. CIT(A), we see no reason to interfere with the appellate order. 8. In the result, the appeal of the Revenue is dismissed. The order is pronounced in the open Court on 22.09.2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 22.09.2025 **btk Printed from counselvise.com ITA No. 724/Ahd/2025 ACIT Vs Mahadev Shipbreakers Pvt Ltd Asst. Year : 2017-18 - 6– आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation …words processed by Hon’ble VP on his PC on…19.09.2025 2. Date on which the typed draft is placed before the Dictating Member 19 .09.2025 3. Other Member 19.09.2025 4. Date on which the approved draft comes to the Sr.P.S./P.S 19.09.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 22.09.25 6. Date on which the fair order comes back to the Sr.P.S./P.S 22.09.25 7. Date on which the file goes to the Bench Clerk 22.09.25 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "