ACIT, CIRCLE-1, BHAVNAGAR, BHAVNAGAR V. MAHENDRAKUMAR JAYANTILAL SHAH, BHAVNAGAR

ITA 1089/AHD/2025

AI Insights

The case revolves around an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) which had deleted an addition of Rs. 90,00,000 as unexplained income under section 68 read with section 115BBE of the Income Tax Act, 1961. The assessee, Mahendrakumar Jayantilal Shah, had declared a total income of Rs. 9,43,120 for the assessment year 2018-19, which included loans from Shreenath Traders and Palak Enterprise. The Revenue contended that these were bogus accommodation entries. However, the CIT(A) found that the assessee had provided sufficient evidence to substantiate the loans, including bank statements and ledger confirmations, and noted the absence of any concrete evidence from the Revenue to prove the loans were dubious.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 834419 (ITAT-AHMEDABAD)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 15-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C DHARNI NATH
• Assessee Lawyers: ADJOURNMENT APPLICATION
• Keywords: Set aside; Reassessment proceedings; Accommodation entries; Bogus
• Section: 147; 144; 132; 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.1089/Ahd/2025 (Assessment Year: 2018-19) The Assistant Commissioner of Income Tax, Circle-1, Bhavnagar. Vs. Mahendrakumar Jayantilal Shah, C/o. M.S Dilipkumar Jayantilal Shah, Harish Road, Bhavnagar-364001. [PAN :APDPS9435 B] (Appellant) .. (Respondent) Appellant by : Shri C Dharni Nath , Sr. DR Respondent by: Adjournment Application Date of Hearing 02.02.2026 Date of Pronouncement 04.02.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal is filed by the Revenue against the appellate order dated 14.03.2025 passed by the Commissioner of Income Tax (Appeals)National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2018-19. 2. The Revenue has raised the following grounds of appeal: 1. \"Whether the CIT(A) has erred in facts and law in deleting the addition Rs90,00,000/- as unexplained income under section 68 r.ws. 115BBE the Act. 1961, without appreciating the fact that the assessee could not substantiate the genuineness of the loan?\" Printed from counselvise.com ITA No. 1089/Ahd/2025 ACIT Vs. mahendrakumar J Shah Asst. Year : 2018-19 - 2– 2. \"Whether the CIT(A) has failed to appreciate that the reassessment proceedings were validly initiated based on credible information gathered from a Search & Seizure operation u/s 132 on entities engaged in providing bogus accommodation entries.\" 3. \"The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary\". 4. \"It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored\". 3. At the outset, we find that none appeared on behalf of the assessee and an adjournment application was filed. However, we proceed to adjudicate the appeal on the basis of the material available on record and on merits of the case. 4. The brief facts of the case are that the assessee had filed return of income on 31.10.2018 for the assessment year 2018-19 declaring total income of Rs.9,43,120/-u/s 130 of the Income Tax Act, 1961(here in after referred as the Act). As per the information available with the department, the assessee is a beneficiary of bogus accommodation entry of Rs. 40,00,000/- from Shreenath Traders and 50,00,000/-from Palak Enterprise during the F.Y. 2017-18. On perusal of the enquiry report provided by the DDIT, it is noticed that Shri Ashish Yogendra Pandya and Shri Pinal Dolatray Sheth and other related individuals and entities had not conducted any real business. These business concerns related to them have been involved in providing accommodation entries. The case was re-opened u/s 147 of I.T. Act, 1961 by issuing notice u/s Printed from counselvise.com ITA No. 1089/Ahd/2025 ACIT Vs. mahendrakumar J Shah Asst. Year : 2018-19 - 3– 148 of the Act on 31.03.2022. During the course of assessment proceedings, various notices were sent to the appellant. In response to the notice, the assessee submitted reply dated 24.02.2023 in which he confirmed the details of loans availed of Rs.40,00,000/- from Shreenath Traders and Rs.50,00,000/- from Palak Enterprise during the F.Y. 2017- 18. But the appellant did not provide any surety for this loan, not furnished ledger account of the concerned loan creditors. Hence, Assessing Officer concluded that the assessee was a beneficiary of bogus accommodation entry of Rs. 90,00,000/-. The assessment was finalized u/s 144 of the Act by treating Rs.90,00,000/- as unexplained income under section 68 r.w.s. 115BBE the Act, 1961 and added to the total income returned of Rs.9,43,120/-. 5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld.CIT(A), who has allowed the appeal of the assessee by observing as follows: “…4. I have carefully considered the assessment order, the grounds of appeal, submission and other relevant material on record. 4.1. The assessing officer, relying on the enquiry report of DDIT (Investigation) in the case of Shri Ashish Yogendra Pandya and Shri Pinal Dolatray Sheth found the appellant benefitted from the accommodation (loan) entries of Rs.40,00,000 and Rs.50,00,000 from M/s Shreenath Traders and M/s Palak Enterprise, respectively. Consequently, the assessing officer reopened the assessment and requested the appellant to substantiate these loans. In response, the appellant provided copies of bank Printed from counselvise.com ITA No. 1089/Ahd/2025 ACIT Vs. mahendrakumar J Shah Asst. Year : 2018-19 - 4– statements and ledger confirmations indicating the receipt and repayment of loans through bank accounts. However, the assessing officer remained unsatisfied with the appellant's explanation, noting that the loans were taken without any surety and that the appellant did not furnish the lenders' ledgers. 4.2. Conversely, the appellant argued that the documents presented by the assessing officer do not constitute evidence of accommodation transactions but rather serve as proof of the loan transactions in question, thus rendering the case untenable. The appellant maintained that the bank statements clearly demonstrated loan utilization, which should be accepted unless valid reasons for rejection are provided. Furthermore, the appellant highlighted that the loans had been repaid with interest prior to the reopening notice, thereby negating the accommodation claim. The appellant also emphasized that, under Section 44AD, they were not required to maintain books of account, and that the duly signed and stamped loan confirmations should suffice. 4.3. Upon careful examination of the assessment order and the appellant's arguments, it is noted that although the assessing officer referred to the STR/enquiry report concerning Shri Ashish Yogendra Pandya and others, and the general modus operandi of their group concerns, no statements of documentary evidence were presented to demonstrate that the loans in question were dubious. Additionally, the appellant provided bank statements reflecting the receipt of the loans during the relevant year and their repayment in subsequent years, along with ledger confirmations from the parties involved. No evidence was presented to show that unaccounted money of the appellant was routed through M/s Shreenath Traders and M/s Palak Enterprises. Under these circumstances, I am Inclined to accept the appellant's argument and allow the appeal. 5. In the result, the appeal is allowed…” Printed from counselvise.com ITA No. 1089/Ahd/2025 ACIT Vs. mahendrakumar J Shah Asst. Year : 2018-19 - 5– 6. Aggrieved by the order of the Ld.CIT(A), the Revenue is in appeal before us. 7. We have heard the submissions and perused the material available on record. It is evident that the Ld. CIT(A) has passed a well-reasoned and speaking order after duly considering the assessment order, the enquiry report, and the evidences furnished by the assessee. The assessee had discharged the primary onus cast upon him under section 68 by establishing the identity of the loan creditors, the genuineness of the transactions through banking channels, and the repayment of loans along with interest. Hence, we find no infirmity in the order of the Ld. CIT(A). Accordingly, the appeal of the Revenue deserves to be dismissed. 8. In the result, the appeal of the revenue is dismissed. The order is pronounced in the open Court on 04.02.2026. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT (True Copy) (True Copy) Ahmedabad; Dated 04.02.2026 MV Printed from counselvise.com ITA No. 1089/Ahd/2025 ACIT Vs. mahendrakumar J Shah Asst. Year : 2018-19 - 6– आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "