ASSISTANT COMMISSIONER OF INCOME TAX-CIRCLE 4(2)(1), MUMBAI V. DISHA DYNAMIC BUILDWELL PRIVATE LIMITED, MUMBAI

ITA 3805/MUM/2024

AI Insights

The case revolves around an appeal by the revenue against the order of the CIT(A) which had deleted an addition made by the Assessing Officer regarding unexplained loans received by Disha Dynamic Buildwell Private Limited. The Assessing Officer had initially treated the loans as unexplained under section 68 of the Income Tax Act, 1961, due to insufficient evidence of the lenders' creditworthiness and the genuineness of the transactions. However, the CIT(A) found that the assessee had provided adequate evidence including loan confirmations, bank statements, and tax returns of the lenders, which established the genuineness of the transactions and the creditworthiness of the lenders. The Tribunal upheld the CIT(A)'s decision, emphasizing that the initial onus was on the assessee to prove these aspects, which they had satisfactorily done.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775218 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 30-07-2024
• Other Referred Cases: DCIT vs Rohini Builders, Orient Trading Co. Ltd. Vs CIT, CIT Vs Nikunj Eximp Enterprises Pvt. Ltd., Rushabh Enterprises vs ACIT, PCIT vs Jalaram Enterprises Co. Pvt. Ltd., CIT vs Ranchhod Jivabhai Nakhava, CIT vs Orissa Corporation (P) Ltd., Nemi Chand Kothari vs CIT, H.R. Mehta vs ACIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAN KASURI
• Assessee Lawyers: SATYAPRAKASH SINGH
• Keywords: Unexplained cash credit; Capital receipt; TDS; Accommodation entries; Bogus
• Section: 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 3805/MUM/2024 (AY: 2014-15) (Physical hearing) ACIT, Circle – 4(2)(1), Mumbai Room No. 640, 6th Floor, Aayakar Bhavan, M.K. Road, New Marine Lines, Mumbai – 400020.] Vs Disha Dynamic Buildwell Private Limited 101, Janet Castle, Marve Road, Opp. Joseph High School, Orlem Malad West, Mumbai – 400064. [PAN: AADCD9697E] Appellant / Revenue Respondent / Revenue Assessee by Mr. Satyaprakash Singh, CA Revenue by Shri Annavaran Kasuri, Sr. DR Date of Institution 30.07.2024 Date of hearing 20.08.2025 Date of pronouncement 05.09.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by revenue is directed against the order of Ld. CIT(A)/NFAC dated 01.06.2024 for assessment year (AY) 2014-15. The revenue has raised following grounds of appeal: “1) Whether on the facts and circumstances of the case and in law, the CIT(A) is right in deleting the addition of Rs. 4,87,55,000/- made by the AO u/s 68 of the Income Tax Act, 1961. 2) The Appellant craves leave to add, amend, alter and/or vary any of the grounds of appeal before or at the time of hearing.” 2. Brief facts of the case are that assessee is a company engaged in the business of construction and manufacturing of ready mix concrete, filed its return of income for A.Y. 2014-15 declaring income of Rs. 67,18,190/-. The case was selected for scrutiny. During assessment, the assessing officer noted that assessee has shown unsecured loan from various parties Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 2 aggregating of Rs. 4.87 crores. The assessee was asked by show cause notice dated 16.12.2016 to furnish income tax return, annual report and audited financial statement and bank statement of the lenders. The assessee furnished its reply dated 26.12.2016. In the reply, the assessee submitted that they have availed loan from said parties in earlier years through account payee cheques and in many cases, the loan has been repaid through account payee cheques, which has been confirmed by parties. The assessee also furnished confirmation of parties and bank statement showing that loan has been repaid. On the basis of such contention, the assessee claimed genuineness of transaction. The assessing officer recorded that he issued notice under section 133(6) to various lenders to seek their details about mode of loan that is whether it was in cash or cheque, bank details, rate of interest and relevant bank statement and copy of ITRs. The said notices were returned by postal authorities with the remark “left” or no response was received from certain parties. The assessing officer by referring certain case laws held that assessee has not proved creditworthiness of the parties. It was also held that no doubt that money was received through banking channel but does not reflect the actual genuineness business transactions. The assessing officer treated the entire loan amount of Rs. 4.87 crores received from seven lenders as unexplained and added under the head income from ‘other sources’ while passing assessment order on 30.12.2016. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written submission. The submissions of assessee are recorded in para 4.1 at page Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 3 no. 4 to 6. The assessee also relied on certain case law. The assessee specifically submitted that during the relevant financial year, the assessee received loan and advances by way of account payee cheques. The loan and advances are shown in the balance sheet. Such entry cannot be treated as bogus accommodation entry mere on general observation. During the assessment, the assessee with their reply dated 26.12.2016 submitted loan confirmation, ITR and bank statement of lenders. The assessee was asked in the show cause notice why such loan should not be treated as unexplained credit. In response to such show cause, the assessee explained that they have not received accommodation entries of unsecured loans from entry provider. The assessee discharged its primary onus. If the assessing officer was of other view, the assessee was to be provided copy of source of information documents relied and to allow cross-examination of parties. The assessee specifically took the plea that loan has been repaid. Copy of bank statement reflecting the receipt of repayment of loan was furnished. In support of their contention, the assessee again furnished loan confirmation of lenders, their PAN number, copy of income tax return with bank statement of assessee and lenders along with statement of repayment of loan. The assessee specifically relied on the decision of Gujarat High Court in DCIT vs Rohini Builders (2002) 256 ITR 360, decision of jurisdictional High Court in Orient Trading Co. Ltd. Vs CIT (1963) 49 ITR 723 (Bom) (HC) and decisions of various benches of Tribunal. 4. The ld. CIT(A) on considering the submissions of assessee noted that loan, which is otherwise a capital receipt can only be added by invoking deeming Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 4 provision under section 68. Section 68 can be invoked where there is a credit of amount in the books maintained by assessee and assessee offered no explanation about the nature and source of such credit or the explanation by the assessee in the opinion of assessing officer is not satisfactory. The opinion of assessing officer is required to be formed objectively with reference to material on record. The evidence produced by assessee cannot be brushed aside in a casual manner. Initial onus lies on the assessee to establish identity, creditworthiness and genuineness of transaction. Identity can be established by furnishing PAN number or by assessment orders of lenders, genuineness of transaction can be proved if money is received through account payee cheques and creditworthiness of lenders can be established by filing ITR, balance sheet of otherwise final accounts and other attending circumstances. During assessment, the assessee furnished loan confirmation of lenders, PAN number of lenders, copy of ITRs, bank account and bank statement showing receipt and repayment of loan. On the basis of aforesaid observation, the ld. CIT(A) recorded that the moot point before assessing officer was to examine the application of section 68. The assessing officer has not examined the case under section 68. The assessing officer has not conducted the required enquiry to show that documents furnished by assessee are not correct or manufacture. Despite furnishing relevant details to discharge their onus, the assessing officer has not conducted any investigation. The assessing officer merely relying upon the report on notices under section 133(6) being remained unserved or non-compliance, which cannot conclude that loan received were not genuine as has been hold by Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 5 Jurisdictional High Court in CIT Vs Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 619 (Bom). The ld. CIT(A) specifically noted that was the assessee has took plea that loan has been repaid back before assessment proceedings were initiated. It was held that on similar set of facts, jurisdictional High Court in Rushabh Enterprises vs ACIT in WP No. 167 of 2015 dated 15.04.2015 held that payments are made by account payee cheques which were encashed in bank account and debtors have paid interest by making TDS, the evidence proved that these loans were taken in regular course are clearly business transaction which cannot be doubted. The assessee furnished evidence of identity, genuineness of transaction and creditworthiness of lenders. All the loans were repaid through banking channel and interest was paid after TDS. The ld. CIT(A) also referred decision of Jurisdictional High Court in PCIT vs Jalaram Enterprises Co. Pvt. Ltd. in Tax Appeal No. 671 of 2017, wherein it was held that when assessee has proved identity, creditworthiness of lenders and genuineness of transaction, no addition can be made. The ld. CIT(A) also referred and relied on the decision of Gujarat High Court in CIT vs Ranchhod Jivabhai Nakhava 208 Taxman 35, Nemi Chand Kothari vs CIT 264 ITR 254, Hon’ble Bombay High Court in Orient Trading Co. Ltd. Vs CIT 49 ITR 723 and Apex Court in CIT vs Orissa Corporation (P) Ltd. 159 ITR 78. After referring aforesaid decision, the ld. CIT(A) held that once the assessee provides the basic details of creditors, the onus stand discharged. The assessee furnished several evidences which beyond doubt proved identity, creditworthiness and genuineness of transaction and thus, no addition could be made in the hand Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 6 of assessee and deleted the addition. Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before Tribunal. 5. We have heard the submissions of learned Senior Departmental Representative (ld. Sr. DR) for the revenue and the learned authorised representative (ld AR) of the assessee and with their assistance perused the orders of lower authorities. The ld SR DR for the revenue submits that during assessment, the assessing officer noted that assessee has shown unsecured loan from seven parties aggregating of Rs. 4.87 crores as recorded in para 4.1 and 4.2 of assessment order. The assessing officer issued notice under section 133(6) to all such lenders. No reply was filed by any of the lenders in response to notice under section 133(6). No confirmation of loan was filed by assessee. The assessee has not discharged its primary onus in proving the identity, creditworthiness of lenders and genuineness of transaction. The ld. CIT(A) allowed the appeal of the assessee by accepting the submission of assessee. The ld. Sr. DR for the revenue submits that the ratio of decision in CIT vs Durga Prasad More 82 ITR 540 is clearly applicable in the present case. The evidence furnished by assessee was not sufficient though it was accepted by ld. CIT(A). Thus, the evidence has to be judged by applying the test of human probability. Once the assessee failed to discharge primary onus. The ld. CIT(A) was not justified in deleting the entire addition made by assessing officer. To support his submission, ld. Sr. DR also relied upon the decision in Hon’ble Supreme Court in Kale Khan Mohammad Hanif vs CIT 50 ITR 1 (SC). Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 7 6. On the other hand, ld. AR of the assessee submits that during his assessment, the assessee furnished complete details of all the lenders. The assessee furnished confirmation of lenders their PAN number, return of income and bank statement. The ld. CIT(A) in para 4.4 of his order has clearly accepted such fact that assessee discharged their primary onus. Once the primary onus was discharged by assessee, the assessing officer was required to further investigate the matter to disbelieve the evidences furnished by assessee. The assessing officer simply relied on report of postal authorities that notices were not served on the lenders. Hon’ble Jurisdictional High Court in CIT vs Nikunj Eximp Enterprises Pvt. Ltd. held that merely notice under section 133(6) was not served and non-appearance of party cannot conclude that loan was not genuine. The ld. AR further submits that entire loan has been immediately after sometime was repaid. Before assessing officer as well as before ld. CIT(A), the assessee furnished complete details of repayment of loan. The repayment of loans, otherwise not disputed by assessing officer. The repayment of loan was brought in the notice of assessing officer. Such fact was recorded by assessing officer in para 4.2 of assessment order. Once the loan has been repaid, and is not disputed by revenue authorities, the receipt of loan cannot be doubted. The ld. AR of the assessee submits that he has placed on record that submission filed before ld. CIT(A). The copy of confirmation of lenders along with their return of income (ITR) and bank statement is also placed on record. All such evidences were before lower authorities. The ld. AR further submits that the entire loan amount has been repaid before issuance of show cause notice by Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 8 assessing officer. To support his submission, the ld. AR of the assessee relied upon the following decision:  CIT vs Nikunj Eximp Enterprises Pvt. Ltd. (372 ITR 619) (Bom)  Rushabh Enterprises vs ACIT (WP No. 167 of 2015 dated 15.04.2015)  PCIT vs Jalaram Enterprises Co. Pvt. Ltd. (ITA No. 671 of 2017)  CIT vs Orissa Corporation (P) Ltd. (159 ITR 78)  Nemi Chand Kothari vs CIT (264 ITR 254)  Orient Trading Co. Ltd. vs CIT (49 ITR 723) (Bom)  CIT vs Ranchhod Jivabhai Nakhava (208 Taxman 35) (Guj)  CIT vs. Ayachi Chandrashekhar Narsangji (2024) 41 taxmann.com 250 (Guj)  H.R. Mehta vs ACIT (2016) 72 taxman.com 110 (Bom) 7. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws recorded by both the parties. We find that during assessment, the assessing officer from the books of account of the assessee noted that assessee has shown unsecured loan from seven parties/lenders aggregating of Rs. 4.87 crores. On show cause notice, the assessee furnished copy of loan confirmation, bank account and audited financial statement and bank statement of lenders. The assessing officer recorded that he has sent notice under section 133(6) to all the parties. The postal authorities in case of Gourav Gems Pvt. Ltd., Mangulmurti Diamonds Pvt. Ltd., Kashish Diamond Pvt. Ltd. and Total Gems Pvt. Ltd. reported that parties have ‘left’. The assessing officer held that assessee has not proved the creditworthiness of the lenders. We find that no finding is given by the assessing officer on various evidences furnished by assessee. The assessing officer made addition of entire loan amount under section 68 of the Act. At the same time, the assessing officer also recorded that a sum of Rs. 4.87 crores is added under Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 9 the head income from ‘other sources’. We find that there is no allegation in the assessment order that the assessee is beneficiary of accommodation entry. 8. We find that before ld. CIT(A), the assessee filed detailed written submission and contended that they have discharged primary onus and furnished complete details of loan transaction including confirmation of parties, bank statement, ITR and proof of credit of loan through banking channel as well as repayment of loan through banking channel. We find that ld. CIT(A) on his detailed discussion held that section 68 can only be invoked when there is a credit of money during the previous year in the books of assessee and that assessee offered no explanation about the nature of sources of such credit and the explanation furnished by assessee is not acceptable to the assessing officer. The primary onus is on assessee. The ld. CIT(A) also held that evidences produced by assessee cannot be brushed aside in a casual manner. The identity of the creditors can be established by furnishing PAN or their assessment order. Genuineness of transaction is proved if the money is received by account payee cheque. Similarly, creditworthiness can also be proved through balance sheet or the ITR. We find that the assessing officer has not given any finding on all such evidences. The transaction through banking channel is not disputed. We find that assessing officer doubted the said parties on the basis of report of postal authorities about non-service of notice under section 133(6). We find that Hon’ble Jurisdictional High Court in the CIT vs Nikunj Eximp Enterprises Pvt. Ltd. (supra) held that merely return Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 10 of notice under section 133(6) as unserved and non-appearance of the parties cannot be basis that loan receipts were not genuine. 9. Hon’ble Gujarat High Court in CIT Vs Ranchhod Jivabhai Nakhava (supra) held that once the assessing officer was given PAN of lenders, it was the duty of assessing officer to ascertain from those lenders whether in their respective return they have shown existence of money to have shown as lent to the assessee. Hon’ble Jurisdictional High Court in Orient Trading Co. Ltd. Vs CIT (supra) also held that once the assessee has furnished identity of third party and other evidence to show that enterprises not fictitious, the initial burden lies on him can be said to have been discharged by him. Then burden shifted to the department to show why the assessee’s case cannot be accepted. We also find that the assessee right from the beginning has taken plea that loan received by him in subsequently repaid such fact is not disputed by assessing officer. We find that Hon’ble Gujarat High Court in Ayachi Chandrasekhar Narsangji (supra) held and once the loan has been repaid subsequently, which has not been doubted, the addition of loan cannot be made. Similar view was taken by the co-ordinate bench of this Tribunal in Rajesh Manohar Patil vs CIT in ITA No. 2504/M/2023 and in Raju Ram Sabji Purohit vs ITO in ITA No. 3864/M/2024. Similar observation was made by Jurisdictional High Court in H.R. Mehta Vs CIT 72 taxmann.com 110 (Bom) while deleting the addition of loans on the ground that material used against the assessee was not provided to him. Thus, in view of the aforesaid factual and legal discussion, we do not find any infirmity in the order passed by ld. CIT(A), which we affirmed by our aforesaid additional observation. Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 11 10. The ratio of decision of relied by ld. Sr. DR for the revenue is not applicable on the facts of the present case. The facts in both the case laws are at variance. In CIT Vs Durga Prasad More (supra) it was held that Tribunal has to judge the evidence before them by applying test of human probability. On applying such principal, we find that once the assessee has discharged his onus and substantiated his stand with primary evidence no such ratio is applicable on the facts of their case. Similarly in case of Kale Kahan Mohd Hanif (supra) it was held that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the ITO is entitled to treat it as taxable income. As recorded above, we have held that the assessee has clearly discharged his onus by filing all requisite evidence, thus, the ratio of this decision is also not applicable on the unique facts of the case in hand. 11. In the result, grounds of appeal raised by revenue are dismissed. 12. In the result, the appeal of revenue is dismissed. Order was pronounced in the open Court on 05/09/2025 Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: /09/2025 Biswajit Printed from counselvise.com ITA No. 3805/Mum/2024 Disha Dynamic Buildwell Private Limited 12 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "