BHADRESH MANSUKHLAL DODHIA,BHIWANDI V. DCIT-CC-3, THANE, THANE

ITA 2218/MUM/2025

AI Insights

The case involves Bhadresh Mansukhlal Dodhia, the appellant, who contested the additions made by the Assessing Officer under sections 68 and 37 of the Income Tax Act, 1961, regarding unsecured loans received from M/s Frank Mercantile Private Limited. The loans were initially treated as unexplained cash credits, leading to additions of Rs. 26,00,000 and Rs. 2,59,858 respectively. The reassessment for the year 2013-14 was initiated by a notice under section 148, which was later challenged as being time-barred and invalid. The Tribunal's decision hinged on the invalidity of the notice and the acceptance of the loan repayment by the revenue authorities, leading to the quashing of the reassessment order and the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711289 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2013-2014
• Other Referred Cases: Union of India Vs Rajeev Bansal, CIT vs. Ayachi Chandrashekhar Narsangji, Rajhans Construction Private Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRISURENDRA MOHAN
• Assessee Lawyers: RAVI GANATRA; SIMRAN DHAWAN
• Keywords: Unexplained cash credit; Principle of natural justice; Borrowed satisfaction
• Section: 147; 148; 144; 143(3); 271(1)(c); 153A; 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 2218/MUM/2025 (AY: 2013-14) (Physical hearing) Bhadresh Mansukhlal Dodhia 60/100, New Mavji Compound Behind Ratan, Talkies Narpoli Bhiwandi, Maharashtra-421302. [PAN No. AFHPD2871E] Vs DCIT – CC-3, Thane Room No. 12, A Wing, 6th Floor, Ashar IT Park, Thane West, Maharashtra-400604. Appellant / Assessee Respondent / Revenue Assessee by Shri Ravi Ganatra & Ms. Simran Dhawan, Advocates Revenue by ShriSurendra Mohan, Sr. DR Date of Institution 29.03.2025 Date of hearing 22.07.2025 Date of pronouncement 22.07.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of Ld. CIT(A), Pune-11 dated 12.02.2025 for assessment year (AY) 2013-14. The assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 26,00,000/- u/s 68 of the Act made by the Ld. Assessing Officer in the assessment order passed u/s 143(3) r.w.s.153A of the Income Tax Act dated 27.03.2022 on account of unsecured loan received by the appellant from M/s Frank Mercantile Private Limited which was treated as unexplained cash credits under section 68 r.w.s. 115BBE, though the appellant had duly discharged its onus by submitting all the relevant documentary evidences to prove identity and creditworthiness of the lender company and genuineness of the transactions. 2. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 2,59.858/- u/s 37 of the Act on account of interest on the unsecured loans taken from the above company despite the fact that the appellant has proved that these loans are genuine. Printed from counselvise.com ITA No. 2218/Mum/2025 Bhadresh Mansukhlal Dodhia 2 3. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 28,59,858/- u/s 68 & 37 treating the same as unexplained disregarding and ignoring the relevant material placed on record of the Ld. AO to substantiate the loans thus resulting in grave injustice and arbitrariness. 4. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 28,59,858/- ignoring the fact that the loan taken stood duly repaid in subsequent years, much before the date of search which proves fact that loan taken was genuine. 5. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the additions of Rs. 28,59,858/- by holding the lender company as paper /shell/non-genuine entity even though the company was MCA Active both at the time of taking of such loan and at the time of repayment of the loan. 6. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs 28,59,858/-on account of unsecured loan and interest thereon without there being any evidence of cash paid at the time of receipt of alleged non- genuine unsecured loan and without there being any evidence of cash received at the time of payment of interest /repayment of alleged non-genuine unsecured loan from/to the company. 7. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 28,59,858/-on account of unsecured loan relying upon the inquiries conducted by the DDIT (Inv.), Kolkata and statements recorded in the course of such inquiry in relation to M/s Frank Mercantile Private Limited, without providing the copy of investigation report or the copies of such statements, thus unjustly incapacitating the appellant from furnishing a rebuttal and with no opportunity of cross examining those persons. 8. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 28,59,858/- u/s 68 on account of alleged unexplained cash credit in respect of unsecured loan in the absence of any incriminating material unearthed during course of search carried out on the appellant and making addition solely on the basis of information received from other sources in the proceedings initiated by issue of notice u/s 153A of the Act. Printed from counselvise.com ITA No. 2218/Mum/2025 Bhadresh Mansukhlal Dodhia 3 9. On the facts and the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in placing reliance on the statements of Shri Bhavik Jakharia, Shri Minesh Dodhia, and Shri Bhadresh Dodhia, despite the fact that these were retracted through notarized affidavits dated 08.03.2020. 10. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the additions aggregating to Rs 28,59,858/- in absence of any incriminating material whatsoever found during the course of search & seizure action, pertaining to the year under consideration. 11. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not treating the re- opening of assessment as bad-in-law since the re-opening was entirely based on borrowed satisfaction and without application of mind on the part of the Ld. Assessing Officer. 12. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in not quashing the assessment order and deleting the addition made even when the Ld. Assessing Officer did not follow the basic principles of natural justice by (i) supplying the appellant with materials collected at its back, (ii) supplying copies of all relevant statements of third parties, (iii) supplying copies of reports of Investigation and (iv) affording opportunity to cross examine the third parties whose statement was relied upon to draw inference against the appellant, despite specific request made by the appellant in response to show cause notice filed by the Appellant. 13. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the levy of interest u/s 234A, 2348 & 234D of the Income Tax Act, 1961. 14. On the facts and in the circumstances of the appellant's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the initiation of penalty u/s 271(1)(c) of the Income Tax Act, 1961. 15. The appellant craves leave to add to, alter, amend, modify and/or delete all or any of the foregoing grounds of appeal. Printed from counselvise.com ITA No. 2218/Mum/2025 Bhadresh Mansukhlal Dodhia 4 The appellant prays before the Hon'ble Tribunal to delete the additions made by the AO and confirmed by the Ld. CIT (A) and/or any other relief as the Hon'ble Tribunal may deem fit.” 2. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits case of assessee for A.Y. 2013-14 was reopened by issuing notice under section 148 dated 27.03.2021. Assessment in the year under consideration was completed under section 147 rws 144 of the Income Tax Act (Act) on 27.03.2022. In the grounds of appeal, the assessee has inadvertently mentioned assessment order under section 153A, in fact assessment was completed under section 147. Notice under section 148 dated 27.03.2021 was issued beyond six years from the end of relevant assessment year. The assessing officer issued such notice after substitution of sections 147 to 151 by Finance Act, 2021. After amendment / substitution of sections 147 to 151, notice under section 148 beyond three years from the end relevant assessment year is not permissible; unless the income escaped is more than Rs. 50.00 lacs. Admittedly, the alleged escapement of income is sonly of Rs. 26.00 lacs, which is less than 50.00 lacs. Thus, the notice under section 148 is invalid, hence, all the action initiated on the basis of such notice is void-ab initio. The ld. AR further submits that after the decision of Hon’ble Apex Court in Union of India Vs Rajeev Bansal (2024) 167 taxmann.com 70 (SC), it has been held that reopening under section 147, wherein escaped income is less than Rs. 50.00 lacs, reopening up to 2015-16 is time barred. 3. On merit, the ld AR of the assessee submits that assessingofficer while passing assessment order made addition under section 68 of Rs. 26.00 lacs Printed from counselvise.com ITA No. 2218/Mum/2025 Bhadresh Mansukhlal Dodhia 5 and disallowances of interest expenses under section 37 of Rs. 2,59,858/-by treating the unsecured loan as unexplained cash credit. The loan received by assessee was subsequently repaid in 2017. The repayment of loan was not disputed by assessing officer. Once, repayment of loan has been accepted, no addition for unexplained cash credit of such loan is sustainable. The ld. AR submits that he has good case on legal issue as well as on merit. 4. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported order of ld. Assessing Officer/CIT(A). 5. I have considered the contentions of both the parties and have gone through the orders of lower authorities carefully. I find that case of assessee for A.Y. 2013-14 was reopened by issuing notice under section 148 dated 27.03.2021. I find that income escaped from assessment is admittedly is less than Rs. 50.00 lacs, therefore, notice under section 148 dated 27.03.3201 is beyond the time limit as has been held by Hon’ble Apex Court in Union of India Vs Rajeev Bansal (supra). Once the notice under section 148 dated 27.03.3021 is beyond the time limit. Therefore, the subsequent action initiated thereon has become void ab initio. Thus, reassessment order dated 27.03.2022 is quashed. 6. Even on merit, I find that alleged loan which was treated as unexplained cash credit has already been repaid when reassessment proceeding was initiated. The loan was repaid on 03.03.2026, copy of bank statement is placed on record at page no.80 of paper book. Such repayment is not doubted by the revenue authorities. Printed from counselvise.com ITA No. 2218/Mum/2025 Bhadresh Mansukhlal Dodhia 6 7. I find that Hon’ble Gujarat High Court in case of CIT vs. Ayachi Chandrashekhar Narsangji (2024) 41 taxmann.com 250 (Guj) held that where department has accepted repayment of loan in subsequent year, no addition was to be made in the current year for such credit. Such, decision has been followed by Surat Bench in case of Rajhans Construction Private Ltd. in ITA No.1450/Ahd/2016 dated 14.03.2022. I find that assessee has placed on record copy their bank statement showing the repayment of loan in subsequent year, which is not doubted by assessing officer, henceaddition under section 68 and interest expenses are not justifiable. Thus, the assessee succeed on legal issue as well as on merit. 8. In the result, the appeal of the assesseeis allowed. Order was pronounced in the open Court on 22/07/2025 at the time of hearing. Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated22/07/2025 Biswajit 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 "