DCIT CC- 1(3), AHMEDABAD V. JANKHIT CHANDULAL PRAJAPATI, AHMEDABAD

ITSSA 121/AHD/2023

AI Insights

The case involves appeals by the Revenue against the order of the CIT(A), Ahmedabad, which deleted the additions made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, concerning unexplained cash credits received by the assessee from various companies. The Assessing Officer had treated these transactions as accommodation entries based on a search operation that revealed digital data showing large credits from several entities. The CIT(A) found no incriminating material to support the additions, leading to the Revenue's appeal. The Tribunal found that the CIT(A) had not examined the merits of the additions and directed a re-examination of the repayments of loans and advances by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714198 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-08-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Assessment Year: 2013-2014
• Other Referred Cases: K. Krishnamurthy vs. DCIT, PCIT vs. Abhisar Buildwell (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: NUPUR SHAH
• Keywords: Set aside; Unexplained cash credit; Income from undisclosed sources; Accommodation entries; Loose papers
• Section: 132; 153A; 68; 131

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 Deputy Commissioner of Income Tax, Central Circle – 1(3), Ahmedabad Room No.304, 3rd Floor, Aayakar Bhavan, Asharam Road, Ahmedabad – 380 009. Vs. Jankhit Chandulal Prajapati, 66, Pushpak Bungalow, Iscon-Ambli, Ahmedabad – 380 058. [PAN – ACCPP 5290 M] (Appellant) (Respondent) Assessee by Ms. Nupur Shah, AR Revenue by Shri R.P. Rastogi, CIT-DR Date of Hearing 29.07.2025 Date of Pronouncement 08.08.2025 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: These two appeals are filed by the Revenue against the common order of CIT(A), Ahmedabad dated 25.05.2023 for the Assessment Years (A.Y.) 2013-14 & 2014-15 in the proceedings under Section 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The brief facts of the case are that a search under Section 132 of the Act was conducted in Popular Group of cases on 08.10.2020, in which the premises of the assessee was also covered. Thereafter, proceeding under Section 153A of the Act was initiated in the case of the assessee Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 2 of 9 for different years. In the course of search, various loose papers and digital data was found. On verification of the digital data seized from the premises of the assessee, it was found that the accounts were maintained in Tally Software. Further, in the said software data, large amounts of credits from several entities, during the period from F.Y. 2012-13 to F.Y. 2019-20, in the form of unsecured loans and amounts received against Banakhat, were found appearing. The list of eleven companies, from which loans and amounts against Banakhat totalling to Rs.35,56,77,701/- was received, is given in the assessment order. On further verification, it transpired that all the eleven companies from which loans/Banakhat amounts received, were registered with RoC, Kolkata. Further, Kolkata Directorate had carried out search and survey action against entry operators, who were operating these companies, and the entry operators had accepted in their statements that these companies were utilised to launder black money and to enable the beneficiaries to introduce their unaccounted incomes by way of unsecured loans and shares premium entries. The Assessing Officer had referred to the database of the shell companies shared by the Kolkata Wing in the assessment order and it was found that all the eleven companies were appearing in the said database. The Assessing Officer has also reproduced statement of Shri Beni Prasad Lahoti, an entry operator, who had explained the modus operandi. On the basis of this information, the Assessing Officer held that the entire amount of Rs.35,56,77,701/- received by the assessee from these 11 companies was accommodation entry obtained in lieu of cash payment. In the course of assessment proceedings, the Assessing Officer had also issued commission under Section 131 of the Act to the Investigation Wing, Calcutta to cause enquiry in respect of these companies. It was found that none of the companies were found in Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 3 of 9 existence at their registered addresses. Further, a statement of some of the Directors of the companies was also recorded, who had expressed their ignorance to the entire transactions. On the basis of these enquiries and the information available on record, the Assessing Officer had held that the entire amount of Rs.35,56,77,701/- received as loan and advances against Banakhat was unexplained cash credit and accordingly the Assessing Officer had made additions under Section 68 of the Act in the following three years: - Assessment Year Amount 2013-14 Rs.24,49,94,071/- 2014-15 Rs.10,00,00,000/- 2018-19 Rs. 1,06,83,630/- Total Rs.35,56,77,701/- 2.1 In addition, the Assessing Officer had considered the commission payment at the rate of 2% for obtaining the accommodation entry and separate addition in this respect was also made. The interest paid by the assessee on these loans/advances was also disallowed by the Assessing Officer. 3. Aggrieved with the orders of the Assessing Officer, the assessee had filed an appeal with the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the additions as made by the Assessing Officer were deleted. 4. Now the Revenue is in appeal before us. We will first take up the appeal in IT(SS)A Nos.121/Ahd/2023 for the A.Y. 2013-14. The following grounds have been taken by the Revenue in this appeal: - Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 4 of 9 “A) In the facts and on the circumstances of the case, Ld. CIT(A) erred in deleting the addition on account of accommodation entries of Rs.24,49,94,077/-, without appreciating facts and evidences e.g. documents, digital data that were seized during the search proceedings and the same were explained in the assessment order on the basis of such additions were made. B) In the facts and on the circumstances of the case, Ld. CIT(A) erred in deleting the addition made on account of unexplained expenses of Rs.48,99,881/- as such expenses were incurred towards accommodation entries.” 5. Shri R.P. Rastogi, Ld. CIT-DR submitted that the Ld. CIT(A) did not examine the additions made by the Assessing Officer on its merit. He explained that all the additions were deleted on technical ground that the additions were not based on any incriminating material found and seized during the course of search. The Ld. CIT-DR explained that this finding of the Ld. CIT(A) was not correct as the Assessing Officer had discussed in details about various materials which were found in the course of search. The Ld. CIT-DR has taken us through the assessment orders to explain the various materials which were considered by the Assessing Officer while making the addition. The Ld. CIT-DR also relied upon the decision of Hon’ble Supreme Court in the case of K. Krishnamurthy vs. DCIT, 171 taxmann.com 413 wherein the Hon’ble Court has held that the documents found in the course of search does not mean documents found in the assessee’s premises alone during the search. 6. Per contra, Ms. Nupur Shah, Ld. AR of the assessee submitted that in the course of search at the premises of the assessee, only digital data in Talley software was seized, which represented regular books of accounts of the assessee. Further, that all the loans and advances taken by the assessee were duly disclosed in the said digital data. Thus, no incriminating material was seized from the assessee vis-a-vis the loans Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 5 of 9 and advances duly disclosed in the accounts of the assessee. The Ld. AR submitted that in view of these facts, the Ld. CIT(A) had rightly held that the addition was made de hors any incriminating material found and seized during the course of search. She contended that there was no direct nexus with the incriminating material found during the search in the case of the assessee with the additions as made by the Assessing Officer. The Ld. AR further submitted that the advance received for sale of land as per the Banakhat was subsequently refunded to the concerned party as the sale could not materialise. Further, the loans taken by the assessee were also returned and amounts repaid to the concerned parties in the subsequent year. In view of these facts, there was no basis to hold that the loans and advances were accommodation entries. The Ld. AR, therefore, strongly supported the order of the Ld. CIT(A). 7. We have considered the rival submissions. It is found that the Ld. CIT(A) has not examined the merits of the additions as made by the Assessing Officer but deleted the additions on technical ground that the additions were not based on any incriminating material found from the assessee during the course of search. The Ld. CIT(A) has relied upon the decision of Hon’ble Supreme Court in the case of PCIT vs. Abhisar Buildwell (P.) Ltd. wherein it was held that no addition can be made by the Assessing Officer in the absence of any incriminating material found in the course of search. In fact, the word “incriminating” is nowhere defined under the Income Tax Act. The provision of section 153A of the Act, only refers to books of accounts or other documents or assets or evidences found during the search and which has a bearing on the total income of the assessee. The dictionary meaning of the word “incriminating” is “making it seem that someone is guilty, especially of a crime”. Therefore, Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 6 of 9 any evidence found during the search, which has a bearing on the income of the assessee and which is not correctly disclosed to the Department, will be in the nature of ‘incriminating material’. Such incriminating material found in the course of search can be any form of evidence such as a document, an entry in the books of accounts, an asset, a statement given on oath, absence of any fact claimed earlier but not found during the course of search etc. Any fact or evidence which suggests that documents/transactions claimed or submitted in any old proceedings were not genuine, fulfilling the ingredients of undisclosed income, shall constitute an incriminating material. 8. Hon’ble Supreme Court in the case of K. Krishnamurthy (supra) has explained the meaning of expression “found in the course of search”. It will be relevant here to reproduce the observations of the Hon’ble Court which is as under: - “40. The argument that the said transactions had not been found in the search at the Appellant's premises but had been found due to 'copies of sale deeds collected from the society' cuts no ice with this Court as the sale deeds had been collected as a result of the search and in continuation of the search. This Court is of the view that as the causation for collecting the sale deeds from the Society was the search at the Appellant's premises, it cannot be said that the said documents were not found in the course of the search. 41. Further, this Court is of the opinion that the expression 'found in the course of search' is of a wide amplitude. It does not mean documents found in the assessee's premises alone during the search. At times, search of an assessee leads to a search of another individual and/or further investigation/ interrogation of third parties. All these steps and recoveries therein would fall within the expression 'found in the course of search’.” 9. The Hon’ble Apex Court in the case of K. Krishnamurthy (supra) has held that the material found in the course of search does not mean documents found during the search from the assessee’s premises alone. Even the materials found from the premises of the other individual or Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 7 of 9 unearthed during further investigation pursuant to search or interrogation of third parties, all constitute materials found in the course of search. In the present case, the Assessing Officer has relied upon not only entries appearing in the digital data seized from the premises of the assessee but also on the evidences found in the course of search by Kolkata Directorate at the premises of entry operators and also the statement of one such entry operator Shri Beni Prasad Lahoti. Further, the Assessing Officer had caused further enquiry in the case of assessment proceedings by issuing commission under Section 131 of the Act, the finding of which were also relied upon for making the addition. As held by the Hon’ble Apex Court, the materials collected as a result of search, in continuation of the search and in the course of enquiries made pursuant to the search - all fall within the expression “found in the course of search”. We find that the documents, digital data, statements and enquiry reports referred by the AO in the assessment order, all fall within the scope of materials “found in the course of search” as enunciated by the Hon’ble Supreme Court. In view of this fact, we are of the considered opinion that the Ld. CIT(A) was not correct in deleting the additions only on the ground that no incriminating material was found and seized during the course of search. The finding of the Ld. CIT(A) that additions made by the AO were dehors any incriminating material found in the course of search is, therefore, reversed. 10. It is found that the Ld. CIT(A) did not examine the additions made by the Assessing Officer on merits. The Assessing Officer had treated the entire loans/advances taken from 11 Kolkata based companies as accommodation entries. On the other hand, the assessee has contended that the entire loan and advance was subsequently repaid to the Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 8 of 9 concerned parties and, therefore, these transactions cannot be considered as accommodation entries. The assessee has also filed year- wise chart as per which loan/advance of Rs.24.15 Crores was received during the A.Y. 2013-14 from nine companies, out of which Rs.4.15 Crores was repaid during the same year. Further, fresh loan of Rs.10 Crores was received in A.Y 2014-15 and the total repayment made during that year was Rs.21,09,64,071/-. The assessee has brought on record copy of ledger account and confirmations from the parties in this regard in the paper-book. The contention of the assessee that the loans and advances were repaid was not verified either by the AO or by the Ld. CIT(A). In our considered opinion, this aspect has a direct impact on the treatment of transactions as accommodation entries. If the loans and advances taken from 11 Kolkata based Companies were all repaid, the transaction cannot be held as accommodation entry. In the interest of justice, we, therefore, deem it appropriate to set aside the matter to the file of the Ld. CIT(A) with direction to verify the repayment of loans & advances as contended by the assessee and, thereafter, pass appropriate order in accordance with law in light of our observations in the preceding part of the paragraph. 11. In the result, the appeal of the Revenue is allowed for statistical purpose. IT(SS)A Nos.122/Ahd/2023 for the A.Y. 2014-15 12. The grounds taken by the Revenue as well as the facts of the case in IT(SS)A Nos.122/Ahd/2023 for the A.Y. 2014-15 are identical to IT(SS)A Nos.121/Ahd/2023 for the A.Y. 2013-14. Therefore, the decision taken in IT(SS)A Nos.121/Ahd/2023 is applicable mutatis mutandis to the appeal in IT(SS)A Nos.122/Ahd/2023 for the A.Y. Printed from counselvise.com IT(SS)A Nos.121 & 122/Ahd/2023 Assessment Years: 2013-14 & 2014-15 DCIT vs. Jankhit Chandulal Prajapati Page 9 of 9 2014-15 as well. Accordingly, the appeal of Revenue for this this year is also allowed for statistical purpose by setting aside the matter to the file of Ld. CIT(A) with a direction to examine the matter on merits and re-adjudicate the additions made by the AO in this year. 13. In the final result, both the appeals of the Revenue are allowed for statistical purpose. Order pronounced in the open Court on this 8th August, 2025. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 8th August, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "