DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 3(2), KOLKATA V. ESKAG SANJEEVANI PVT. LTD., KOLKATA

ITA 1638/KOL/2024

AI Insights

The case involves appeals by the Deputy Commissioner of Income Tax (DCIT) against ESKAG Sanjeevani Pvt. Ltd. concerning the assessment years 2019-20 and 2020-21. The primary issue was the addition of \\u20b94,04,50,000 as unexplained credit under section 68 of the Income Tax Act, which the Assessing Officer (AO) had made following a search operation. The CIT(A) later deleted this addition, a decision which the Tribunal upheld. The Tribunal noted that the assessee had provided comprehensive documentation to substantiate the loans received, including details of the lenders and evidence of repayments, which the AO failed to adequately contest or investigate further.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 780441 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2019-2020
• Appeal Filed On: 05-08-2024
• Other Referred Cases: Iris Clothings Ltd vs DCIT, Principal Commissioner of Income-tax v. Sreeleathers, Principal Commissioner of Income-tax v. Ambe Tradecorp (P.) Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P.N. BARNWAL
• Assessee Lawyers: RAJEEVA KUMAR; PASSING A VERY CRYPTIC; NON
• Keywords: Set aside; Question of law; Corroborative evidences; Unexplained cash credit; TDS; Accommodation entries; Bogus
• Section: 153A; 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI SONJOY SARMA, JM ITA No. 1638 & 1639/KOL/2024 (Assessment Years: 2019-20 & 2020-21) DCIT 110 Shantipally, Aaykar Bhawan Poorva, EM By pass, Kolkata-700107, West Bengal Vs. ESKAG Sanjeevani Pvt. Ltd. P-48, Baghbazar, SO Kolkata, Kolkata-700107 West Bengal (Appellant) (Respondent) PAN No. AABCE9600J Assessee by : Shri Rajeeva Kumar, AR Revenue by : Shri P.N. Barnwal, DR Date of hearing: 11.09.2025 Date of pronouncement: 08.10.2025 O R D E R Per Rajesh Kumar, AM: These are appeals preferred by the assessee against the orders of the Commissioner of Income-tax (Appeals), Kolkata-21 (hereinafter referred to as the “Ld. CIT(A)”] dated 28.05.2024 for the AY 2019-20. 02. At the outset, we observe from the appeal folder that there are delay of 9 & 8 days in ITA No. 1638 & 1639/KOL/2024 respectively in filing the appeals by the department and in support of this condonation petitions were filed. It was stated in the condonation petitions that the delay had occurred due to obtaining the administrative approvals from the competent authorities and accordingly, the delay may be condoned. The ld. AR, on the other hand, did not oppose the condonation of delay. Printed from counselvise.com Page | 2 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 Considering the reasons cited before us, we are inclined to condone the delay and admit the appeals for hearing. 03. The issue raised in ground no. 1 is against the order of ld. CIT (A) deleting the addition of ₹4,04,50,000/- as made by the ld. AO u/s 68 of the Act in respect of unsecured loans taken during the year. 04. The facts in brief are that a search action was conducted on the health care group on 05.02.2021 and the assessee was one of the related entities. The assessee filed the return of income u/s 139(1) of the Act on 19.11.2019, declaring total income at ₹ nil. The assessee was issued notice u/s 153A of the Act on 28.10.2021, which was not complied with by filing any return of income. Thereafter the statutory notices along with questionnaire were duly issued and served upon the assessee and also replied by filing the requisite evidences/ details/ documents as asked by the ld. Assessing Officer. The ld. AO observed that during the year the assessee has taken unsecured loans from Asha apartments Pvt Ltd. amounting to ₹4,04,50,000/-on which interest of ₹31,27,420/- was paid during the year. The assessee was accordingly requested to produce the director of the lender company for examination and verification, however, the assessee failed to do so and thus, the ld. AO noted that the identity, genuineness of the transactions in respect of the above party remained unverified. The ld. AO issued notice u/s 133(6) of the Act and the lender / creditor however, M/s Asha Apartments Pvt Ltd did not respond. The ld. AO also discussed the balance sheet of the lender thereby noting that the lender has hardly any income and recurring income to advance made to the assessee. The relied heavily on statement of Shri Manohar Lal Nangalia recorded on 14.11.2014, by the investigation wing, wherein he confirmed that the company is a shell company controlled by him for the purpose of Printed from counselvise.com Page | 3 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 accommodation entries Finally, the amount of loan received from the said party was treated as unexplained credit and added to the income of the assessee. Similarly, the interest paid on the said loan of ₹31,27,427/- was also added to the income of the assessee. 05. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee on merit by observing and holding as under: - “Ground No. 2 This ground agitates against the additions made by the AO on merits of the case and that the AO did not take cognizance of the detailed submission made by the assessee regarding the loans received wherein copies of the requisite documents such as name, address, PAN, loan confirmation, MCA Data, Audited Accounts for the relevant F.Y, ITR for the relevant F.Y & bank statement etc of the lender company were submitted by the appellant. The appellant during the course of appellate proceedings has submitted copies of ledger accounts and the relevant bank statements to substantiate that the loans to the tune of Rs.4,04,50,000/- taken from M/s Asha Apartments Pvt. Ltd was repaid in subsequent years. The A/R of the appellant has drawn attention to the fact that the said loan from M/s Asha Apartments Pvt. Ltd was a running loan wherein an amount of Rs. 93,00,000/- was taken during the previous F.Y: 2017-18. During the F.Y: 2018-19 pertaining to AY: 2019-20, besides taking a further amount of Rs.4,04,50,000/- as loan, the appellant had repaid an amount of Rs. 1,57,47,589/-, which is even before the search was conducted. The closing balance of such loan from M/s Asha Apartments Pvt. Ltd on 31.03.2019 stood at Rs. 3,78,13,378/-. During the next F.Y also the appellant made a payment of Rs. 34,79,930/-. The appellant has adduced evidences to substantiate that the principal amount of the loan was repaid in full during the F.Y: 2023-24. The appellant in its submissions has also argued that the lender had sufficient own funds to advance unsecured loans to the assessee and in support of the same the appellant has adduced the audited accounts of the lender company for the AY: 2019-20. From the audited accounts the following details of the net own funds of the lender and the loans advanced by them were observed: The appellant has also adduced evidences before the AO to substantiate that the loans were taken through banking channels and was repaid in full through banking channels Printed from counselvise.com Page | 4 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 as well. The AO has nowhere brought on record that the lender company had not shown such interest income in its return of income for the AY: 2019-20. The AO has also not been able to put forward any evidence such as fund flow statement or cash flow statement to lend credence to his claim that it was the appellant`s own unaccounted funds which was being brought back through the lender company in the garb of unsecured loans. The statement of Manohar Lal Nangalia being relied upon by the AO was recorded 5 years prior to such transaction and cannot be related to the instant transaction of unsecured loans during the FY: 2018-19. Since the appellant had filed all the relevant documents to establish the identity and creditworthiness of the lender as well as the genuineness of the transactions, the view of the AO that the appellant failed to discharge his onus in establishing the identity, creditworthiness of the lenders and the genuineness of the transaction, cannot be agreed upon. I find that a very similar matter has been adjudicated by the Hon. ITAT “ A” Bench in the case of Iris Clothings Ltd vs DCIT for AY: 2013-14 in ITA No.1015/Kol/2023 wherein the Hon. ITAT concluded that the assessee has filed all the evidences concerning transactions to establish the identity and creditworthiness of the lenders and to prove the genuineness of the transactions and the Assessing Officer has not carried out any further verification, the addition cannot be made in the hands of the assessee. The AO must examine the issue in the cases of creditors and make the addition there and not in the hands of the assessee. The assessee has discharged its initial burden and the burden shifted on the Assessing Officer to enquire further into the matter by filing the evidences, which he failed to do. Accordingly, the Hon. ITAT set aside the order of CIT(Appeals) and deleted the addition. The relevant part of the judgement is being reproduced below: “8. After hearing the rival contentions and perusing the relevant material placed before us, we find that the assessee has raised loans from twelve entities, the details of which were given in the assessment order in para 3. We note that the assessee has also paid interest on these loans after deduction of tax at source and the details were also given in the same table. The tax deducted at source was also deposited in the Government Treasury. We would like to note that these loans were repaid through banking channel even prior to passing of the assessment order by the ld. Assessing Officer. The assessee has filed copies of ITR acknowledgments, master-data of the lenders, audited financial statements, Memorandum & Article of Associations, copies of bank statements, loan confirmations and ledgers showing receipt and refund of loans alongwith TDS details in respect of each of the lenders, which are filed in the paper book from pages no. 11 to 718. We also note that the AO issued notices under section 133(6) of the Act to twelve parties which could only be served to six parties and remaining six cases, the notices were returned back unserved. We note that the six parties, to whom notices were served, have duly responded and replied with all the requisite details. The ld. Assessing Officer has made the addition on the basis of the statements of three persons, namely Shri Shri Abhishek Chokhani, Shri Sanjay Kumar Drolia and Shri Praveen Kumar Agarwal and stated that they have arranged the loans from four parties. The ld. Assessing Officer has disbelieved the transactions on the basis of the statements of three persons, who were stated to have arranged loans four parties mentioned at serial nos. 1, 2 &6 and 11 and reached a generalized conclusion even on the remaining parties. The ld. CIT(Appeals) has simply dismissed the appeal of the assessee by passing a very cryptic and non- Printed from counselvise.com Page | 5 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 speaking order. Now the issue before us is whether the assessee has duly discharged his burden by filing the aforesaid evidences before the authorities or not. We note that the assessee has filed all the evidences qua these lenders along with their ITRs, confirmation certificates, names, addresses, PANs banking statements showing the receipt and repayment of loans along with their Master Data. The ld. Assessing Officer has relied only on the statements of three parties as stated above, who according to the AO have arranged the loans from four parties mentioned at serial nos. 1, 2 & 6 and 11. In our opinion, the assessee has duly discharged its onus by filing evidences before the ld. Assessing Officer and ld. Assessing Officer has acted on the basis of statements of three persons, which lacks evidentiary value in absence of any substantive and corroborative evidences being brought on records. The ld. AR stated that where the AO has any doubt about the lenders where the assessee has furnished all the evidences before the AO, then the matter should be looked into the hands of the creditors and not the assessee. The Hon. ITAT has relied upon the judgement of the Hon. Jurisdictional High Court in [2022] 143 taxmann.com 435 (Calcutta) HIGH COURT OF CALCUTTA, Principal Commissioner of Income-tax v. Sreeleathers wherein the Hon. Court held: “It is not enough for the assessing officer to say so but he should record reasons inwriting as to why the documents which were filed by the assessee along with the reply dated 22-12-2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A).” The Hon. ITAT has further relied upon the judgement of the Hon. Gujarat High Court in its judgement in the case of Principal Commissioner of Income-tax v.AmbeTradecorp (P.) Ltd[2022] 145 taxmann.com 27 (Gujarat) wherein the Hon. Court held that: “3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act. 3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions. 3.2 The appellate authority observed that, \"In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information.\" Printed from counselvise.com Page | 6 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt. The accounts were finally settled with the repayment of the loan to the lender companies. 3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and also in Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC), to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded thatnotice under section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. 3.5 While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine. 4. Learned advocate for the appellant attempted to emphasize that for the purpose of application of section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied. 5.As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. 6. The Tribunal rightly recorded in para 29 of the judgment, \"Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A. \" 7. For the reasons recorded above, no question of law muchless substantial questions arises in this appeal. It stands meritless and accordingly dismissed. “In the instant case also, besides submitting the relevant documents to establish the necessary documents to establish the identity, creditworthiness of all the lender as well as the genuineness of the transactions, the loans were also repaid by the assessee in Printed from counselvise.com Page | 7 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 respect of M/s Asha Apartments Pvt. Ltd.in the subsequent years and therefore the assessee cannot be said to be the beneficiary of the loan received. Owing to the above discussion, and the judgements discussed above, the action of the AO intreating the unsecured loans to the tune of Rs.4,04,50,000/- as bogus cannot be sustained and stands deleted. This ground is therefore allowed.” 06. The ld. DR relied on the decision of Hon'ble Delhi High Court in case of Seema Jain Vs. ACIT (2018) 406 ITR 411 (Delhi) vide order dated 11.07.2018, wherein it has been held that mainly because the loan transaction was squared be in the next financial year would not establish the transactions to be genuine and not bogus. Similarly, the ld. DR relied on the decision of co-ordinate benches in the case of (2022) 142 taxmann.com 383 (Mumbai-Trib), wherein in para no.11, the co-ordinate Bench has held that payment through banking channel is not sufficient. 07. The ld. AR strongly argued that when the two constructions are there then the construction favorable to the assessee has to be followed as has been held by the Hon’ble Apex Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC). 08. After hearing the rival contentions and perusing the materials available on record, we find that in this case the assessee has borrowed money from various lenders including Asha Apartments Pvt Ltd. for which the assessee filed all the details comprising names, addresses, PANs, audited balance sheets, confirmations, bank statements, etc. to prove the identity, creditworthiness of the lenders and genuineness of the transactions. We note that the ld. AO in order to independently verify the transactions issued notice u/s 133(6) of the Act to all the lenders who replied the said notices except Asha Apartments Pvt Ltd and thus, the ld. AO made an addition in respect of said party of ₹4,04,50,000/- along with interest of ₹34,79,930/- on the ground that Printed from counselvise.com Page | 8 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 the party is not having any creditworthiness to lend the money to the assessee as it has hardly any fixed assets, recurring income, etc. to lend the money. We note that the ld. CIT (A) recorded a finding on page no. 57 that the assessee has been borrowed from the said party earlier year also i.e. in F.Y. 2017-18 when the assessee borrowed ₹93 lacs from the said party. Similarly, during the year under consideration 2019-20, the assessee made further borrowing of ₹4,04,50,000/- and repaid ₹1,57,57,589/- during the year even before the search was conducted on the assessee and the closing balance was ₹3,79,13,378/- . The ld. CIT (A) further recorded a finding of fact that appellant has furnished evidences to substantiate that principal loan was repaid in full during the F.Y. 2023-24. The ld. CIT (A) also noted that the lender has advanced money to the tune of 16.74% of his net worth at page no.58. The ld. CIT (A) noted that the loan was received through banking channel and repaid full through banking channel as well. Further, the ld. CIT (A) noted that the ld. AO has not given any finding qua the appellant own funds being brought back through lender company in the garb of unsecured loans. The ld. CIT (A) noted that the statement relied upon by the ld. AO of Manohar Lal Nangalia was recorded on 5 year prior to the date of transaction and cannot be related to the instant transactions of unsecured loan during the F.Y. 2018-19. The ld. CIT (A) further noted that the assessee has discharged its onus by furnishing all the details/ evidences qua the said lender which then shifts to the Revenue to carry out further enquiries. The ld. CIT (A) also relied on the decision of the co-ordinate bench in case of Iris Clothings Ltd vs DCIT for AY: 2013-14 in ITA No.1015/Kol/2023 and the decision of the Hon'ble Calcutta High Court in case of PCIT Vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta), wherein it has been held that where the assessee filed all the evidences qua the lenders and AO has not carried Printed from counselvise.com Page | 9 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 out any further investigation, the addition cannot be made as the assessee has discharged its initial burden and burden shift to the Revenue. Similarly, the ld. CIT (A) at page no.16 relied on the decision of Gujarat High Court in case of Principal Commissioner of Income-tax v. Ambe Tradecorp (P.) Ltd [2022] 145 taxmann.com 27 (Gujarat), wherein the Hon'ble Gujarat High Court has held that where money borrowed by the assessee was repaid by the assessee in the subsequent year then the assessee cannot said to be beneficiary of any accommodation entries and no addition can be made u/s 68 of the Act. Therefore, the ld. CIT (A) has passed a very reasoned and speaking order relied on the above decisions. In our opinion, the assessee has furnished all the evidences before the ld. AO qua the lender and the ld. AO has not pointed out any defect or deficiency and also has not carried out any further investigation on the issue. Therefore, In our opinion , the assessee has discharged its onus of proving the identity, creditworthiness of the lenders and the genuineness of the transactions and therefore the addition made by the AO is wrong and cannot be sustained. We also note that the entire loan was repaid in the current year as well as in the subsequent year. Therefore, we are inclined to uphold the order of the ld. CIT (A) by dismissing the appeal of the assessee. Ground no.1 of the Revenue’s appeal is dismissed. 09. The issue raised in ground no.2 is in respect of interest paid on the loan from M/s Asha Apartments Pvt Ltd. and is consequential to ground no.1, where we have upheld the order of the ld. CIT (A). Therefore, ground no.2 of the Revenue is dismissed. 1639/KOL/2024 010. The issue raised in this appeal is in respect of disallowance of interest and is identical to one as decided by us in ITA No. Printed from counselvise.com Page | 10 ITA No. 1638 & 1639/KOL/2024 ESKAG Sanjeevani Pvt. Ltd; A.Ys. 2019-20 & 2020-21 1638/KOL/2024. Accordingly, our decision would, mutatis mutandis, apply to this appeal of Revenue in ITA No. 1639/KOL/2024. Hence, the appeal of Revenue in ITA No. 1639/KOL/2024 is dismissed. 011. In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 08.10.2025. Sd/- Sd/- (SONJOY SARMA) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:08.10.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "