DY COMMISSIONER OF INCOME TAX 2 1 1 , MUMBAI V. CENTRUM FINANCIAL SERVICES LIMITED, MUMBAI

ITA 8150/MUM/2025

AI Insights

The case involves the Deputy Commissioner of Income Tax-2(1)(1) as the appellant and Centrum Financial Services Limited as the respondent. The dispute centered on an addition of Rs. 40 lakhs made by the AO to the assessee's income, alleging it to be an accommodation entry. The assessee contended that the amount represented a repayment of a loan previously given to M/s. Shipra Fabrics Private Limited. The Ld.CIT(A) accepted the assessee's explanation and deleted the addition, a decision which the Revenue appealed against in the Tribunal. The Tribunal dismissed the Revenue's appeal, supporting the Ld.CIT(A)'s findings.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 847743 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Mumbai
• Assessment Year: 2010-2011
• Appeal Filed On: 28-11-2025
• Other Referred Cases: CIT vs. Prashant (P), ITO vs. M/s. Celebrity Lifespace Pvt. Ltd., ITO vs. Ramanbhai Jagabhai Bharwad, ACIT vs. Evermore Stock Brokers (P.) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIRABHADRA MAHAJAN
• Assessee Lawyers: RAVIKANT PATHAK; INVOKING
• Keywords: Additional evidence; Reassessment proceedings; Capital Gains; Search and seizure; Accommodation entries; Source of fund; Competent authority; Bogus Share capital; Reason to believe; Bogus
• Section: 148; 143(3); 132; 68; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “C” BENCH : MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No. 8150/Mum/2025 Assessment Year : 2010-11 The Deputy Commissioner of Income Tax-2(1)(1), 561, Aayakar Bhavan, M.K.Road, Mumbai-400020. vs. Centrum Financial Services Limited, 2nd Floor, Bombay Mutual Building, Dr.D.N. Road, Fort, Mumbai-400001. PAN : AAFCS9489P (Appellant) (Respondent) For Assessee : Shri Ravikant Pathak For Revenue : Shri Virabhadra Mahajan, Sr.DR Date of Hearing : 18-02-2026 Date of Pronouncement : 23-03-2026 O R D E R PER VIKRAM SINGH YADAV, A.M : This is an appeal filed by the Revenue against the order of the Learned ADDL/JCIT(A)-6, Kolkata [„Ld.CIT(A)‟], dated 15-09-2025, pertaining to Assessment Year (AY) 2010-11. 2. Briefly, the facts of the case are that the assessee company which is in the business of non-banking finance, filed its original return of income on 12-10-2010, declaring total income of Rs.43,27,258/-. Subsequently, the AO got information from Investigation Wing that during the course of search and seizure action in case of Shri Vipul Vidur Bhatt, it was found Printed from counselvise.com 2 ITA No. 8150/Mum/2025 that he used to provide bogus entries in the form of capital gains, bogus share capital etc., to beneficiaries in lieu of commission. In his statement, he has confessed that he was managing and controlling the activities/affairs of several companies, through which he used to provide entries in the form of loan etc., and one of such companies was M/s. Shipra Fabrics Private Limited and the assessee was one of the beneficiaries, who have received unsecured loan of Rs. 40 lakhs from the said entity. The AO accordingly held that he has reason to believe that the assessee has concealed his income to that extent and reasons were recorded and notice u/s. 148 of the Act was issued after seeking approval from the competent authority, dt. 31-03-2017. In response, the assessee requested to treat the original return of income filed as return in response to notice u/s. 148 of the Act. Subsequently, notices were issued calling for necessary information and documentation and in response, the assessee submitted that it has not received any accommodation entry and the amount represents loan advanced in earlier year and repaid during the year and certain documentation were submitted. However, the same was not found acceptable and addition of Rs. 40 lakhs was made in the hands of the assessee in respect of accommodation entries by way of unsecured loan taken from M/s. Shipra Fabrics Private Limited and assessment order was passed u/s. 143(3) r.w.s. 147 of the Act, vide order dt. 18-12-2017. 3. The assessee thereafter carried the matter in appeal before the Ld.CIT(A). During the course of appellate proceedings, it was submitted that the assessee has not taken any loan from M/s. Shipra Fabrics Private Limited, in fact, the amount which has been received was towards repayment of loan which was advanced by the assessee to M/s. Shipra Fabrics Private Limited in financial year 2008-09 relevant to AY. 2009-10 and in support of its contentions, the assessee submitted certain Printed from counselvise.com 3 ITA No. 8150/Mum/2025 additional documentation. The Ld.CIT(A) admitted the additional documentation in terms of Rule 46A and has also called for the remand report from the AO and after considering the same, has deleted the addition so made by the AO and the relevant findings of the Ld.CIT(A) are contained at para No. 5.5, which reads as under: “5.5 I have analysed the remand report submitted by AO and rejoinder of the appellant. The following points emerge out:- 1. The AO has reiterated that fresh evidences are not maintainable as per Rule 46A of I.T. Rules. However, I have already decided, supra, to admit these evidences after considering the circumstances involved. 2. On merits, it is clear that AO has neither examined the fresh evidences/documents filed by appellant nor allowed appellant any opportunity of hearing. In view of the same, I decide the issue on merit as under.- 1. The impugned loan of Rs.40,00,000/- was paid by appellant to SFPL on 30.03.2009 i.e. the year immediately preceding the year in this appeal. 2. The loan confirmation issued by SFPL and ledger of SFPL in appellant's books for the FY-2008-09 confirms this. 3. The bank statement of SFPL also confirms the credit of Rs.40,00,000/- on 30.09.2009. Narration in bank statement reveals it is from the appellant. 4. The said loan was repaid by SFPL to the appellant in the relevant year i.e. FY-2009-10. 5. The loan confirmation issued by SFPL and ledger of SFPL in appellant's books for the FY-2009-10 confirms this. 6. The bank statement of SFPL also confirms the debit of Rs. 10,00,000/- each on 07.06.2010, 08.06.2010, 09.06.2010 and 17.06.2010. Narration in bank. statement reveals these are paid to the appellant. Appellant's claim that Rs.40,00,000/- received by them from SFPL during the AY- 2010-11 are not any new loan but repayment of loan advanced by them to SFPL in the earlier year is therefore correct. The bank statement of SFPL also indicated that they had sufficient funds (and not in the form of any cash deposits) immediately before debits of all the four amounts of Rs. 10,00,000/- in the name of appellant. The appellant was not supposed to explain the source of Rs.40,00,000/- in the hands of SFPL as the requirement of establishing source of source in relation to loan transaction was introduced in section 68 of the Act only with effect from AY- 2023-24. Since the appellant had discharged its onus of establishing the genuineness of the loan transaction with SFPL as also the identity and creditworthiness of the said party, it was not justified on the part of the AO to add it as being bogus and in the nature of accommodation entry. The addition of Rs.40,00,000/- is therefore directed to be deleted and this ground of appeal allowed.” Printed from counselvise.com 4 ITA No. 8150/Mum/2025 4. Against the said findings and the order of the Ld.CIT(A), the Revenue has filed the present appeal before us. 5. During the course of hearing, Ld. DR submitted that the decision of the Ld. CIT(A) is not acceptable for the reason that the Ld.CIT(A) ignored provisions of Rule 46A of the Income-tax Rules, 1962 before accepting the additional evidences as the assessee did not fulfill any of the conditions which are mandatory to fulfill for acceptance of additional evidence by First Appellate Authority. It was submitted that the Ld.CIT(A) ignored the fact that Mr. Vipul Vidur Bhatt, Director of M/s. Shipra Fabric Pvt. Ltd. has accepted in his written statement recorded during the search and survey action u/s. 132 of the Act that M/s. Shipra Fabric Pvt. Ltd. is nothing but a paper/bogus company, which provides bogus accommodation entries to other beneficiaries. Moreover, during the reassessment proceedings, the assessee was given ample opportunities to prove genuineness of the transactions done with M/s. Shipra Fabric Pvt. Ltd. However, the assessee could not submit anything supported by the evidences which may prove that the transaction was bonafide. The only argument of the assessee company was that the transactions were done through banking channels which is not a sufficient cause to prove the genuineness of the transaction. It was submitted that as discussed by the AO in the assessment order, the payments being made by a/c payee cheques is not proof of genuineness of the loans and it cannot make an otherwise sham transaction genuine. In this regard, the Ld.DR placed reliance on the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Prashant (P) (1994) 121 CTR (Cal) 20, wherein it has inter-alia held that “even payment by account payee cheque is not sacrosanct and it would not make an otherwise non-genuine transaction genuine.” It was further submitted that the Ld.CIT(A) ignored the fact that during the Printed from counselvise.com 5 ITA No. 8150/Mum/2025 assessment proceedings, the AO also issued notice u/s. 133(6) of the Act to M/s Shipra Fabrics Pvt. Ltd. for furnishing details and confirmation of loan transactions which remain uncomplied with. Moreover, the assessee company also failed to provide material evidences supporting genuineness of the transactions. Finally, the Ld.DR submitted that no contemporaneous evidence such as communication regarding negotiation of loan, source of funds, audited accounts of SFPL, Board resolutions, independent third-party corroboration etc., has been provided and argued that practically, no new evidence is submitted, except the payments being made through banking channel. He accordingly supported the order of the AO and submitted that the order of the ld CIT(A) be set-aside and that of the AO be confirmed. 6. In his submissions, the Ld.AR submitted that during the course of appellate proceedings, the assessee has filed confirmation letter from M/s.Shipra Fabrics Private Limited, reflecting loan taken from the assessee, another confirmation letter from the said entity reflecting the repayment of loan to the assessee-company and the relevant extract of the bank statements of M/s. Shipra Fabrics Private Limited, highlighting loan taken in the previous financial year as well as the repayment of loan during the current financial year and a copy of the certificate of incorporation of M/s. Shipra Fabrics Private Limited. It was submitted that the assessee was never asked these documents during the reassessment proceedings, all the assessee was asked was as to why the addition should not be made and the assessee explained the same along with ledger and Books of Account, its bank statement showing payment and repayment of loan and other documents. It was accordingly submitted that since these additional documents were not asked during the reassessment proceedings, the assessee could not submit those documents at the time of Printed from counselvise.com 6 ITA No. 8150/Mum/2025 reassessment proceedings, the same were submitted before the Ld.CIT(A) to supplement the existing documentation to demonstrate the genuineness of the loan transaction. Further, our reference was drawn to the findings of the Ld.CIT(A), which are contained in para 5.3 of the impugned order, wherein the Ld.CIT(A) while admitting the additional evidences, to verify the claim of the assessee that these documents were never asked by the AO, he has examined the Income Tax portal and has recorded his finding that in the notices so issued by the AO, the AO nowhere asked for any confirmation from M/s.Shipra Fabrics Private Limited, bank statements or copy of the ledger accounts. It was further held by the ld CIT(A) that the AO called for details of the loan transaction with 16 other companies but the name of M/s. Shipra Fabrics Private Limited was not mentioned therein and, therefore, the assessee‟s claim was proved to be correct since it was never asked to produce the details of loan transactions with M/s. Shipra Fabrics Private Limited and accordingly, the ld CIT(A) has held that the assessee has sufficient reason to state that it was not allowed to submit the above evidences before the AO during the assessment proceedings and the fresh evidences filed by the assessee were therefore admitted by the ld CIT(A) as per Rule 46A of the I.T. Rules. 7. Regarding the statement of Shri Vipul Vidur Bhatt, it was submitted that firstly, he has nowhere mentioned the name of the assessee, wherein he has provided accommodation entries through the said entity. It was further submitted that Shri Vipul Vidur Bhatt has since retracted his statement on 15-02-2014 and basis that, the Co-ordinate Benches of the Tribunal have decided the matter in other cases. Therefore, much reliance on the statement of Shri Vipul Vidur Bhatt cannot be made. Printed from counselvise.com 7 ITA No. 8150/Mum/2025 8. Regarding ample opportunities provided by the AO, it was submitted that the assessee submitted its explanation, stating that it is a case of repayment of loan by M/s. Shipra Fabrics Private Limited and not a case of loan taken by the assessee from M/s. Shipra Fabrics Private Limited and in this regard, our reference was drawn to the submissions dt. 02-12-2017 wherein the assessee has stated that it has given loan of Rs. 40 lakhs to M/s. Shipra Fabrics Private Limited on 30-03-2009, vide cheque drawn on Ratnakar Bank and against the said loan, the assessee-company has received four cheques, Rs. 10 lakhs each on four occasions which falls in financial year 2009-10 relevant to the impugned assessment year and it was accordingly submitted that the assessee-company has not taken any accommodation entry from M/s. Shipra Fabrics Private Limited, however, the said submissions were not found acceptable to the AO and he has gone merely by the information received from the Investigation Wing and the statement of Shri Vipul Vidur Bhatt recorded u/s. 132(4) of the Act, which has subsequently been retracted by him. 9. It was further submitted that it is not case where the assessee has merely filed bank statements and submitted that the case should be decided looking into the entirety of facts and circumstances of the case and in the instant case as evident, the assessee has given loan to M/s. Shipra Fabrics Private Limited in the preceding financial year and the same has been repaid in the current financial year. These fact are also evident from the ledger accounts in the books of M/s. Shipra Fabrics Private Limited and as well as ledger accounts in the books of the assessee. Further, the bank statements have already been filed and, therefore, merely because the said loan repaid during the subject year, it cannot be said that the assessee has only availed bank loan. It was accordingly submitted that the Ld.CIT(A) has rightly appreciated the Printed from counselvise.com 8 ITA No. 8150/Mum/2025 evidences placed on record and none of the evidences have been rebutted by the Revenue. Therefore, the Ld.AR relied on the findings of the Ld.CIT(A) and further, in support, the Ld. AR placed reliance on the following decisions: i. ITO vs. M/s. Celebrity Lifespace Pvt. Ltd., in ITA No. 6301/Mum/2017 (AY. 2014-15), dt. 05-12-2019; ii. ITO vs. Ramanbhai Jagabhai Bharwad in ITA No. 1834/Ahd/2024 (AY. 2017-18), dt. 23-06-2025; iii. ACIT vs. Evermore Stock Brokers (P.) Ltd., [2024] 158 taxmann.com 211 (Delhi – Trib.) 10. We have heard the rival contentions and perused the material available on record. Admittedly, the case of the assessee was reopened basis information received during the course of search action in case of Vipul Vidur Bhat that the assessee has obtained bogus accommodation entry to the tune of Rs 40,00,000/- from Shipra Fabrics Private Ltd, one of the entities operated by him to provide accommodation entries. During the course of reassessment proceedings, the assessee has contested the same and has submitted that no such accommodation entry has been taken and the transaction in fact represent repayment of loan advanced in the earlier financial year 2008-09 and in support, certain documentation were submitted to demonstrate advancing of loan in the earlier financial year 2008-09 and repayment thereof in the current financial year 2009-10. During the course of appellate proceedings, the assessee reiterated the said position and in support, further documentation has been submitted before the Ld.CIT(A) which we find has been rightly admitted by the Ld. CIT(A). The Ld.CIT(A) after going through the entirety of documentation placed on record has returned a finding that the assessee‟s claim that Rs.40,00,000/- received from Shipra Fabrics Private Ltd during the Printed from counselvise.com 9 ITA No. 8150/Mum/2025 AY.2010-11 is not any new loan transaction but repayment of loan advanced by the assessee to Shipra Fabrics Private Ltd in the earlier year is correct. The said findings have remained unrebutted before us. Further, nothing has been brought on record where the Revenue has disputed the initial transaction by way of advancement of loan to Shipra Fabrics Private Ltd in the earlier financial year. Therefore, we have a situation where the assessee‟s own money advanced to Shipra Fabrics Private Ltd in the earlier financial year has been accepted as a genuine transaction and when the same amount has been repaid and accounted for in its books of accounts in the current financial year, the same has been questioned by the Revenue as a non-genuine transaction holding it to be a bogus accommodation entry which we are unable to appreciate and uphold as the same represents a piecemeal approach on part of the Revenue and a blind reliance on the information initially received from the Investigation Wing without analyzing thereof in light of documentation placed on record by the assessee. The Ld.CIT(A) has also examined the bank statement of Shipra Fabrics Private Ltd and returned a finding that it had had sufficient funds (and not in the form of any cash deposits) immediately before debits of all the four amounts of Rs. 10,00,000/- in the name of assessee. There is thus clear documentation trail which has been established by the assessee in terms of advancing the loan and the repayment thereof through the banking channel, the accounting thereof including interest on such loan in its books of accounts for both the financial years and confirmations thereof by Shipra Fabrics Private Ltd with whom the assessee has carried out such loan transaction. None of the documentation submitted by the assessee have been rebutted by the Revenue by bringing any adverse material on record. Therefore, as far as the assessee is concerned, we find that the assessee has discharged the necessary onus in terms of explaining the nature and source of the credit Printed from counselvise.com 10 ITA No. 8150/Mum/2025 which is its own money which has been received and credited in its books of accounts during the year under consideration and by no stretch of imagination, the principal repayment of loan amount received by the assessee can be brought to tax in the hands of the assessee holding it to be a non-genuine transaction. 11. The decisions of the Coordinate Benches in case of Ramanbhai Jagabhai Bharwad (supra) wherein it was held that repayment of money from earlier advances cannot be added u/s 68 and in case of Evermore Stock Brokers (P.) Ltd. (supra) wherein again, there was repayment of existing loans and it was held by the Coordinate Bench that the AO has misdirected himself in law in proceeding against the assessee by invoking provisions of section 68 on misplaced assumption of facts, also supports the case of the assessee. 12. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on 23-03-2026 Sd/- Sd/- [SANDEEP SINGH KARHAIL] [VIKRAM SINGH YADAV] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 23-03-2026 TNMM Printed from counselvise.com 11 ITA No. 8150/Mum/2025 Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai Printed from counselvise.com "