NEELIMA SUNIL KHANNA,VASHI NAVI MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, 27(2), VASHI, NAVI MUMBAI

ITA 7810/MUM/2025

AI Insights

The case involves appeals by Neelima Sunil Khanna against the orders of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, which confirmed the additions made by the Assessing Officer for the assessment years 2012-13 and 2014-15. The primary issues were the reopening of the assessment under sections 147 and 148, the addition of Rs. 1,25,00,000 as unexplained cash credits from unsecured loans, and the disallowance of interest paid on these loans. The Tribunal upheld the additions, citing the involvement of the loans in an accommodation entry scheme and the failure of the assessee to provide sufficient evidence to prove the genuineness of the transactions.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848144 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Mumbai
• Assessment Year: 2012-2013
• Appeal Filed On: 25-11-2025
• Other Referred Cases: Rochana Agarwal vs ACIT, ITO vs. Lakhmani Mewal Das, PCIT vs. RMG Polyvinyl (1) Ltd., PCIT vs. Meenakshi Overseas P. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARI
• Assessee Lawyers: HEMANT JAWAHAR; WAY OF LETTER; WAY OF LETTER; WAY OF LETTER
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings; Unexplained cash credit; Documents seized; Bogus purchase; Onus to prove; Reopening of assessment; Search and seizure; Accommodation entries; Reason to believe; Opportunity of cross examination; Tangible material; Borrowed satisfaction; Bogus
• Section: 147; 143(3); 142(1); 132; 68; 131; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA Nos. 7810 & 7811/MUM/2025 Assessment Year: 2012-13 & 2014-15 Neelima Sunil Khanna, 311, Arenia Corner Sector-17, Vashi, Navi Mumbai-400703 Vs. National Faceless Appeal Centre, DCIT Circle 27(2), Vashi Railway Station, Vashi. PAN NO. ANXPK 6065 D Appellant Respondent Assessee by : Mr. Hemant Jawahar Revenue by : Mr. Swapnil Choudhari, Sr. DR Date of Hearing : 18/02/2026 Date of pronouncement : 27/03/2026 ORDER PER OM PRAKASH KANT, AM These two appeals by the assessee are directed against two separate orders, both dated 25.09.2025, passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment years 2012- 13 and 2014-15 respectively. Printed from counselvise.com 2. As common issue in dispute is involved in these appeals, therefore, same were heard together and dispose consolidated order for the sake of convenience. 3. Firstly, we take up the appeal of the assessee for assessment year 2012-13. The grounds raised are reproduced as under: 1 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming the action of the AO of reopening the assessment under section 147 r.w.s. 148 of the Act. 2 Reasons given by the learned CIT(A) NFAC for confirming the action of the AO of reopening the assessment under section 147 r.w.s. 148 of the Act, are wrong, insufficient, and contrary to the facts and evidence on record. 3 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in sustaining the addition of Rs. 1,25,00,000/ assessee, by treating the same as unexplained cash credits. 4 Reasons given by the learned CIT(A) NFAC for sustaining the addition of Rs. 1,25,00,000/ unsecured loans taken by the assessee, by treating the unexplained cash credits, are wrong, insufficient and contrary to the facts and evidence on record. 5 In view of the fact that no summons were issued by the A. O. to the said two parties and in absence of cross examination of the said two parties, justified in law to use the evidence recorded by the third party without affording opportunity to the assessee to cross examine the said parties in order to draw an adverse inference of making addition of Rs. 1 6 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming disallowance of the assessee's claim of interest paid of Rs. 5,34,453/ of Rs. 1,25,00,000/ 7 Reasons given by the CIT(A) NFAC for confirming disallowance of the assessee's claim of interest paid of Rs. 5,34,453/ ITA Nos. 7810 & 7811/MUM/2025 As common issue in dispute is involved in these appeals, therefore, same were heard together and disposed off by way of this consolidated order for the sake of convenience. Firstly, we take up the appeal of the assessee for assessment 13. The grounds raised are reproduced as under: 1 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming the action of the AO of reopening the assessment under section 147 r.w.s. 148 of the Act. 2 Reasons given by the learned CIT(A) NFAC for confirming the action of the AO of reopening the assessment under section 147 .w.s. 148 of the Act, are wrong, insufficient, and contrary to the facts and evidence on record. 3 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in sustaining the addition of Rs. 1,25,00,000/- made by AO, being unsecured loans taken by the assessee, by treating the same as unexplained cash credits. 4 Reasons given by the learned CIT(A) NFAC for sustaining the addition of Rs. 1,25,00,000/-/- made by AO, being alleged unsecured loans taken by the assessee, by treating the unexplained cash credits, are wrong, insufficient and contrary to the facts and evidence on record. In view of the fact that no summons were issued by the A. O. to the said two parties and in absence of cross examination of the said two parties, the A. O. as well as the CIT(A) NFAC was not justified in law to use the evidence recorded by the third party without affording opportunity to the assessee to cross examine the said parties in order to draw an adverse inference of making addition of Rs. 1,25,00,000/- as unexplained cash credit. 6 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming disallowance of the assessee's claim of interest paid of Rs. 5,34,453/- on the said loan of Rs. 1,25,00,000/-. 7 Reasons given by the CIT(A) NFAC for confirming disallowance of the assessee's claim of interest paid of Rs. 5,34,453/- Neelima Sunil Khanna 2 ITA Nos. 7810 & 7811/MUM/2025 As common issue in dispute is involved in these appeals, d off by way of this Firstly, we take up the appeal of the assessee for assessment 13. The grounds raised are reproduced as under: 1 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming the action of the AO of reopening the assessment under section 147 r.w.s. 148 of the Act. 2 Reasons given by the learned CIT(A) NFAC for confirming the action of the AO of reopening the assessment under section 147 .w.s. 148 of the Act, are wrong, insufficient, and contrary to the 3 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in sustaining the addition of Rs. ed loans taken by the assessee, by treating the same as unexplained cash credits. 4 Reasons given by the learned CIT(A) NFAC for sustaining the made by AO, being alleged unsecured loans taken by the assessee, by treating the same as unexplained cash credits, are wrong, insufficient and contrary to In view of the fact that no summons were issued by the A. O. to the said two parties and in absence of cross examination of the the A. O. as well as the CIT(A) NFAC was not justified in law to use the evidence recorded by the third party without affording opportunity to the assessee to cross examine the said parties in order to draw an adverse inference of making as unexplained cash credit. 6 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming disallowance of the on the said loan 7 Reasons given by the CIT(A) NFAC for confirming disallowance of - on the said Printed from counselvise.com loan of Rs. 1,25,00,000/ the facts and evidence on record. 8 In the facts and cir learned CIT(A) NFAC erred in sustaining addition of Rs. 2,10,000/ made by the AO by invoking provisions of section 23(1)(C), being the notional rental income. 9 Reasons given by the learned CIT(A) NFAC for sustaining addition of Rs. 2,10,000/ income u/s. 23(1)(C) of the Act, are wrong, insufficient and contrary to the facts and evidence on record 4. Briefly stated facts of the case are that the assessee filed its original return of income on 05.03.2013 declaring total income at Rs.34,32,290/-. The return of income filed by the assessee was processed u/s 143(1) of the Income Act’). Subsequently, information was received from the Director General of Income-tax (Investigation) taken accommodation entries of bogus unsecured loan from M/s ‘Daksh Diamonds’ and indirectly controlled and operated by Shri Bhanwarlal Jain managed through him information was gathered by the Investigation Wing during search and seizure action u/s 132 of the Act carried out on the cases of the Bhanwarlal Jain group on 03.10.2013. In view of information and the material received from the Investigation Wing, the Assessing Officer recorded reasons to believe that income escaped assessment and accordingly, issued notice u/s 148 of the Act on 25.04.2018 with prior approval from the appropriate authority. The said notice was duly served upon the assessee and the assessee by way of letter ITA Nos. 7810 & 7811/MUM/2025 loan of Rs. 1,25,00,000/-, are wrong insufficient and contrary to the facts and evidence on record. 8 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in sustaining addition of Rs. 2,10,000/ made by the AO by invoking provisions of section 23(1)(C), being the notional rental income. 9 Reasons given by the learned CIT(A) NFAC for sustaining addition of Rs. 2,10,000/- made by AO, being notional rental income u/s. 23(1)(C) of the Act, are wrong, insufficient and contrary to the facts and evidence on record facts of the case are that the assessee filed its of income on 05.03.2013 declaring total income at . The return of income filed by the assessee was processed u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’). Subsequently, information was received from the Director tax (Investigation)-(II), Mumbai that assessee had accommodation entries of bogus unsecured loan from M/s and ‘Marc Gems’, firms which were directly or indirectly controlled and operated by Shri Bhanwarlal Jain himself or his dummy associates. The said information was gathered by the Investigation Wing during search and seizure action u/s 132 of the Act carried out on the cases of the Bhanwarlal Jain group on 03.10.2013. In view of information and eceived from the Investigation Wing, the Assessing Officer recorded reasons to believe that income escaped assessment and accordingly, issued notice u/s 148 of the Act on 25.04.2018 with prior approval from the appropriate authority. The said notice ly served upon the assessee and the assessee by way of letter Neelima Sunil Khanna 3 ITA Nos. 7810 & 7811/MUM/2025 , are wrong insufficient and contrary to cumstances of the case and in law the learned CIT(A) NFAC erred in sustaining addition of Rs. 2,10,000/- made by the AO by invoking provisions of section 23(1)(C), being 9 Reasons given by the learned CIT(A) NFAC for sustaining the made by AO, being notional rental income u/s. 23(1)(C) of the Act, are wrong, insufficient and facts of the case are that the assessee filed its of income on 05.03.2013 declaring total income at . The return of income filed by the assessee was tax Act, 1961 (in short ‘the Act’). Subsequently, information was received from the Director (II), Mumbai that assessee had accommodation entries of bogus unsecured loan from M/s rms which were directly or indirectly controlled and operated by Shri Bhanwarlal Jain and his dummy associates. The said information was gathered by the Investigation Wing during search and seizure action u/s 132 of the Act carried out on the cases of the Bhanwarlal Jain group on 03.10.2013. In view of information and eceived from the Investigation Wing, the Assessing Officer recorded reasons to believe that income escaped assessment and accordingly, issued notice u/s 148 of the Act on 25.04.2018 with prior approval from the appropriate authority. The said notice ly served upon the assessee and the assessee by way of letter Printed from counselvise.com dated 16.05.2018 submitted return of income on 30.04.2018. Subsequently, the reasons for reopening were provided to the assessee and objections filed by the assessee the case were also disposed off by the Ld. Assessing Officer on 05.10.2018. Thereafter, he commenced the reassessment proceedings and after carrying out necessary inquiries and considering submission of the assessee, rejected the assessee regardin from ‘Daksh Diamond unexplained cash credit in terms of section 68 of the Act and made addition aggregating to Rs.1,25,00,000/ made disallowance of interest paid by the assessee corresponding to unsecured loans taken from tho interest aggregating to Rs.5,34,453/ made addition for the deemed rental income which was computed at Rs.2,10,000/ reassessment order completed on 20.1 of the Act, total income of the assessee Rs.1,66,76,740/-. 5. On further appeal before the Ld. CIT(A), the assessee challenged validity of the reassessment proceedings as well as addition on merit. However, the the Ld. CIT(A). Aggrieved, the assessee is in appeal before the Tribunal by way of grounds reproduced above. ITA Nos. 7810 & 7811/MUM/2025 dated 16.05.2018 submitted return of income on 30.04.2018. Subsequently, the reasons for reopening were provided to the assessee and objections filed by the assessee against e were also disposed off by the Ld. Assessing Officer on 05.10.2018. Thereafter, he commenced the reassessment proceedings and after carrying out necessary inquiries and considering submission of the assessee, rejected the contention of ing the two unsecured loans inter Daksh Diamond’ and ‘Marc Gems’ and held the same as unexplained cash credit in terms of section 68 of the Act and made addition aggregating to Rs.1,25,00,000/-. The Assessing Officer also made disallowance of interest paid by the assessee corresponding to taken from those two entities and disallowed interest aggregating to Rs.5,34,453/-. The Assessing Officer also made addition for the deemed rental income from house property which was computed at Rs.2,10,000/-. In this manner, in the reassessment order completed on 20.12.2018 u/s 143(3) r.w.s. 147 total income of the assessee was On further appeal before the Ld. CIT(A), the assessee challenged validity of the reassessment proceedings as well as addition on merit. However, the assessee could not succeed before the Ld. CIT(A). Aggrieved, the assessee is in appeal before the Tribunal by way of grounds reproduced above. Neelima Sunil Khanna 4 ITA Nos. 7810 & 7811/MUM/2025 dated 16.05.2018 submitted return of income on 30.04.2018. Subsequently, the reasons for reopening were provided to the against reopening of e were also disposed off by the Ld. Assessing Officer on 05.10.2018. Thereafter, he commenced the reassessment proceedings and after carrying out necessary inquiries and the contention of inter-alia received and held the same as unexplained cash credit in terms of section 68 of the Act and made . The Assessing Officer also made disallowance of interest paid by the assessee corresponding to se two entities and disallowed . The Assessing Officer also from house property . In this manner, in the 2.2018 u/s 143(3) r.w.s. 147 was assessed at On further appeal before the Ld. CIT(A), the assessee challenged validity of the reassessment proceedings as well as assessee could not succeed before the Ld. CIT(A). Aggrieved, the assessee is in appeal before the Printed from counselvise.com 6. Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 117 and also filed a co cases. 7. The ground Nos validity of reopening of the reassessment. The assessee challenged the reopening of the assessment before the Ld. CIT(A) also but the Ld. CIT(A) has dismisse under: 4. Ground No.1(a,b,c&d): Appellant submitted that the reopening of the case u/s 147 was without jurisdiction, was made borrowed satisfaction and was no nexus between material ava Appellant also submitted that AO, disposed off the objections raised by the appellant at the reopening stage, without proper analysis. 4.2 Appellant's submissions were carefully considered. In the assessment order, AO had clear reopening the case. An information was received from DGIT (Inv) – II, Mumbai that the appellant had taken accommodation entries for bogus unsecured loans from M/s Daksh Diamonds and M/s Mark Gems, firms which were directly or i Shri. Bhanwarlal Jain, hawala trader. The appellant was provided sufficient opportunities to furnish its explanations. After analyzing the appellant's reply the case was reopened. 4.3 In the case of Rochana Agarwal vs ACIT (2022) 138 taxman.com 336 (Allahabad), the Hon'ble High Court of Allahabad observed as under: \"where AO, after considering the report of Director (Inv), had conducted investigation and gone through IT return and other related documents of assesee and only thereafter reason to believe that assessee was a beneficiary of bogus accommodation entries, impugned notice issued u/s 148 for reopening of assessment was justified.\" ITA Nos. 7810 & 7811/MUM/2025 Before us, the Ld. counsel for the assessee filed a Paper Book containing pages 1 to 117 and also filed a compilation of the legal s. 1 and 2 of the appeal relate validity of reopening of the reassessment. The assessee challenged the reopening of the assessment before the Ld. CIT(A) also but the Ld. CIT(A) has dismissed the said ground observing as 4. Ground No.1(a,b,c&d): Appellant submitted that the reopening of the case u/s 147 was without jurisdiction, was made borrowed satisfaction and without independent enquiry. There was no nexus between material available and reasons recorded. Appellant also submitted that AO, disposed off the objections raised by the appellant at the reopening stage, without proper 4.2 Appellant's submissions were carefully considered. In the assessment order, AO had clearly mentioned reasons for the reopening the case. An information was received from DGIT (Inv) II, Mumbai that the appellant had taken accommodation entries for bogus unsecured loans from M/s Daksh Diamonds and M/s Mark Gems, firms which were directly or indirectly operated by Shri. Bhanwarlal Jain, hawala trader. The appellant was provided sufficient opportunities to furnish its explanations. After analyzing the appellant's reply the case was reopened. 4.3 In the case of Rochana Agarwal vs ACIT (2022) 138 taxman.com 336 (Allahabad), the Hon'ble High Court of Allahabad observed as under: \"where AO, after considering the report of Director (Inv), had conducted investigation and gone through IT return and other related documents of assesee and only thereafter reason to believe that assessee was a beneficiary of bogus accommodation entries, impugned notice issued u/s 148 for reopening of assessment was justified.\" Neelima Sunil Khanna 5 ITA Nos. 7810 & 7811/MUM/2025 Before us, the Ld. counsel for the assessee filed a Paper Book mpilation of the legal e to challenge of validity of reopening of the reassessment. The assessee had challenged the reopening of the assessment before the Ld. CIT(A) d the said ground observing as 4. Ground No.1(a,b,c&d): Appellant submitted that the reopening of the case u/s 147 was without jurisdiction, was made with without independent enquiry. There ilable and reasons recorded. Appellant also submitted that AO, disposed off the objections raised by the appellant at the reopening stage, without proper 4.2 Appellant's submissions were carefully considered. In the ly mentioned reasons for the reopening the case. An information was received from DGIT (Inv) II, Mumbai that the appellant had taken accommodation entries for bogus unsecured loans from M/s Daksh Diamonds and M/s ndirectly operated by Shri. Bhanwarlal Jain, hawala trader. The appellant was provided sufficient opportunities to furnish its explanations. After analyzing the appellant's reply the case was reopened. 4.3 In the case of Rochana Agarwal vs ACIT (2022) 138 taxman.com 336 (Allahabad), the Hon'ble High Court of \"where AO, after considering the report of Director (Inv), had conducted investigation and gone through IT return and other related documents of assesee and only thereafter formed a reason to believe that assessee was a beneficiary of bogus accommodation entries, impugned notice issued u/s 148 for Printed from counselvise.com Relying on the decision in the above case, the action of the AO in reopening the case u/s these grounds is dismissed. 7.1 Before us, the Ld. counsel for the assessee mainly submitted that there was no live link between the material available and the reasons recorded by invoking section 148 of the Act: “2. OBJECTION NO.2 : AVAILABLE AND REASON RECORDED FOR INVOKING SECTION 148 OF THE ACT, 1961: That it submitted that upon perusal of copy of reason recorded it is submitted that invoking of reassessment proceedings lacks legal sanity in the eyes of law, since there is no nexus and / or live link between tangible material available and reason recorded for invoking reassessment provisions. It is alleged that assessee has taken accommodation entries from Mr. Bhanwarlal Jain, based on the information provided by the investigation wing; whereas no tangible material in this regard was provided which proves that assessee has taken accommodation entries. Per Contra assessee has duly disclosed all the relevant transactions entered with that effect. This office has grossly failed to prove that there has been failure on the part of assessee to disclose fully and truly particulars of income; which has biding precedence of being bad law and aga Reliance in regard is placed on the judgement delivered by the hon'ble Apex court in case of ITO VS. LAKHMANI MEWAL DAS REPORTED IN 103 ITR 437 (SC). Their lordship has held as under:- \"It is, therefore, es requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income tax Officer in the present case and the belief which he was to form regardin assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for r the learned judges in the High Court, in out opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent ITA Nos. 7810 & 7811/MUM/2025 Relying on the decision in the above case, the action of the AO in reopening the case u/s 147 of the Act, is confirmed. Appeal on these grounds is dismissed.” Before us, the Ld. counsel for the assessee mainly submitted that there was no live link between the material available and the reasons recorded by invoking section 148 of the Act: 2. OBJECTION NO.2 :- NO LIVE LINK BETWEEN MATERIAL AVAILABLE AND REASON RECORDED FOR INVOKING SECTION 148 OF THE ACT, 1961:- That it submitted that upon perusal of copy of reason recorded it is submitted that invoking of reassessment proceedings lacks l sanity in the eyes of law, since there is no nexus and / or live link between tangible material available and reason recorded for invoking reassessment provisions. It is alleged that assessee has taken accommodation entries from Mr. Bhanwarlal Jain, d on the information provided by the investigation wing; whereas no tangible material in this regard was provided which proves that assessee has taken accommodation entries. Per Contra assessee has duly disclosed all the relevant transactions entered with parties in questions and submitted documents to that effect. This office has grossly failed to prove that there has been failure on the part of assessee to disclose fully and truly particulars of income; which has biding precedence of being bad law and against the spirit of section 147 of the Act, 1961. Reliance in regard is placed on the judgement delivered by the hon'ble Apex court in case of ITO VS. LAKHMANI MEWAL DAS REPORTED IN 103 ITR 437 (SC). Their lordship has held as \"It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned judges in the High Court, in out opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent Neelima Sunil Khanna 6 ITA Nos. 7810 & 7811/MUM/2025 Relying on the decision in the above case, the action of the AO in 147 of the Act, is confirmed. Appeal on Before us, the Ld. counsel for the assessee mainly submitted that there was no live link between the material available and the NO LIVE LINK BETWEEN MATERIAL AVAILABLE AND REASON RECORDED FOR INVOKING SECTION That it submitted that upon perusal of copy of reason recorded it is submitted that invoking of reassessment proceedings lacks l sanity in the eyes of law, since there is no nexus and / or live link between tangible material available and reason recorded for invoking reassessment provisions. It is alleged that assessee has taken accommodation entries from Mr. Bhanwarlal Jain, d on the information provided by the investigation wing; whereas no tangible material in this regard was provided which proves that assessee has taken accommodation entries. Per Contra assessee has duly disclosed all the relevant transactions parties in questions and submitted documents to that effect. This office has grossly failed to prove that there has been failure on the part of assessee to disclose fully and truly particulars of income; which has biding precedence of being bad inst the spirit of section 147 of the Act, 1961. Reliance in regard is placed on the judgement delivered by the hon'ble Apex court in case of ITO VS. LAKHMANI MEWAL DAS REPORTED IN 103 ITR 437 (SC). Their lordship has held as sential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income tax Officer in the present case and the belief which he g the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a eopening the assessment. The majority of the learned judges in the High Court, in out opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent Printed from counselvise.com had escaped asse disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs.\" A copy of referred judgement of Apex Court is annexed hereto and marked as \"E 3. OBJECTION NO.3: ON BORROWED SATISFACTION: That it is submitted that in the instant case it is clearly discernible that \"no independent inquiry has been carried before invoking reassessment provisions\", \"borrowed satisfaction\" and no application of mind to the tangible material which forms the basis of the reason to believe that income has escaped assessment. Apropos, from the copy of reasons recorded as supplied to assessee it can be page of copy of reason recorded it mentioned with specific words that \"As per information received\"; which gives absolute clarity that satisfaction was recorded in the grab of information unearthed by Investigation wing. This clearly shows reassessment provisions is invoked without conducting independent inquiry and only on the basis on borrowed satisfaction. Reliance is placed on the judgement delivered by the hon'ble Delhi High Court in case of PCIT vs. RMG Polyvinyl (1) Ltd. reported where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information could not be said to be tangib on said basis was not justified. Said judgement covered assessee's case in entirety, apropos perusal of copy of reason recorded it can be seen that reassessment provision was invoked only on the basis of informa investigation without making any effort to further investigate in independent manner to form prima facie opinion that income had escaped assessment; infact decisive requirement of section 147 of the Act, 1961 is that AO s order to form reasons to believe that income had escaped assessment. A copy of referred judgement is annexed hereto and marked as \"Exhibit That combined reading of objection no. 1 and 2 suggest that where no link betwe triggering reassessment provisions it would amount to borrowed satisfaction and has to be presumed there is lack of application ITA Nos. 7810 & 7811/MUM/2025 had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with A copy of referred judgement of Apex Court is annexed hereto and marked as \"Exhibit - A\" 3. OBJECTION NO.3:- INITIATION OF REASSESSMENT BASED ON BORROWED SATISFACTION:- That it is submitted that in the instant case it is clearly discernible that \"no independent inquiry has been carried before invoking reassessment provisions\", which tantamount to \"borrowed satisfaction\" and no application of mind to the tangible material which forms the basis of the reason to believe that income has escaped assessment. Apropos, from the copy of reasons recorded as supplied to assessee it can be seen that first page of copy of reason recorded it mentioned with specific words that \"As per information received\"; which gives absolute clarity that satisfaction was recorded in the grab of information unearthed by Investigation wing. This clearly shows reassessment provisions is invoked without conducting independent inquiry and only on the basis on borrowed satisfaction. Reliance is placed on the judgement delivered by the hon'ble Delhi High Court in case of PCIT vs. RMG Polyvinyl (1) in 396 ITR 5 (Del), wherein their lordship held that where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information could not be said to be tangible material as per se and, thus reassessment on said basis was not justified. Said judgement covered assessee's case in entirety, apropos perusal of copy of reason recorded it can be seen that reassessment provision was invoked only on the basis of information received from the Director of investigation without making any effort to further investigate in independent manner to form prima facie opinion that income had escaped assessment; infact decisive requirement of section 147 of the Act, 1961 is that AO should apply independent mind in order to form reasons to believe that income had escaped assessment. A copy of referred judgement is annexed hereto and marked as \"Exhibit - B\". That combined reading of objection no. 1 and 2 suggest that where no link between tangible material and reasons records for triggering reassessment provisions it would amount to borrowed satisfaction and has to be presumed there is lack of application Neelima Sunil Khanna 7 ITA Nos. 7810 & 7811/MUM/2025 ssment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with A copy of referred judgement of Apex Court is annexed hereto INITIATION OF REASSESSMENT BASED That it is submitted that in the instant case it is clearly discernible that \"no independent inquiry has been carried before which tantamount to \"borrowed satisfaction\" and no application of mind to the tangible material which forms the basis of the reason to believe that income has escaped assessment. Apropos, from the copy of seen that first page of copy of reason recorded it mentioned with specific words that \"As per information received\"; which gives absolute clarity that satisfaction was recorded in the grab of information unearthed by Investigation wing. This clearly shows that reassessment provisions is invoked without conducting independent inquiry and only on the basis on borrowed satisfaction. Reliance is placed on the judgement delivered by the hon'ble Delhi High Court in case of PCIT vs. RMG Polyvinyl (1) in 396 ITR 5 (Del), wherein their lordship held that where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information could not le material as per se and, thus reassessment on said basis was not justified. Said judgement covered assessee's case in entirety, apropos perusal of copy of reason recorded it can be seen that reassessment provision was invoked tion received from the Director of investigation without making any effort to further investigate in independent manner to form prima facie opinion that income had escaped assessment; infact decisive requirement of section 147 hould apply independent mind in order to form reasons to believe that income had escaped assessment. A copy of referred judgement is annexed hereto and That combined reading of objection no. 1 and 2 suggest that en tangible material and reasons records for triggering reassessment provisions it would amount to borrowed satisfaction and has to be presumed there is lack of application Printed from counselvise.com of mind. The reliance in this regard is placed on judgement delivered by hon'ble De Meenakshi Overseas P. Ltd. 395 ITR 677 (Del). which squarely covers the assessee's case wherein their lordship held that if the reasons failed to demonstrate the link between the tangible material and formation of the rea has escaped assessment then, it would amount to borrowed satisfaction and has to be presumed that there is no independent application of mind by the AO to the tangible material which forms the basis of the reason to believe assessment. A copy of referred judgment is annexed hereto and marked as \"Exhibit 4. OBJECTION NO. 4: FAILED TO CONSIDER DOCUMENTARY EVIDENCE PLACED ON RECORD AND REASSESSMENT BASED ON MATERIAL ALREADY AVAILABLE ON RECORD AND TRANSACTION IN QUESTION IS SUB JUDICE BEFORE HIGHER INCOME TAX AUTHORITIES: It is submitted that during the course of assessment proceeding for AY 2014-15 vide notice dated 11/11/2016 issued u/s. 142(1) of the Act, 1961 queries with regard to funds receive parties in question was raised. Documentary evidences such as loan confirmations, bank statement and ITR of parties was submitted vide assessee's letters dated 18/11/2016 and another letter. Which proves that funds was rooted through proper banking accounted, documented and supported with evidence which duly proves genuineness of transaction, creditworthiness and identity of parties in questions, which cannot be brush aside without disproving. By submitting doc primary onus. be against binding precedence if order was sought to be passed without disproving each and every evidence placed on records. It is pertinent to mention here that till today all the evidence placed on records rem above contention it can be said that reassessment provision are sought to be invoked on the documents already placed on records which were never taken into consideration while framing reasons for initiation of reassessment p regard is placed on judgment delivered by hon'ble Delhi high Court in case of MOD CREATIONS PVT. LTD, VS. ITO (2012) 354 ITR 282 (DEL) wherein their lordship has held as under: \"Section 68 of the Income presumption against the assessee whenever unexplained credits are found in the refuting the presumption raised, the initial burden is on the assessee This burden, which is placed on the ITA Nos. 7810 & 7811/MUM/2025 of mind. The reliance in this regard is placed on judgement delivered by hon'ble Delhi High Court in case of PCIT vs. Meenakshi Overseas P. Ltd. 395 ITR 677 (Del). which squarely covers the assessee's case wherein their lordship held that if the reasons failed to demonstrate the link between the tangible material and formation of the reasons to believe that the income has escaped assessment then, it would amount to borrowed satisfaction and has to be presumed that there is no independent application of mind by the AO to the tangible material which forms the basis of the reason to believe that income has escaped assessment. A copy of referred judgment is annexed hereto and marked as \"Exhibit - C\". 4. OBJECTION NO. 4: FAILED TO CONSIDER DOCUMENTARY EVIDENCE PLACED ON RECORD AND REASSESSMENT BASED ON MATERIAL ALREADY AVAILABLE ON RECORD AND RANSACTION IN QUESTION IS SUB JUDICE BEFORE HIGHER INCOME TAX AUTHORITIES:- It is submitted that during the course of assessment proceeding 15 vide notice dated 11/11/2016 issued u/s. 142(1) of the Act, 1961 queries with regard to funds receive parties in question was raised. Documentary evidences such as loan confirmations, bank statement and ITR of parties was submitted vide assessee's letters dated 18/11/2016 and another letter. Which proves that funds was rooted through proper banking channel and transaction in question was accounted, documented and supported with evidence which duly proves genuineness of transaction, creditworthiness and identity of parties in questions, which cannot be brush aside without disproving. By submitting documents assessee has discharged primary onus. be against binding precedence if order was sought to be passed without disproving each and every evidence placed on records. It is pertinent to mention here that till today all the evidence placed on records remain uncontroverted. Considering above contention it can be said that reassessment provision are sought to be invoked on the documents already placed on records which were never taken into consideration while framing reasons for initiation of reassessment proceedings.. shall Reliance in this regard is placed on judgment delivered by hon'ble Delhi high Court in case of MOD CREATIONS PVT. LTD, VS. ITO (2012) 354 (DEL) wherein their lordship has held as under: \"Section 68 of the Income-tax Act, 1961, only sets up a presumption against the assessee whenever unexplained credits are found in the refuting the presumption raised, the initial burden is on the assessee This burden, which is placed on the Neelima Sunil Khanna 8 ITA Nos. 7810 & 7811/MUM/2025 of mind. The reliance in this regard is placed on judgement lhi High Court in case of PCIT vs. Meenakshi Overseas P. Ltd. 395 ITR 677 (Del). which squarely covers the assessee's case wherein their lordship held that if the reasons failed to demonstrate the link between the tangible sons to believe that the income has escaped assessment then, it would amount to borrowed satisfaction and has to be presumed that there is no independent application of mind by the AO to the tangible material which that income has escaped assessment. A copy of referred judgment is annexed hereto and 4. OBJECTION NO. 4: FAILED TO CONSIDER DOCUMENTARY EVIDENCE PLACED ON RECORD AND REASSESSMENT BASED ON MATERIAL ALREADY AVAILABLE ON RECORD AND RANSACTION IN QUESTION IS SUB JUDICE BEFORE HIGHER It is submitted that during the course of assessment proceeding 15 vide notice dated 11/11/2016 issued u/s. 142(1) of the Act, 1961 queries with regard to funds received from parties in question was raised. Documentary evidences such as loan confirmations, bank statement and ITR of parties was submitted vide assessee's letters dated 18/11/2016 and another letter. Which proves that funds was rooted through channel and transaction in question was accounted, documented and supported with evidence which duly proves genuineness of transaction, creditworthiness and identity of parties in questions, which cannot be brush aside without uments assessee has discharged primary onus. be against binding precedence if order was sought to be passed without disproving each and every evidence placed on records. It is pertinent to mention here that till today all the ain uncontroverted. Considering above contention it can be said that reassessment provision are sought to be invoked on the documents already placed on records which were never taken into consideration while framing reasons Reliance in this regard is placed on judgment delivered by hon'ble Delhi high Court in case of MOD CREATIONS PVT. LTD, VS. ITO (2012) 354 (DEL) wherein their lordship has held as under:- nly sets up a presumption against the assessee whenever unexplained credits are found in the refuting the presumption raised, the initial burden is on the assessee This burden, which is placed on the Printed from counselvise.com assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub assessee to prove the creditworthiness of the sub A copy of referred judgment is annexed hereto and marked as \"Exhibit - D\". Copies of notice dated 11/11//2016 issued u/s. 142(1) of the Act, 1961 and letters dated 18/11/2016 and another letter ar \"E2\" and \"E3\". The then AO knowingly did not issue notice u/s. 148 of the Act. 1961 for AY 2012 transaction and parties in question was already placed in records; conseq already available on records is against the canon of law. 5. OBJECTION NO.5: AVAILABLE WHICH INDICATES ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME: Perusal of copy of reason recorded provided to assessee clearly shows that there has been lack of application of mind and taciturn with regard to providing evidences to base the baseless allegation made against assessee. Neither Mr. Bhanwarlal has given statement nor h documentary evidences which conclusively proves that assessee has been benefited of the accommodation entries rooted from Mr. Bhanwarlal Jain's chamber, since no record of such kind exist. This entire exercise if in and assumption basis. It has been categorically held by the various courts that dubious statement can never take place of evidence. Tax proceedings being judicial in nature has to be conducted and concluded based on d not on mere surmise and assumptions. 7.2 We have heard rival submissions of the parties and perused the relevant materials on record validity of the reassessment mainly on the reasons recorded. It is relevant to reproduce the said reasons as under: ITA Nos. 7810 & 7811/MUM/2025 assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the sessee to prove the creditworthiness of the sub-creditors.\" A copy of referred judgment is annexed hereto and marked as D\". Copies of notice dated 11/11//2016 issued u/s. 142(1) of the Act, 1961 and letters dated 18/11/2016 and another letter are annexed hereto and marked as \"Exhibit \"E2\" and \"E3\". The then AO knowingly did not issue notice u/s. 148 of the Act. 1961 for AY 2012-13; since all the documents pertaining to transaction and parties in question was already placed in records; consequently reassessment based on information already available on records is against the canon of law. 5. OBJECTION NO.5:- NO CORROBORATIVE EVIDENCE AVAILABLE WHICH INDICATES ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME: py of reason recorded provided to assessee clearly shows that there has been lack of application of mind and taciturn with regard to providing evidences to base the baseless allegation made against assessee. Neither Mr. Bhanwarlal has given statement nor has investigation department provided any documentary evidences which conclusively proves that assessee has been benefited of the accommodation entries rooted from Mr. Bhanwarlal Jain's chamber, since no record of such kind exist. This entire exercise if invoking section 148 is based on surmise and assumption basis. It has been categorically held by the various courts that dubious statement can never take place of evidence. Tax proceedings being judicial in nature has to be conducted and concluded based on documentary evidences and not on mere surmise and assumptions.” We have heard rival submissions of the parties and perused the relevant materials on record. The assessee has assailed the validity of the reassessment mainly on the reasons recorded. It is relevant to reproduce the said reasons as under: Neelima Sunil Khanna 9 ITA Nos. 7810 & 7811/MUM/2025 assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee's burden to prove either the genuineness of the transactions executed between the creditors nor is it the burden of the creditors.\" A copy of referred judgment is annexed hereto and marked as D\". Copies of notice dated 11/11//2016 issued u/s. 142(1) of the Act, 1961 and letters dated 18/11/2016 and e annexed hereto and marked as \"Exhibit-E1\", The then AO knowingly did not issue notice u/s. 148 of the Act. 13; since all the documents pertaining to transaction and parties in question was already placed in uently reassessment based on information already available on records is against the canon of law. NO CORROBORATIVE EVIDENCE AVAILABLE WHICH INDICATES ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY PARTICULARS OF INCOME:- py of reason recorded provided to assessee clearly shows that there has been lack of application of mind and taciturn with regard to providing evidences to base the baseless allegation made against assessee. Neither Mr. Bhanwarlal has as investigation department provided any documentary evidences which conclusively proves that assessee has been benefited of the accommodation entries rooted from Mr. Bhanwarlal Jain's chamber, since no record of such kind exist. voking section 148 is based on surmise and assumption basis. It has been categorically held by the various courts that dubious statement can never take place of evidence. Tax proceedings being judicial in nature has to be ocumentary evidences and We have heard rival submissions of the parties and perused . The assessee has assailed the validity of the reassessment mainly on the reasons recorded. It is Printed from counselvise.com Sub: Reasons for reopening assessment for AY 2012 5 Khanna-ANXPK60650 The reasons for reopening the assessment proceedings for AY 2012-13 in your case is as below: \"The assessee i.e. Ms. is an individual assessee filed return of income on 05.03.2013. Subsequently, the Director vide letter No. (Investigation) DIT(inv.)-II/ information/BLJ/LDV/2014 11.07.2014 had forwarded information of assessee's who had taken accommodation entries for bogus unsecured loan. As per the information received, Ms. Neelima Sunil Khanna, the assessee, in the instant case, has taken unsecured loan from the M/s Marc Gems (PAN:CVEPS0399P) & from Daksh Diamond (PAN: AURPS3696K), directly or indirectly operated by Bhanwarlal Jain, Hawala dealer through self and his dummy associates. This information was brought out to the fore during search & Seizure action u/s 132 of the LT. Act, 1961 in the case of Bhanwarlal Jain, dated 03/10/2013. In the above, information, it is reported that the M/s Marc Gems (PAN:CVEPS0399P) & from Daksh Diamond (PAN: AURPS3696K), was controlled by Bhanwarlal Jain. In this case, the details of accommodation entries in the as under:- Sr. No. 1. 2. This prima facie, leads to a conclusion that the assessee has not declared income chargeable to tax for F.Y.2011 A.Y.2012-2013 amounting to Rs. 1,30,34,453/ transactions. Thus the income element in respect of above transactions remains undisclosed and the same is required to be considered in computing total income of the assessee. On the basis of this tangible information available on record, and by ITA Nos. 7810 & 7811/MUM/2025 Sub: Reasons for reopening assessment for AY 2012- ANXPK60650 The reasons for reopening the assessment proceedings for AY 13 in your case is as below: \"The assessee i.e. Ms. Neelima Sunil Khanna, PAN: ANXPK6065D is an individual assessee filed return of income on 05.03.2013. Subsequently, the Director vide letter No. (Investigation) II/ information/BLJ/LDV/2014-15/286 dated 11.07.2014 had forwarded information of Income Tax regarding assessee's who had taken accommodation entries for bogus unsecured loan. As per the information received, Ms. Neelima Sunil Khanna, the assessee, in the instant case, has taken unsecured loan from the M/s Marc Gems (PAN:CVEPS0399P) & rom Daksh Diamond (PAN: AURPS3696K), directly or indirectly operated by Bhanwarlal Jain, Hawala dealer through self and his dummy associates. This information was brought out to the fore during search & Seizure action u/s 132 of the LT. Act, 1961 se of Bhanwarlal Jain, dated 03/10/2013. In the above, information, it is reported that the M/s Marc Gems (PAN:CVEPS0399P) & from Daksh Diamond (PAN: AURPS3696K), was controlled by Bhanwarlal Jain. In this case, the details of accommodation entries in the form of unsecured loan are found Α.Υ. Name of party from whom bogus bill/unsecured loan has been taken 2012-13 M/s Marc Gems (PAN: CVEPS0399P) 2012-13 M/s Daksh Diamond (PAN: AURPS3696K) This prima facie, leads to a conclusion that the assessee has not declared income chargeable to tax for F.Y.2011-2012 relevant to 2013 amounting to Rs. 1,30,34,453/- related to above transactions. Thus the income element in respect of above ctions remains undisclosed and the same is required to be considered in computing total income of the assessee. On the basis of this tangible information available on record, and by Neelima Sunil Khanna 10 ITA Nos. 7810 & 7811/MUM/2025 -13-Neelima The reasons for reopening the assessment proceedings for AY Neelima Sunil Khanna, PAN: ANXPK6065D is an individual assessee filed return of income on 05.03.2013. Subsequently, the Director vide letter No. (Investigation)-II 15/286 dated Income Tax regarding assessee's who had taken accommodation entries for bogus unsecured loan. As per the information received, Ms. Neelima Sunil Khanna, the assessee, in the instant case, has taken unsecured loan from the M/s Marc Gems (PAN:CVEPS0399P) & rom Daksh Diamond (PAN: AURPS3696K), directly or indirectly operated by Bhanwarlal Jain, Hawala dealer through self and his dummy associates. This information was brought out to the fore during search & Seizure action u/s 132 of the LT. Act, 1961 se of Bhanwarlal Jain, dated 03/10/2013. In the above, information, it is reported that the M/s Marc Gems (PAN:CVEPS0399P) & from Daksh Diamond (PAN: AURPS3696K), was controlled by Bhanwarlal Jain. In this case, the details of form of unsecured loan are found Name of party from whom bogus bill/unsecured loan has been Amount (In Rs.) M/s Marc Gems (PAN: 58,73,932/- M/s Daksh Diamond (PAN: 71,60,521/- This prima facie, leads to a conclusion that the assessee has not 2012 relevant to related to above transactions. Thus the income element in respect of above ctions remains undisclosed and the same is required to be considered in computing total income of the assessee. On the basis of this tangible information available on record, and by Printed from counselvise.com reason of the failure on the part of the assessee to disclose fully & Truly all material facts necessary thereto in his return of Income, I have reason to believe that the income to the extent of Rs. 1,30,34,453/ has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. A notice u/s 148 r.w.s 147 of the Act, is being proposed to be issued to assess such income and also any other income chargeable to tax which has escaped assessment.\" Notice u/s 148 was issued after grant of approval from Pr. Commissioner 7.3 Before us, the learned counsel for the assessee contended, in the first instance, that there exists no live nexus between the material available with the Assessing Officer and the reasons recorded for reopening the the reasons recorded, we find that the material relied upon by the Assessing Officer emanated from information gathered during the course of a search conducted in the case of Shri Bhanwarlal Jain. During the said searc unearthed material indicating that certain entities controlled and operated by Shri Bhanwarlal Jain through dummy directors were engaged in providing accommodation entries. It was further noticed that the assessee had obtained unsecured loans from two such concerns, namely M/s Daksh Diamonds and M/s Merc Gems. Statements of the dummy directors/partners of these entities were also recorded during the course of the search proceedings. 7.4 On the basis of the informa Investigation Wing, the Assessing Officer examined the material ITA Nos. 7810 & 7811/MUM/2025 reason of the failure on the part of the assessee to disclose fully y all material facts necessary thereto in his return of Income, I have reason to believe that the income to the extent of Rs. 1,30,34,453/- chargeable to tax in the hands of the assessee has escaped assessment within the meaning of section 147 of e Tax Act, 1961. A notice u/s 148 r.w.s 147 of the Act, is being proposed to be issued to assess such income and also any other income chargeable to tax which has escaped Notice u/s 148 was issued after grant of approval from Pr. Commissioner of Income Tax 28, Mumbai.” Before us, the learned counsel for the assessee contended, in the first instance, that there exists no live nexus between the material available with the Assessing Officer and the reasons recorded for reopening the assessment. Upon a careful perusal of the reasons recorded, we find that the material relied upon by the Assessing Officer emanated from information gathered during the course of a search conducted in the case of Shri Bhanwarlal Jain. During the said search, the Investigation Wing of the Department unearthed material indicating that certain entities controlled and operated by Shri Bhanwarlal Jain through dummy directors were engaged in providing accommodation entries. It was further noticed e had obtained unsecured loans from two such concerns, namely M/s Daksh Diamonds and M/s Merc Gems. Statements of the dummy directors/partners of these entities were also recorded during the course of the search proceedings. On the basis of the information so received from the Investigation Wing, the Assessing Officer examined the material Neelima Sunil Khanna 11 ITA Nos. 7810 & 7811/MUM/2025 reason of the failure on the part of the assessee to disclose fully y all material facts necessary thereto in his return of Income, I have reason to believe that the income to the extent of chargeable to tax in the hands of the assessee has escaped assessment within the meaning of section 147 of e Tax Act, 1961. A notice u/s 148 r.w.s 147 of the Act, is being proposed to be issued to assess such income and also any other income chargeable to tax which has escaped Notice u/s 148 was issued after grant of approval from Pr. Before us, the learned counsel for the assessee contended, in the first instance, that there exists no live nexus between the material available with the Assessing Officer and the reasons assessment. Upon a careful perusal of the reasons recorded, we find that the material relied upon by the Assessing Officer emanated from information gathered during the course of a search conducted in the case of Shri Bhanwarlal Jain. h, the Investigation Wing of the Department unearthed material indicating that certain entities controlled and operated by Shri Bhanwarlal Jain through dummy directors were engaged in providing accommodation entries. It was further noticed e had obtained unsecured loans from two such concerns, namely M/s Daksh Diamonds and M/s Merc Gems. Statements of the dummy directors/partners of these entities were also recorded during the course of the search proceedings. tion so received from the Investigation Wing, the Assessing Officer examined the material Printed from counselvise.com available on record and formed a prima facie belief that the loans received by the assessee from the aforesaid concerns were not genuine but constituted accommodation escapement of income. 7.5 The learned counsel for the assessee, however, argued that during the course of search proceedings in the case of Shri Bhanwarlal Jain, the admission made by him pertained only to the issuance of accommodati and sales, and not to the provision of unsecured loan entries. submitted that neither was there any question asked to him on unsecured loans, nor conducted in this regard Bhanwarlal Jain nor any other person had admitted that the concerns M/s Daksh Diamonds and M/s Merc Gems were engaged in providing accommodation entries in the nature of unsecured loans. 7.6 In our considered view, the the nature of a narrow and hyper gathered during the search proceedings appreciation of facts observed in the search proceeding in the case of sh Bhanwarlal Jain. Bhanwarlal Jain revealed, inter alia, that various entities controlled by him were engaged in issuing accommodation bills without carrying on any real business activity. The search team also found ITA Nos. 7810 & 7811/MUM/2025 available on record and formed a prima facie belief that the loans received by the assessee from the aforesaid concerns were not genuine but constituted accommodation entries, resulting in escapement of income. The learned counsel for the assessee, however, argued that during the course of search proceedings in the case of Shri Bhanwarlal Jain, the admission made by him pertained only to the issuance of accommodation bills in respect of diamond purchases and sales, and not to the provision of unsecured loan entries. submitted that neither was there any question asked to him on nor any suggestion that an enquiry was conducted in this regard. It was further contended that neither Shri Bhanwarlal Jain nor any other person had admitted that the concerns M/s Daksh Diamonds and M/s Merc Gems were engaged in providing accommodation entries in the nature of unsecured In our considered view, the aforesaid contention is largely in the nature of a narrow and hyper-technical reading of the material gathered during the search proceedings rather than overall appreciation of facts observed in the search proceeding in the case of sh Bhanwarlal Jain. The search conducted in the case of Shri Bhanwarlal Jain revealed, inter alia, that various entities controlled by him were engaged in issuing accommodation bills without carrying on any real business activity. The search team also found Neelima Sunil Khanna 12 ITA Nos. 7810 & 7811/MUM/2025 available on record and formed a prima facie belief that the loans received by the assessee from the aforesaid concerns were not entries, resulting in The learned counsel for the assessee, however, argued that during the course of search proceedings in the case of Shri Bhanwarlal Jain, the admission made by him pertained only to the on bills in respect of diamond purchases and sales, and not to the provision of unsecured loan entries. He submitted that neither was there any question asked to him on any suggestion that an enquiry was s further contended that neither Shri Bhanwarlal Jain nor any other person had admitted that the concerns M/s Daksh Diamonds and M/s Merc Gems were engaged in providing accommodation entries in the nature of unsecured aforesaid contention is largely in technical reading of the material rather than overall appreciation of facts observed in the search proceeding in the case search conducted in the case of Shri Bhanwarlal Jain revealed, inter alia, that various entities controlled by him were engaged in issuing accommodation bills without carrying on any real business activity. The search team also found Printed from counselvise.com that such entities ha or staff to conduct genuine business operations, and that the directors or partners were either relatives, associates or employees of Shri Bhanwarlal Jain. These circumstances, taken together, clearly indicated that the entities were merely paper concerns used for providing accommodation entries. 7.7 On the basis of the overall material gathered during the search, the Assessing Officer formed a belief that the concerns from which the assessee had received loan accommodation entry network controlled by Shri Bhanwarlal Jain. In such circumstances, the inference drawn by the Assessing Officer that the unsecured loans received by the assessee from these entities were also accommodation entries can irrational or without basis. The belief so formed is essentially a subjective satisfaction of the Assessing Officer, though founded upon objective criteria on material available on record. 7.8 In our opinion, therefore, the Assessing Offi material which was relevant to the assessee and had a direct bearing on the assessment year in question. Consequently, the contention of the assessee that there was no live link between the material available and the reasons recorded is 7.9 The learned counsel for the assessee placed reliance upon the judgment of the Hon’ble Supreme Court in the case of ITA Nos. 7810 & 7811/MUM/2025 that such entities had no stock at their premises, no infrastructure or staff to conduct genuine business operations, and that the directors or partners were either relatives, associates or employees of Shri Bhanwarlal Jain. These circumstances, taken together, ed that the entities were merely paper concerns used for providing accommodation entries. On the basis of the overall material gathered during the search, the Assessing Officer formed a belief that the concerns from which the assessee had received loans were part of the accommodation entry network controlled by Shri Bhanwarlal Jain. In such circumstances, the inference drawn by the Assessing Officer that the unsecured loans received by the assessee from these entities were also accommodation entries cannot be said to be irrational or without basis. The belief so formed is essentially a subjective satisfaction of the Assessing Officer, though founded upon objective criteria on material available on record. In our opinion, therefore, the Assessing Officer had before him material which was relevant to the assessee and had a direct bearing on the assessment year in question. Consequently, the contention of the assessee that there was no live link between the material available and the reasons recorded is devoid of merit. The learned counsel for the assessee placed reliance upon the judgment of the Hon’ble Supreme Court in the case of Neelima Sunil Khanna 13 ITA Nos. 7810 & 7811/MUM/2025 d no stock at their premises, no infrastructure or staff to conduct genuine business operations, and that the directors or partners were either relatives, associates or employees of Shri Bhanwarlal Jain. These circumstances, taken together, ed that the entities were merely paper concerns used On the basis of the overall material gathered during the search, the Assessing Officer formed a belief that the concerns from s were part of the accommodation entry network controlled by Shri Bhanwarlal Jain. In such circumstances, the inference drawn by the Assessing Officer that the unsecured loans received by the assessee from not be said to be irrational or without basis. The belief so formed is essentially a subjective satisfaction of the Assessing Officer, though founded upon objective criteria on material available on record. cer had before him material which was relevant to the assessee and had a direct bearing on the assessment year in question. Consequently, the contention of the assessee that there was no live link between the devoid of merit. The learned counsel for the assessee placed reliance upon the judgment of the Hon’ble Supreme Court in the case of ITO v. Printed from counselvise.com Lakhmani Mewal Das that there must be a rational connection or a live link between the material coming to the notice of the Assessing Officer and the formation of the belief that income chargeable to tax has escaped assessment. Having carefully considered the said decision, we find that the principle laid down therein is duly satisfied in the present case. The information received from the Investigation Wing, based on the search action conducted in the case of Shri Bhanwarlal Jain constituted tangible and relevant material having a direct nexus with the loans received by the assessee. Accordingly, the reliance placed by the assessee on the aforesaid decision does not advance its case. 7.10 The second limb of the argument of the le assessee was that the Assessing Officer had reopened the assessment merely on the basis of borrowed satisfaction from the Investigation Wing without conducting any independent inquiry. We are unable to accept this contention. The Hon’ the case of Assistant Commissioner of Income Stock Brokers (P.) Ltd. the purpose of reopening an assessment, the requirement is the formation of a bona fide belief by t relevant material, that income chargeable to tax has escaped assessment. The sufficiency or adequacy of such material is not to be examined at that stage. ITA Nos. 7810 & 7811/MUM/2025 Lakhmani Mewal Das [1976] 103 ITR 437 (SC), wherein it was held that there must be a rational connection or a live link between the material coming to the notice of the Assessing Officer and the formation of the belief that income chargeable to tax has escaped aving carefully considered the said decision, we find that the principle laid down therein is duly satisfied in the present case. The information received from the Investigation Wing, based on the search action conducted in the case of Shri Bhanwarlal Jain constituted tangible and relevant material having a direct nexus with the loans received by the assessee. Accordingly, the reliance placed by the assessee on the aforesaid decision does not advance The second limb of the argument of the learned counsel for the assessee was that the Assessing Officer had reopened the assessment merely on the basis of borrowed satisfaction from the Investigation Wing without conducting any independent inquiry. We are unable to accept this contention. The Hon’ble Supreme Court in Assistant Commissioner of Income-tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Taxman 316 (SC) has held that for the purpose of reopening an assessment, the requirement is the formation of a bona fide belief by the Assessing Officer, based on relevant material, that income chargeable to tax has escaped assessment. The sufficiency or adequacy of such material is not to be examined at that stage. It is pertinent to note that under the Neelima Sunil Khanna 14 ITA Nos. 7810 & 7811/MUM/2025 [1976] 103 ITR 437 (SC), wherein it was held that there must be a rational connection or a live link between the material coming to the notice of the Assessing Officer and the formation of the belief that income chargeable to tax has escaped aving carefully considered the said decision, we find that the principle laid down therein is duly satisfied in the present case. The information received from the Investigation Wing, based on the search action conducted in the case of Shri Bhanwarlal Jain, constituted tangible and relevant material having a direct nexus with the loans received by the assessee. Accordingly, the reliance placed by the assessee on the aforesaid decision does not advance arned counsel for the assessee was that the Assessing Officer had reopened the assessment merely on the basis of borrowed satisfaction from the Investigation Wing without conducting any independent inquiry. We ble Supreme Court in tax v. Rajesh Jhaveri [2007] 161 Taxman 316 (SC) has held that for the purpose of reopening an assessment, the requirement is the he Assessing Officer, based on relevant material, that income chargeable to tax has escaped assessment. The sufficiency or adequacy of such material is not to It is pertinent to note that under the Printed from counselvise.com provisions of section 147/148, amendment with effect from 01.04.2021, the law did not mandate that the Assessing Officer must conduct a detailed inquiry before issuing a notice for reassessment. The only statutory requirement was the formation of a reasonable In the present case, the Assessing Officer examined the information received from the Investigation Wing and correlated the same with the records pertaining to the assessee before arriving at the requisite belief that inc allegation that the reopening was based on borrowed satisfaction or without application of mind is without substance. 7.11 The learned counsel further submitted that the information available with the Department p sale transactions of entities belonging to the Bhanwarlal Jain group, whereas the transaction in the case of the assessee related to unsecured loans. According to him, this demonstrated non application of mind by the Assessin accept this submission. The material unearthed during the search indicated that the concerns controlled by Shri Bhanwarlal Jain were engaged in providing accommodation entries through various modes. Once the entities themselves and engaged in accommodation entry operations, the inference drawn by the Assessing Officer that the loans received from such entities could also represent accommodation entries cannot be ITA Nos. 7810 & 7811/MUM/2025 provisions of section 147/148, as they stood prior to the amendment with effect from 01.04.2021, the law did not mandate that the Assessing Officer must conduct a detailed inquiry before issuing a notice for reassessment. The only statutory requirement was the formation of a reasonable belief based on relevant material. In the present case, the Assessing Officer examined the information received from the Investigation Wing and correlated the same with the records pertaining to the assessee before arriving at the requisite belief that income had escaped assessment. Therefore, the allegation that the reopening was based on borrowed satisfaction or without application of mind is without substance. The learned counsel further submitted that the information available with the Department pertained to bogus purchase and sale transactions of entities belonging to the Bhanwarlal Jain group, whereas the transaction in the case of the assessee related to unsecured loans. According to him, this demonstrated non application of mind by the Assessing Officer. We are unable to accept this submission. The material unearthed during the search indicated that the concerns controlled by Shri Bhanwarlal Jain were engaged in providing accommodation entries through various modes. Once the entities themselves were found to be non and engaged in accommodation entry operations, the inference drawn by the Assessing Officer that the loans received from such entities could also represent accommodation entries cannot be Neelima Sunil Khanna 15 ITA Nos. 7810 & 7811/MUM/2025 as they stood prior to the amendment with effect from 01.04.2021, the law did not mandate that the Assessing Officer must conduct a detailed inquiry before issuing a notice for reassessment. The only statutory requirement belief based on relevant material. In the present case, the Assessing Officer examined the information received from the Investigation Wing and correlated the same with the records pertaining to the assessee before arriving at the ome had escaped assessment. Therefore, the allegation that the reopening was based on borrowed satisfaction or The learned counsel further submitted that the information ertained to bogus purchase and sale transactions of entities belonging to the Bhanwarlal Jain group, whereas the transaction in the case of the assessee related to unsecured loans. According to him, this demonstrated non- g Officer. We are unable to accept this submission. The material unearthed during the search indicated that the concerns controlled by Shri Bhanwarlal Jain were engaged in providing accommodation entries through various were found to be non-genuine and engaged in accommodation entry operations, the inference drawn by the Assessing Officer that the loans received from such entities could also represent accommodation entries cannot be Printed from counselvise.com regarded as arbitrary. the basis of the entire material which was available before him. 7.12 In this context, it is relevant to refer to the judgment of the Hon’ble Supreme Court in 236 ITR 34 (SC), wherein it recording reasons for reopening the assessment, the Assessing Officer is only required to have prima facie material suggesting escapement of income; the sufficiency or correctness of such material cannot be examined by th stage. Applying the aforesaid principle, we find no merit in the contention of the assessee that the material relied upon by the Assessing Officer had no nexus with the formation of belief. 7.13 The learned counsel for the assessee also contended that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In this regard, we note that the assessee had indeed disclosed the loans rece aforesaid parties in its books of account and return of income has been filed during the search in the case of Shri Bhanwarlal Jain indicated that these entities were engaged in providing that the loans were not genuine. Such facts were evidently not disclosed by the assessee. disclose the material ITA Nos. 7810 & 7811/MUM/2025 regarded as arbitrary. The Assessing Officer has formed belief the basis of the entire material which was available before him. In this context, it is relevant to refer to the judgment of the Hon’ble Supreme Court in Raymond Woollen Mills Ltd. v. ITO 236 ITR 34 (SC), wherein it has been held that at the stage of recording reasons for reopening the assessment, the Assessing Officer is only required to have prima facie material suggesting escapement of income; the sufficiency or correctness of such material cannot be examined by the Court or the Tribunal at that stage. Applying the aforesaid principle, we find no merit in the contention of the assessee that the material relied upon by the Assessing Officer had no nexus with the formation of belief. The learned counsel for the assessee also contended that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In this regard, we note that the assessee had indeed disclosed the loans rece aforesaid parties in its books of account and on the basis of which return of income has been filed. However, the material gathered during the search in the case of Shri Bhanwarlal Jain indicated that these entities were engaged in providing accommodation entries and that the loans were not genuine. Such facts were evidently not disclosed by the assessee. Thus, certainly the assessee has failed to disclose the material facts fully and truly. Neelima Sunil Khanna 16 ITA Nos. 7810 & 7811/MUM/2025 formed belief on the basis of the entire material which was available before him. In this context, it is relevant to refer to the judgment of the Raymond Woollen Mills Ltd. v. ITO [1999] has been held that at the stage of recording reasons for reopening the assessment, the Assessing Officer is only required to have prima facie material suggesting escapement of income; the sufficiency or correctness of such e Court or the Tribunal at that stage. Applying the aforesaid principle, we find no merit in the contention of the assessee that the material relied upon by the Assessing Officer had no nexus with the formation of belief. The learned counsel for the assessee also contended that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In this regard, we note that the assessee had indeed disclosed the loans received from the on the basis of which . However, the material gathered during the search in the case of Shri Bhanwarlal Jain indicated that accommodation entries and that the loans were not genuine. Such facts were evidently not Thus, certainly the assessee has failed to Printed from counselvise.com 7.14 Be that as it may, the proviso to section 147, reopening after four years in the absence of failure to disclose fully and truly all material facts, becomes relevant only where the original assessment has been completed under section 143(3) of the Act. In the present case, it is an admitted assessment under section 143(3) had been carried out prior to the issuance of notice under section 148. Consequently, the embargo contained in the proviso to section 147 is not attracted. 7.15 The learned counsel further argued th proceedings were initiated merely on a ‘change of opinion’. This contention also does not merit acceptance. Since no scrutiny assessment had been completed earlier, there was no occasion for the Assessing Officer to form any opinion on loans received by the assessee. In the absence of any prior formation of opinion, the doctrine of change of opinion has no application. 7.16 In view of the foregoing discussion, we are satisfied that the Assessing Officer had validl 147 of the Act on the basis of tangible material leading to the formation of a bona fide belief that income chargeable to tax had escaped assessment. We, therefore, find no infirmity in the order of the learned CIT(A) u proceedings. ITA Nos. 7810 & 7811/MUM/2025 Be that as it may, the proviso to section 147, reopening after four years in the absence of failure to disclose fully and truly all material facts, becomes relevant only where the original assessment has been completed under section 143(3) of the Act. In the present case, it is an admitted position that no scrutiny assessment under section 143(3) had been carried out prior to the issuance of notice under section 148. Consequently, the embargo contained in the proviso to section 147 is not attracted. The learned counsel further argued that the reassessment proceedings were initiated merely on a ‘change of opinion’. This contention also does not merit acceptance. Since no scrutiny assessment had been completed earlier, there was no occasion for the Assessing Officer to form any opinion on the genuineness of the loans received by the assessee. In the absence of any prior formation of opinion, the doctrine of change of opinion has no In view of the foregoing discussion, we are satisfied that the Assessing Officer had validly assumed jurisdiction under section 147 of the Act on the basis of tangible material leading to the formation of a bona fide belief that income chargeable to tax had escaped assessment. We, therefore, find no infirmity in the order of the learned CIT(A) upholding the validity of the reassessment Neelima Sunil Khanna 17 ITA Nos. 7810 & 7811/MUM/2025 Be that as it may, the proviso to section 147, which bars reopening after four years in the absence of failure to disclose fully and truly all material facts, becomes relevant only where the original assessment has been completed under section 143(3) of the position that no scrutiny assessment under section 143(3) had been carried out prior to the issuance of notice under section 148. Consequently, the embargo contained in the proviso to section 147 is not attracted. at the reassessment proceedings were initiated merely on a ‘change of opinion’. This contention also does not merit acceptance. Since no scrutiny assessment had been completed earlier, there was no occasion for the genuineness of the loans received by the assessee. In the absence of any prior formation of opinion, the doctrine of change of opinion has no In view of the foregoing discussion, we are satisfied that the y assumed jurisdiction under section 147 of the Act on the basis of tangible material leading to the formation of a bona fide belief that income chargeable to tax had escaped assessment. We, therefore, find no infirmity in the order of pholding the validity of the reassessment Printed from counselvise.com 7.17 Accordingly, the challenge raised by the assessee to the validity of the reassessment is rejected, and the findings of the learned CIT(A) on this issue are affirmed. Ground Nos. 1 and 2 raised by the assessee are, therefore, dismissed. 8. Ground Nos. 3 to 5 of the appeal relate to the addition of unsecured loans amounting to sustained by the learned CIT(A). The primary contention of the assessee is that the addition h third-party information and that no opportunity of cross examination of such third parties was provided to the assessee. 8.1 The brief facts relevant to this issue are that the Assessing Officer, on the basis of informat Wing, formed a view that the loans received by the assessee from two concerns, namely M/s Daksh Diamonds ( M/s Marc Gems ( accommodation entries. Accordingly, the asse to discharge the onus cast upon it under section 68 of the Act by establishing the identity of the lenders, their creditworthiness, and the genuineness of the transactions. 8.2 In response, the assessee furnished confirmations from the said parties along with their names, addresses, PAN details, and the mode of payment. The assessee also placed on record copies of its bank statements reflecting receipt of the amounts through bank ITA Nos. 7810 & 7811/MUM/2025 Accordingly, the challenge raised by the assessee to the validity of the reassessment is rejected, and the findings of the learned CIT(A) on this issue are affirmed. Ground Nos. 1 and 2 the assessee are, therefore, dismissed. Ground Nos. 3 to 5 of the appeal relate to the addition of unsecured loans amounting to ₹1,25,00,000/–, which has been sustained by the learned CIT(A). The primary contention of the assessee is that the addition has been made merely on the basis of party information and that no opportunity of cross examination of such third parties was provided to the assessee. The brief facts relevant to this issue are that the Assessing Officer, on the basis of information received from the Investigation Wing, formed a view that the loans received by the assessee from two concerns, namely M/s Daksh Diamonds (₹70,00,000/ M/s Marc Gems (₹55,00,000/–), were in the nature of accommodation entries. Accordingly, the assessee was called upon to discharge the onus cast upon it under section 68 of the Act by establishing the identity of the lenders, their creditworthiness, and the genuineness of the transactions. In response, the assessee furnished confirmations from the said parties along with their names, addresses, PAN details, and the mode of payment. The assessee also placed on record copies of its bank statements reflecting receipt of the amounts through bank Neelima Sunil Khanna 18 ITA Nos. 7810 & 7811/MUM/2025 Accordingly, the challenge raised by the assessee to the validity of the reassessment is rejected, and the findings of the learned CIT(A) on this issue are affirmed. Ground Nos. 1 and 2 Ground Nos. 3 to 5 of the appeal relate to the addition of , which has been sustained by the learned CIT(A). The primary contention of the as been made merely on the basis of party information and that no opportunity of cross- examination of such third parties was provided to the assessee. The brief facts relevant to this issue are that the Assessing ion received from the Investigation Wing, formed a view that the loans received by the assessee from 70,00,000/–) and ), were in the nature of ssee was called upon to discharge the onus cast upon it under section 68 of the Act by establishing the identity of the lenders, their creditworthiness, and In response, the assessee furnished confirmations from the said parties along with their names, addresses, PAN details, and the mode of payment. The assessee also placed on record copies of its bank statements reflecting receipt of the amounts through banking Printed from counselvise.com channels, as well as copies of the financial statements and income tax returns of the lender concerns. On the basis of these documents, the assessee contended that the burden cast upon it under section 68 had been duly discharged. 8.3 The Assessing Off 133(6) of the Act to the said parties, but no response was received from them. The Assessing Officer thereafter confronted the assessee with the material unearthed during the course of search proceedings conducte it was found that the concerns M/s Daksh Diamonds and M/s Marc Gems were controlled and managed by him and were used for providing accommodation entries. The Assessing Officer also referred to the statements r statement of Shri Bhanwarlal Jain, wherein he admitted that various entities under his control were engaged in providing accommodation entries for commission. statement is reproduced as und “5.4 In view of the above discussion, it is clear that even though the above named persons are partners and proprietor of the firms, the overall control and management of the entities was operated by Shri Bhanwarlal Jain, who is engaged in the business accommodation entries after charging his commission. Further, Shri Bhanwarlal Jain in his statement recorded on 11 response to Q. No. 29, has clearly admitted that he used to charge commission of 2 paisa per Rs.100. The relevant p is reproduced below for the sake of bravity: \"Q 29 In this statement, in response to question no 19 and 20 of this statement, you have stated that the documents seized as Annexure 14 from 210, J 55 Road, Girgaum, Mumbai are pertaining t ITA Nos. 7810 & 7811/MUM/2025 channels, as well as copies of the financial statements and income tax returns of the lender concerns. On the basis of these documents, the assessee contended that the burden cast upon it under section 68 had been duly discharged. The Assessing Officer, however, issued notices under section 133(6) of the Act to the said parties, but no response was received from them. The Assessing Officer thereafter confronted the assessee with the material unearthed during the course of search proceedings conducted in the case of Shri Bhanwarlal Jain, wherein it was found that the concerns M/s Daksh Diamonds and M/s Marc Gems were controlled and managed by him and were used for providing accommodation entries. The Assessing Officer also referred to the statements recorded during the search, including the statement of Shri Bhanwarlal Jain, wherein he admitted that various entities under his control were engaged in providing accommodation entries for commission. For ready reference, said statement is reproduced as under: 5.4 In view of the above discussion, it is clear that even though the above named persons are partners and proprietor of the firms, the overall control and management of the entities was operated by Shri Bhanwarlal Jain, who is engaged in the business accommodation entries after charging his commission. Further, Shri Bhanwarlal Jain in his statement recorded on 11 response to Q. No. 29, has clearly admitted that he used to charge commission of 2 paisa per Rs.100. The relevant portion of the same is reproduced below for the sake of bravity:- \"Q 29 In this statement, in response to question no 19 and 20 of this statement, you have stated that the documents seized as Annexure 14 from 210, J 55 Road, Girgaum, Mumbai are pertaining t Neelima Sunil Khanna 19 ITA Nos. 7810 & 7811/MUM/2025 channels, as well as copies of the financial statements and income- tax returns of the lender concerns. On the basis of these documents, the assessee contended that the burden cast upon it icer, however, issued notices under section 133(6) of the Act to the said parties, but no response was received from them. The Assessing Officer thereafter confronted the assessee with the material unearthed during the course of search d in the case of Shri Bhanwarlal Jain, wherein it was found that the concerns M/s Daksh Diamonds and M/s Marc Gems were controlled and managed by him and were used for providing accommodation entries. The Assessing Officer also ecorded during the search, including the statement of Shri Bhanwarlal Jain, wherein he admitted that various entities under his control were engaged in providing For ready reference, said 5.4 In view of the above discussion, it is clear that even though the above named persons are partners and proprietor of the firms, the overall control and management of the entities was operated by Shri Bhanwarlal Jain, who is engaged in the business of providing accommodation entries after charging his commission. Further, Shri Bhanwarlal Jain in his statement recorded on 11-10-2013, in response to Q. No. 29, has clearly admitted that he used to charge ortion of the same \"Q 29 In this statement, in response to question no 19 and 20 of this statement, you have stated that the documents seized as Annexure 14 from 210, J 55 Road, Girgaum, Mumbai are pertaining to the Printed from counselvise.com business of your concern. You are once again asked to go through the said documents and explain the entries therein? Ans I reaffirm that these documents seized as per Annexure 14 pertains to business related transaction of our group concerns. The entries mentioned in the said documents routed through banks are recorded and reflected in the books of accounts of Group concerns. There are certain other entries in these documents routed through banks but through the Aangaria account in cash a per the market practice. Such transactions are not recorded in the books of accounts of the Group concerns. Certain transactions in these documents are also in the nature of \"square off transactions which is to say that cash is received and paid back. I receive commission of 2 paisa per Rs 100 on all such transactions that are done through the Aangaria account in cash and are not recorded in the regular books of accounts of the Group Concerns.\" 8.4 Further, the Assessing Officer relied upon Shri Ritesh Siroya, proprietor of M/s Daksh Diamonds, recorded under section 131 of the Act, wherein he explained the modus operandi adopted by the group for providing accommodation entries through various concerns recorded and other material gathered during the search, the Assessing Officer concluded that the said entities were merely accommodation entry providers and were not engaged in genuine business activities. Ritesh Siroya is reproduced as under: “7.1 Further, the Proprietor of M/s Daksh Diamond, Mr Ritesh Siroya had given statement u/s 131 of the I.T. Act in the O/o DDIT Unit IX (2), 2nd Floor, Room No 231, Scindia House, Ballard Pier on 04.10.2013. The relevant portion of the statement is reproduced as under:- ITA Nos. 7810 & 7811/MUM/2025 business of your concern. You are once again asked to go through the said documents and explain the entries therein? Ans I reaffirm that these documents seized as per Annexure 14 pertains to business related transaction of our group concerns. The ries mentioned in the said documents routed through banks are recorded and reflected in the books of accounts of Group concerns. There are certain other entries in these documents routed through banks but through the Aangaria account in cash a per the market practice. Such transactions are not recorded in the books of accounts of the Group concerns. Certain transactions in these documents are also in the nature of \"square off transactions which is to say that cash is received and paid back. I receive commission of 2 paisa per Rs 100 on all such transactions that are done through the Aangaria account in cash and are not recorded in the regular books of accounts of the Group Concerns.\" Further, the Assessing Officer relied upon the statement of Shri Ritesh Siroya, proprietor of M/s Daksh Diamonds, recorded under section 131 of the Act, wherein he explained the modus operandi adopted by the group for providing accommodation entries through various concerns /brokers. On the basis of the statements recorded and other material gathered during the search, the Assessing Officer concluded that the said entities were merely accommodation entry providers and were not engaged in genuine business activities. The relevant part of the statemen is reproduced as under: 7.1 Further, the Proprietor of M/s Daksh Diamond, Mr Ritesh Siroya had given statement u/s 131 of the I.T. Act in the O/o DDIT Unit IX (2), 2nd Floor, Room No 231, Scindia House, Ballard Pier on The relevant portion of the statement is reproduced as ---------paper left blank------- Neelima Sunil Khanna 20 ITA Nos. 7810 & 7811/MUM/2025 business of your concern. You are once again asked to go through Ans I reaffirm that these documents seized as per Annexure 14 pertains to business related transaction of our group concerns. The ries mentioned in the said documents routed through banks are recorded and reflected in the books of accounts of Group concerns. There are certain other entries in these documents -,\" not been routed through banks but through the Aangaria account in cash as per the market practice. Such transactions are not recorded in the books of accounts of the Group concerns. Certain transactions in these documents are also in the nature of \"square off transactions which is to say that cash is received and paid back. I do confirm I receive commission of 2 paisa per Rs 100 on all such transactions that are done through the Aangaria account in cash and are not recorded in the regular books of accounts of the Group Concerns.\" the statement of Shri Ritesh Siroya, proprietor of M/s Daksh Diamonds, recorded under section 131 of the Act, wherein he explained the modus operandi adopted by the group for providing accommodation entries f the statements recorded and other material gathered during the search, the Assessing Officer concluded that the said entities were merely accommodation entry providers and were not engaged in genuine statement of Shri 7.1 Further, the Proprietor of M/s Daksh Diamond, Mr Ritesh Siroya had given statement u/s 131 of the I.T. Act in the O/o DDIT Unit IX (2), 2nd Floor, Room No 231, Scindia House, Ballard Pier on The relevant portion of the statement is reproduced as Printed from counselvise.com Statement of Ritesh Siroya recorded under section 131 of the Income Tax Act 1961 in the O/o DDIT Unit IX(2), 2nd Floor, Room No. 231, Scindia House, Ba 56. Please explain how the purchase and sale entries are made in the books of accounts of your concerns? Please explain the entire modus operandi used by Rajesh B Jain for purchase and sale of diamond. Import of diamond is made on make imports in their own names (real importer). In the books of our concerns, the same stands as stock. The material is then invoiced to the real importer out of books. However, in our books, the import is still standing as stock, since the material/consignment is sold to the real importer out of books. To show sale against this stock, our concerns issue sale bills to the parties who need accommodation bills against purchases made in cash. These parties make payment through RTGS which is used to make payment to the party from whom import is made thereby squaring off this transaction. Against the RTGS, the party wants the cash back. The real importer, who purchases the consignment out of books in cash, sells the same in cash in market, thereby generating cash. The real importer has its account with Angadia. It instructs the Angadia to make the payment for the imported consignment in cash to our concern. Our concern, on receiving the cash from Angadia returns the cash to th party who has made RTGS against bogus accommodation entry thereby squaring off this transaction. 57. Please explain how the clients in need of accommodation entries contact you. Ans: The clients who are in need of accommodation entries contact us directly or through their brokers. 58. Give the names of the brokers who contact you for accommodation entries on behalf of other clients? Ans: The names of few such brokers are as under: i. Anil Bhai – 9820040350 ii. Viresh – 9821138008 iii. Shailesh Bhai iv. Vipul Bhai ITA Nos. 7810 & 7811/MUM/2025 Statement of Ritesh Siroya recorded under section 131 of the Income Tax Act 1961 in the O/o DDIT Unit IX(2), 2nd Floor, Room No. 231, Scindia House, Ballard Pier on 04/10/2013 56. Please explain how the purchase and sale entries are made in the books of accounts of your concerns? Please explain the entire modus operandi used by Rajesh B Jain for purchase and sale of Import of diamond is made on behalf of certain parties who cannot make imports in their own names (real importer). In the books of our concerns, the same stands as stock. The material is then invoiced to the real importer out of books. However, in our books, the import is ng as stock, since the material/consignment is sold to the real importer out of books. To show sale against this stock, our concerns issue sale bills to the parties who need accommodation bills against purchases made in cash. These parties make payment ough RTGS which is used to make payment to the party from whom import is made thereby squaring off this transaction. Against the RTGS, the party wants the cash back. The real importer, who purchases the consignment out of books in cash, sells the same ash in market, thereby generating cash. The real importer has its account with Angadia. It instructs the Angadia to make the payment for the imported consignment in cash to our concern. Our concern, on receiving the cash from Angadia returns the cash to th party who has made RTGS against bogus accommodation entry thereby squaring off this transaction. 57. Please explain how the clients in need of accommodation entries Ans: The clients who are in need of accommodation entries contact directly or through their brokers. 58. Give the names of the brokers who contact you for accommodation entries on behalf of other clients? Ans: The names of few such brokers are as under: 9820040350 9821138008 iii. Shailesh Bhai – I don’t have his contact no. iv. Vipul Bhai – I don’t have Neelima Sunil Khanna 21 ITA Nos. 7810 & 7811/MUM/2025 Statement of Ritesh Siroya recorded under section 131 of the Income Tax Act 1961 in the O/o DDIT Unit IX(2), 2nd Floor, Room 56. Please explain how the purchase and sale entries are made in the books of accounts of your concerns? Please explain the entire modus operandi used by Rajesh B Jain for purchase and sale of behalf of certain parties who cannot make imports in their own names (real importer). In the books of our concerns, the same stands as stock. The material is then invoiced to the real importer out of books. However, in our books, the import is ng as stock, since the material/consignment is sold to the real importer out of books. To show sale against this stock, our concerns issue sale bills to the parties who need accommodation bills against purchases made in cash. These parties make payment ough RTGS which is used to make payment to the party from whom import is made thereby squaring off this transaction. Against the RTGS, the party wants the cash back. The real importer, who purchases the consignment out of books in cash, sells the same ash in market, thereby generating cash. The real importer has its account with Angadia. It instructs the Angadia to make the payment for the imported consignment in cash to our concern. Our concern, on receiving the cash from Angadia returns the cash to the party who has made RTGS against bogus accommodation entry 57. Please explain how the clients in need of accommodation entries Ans: The clients who are in need of accommodation entries contact 58. Give the names of the brokers who contact you for Printed from counselvise.com 59. Name the person who is contacted by clients in need of accommodation entries. Ans: Such clients either contact Rajesh B Jain, Lunkaran Parasmal Kothari, A tul Ladda, Rohit Bairawat and 8. It was also proved beyond doubt during the course of search action itself that M/s Daksh Diamond & M/s Marc Diamond are two of the dummy entities floated by Shri Bhanwarlal Jain with a malafide intention to provide various accommodation entries people, who wish to siphon off profits or those who wants to convert their unaccounted money to give a colour of accounted money. In view of the specific facts and the evidences available in the shape of copies of statements recorded under oath of wherein they have denied of having made any genuine business activities, the details / documents produced by the assessee in the form of loan confirmation and bank statement would not adequately rebut and controvert the specific statemen parties during the course of search action. 8.1 Hence, it can safely be concluded that the loan transaction entered into by the assessee with M/s Daksh Diamond & M/s Marc Diamond are non payment of legitimate taxes. On account of these facts, the loans of Rs. 70,00,000/ of Rs. 55,00,000/ 1,25,00,000/ unexplained credits and added back to the total income of the assessee. Penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 is initiated separately for furnishing inaccurate particulars of income. 8.5 In these circumstances, the Assessing Officer held that the documentary evidence furnished by the assessee, such as confirmations and bank statements, could not rebut the categorical statements recorded on oath during the course of search proceedings. Since the assessee failed to produce the lender parties to substantiate the genuineness of the transactions, the Assessing Officer treated the amounts of ITA Nos. 7810 & 7811/MUM/2025 59. Name the person who is contacted by clients in need of accommodation entries. Ans: Such clients either contact Rajesh B Jain, Lunkaran Parasmal Kothari, A tul Ladda, Rohit Bairawat and myself. 8. It was also proved beyond doubt during the course of search action itself that M/s Daksh Diamond & M/s Marc Diamond are two of the dummy entities floated by Shri Bhanwarlal Jain with a malafide intention to provide various accommodation entries people, who wish to siphon off profits or those who wants to convert their unaccounted money to give a colour of accounted money. In view of the specific facts and the evidences available in the shape of copies of statements recorded under oath of the above persons, wherein they have denied of having made any genuine business activities, the details / documents produced by the assessee in the form of loan confirmation and bank statement would not adequately rebut and controvert the specific statements recorded on oath by the parties during the course of search action. 8.1 Hence, it can safely be concluded that the loan transaction entered into by the assessee with M/s Daksh Diamond & M/s Marc Diamond are non-genuine transaction and was entered to avo payment of legitimate taxes. On account of these facts, the loans of Rs. 70,00,000/- received from M/s Daksh Diamonds and the loans of Rs. 55,00,000/- received from M/s Marc Diamond totalling to Rs. 1,25,00,000/- during the year under consideration, unexplained credits and added back to the total income of the assessee. Penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 is initiated separately for furnishing inaccurate particulars of income. (Add: Unsecured loan : Rs. 1,25,00,000/ In these circumstances, the Assessing Officer held that the documentary evidence furnished by the assessee, such as confirmations and bank statements, could not rebut the categorical statements recorded on oath during the course of search gs. Since the assessee failed to produce the lender parties to substantiate the genuineness of the transactions, the Assessing Officer treated the amounts of ₹70,00,000/– and Neelima Sunil Khanna 22 ITA Nos. 7810 & 7811/MUM/2025 59. Name the person who is contacted by clients in need of Ans: Such clients either contact Rajesh B Jain, Lunkaran Parasmal 8. It was also proved beyond doubt during the course of search action itself that M/s Daksh Diamond & M/s Marc Diamond are two of the dummy entities floated by Shri Bhanwarlal Jain with a malafide intention to provide various accommodation entries for the people, who wish to siphon off profits or those who wants to convert their unaccounted money to give a colour of accounted money. In view of the specific facts and the evidences available in the shape of the above persons, wherein they have denied of having made any genuine business activities, the details / documents produced by the assessee in the form of loan confirmation and bank statement would not adequately ts recorded on oath by the 8.1 Hence, it can safely be concluded that the loan transaction entered into by the assessee with M/s Daksh Diamond & M/s Marc genuine transaction and was entered to avoid the payment of legitimate taxes. On account of these facts, the loans of received from M/s Daksh Diamonds and the loans received from M/s Marc Diamond totalling to Rs. is treated as unexplained credits and added back to the total income of the assessee. Penalty proceedings u/s.271(1)(c) of the I.T. Act, 1961 is initiated separately for furnishing inaccurate particulars of income. (Add: Unsecured loan : Rs. 1,25,00,000/-).” In these circumstances, the Assessing Officer held that the documentary evidence furnished by the assessee, such as confirmations and bank statements, could not rebut the categorical statements recorded on oath during the course of search gs. Since the assessee failed to produce the lender parties to substantiate the genuineness of the transactions, the Assessing and ₹55,00,000/– Printed from counselvise.com received from M/s Daksh Diamonds and M/s Marc Gems respectively, aggregating to credits under section 68 of the Act and added the same to the total income of the assessee. 8.6 On appeal, the learned CIT(A), after considering the material on record and relying inter alia on the decision of the Tribunal in Global v. ITO (2024) 167 taxmann.com 15 (Mumbai the addition by observing that the search proceedings in the Shri Bhanwarlal Jain clearly established that the aforesaid concerns were part of a network engaged in providing accommodation entries. reproduced under: “6.4 Appellant's submissions were carefully considered. clearly brought out in the assessment order that M/s Daksh Diamonds and M/s Mark Gems were controlled and operated by Shri. Bhanwarlal Jain, who was engaged in providing accommodation entries. A search and seizure action u/s 132 of the Act was carried out on Shri. Bhanwarlal Jain and his group concerns on 03/10/2013. ΑO, vide para 5.4 of the assessment order dated 20/12/2018 had reproduced the statement recorded from Shri. Bhanwarlal Jain, by the Inv. Wing. In his statement Shri. Bhanwarlal Jain entries and also explained the modus operandus, adopted by him in giving the accommodation entry. While answering the question No.24, in the statement recorded, Shri. Bhanwarlal Jain confirmed the he had provide Diamonds and M/s Mark Gems. The relevant extract of the statement is reproduced as under: Q.24 From your response to question 5 to Q no 15 and Q 22 to Q 23, it is observed that you are managing are managing the ove business of numerous concerns. You are hereby requested to furnish the names of the concerns that are managed and controlled by you? ITA Nos. 7810 & 7811/MUM/2025 received from M/s Daksh Diamonds and M/s Marc Gems regating to ₹1,25,00,000/–, as unexplained cash credits under section 68 of the Act and added the same to the total income of the assessee. On appeal, the learned CIT(A), after considering the material on record and relying inter alia on the decision of the Tribunal in (2024) 167 taxmann.com 15 (Mumbai the addition by observing that the search proceedings in the Shri Bhanwarlal Jain clearly established that the aforesaid concerns were part of a network engaged in providing accommodation entries. The relevant finding of ld CIT(A) i 6.4 Appellant's submissions were carefully considered. clearly brought out in the assessment order that M/s Daksh Diamonds and M/s Mark Gems were controlled and operated by Shri. Bhanwarlal Jain, who was engaged in providing accommodation entries. A search and seizure action u/s 132 of the arried out on Shri. Bhanwarlal Jain and his group concerns on 03/10/2013. ΑO, vide para 5.4 of the assessment order dated 20/12/2018 had reproduced the statement recorded from Shri. Bhanwarlal Jain, by the Inv. Wing. In his statement Shri. Bhanwarlal Jain accepted that he was providing accommodation entries and also explained the modus operandus, adopted by him in giving the accommodation entry. While answering the question No.24, in the statement recorded, Shri. Bhanwarlal Jain confirmed the he had provided accommodation entries through M/s Daksh Diamonds and M/s Mark Gems. The relevant extract of the statement is reproduced as under: Q.24 From your response to question 5 to Q no 15 and Q 22 to Q 23, it is observed that you are managing are managing the ove business of numerous concerns. You are hereby requested to furnish the names of the concerns that are managed and controlled Neelima Sunil Khanna 23 ITA Nos. 7810 & 7811/MUM/2025 received from M/s Daksh Diamonds and M/s Marc Gems , as unexplained cash credits under section 68 of the Act and added the same to the total On appeal, the learned CIT(A), after considering the material on record and relying inter alia on the decision of the Tribunal in JK (2024) 167 taxmann.com 15 (Mumbai-Trib.), upheld the addition by observing that the search proceedings in the case of Shri Bhanwarlal Jain clearly established that the aforesaid concerns were part of a network engaged in providing The relevant finding of ld CIT(A) is 6.4 Appellant's submissions were carefully considered. The AO has clearly brought out in the assessment order that M/s Daksh Diamonds and M/s Mark Gems were controlled and operated by Shri. Bhanwarlal Jain, who was engaged in providing accommodation entries. A search and seizure action u/s 132 of the arried out on Shri. Bhanwarlal Jain and his group concerns on 03/10/2013. ΑO, vide para 5.4 of the assessment order dated 20/12/2018 had reproduced the statement recorded from Shri. Bhanwarlal Jain, by the Inv. Wing. In his statement Shri. accepted that he was providing accommodation entries and also explained the modus operandus, adopted by him in giving the accommodation entry. While answering the question No.24, in the statement recorded, Shri. Bhanwarlal Jain confirmed d accommodation entries through M/s Daksh Diamonds and M/s Mark Gems. The relevant extract of the Q.24 From your response to question 5 to Q no 15 and Q 22 to Q 23, it is observed that you are managing are managing the overall business of numerous concerns. You are hereby requested to furnish the names of the concerns that are managed and controlled Printed from counselvise.com Ans I agree that I look after the overall business of the concerns mentioned in Annexure A of this statement. Apart fr mentioned in the said Annexure, there are various other concerns whose management is carried out by me. A comprehensive list of all such concerns where I manage and supervise is given in the table below: S. No. Name of the concern 40 M/s Daksh Diamonds 47 M/s Marc Gems 8.7 Before us, the learned counsel for the assessee submissions advanced before the lower authorities and contended that the assessee had discharged the onus cast upon it under section 68 by furnishing confirmations, financial statements, and bank statements of the lender parties. It was furt the loans were received through banking channels and were subsequently repaid in later years, which, according to the assessee, establishes the genuineness of the transactions. The learned counsel also contended that the Assessing Office carried out any independent inquiry and had relied solely upon statements recorded during the search proceedings, without affording the assessee an opportunity to cross concerned persons. According to the Ld. counsel, the lender parti has shown substantial amount of turnover in their books of accounts and having substantial amount of the debtors as well as creditors justify the creditworthiness. Further, he submitted that loans have been obtained by way of bank transfer and therefore ITA Nos. 7810 & 7811/MUM/2025 Ans I agree that I look after the overall business of the concerns mentioned in Annexure A of this statement. Apart from the concerns mentioned in the said Annexure, there are various other concerns whose management is carried out by me. A comprehensive list of all such concerns where I manage and supervise is given in the table Name of the concern Company/ firm/Prop Concern Name of the director/ partner/proprietor on paper PAN M/s Daksh Diamonds Firm Prop. Lavapal R Singh AURPS3696K M/s Marc Gems Firm Prop. Ritesh Sumer Mal Siroya CVEPS0399P Before us, the learned counsel for the assessee submissions advanced before the lower authorities and contended that the assessee had discharged the onus cast upon it under section 68 by furnishing confirmations, financial statements, and bank statements of the lender parties. It was further submitted that the loans were received through banking channels and were subsequently repaid in later years, which, according to the assessee, establishes the genuineness of the transactions. The learned counsel also contended that the Assessing Office carried out any independent inquiry and had relied solely upon statements recorded during the search proceedings, without affording the assessee an opportunity to cross According to the Ld. counsel, the lender parti has shown substantial amount of turnover in their books of accounts and having substantial amount of the debtors as well as creditors justify the creditworthiness. Further, he submitted that loans have been obtained by way of bank transfer and therefore Neelima Sunil Khanna 24 ITA Nos. 7810 & 7811/MUM/2025 Ans I agree that I look after the overall business of the concerns om the concerns mentioned in the said Annexure, there are various other concerns whose management is carried out by me. A comprehensive list of all such concerns where I manage and supervise is given in the table Name of the director/ partner/proprietor on paper PAN Prop. Lavapal R Singh AURPS3696K Prop. Ritesh Sumer Mal Siroya CVEPS0399P Before us, the learned counsel for the assessee reiterated the submissions advanced before the lower authorities and contended that the assessee had discharged the onus cast upon it under section 68 by furnishing confirmations, financial statements, and her submitted that the loans were received through banking channels and were subsequently repaid in later years, which, according to the assessee, establishes the genuineness of the transactions. The learned counsel also contended that the Assessing Officer had not carried out any independent inquiry and had relied solely upon statements recorded during the search proceedings, without affording the assessee an opportunity to cross-examine the According to the Ld. counsel, the lender parties has shown substantial amount of turnover in their books of accounts and having substantial amount of the debtors as well as creditors justify the creditworthiness. Further, he submitted that loans have been obtained by way of bank transfer and therefore, Printed from counselvise.com genuineness of the transaction is also not in doubt. He further submitted in subsequent years then loans have already been repaid and therefore, also no addition is warranted in the case of the assessee. 8.8 Per contra, the learned Departmental Representative submitted that after the assessee furnished the documentary details, the Assessing Officer made further inquiries by issuing notices under section 133(6) of the Act, which remained uncomplied with by the lender parties. and therefore, the assessee was required to produce those parties before the Assessing Officer particularly in background of the statement given by the proprietor of M/s Daksh Diamond that he was engaged only in providing accommodation entry and not any real business. In view of the statements recorded during the search proceedings clearly indicating that the said concerns were accommodation entry providers and taken loan from said parties to produce the concerned parties the genuineness of the transactions. assessee to discharge his onus for producing them 8.9 The learned D statements of the lender concerns placed in the paper book. It was pointed out that M/s Daksh Diamonds had declared a turnover of ₹167.52 lakh but had reported a meagre profit of ITA Nos. 7810 & 7811/MUM/2025 genuineness of the transaction is also not in doubt. He further submitted in subsequent years then loans have already been repaid and therefore, also no addition is warranted in the case of the Per contra, the learned Departmental Representative submitted that after the assessee furnished the documentary details, the Assessing Officer made further inquiries by issuing notices under section 133(6) of the Act, which remained uncomplied lender parties. This fact was confronted to the assessee and therefore, the assessee was required to produce those parties before the Assessing Officer particularly in background of the statement given by the proprietor of M/s Daksh Diamond that he aged only in providing accommodation entry and not any In view of the statements recorded during the search proceedings clearly indicating that the said concerns were accommodation entry providers and it is the assessee who has om said parties, the burden shifted upon the assessee to produce the concerned parties as his witness and substantiate the genuineness of the transactions. but no steps were taken by the assessee to discharge his onus for producing them. The learned DR further drew attention to the financial statements of the lender concerns placed in the paper book. It was pointed out that M/s Daksh Diamonds had declared a turnover of 167.52 lakh but had reported a meagre profit of ₹2,24,928/ Neelima Sunil Khanna 25 ITA Nos. 7810 & 7811/MUM/2025 genuineness of the transaction is also not in doubt. He further submitted in subsequent years then loans have already been repaid and therefore, also no addition is warranted in the case of the Per contra, the learned Departmental Representative submitted that after the assessee furnished the documentary details, the Assessing Officer made further inquiries by issuing notices under section 133(6) of the Act, which remained uncomplied This fact was confronted to the assessee and therefore, the assessee was required to produce those parties before the Assessing Officer particularly in background of the statement given by the proprietor of M/s Daksh Diamond that he aged only in providing accommodation entry and not any In view of the statements recorded during the search proceedings clearly indicating that the said concerns were it is the assessee who has , the burden shifted upon the assessee and substantiate but no steps were taken by the R further drew attention to the financial statements of the lender concerns placed in the paper book. It was pointed out that M/s Daksh Diamonds had declared a turnover of 2,24,928/–. The Printed from counselvise.com balance sheet reflected sundry creditors of debtors of ₹46.66 crore, while the proprietor’s capital stood at merely ₹3,13,068/–. Similarly, M/s Marc Gems had declared a turnover exceeding ₹2,27,852/–, with proprietor’s capital of only reflecting huge amounts of sundry creditors and debtors. According to the learned DR, these financials clearly demonstrate that the concerns did not possess the financial capacity to advance loans of the magnitude claimed by the assessee. 8.10 We have considered the rival submissions and perused the material available on record. It is well settled that for the purpose of section 68 of the Act, the assessee is required to establish three essential ingredients, namely the identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. Mere furnishing of confirmations and bank statements, without establishing the real financial capacity of the creditor and the genuineness of the underlying transaction, cannot be regarded as sufficient discharge of the burden cast upon the assessee. 8.11 In the present case, the material brought on record by the Department, particularly the statements recorded during the search proceedings in the case of Shri Bhanwarlal Jain and his associates, clearly indicates that the concerns M/s Daksh Diamonds and M/s Marc Gems were part of an accommodation entry network. Despite ITA Nos. 7810 & 7811/MUM/2025 ected sundry creditors of ₹76.46 crore and sundry 46.66 crore, while the proprietor’s capital stood at . Similarly, M/s Marc Gems had declared a turnover exceeding ₹151 crore but reported a nominal profit of proprietor’s capital of only ₹3,47,852/ reflecting huge amounts of sundry creditors and debtors. According to the learned DR, these financials clearly demonstrate that the concerns did not possess the financial capacity to advance loans of gnitude claimed by the assessee. We have considered the rival submissions and perused the material available on record. It is well settled that for the purpose of section 68 of the Act, the assessee is required to establish three s, namely the identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. Mere furnishing of confirmations and bank statements, without establishing the real financial capacity of the creditor and of the underlying transaction, cannot be regarded as sufficient discharge of the burden cast upon the assessee. In the present case, the material brought on record by the Department, particularly the statements recorded during the search in the case of Shri Bhanwarlal Jain and his associates, clearly indicates that the concerns M/s Daksh Diamonds and M/s Marc Gems were part of an accommodation entry network. Despite Neelima Sunil Khanna 26 ITA Nos. 7810 & 7811/MUM/2025 76.46 crore and sundry 46.66 crore, while the proprietor’s capital stood at . Similarly, M/s Marc Gems had declared a 151 crore but reported a nominal profit of 3,47,852/–, despite reflecting huge amounts of sundry creditors and debtors. According to the learned DR, these financials clearly demonstrate that the concerns did not possess the financial capacity to advance loans of We have considered the rival submissions and perused the material available on record. It is well settled that for the purpose of section 68 of the Act, the assessee is required to establish three s, namely the identity of the creditor, the creditworthiness of the creditor, and the genuineness of the transaction. Mere furnishing of confirmations and bank statements, without establishing the real financial capacity of the creditor and of the underlying transaction, cannot be regarded as sufficient discharge of the burden cast upon the assessee. In the present case, the material brought on record by the Department, particularly the statements recorded during the search in the case of Shri Bhanwarlal Jain and his associates, clearly indicates that the concerns M/s Daksh Diamonds and M/s Marc Gems were part of an accommodation entry network. Despite Printed from counselvise.com being confronted with this material, the assessee failed to produce the lender parties before the Assessing Officer to substantiate the genuineness of the loans. 8.12 When these financials are seen in the light of statement made by Shri Ritesh Siroya during the course of search premises along with premises of Bhanwarlal Jain, it only name shake firms not having enough resources. The proprietor capital is shown only at Rs.3,13,068/ concerns does not substantiate creditworthiness of the said party to extent loan without lender Marc Gems has shown profit of Rs.2,27,852/ more than Rs.151 crores. Again in the balance sheet of the said concern also, the capital account contribution is only Rs.3,47,852/ whereas sundry creditors are of Rs.32.55 crores, sundry debtors are of Rs.56.33 crores. The real identity of the parties is not of trading in diamond but these are actually bogus accommodation entry providers. 8.13 The financial statements of the lender concerns, when examined in the light of the statements recorded during the search, do not inspire confidence regarding their financial capacity to advance the impugned loans. The extremely low capital base and nominal profits declared by these entities, despite reflecti substantial turnover and large amounts of sundry creditors and ITA Nos. 7810 & 7811/MUM/2025 being confronted with this material, the assessee failed to produce nder parties before the Assessing Officer to substantiate the genuineness of the loans. When these financials are seen in the light of statement made by Shri Ritesh Siroya during the course of search premises along with premises of Bhanwarlal Jain, it is evident that these firms are only name shake firms not having enough resources. The proprietor capital is shown only at Rs.3,13,068/-. Thus, the financials of the concerns does not substantiate creditworthiness of the said party to extent loan without having own resources. Similarly, the another lender Marc Gems has shown profit of Rs.2,27,852/ more than Rs.151 crores. Again in the balance sheet of the said concern also, the capital account contribution is only Rs.3,47,852/ ry creditors are of Rs.32.55 crores, sundry debtors are of Rs.56.33 crores. The real identity of the parties is not of trading in diamond but these are actually bogus accommodation entry The financial statements of the lender concerns, when examined in the light of the statements recorded during the search, do not inspire confidence regarding their financial capacity to advance the impugned loans. The extremely low capital base and nominal profits declared by these entities, despite reflecti substantial turnover and large amounts of sundry creditors and Neelima Sunil Khanna 27 ITA Nos. 7810 & 7811/MUM/2025 being confronted with this material, the assessee failed to produce nder parties before the Assessing Officer to substantiate the When these financials are seen in the light of statement made by Shri Ritesh Siroya during the course of search premises along is evident that these firms are only name shake firms not having enough resources. The proprietor . Thus, the financials of the concerns does not substantiate creditworthiness of the said party to having own resources. Similarly, the another lender Marc Gems has shown profit of Rs.2,27,852/- on turnover of more than Rs.151 crores. Again in the balance sheet of the said concern also, the capital account contribution is only Rs.3,47,852/- ry creditors are of Rs.32.55 crores, sundry debtors are of Rs.56.33 crores. The real identity of the parties is not of trading in diamond but these are actually bogus accommodation entry The financial statements of the lender concerns, when examined in the light of the statements recorded during the search, do not inspire confidence regarding their financial capacity to advance the impugned loans. The extremely low capital base and nominal profits declared by these entities, despite reflecting substantial turnover and large amounts of sundry creditors and Printed from counselvise.com debtors, lend credence to the finding of the Assessing Officer that the entities were merely paper concerns used for providing accommodation entries. 8.14 In view of the totality of the fact no infirmity in the conclusion drawn by the Assessing Officer and affirmed by the learned CIT(A) that the assessee failed to satisfactorily explain the nature and source of the impugned credits. The addition of the Act is therefore upheld. the appeal of the assessee are dismissed. 9. Ground Nos. 6 and 7 relate to the disallowance of interest amounting to ₹5,34,453/ unsecured loans of addition of the principal amount under section 68 of the Act, the disallowance of interest paid thereon is merely consequential. Accordingly, the disallowance made by the Assessing Officer and sustained by the learned CIT(A) is also upheld. 10. The ground No. 8 and 9 relate to addition for the deemed rental income of Rs.2,10,000/ Act. 10.1 Before us, the Ld. counsel for the assessee did not press this ground. Accordingly same are dismissed as infructuous. ITA Nos. 7810 & 7811/MUM/2025 debtors, lend credence to the finding of the Assessing Officer that the entities were merely paper concerns used for providing accommodation entries. In view of the totality of the facts and circumstances, we find no infirmity in the conclusion drawn by the Assessing Officer and affirmed by the learned CIT(A) that the assessee failed to satisfactorily explain the nature and source of the impugned credits. The addition of ₹1,25,00,000/– made under section 68 of the Act is therefore upheld. Accordingly, the grounds No. 3 to 5 of the appeal of the assessee are dismissed. Ground Nos. 6 and 7 relate to the disallowance of interest 5,34,453/– paid in respect of the aforesaid nsecured loans of ₹1,25,00,000/–. Since we have upheld the addition of the principal amount under section 68 of the Act, the disallowance of interest paid thereon is merely consequential. Accordingly, the disallowance made by the Assessing Officer and ained by the learned CIT(A) is also upheld. The ground No. 8 and 9 relate to addition for the deemed rental income of Rs.2,10,000/- invoking provisions of 23(1)(c) of the Before us, the Ld. counsel for the assessee did not press this Accordingly same are dismissed as infructuous. Neelima Sunil Khanna 28 ITA Nos. 7810 & 7811/MUM/2025 debtors, lend credence to the finding of the Assessing Officer that the entities were merely paper concerns used for providing s and circumstances, we find no infirmity in the conclusion drawn by the Assessing Officer and affirmed by the learned CIT(A) that the assessee failed to satisfactorily explain the nature and source of the impugned ade under section 68 of Accordingly, the grounds No. 3 to 5 of Ground Nos. 6 and 7 relate to the disallowance of interest paid in respect of the aforesaid . Since we have upheld the addition of the principal amount under section 68 of the Act, the disallowance of interest paid thereon is merely consequential. Accordingly, the disallowance made by the Assessing Officer and The ground No. 8 and 9 relate to addition for the deemed invoking provisions of 23(1)(c) of the Before us, the Ld. counsel for the assessee did not press this Accordingly same are dismissed as infructuous. Printed from counselvise.com 11. Now we take up the appeal of the assessee for assessment year 2014-15. The grounds raised by the assessee are reproduced as under: 1 In the facts and circumstances of the case and in law the learned CIT(A) NFAC erred in confirming disallowance of the assessee's claim of interest paid of Rs. 11,25,000/ loan of Rs. 1,25,00,000/ 2 Reasons given by the CIT(A) NFAC for confirming disallowance of the assessee's claim of in said loan of Rs. 1,25,00,000/ insufficient and contrary to the facts and evidence on record. 11.1 In the year under consideration, the Assessing Officer has made addition of interest pa unsecured loan parties which we have upheld in assessment year 2012-13. Since the interest disallowance is consequent to the finding in case of unsecured loan amounting to Rs.1,25,00,000/ assessment year 2012 being consequent to the said addition of section 68 of the Act. Both the ground of appeal of the assessee are accordingly dismissed. 12. In the result, both the appeals of the assessee are dismissed. Order pronounced Sd/- (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 27/03/2026 Rahul Sharma, Sr. P.S. ITA Nos. 7810 & 7811/MUM/2025 Now we take up the appeal of the assessee for assessment year 15. The grounds raised by the assessee are reproduced as 1 In the facts and circumstances of the case and in law the CIT(A) NFAC erred in confirming disallowance of the assessee's claim of interest paid of Rs. 11,25,000/- on the said loan of Rs. 1,25,00,000/- taken in AY 2012-13. 2 Reasons given by the CIT(A) NFAC for confirming disallowance of the assessee's claim of interest paid of Rs. 11,25,000/ said loan of Rs. 1,25,00,000/- taken in AY 2012-13, are wrong insufficient and contrary to the facts and evidence on record. n the year under consideration, the Assessing Officer has made addition of interest paid Rs.11,25,000/- loan parties which we have upheld in assessment year 13. Since the interest disallowance is consequent to the finding in case of unsecured loan amounting to Rs.1,25,00,000/ assessment year 2012-13. Accordingly, said disallowance is upheld being consequent to the said addition of section 68 of the Act. Both the ground of appeal of the assessee are accordingly dismissed. In the result, both the appeals of the assessee are dismissed. ced in the open Court on 27/03 Sd/ (KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Neelima Sunil Khanna 29 ITA Nos. 7810 & 7811/MUM/2025 Now we take up the appeal of the assessee for assessment year 15. The grounds raised by the assessee are reproduced as 1 In the facts and circumstances of the case and in law the CIT(A) NFAC erred in confirming disallowance of the on the said 2 Reasons given by the CIT(A) NFAC for confirming disallowance terest paid of Rs. 11,25,000/- on the 13, are wrong insufficient and contrary to the facts and evidence on record. n the year under consideration, the Assessing Officer has in respect of loan parties which we have upheld in assessment year 13. Since the interest disallowance is consequent to the finding in case of unsecured loan amounting to Rs.1,25,00,000/- in ngly, said disallowance is upheld being consequent to the said addition of section 68 of the Act. Both the ground of appeal of the assessee are accordingly dismissed. In the result, both the appeals of the assessee are dismissed. /03/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER Printed from counselvise.com Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA Nos. 7810 & 7811/MUM/2025 Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Neelima Sunil Khanna 30 ITA Nos. 7810 & 7811/MUM/2025 BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "