NIMISH MEDICAL CORPORATION,VASAI V. ITO WARD 23(2)(6), MUMBAI

ITA 3578/MUM/2025

AI Insights

Nimish Medical Corporation appealed against the order of the National Faceless Appeal Centre (NFAC), which had confirmed the addition of INR 25,00,000 as unexplained investment under Section 69B of the Income Tax Act, 1961. The addition was based on the allegation that the unsecured loan from M/s. Kriya Impex Pvt. Ltd. was bogus, a conclusion drawn from information provided by the Directorate General of Income Tax (Investigation), Mumbai. The Tribunal noted that the Assessee had not sufficiently proven the genuineness of the loan transaction and directed a re-examination of the matter, allowing the Assessee to present further evidence and cross-examine the affiant.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713054 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2010-2011
• Other Referred Cases: Rajendra Sohan Lal Jain Vs. Deputy Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSEE
• Keywords: Set aside; Reassessment proceedings; Unexplained investment; Retraction; Accommodation entries; Assessment record; Bogus loan; Bogus
• Section: 147; 148; 143(3); 142(1); 132; 153A; 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “K (SMC)” BENCH, MUMBAI SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.3578/MUM/2025 (Assessment Year:2010-2011) Nimish Medical Corporation 112, UNICO Industrial Park, Building No.2, Tungar Phata, Sativali, Vasai East, Thane – 401208. Maharashtra. [PAN:AAAFN0890R] …………. Appellant Income Tax Officer Ward 23(2)(6), Mumbai Piramal Chambers, Lower Parel, Mumbai – 400051. Vs …………. Respondent Appearance For the Appellant/Assessee For the Respondent/Department : : Shri Hitesh Shah Shri Bhagirath Ramawat Date Conclusion of hearing Pronouncement of order : : 21.07.2025 30.07.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member: 1. The present appeal preferred by the Assessee is directed against the order, dated 25/03/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 21/12/2017, passed under Section 143(3) read with Section 147 of the Act for the Assessment Year 2010-2011. 2. The Assessee has raised following grounds of appeal : “On the facts and circumstances of the case and in the law, Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 2 the Commissioner of Income Tax (Appeals), NFAC erred in confirming the addition of Rs.25,00,000/- u/s.69B as unexplained investment for unsecured loan taken from M/s.Kriya Impex Pvt. Ltd. alleging it being bogus based on information received from DGIT (Inv) – Mumbai alone. The Appellant therefore prays that the addition of Rs.25,00,000/- on account unexplained investment u/s.69B being unwarranted, illegal, bad-in-law be deleted .” 3. The relevant facts in brief are that the Assessee, a firm engaged in the business of wholesale trading in Drugs and Medicines, filed return of income for the Assessment Year 2010-2011 on 25/09/2010 declaring total income at INR.11,38,770/-. The proceedings were initiated in the case of the Assessee under Section 147 of the Act on the basis of information received from the office of Director General Income Tax (Investigation), Mumbai to the effect that the Assessee was beneficiary of bogus accommodation entries of unsecured loan of INR.25,00,000/- taken in the Financial Year 2009-2010 from M/s.Kriya Impex Pvt. Ltd., a group concerned of Bhawarlal Jain who was managing and controlling entities engaged in providing bogus loans/advances entries. In response to the notice issued under Section 148 of the Act, the Assessee filed letter, dated 11/07/2017, adopting the original return of income as return filed under Section 148 of the Act. During the reassessment proceedings the Appellant filed (a) Affidavit of the Director Mr. Manish Jain (b) Loan Confirmation (c) Ledger Account and (d) Bank Statement of the lenders reflecting the transactions through account payee cheque. It was submitted that on behalf of the Assessee that the loan was taken from Kriya Impex Pvt. Ltd. by way of account payee cheque and interest on same was paid after complying with the tax withholding requirements. In order to verify the genuineness of the transaction, the Assessing Officer issued notice under Section 133(6) of the Act to Kriya Impex Pvt. Ltd. which was complied with and vide Letter, dated 30/12/2015, M/s. Kriya Impex Pvt. Ltd. filed loan Ledger confirmation, and bank. However, the Assessing Officer was Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 3 not satisfied with the documents/details furnished by the Assessee. According to the Assessing Officer the details/documents furnished by the Assessee did not constitute strong clinching evidence and mere filing of the aforesaid documents did not prove the genuineness of the transaction in view of the enquiries conducted by the investigation wing which showed that Kriya Impex Pvt. Ltd. was engaged in providing accommodation entries. The Assessing Officer concluded that the Appellant had failed to prove genuineness of the transactions. Thus, the Assessing Officer made addition of INR,25,00,000/- in the hands of the Assessee vide Assessment Order, dated 21/12/2017, passed under Section 143(3) read with Section 147 of the Act. 4. Being aggrieved, the Assessee preferred appeal before the CIT(A) challenging the above addition of INR.25,00,000/- which was dismissed by the CIT(A) vide order, dated 21/12/2017, impugned by way of the present appeal. 5. We have heard both the sides and perused the material on record. The Learned Authorised Representative for the Appellant reiterated the submissions made before the authorities below while the Learned Departmental Representative relied upon the orders passed by the Assessing Officer and the CIT(A). 6. We find that the Tribunal has in the case of Rajendra Sohan Lal Jain Vs. Deputy Commissioner of Income Tax [IT(SS) Appeal Nos. 294 to 299/Ahd/2017], dated 26/11/2021, had returned, inter alia, the following findings in respect of entities controlled and managed by the said assessee: “ 2. Brief facts of the case are that assessee is proprietor of Avi exports, allegedly engaged in the business of trading, import, export and local trading of diamonds. A search action under section 132 was initiated on the assessee group on 3rd October 2007. During the search action, the statement of assessee was recorded under section 132(4). In the statement recorded Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 4 under section 132(4) on 5th October 2013, the assessee confessed that he along with his other associate, employees and family members are operating through a number of business concern of three natures i.e. Proprietorship firm, partnership firm as well as companies in the name of various persons including his employees. For all practical purposes, he himself ensures the chain of entire business network on profit sharing basis. The assessee also provided the name of Proprietorship firm, the person who is mainly handling those proprietress of firm, partnership firm and name of companies in the following manner: Proprietorship firm Name of Proprietor a. Avi Exports Rajendra S. Jain (myself) b. Kalash Enterprises Manish Jain c. Aadi Impex Anoop Jain d. Arihant Exports Sachin Pareek e. Vitrag Jewels Mudit Kannawat (Ex-employee) f. Super Jewels Ashok Jain (Ex-employee) Proprietorship firm Name of Proprietor Sun Diam Rajendra S Jain (myself) & Manish Jain Companies Name of Director a. Kriya Impex Pvt. Ltd. Rajendra S Jain (myself) & Manish Jain b. Sparsh Exports Pvt. Ltd. Rajendra S Jain (myself) & Manish Jain C. Karnavat Impex Pvt. Ltd. Sachin Pareek & Manish Jain D. Moulimani Pvt. Ltd. Rajendra S Jain (myself) & Manish Jain 3. The assessee further disclosed that his group is providing accommodation entry in the form of sales, purchase of diamonds and entry of unsecured loans. The assessee also disclosed his back history, as to how he came in such hawala transaction business, which he has learnt from his ex employer. The assessee also disclosed the modus operandi for providing accommodation entry with regard to import and export of rough and polished diamonds. The assessee admitted that not a single piece of diamond was found during the search action at his residence and business premises, the assessee further reaffirm the fact that they are merely lending names of their various business concerns to real importers of diamond who takes the actual delivery of diamonds. The assessee also provided details of various bank accounts of different firms and companies managed by them. During recording the statement of assessee, he was confronted with various e-mails extracted from his computer network. The assessee admitted that he gets the commission on value of import at the rate of 0.2% from the real importer who route the transaction through his paper concern. Besides this, whenever any entry of unsecured Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 5 loan is provided, the assessee received commission in the range of 0.25% to 0.5%. On the basis of aforesaid incriminating evidence and material the assessee was served with the notice under section 153A dated 17th October 2014 to file his return of income for assessment year under consideration. The assessee filed his return of income on 14th November 2014 declaring income of 4.02 lakhs. No additional income was offered by the assessee while filing return of income in response to notice under section 153A. 4. Initially the assessee filed his return of income under section 139(1) for subject assessment year on 29th August 2008 declaring income of 4.02 lakhs. The case was selected for scrutiny and assessment was completed under section 143(3) on 26 March 2010, assessing total income at 9.97 lakhs. The assessing officer after serving statutory notices under section 143(2) and 142(1) and issuing was various questionnaires proceeded for assessment. The assessing officer recorded that during the search operation on this group various evidences were collected including disclosure and modus operandi of providing accommodation entries in the nature of bogus sales, purchases and unsecured loan. During the search action the statement of Rajinder Jain, Dharmi Chand Jain and Sanjay Chowdhary was recorded. The assessing officer referred relevant part of the statement of assessee and diagram of modus operandi of business operation prepared during the search action, about the modus operandi business operation followed by assessee and his group. The assessing officer further recorded that the statement of Sachin Pariekh proprietor of Arihant Export, director of Karnawat Impex Pvt Ltd & Moulimani Impex, Manish Jain (prop of Kalash Enterprises, Director of Kriya Impex Pvt Ltd and Karnawat Impex Pvt Ltd.) and Anoop Jain (Prop of Adi Impex) was recorded during search. All the above person in their restatement admitted that they were acting as per the direction of assessee and assessee was having control over the entire affairs, for which they were receiving salary. 5. The Assessing Officer (AO) extracted certain part of statement of Sachin Parikh, Manish Jain and Anoop Jain in the assessment order wherein they admitted that all they were working on remuneration with Rajinder Kumar Jain (assessee). The AO further recorded that during recording statement of assessee, in Question No. 15, he was asked to explain the modus operandi of his business. the assessee explained by way of pictorial graph his entire modus operandi, which is extracted below; Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 6 This pictorial graph is not being uploaded due to system issues, however is available in para 5 of the said order. 6. The AO on the basis of modus-operandi disclosed by the assessee and the various other incriminating material gathered during the search action and on the basis of statement of Rajendra Jain and his associates held that all the business concerns of the assessee were merely doing paper transaction, instead of carrying any real business, those concern were doing of maintaining „books of accounts‟ and do not carry any actual or physical business of diamonds, the actual importers of rough diamonds approach these concern to import their diamonds through this group and on receipt of consignment, the real importer get the delivery of diamonds after clearance from CHA. The books of stock of rough diamonds have been converted by this group to cut and polished diamonds through commission companies or through name landing concern issues bill of rough diamonds to local purchasers and show purchase of polished diamonds from them. And on receipt of such cut and polished diamonds they issue bills to various parties on their demand of actual import. The actual importer arranges the sale proceed from the parties to whom sales bills are issued. On receipt of sale proceed; this group makes import remittance at the request of importer. ………….. 16. Before us, the ld AR for the assessee basically made two fold submissions that no incriminating material/ evidence was recovered during the course of search and that the assessee retracted from his statement recorded by the search party and the assessee was doing real business and not engaged in providing accommodation entry. We find that during the search action more than sufficient incriminating evidence was found, which is also supported with the corroborative evidence found in the form of emails and other evidence in the form of books of account recovered from the pendrive, which itself is incriminating evidence against the assessee. We further noted the assessee in his retraction statement has not explained the material evidence found in the form of e- mail, from his e-mail account, his background history as to how he entered in the this particular business of providing entry, which he himself disclosed during the search action that he learnt all this business module of providing accommodation entry from his ex-employer namely Ratanlal Jain. The said retraction is filed for the Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 7 first time before AO after gap of 12 months period. The reliance in case Manoj Begani Vs ACIT (supra), passed by Kolkata Tribunal which is case of beneficiary of the alleged accommodation entry from Rajendra Jain, is not helpful to the assessee. Here in the present case, there is clear admissions of the assessee about the entire business affair carried out by him with his associate for providing bogus entry, mere obitor in case of beneficiary by the Coordinate bench, will not absolve the assessee from his own admission. The finding of Tribunal in Manoj Begani vs. ACIT(supra) is based on the facts and evidences produced by that assessee. Therefore, in view of the abovesaid discussions, we are in full agreement with the finding of ld CIT(A) that once the books are rejected the profit is to be estimated on the basis of commission rates and net profit is to be determined. We also affirms the finding of ld CIT(A) that that when the actual business of assessee was importing goods for others and in the books credit in the name of exporters, thus exchange rate difference is not payable by the assessee and the assessee is not eligible for deduction of such exchange rate fluctuation. Even otherwise, no evidence is filed by the assessee on record to prove the fact that the assessee entered into hedging contract with the Banker, the evidence found in the form of e-mail and other evidences show the facts otherwise.” (Emphasis Supplied) 7. On perusal of above we find that the Tribunal had concluded that the Assessee in the above case (i.e. Rajendra Sohan Lal Jain) was controlling, inter-alia, Kriya Impex Pvt. Ltd and was utilizing the said company for providing accommodation entries in return for commission income. While returning the aforesaid finding the Tribunal had taken into consideration the retraction statement given by Mr. Rajendra Sohan Lal Jain also. There is nothing on record to show that the aforesaid findings of the Tribunal have since been overturned. Thus, the onus was on the Assessee to show that the loan transactions were genuine in nature. As regards the affidavit of Mr. Manish Sushil Kumar Jain, director of Kriya Impex Pvt. filed by the Assessee in support of contention that the loan transactions of INR.25,00,000/- undertaken by the Assessee that Kriya Impex Pvt. Ltd was genuine is concerned, we find that the said director had also given statement before the investigation wing to the effect that Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 8 Kriya Impex Pvt. was engaged in providing accommodation entries. During the assessment proceedings a request was made on behalf of the Assessee to cross-examine Manish Sushil Kumar Jain. However, the same was rejected by the Assessing Officer. We note that the Assessee had filed Affidavit of Shri Manish Sushil Kumar Jain, sworn on 07/07/2017 to support the genuineness of the transaction. However, it is admitted position that the Assessee had failed to produce Mr. Manish Sushil Kumar Jain before the Assessing Officer for examination/cross-examination. It is admitted position that Mr. Manish Sushil Kumar Jain was the director of Kriya Impex Private Limited. On perusal of the bank statement of Kriya Impex Private Limited for the period 01/04/2009 to 31/03/2010 filed by the Assessee (placed at Pages 12 to 14 of the paper-book) it is apparent that Kriya Impex Private Limited had financial transactions with other entities of Mr. Rajendra Sohan Lal Jain (namely Sun Diam, Avi Exports, Aadi Impex and Kalash Enterprises). The aforesaid supports the case of the Revenue. Therefore the contents of affidavit of Mr. Manish Sushil Kumar Jain cannot be accepted ex-facie without cross- examination. Accordingly, the aforesaid affidavit also does not advance the case of the Assessee. Thus, we reject the contention of the Assessee that the Assessee had discharge the onus cast upon the Assessee to prove the genuineness of the transaction. In our view, the material placed on record by the Assessee is not sufficient to corroborate the stand taken by the Assessee. 8. We note that the Assessee had set up the case that loan of INR.25,00,000/- was taken for business operations and was repaid after short interval of 14 days. The material on record is no sufficient to support the aforesaid stand taken by the Assessee. Accordingly, we grant another opportunity to the Assessee to corroborate the same by way of cogent documents/evidence before the Assessing Officer. The Assessee is directed to place before the Assessing Officer documents/details to show the business purpose for which Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 9 loan of INR.25,00,000/- was taken, and its actual utilization for the said business purpose. The Assessing Officer is directed to take into consideration the aforesaid documents/details furnished by the Assessee alongwith the material already forming part of the assessment record while adjudicating the contentions of the Assessee afresh. In case the Assessee fails to furnish the aforesaid documents/details before the Assessing Officer, the Assessing Officer would be at liberty to draw adverse inference against the Assessee. The Assessee would also be at liberty to produce before the Assessing Officer Mr. Manish Sushil Kumar Jain for cross- examination by the Assessing Officer in relation to the contents of the affidavit sworn on 07/07/2017. In case the Assessee is able to produce Mr. Manish Sushil Kumar Jain before the Assessing Officer, the Assessing Officer shall take into consideration the contents of affidavit and cross-examination statement of Mr. Manish Sushil Kumar Jain while adjudicating the issue in terms of aforesaid directions. 9. In view of the above, the addition of INR.25,00,000/- made in the hands is set aside and the issue is restore back to the file of Assessing Officer for denovo adjudication in terms of the above directions. Accordingly, Ground No.1 raised by the Assessee is treated as allowed for statistical purpose. 10. In result the appeal preferred by the Assessee is treated as allowed for statistical purpose. Order pronounced on 30.07.2025. Sd/- Sd/- (Om Prakash Kant) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 31.07.2025 Milan,LDC Printed from counselvise.com ITA No.3578/Mum/2025 Assessment Year 2010-2011 10 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त/ The CIT 4. प्रध न आयकर आय क्त / Pr.CIT 5. दिभ गीय प्रदिदनदध ,आयकर अपीलीय अदधकरण ,म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदधकरण, म ुंबई / ITAT, Mumbai Printed from counselvise.com "