NITIN AVANTILAL DOSHI,MUMBAI V. ASSISTANT COMMISSIONER OF INCOME TAX 20(1) MUMBAI, MUMBAI

ITA 1667/MUM/2025

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The case involves Nitin Avantilal Doshi, the proprietor of M/s Kushal Metal & Steel Industries, who appealed against the order of the Commissioner of Income Tax (Appeals)-4, Chennai, which upheld the addition made by the Assessing Officer under section 68 of the Income Tax Act, 1961. The addition was based on the claim that the assessee had taken a bogus loan of Rs. 10,01,027 from M/s Kangan Jewels Pvt. Ltd. The Tribunal examined the validity of the reopening of the assessment and the merits of the addition. It was found that the information used for reopening was not new and that the assessee had provided sufficient evidence to prove the genuineness of the loan.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314590 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Other Referred Cases: PCIT vs. Nesco Limited [2023] 146 taxmann.com 325 (Bom.), PCIT vs. Ambe Trade Corp Pvt. Ltd. [2022] 145 taxmann.com 57 (Guj.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LEYAQAT ALI AAFAQUI
• Assessee Lawyers: FENIL BHATT
• Keywords: Difference of opinion; Change of opinion; Question of law; Unexplained cash credit; Reopening of assessment; TDS; Accommodation entries; Reason to believe; Bogus loan; Tangible material; Bogus
• Section: 147; 148; 143(3); 68; 133(6); 69C; 2

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VP & MS PADMAVATHY S, AM I.T.A. No. 1667/Mum/2025 (Assessment Year: 2013-14) Nitin Avantilal Doshi, A-23A, 2nd Floor, Atlas Apartment, Plot No.11, Jamnadas M Mehta Marg, Malabar Hill, Maharashtra-400006 PAN: AABPD1214A Vs. ACIT-20(1), Room No. 113, Piramal Chambers, Lalbaug, Parel-400012. Appellant) : Respondent) Appellant /Assessee by : Shri Fenil Bhatt, AR Revenue / Respondent by : Shri Leyaqat Ali Aafaqui- Sr. DR Date of Hearing : 24.04.2025 Date of Pronouncement : 06.05.2025 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)-4, Chennai [In short 'CIT(A)'] dated 24.01.2025 for AY 2013-14. The assessee raised the following grounds of appeal: “1. On the facts and circumstances of the case as well as in Law, the Learned Assessing Officer has erred in reopening assessment u/s 147 of the 2 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi Act. The reopening of assessment u/s 147 of the Act directed by the Learned Assessing Officer, sustained by the Hon'ble Commissioner of Income Tax (Appeals), ADDL/JCIT (A)-4 CHENNAI, is unfair and illegal and needs to be struck down. 2. On the facts and circumstances of the case as well as in law the Learned Assessing Officer has grossly erred in directing addition u/s 69C of the Act amounting to Rs. 10,01,027/-. The said disallowance directed by the Learned Assessing Officer, sustained by the Hon'ble Commissioner of Income Tax (Appeals), is unfair and illegal and needs to be struck down. 3. Under the circumstances the Appellant has been denied a reasonable opportunity to present its case. 4. The order under appeal is not only bad in law and invalid, but also against the principles of natural law of equity and justice.” 2. The assessee is an individual and is the proprietor of M/s Kushal Metal & Steel Industries engaged in the business of wholesale trading of Metal. The assessee filed the return of income for AY 2013-14 on 28.09.2013 declaring a total income of Rs. 76,58,020/-. The Assessing Officer (AO) received information from DCIT, Central Circle, Surat that assessee is one of the beneficiary for accommodation entries and that the assessee has taken a bogus loan of Rs. 10,01,027/- from M/s Kangan Jewels Pvt. Ltd. The AO accordingly issued notice under section 148 of the Income Tax Act, 1961 (the Act) reopening the assessment on 29.03.2017. The assessee vide letter dated 04.04.2017 submitted that the return originally filed on 28.09.2013 may be treated as the return in response to notice under section 148 of the Act. The assessee also filed objections to the reasons for reopening vide letter dated 26.09.2017 and the AO dismissed the objections vide order dated 18.12.2017. The AO called for details pertaining to the loan and also issued notice under section 133(6) of the Act to the parties from whom the unsecured loan was taken. After perusing the details furnished by the assessee the AO held that the assessee has taken accommodation entry and that the subsequent payment of loan as submitted 3 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi by the assessee is afterthought. Accordingly, the AO made addition under section 68 of the Act towards the entire loan amount of Rs. 10,01,027/-. Aggrieved the assessee filed further appeal before the CIT(A). The assessee before the CIT(A) raised a legal contention with regard to the validity of reopening based on information borrowed. The assessee also submitted various details on merits before the CIT(A). However, the CIT(A) rejected both the contentions of the assessee and upheld the addition made by the AO. The assessee is an appeal before the Tribunal against the order of the CIT(A). 3. The ld. AR submitted that in assessee's case the scrutiny assessment under section 143(3) of the Act was completed on 17.03.2016 and that as per the reasons recorded for reopening the information from DCIT, Central Circle, Surat was received vide letter dated 26.11.2015. Therefore, the ld. AR argued that the information based on which the assessment is reopened was received before the completion of the regular assessment under section 143(3) itself. Accordingly the ld AR argued the reopening is not based on any new tangible material but based on a material which was already available on record before the completion of original assessment itself. The ld. AR submitted that a precondition for initiation of reassessment proceeding is that the assessee should have a reason to believe based on tangible material that the income has escaped assessment. The ld. AR argued that in assessee's case the AO has initiated the reassessment proceeding based on the material which was already available at the time of original assessment. Therefore, the ld. AR argued that the reopening is not valid. The ld. AR in this regard relied on the decision of the Hon'ble Bombay High Court in the case of PCIT vs. Nesco Limited [2023] 146 taxmann.com 325 (Bom.). On merits the ld. AR submitted that the assessee has filed all the relevant information such as the bank statement, confirmations, the ITR, etc. and this fact has been acknowledged by the CIT(A). 4 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi The ld. AR further submitted that the loan has been repaid during the Financial Year (FY) 2014-15 and that the tax has been duly deducted on the interest paid on the impugned loan. The ld. AR also submitted that the assessee has discharged the onus of proving the genuineness of the loan by submitting by these documents and that the AO/CIT(A) without recording any adverse findings with regard to these documents have merely relied on the statement recorded to make the addition. 4. The ld. DR on the other hand relied on the orders of the lower authorities. 5. We heard the parties and perused the material on record. The reasons for reopening the assessment in assessee's case is the information received from DCIT, Central Circle, Surat vide letter dated 26.11.2015. As per the information Shri Rajendra Jain, Shri Sanjay Choudhary and Shri Darmichand Jain are indulged in accommodation entries in the nature of bogus sale and unsecured loan and that the assessee is one of the recipients of the bogus loan entry. It is relevant to notice that in the reasons recorded the AO has mentioned that the scrutiny assessment in assessee's case has completed under section 143(3) of the Act vide order dated 17.03.2016. From the perusal of the reason recorded, we notice that the revenue has not disputed the fact that the information from DCIT is received prior to the date of completion of regular assessment under section 143(3) of the Act. The contention of the assessee is that the reopening is based on no new tangible material but is based on an information which was already available at the time of regular assessment itself. The Hon'ble Bombay High Court in the case of Nesco Ltd. (supra) has considered a similar issue where it has been held that “15. When the assessee's case was taken up for scrutiny, during the assessment proceedings under section 143(3) of the Act, the aforesaid facts were considered and have been relied upon in the order of the CIT(A) and the Tribunal. It is recorded that the details about the amount of compensation debited in the P & L Account for the aggregate amount of Rs. 5 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi 6,50,00,000/- is found to be reflected in the accounts. It is also recorded that the assessee has submitted party-wise details giving justification for allowability of compensation with respect to each party which was shown in the subsequent year. That the amount of compensation is recorded to be paid as and when settled by the Civil Courts and the amount not paid was returned back as part of other income. These factual findings stand undisputed and uncontroverted by the Revenue. The working referred to in the CIT(A) order has been found to be based on actual occurrence of financial incidence related to business activities of the assessee. These are concurrent findings of fact by the CIT(A) and the Tribunal. No contrary fact has been brought to our notice by the Revenue. It would therefore not be correct to say that the provisioning could not be treated as expenditure. The Assessing Officer could not have disallowed the claim of compensation of Rs. 6,50,00,000/- The CIT(A) has rightly deleted the disallowance of the claim of compensation of Rs. 6,50,00,000/- which has been confirmed by the Tribunal 16. Further, it is also recorded in the Tribunal order that the Assessing Officer before recording the reasons for reopening has made reference to the same documents/material which were also on the record of the Assessing Officer in the original assessment proceedings under section 143(3). We, therefore, observe that there does not appear to be any fresh tangible material that has come into the possession of the Assessing Officer before recording the reasons for re-opening the assessment. Even in the recorded reasons, the Assessing Officer clearly states that his observations are based \"on a perusal of records\" but no fresh or new tangible material has been referred to or brought on record. 17. The re-opening is within a period of four years from the end of the relevant assessment year. Therefore, it is important that the officer reopening a assessment has reason to believe based on tangible material that income has escaped assessment. What we observe from the aforesaid facts is that the dis-allowance of the claim of Rs. 6,50,00,000/- on account of compensation is based on record that was already with the Assessing Officer at the time of the proceedings under section 143 (3) of the Act. There is no new or fresh tangible material that has been brought on record. This appears to be an attempt to view the same material from a different angle of perception. It is nothing but a case of change of opinion, which cannot be permitted. We also agree with the Tribunal that since the impugned issue was examined by the A.O. on a query raised by him and which was replied to with details during the original scrutiny proceedings, Explanation I to section 147 would not be applicable in the facts of the case.” (emphasis supplied) 6 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi 6. From the above observations of the Hon'ble High Court, it is clear that for the purpose of reopening the reasons recorded should be based on a fresh tangible material which has come into the possession of the AO which was not available at the time of original assessment under section 143(3) of the Act. In assessee's case, it is an admitted fact that the material based on which the assessment is reopened i.e. the information from DCIT dated 26.11.2015 was already available at the time of original assessment under section 143(3) of the Act which was completed on 17.03.2016. Therefore, there is merit in the submission of the ld. AR that the reopening is not based on any new tangible material and therefore, not valid. 7. On merits, we notice that the assessee has submitted various documents such as the ledger confirmation from M/s Kangan Jewels Pvt. Ltd., bank statement reflecting the loan receipts and the repayment, copy of ITR of M/s Kangan Jewels Pvt. Ltd. and the ledger account (page 46 to 57 of PB). From the perusal of the documents submitted by the assessee before the lower authorities, we notice that the assessee has paid interest on the impugned loan after deducting TDS and that the assessee has repaid the loan in subsequent AYs. It is also relevant to mention here that the lower authorities have not recorded any adverse findings with regard to the various documents submitted by the assessee. It is also relevant to notice that the statement recorded from Shri Dharnichand Jain based on which the addition is made in the hands of the assessee is subsequently retracted and that the same does not mention the name of the assessee. In view of this discussion and considering the material on record, we are of the view that the AO is not correct in making the addition merely based on the statement recorded which was subsequently retracted without bringing any material on record to show that the assessee has benefited by the alleged bogus loan entries. We notice that the Hon'ble Gujarat High Court in the 7 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi case of PCIT vs. Ambe Trade Corp Pvt. Ld. [2022] 145 taxmann.com 57 (Guj.) held that “3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act. 3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions. 3.2 The appellate authority observed that, \"In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the LT. Act and in compliance thereto both the companies have submitted the requisite information.\" 3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt The accounts were finally settled with the repayment of the loan to the lender companies. 3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and also in Simati Doval v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC), to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of 8 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi the loan received by it and the loan was repaid by the assessee in the subsequent year It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. 3.5 While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine. 4. Learned advocate for the appellant attempted to emphasize that for the purpose of application of section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied. 5. As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. 6. The Tribunal rightly recorded in para 29 of the judgment, \"Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A. \" 7. For the reasons recorded above, no question of law much less substantial questions arises in this appeal. It stands meritless and accordingly dismissed.” 8. As already mentioned, the revenue has not recorded any adverse finding with regard to the documentary evidences submitted by the assessee substantiating the identity, credit worthiness and genuineness of the loan and that the loan is repaid in the subsequent year. Therefore in our considered view, the ratio of the above decision is applicable to assessee's case also. Accordingly, we hold that the addition 9 ITA No. 1667/Mum/2025 Nitin Avantilal Doshi made by the AO under section 68 towards alleged bogus loan does not survive on merits also and is liable to be deleted. 9. In result, appeal of the assessee is allowed. Order pronounced in the open court on 06-05-2025. Sd/- Sd/- (SAKTIJIT DEY) (PADMAVATHY S) Vice-President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai "