RAMESHCHANDRA NEMCHAND DHANANI,BHIWANDI V. DCIT-CC-3, THANE, THANE

ITSSA 434/MUM/2025

AI Insights

The case revolves around an appeal by Rameshchandra Nemchand Dhanani against the order of the CIT (A), Pune-11, which upheld the addition of Rs. 50,00,000 to the assessee's income under section 68 of the Income Tax Act. This addition was initially made by the Assessing Officer (AO) following a search and seizure operation under section 132, which implicated the assessee in a broader investigation concerning the Dodhia Group's financial activities. The AO concluded that the loan from Vinam Finance Ltd. was a sham accommodation entry, a finding supported by the Investigation Wing's report. However, the Tribunal found that the assessee had provided substantial evidence to prove the legitimacy of the loan, including the lender's PAN, incorporation documents, and financial statements, which the AO failed to independently verify.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712597 (ITAT-MUMBAI)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2015-2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMA SHANKAR PRASAD
• Assessee Lawyers: SIMRAN DHAWAN
• Keywords: Unexplained cash credit; Retraction; Search and seizure; Accommodation entries; Bogus
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & MS. PADMAVATHY S, ACCOUNTANT MEMBER IT(SS)A No.434/Mum/2025 (Assessment Year :2015-16) Rameshchandra Nemchand Dhanani H.No.1346, A-204 Akshay Park Kamatghar Road Maharashtra- 421 302 Vs. DCIT-CC-3, Thane PAN/GIR No.AGXPD6627P (Appellant) .. (Respondent) Assessee by Ms. Simran Dhawan Revenue by Shri Umashankar Prasad, CIT DR Date of Hearing 03/07/2025 Date of Pronouncement 31/07/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 29/11/2024 passed by ld. CIT (A), Pune-11 for the quantum of assessment passed u/s.153C r.w.s. 143(3) for the A.Y.2015-16. Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 2 2. The assessee is merely aggrieved by addition of Rs.50,00,000/- and made /s.68 on account of unsecured loans received from Vinam Finance Ltd., 3. The brief facts are that a search and seizure operation u/s.132 was carried out on Dodhia Group on 27/11/2019. The assessee, being associated with the Dodhia Group, which is engaged in the business of cloth & yarn trading and job work contracts, was consequently covered under the search proceedings. According to the ld. AO certain incriminating documents were found and seized pertaining to the assessee and based on such material, ld. AO has duly recorded his satisfaction u/s.153C and issued notice u/s.153C on 18/10/2021. The assessee had originally filed his return of income on 25/11/2014 declaring total income of Rs.4,89,430/-. In response to the notice issued u/s.153C, same amount was reiterated. 4. The case of the ld. AO is that during the course of search proceedings, certain documents were found indicating that assessee has obtained an unsecured loan from Vinam Finance Ltd., of Rs.50,00,000/- during the F.Y. 2014-15. Pursuant to the enquiries conducted by the department, it was ascertained that Vinam Finance Ltd., a private limited company was primarily engaged in providing accommodation entries. The ld. AO has proceeded to make the addition u/s.68 on the ground that identity, genuineness and creditworthiness could not be established; and further, that assessee failed to respond to the Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 3 notices sent. Thereafter, he has relied upon the report of the Investigation Wing concerning Vinam Finance Ltd., which identified as a Kolkata based company. The report included the statement of one Shri Sushil Goyal, an alleged Kolkata based entry operator, who admitted that most such companies were mere façade for providing accommodation entries. The detailed statement has been incorporated in the assessment order. From these statements he has concluded that any transaction or loan taken from Vinam Finance Ltd., was bogus. The ld. AO has incorporated the report of the Investigation Wing and also the details of Kolkata based parties who were providing accommodation entries in different form from various parties. Based on the report the Ld. AO has concluded that the loan transaction from Vinam Finance Ltd was not genuine, but rather a sham accommodation entry. In support of his conclusion, the AO incorporated not only the allegedly engaged in providing accommodation entries through different layers and modes. Consequently, ld. AO held that Vinam Finance Ltd., being a paper entity lacking any credibility of genuine financial standing has extended fictitious loan to the assessee. The amount was thus treated as ‘unexplained cash credit’ and added to the assessee’s income u/s.68. 5. Ld. CIT(A) has upheld the addition relying extensively on judicial precedents running into several pages. In sum and substance, ld. CIT(A) has concurred with the findings of the ld.AO that the loan transaction was devoid of any commercial Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 4 substance and was mere facade for opting unaccounted money. The relevant finding of ld. CIT(A) on merits are as under:- “42. To sum up, in the present case, the appellant did not file the details before the AO for a long period and filed the documentary evidences only at the fag end of the assessment year that too after issuance of final show cause notice. The appellant has not commented anything on the investigation carried out by the Department at Kolkata wherein the said company was found engaged in providing accommodation entries. Shri Bhadresh Dodhia agreed that cash amounting to Rs. 43 crores (approx.) was routed to books of accounts of various entries of Dodhia group, through M/s Vinam Finance Pvt. Limited. It is further seen that during the assessment proceedings, the AO has specifically requested the appellant to produce the director of the loan creditor company but same was not done by the appellant. No such request of any fresh enquiry is made before me. The appellant has also not stated that given a chance, it can produce the directors of the said company. The appellant is relying solely on the make- believe documentation. As discussed earlier in this order, make- believe documentation is not sufficient in order to discharge assessee's onus u/s. 68 of the Act. In the facts of the present case, the make-believe documentation in the form of ITR acknowledgement, bank statement and financial statement, are not sufficient to discharge the onus u/s. 68 of the Act. Considering the case-laws discussed earlier in this order, it is held that the findings of the AO that the unsecured loan raised from M/s. Vinam Finance Pvt. Ltd., is nothing but accommodation entries, does not require any interference. Therefore, the addition of Rs. 50,00,000/- made by the AO u/s. 68 of the Act, is upheld. Accordingly the ground no. 3 and 5 raised by the appellant stands DISMISSED. 6. We have heard both the parties at length and have carefully perused the findings recorded in the impugned order. At the very outset, we note that the allegation made by the Assessing Officer that the assessee failed to furnish any details or offer any Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 5 explanation during the assessment proceedings is factually incorrect and contrary to the material available on record. Our attention has been drawn to the assessee’s detailed reply dated 11 December 2022, filed in response to the show cause notice dated 29 November 2022, wherein the assessee had duly submitted comprehensive documentary evidence in support of the unsecured loan transaction. The documents placed on record include: i. Copy of PAN of the lender company ii. Certificate of Incorporation, Memorandum and Articles of Association iii. MCA portal status reflecting ‘Active Compliant’ iv. Acknowledgement of Return of Income for Assessment Year 2015–16 v. Audited financial statements comprising the Independent Auditor’s Report, audited balance sheet, profit and loss account, significant accounting policies, and notes to accounts forming part of the financials for the year ending 31 March 2015, relevant to A.Y. 2015–16 vi. Ledger account confirmation of the lender company as recorded in the books of the assessee vii. Bank statement of the assessee reflecting the loan transactions with the said lender On an overall consideration of the above evidences, it is apparent that the assessee had not only established the identity of the Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 6 lender, namely Vinam Finance Private Limited, through statutory documents such as PAN and certificate of incorporation, but had also substantiated the genuineness of the loan transaction by furnishing ledger confirmations and bank statements evidencing receipt of funds through account payee cheques. The creditworthiness of the lender stood corroborated by its audited financial statements and balance sheet, which were duly filed before the Assessing Officer. From the balance sheet submitted during the course of the assessment proceedings, it clearly emerges that the lender company possessed substantial surplus funds generated from its regular trading operations. These funds were deployed for lending purposes on which interest income was being earned, thereby reinforcing the commercial nature of the transaction. 7. Upon a thorough perusal of the documents placed on record, it is evident that the assessee has duly discharged the initial onus cast upon him under law to establish the identity, creditworthiness, and genuineness of the loan transaction. The balance sheet of the lender disclosed reserves and surplus in excess of ₹43.17 crores and clearly indicated the source and application of funds, including the disbursement of loans. Accordingly, the financial capacity of the lender stands reasonably demonstrated through audited financials and contemporaneous records. Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 7 8. The entire basis of the impugned addition rests upon the report of the Investigation Wing. However, it is pertinent to note that the Assessing Officer did not undertake any independent enquiry or verification with the lender company, despite the assessee having submitted complete supporting documentation. No attempt was made to either rebut or even acknowledge the documentary evidence placed on record in response to the show cause notice. Importantly, the Assessing Officer was duty bound to conduct independent verification to ascertain whether the lender continues to be assessed regularly under the Income Tax Act, and whether any adverse inference has been drawn against either the lender or the assessee in any scrutiny assessments undertaken by the Department. The absence of such verification, particularly when the lender remains an active and assessed entity, renders the addition unsupported by any objective enquiry. 9. It is a well settled proposition of law that while a report of the Investigation Wing may provide a basis to initiate enquiry, it cannot, in itself, constitute sufficient justification for an addition under section 68 once the assessee has produced credible evidence satisfying the threefold requirement of establishing identity, creditworthiness, and genuineness. When the lending entity is on the records of the Revenue, is filing regular returns, is statutorily compliant, and possesses disclosed financial capacity, the burden shifts to the Department to disprove such Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 8 evidence through cogent material. In the present case, no such rebuttal has been brought on record. 10. Moreover, we observe that the Assessing Officer has placed reliance on statements recorded by the Investigation Wing without confronting the assessee with such material or offering any opportunity for cross-examination. He has also disregarded the retraction made during the course of the investigation proceedings. Such reliance, in the absence of procedural safeguards, lacks evidentiary integrity and renders the conclusion legally untenable. 11. In view of the foregoing discussion and in the absence of any material brought on record to dislodge the assessee’s evidentiary submissions, we are of the considered opinion that the addition of ₹50,00,000 made under section 68 is unsustainable both in law and on facts. Accordingly, the said addition stands deleted. 12. In the result, the appeal of the assessee is allowed. Order pronounced on 31st July, 2025. Sd/- (PADMAVATHY S) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 31/07/2025 KARUNA, sr.ps Printed from counselvise.com IT(SS)A No. 434/Mum/2025 Rameshchandra Nemchand Dhanani 9 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// Printed from counselvise.com "