ACIT, CC-25, Delhi vs Baba Construction Private Limited

The Revenue as well as Assessee has filed the respective captioned appeals against the separate orders of the Ld. Commissioner of Income Tax (Appeals-30), New Delhi, relating to assessment years 2017-18 to 2021-22 respectively. Since the appeals related to one assessee, thus, the same were heard together and are being disposed of by this common order for the sake of convenience, by dealing with first with assessee’s appeal No. 6290/Del/2025 (AY 2017-18).

The brief facts of the case are that the return of income for the AY 2017-18 was e-filed on 24.12.2018 declaring total income of Rs. 7,76,09,470/- u/s. 139(1) of the Act. In this case, an information has been received on Insight Portal, a search action u/s. 132 of the Act was conducted on 20.7.2022 in the case of SMC Group and others. During search related investigation the introduction of capital in Log Hut Builders and Developers Pvt. Ltd. was examined. AO noted that assessee company has taken accommodation entries from various non-descript entities. The entity M/s Paras Fincap Pvt. Ltd. and M/s IDIR Tradex Pvt. Ltd. are some entities, enquiry of which revealed that these are shell companies /paper companies. The assessee has entered into the respective transactions amounting to Rs. 99,00,000/- with M/s IDIR Tradex Pvt. Ltd. and amounting to Rs. 25,00,000/-with M/s Paras Fincap Pvt. Ltd. during the year under consideration. Thereafter, statutory notices were issued and in response thereof, the assessee filed its reply stating that the assessee has took loan of Rs. 99 lacs from M/s Idir Tradex Pvt. Ltd. and of Rs. 25 lacs from M/s Paras Fincap Pvt. Ltd. for working capital requirement of the assessee and it was also submitted that it has paid loan in AY 2020-21. AO observed that assessee has taken the accommodation entries amounting to Rs. 25 lacs and Rs. 99 lacs during FY 2018-19 relevant to assessment AY 2017-18 from the entity M/s Paras Fincap Pvt. Ltd. and M/s Idir Tradex Pvt. Ltd. respectively which are paper companies. Thus, the amount of Rs. 1.24 crore is unexplained credit in the books of the assessee, hence, the same was added to the income of the assessee u/s. 68 of the Act. Further an amount of Rs. 21,617/- was also added on account of non-furnishing of documents/evidences to prove the genuineness of the interest paid, thus, the amount of Rs. 21,617/- was added to the total income of the assessee on account of unexplained expenditure u/s. 69C of the Act. In appeal, Ld. CIT(A) held that the addition of Rs. 25 lacs u/s. 68 is made without cogent or circumstantial evidence, thus is not sustainable on fact as well as law and deleted the same. However, he confirmed the addition of Rs. 99 lacs by observing that assessee failed the test of creditworthiness of lending company, hence, the loan received by the assessee from this company was held to be bogus. Against the above, revenue as well as assessee are in appeal before us.

We have heard the rival contention and perused the records.

As regards addition of Rs. 1.24 crore is concerned, it is an admitted fact that assessee company has made accommodation entry of Rs. 1,24,00,000/- with M/s Paras Fincap Pvt. Ltd. and M/s Idir Tradex Pvt. Ltd.. It is the contention of the Ld. AR that assessee has raised interest bearing unsecured loan from the said concern that too for the business purpose only and the same has been squared off. Interest has also been paid by the assessee company to the lender entities on which TDS has also been deducted. All the transactions have been made through proper banking channel. It is noted that the assessee company has filed the documents evidences of the period under consideration in respect of these companies viz. copy of ledger account of the said concern in the books of assessee company; copy of relevant portion of bank statement of the assessee company; copy of Audited Balance Sheet of the said concern; copy of Form 16a showing that the TDS has been deducted on the amount of interest payment on unsecured loan; copy of acknowledgement of income tax return of the lender entity; assessee’s acknowledgement of return of computation of income; audited financial statement together with tax audit report. It is noted that these transactions have been made by the assessee company through banking channel and all the lender entity are assed to tax. More particularly, it is the contention of the assessee that entire loan has been repaid before the initiation of impugned proceedings. The assessee company has maintained its books of account in accordance with law and the same are audited by the Chartered Accountants and no defect have been pointed out in the audited books of account of the assessee company. The case laws cited by the Ld. DR are distinguishable to the facts of the case in hand. Therefore, in view of the aforesaid discussions, we find force in the contention of the assessee about the genuineness and creditworthiness of the transactions, hence, the addition sustained by the ld. CIT(A) amounting to Rs. 99 lacs is hereby deleted and accordingly, the consequent addition on account of interest paid amount is also deleted. Since we have decided the case on merits, other pleadings have rendered academic. Accordingly, the ground raised by the Assessee in AY 2017-18 are allowed and ground raised by the Revenue are dismissed. Resultantly, the assessee’s appeal is allowed in very terms and revenue’s appeal is dismissed as infructuous.

As regards deletion of addition of Rs. 2,44,01,370/- made by the AO u/s. 68 of the Act is concerned, it is the contention of the Ld. AR that the loans in aggregating to the aforesaid amount were received through banking channels fro identified corporate lenders and every element required under section 68 of the Act i.e. identity, creditworthiness and genuineness was substantiated with (a) master data from MCA portal, (b) audited balance sheets, (c) bank statements and ledgers showing receipt and repayment, and (d) TDS certificate for interest paid. It is the further contention that all these loans were fully repaid. Ld. DR relied on the order of the Assessing Officer. It is admitted fact that the assessee has availed loans to the tune of Rs. 2,44,01,370/- from 03 companies i.e. 2 NBFCs M/s LVS and M/s PFPLL and M/s HGCSL and the said loans have also been repaid subsequently. These companies have paid taxes and declared adequate profits in the relevant assessment year. It reveals that the Investigation Report has given general lead about the companies controlled by entry operator. The AO ignored very important fact that this NBFC has accumulated capital and reserves carried over from previous years and without refuting the genuineness of capital and reserves, it is not possible to held the same as an accommodation entry. As the addition loans received by the assessee amounting to Rs. 2,44,01,370/- u/s. 68 of the Act is made without cogent or circumstantial evidence and hence, not sustainable on facts as well as in law and hence, the same was rightly deleted by the Ld. CIT(A), therefore, we uphold the action of the Ld. CIT(A) on this issue and reject the grounds raised by the revenue and decide the issue in favour of the assessee.

Further, as regards addition of Rs. 5,90,651/- on account of treating interest paid to the lenders i.e. M/s LVS, M/s HGCSL and M/s Sirsa Deposits and Advances Pvt Ltd. )SDAL) as unexplained expenditure by AO. Since the addition made u/s. 68 of the Act in respect of loans pertaining to M/s LVS and M/s HGCSL was deleted as aforesaid, thus, it is proved to be genuine transaction, accordingly, the interest paid to the said lending companies in aggregating to Rs. 4,41,966/-, after complying to TDS provisions, was rightly held to be allowable business expenses and accordingly, deleted, which does not need any interference on our part. As regards remaining amount of interest of Rs. 1,48,685/- was paid to lender M/s Sirsa Deposits and Advances Limited (SDAL). It is noted that the alleged payment has been made out the fund available in the bank account of the appellant-company meaning thereby that payment has been made out of the explained sources, which establish from a copy of confirmation of account of M/s SDAL in the books of assessee company for AY 2018-19 to 2021-22 (APB Pages 534-539). After perusing the same, it is noted that the unsecured loan amounting to Rs. 50,00,000/- has been received during the year under consideration through proper banking channels from SDAL. A copy of confirmation of interest on unsecured loan of M/s DAL for the FY 2017-18/ AY 2018-19, shows that the interest amounting to Rs. 1,62,206/- has been booked and corresponding TDS amounting to Rs. 16,521/- has been deducted by the assessee-company. It further shows that the total outstanding interest paid by the assessee company to lender entity was Rs. 1,48,685/-. It is also noted from the copy of confirmation of M/s SDAL for the FY 2017-18 / AY 2018-19, evidencing that Rs. 50 lacs being amount of unsecured loan has been repaid by the assessee company on 17.12.2018 and from the copy of ledger confirmation of interest on unsecured loan of SDAL for FY 2020-21 / AY 2021-22, evidencing that total outstanding interest amounting to Rs. 2,89,603/- has been repaid through banking channel on 3.7.2020. In view of above, the sustained addition of Rs. 1,48,685/- is hereby deleted.

Further, addition of Rs. 2,82,000/- made u/s. 69C of the Act on account of presumptive commission paid for availing accommodation entries to the tune of Rs. 94 lacs from M/s LVS and M/s SDAL. It is noted that AO has failed to bring any evidence of cash expenditure or even circumstantial evidence of unaccounted cash generation by assessee to substantiate the presumption that the assessee must have spent such expenditure for alleged accommodation entry. As the addition of Rs. 2,82,000/- was on mere presumption without any evidence of expenditure cogent or circumstantial, thus the same was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same.

As regards, addition of Rs. 55,74,745/- u/s. 69C of the Act on account of bogus purchases undertaken with M/s Subh Traders is concerned, it is noted that it was the consistent claim of the assessee during the year under consideration that assessee company has not made any purchase or has not entered into any transaction with M/s Subh Traders that too for an amount of Rs. 55,74,745/-, thus the addition made by AO is without any basis. The audited financial statements of the assessee company for the year under consideration, evidencing that the assessee company has not claimed any purchases of Rs. 55,74,745/- allegedly made from M/s Shubh Traders, thus, the addition in dispute is not sustainable, hence, the same is deleted.

In view of above, the ground raised by the Assessee in AY 2018-19 are allowed and ground raised by the Revenue are dismissed. Resultantly, the assessee’s appeal is allowed in very terms and revenue’s appeal is dismissed as infructuous.

As regards addition of Rs. 25,00,000/-, it is noted that during the year under consideration, the assesse has taken total loan of Rs. 25 lacs from M/s LVS Financial Services Pvt. Ltd. (LVS). It is observed that Ld. CIT(A) has noted that assessee has satisfied all tests identity, creditworthiness, and genuineness of the loan of Rs. 25 lacs availed from entity which is NBFC and the said loan has also been repaid in the subsequently. This company has paid taxes and declared profit in the relevant assessment year. It is noted that addition of loan was received from NBFC i.e. M/s LVS, amounting to Rs. 25 lacs u/s. 68 of the Act is made without cogent or circumstantial evidence and hence, not sustainable, thus, the same was rightly deleted by the Ld. CIT(A), accordingly, we affirm the same.

As regards addition of Rs. 27,96,41/- on account of treating interest paid to the lenders i.e. Rs. 4,49,630/- to M/s LVS Financial Services Pvt. Ltd. (LVS); Rs. 13,50,000/- to M/s High Growth Credit Services Ltd. (HGCSL); Rs. 6,75,000/- to M/s Paras Fincap Pvt. Ltd. (PFPL) and Rs. 3,21,781/ to M/s Sirsa Deposits and Advances Ltd. (SDAL) as unexplained expenditure by the AO are concerned. Since the above loan availed from M/s LVS is held genuine as aforesaid, and similarly, loans from the remanding lenders have been held as genuine in the AY 2018-19 as aforesaid. Therefore, interest paid to the said lending companies to the tune of Rs. 27,96,411/- is allowed.

Further, the addition of Rs. 75,000/- u/s. 69C of the Act on account of presumptive commission paid for availing accommodation entries to the tuen of Rs. 25 lacs from M/s LVS is concerned, it is noted that AO has failed to bring any evidence of cash expenditure or even circumstantial evidence of unaccounted cash generation by assessee to substantiate the presumption that the assessee must have spent such expenditure for alleged accommodation entry. As the addition of Rs. 75,000/- was on mere presumption without any evidence of expenditure cogent or circumstantial, thus the same was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the same.

In view of above, ground raised by the Assessee in AY 2019-20 are allowed and ground raised by the Revenue are dismissed. Resultantly, the assessee’s appeal is allowed in very terms and revenue’s appeal is dismissed as infructuous.

As regards additions of Rs. 1,81,00,000/- is concerned, it is noted that during the year under consideration, the assesse has taken total loan of Rs. 1.81 crore from M/s LVS Financial Services Pvt. Ltd. (LVS). It is observed that Ld. CIT(A) has noted that assessee has satisfied all tests identity, creditworthiness, and genuineness of the loan of Rs. 51 lacs availed from entity which is NBFC and the said loan has also been repaid in the subsequently. This company has paid taxes and declared profit in the relevant assessment year. It is noted that addition of loan was received from NBFC i.e. M/s LVS, amounting to Rs. 51 lacs u/s. 68 of the Act is made without cogent or circumstantial evidence and hence, not sustainable, thus, the same was rightly deleted by the Ld. CIT(A), accordingly, we affirm the same. Further, the addition of Rs. 1,30,00,000/- was made on account of loan received from the lending company M/s ALPS. As per confirmation from M/s ALPS Management Solutions Pvt. Ltd. it has been confirmed that an aggregate amount of Rs. 1,30,00,000/- was advanced to the assessee company during the year under consideration through proper banking channels and it was confirmed that out of the said amount, a sum of Rs. 20 lacs was repaid by the assessee through banking channels on 24.10.2019. A further confirmation regarding interest on unsecured loan of M/s ALPS Management Solutions Pvt. Ltd. wherein they have charged interest of Rs. 7,76,466/- during the year under consideration on the aforesaid loan advanced by them to the assessee company on which TDS amounting to Rs. 77,647/- was also deducted by the assessee company. As per extract of bank statement of assessee company showing that an aggregating amount of Rs. 1,30,00,000/- was received by the assessee company from M/s ALPS Management Solutions Pvt. Ltd. (amount of Rs. 50,00,000/-received on 18.6.2019, Rs. 60,00,000/- on 20.6.2019 and Rs. 20,00,000/- received on 23.10.2019). Further, a copy of Audited Financial Statements of M/s ALPS Management Solutions Pvt. Ltd. for FY 2019-20, shows that the total net worth of lender entity was approx.. Rs. 100.21 cr. Which establishes that the lender entity had sufficient funds to make the said advances to the assessee company; the copies of acknowledgement of income tax return for the AY 2020-21 to 2022-23 evidencing that the lender entity is assessed under the Income Tax Act and his its identity has been proved. Copies of Audited Financial Statements of M/s ALPS Management Solutions Pvt. Ltd. for AY 2020-21 to 2022-23 which duly establish the continuity of their business operations as well as their creditworthiness. In view of above, the sustained addition of Rs. 1,30,00,000/- is hereby deleted.

Further with regard to addition of Rs. 25,65,000/- made u/s. 69A of the Act relates to sums repaid towards an old loan from M/s Arti Securities and Services Ltd which is an RBI registered NBFC having substantial capital, reserves and profit. There was no loan received in the current year; the opening balance was repaid entirely via banking channels, with full details submitted (ledger, TDS, repayment proofs). It is noted that Section 69A requires that the assessee must be “found to be owner of” explained money, bullion, jewellery, or valuable article, and such ownership must be supported by facts and evidence, however, in the present case the AO has not brought any concrete evidence on record to show that any unexplained cash accrued to the assessee as a result of repayment to the alleged shell company. The mere presumption, unbacked by evidence, is not a valid basis for invoking section 69A. The whole basis of the addition is based on mere investigation finding that the company to whom loan were repaid are non-descript entity. Thus, the addition cannot be made u/s. 69A on the basis of presumption without any cogent evidence, hence, the same was rightly been deleted by the Ld. CIT(A), therefore, we uphold the same.

Further as regards addition of Rs. 6,19,950/- u/s. 69C of the Act on account of presumptive commission paid for availing accommodation entries to the tune of Rs. 2,06,65,000/- from M/s LVS, M/s ALPS and M/s ASSL is concerned, it is noted that AO has failed to bring any evidence of cash expenditure or even circumstantial evidence of unaccounted cash generation by assessee to substantiate the presumption that the assessee must have spent such expenditure for alleged accommodation entry. Thus, the same was rightly deleted by the Ld. CIT(A), therefore, we affirm the same.

Further as regards addition of Rs. 1,86,97,328/- u/s 69C of the Act on account of bogus purchases undertaken by assessee company with M/s Khushi Enteprises amounting to Rs. 28,29,500/-; M/s Kohinoor Enterprises amounting to Rs. 1,07,53,917/- and M/s Shree Ganesh Enterprises amounting to Rs. 51,13,910/-is concerned. It is noted from the copy of ledger of M/s Kushi Enterprises in the books of assesse company for the FY 2019-20 shows that the assessee company has made purchase goods worth of Rs. 7,60,000/- on 29.10.2019, Rs. 7,50,800/- on 30.10.2019, Rs. 5,44,700/- on 29.11.2019 and Rs. 7,74,000/- on 30.11.2019 aggregating to Rs. 29,29,500/-. From the sample copies of invoices issued by the vendor entity i.e. M/s Khushi Enterprises alongwith its corresponding transport receipt and w-way bill generated at the time of transfer of goods etc. Copy of relevant extract of the bank statement of assessee company shows that the assessee company made payment of Rs. 17,82,744/- through banking channels to M/s Khushi Enterprises for the purchase of goods. It is noted from the copy of the bank statement of the assessee company that the assessee made balance payment amounting to Rs. 15,56,066/- dated 28.5.2025 through banking channels. Similarly, purchases of Rs. 1,07,53,917/- from M/s Kohinoor Enterpises Prp. Ajay Sharma is concerned, the copy of the ledger account of M/s Kohinorr Enterprises in the books of the assessee company for the period from 1.4.2019 to 31.5.2021, which reflects that the assessee company had purchased goods amounting to Rs. 1,26,89,623/- (inclusive of GST) during the year under appeal and payments against these purchases were made through proper banking channels. Thus, the same was rightly deleted by the Ld. CIT(A), therefore, we affirm the same. Further, the addition on account of purchase amounting to Rs. 51,13,910/- from M/s Shree Ganesh Enterprises, Ravi Giri is concerned, copy of ledger of M/s Shree Ganesh Enterprises in the books of assessee company for the period ranging from 1.4.2019 to 31.5.2021 which would show that the assessee company has made purchases worth of Rs. 60,34,415/- (inclusive of GST) during the year under appeal. and payments against these purchases were made through proper banking channels. Thus, the same was rightly deleted by the Ld. CIT(A), therefore, we affirm the same.

Further, as regards addition of Rs. 43,37,287/- on account of treating interest paid to the lenders i.e. Rs. 22,07,121/- to M/s LVS Financial Services Pvt. Ltd. (LVS); Rs. 13,53,700/- to M/s High Growth Credit Services Ltd. (HGCSL); Rs. 7,76,466/- to M/s Arti Securities and Services and Services Limited (ASSL) as unexplained expenditure by the AO are concerned. Since the above loan availed from M/s LVS is held genuine as aforesaid, and similarly, loans from the remanding lenders have been held as genuine in the AY 2018-19 as aforesaid. Therefore, interest paid to the said lending companies to the tune of Rs. 43,37,287/- is allowed.

In view of above, the ground raised by the Assessee in AY 2020-21 are allowed and ground raised by the Revenue are dismissed. Resultantly, the assessee’s appeal is allowed in very terms and revenue’s appeal is dismissed as infructuous.

As regards deletion of addition of Rs. 81,09,966/- made by the AO u/s. 68 of the Act is concerned, it is the contention of the Ld. AR that the loans in aggregating to the aforesaid amount were received through banking channels from identified corporate lenders and every element required under section 68 of the Act i.e. identity, creditworthiness and genuineness was substantiated with (a) master data from MCA portal, (b) audited balance sheets, (c) bank statements and ledgers showing receipt and repayment, and (d) TDS certificate for interest paid. It is the further contention that all these loans were fully repaid. Ld. DR relied on the order of the Assessing Officer. It is admitted fact that the assessee has availed loans to the tune of Rs.81,09,966/- availed from entity which is NBFC and the said loan has also been repaid in the subsequently. This company has paid taxes and declared profit before tax of Rs. 29,04,689/- in the relevant assessment year. It It reveals that the Investigation Report has given general lead about the companies controlled by entry operator. The AO ignored very important fact that this NBFC has accumulated capital and reserves carried over from previous years and without refuting the genuineness of capital and reserves, it is not possible to held the same as an accommodation entry. As the addition loans received by the assessee amounting to Rs. 81,09,966/- u/s. 68 of the Act is made without cogent or circumstantial evidence and hence, not sustainable on facts as well as in law and hence, the same was rightly deleted by the Ld. CIT(A), therefore, we uphold the action of the Ld. CIT(A) on this issue and reject the grounds raised by the revenue and decide the issue in favour of the assessee.

Further, as regards addition of Rs. 31,54,384/- on account of treating interest paid to the lenders i.e. M/s Arti Securities and Services Ltd. (ASSL), Rs. 11,64,384/- to M/s High Growth Credit Services Limited (HGCSL) and Rs. 8,80,000/- to M/s Alps Management Solutions Pvt. Ltd. (ALPS) as unexplained expenditure by AO. Since the addition made u/s. 68 of the Act in respect of loans pertaining to M/s ASSL and M/s HGCSL was deleted as aforesaid, thus, it is proved to be genuine transaction, accordingly, the interest paid to the said lending companies in aggregating to Rs. 22,74,384/-, after complying to TDS provisions, was rightly held to be allowable business expenses and accordingly, deleted, which does not need any interference on our part. As regards remaining amount of interest of Rs. 8,80,000/- was paid to lender M/s ALPS. It is noted that the alleged payment has been made out the fund available in the bank account of the appellant-company meaning thereby that payment has been made out of the explained sources, which establish from a copy of confirmation of unsecured loan from M/s ALPS Management Solutions Pvt. Ltd. evidencing that total outstanding of unsecured loan of Rs. 1,10,00,000/- A copy of confirmation of interest on unsecured loan of M/s ALPS for the FY 2020-2021/AY 2021-22, shows that the interest amounting to Rs. 8,80,000/- has been booked and corresponding TDS amounting to Rs. 66,000/- has been deducted by the assessee-company. It further shows that the total outstanding interest paid by the assessee company to lender entity was Rs. 6,98,819/-. It is also noted from the copy of confirmation of M/s ALPS for the FY 2020-21 / AY 2021-22, evidencing that the TDS has been deducted and deposited against the PAN of lender entity. From the copy of audited financial statements of lender entity i.e. M/s ALPS it reveals that that the lender had share capital of Rs. 99,96,850/- and other equity of Rs. 98,23,88,942/- at the end of the relevant year. Further the lender entity earned total revenue of Rs. 6,91,78,902/- during the year. This proves that that lender entity had sufficient funds to advance the loan to the assessee company and was engaged in genuine business activities. In view of above, the sustained addition of Rs. 31,54,384/- is hereby deleted.

Further with regard to addition of Rs. 24,30,000/- made u/s. 69A of the Act relates to sums repaid towards an old loan from M/s Arti Securities and Services Ltd which is an RBI registered NBFC having substantial capital, reserves and profit. There was no loan received in the current year; the opening balance was repaid entirely via banking channels, with full details submitted (ledger, TDS, repayment proofs). It is noted that Section 69A requires that the assessee must be “found to be owner of” explained money, bullion, jewellery, or valuable article, and such ownership must be supported by facts and evidence, however, in the present case the AO has not brought any concrete evidence on record to show that any unexplained cash accrued to the assessee as a result of repayment to the alleged shell company. The mere presumption, unbacked by evidence, is not a valid basis for invoking section 69A. The whole basis of the addition is based on mere investigation finding that the company to whom loan were repaid are non-descript entity. Thus, the addition cannot be made u/s. 69A on the basis of presumption without any cogent evidence, hence, the same was rightly been deleted by the Ld. CIT(A), therefore, we uphold the same.

Further as regards addition of Rs. 72,900/- u/s. 69C of the Act on account of presumptive commission paid for availing accommodation entries to the tune of Rs. 24,30,000/- from M/s ASSL is concerned, it is noted that AO has failed to bring any evidence of cash expenditure or even circumstantial evidence of unaccounted cash generation by assessee to substantiate the presumption that the assessee must have spent such expenditure for alleged accommodation entry. Thus, the same was rightly deleted by the Ld. CIT(A), therefore, we affirm the same.

In view of above, grounds raised by the Assessee in AY 2021-22 are allowed and ground raised by the Revenue are dismissed. Resultantly, the assessee’s appeal is allowed in very terms and revenue’s appeal is dismissed as infructuous.

In the result, all the 05 assessee’s appeals are allowed and all the 05 appeals of the revenue are dismissed in the very terms, as aforesaid.