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Judgment
PER SATBEER SINGH GODARA, JM
This Revenue’s appeal for assessment year 2019-20, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1075520970(1), dated 07.04.2025 involving proceedings under section 147 r.w.s. 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
The Revenue’s sole substantive grievance raised in the instant appeal seeks to reverse the CIT(A)’s action holding the Assessing Office to have erred in law and on facts in treating the assessee’s loan amount of Rs. 2,88,83,699/-; as unexplained cash credits under section 68 of the Act; vide following detailed discussion:
“5.I have perused the order passed by the AO and the written submissions filed by the appellant. In this case, the assessment was reopened on the basis of certain information received from the Insight Portal that the appellant company has taken fictitious loan. On the basis of that information, the AO proceeded to treat the loan of Rs. 2,88,83,699/ as unexplained cash credit. However, on the other hand the appellant filed a detailed written submission by stating that the loan taken by the appellant company was Rs. 2,70,00,000/ and they made interest payment on the loan after deducting the TDS. The appellant company further stated that the loan was taken from Satsai Finlease Pvt Ltd. against the hypothecation of the securities of the company as well as the directors of the company. In addition to the above, the appellant also claimed in the written submission that the entire loan was repaid in the month of March 2023. In addition to the above, the appellant also submitted an affidavit of Shri. Ankit Bhageria and claimed that the loan obtained by them was a genuine transaction. In order to verify the claim of the appellant company, copies of bank accounts of the appellant company were called for. The appellant company submitted the same. Upon perusal of the bank statements, it is noticed the loan taken by the company in the AY 2019-20 has been repaid in the month of March 2023.
6.Along with written submission, the appellant filed copy of one assessment order passed in the case of M/s Interbuild Consultant Pvt. Ltd. and claimed that the AO reopened the assessment on similar ground whereas no addition was made. The appellant also filed copy of an appeal order passed by CIT (Appeals), NFAC in the case of M/s Adonia Systems Pvt. Ltd and claimed that the addition made by the AO on similar reasons was deleted by CIT (Appeals) and their appeal was allowed. Incidentally, both these companies are the sister concerns.
7. Calling for remand report:
7.1Entire written submissions were forwarded to the AO and the AO was asked to comment on the submission of the appellant and he was also asked to share all the evidences available in his possession in support of the allegation that the transaction entered between the appellant and Satsai Finlease (P) Ltd was not a genuine transaction. The notice was issued on 17.02.2025 by posting the case to 25.02.2025. As the AO did not respond, reminder dated 27.02.2025, 10.03.2025 and 21.03.2025 were also issued. However, there is no remand report is received from the AO.
8. Decision:
8.1In this case, the only issue involved was receipt of unsecured loan of Rs. 2,88,83,699/ in the AY 2019-20 from Filatex Group controlled and operated by Shri Ankit Bhageria, who is an entry operator provided the accommodation entries to various beneficiaries. During the course of appeal proceedings, the appellant company filed a detailed written submission by claiming that, the transaction entered between them and M/s Satsai Finlease Pvt Ltd was a genuine business transaction and the loan received by them in A.Y 2019-20 has been subsequently repaid.
8.2Further, the appellant company also submitted that, in their group case, similar addition made by the assessing officer has been allowed by the CIT(A) vide order dated: 18.12.2024. The findings given by CIT(A), NFAC in the case of Adonia Systems (P) Limited is as under;
8.2During the course of the appellate proceeding, it is noticed that the main reason of the addition made by the AO towards the loan transaction was the statement recorded of Mr. Ankit Bhageria (promoter of M/s. Satsai Fin lease Private Limited) during the search and seizure operation in the case of Filatex Group. In the report shared by the DDlT(lnv.), Unit-2(4), New Delhi, modus operand! was explained as under:
"... Modus Operand/: Sh. Ankit Bhageria and his father late Sh. Vimal Bhageria provide accommodation entries to accommodate cash of various parties who require entries in their books through banking system. There are several companies controlled by him wherein capital was built over time by taking entries from other shell entities by introducing capital, unsecured loans and securities premium. Whenever a client gives cash, they do send an RTGS or cheque of an equal amount to his company from one of his shell companies. It is shown as unsecured loan by Ankit Bhageria’s company to client’s company and also route unaccounted cash for beneficiaries by providing bogus purchase bill entries. Similarly, when the beneficiaries are in need of cash for out of books transaction, they transfer money to Ankit Bhageria entities which then closes the loan account and gives back the cash to beneficiaries ..."
8.3However, the appellant has pointed out some ambiguities towards the understating of statement of the Mr. Ankit Bhageria by the Income Tax Department as the business activities of the Company, M/s Satsai Finlease Pvt. Ltd. i.e. Modus of Operand! was discussed in answer to Q. No 15 & 16 of the statement and nowhere it was mentioned that these loans were bogus or fictitious. In the recorded statement, Mr. Ankit Bhageria stated that M/s Satsai Finlease Pvt Ltd. sanctioned the Loans to the Other Parties and such loans were granted after executing the Loan Agreements and such loans were granted for a certain period with the Interest Only after execution of Loan Agreement M/s Satsai Finlease Pvt. Ltd. transferred Loan amount through RTGS to the other party for a certain period at a prescribed Rate of Interest.
8.4The details submitted by the appellant against the show cause notice u/s. 148A of the IT Act dated 18.03.2023 have been considered which were already submitted by the appellant before the AO before passing of assessment order. Apart from the above, the Appellant also shared the assessment order passed by the Income Tax Department in the case of M/s. Inter Build Consultants Private Limited for the AY 2019-20 wherein the case was re-opened for the assessment based on the similar information i.e. Loans availed from M/s. Sats ai Fin lease Private Limited. However, during the course of the assessment proceeding, the respective assessing officer allowed for cross objection wherein Mr. Ankit Bhageria retracted from the statement stating that his previous statement dated 03.09.2021 was recorded in a different room and Computer System through which the Print out was taken is in other Room and he was not allowed to go through the printed statement rather it was told him The Printed Statement and Statement recorded by him are the same and relying upon which he signed the statement.
8.5In regard to these facts, reliance is also drawn upon the decision of Hon'ble Apex Court, in the case of Commissioner of Income Tax v. Best Infrastructure (India) Private Limited (2018) & also Commissioner of Income Tax v. Harjeev Aggarwal (2016) 290 CTR 263, wherein it had been discussed that mere statements made during the course of the search, under Section 132 (4) of the Act, cannot be considered to be incriminating material.
8.6Further Hon'ble Apex court in the case of Nemi Chand Kothari vs Commissioner Of Income-Tax 2003 264 ITR 254 Gauhati has also discussed in depth regarding the detailed verification of creditworthiness of the party before making addition towards the loan transaction. The relevant portion of the same is reproduced as under:
The harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income-tax Act will be that though apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. What follows, as a corollary, is that it is not the burden of the assessee to prove the genuineness of the transactions between his creditor and sub- creditors nor is it the burden of the assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the assessee.lt, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and subcreditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee.
8.7During the course of the assessment proceeding, the AO has not recorded any adverse comments over the creditworthiness of the M/s. Satsai Finlease Private Limited. Moreover, the appellant has stated that M/s. Satsai Finlease Private Limited is a RBI Registered Non-Banking Finance Company and involved in providing the Loan facilities. The appellant has also submitted the Loan agreement executed before availing the Loan. Further the affidavit of Mr. Ankit Bhageria clearly states that the Appellant company availed a loan facility of Rs. 1,05,00,000/- at the interest rate of 8%. The appellant company had also made payment of Rs. 7,15,808/- towards the interest on 03.05.2019 after deducting the TDS over the same. Mr. Ankit Bhageria has also claimed that the entire loan amount has been repaid by the appellant and there is not outstanding amount towards the same. Considering these facts along with the above discussion and the case laws, no adverse inference can be drawn towards these transactions.
8.8Therefore, considering the facts of the case, the details furnished by the appellant during the course of the 148A proceeding, submission of the appellant and the above discussion, the addition made by the AO of Rs. 1,12,95,342/- (as fictitious loan availed) is hereby deleted. Further as the addition of Rs. 1,12,95,342/- itself is hereby deleted which is the basis of second addition of Rs. 5,64,767/- (towards the commission for provision bogus entry), the addition made by the AO of Rs. 5,64,767/- also cannot be sustained and hereby deleted. Accordingly, these grounds of appeal are hereby allowed.
8.3The facts are similar to the case of the appellant company also. Sri. Ankit Bhageria has clearly stated in his affidavit that the loan given was genuine. The entire submission was forwarded to the AO and remand report has been called for. However, no remand report is submitted by the AO.
8.4In addition to the above, it is also submitted by the appellant that, in other sister concern, the assessing officer did not even make any addition and accepted their submission filed before the AO during the course of the assessment proceedings. As the same issue is already considered in favour of the appellant by the AO as well as the CIT(A) in their group cases, addition made in the hands of the appellant is not maintainable. Accordingly, the grounds of appellant are allowed.
9.As a result, the appeal is allowed.”
Both the parties vehemently reiterate their respective stands against and in support of the impugned addition. The Revenue more particularly invites our attention to para 7.1 in the above extracted lower appellate discussion that the CIT(A) had sought for a remand report on 17.02.2025 followed by the alleged three reminders and then proceed to deleted the impugned addition due to lack of response coming from the Assessing Officer’s side.
That being the case, there could be hardly any dispute that the learned CIT(A)’s lower appellate proceedings prima facie appears not to have afforded even four weeks’ time to the Assessing Officer to finalize the remand proceedings. This is also not the assessee’s case that it had brought the remand proceedings to the Assessing Officer’s notice as well. We wish to emphasize here that the March month end indeed involves various time-bound proceedings to be finalized by the Assessing Officer wherein such a communication gap couldn’t be ruled out in entirety.
Learned counsel at this stage seeks to buttress the point that the CIT(A) has taken note of similar developments in the assessee’s group of companies. We are of the considered view that there is no finding in the learned CIT(A)’s detailed discussion ensuring compliance to section 250(6) of the Act wherein it could be proved that he had examined the concerned creditors clinching issue of genuineness and creditworthiness. We thus deem it appropriate in the larger interest of justice to restore the Revenue’s instant appeal back to the CIT(A) for his afresh appropriate adjudication as per law preferably within three effective opportunities of hearing.
All other remaining issues between the parties are kept open at this stage.
This Revenue’s appeal is allowed for statistical purposes.