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Judgment
PER MADHUMITA ROY, JUDICIAL MEMBER:
The instant appeal filed by the Department is directed against the order dated 10.09.2025 passed by the Ld. Commissioner of Income-tax (Appeals)-29, New Delhi [hereinafter referred to as the Ld. CIT(A)] under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) arising out of the Assessment Order dated 27.03.2025 passed by the ACIT, Central Circle-25, New Delhi (hereinafter referred to as ‘the ld. AO’) under Section 147 of the Act for Assessment Year 2019-20.
Heard the parties and perused the record.
The Revenue has filed the appeal with the following grounds of appeal:
“a. The Ld. CIT (A) did not appreciated the fact that the findings, of search proceedings on the assessee as well as the Galaxy Group, establishes that the assessee along with associated entities was indulged in accepting huge cash, out of books, booked bogus expenses, and taking bogus accommodation entries aggregating “routing the unexplained money” in parallel black economy of entire Galaxy Group willingly to evade taxes as per the requirement of beneficiaries. Hence, the decision on the issue, of the CIT(A) is not acceptable in the case and further appeal is recommended on this ground.
b. That the Ld. CIT(A) erred in deleting the addition of Rs.53,30,390/- u/s 69A of the I.T. Act towards bogus ENTRY/LOAN on account of payment to non descript company M/s Shridhar Portfolio Management Limited and M/s I Tech Insurance Brokers Private Limited ignoring Investigation Wing findings and statements of operators confirming that the concern was only an accommodation entry provider.
c. CIT(A) has erred in not appreciating that these entry provider have established a organized tax evasion racket and are working in such a large scale which is against the economic security of nation.
d. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
e. The grounds of appeal are without prejudice to each other.
f. That the appellant craves to add, amend, after or modify any grounds of appeal at the time of hearing.”
The deletion of addition of Rs.53,30,390/- under Section 69A of the Act on account of bogus entries/loan payment to non-descript companies M/s Shridhar Portfolio Management Limited and M/s I Tech Insurance Brokers Private Limited by the Ld.CIT(A) is the main challenge before us.
The brief facts leading to this case is that a search action under Section 132 of the Act was conducted on Galaxy group, Shri Deepak Agarwal and Shri Himanshu Verma, both entry providers on 17.11.2021 at their residences and office premises wherein incriminating documents galore supporting involvement in providing various types of accommodation entries to a large number of beneficiaries which were managed and controlled through various paper companies managed and controlled by these two persons, namely Shri Deepak Agarwal and Shri Himanshu Verma in lieu of commission. Providing accommodation entries in the form of unsecured loans, share capital, share premium, purchase and sale, etc., at huge level utilizing web of bank accounts in different banks in the name of paper companies/entities. Documents like name of the directors in the form of bank account details, income-tax credentials, unsigned board resolutions including Whatsapp chats instructing fund transfer from various non-descript entities and list of beneficiaries were found. It is the case of the assessee that neither the directors complied with the summons issued to them as the summonses were returned unserved from their available addresses on record. Field inquiries further revealed that these paper companies/entities are not existing on the given addresses. These particular documents further revealed the fact of obtaining accommodation entries by the assessee amounting to Rs.53,30,390/- during the FY 2018-19 relevant to AY 2019-20 from the entities, namely, M/s Shridhar Portfolio Management Limited and M/s I Tech Insurance Brokers Private Ltd. to the tune of Rs.20,29,737/- and Rs.33,00,653/- respectively whereupon show-cause was served upon them as to why the same should not be treated as unexplained money under the provisions of Section 69 of the Act in the hands of the assessee. The assessee’s case is that the amount impugned to the tune of Rs.53,30,390/- in total has been repaid during the year under consideration. Further, that the transactions were completed through the banking channel, but, without any supporting documents to prove the genuineness of the said transactions and with the following observations, therefore, the Ld. AO along with the others finalized the assessment upon making addition on very many counts including the amount of Rs.53,30,390/- under Section 69A of the Act as unexplained income of the assesse.
The same was, however, deleted by the First Appellate Authority, Hence, the instant appeal by the Revenue before us.
It appears that the search and survey action were also carried out earlier on 23.07.2015 and 13.04.2012 on the same assessee itself wherein finally it was held that the departmental database indicated that the entities were not into any actual business and were not found existing at the given addresses controlled by Deepak Agarwal and Shri Himanshu Verma found to be non-descript entities. On 23.07.2015, a search was also conducted in the residential premises of Shri Deepak Agarwal and another associate, namely Shri Mukesh Kumar by the DDIT (Inv.) Unit 2(2), New Delhi, on the same allegation being entry operator managing various non-descript entities and providing accommodation entries of unsecured loans/share capital/share premium/purchase and sale, etc. The said Shri Himanshu Verma was also subjected to search under Section 132 of the Act twice before by the Investigation Wing, Noida on 29.03.2012 and 13.09.2017, respectively and the fact of accommodation entry provider was also found as observed by the CIT(A) while passing the appellate order dated 26.12.2014 which was further confirmed by the Coordinate Bench in the order dated 15.03.2019 clearly holding Shri Himanshu Verma is an accommodation entry operator. Therefore, the following fact as narrated by the Ld. AO at para 14.5 was established:-
i)After analysis of ITRs of these entities, it was found that these entities had declared meagre turnover over the past few Assessment years, fixed assets recorded are negligible. Salaries and wages to employees, statutory benefit such as ESI, PF, etc. recorded were negligible.
ii) Directors of many of these companies were found to be same and their financial analysis also indicated that they are person of no means.
iii) During the physical enquiry on their given address, no such company was found existing.
In those searches, one of the key employees, Shri Pradeep Indra Prasad Agrawala named Shri Rajnish Jain in his statement recorded under Section 131(1A) of the Act at the office of Galaxy Group, Greater Noida, UP categorically accepted that the group companies of Galaxy Group had received accommodation entries in the form of bogus unsecured loan and the said documents were given to him by Shri Pradeep Indra Prasad Agrawala which includes details of some of the non-descript entities controlled and managed by the entry providers Shri Deepak Agarwal, i.e., Alps Management Solutions Pvt. Ltd., Haripriya Real Estate Pvt. Ltd., Pine View Portfolio Pvt. Ltd., LTE Info Technologies Private Ltd., Shyamali Security and Consultants Pvt. Ltd., MPM Realty Pvt. Ltd., Sarlokeshwar Construction Pvt. Ltd., M/s Saivi Finance Pvt. Ltd., MPM Realty Pvt. Ltd., Arti Securities & Services Ltd., Covet Financial Services Pvt. Ltd. by Shri Himanshu Verma, i.e, Sarvottam Securities Pvt. Ltd., Upaj Leasing and Finance Pvt. Ltd., LVS Financial Services Pvt. Ltd., RCM Finance and Leasing Pvt. Ltd.
During the search under challenge before us dated 17.11.2021 at the premises of Shri Deepak Agarwal i.e., B-7, 2nd Floor, Ashoka Niketan, New Delhi, certain incriminating Whatsapp chats were found and extracted from the phone of Shri Rasik Agarwal, Son of Shri Deepak Agarwal, wherein different photos of rupee notes and chats of cash/’kg’ transfers were found which was confronted and the said Shri Rasik Agarwal said the charts pertained to providing bank entries by their entities on the directions of his father Shri Deepak Agarwal against cash. The details of such statements are duly considered by the Ld. AO in para 14.7 of the order passed by him. During the said search, statement of Smt. Sonia Sharma, an employee of Shri Deepak Agarwal an dummy director in M/s Covet Financial Services Ltd. and M/s Phont Real Estate Pvt. Ltd. was recorded under Section 132(4) of the Act wherein she accepted of being a sleeping director in both the entries controlled by Shri Deepak Agarwal and the documents related to these companies were signed by her as and when required and when directed by Shri Deepak Agarwal the details whereof is appearing at page 14 of the order passed by the Ld. AO. The statements further accepts all the companies as shell companies which are controlled by Shri Rajesh Agarwal, CA and close associate of Shri Deepak Agarwal. The same were the facts revealed by Shri Himanshu Verma wherein on oath under Section 131(1A) of the Act he admitted that certain companies are managed and controlled by Shri Deepak Agarwal by providing accommodation entries in lieu of cash. Other details are appearing from paras 14.10 to 14.13 of the order passed by the Ld. AO.
Under these facts and circumstances of the matter, the Ld. CIT(A) deleted the addition contending that the AO’s reliance on the shell nature of the lender does not override evidence submitted on identity, creditworthiness and repayment through verifiable banking means. Moreover, when the loan was paid by the assesseee in the current year itself through banking channels details whereof were submitted to him, the addition under Section 69A is not tenable attracting unrecorded for unexplained money as of the opinion of the Ld.CIT(A). The relevant observation is as follows:-
“6.Ground No. 2: is regarding addition of Rs. 53,30,390/- made by AO u/s 69A of the Act.
6.1The appellant contended that the impugned addition relates to sums repaid towards earlier loans taken from M/s Shridhar Portfolio Management Limited (SPMLL) and M/s Itech Insurance Brokers Private Limited (IIBPL). 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, bank statements, and MCA data). The AO ignored that the money was always recorded in the books, and such recorded and repaid loans do not fall within the ambit of section 69A, which targets unrecorded or unexplained money.
6.2Further, the appellant contended that the AO’s reliance on the shell nature of the lender does not override evidence submitted on identity, creditworthiness, and repayment through verifiable banking means. Legal precedents (e.g. Jagmag Builders Hon’ble ITAT, Delhi, Habitat Infrastructure ITAT Delhi) affirm that once repayment and documentation are complete, such sums cannot be again taxed as unexplained under deeming sections.
6.3I have gone through the assessment order, the AO treated loan repayments to alleged shell companies as accommodation entry and presumed that the cash must have been received by appellant in lieu of repayment of loan. However, AO failed to bring anything in assessment order about cheque for cash transaction in respect of this transaction. Before going to the merit of case, I am reproducing section 69A as under:
Section 69A - Unexplained money, etc.:
“Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of bullion, jewellery or valuable article may be deemed to be the income of the assessee for such financial year. ”
6.4The Section 69A requires that the assessee must be “found to be the owner of unexplained money, bullion, jewellery, or valuable article, and such ownership must be supported by facts and evidence. In the present case, the AO has not brought any concrete evidence on record to show that any unexplained cash accrued to the appellant as a result of repayment to the alleged shell company. The formation of a mere presumption, unbacked by evidence, is not a valid basis for invoking Section 69A.
6.5Jurisprudence also establishes that the onus is on the Revenue to prove actual possession or ownership of unexplained assets. Without such proof, additions u/s 69A are not sustainable. This establishes a clear rebuttal to the addition by emphasizing the evidentiary requirements and the statutory language of Section 69A. The AO failed to bring any evidence which can remotely suggest that appellant is in possession of unrecorded money by way of repayment of loans. The whole basis of this addition is based on mere investigation finding that the companies to whom loans were repaid are nondescript entity. The addition cannot be made u/s 69 A on the basis of presumption without and cogent evidence. Therefore, the addition made by AO cannot be sustainable and hence, this ground of appeal is allowed.”
In our considered opinion, non-repayment of loan cannot justify the transaction as genuine when the entire transaction is nothing, but, found to have been accommodation entry by the entry provider to the different assessees including the assessee before us. The first and foremost condition of creditworthiness of those companies, the identity or the genuineness of the transaction is still on dark; merely repayment of loan by the assesseee cannot be a ground at all to grant relief from the series of allegations of receiving loan from the accommodation entry provider. We note that in ITA No.6303/Del/2025, in the case ACIT vs. Bhawani Finvest Private Limited, we have dealt with the matter and dismissed the appeal with the following observations and quashed the order passed by the Ld.CIT(A) upholding the order passed by the Ld. AO observing as under:-
“5.The ld. AO accordingly proceeded to make the impugned addition of Rs.2 Crores under section 68 qua loan received from M/s Sarvottam Securities Pvt. Ltd. . Additionally, the ld. AO also made addition of Rs.15,06,164/- on account of interest paid on the unsecured loan of Rs.2 Crores and addition of Rs.6 lakhs under section 69C of the Act on the presumption of commission @3% of Rs.2 Crores. The ld. CIT(A) through his order dated 11.06.2025 deleted the impugned additions while inter alia concurring with the argument of the appellant that the assessee has repaid the part loan during the current Financial Year, loan was received through banking channels, etc. He also held that the addition was made on general observations and that the AO had not brought on record evidence to establish the factum of accommodation entry. The addition of interest and commission were also deleted on the premise that main addition of Rs.2 crores has been deleted.
6.Before us, the ld. Counsel for the assessee reiterated the arguments taken before the ld. CIT(A). It was vehemently argued that as the loan was repaid during the year through banking channel , it was impermissible to add the same u/s 68 of the Act.
7.The ld. CIT- DR, Shri Rajesh Kumar, vehemently argued in favour of the order of the AO. It was urged that the factum of indulgence of assessee with accommodation entry providers is clearly brought out by the ld. AO in his order. On the issue of repayment of loan during the year under consideration, the ld. DR placed reliance upon the decision of Hon'ble ITAT Mumbai in its order dated 05.09.2024 in ITA No.3258 to 3260/Mum/2023 in the case or J.K. Global. It was stated that it has been held in the impugned order that repayment of loan would not take away the blame of accommodation entry.
8.We have heard rival submission in the light of material available on records. We have noted that the ld. AO has vividly demonstrated in his assessment order extracted hereinabove that the assessee was having connections with accommodation entry providers. We have also noted that the ld. AO has extensively brought out in the assessment order while analyzing statements of entry providers Shri Himanshu Verma and Shri Deepak Agarwal and their employees Ms. Sonia, etc that a web of shell company was created to route accommodation entries and that the assessee was beneficiary of one such company. On the issue of justification of loan qua its repayment, we have noted that a co-ordinate Bench of the Mumbai Tribunal in the case of J.K. Global (supra) held as under:-
"..7. Considering the facts of the case in toto and in the light of the decisions of the coordinate bench (supra), we have no hesitation in confirming the addition made u/s 68 of the Act for the captioned Assessment years. The contention of the ld. counsel that the loans have been re-paid during the year under consideration therefore the set off of the same should also be given to the assessee does not hold any water as it has been established that the impugned loans were nothing but accommodation entries and the repayment is also nothing but return of accommodation entries therefore, the money which has been brought in the garb of unsecured loan is nothing but the unaccounted money of the assessee and the repayment of the same does not make any sense...."
9.Thus, we have noted that the argument of the assessee regarding the justification of impugned loan of Rs.2 crores on account of repayment cannot be accepted. In respectful compliance to the decision of Hon'ble Mumbai Tribunal in the case of J.K Global(supra), we are of the considered view that the relief accorded by the ld CIT(A) is not based upon correct understanding of the facts of the case. We, therefore, set-aside the order of the ld. CIT(A) and confirm the addition of Rs.2 crores made by the ld. AO. Similarly, we also confirm the addition made by the AO of Rs.15,06,164/- on account of interest and of Rs.6 lakhs on account of commission. The appeal of the Revenue is therefore allowed.”
Having regard to the identical facts and circumstances, we, therefore, allow the appeal preferred by the Revenue by quashing the order passed by the Ld.CIT(A) found to have been passed with total non-application of mind on the gravity of the matter, the documents adduced by the assesseee and the field report of the Ld. AO. Further, the observation made by the Ld. AO, considering the entire aspect of the matter is found to be just and proper and the order of the Ld. AO is confirmed.
In the result, the appeal filed by the Department is allowed.