DCIT vs C Net Software Services Pvt. Ltd.

“a. Whethe r the Ld. CHA) justifie d in deleting the addition o f Rs.50,00,000/- u/s 68 o f the I.T. Act,1961 despite of the fact that Sh. Deepak Agarwal is habitual entr y provider and willfully involve d in the syndicate for o rganized accommodation e ntries through there associated e ntity M/s Syamali Security & Consultant Pvt. L td.

b. Whether the L d. CIT(A) justifie d in de leting the addition of Rs.1,50,000/- u/s 69C of the I.T. Act o n account of commission which is co nsequential of the accommodation e ntries of Rs.50,00,000/- from the non-descript entity M/s Syarali Security & Consultant Pvt. L td.

c. The L d. CTA) has no t appreciate d the fact that the Non-descr ipt entity M/s Syamali Security &Consultant Pvt. Ltd. involved with Sh. Deepak Agarwal gives non genuine trans action, on account of accommodatio n entr ies in the form of bogus lo an/purchase/sales, which were given/taken in so asophisticated manne r with tak ing care of each step to give the image o f legal transaction by utilizing web o f bank accounts in different banks as well as books of accounts in respective entities. d. The entries shown given in the books of accounts and the account reflecting in the bank statements car e only managed arr angement to give the sham transactio n, a legal look. e. That the case falls under exception "h” of Para 3 o f the Circular No . 5/2024 date d 15.03.2024. f. That the o rder of the CIT (A) is perverse, erroneous and is no t tenable on facts and in law. g. The grounds of appe al are without prejudice to each other.”

“6.18

I have further carefully gone through the submission o f appellant alo ng wi th pape r book. From the reply fi led by appellant, fo llo wing facts emerged by the mere perusal of submissio ns filed by the assesse e during assessment and appellate pro ceedings.

i.

The company in the ins tant case is regularly filing its forms to MCA and AO did not bring anything in the assessment order which shows that there is any adverse finding.

ii.

The lending company has substantial turno ver in the rele vant assessment year whic h has not been questioned by the AO in assessment order . Rathe r AO relied on gene ral finding of investigation re po rt that "these co mpanies have meagre turnove r"

iii.

The lending company i.e. M/s SSCPL has declare d profit befo re tax of Rs. 9.16 L acs, in the relevant assessment ye ar which cannot be said that it has meagre income by any imagination as claimed in the investigation report o n which AO heavily relied.

iv.

This company has shown huge share capital, and reserves, which have been purpo rtedly used for the lending of loan. The AO has not bro ught anything in the assessment order which can establish that these funds are artificial. AO faile d to bring anything in the assessment orde r or from past assess ment reco rds which shows that these funds are artificial.

v.

It is irrefutable fact that the said loan was interest bearing.

vi.

Above all, the AO has not brought any evidence in the assessment orde r w hich re flects that cash originated from the coffer of appellant and travel to lending company or any transactio n which shows that cash have been generated by appe llant company. The A O has no t distur bed the debit side of profit and loss accounts from where cash can be gener ated.

vii.

Moreover, nothing found in the asse ssment order which shows the appellant has its some activity by which he can generate unacco unted cash for taking accommodation entry. Therefore, there is not even circumstantial evidence has been brought in the assessment orde r which shows cash have been delive red to e ntr y operators in lieu of cheque .

6.19

Furthermore, the bona fides of the transac tions are substantiate d by the subsequent repayment of the loans through recognized banking channels, there by eliminating any doubt as to its genuineness. T he appe llant was no t bene ficiary when the loan was repaid. Further, the over-riding factum of repayment of lo an itself re pels any form o f disguise on the part of the appe llant and dispe ls the pe rception o f any so rdid or extraneous affairs. The clinching evide nces to wards loan procurement discharge the primary o nus which lay upon the A ppe llant under s. 68 o f the Act. Besides, the lo an itse lf having been repaid, the appe llant do es not ultimately stand to gain any spurio us bene fit from such alleged unexplained cash credit. Such fact justifies the plea of the appe llant towar ds existence of bonafides in the transactio ns.

6.20

Reliance is also place d on the fo llowing judicial pronouncements in this regard:

•

Pr. Commissio ner of Income Tax-12, De lhi vs. Jagmag Builders ITA No. 325/2024 [Hon'ble Delhi High Court]

2.

The issue itse lf pertains to additions under Sections 68 and 37 of the Income Tax Act, 1961 ['Act’] which wer e made by the A ssessing O fficer ['AO’] on account of une xplained unsecured lo ans and disallowance of inte rest expenses. We note that the Tr ibunal while affirm ing the conclusions which were arrived at by Commissioner of Income Tax (Appeals) has observed as follo ws:

"From the e vide nces .furnished by the assessee before the departmental author ities, it is established that the entire loan, which is subject matter o f addition, as unexplained cash credit has been repaid eithe r in the year unde r conside ration or subseque nt assessment years. The entire transaction relating to availing of and repayment of lo an has been do ne thro ugh banking channe l. All details relating to loa n availed and re payments made have been furnishe d before the departmental autho rities, the details of which have been produced at pages 24 to 29 o f the order o f le arne d F irst Appellate Authority. It is also a fact on reco rd that assessee has fur nis hed all suppo rting e vidences not only to pr ove the identity of the lende rs but even cre ditworthiness as we ll as genuineness o f the transactio n by furnishing their bank statements, income-tax retur n copy, confirmations etc. Thus, it is e vide nt, assessee has dischar ged its onus of proving the identity an d creditwo rthiness of the creditors as well as genuineness o f the loan transactions. There fore , i n our conside red opinion, learne d First Appe llate Authority was justified in deleting the additio n o f Rs.2,67,05,959 made under Section 68 of the Act. Since , the additio n made under Section 68 of the Act has bee n de leted, as a natur al corollary, the disallo wance of interest paid on such loan also has to be dele ted. Accordingly, we do so. Grounds are dismisse d."

3.

Bearing in mind the aforesaid, we are o f the conside red opinio n that no substantial questio n of law arises. The appe al fails and shall stand dismisse d".

•

Principal Com missioner of Income-tax v. Ambe Tradeco rp ( P.)Ltd. [ 2022] 145 taxmann.com 27 (Gujarat) .

5.

As discusse d abo ve, since the re quisi te material was furnished by assessee sho wing the identity and since the assesse e was not beneficiary when the loan was repaid in the subse que nt year, even the ingredie nts of cre ditwor thiness and genuineness o f transactio n we re well satisfied.

6.

The Tribunal rightly recorde d in para 29 of the judgment,

"Once re payment of the loan has been established based o n the documentary e vidence, the credi t entr ies cannot be looked into isolation afte r igno ring the debit e ntries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were ho ld that there is no infirmity in the order o f the L d. CIT- A."

7.

For the re asons r ecorded above , no question of law much les s substantial questions arises in this appe al .

•

Navyug Iron T rade rs vs DCIT ITA No. 553/De l/2017 (Ho n'ble ITAT De lhi - 24.09.2019]

6.

We have considered the rival submissions and peruse d the mate rial available o n record. It is not in dispute that assessee filed co pies of ledge r account of all the three creditors along with their IT R, confirmation, bank statement and balance-sheet o f the investors. The creditors have confirmed giving advances to the assessee. Since the deal could not be materialized, the assessee re tur ned the amount in question in subse quent year. All the tr ansactions are carried out through banking channel and no de fects in the books of acco unt have been po inte d out. All the creditors are asse ssed to tax and have disclosed the transactio ns to the Income Tax Department. The assessee explaine d that since parties are not in his direct control, the refore , direct enquir y may be made from the credito rs, fo r which, assessee also deposited fees as required for the same. Ho wever , no attempt have bee n made to verify the transactions from the creditors. Since all the creditors were assessed to tax and their PAN we re available to the AO, therefore , AO could have e xamine the source o f their income from the income tax re cord. But the AO did not do anything in the matte r. T herefo re, decisio n of the Ho n'ble Supreme Court in the case of Orissa Corpo ration Pvt. Ltd., 159 ITR 78 (SC) would apply. The assessee in these circumstances is able to discharge onus upon it to pro ve the ingre dients of Sectio n 68 o f the LT. Act. We rely upo n Judgment of the Hon'ble G ujarat High Court in the case of Rohini Buil ders 256 ITR 360 (G uj.) and Gauhati High Court in the c ase of Nemichand Kothari 264 ITR 254 ( Gauhati) . Since in this case the repayment made by assessee in subseque nt ye ar have not been disputed by the Revenue Department, therefore, case of assessee would also be covered by Judgment o f Hon' ble Guj arat High Court in the case of CIT vs. Ayachi C handrashekhar Narsangji (supr a) and Hon'ble Allahabad High Court in the case of CIT vs. (supra). The authorities Kapoo r Chand Mangesh Chand below rejected the explanation of assessee because in response to no tice issued by A.O. the credito rs did not respond. The Hon'ble Delhi High Co urt in the case of Divine Leasing and Finance Ltd. 299 ITR 268 (De l.) held that "no adverse inference should be drawn if shareholders faile d to respond to the notice issued by the A.O ." Similar view is taken by Hon'ble Delhi High Court in the case of CIT vs. Winstrall Pe tro Chemic als Pvt. Ltd., 330 ITR603 (Del.). Further no material has been brought o n record that the credit amount introduced by the creditors was actually emanated from the coffe rs of the assessee so as to enable it to be tre ate d as undisclosed income of the assessee. We rely upo n Judgment of Hon' ble Delhi High Co urt in the case of CIT vs. V alue Capital Servi ces Pvt. Ltd., 307 ITR 334 (Del.). Considering the totality o f the facts and circumstance s of the case and that whe n i t is explained that trading advances were received and when the material co uld not be supplie d, amounts have been returned in subse que nt year, same could not be disputed by the authorities below to delete the same as undisclosed income of the assessee. Consider ing the totality of the facts and circumstances, we do not find any justific ation to sustain the addition because assessee is able to pro ve identity of the creditors , their creditwor thiness and genuineness o f the transactio n in the matte r. In this view of the matter, we set aside the Orders o f the authorities be low and de lete the entire additio n.

•

Hon'ble Delhi ITAT in case or Real Inne rspring Technologies (P.) Ltd. v. ACIT (Hon'ble ITAT Delhi) vide its order dated 27-03- 2025 has held as under:

when the assesse e takes the loan and repaid along with the interest clearly shows that the trans actions are genuine . B y re turning the loan, the assessee has only utilized the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs, all the tr ansactions cannot be labelle d as non-genuine. Every tr ansactio n has to be evaluate d on its merit rather than on the basis o f suspicion.

•

Hon'ble De lhi ITAT in its rece nt pro nouncement in the case o r Dazzling Construction Pvt. L td. Vs IT O Ward- 7( 2), New Delhi bearing ITA No. 3771/Del/2023 has held as unde r: the factum of re payment quells the ·apprehe nsion entertained by the Revenue . The o ver-r iding factum of repayment of loan itself repels any fo rm of disguise o n the part o f the assessee and dispels the perceptio n of any sordid or e xtraneous affairs. The clinching evidences towards lo an procurement dischar ge the pr imary onus which lay upon the assessee unde r s. 68 of the Act. B esides, the loan itself having bee n repaid, the assessee does no t ultimate ly stand to gain any spurio us benefit from such allege d une xplained cash cr edit. Such fact justifies the ple a of the assessee towards exis tence of bonafides in the tr ansactions. In the totality of facts, where the trail/or obtaining of lo an and repayment thereof is proved and the lende r has duly filed its return of income encompassing the transactio n carrie d with the assessee, the actio n of the Re venue cannot be countenance d in law.

6.21

To conclude, in view of the fore going discussion, it can be said that the appellant has satis fied all tests identity, creditwo rthiness, and genuineness of the unsecured loan of Rs. 50,00,000/- availed from lende r i.e. M/ s SSCPL. T he said lo an has also been repaid in subsequent year via banking channels by appellant. This company has pai d taxes and declare d profit in the relevant assessme nt year. It is also to be noted that in income tax e very transactio n shall be seen separ ate ly, labe lling a company as paper entity must be backed by cogent evidence as discussed in pre ceding paras. T he investigation re port has given general le ad about the companies controlled by entry o perator. The AO ignored very crucial fact that this lender has accumulated capital and reserves carr ied o ver from previous years. Witho ut refuting the genuine ness of capital and rese rve and in lack of evidence of movement of unaccounted mone y from appe llant's coffe r to entry o perato r's coffers , it is not poss ible to held transactions as an accommodation entry in such circumstances.

6.22

In view o f the detaile d discussion above, I am of the considered view that the addition o f unsecured business loan re ceived by appe llant amounting to Rs.50,00,000/- u/ s 68 o f the Act is made without cogent or circumstantial evi dence and hence no t sustainable on facts as well as in law and hence , the same is liable to be deleted. As such, this part of grounds of appeal is allowed.

7.

Ground No. 10: pertains to addition of Rs.1,50,000/- u/s 69C of the Act on account of presumptive commission paid for availing accommodation entries to the tune of R s.50,00,000/ -from M/s SSCPL.

7.1

The appellant contended that "the so-called commission addition (3% of unsecur ed loan amount) is wholly arbitrary. No evidence, direct or circumstantial, of any actual payment was found on recor d. The AO merely presumed a notional commission solely because of the perceptio n that the tr ansaction was an accommodation e ntry. Law and jurisprudence requir e tangible corrobo ration fo r suc h additions, and additions based o nly o n presumption/percentage are unsustainable."

7.2

I have pe rused the assessment order and found that AO has drawn fo llo wing presumption fo r making addition u/ s 69C of the Act.

i)

The loan has be en rece ived from the alleged pape r entities controlled by entry operator.

ii) It is admitte d fact by e ntry ope rator that he takes commissio n of 3% for providing accommodation e ntry.

iii) It is also fact that AO has not brought anything in the assessment or der about the trans action, whether same was confro nted to directo r of pape r entity or entry ope rator .

iv) The AO has not brought any e vidence of cheque-cash nexus in the assessment orde r.

7.3

Before going further to the merit of case, I am repro ducing sectio n 69C as unde r:

“Sectio n 69C - Unexplained Expenditure , e tc.

"Where in any .financ ial year an assessee has incurre d any e xpenditure and he offers no explanation about the source of such expe nditure or par t thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Office r, satisfactor y, the amount cove red by such expenditure o r part the reof, as the case may be, may be deemed to be the income of the assessee for such financial year ."

7.4

It is established legal positio n that for invocation of section 69C, it is mandator y fo r the AO to have concrete evidence of actual expenditure inc ur red by the assessee . Mere modus operandi statements about general practices by e ntry o perators do not suffice as direct proof of commission payment in the spec ific case at hand.

7.5

The Hon'ble ITA T has repeatedly held that additions u/s 69C cannot be sustained base d o n unve rified or ge ne ralize d statements, especially if the assessee was no t provide d cro ss- examination o r if there is no co rro borative evidence to establish that commission was, in fact, paid for the entries invo lved.

7.6

The onus lies on the AO to demonstrate with evide nce (suc h as statements, seized documents, o r admissions specific to the assessee) that unexplained expenditure has actually been incurr ed. In the absence of such evidence, addition u/ s 69C is mere assumption and against pr inciples of natural j ustice.

7.7

Even if entry ope rators ge nerally admit to taking commission, unless there is a statement or material indicating that the appellant in this assessment year paid any such commission, the addition is unsustainable. Seized mate rials or statements descr ibing industry-wide modus operandi are insufficie nt for a 69C addition without direct nexus to the specific transactio n or assesse e. Moreove r, in the instant case the AO failed to bring circumstantial evide nce for generation of cash in the assessment order . This fact may be e laborated with following:

i)

AO did not bring anything in the assessment order which can substantiate that the assessee/ appe llant is involved in some other activity whe re he can generate cash for such e xpe nditure.

ii) The AO faile d to distur b profit and loss account of the appellant company to prove see here assessee claimed bogus e xpe nses and cash have been gener ate d by way o f these bo gus e xpenses.

7.8

Therefo re, from the abo ve discussion it is ampl y clear that AO failed to bring any evidence of cash expenditure or even circumstantial evidence of unacco unted cash gene ration by appellant to substantiate the presumption that the appe llant must have spe nt such expe nditur e for alle ged accommodation entry. The additio n made by the AO of Rs.1,50,000/- was on mere presum ptio n without any evide nce o f e xpenditure cogent or c ircumstantial. Such addition lacks merit, hence, canno t be sustained and is hereby de lete d. T herefo re, this gro und of appeal is allo wed.”

“During the year under conside ration the assessee company has rece ived a lo an of Rs 50,00,000/- from M/s Syamali Security & Consultant Pvt. Ltd. on 06.05.2020, and the amount was duly re paid by the assessee in the subsequent ye ar i.e. on FY 2021-22 and 2022-23. In this regard the asse ssee has submitted the following suppo rting documents:

- Copy o f PAN Card of S yamali Security & Consultant Private Limited (PB Page No. 43)

- Copy of ITR Ack nowledgement for the AY 2021- 22 of Syamali Security & Consultant Pr ivate Limited. (PB Page No. 44)

- Copy o f Audited Financial Statement of Syamali Security & Co nsultant Private Limited. (PB Page No. 45-66)

- Copy of ledge r account of M/s Syamali Security & Consultant Pvt. Ltd. in the books o f assessee for the FY 2020-21 (PB Page No. 33) and for the FY 2021- 22 & 2022-23 (PB Page No. 91 & 92)

- Copy o f confirmatio n of accounts from Syamali Security & Co nsultant Private Limited for the per iod 01.04.2020 to 14.06.2022 ( PB Page No. 90)

- Copy o f Bank statement of S yamali Security & Consultant Private Limite d reflecting loan given to assessee (PB Page No. 41- 42)

- Copy o f bank statement of assessee reflecting lo an receive d from Syamali Security & Consultant Private Limited and re payment made by the assessee (PB Page No. 93-95)

- Copy of the TDS certi ficate (Form 16A) re flecting the TDS de ducted on interest o n loan (PB Page No. 34-35)

- Copy o f challan r eflecting fees paid for filing Annual return forms namely AOC-4 & MGT-7A o f Syamali Security & Co nsultant Private Limited (PB Page No. 100-101)

The lender company, M/s Syamali S ecurity & Co nsultants Pvt. Ltd. ho lds an ‘Active’ status on the MCA Po rtal. The last Annual General Meeting (A GM) was held on 30.09.2025 in accordance with statutory re quirements as per the MCA website.

Repayment of Loan:

The loan of Rs 50,00,000/- was fully re pai d by the assessee as o n 14.06.2022 and the said loan has been squared o ff in the FY 2022- 23 along with interest after deducting T DS.

The details of lo an and interest amount repaid is as under for your ready refe rence:

Date	FY	Amount Repaid	Interest Amount	TDS Amount
31.03.2021	2020-21	-	3,61,644/-	27,123/-
16.11.2021	2021-22	3,34,521/-	4,00,000/-	40,000/-
14.06.2022	2022-23	54,33,972/-	82,192/-	8,220/-

Source o f Repayment:

The source o f the said repayment was LA P (Loan Against Prope rty) availed by the assessee from HDF C B ank on 25.05.2022 amounting to Rs 22,00,00,000/-.

- Copy of the HDFC LAP loan ledger account ( PB Page No. 96-99)

- Copy o f re levant bank statement o f assessee reflecting repayment (PB Page No. 93-95)

Assessment Proceedings Initiated After Complete Repayment of Loan

The Ld. A O has faile d to acknowle dge the fact that the loan in question was fully repaid well before the initiation of the assessment proceedings against the assessee. The notice u/s 148 o f the Act was issued on 29.03.2024, whereas the last repayment of the loan was made on 14.06.2022.”