Genuineness of Transaction Warrants Deletion of ₹3.55 Cr Income Tax Addition: ITAT Upholds Relief in Accommodation Entry Dispute [Read Order]
The Tribunal ruled that evidence sufficiently established the genuineness of the transaction, and since the Revenue could not controvert them, the additions made under Section 68 were unsustainable.
The bench of the Income Tax Appellate Tribunal, Ahmedabad, dismissed the Revenue’s appeals against the deletion of additions made under Section 68 of the Income Tax Act, 1961, in connection with alleged accommodation entries. The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) [CIT(A)], observing that the transactions were genuine.
There were two appeals before the Tribunal on the same subject matter. Therefore, ITAT ruled in a consolidated order for the sake of brevity.
The Appellant, Piyush Subodhbhai Jhaveri, an individual engaged in share broking and trading in shares and securities through his proprietary concern, M/s Shri Parshwa Finance. For Assessment Year (AY) 2010-11, he filed a return of income declaring ₹1,69,973. The case was reopened under Section 147 of the Income Tax Act, 1961, based on information that he had received unsecured loans of ₹1,85,00,000 from M/s Prraneta Industries Ltd., alleged to be a shell entity controlled by Shirish C. Shah.
The Assessing Officer (AO) completed the reassessment under Section 143(3) read with Section 147, treating the loan as an unexplained cash credit under Section 68 and raising a tax demand. On appeal, the CIT(A) deleted the addition after examining bank statements, confirmations, audited accounts, and repayment proofs, holding that the assessee had sufficiently discharged the burden under Section 68.
A similar issue arose in the case of Soham Commodities Pvt. Ltd., which had received ₹1,70,00,000 from the same company. The Assessing Officer made a like addition, which was also deleted by the CIT(A).
Represented by Deepak R. Shah, the assessee argued that the loans were genuine, routed entirely through banking channels, and repaid within the same financial year. It was submitted that M/s. Prraneta Industries Ltd. was a listed company with substantial net worth, and its financials disproved the allegation of being a shell entity.
It was contended that the AO made the addition solely on the basis of material seized from a third party, Shirish C. Shah, without granting cross-examination or establishing a direct nexus with the assessee. It was submitted that identity, genuineness, and creditworthiness were duly established.
Represented by Rignesh Das, the Revenue contended that M/s Prraneta Industries Ltd. is known for providing accommodation entries. It argued that the directors of the company had admitted to being dummy directors and that the rise in its share price was artificial and unsupported by fundamentals.
The Bench comprising T.R. Senthil Kumar, Judicial Member, and Narendra Prasad Sinha, Accountant Member upheld the orders of the CIT(A). It was observed that the assessee had furnished complete evidence to establish the identity, genuineness, and creditworthiness of the lender, including repayment details through cheques.
It further held that the AO had failed to disprove these evidence or establish any live link between the assessee and the alleged accommodation entry operator. The Tribunal held that once loans are received and repaid through banking channels, no addition under Section 68 can be sustained without further evidence.
Accordingly, the Tribunal dismissed both appeals of the Revenue.
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