Nandkshore Telefilms & Media Pvt. Ltd. v. DCIT

Case snapshot

Sections / provisions: 68

Questions before the Court / Tribunal

• Loan credit; third-party/retracted statement and cross-examination: The reported order concerns a loan supported by confirmations, tax records and banking evidence. It questions reliance on a retracted third-party statement where effective cross-examination was not provided.

Material facts and background

A.Y. 2013-14, wherein the addition made by AO u/s 68 and 69 of the Act was confirmed. 2. The brief facts as culled out from the proceedings of authorities below are that the assessee e-filed the return of income for AY 2013-15 on 30.09.2013 declaring total loss at Rs. 10,25,982/- which was processed u/s 143(1) of the Act. However, the case was opened by issuing notice u/s.148 dated 30.03.2017 which was duly served after recording reasons.In response to the notice u/s 148 of the Act, the assessee submitted that the earlier return filed on 21.04.2017 may be considered as return filed u/s. 148 of the Act for the said assessment year. Further, the assessee raised objections to the reopening of assessment u/s. 147 of the Act and the same were rejected vide letter dated 22.09.2017. In the mean time, the statutory notices u/s 143(2) and 142(1) of the Act were issued on 10.11.2017 along with questionnaire. In response, the assessee furnished all the necessary details. The AO observed that assessee has taken bogus accommodation entries as mentioned in para 4.1 of the assessment order and the same is extracted below:Sr. Name of Bogus Entity No. 1 Dolex Commercial P. Ltd. 2 P Saji Textiles...

Shyam Alcohol & Chemical Ltd Victory Sales P. Ltd. B K Dyeing & Printing Mills P. Ltd.

3. In response to the statutory notice u/s 142(1) of the Act, the assessee submitted the details vide letter dated 20.11.2017 in the form of loan creditors, copy of bank account reflecting the transactions, ITR acknowledgement and balance sheet. Additionally, the assessee company also submitted the copies of loan confirmation of all the parties from whom the assessee company had taken loan stating that assessee had taken genuine business loans from the loan creditors and the loan’s were repaid in the same financial year and nothing was outstanding as on 31.03.2013. It was further submitted before the AO that on the basis of above documents, assessee clearly established the genuineness of the loan with respect to identity, source and creditworthiness of the loan creditors and the onus cast on the assessee company u/s 68 of the IT Act was duly fulfilled. 4. During the assessment proceedings, the AO issued notice u/s 133(6) of the Act dated 10.11.2017 to the entities from whom loans were taken. In response to notice u/s 133(6), reply received on 27.11.2017 was not found complete and no detail/explanation was received which made the AO to believe that the company from which loan was...

Appellant / assessee submissions

A.Y. 2013-14, wherein the addition made by AO u/s 68 and 69 of the Act was confirmed. 2. The brief facts as culled out from the proceedings of authorities below are that the assessee e-filed the return of income for AY 2013-15 on 30.09.2013 declaring total loss at Rs. 10,25,982/- which was processed u/s 143(1) of the Act. However, the case was opened by issuing notice u/s.148 dated 30.03.2017 which was duly served after recording reasons.In response to the notice u/s 148 of the Act, the assessee submitted that the earlier return filed on 21.04.2017 may be considered as return filed u/s. 148 of the Act for the said assessment year. Further, the assessee raised objections to the reopening of assessment u/s. 147 of the Act and the same were rejected vide letter dated 22.09.2017. In the mean time, the statutory notices u/s 143(2) and 142(1) of the Act were issued on 10.11.2017 along with questionnaire. In response, the assessee furnished all the necessary details. The AO observed that assessee has taken bogus accommodation entries as mentioned in para 4.1 of the assessment order and the same is extracted below:Sr. Name of Bogus Entity No. 1 Dolex Commercial P. Ltd. 2 P Saji Textiles...

3. In response to the statutory notice u/s 142(1) of the Act, the assessee submitted the details vide letter dated 20.11.2017 in the form of loan creditors, copy of bank account reflecting the transactions, ITR acknowledgement and balance sheet. Additionally, the assessee company also submitted the copies of loan confirmation of all the parties from whom the assessee company had taken loan stating that assessee had taken genuine business loans from the loan creditors and the loan’s were repaid in the same financial year and nothing was outstanding as on 31.03.2013. It was further submitted before the AO that on the basis of above documents, assessee clearly established the genuineness of the loan with respect to identity, source and creditworthiness of the loan creditors and the onus cast on the assessee company u/s 68 of the IT Act was duly fulfilled. 4. During the assessment proceedings, the AO issued notice u/s 133(6) of the Act dated 10.11.2017 to the entities from whom loans were taken. In response to notice u/s 133(6), reply received on 27.11.2017 was not found complete and no detail/explanation was received which made the AO to believe that the company from which loan was...

Revenue / respondent submissions

7. Ground no. 1 pertains to validity of reopening u/s 147 of the Act. Ground no. 2 & 4 pertains to the addition made u/s 68 and 69 of the Act. 8. We have heard Ld. AR and Ld. DR and examined the record. At the outset, Ld. AR submitted thatassessee does not want to press Ground no. 1. Hence, the ground no. 1 is dismissed as not pressed. With regard to Ground no. 2 to 4, Ld. AR in support of his arguments relied on paper book containing 1 to 200 pages and various judgments. Ld. AR further argued that the impugned order as well as assessment order is not legally sustainable because of the following reasons:i)

submitted that requirement of onus of assessee u/s 68 of the Act has been fulfilled and in the absence of cross examination of Mr. Vipul Bhatt and relying on the retracted statement of Mr. Vipul Bhatt makes assessment order illegal as it has resulted into miscarriage of justice, therefore the grounds raised by the assessee are required to be allowed. 9. Ld. DR on the other hand, relied on the orders passed by the AO as well as Ld. CIT(A) and submitted that Mr. Vipul Bhatt has retracted the statement after 8 months which is an afterthought. Ld. DR argued that the payment of loan by the assessee of the unsecured loan to creditors who were bogus entity does not absolve the assessee from the addition made u/s 68 and 69 of the Act. Ld. DR further argued that the retracted statement of Mr. Vipul Bhatt has rightly been relied by the AO who has rightly concluded that the existence of loan creditors are not proved. Ld. DR further submitted that the evidence of loan confirmation, bank statement is not sufficient to establish the lender’s creditworthiness or genuineness because in response to notices u/s 133(6) of the Act, the said lenders did not respond which has undermined the...

Court’s case of CIT vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) wherein it was held that the assessee must prove the genuineness of transaction beyond banking channel. Ld. DR further relied on the case of Hon’ble High Court in PCIT vs. Kanak Impex (India) Ltd. (2025) 172 taxmann.com 283 (Bombay HC), Buniyad Chemicals Ltd. Ltd. vs. ACIT (2025) 172 taxmann.com 462 (Bom HC) and A and R Buildmart Pvt. Ltd. vs. ITO. Ld. DR therefore, submitted that the appeal of the assessee is liable to be dismissed. 10.

Court / Tribunal analysis and reasoning

7. Ground no. 1 pertains to validity of reopening u/s 147 of the Act. Ground no. 2 & 4 pertains to the addition made u/s 68 and 69 of the Act. 8. We have heard Ld. AR and Ld. DR and examined the record. At the outset, Ld. AR submitted thatassessee does not want to press Ground no. 1. Hence, the ground no. 1 is dismissed as not pressed. With regard to Ground no. 2 to 4, Ld. AR in support of his arguments relied on paper book containing 1 to 200 pages and various judgments. Ld. AR further argued that the impugned order as well as assessment order is not legally sustainable because of the following reasons:i)

The AO highly relied on the statement of Mr. Vipul Bhatt dated 09.02.2016 because he is the main person allegedly operating the entities from whom loan was taken by the assessee and he was the accommodation entries provider against cash. It is submitted that the reliance on the said statement is not as per law because the said statement was retracted by him and therefore the reliance on retracted statement was against the settled principle of law.Ld. AR placed reliance on the judgment of Hon’ble Supreme Court in the case of Mehta Parikh & Co. (1956) 30 ITR 181 (SC) wherein it was held that once the statement on oath is retracted, AO has to Page | 7

It was also argued that assessee has discharged his onus u/s 68 by proving the identity of the creditors, genuineness of the transaction and creditworthiness of the creditors and the AO has failed to bring anything on record to contradict the factual material and evidence brought on record by the assessee in the form of bank statement confirmation of the loan by the creditors andrepayment of loan in the same assessment year. It is therefore Page | 8

submitted that requirement of onus of assessee u/s 68 of the Act has been fulfilled and in the absence of cross examination of Mr. Vipul Bhatt and relying on the retracted statement of Mr. Vipul Bhatt makes assessment order illegal as it has resulted into miscarriage of justice, therefore the grounds raised by the assessee are required to be allowed. 9. Ld. DR on the other hand, relied on the orders passed by the AO as well as Ld. CIT(A) and submitted that Mr. Vipul Bhatt has retracted the statement after 8 months which is an afterthought. Ld. DR argued that the payment of loan by the assessee of the unsecured loan to creditors who were bogus entity does not absolve the assessee from the addition made u/s 68 and 69 of the Act. Ld. DR further argued that the retracted statement of Mr. Vipul Bhatt has rightly been relied by the AO who has rightly concluded that the existence of loan creditors are not proved. Ld. DR further submitted that the evidence of loan confirmation, bank statement is not sufficient to establish the lender’s creditworthiness or genuineness because in response to notices u/s 133(6) of the Act, the said lenders did not respond which has undermined the...

Court’s case of CIT vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC) wherein it was held that the assessee must prove the genuineness of transaction beyond banking channel. Ld. DR further relied on the case of Hon’ble High Court in PCIT vs. Kanak Impex (India) Ltd. (2025) 172 taxmann.com 283 (Bombay HC), Buniyad Chemicals Ltd. Ltd. vs. ACIT (2025) 172 taxmann.com 462 (Bom HC) and A and R Buildmart Pvt. Ltd. vs. ITO. Ld. DR therefore, submitted that the appeal of the assessee is liable to be dismissed. 10.

11. On perusal of the impugned order, we have noticed that Ld. CIT(A) himself is not sure about the fault if any in transaction done by the assessee because it is observed that prima facie everything is in four corners of Law, but due to failure of lenders appearing before the AO, Page | 11

“The AO computed disallowance of Rs. 16,14,410/- on the loans granted to the above lender parties. Having concluded the above that the loans are not to be considered as in genuine, I hereby allow the interest paid on the same to the said lender parties and delete the addition made by the A.O. This ground of appeal is allowed”. 5. Against the above order of the CIT(A) the revenue is in further appeal before us. 5.1. At the outset, ld. AR placed on record order of the Tribunal in the case of group concerns M/s. Manba Finance Ltd in ITA No.1448, 1449 & 1461/Mum/2017 dated 15/10/2018 for the A.Yrs.2013-14, 2010-11 and 2011-12 wherein under similar facts and circumstances, the Tribunal have confirmed the order of CIT(A) for deleting similar additions made by the AO during the course of very same search. 5.2. Ld. AR also relied on the findings recorded by CIT(A) to the effect that loan was genuine and was repaid in next financial year. He also invited our attention to the observation of CIT(A) to the effect that the parties from whom loan was taken had sufficient creditworthy 5.3. On the other hand, ld. DR relied on the order passed by the AO and contended that CIT(A) was not justified...

Operative decision and relief

“The AO computed disallowance of Rs. 16,14,410/- on the loans granted to the above lender parties. Having concluded the above that the loans are not to be considered as in genuine, I hereby allow the interest paid on the same to the said lender parties and delete the addition made by the A.O. This ground of appeal is allowed”. 5. Against the above order of the CIT(A) the revenue is in further appeal before us. 5.1. At the outset, ld. AR placed on record order of the Tribunal in the case of group concerns M/s. Manba Finance Ltd in ITA No.1448, 1449 & 1461/Mum/2017 dated 15/10/2018 for the A.Yrs.2013-14, 2010-11 and 2011-12 wherein under similar facts and circumstances, the Tribunal have confirmed the order of CIT(A) for deleting similar additions made by the AO during the course of very same search. 5.2. Ld. AR also relied on the findings recorded by CIT(A) to the effect that loan was genuine and was repaid in next financial year. He also invited our attention to the observation of CIT(A) to the effect that the parties from whom loan was taken had sufficient creditworthy 5.3. On the other hand, ld. DR relied on the order passed by the AO and contended that CIT(A) was not justified...

Authorities and precedents appearing in the judgment

• Supreme Court in the case of Andaman Timber Industries vs. Commissioner of Central Excise
• CIT vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR 195 (SC)
• High Court in PCIT vs. Kanak Impex (India) Ltd. (2025) 172
• Buniyad Chemicals Ltd. Ltd. vs. ACIT
• Ltd. vs. ITO. Ld. DR therefore
• CIT v. Varinder Rawley (2014) 366
• Gujarat High Court decision in the case of CIT v. Sachitel Communications P. Ltd. (2014) 227 Taxman 219 (Mag) and others

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Loan credit; third-party/retracted statement and cross-examination. The operative result is classified as Allowed. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Loan credit; third-party/retracted statement and cross-examination. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Build a transaction-level evidence file: confirmations, bank trail, invoices, ledger, tax/GST records and counter-party material rather than relying on a generic explanation.
• Where the addition depends on a third-party statement or investigation report, record the request for the relied material and cross-examination at the earliest stage.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

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