The burden of proof shifts to the Assessing Officer of the lenders to verify transactions once PAN and confirmations are provided by the taxpayer.

PER MAKARAND V. MAHADEOKAR, AM:

This appeal by the assessee is directed against the revisionary order passed by the learned Principal Commissioner of Income Tax [hereinafter referred to as “the PCIT”] under section 263 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for the assessment year 2018–19, dated 25.03.2025. The assessee is aggrieved by the assumption of jurisdiction under section 263 and the consequential setting aside of the assessment order dated 20.03.2023 passed under section 143(3) read with section 147 of the Act by the Assessing Officer.

2. Facts of the Case

2.1 The assessee filed his return of income on 30.07.2018 declaring income of Rs.75,22,740/-. The assessee’s case was reopened by issuance of notice under section 148. Case was flagged by Insight Portal as Priority-P1 transaction for FY 2017-18 relevant to AY 2018-19. Flag was based on transaction information that assessee had purchased shares of West India Recreation Projects Pvt. Ltd. (WIRPPL) worth Rs. 2,76,00,000/-. The assessee filed the return of income in response to the said notice on 30.02.2022 declaring the same income as per the original return of income. 2.2 In the course of reassessment proceedings, the assessee furnished detailed submissions in response to the notices issued by the Assessing Officer. The assessee explained that he was a Director of WIRPPL and was in receipt of director’s remuneration from the said company. The assessee provided a complete explanation regarding the source of funds utilised for the purchase of shares. In support of the same, he submitted a copy of his demat account evidencing that the shares were indeed held in his name. He further furnished tabular details of all payments made towards purchase of shares across nine different dates along with the corresponding banking channels used. The evidentiary material included bank statements of Union Bank of India and HDFC Bank with relevant entries highlighted. The assessee placed on record the following statement showing the share purchase payments:

Date Bank Amount (Rs.)

22/02/2018 UBI 47,00,000 16/03/2018 HDFC 38,00,000 17/03/2018 HDFC 31,00,000 19/03/2018 HDFC 25,00,000 20/03/2018 HDFC 25,00,000 20/03/2018 HDFC 53,00,000 21/03/2018 HDFC 57,00,000

22/03/2018 HDFC 5,00,000 23/03/2018 HDFC 5,00,000 Total: Rs. 2,76,00,000/-

2.3 The AO sought particulars regarding the source of the credit entry of Rs.47,33,206/-, the PAN and ITR details of persons from whom credit entries had been received, and clarification regarding the nature of transfers made by the assessee to WIRPPL. In reply, the assessee submitted that the credit of Rs. 47,33,206/- represented the amount received on account of EPF withdrawal. He enclosed the EPF withdrawal application filed with the concerned authority. The AO recorded that the EPF application did not itself specify the amount withdrawn and had accordingly called for complete documentary evidence. Subsequently, vide reply dated 10.03.2023, the assessee submitted a comprehensive set of documents substantiating the EPF withdrawal explaining credit of Rs. 47,33,206/- on 22/02/2018.

2.4 With regard to other credits appearing in his HDFC Bank account, the assessee further clarified that nine such entries had represented borrowings received from five parties, namely, Dipesh Chandrakant Shah, Komal Raj Shah, Roosnik Dipakbhai Modi, H P & Sons, and Lalit Traders. The assessee stated that all such borrowings had been received through normal banking channels and indicated that the ledger accounts of these parties had already been uploaded, though he expressed his inability to furnish the lenders’ income tax returns.