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2026 Supreme(Online)(ITAT) 7471
INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)
Rajpal Yadav, Vice President, Manoj Kumar Aggarwal, Accountant Member
TJR Properties Private Limited – Appellant
Versus
ACIT – Respondent
ITA No.994/CHANDI/2025 | ITA No.1377/CHANDI/2025
For the Appellants/Petitioners: Parikshit Aggarwal, T.N. Singla
For the Respondents: Yamini
An assessee satisfies the primary burden under Section 68 by providing evidence for the identity, creditworthiness, and genuineness of transactions. Once discharged, the tax authorities cannot make additions based merely on presumptions of being a shell company; they must provide concrete, empirical evidence to rebut the taxpayer's submissions.
Headnote:(A) Income Tax Act, 1961 - Sections 68, 132, 143(3), 153B, 271AAB - Unexplained cash credit - Burden of proof - Addition - Initial assessment treating legal entity as shell company for lack of business activity - Appellate authority deleting additions on ground of primary onus being discharged by assessee and absence of concrete evidence to disprove claims - Whether shell company status is an independent ground for Section 68 addition without proving genuineness of transactions - Held, no. (Paras 3, 4, 11 and 12)
(B) Evidence - Burden of proof - Section 68 of the Act - The initial burden of proof lies upon the assessee to establish the identity of the lender, the creditworthiness of the lender, and the genuineness of the transaction - Once the assessee submits necessary documents, the onus shifts to the Assessing Officer to carry out detailed inquiry and bring on record cogent/concrete evidence to rebut the claim - No addition can be made merely on the basis of suspicion, assumption, or surmises. (Paras 5, 8, 11 and 12)
Facts of the case:
The taxpayer, a resident corporate entity, was subjected to a search operation. Following this, the tax authorities rejected the taxpayer's claim of business loss and made additions under Section 68 regarding various bank credit entries, alleging the taxpayer was a 'shell company' existing merely on paper, lacking profit-earning apparatus. The taxpayer contested these additions in the appellate proceedings, submitting bank statements, ledger accounts, and tax returns for the respective entities involved in the transactions. The appellate authority partially granted relief based on the documentation provided.
Findings of Court:
The court found that the entity had a history of filing tax returns, conducting past and future business activities, and was not a 'shell company' as alleged. The court held that the taxpayer discharged the primary burden of proof under Section 68 of the Act by providing documentary evidence. The revenue failed to conduct independent inquiries or provide concrete rebuttal evidence to disprove the authenticity of the transactions.
Issues: Whether the taxpayer should be classified as a 'shell company' merely due to lack of substantial business activity; and 2) Whether the initiation of addition under Section 68 without independent inquiry, solely relying on the 'shell' premise, is legally sustainable.
Ratio Decidendi: The court ruled that an entity cannot be termed as a 'shell company' simply because of a temporary absence of business activities. Additionally, once an assessee submits relevant documentary evidence to establish identity, creditworthiness, and genuineness of transactions, the burden rests on the tax authorities to conduct sufficient inquiries and provide factual rebuttals to uphold additions under Section 68; assessments based on conjectures and assumptions are unsustainable.
Result: Appeals allowed in part; additions deleted.
| Table of Content |
|---|
| 1. assessment and appellate background regarding search action and additions u/s 68 and 69. (Para 3) |
| 2. analysis of documentary evidence and specific bank credit justifications. (Para 4 , 5 , 6 , 9 , 10) |
| 3. assessee's burden of proof under section 68 and status of the corporate entity. (Para 7 , 8 , 11) |
| 4. final ruling ordering deletion of additions and disposal of cross-appeals. (Para 12 , 13 , 14) |
Manoj Kumar Aggarwal (Accountant Member)
1.1 Aforesaid cross-appeals for Assessment Year (AY) 2018-19 arises out of an order of learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] dated 29-07-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) r.w.s. 153B(1)(b) of the Act on 30-12-2019.
1.2 The ground as raised by the revenue read as under: -
1. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs.6,47,72,165/- (3,75,00,000/- +2,72,72,167/-) credited in the bank account of assessee during A.Y. 2012-13 was to be considered as unexplained cash credit u/s 68 of the Act.
2. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs.30,00,000/- has been added by the AO as unexplained investment and no double addition has been made for the same amount of credits.
3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in allowing the appeal of the assessee by accepting identity and creditworthiness of the persons from whom the credit entries have been received and genuineness of the transactions despite the fact that no conclusive justification with regard to genuineness of the transactions with regard to the utilization of the funds generated through credit entries in its bank account have been provided by the assessee either at the assessment proceedings stage or during the appellate proceedings. Thus, all 3 essentials for establishing the transaction to be out of scope of Section 68 has not been fulfilled by the assessee.
1.3 The ground as raised by the assessee read as under: -
1. That the order of Ld. CIT(A) is bad in law and against the facts of the case.
2. That the Ld. CIT(A) has wrongly upheld the assessment proceeding u/s 143(3) r.w.s. 153B(1)(b) of the Income Tax Act, 1961 which is against the provisions of the law as neither any search was conducted on the company nor any Panchnama was prepared in the name of the company.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has wrongly upheld assessment order passed u/s 153B of the Act which is wholly illegal and without jurisdiction as no search had been conducted under Section 132 of the Act in any of the business premises of the appellant company.
4. That the Ld. CIT(A) has wrongly upheld additions u/s 68 of the Act simply on the suspicion of genuineness of transactions without mentioning any specific defect in the documents submitted to prove source of the transactions.
5. That the Ld. CIT(A) has wrongly upheld additions of credits in the bank account of assessee company from the following persons:
a. Rs. 25,00,000 from M/s Ind Sphinx Precision Limited
b. Rs. 29,00,000 from Sh. Jatin Garg
c. Rs. 2,00,000 of Cash Deposits
d. Rs. 30,00,000 from Sh. T.N. Singla
e. Rs. 20,00,000 from Sh. T.N. Singla HUF
f. Rs. 49,00,000 from Sh. Sanbir Singh
g. Rs. 40,00,000 from Sh. Sanbir Singh
h. Rs. 20,00,000 from Sh. Gurvarinder Singh
i. Rs. 30,00,000 from Sh. T.N. Singla
j. Rs. 1,10,00,000 from Sh. Sanjit Singh Randhawa
k. Rs. 20,00,000 from Sh. Sunil Taneja
6. That the Ld. CIT(A) has wrongly upheld addition of Rs.3,75,00,000/- u/s 68 on surmises and conjectures, without application of own mind.
7. That the Ld. CIT(A) has wrongly upheld disallowance of loss claimed amounting to Rs.8,24,902/-.
8. That the Ld. CIT(A) has wrongly upheld additions made in the hands of the appellant company on the basis of credi
