TaxTMI 
TaxTMI 
2019 (9) TMI 774
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....leged unexplained unsecured loans raised by the assessee from the following parties brought to tax under section 68 of the Act:- S.No. Name of parties Amount (Rs.) i) M/s Multi Brand Trading Corporation 27,50,000/- ii) GST Corporation Ltd. 30,00,000/- iii) Prem Dua 5,00,000/- Total 62,50,000/- 1.1 That while upholding the addition, the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the assessee had placed on record confirmation alongwith income tax particulars and, the loans had been raised by account payee cheques and interest thereon had already been duly credited to the account of the payees, the initial burden of the assessee stood discharged and therefore, addition sustained on the ground that the assessee has not been able to prove creditworthiness of the above party or they had not complied with notice under section 133(6) of the Act is not based on correct appreciation of the facts and circumstances of the case of the assessee and statutory provisions of law and hence untenable. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on f....
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....ay kindly be deleted and appeal of the assessee be allowed." 2. Brief facts of the case are that the assessee filed e-return for the assessment year 2015-16 on 26.09.2015 declaring an income of Rs. 1,13,43,620/-. The Assessing Officer processed the return u/s. 143(1) of the Income Tax Act, 1961 (in short "Act") electronically at returned income and case was selected for Limited Scrutiny through CASS. The case was selected for Compulsory scrutiny through CPC as per guidelines / procedure for selection of cases for scrutiny. Accordingly, statutory notice under section 143(2) of the Act was issued on 19.9.2016. Subsequently, AO issued notice u/s. 142(1) of the Act and in response to the same the AR for the Assessee appeared from time to time and submitted various details/ information called for and examined the same. During the year under consideration, the assessee has derived its income under the heads Income from Business & Profession only. As per details filed in Form 3CD, the firm has two partners, namely, Sh. Maninder Jit Singh Bindra and Sh. Inderpreet Singh Bindra. The partners have a profit share ratio of 60% and 40% respectively. The list of 15 persons from whom unsecured....
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.... was given several opportunities in this regard earlier too, vide note sheet entry dated 24.10.2017, notice u/s. 142(1) dated 1.11.2017 and final show cause notice dated 06.12.2017. AO observed that Assessee never bothered to explain and justify the creditworthiness and completely overlooked statutory notices in this regard. AO further observed that assessee has nothing more to say about such transactions. As per AO, Assessee clearly failed to justify the genuineness and creditworthiness of the unsecured loan taken from the parties. The AR of the assessee neither filed the copy of ITR nor filed the bank statement of the parties. None of the parties except two (which also refused that any unsecured loan being given) as mentioned above, replied to the notice u/s. 133(6). Hence, the AR of the assessee has not only failed to furnish the desired details but also failed to establish the creditworthiness and genuineness of the said unsecured loans. Therefore, Rs. 8,22,70,000/- was added to the income of the assessee u/s. 68 of the Act. Further, the AO observed that assessee has debited remuneration amounting to Rs. 18,00,000/- to the P&L account and the same is not admissible for deduc....
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....to the partner by invoking clause (v) of section 40(b) of the Act. It was further submitted that learned Commissioner of Income Tax (Appeals) further erred in holding that "the partnership deed mentions the maximum amount payable under section 40(b)(v) but not the amount that has been mutually agreed to be paid as remuneration. The quantum of remuneration to be paid to the individual partners is left undecided, unstipulated and left to the discretion of the two partners to be decided at a future pint in time" is factually and legally misconceived and untenable. He further submitted that the remuneration paid to the partners was in terms of the deed of partnership dated 01.04.2013 which had been allowed consistently in preceding and succeeding assessment years in assessments framed under section 143(3) of the Act and therefore, disallowance made is illegal, invalid and untenable and needs to be deleted. He further submitted that the learned Commissioner of Income Tax (Appeals) has erred in upholding a disallowance of a sum of Rs. 7,69,097/- representing interest paid by the assessee by invoking section 40(a)(ia) of the Act. It was submitted that provisions uls 40(a)(ia) of the Ac....
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.... 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish creditworthiness of investor companies stood discharged. 5. We have heard both the parties and perused the records, especially the impugned order; Synopsis; Paper Book filed by the Assessee's counsel and case laws relied by both the parties. As regards sustaining of addition of Rs. 62,50,000/- on account of sums received as unsecured loan is concerned, we find that the AO has made sum of Rs. 8,22,70,000/- on account of sum received from 08 parties as mentioned in the assessment order at page no. 3 and in appeal Ld. CIT(A) has partially deleted the addition and sustained the addition of Rs. 62,50,000/-. We note that the unsecured loan received by the assessee has been fully substantiated not by substantial documentary evidence including copy of audited financial statement, acknowledgement of return of income, confirmation from lender, bank statement of lender, therefore such sum could not in law or on fact be held to be unexplained cash credit u/s. 68 of the Act. It is noted that no material has been ....
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....the decisions relied upon with the peculiar facts of the case in hand. In view of above, we delete the addition of Rs. 62,50,000/- on account of sums received as unsecured loan and erroneously held as unexplained cash credit under section 68 of the Act, which was confirmed by the Ld. CIT(A) and accordingly, we allow the ground no. 1 to 1.1 raised by the assessee. 5.1 Apropos ground no. 2 to 2.2 relating to confirmation of addition of Rs. 18,00,000/- on account of alleged excess remuneration paid to the partners and disallowed by invoking clause (v) of section 40(b) of the Act is concerned, we find that this amount was disallowed by holding that, the partnership deed does not specify the amount of the remuneration payable to the partners and as such, the same is not allowable in view of the section 40(b)(v) of the Act. The AO was of the view that the expenditure incurred cannot be allowed as deduction unless the partnership deed either specifies the amount of remuneration payable to each individual working partner or lays down the manner of quantifying such remuneration and similarly, Ld. CIT(A) in appeal has sustained this disallowance. We note that in the instant case, remunera....
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....essment proceedings two parties namely GST Corporation Ltd. And Mudit Jain did not confirm the transaction and denied that any unsecured loan was given to the assessee which was also confirmed during the appellate proceedings affirms that assessee furnished inaccurate particulars of income. 3. The assessee craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal. 7. The brief facts in this case have already been discussed in Assessee's appeal, as aforesaid, hence, the same are not repeated here for the sake of brevity. 8. Ld. DR relied upon the order of the AO and stated that Ld. CIT(A) erred in deleting addition of Rs. 7,60,20,000/-, because all these parties did not respond to the notice issued u/s. 133(6). He further submitted that it needs to be that genuineness, creditworthiness and identity of lender/ creditors are deeper and obstructive than mere completion of paperwork or documentation. It was further submitted that Ld. CIT(A) erred in not appreciating the fact that during the course of assessment proceedings two parties namely GST Corporation Ltd. and Mudit Jain did not confirm the transaction and ....
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....said person which was accepted by the AO and therefore no adverse inference could drawn. Further, in respect of the remaining four parties namely Prem Dua, Multi Bond Trading Corporation, JBL Intervention Associates and G.S.T. Corporation sum aggregating to Rs. 92,50,000/- was raised which was repaid also during the year. It was further contended that in respect of sum received from related parties including partners and one outside party in the respect of whom there was closing outstanding balance at the end of year, assessee has paid interest in instant year and previous years and which was duly allowed in assessment order in the instant year and the previous years. It is noticed that the assessee had submitted loan confirmations, the bank statements and the ITRs of the arties before the AO. The issue was examined in respect of unsecured loans taken as under:- Ms. Preetinder Kaur Bindra - The assessee has shown unsecured loan of Rs. 1,41,00,000/- taken during the year from Ms. Preetinder Kaur Bindra and the closing balance as on 31.03.2015 has been shown at Rs. 2,78,12,418/-. It was noted that she was the erstwhile partner in the assessee firm and has shown returned income ....
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....n the books of the assessee. It appears that the AO made addition uls 68 of the Act in respect of the above loan only because the said creditor did not respond to 133(6) notice. Considering the facts mentioned above, we find that Ld. CIT(A) has rightly observed that assessee has been able to explain the identity, genuineness of the transaction and the creditworthiness of the creditor and therefore addition of Rs. 1,55,00,000/- was deleted, which does not need any interference on our part. 3. Jiya Bindra The assessee has shown unsecured loan of Rs. 2,89,20,000/- taken during the year from Ms. Jiya Bindra and the closing balance as on 31.03.2015 has been shown at Rs. 2,04,31,760/--. It is noted that she is the relative of the partner of the assessee firm. She is covered as a related party uls 40A(2)(b) of the Act in the tax audit report. She has shown her returned income at Rs. 18,44, 152/-. Further, interest of Rs. 18,76,115/- paid to her has been allowed by the AO. On perusal of her computation of income for AY. 2015- 16, it is noticed that she has shown interest from Radius Industries at Rs. 18,76,115/-. On perusal of her balance sheet, it was noted that total of her assets ....