TaxTMI 
TaxTMI 
2019 (12) TMI 1158
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....ed to file any details or documents as regard to receipt of alleged unsecured loan of Rs. 10,65,32,302/- substantiating the creditworthiness and genuineness of the transaction in original assessment proceedings and also in remand proceedings. 3.That on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of a sum of Rs. 33,70,549/- u/s 14A read with Rule 8D ignoring the essence of CBDT's Circular No. 5/2014 dated 11.02.2014. 4.That the appellant craves for leave to add, delete, amend or modify any ground before or at the time of appellate proceedings." The grounds of appeal raised by the revenue for the Assessment Year 2013-14 read as under:- "1. That on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting a sum of Rs. 1,42,95,699/- representing the alleged amounts received by the assessee as inter-corporate deposit. 2.That on the facts and in the circumstance of the case and in law, the Ld. CIT(A) has erred in appreciating the facts that the assessee failed to file any details or documents as regard to receipt of alleged deposits of Rs. 1,42,9....
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....e assessee company directing it to present its director along with details as asked for, (the letter has been reproduced in the assessment order). In the said letter, he had also directed the assessee company to produce the Directors of the lender companies along with the relevant books of accounts/documents to prove the identity, genuineness and creditworthiness of the loan given by them during the relevant Financial Year. According to the Assessing Officer, there was no compliance on the part of the assessee on the date on which the case was listed for hearing i.e., 09/03/2015. Thereafter, the Assessing Officer notes that the assessee had shown unsecured loan (according to the ld. A/R, wrong figure of closing balance of loan as on 31/03/2012) as Rs. 10,71,51,675/-, taken from 13 (thirteen) corporates. The Assessing Officer noted that assessee had filed the list of lenders, on perusal of which, he noted that Rs. 10,65,32,302/- has been credited to the books of the assessee during the previous year. Thereafter, the Assessing Officer notes that summons u/s 131 of the Act, was issued to the Director of the assessee company to verify the genuinity of the loan transactions, however it ....
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....ng payments of the loan to the Assessee. 8.In addition to the above documents, the assessee company also submitted its own bank statement evidencing the receipt of the said sum in its account. Thus, according to the assessee it was clearly demonstrated before the Assessing Officer that all the payments/borrowings were made by account payee cheques drawn on their respective bankers showing genuineness of the transactions. According to assessee, by filing the Income-Tax Return acknowledgements of the lenders, it was able to demonstrate before the Assessing Officer that all the lenders were regularly assessed to Income-Tax Department and the sum lent by them to the assessee has been duly and fully reflected in their respective books of accounts as well as reflected in their bank records and thus their identity stands proved. Further, according to the assessee, by filing the lenders' source of funds [certificate for the amount lent by them to the assessee] the lenders' creditworthiness also stands established. Moreover, the genuineness of the transaction cannot be doubted because tax was deducted at source by the assessee while interest was paid to the lenders on the amount of....
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.... deduct ed Loan repaid during the year Closing balance as on 31/03/12 Closing balance as on 31/03/19 1. Deepak Pens & Plastics Pvt. Ltd PAN:AAACD9050G -- 2500000 215753 21575 2694178 -- Repaid as on 31.3.12 2. Motorex Finance Pvt. Ltd PAN:AACCM1042R -- 3000000 264082 26408 -- 3237674 Bal. remains 3. Maharaja Vanijya Pvt. Ltd PAN:AAFCM3843B -- 50,00,000 429041 42904 -- 5386137 Repaid as on 31.3.19 4. Kokila Exports Pvt. Ltd PAN:AABCK1178K -- 1,05,00000 552699 55270 -- 10997429 Repaid as on 31.3.14 5. Hexagon Commerce Pvt. Ltd PAN: AAACH6742D 16745422 -- 69534 6953 15500000 808003 Repaid as on 31.3.19 6 K.B.Switchger Pvt. Ltd PAN:AABCK2162K -- 30000000 81370 8137 -- 30073233 Repaid as on 31.3.19 7. Dhoot Industrial & Investment Co. Pvt. Ltd PAN: AABCD1808R -- 7500000 9247 925 -- 7508322 Repaid as on 31.3.19 8. Nidhi Agro Pvt. Ltd. PAN:AAACN8759L 11294433 549370 54937 36988866 -- Repaid as on 31.3.12 9 Shree Sudarshan Castings Pvt. Ltd PAN:AADCS9429B ....
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.... Total: 93901675 23950000 9505037 949146 18210192 108197374 Details of Advances Repaid: 1. Asish Finance Ltd PAN:AAACE57774A 13000000 - 10330 1034 13000000 -- Opening balance repaid. 12. We note that the assessment order for AY 2012-13 has been passed on 31/03/2015 and for AY 2013-14 on 03.03.2016. We note that though the assessee had filed the following documents before the Assessing Officer, he has drawn adverse inference against the assessee only on the reason that the Director of the assessee company did not present himself before him. We note that for the Assessment Year 2012-13, the following documents have been filed by the assessee before the Assessing Officer to substantiate the identity, creditworthiness and genuineness of the transactions between the assessee and the 12 (twelve) lender companies:- i)Copy of the return filing acknowledgement along with computation of income and audited accounts of the assessee for AY 2012-13. (Pg.17-28 of the Paper Book) ii)Copy of the notice dated 3-06-2014 and 02-02-2015 issued by the AO during assessment proceedings. (Pg.29-31 of the Pap....
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....opy of the ledger accounts for the period 01-04-2011 to 3103-2019 and letter filed before the AO by the party submitting the details. (Pg.132-157 of the Paper Book) xiii) Copy of the return filing acknowledgement & audited accounts for AY 2012-13 of loan creditor party namely K.B. Switchgear Pvt. Ltd., along with copy of relevant bank statement reflecting the loan along with confirmation of accounts for AY 2012-13 and copy of the ledger accounts for the period 01-04-2011 to 3103-2019 and letter filed before the AO by the party submitting the details.(Pg.158-190 of the Paper Book) xiv)Copy of the return filing acknowledgement & audited accounts for AY 2012-13 of loan creditor party namely Dhoot Industrial & Investment Co. Pvt. Ltd., along with copy of relevant bank statement reflecting the loan along with confirmation of accounts for AY 2012-13 and copy of the ledger accounts for the period 01-04-2011 to 31-03-2019 and letter filed before the AO by the party submitting the details.(Pg. 191-225 of the Paper Book) xv)Copy of the return filing acknowledgement & audited accounts for AY 2012-13 of loan creditor party namely Nidhi Agro Pvt. Ltd., alo....
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....15 and 31-072015 filed by the assessee before the Assessing Officer (Pg. 34-43 of the Paper Book) iv)Copy of the summons dated 24-11-2015 & 18-02-2016 issued to the assessee (Pg. 44-45 of the Paper Book) v)Copy of the reply dated 02-03-2016 filed by the assessee complying to the summons issued u/s 131 by the AO. (Pg. 46 of the Paper Book) vi)Details of unsecured loan with the full names and address of the parties along with their PAN No. (Pg. 47 of the Paper Book) vii)Copy of the confirmation of accounts in respect of all the 13 unsecured loan parties for AY 2013-14. (Pg.48-60 of the Paper Book) viii)Copy of the return filing acknowledgement & audited accounts for AY 2013-14 of loan creditor party namely Amrithphal Tradelink Pvt. Ltd., along with copy of relevant bank statement reflecting the loan along with confirmation of accounts for AY 2012-13 and copy of the ledger accounts for the period 01-042012 to 31-03-2019. (Pg. 61-76 of the Paper Book) ix)Copy of the return filing acknowledgement & audited accounts for AY 2013-14 of loan creditor party namely Ishphan Real Estates Pvt. Ltd along with copy of relevant bank ....
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....orts [twice] from the Assessing Officer. The ld. CIT(A) has clearly given a finding that though the remand reports were furnished, the Assessing Officer has not been able to point out any defect in neither the details filed by the assessee in respect of unsecured loan nor has been able to find out any infirmity/falsity in the records furnished by the assessee/lenders in respect of the loan taken from the 12 (twelve) lender companies. The ld. CIT(A) while giving relief to the assessee (for both Assessment Years) has taken note that the assessee had furnished complete details of the loan transactions, including names, addresses, PAN Nos., along with audited accounts, copy of the ITR acknowledgements, bank statements etc before the Assessing Officer as well as before him. The loan confirmation as well as the copy of the audited financial statement for Financial Year 2011-12 of the lenders, lenders' source of funds certificate for the amount lent by them to the assessee, lenders' bank statements evidencing payments of the above sum to the assessee were also filed. The ld. CIT(A) has taken note that the assessee also has submitted its own bank statement evidencing the receipt of t....
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....ts onus to prove the identity, creditworthiness and genuineness of the lender companies and had deleted the addition made u/s. 68 of the Act. Before we adjudicate as to whether the Ld. CIT(A)'s action is right or erroneous, let us look at section 68 of the Act and the judicial precedents on the issue at hand. 17.Section 68 under which the addition has been made by the Assessing Officer reads as under: "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. " The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case the legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year....
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....f summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69 19. In the case of Nemi Chand Kothari 136 Taxman 213, (supra), the Hon'ble Guahati High Court has thrown light on another aspect touching the issue of onus on assessee under section 68, by holding that the same should be decided by taking into consideration the provision of section 106 of the Evidence Act which says that a person can be required to prove only such facts which are in his knowledge. The Hon'ble Court in the said case held that, once it is found that an ass....
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....n 106 of the Evidence Act limits the onus of the assessee to the extent of his proving the source from which he has received the cash credit, section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s)of the creditor but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the assessee, in the form of loan from the creditor, though routed through the sub-creditors, actually belongs to, or was of, the assessee himself. In other words, while section 68 gives the liberty to the Assessing Officer to enquire into the source/source from where the creditor has received the money, section 106 makes the assessee liable to disclose only the source(s) from where he has himself received the credit and IT is not the burden of the assessee to prove the creditworthiness of the source(s) of the sub-creditors. If section 106 and section 68 are to stand together, which they must, then, the interpretation of section 68 are to stand together, which they must, then the interpretation of section 68 has to be in such a way that it does not make section 106 redundant. Hence, the harmonious construction of sec....
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.... vis-a-vis the transactions which had taken place between the assessee and the creditor and not between the creditor and the sub-creditors, for, it is not even required under the law for the assessee to try to find out as to what sources from where the creditor had received the amount, his special knowledge under section 106 of the Evidence Act may very well remain confined only to the transactions, which he had' with the creditor and he may not know what transaction(s) had taken place between his creditor and the sub-creditor... " ********** "In other words, though under section 68 an Assessing Officer is free to show, with the help of the inquiry conducted by him into the transactions, which have taken place between the creditor and the sub-creditor, that the transaction between the two were not genuine and that the sub-creditor had no creditworthiness, it will not necessarily mean that the loan advanced by the sub-creditor to the creditor was income of the assessee from undisclosed source unless there is evidence, direct or circumstantial, to show that the amount which has been advanced by the sub-creditor to the creditor, had actually been rece....
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.... "4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AAC, setting aside the assessment order." 21.We also take note of the decision of the Hon'ble High Court, Calcutta in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata 347 ITR 347 wherein the Court held as follows: "15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of l....
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....entire judgment of the Commissioner of Income-tax (Appeals), therefore, it was not proper to take up some portion of the judgment of the Commissioner of Income-tax (Appeals) and to ignore the other portion of the same. The judicial propriety and fairness demands that the entire judgment both favourable and unfavourable should have been considered. By not doing so the Tribunal committed grave error in law in upsetting the judgment in the order of the Commissioner of Income-tax (Appeals). 9.In this connection he has drawn our attention to a decision of the Supreme Court in the case of Udhavdas Kewalram v. CIT [19671 66 ITR 462. In this judgment it is noticed that the Supreme Court as proposition of law held that the Tribunal must In deciding an appeal, consider with due care, all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner in the light of the evidence and the relevant law. 10.We find considerable force of the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. ....
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....single word has been spared to up set the fact finding of the Commissioner of Income-tax (Appeals) that there are materials to show the cash credit was received from various persons and supply as against cash credit also made. 13.Hence, the judgment and order of the Tribunal is not sustainable. Accordingly, the same is set aside. We restore the judgment and order of the Commissioner of Income-tax (Appeals). The appeal is allowed. 23.When a question as to the creditworthiness of a creditor is to be adjudicated and if the creditor is an Income Tax assessee, it is now well settled by the decision of the Hon'ble Calcutta High Court that the creditworthiness of the creditor cannot be disputed by the AO of the assessee, but only the AO of the creditor. In this regards our attention was drawn to the decision of the Hon'ble High Court, Calcutta in the COMMISSIONER OF INCOME TAX, KOLKA TA-Ill Versus DATAWARE PRIVATE LIMITED ITAT No. 263 of 2011 Date: 21st September, 2011 wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of ....
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.... that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials o....
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....of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the loans are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest after deducting TDS as per ledger available at pages 78 to 84 of the paper book. (iii)In respect of M/s. Maharaja Vanijya Pvt. Ltd., the Ld. AR drew our attention to pages 87 to 109 of the paper book and the Balance sheet, from where we note that this company gave loan of a sum of Rs. 50,00,000/- to the appellant company. The loan was made by account payee cheque. This company duly filed its return of income before ITO Ward 35(4), Kolkata and was having PAN AAFCM3843B. This company was having a paid up capital with free reserves and surplus of Rs. 84,22,297/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the loans are also available ....
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....0,13,067/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the loans are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest after deducting TDS and the loan was repaid as on 31.3.2019 as per ledger available at pages 182 to 189 of the paper book. The company had also submitted reply to the AO of the appellant company and copy of the reply is available at page 190 of the paper book. vi) In respect of M/s. Dhoot Industrial & Investment Co. Pvt. Ltd., the Ld. AR drew our attention to pages 191 to 225 of the paper book and the Balance sheet, from where we note that this company gave loan of a sum of Rs. 75,00,000/- to the appellant company. The loan was made by account payee cheque. This company duly filed its return of income before DCIT, Circle-6, Kolkata, and was having PAN AABCD1808R. This company was having a paid up capital with free reserves and surplus of Rs. 34,61,96,015/- as on 31/03/2012. The copy ....
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.... are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest after deducting TDS and the loan was repaid as on 31.3.2012 as per ledger available at page 264 of the paper book. x)In respect of M/s. Dufflaghur Investments Ltd., the Ld. AR drew our attention to pages 265 to 286 of the paper book and the Balance sheet, from where we note that this company gave loan of a sum of Rs. 3,00,00,000/- to the appellant company. The loan was made by account payee cheque. This company duly filed its return of income and was having PAN AAACD9587C. This company was having a paid up capital with free reserves and surplus of Rs. 5,54,24,202/- as on 31/03/2012. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the loans are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest after deducting TDS and the loan was repaid as on 31.3.2014 as per ledger available at pages 284 ....
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....t, from where we note that this company gave loan of a sum of Rs. 16,50,000/- to the appellant company. The loan was made by account payee cheque. This company duly filed its return of income before ITO, Ward 4(3), Kolkata and was having PAN AAICA1299E. This company was having a paid up capital with free reserves and surplus of Rs. 2,21,59,012/- as on 31/03/2013. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the loans are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest after deducting TDS and the loan was repaid as on 19-07-2019 as per ledger available at pages 69 to 75 of the paper book. ii)In respect of M/s. Dhoot Industrial & Investment Co. Pvt. Ltd., the Ld. AR drew our attention to pages 77 to 126 of the paper book and the Balance sheet, from where we note that this company gave loan of a sum of Rs. 1,00,00,000/- to the appellant company. The loan was made by account payee cheque. This company duly filed it....
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....ails of source of funds from which this company had made the loans are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest after deducting TDS and the loan was repaid as on 31.3.2014 as per ledger available at pages 150 to 153 of the paper book. v)In respect of M/s. Rudra Goods Pvt. Ltd., the Ld. AR drew our attention to pages 155 to 170 of the paper book and the Balance sheet, from where we note that this company gave loan of a sum of Rs. 38,00,000/- to the appellant company. The loan was made by account payee cheque. This company duly filed its return of income before ITO, Ward 4(3), Kolkata and was having PAN AAECR0974R. This company was having a paid up capital with free reserves and surplus of Rs. 87,95,6591/- as on 31/03/2013. The copy of the bank statement of the Company is duly available in the paper book. On examination of the bank statement it is taken note that there is no deposit of cash. The details of source of funds from which this company had made the loans are also available from a perusal of the bank statement filed in the paper book. On the loan the appellant company paid interest a....
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....are (i) income tax assessee's, (ii) they are filing their return of income, (iii) confirmations are available on record, (iv) the loans were made by account payee cheques, (v) the details of the bank accounts belonging to the lenders and their bank statements, (vi) in none of the transactions the AO found deposit in cash before issuing cheques to the assessee , (vii) the lenders are having substantial creditworthiness which is represented by a capital and reserve as noted above. 27.As noted from the judicial precedents cited above, where any sum is found credited in the books of an assessee then there is a duty casted upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of loan from lending companies. The nature of receipt towards loan is seen from the entries passed in the respective balance sheets of the companies as loan to assessee firm. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e. identity of lenders, genuineness of transactions and creditworthiness of lenders. For proving the identity of lenders, the assessee furnished the name....
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....that this Bench of the Tribunal, under similar circumstances in the case of ITO vs. M/s.Wiz-Tech Solutions Pvt. Ltd. in ITA No. 1162/Kol/2015; Assessment Year 2012-13; order dt. 14/06/2018, wherein such addition was made under section 68 of the Act (share capital and premium) was deleted after discussing the issue of section 68 at length and considering a plethora of judgments. For the sake of brevity the same are not discussed. The case laws relied by the Tribunal will apply mutatis mutandis to this case also and we rely upon them. To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the loan received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the lender companies. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the....
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....;advance under section 68 of the Act as unexplained cash credit. It is submitted that in course of the assessment proceedings and in response to notice issued u/s 142(1) the assessee submitted a letter dated 31.07.2015. In point number 1 of this letter the assessee explained that it had received sum of Rs. 16,20,000/- from Dhoot Infrastructure Projects Limited , 904-907, Time. Tower, M.G.Road, Sector-28, Gurgoan, Haryana.(PAN AACCD2118H) towards sale of shares to them. Copies of purchase and sale invoices were also furnished by the assessee. The nature of such Trade Payable was also explained to the AO. The assessee furnished the complete details including name, address, PAN, Bank statement highlighting the transaction before the AO. The AO has conveniently ignored such details filed by the assessee and made a swiping remark that the assessee failed to produce any documentary evidence with respect to the advance received. The AO has not found any fault in the documents filed by the assessee in this regard. No discrepancy has been pointed out by the AO. The matter was also referred to the AO for remand report on merit after examination of the reply on merit. The AR of....
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....before the AO during the assessment proceeding and the same along with enclosures were also sent at the time of asking for remand report from the AO. While going through the details enclosed with above referred letter, it is clear that the letter itself contained name and address of the party with PAN and copy of invoice. These document were also sent the AO at the time of asking remand report in the matter. The AO instead of issuing' the summon u/s 131 to the lender for verification of identity, financial capacity and genuineness of the transaction, issued summon to the directors of the company who has already filed all the relevant details like list of the party, conformation and source of the fund."And thereafter, the Ld CIT(A) deleted the addition 33.Having heard both parties, we note that AO has made the addition of sum Rs .16,20,000/- received by the assessee as 'advance under section 68 of the Act as unexplained cash credit'. It is noted that pursuant to notice issued by AO u/s 142(1) of the Act, the assessee explained that it had received sum of Rs. 16,20,000/- from M/s Dhoot Infrastructure Projects Limited, 904-907, TimeTower, M.G.Road, Sector-28, Gurgoan,....