TaxTMI 
TaxTMI 
2020 (1) TMI 1028
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....iating the facts that as per the Tax Audit report, loan of Rs. 1,crore from Rampion Eyetech Pvt.Ltd., Rs. 18,54,000/- from Shri Sunil K Jain, HUF, Rs. 1,27,626/- from Shri Anuj R Mehta were shown to have been received otherwise than by account payee cheques/drafts and the assessee had failed to produce bank accounts to enable the A.O. to verify the genuineness of the transactions. 3. The Ld.CIT(A) has erred in law and on facts by not appreciating that the loans amounting to Rs. 1,21,00,000/- were squired up during the year and the assessee has failed to furnish documentary evidences to prove the genuineness of the transactions and creditworthiness of the lenders. 4. The Ld.CIT(A) has erred in law and on facts by not considering the facts that the assessee failed to furnish relevant evidences in support of loan amounting to Rs. 10,00,000/- shown in the name of Vishal Agencies in tax audit report. 5. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 11,23,686/- made u/s.36(1)(iii) on account of disallowance of interest expenses. 6. The Ld.CIT(A) has erred in law and on facts by not appreciating that when the assessee itse....
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....unt of the Rampion Eyetech Pvt. Ltd. c) Confirmation along with PAN and address of the party. d) Copy of ITR of Rampion Eyetech Pvt. Ltd. ii. Sunil Kumar K Jain HUF a) Confirmation along with PAN and address of the party. b) Ledger Copy of the assessee in the books of account of party. c) Copy of the ITR of shri Sunil Kumar K Jain HUF iii. Anuj R. Mehta a) Confirmation along with PAN and address of the Party. b) Copy of the ITR of Shri R. Mehta 3.4 The Ld.CIT (A) called for the remand report on the submissions/details filed by the assessee from the AO who submitted as under: i. The assessee has taken loan in the year under consideration amounting to Rs. 3,89,81,726/- as evident from the tax audit report. Out of such loan, the assessee has squared up the loan for Rs. 1,21,00,000/- in the year under consideration. Thus the fresh loan which remained outstanding as on 31st 2003 is of Rs. 2,68,81,726/-. ii. The assessee has taken a loan of Rs. 10 lakhs from M/s Vishal agencies which was not squared up in the year under consideration. But the assessee failed to furnish the details of suc....
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....e four loans obtained by the appellant which were new and were part of Rs. 4.48 crores. These four new loans pertain to Rampion Eyetech Pvt.Ltd. for an amount of Rs. 2 crores, from Vishal Agencies for an amount of Rs. 10 lacs. Sunilkumar K.Jain HUF for an amount of Rs. 9.84 lacs and from Anuj R.Mehta for an amount of Rs. 31,22,726/-. The additional evidences has been filed by the appellant in respect of three loans except for Vishal Agencies as mentioned above. Rampion Eyetech Pvt.Ltd. and Anuj R. Mehta were assessed by the same A.O. hence, all the details in respect of the two were already available with the A.O. In respect of Sunilkumar K. Jain HUF, the appellant as filed the copy of return of income along with PAN for the said person. As far as Vishal Agencies is concerned it is mentioned by the appellant that the opening balance of unsecured loan was of Rs. 30,41,308/-. During the year under consideration an addition of Rs. 10 lacs was made to this unsecured loan. During the year there was a repayment of Rs. 9,41,308/- leaving behind the blance of Rs. 21 lacs. Hence, the unsecured loan from Vishal Agencies was the brought forward loan and Rs. 21 lac is the par....
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....to 14, 1 to 6, 1 to 18, 1 to 149 and 1 to 85 respectively and submitted that the original assessment records are not traceable. In this regard, the ld. AR drew our attention on the letter furnished by the AO dated 11-10-2019 which is placed on record. 5. On the contrary, the learned AR before us filed a paper book running from pages 1 to 85 and submitted that the assessee has repaid the loan amount in subsequent year. The assessee to substantiate its claim submitted the following details: 1) A chart depicting the payment and the balance of all unsecured loan details from AY 2003-04 to AY 2011-12 with respect to all the parties. (pages nos. 42 and 43 of paper nook) 2) Ledger account of Vishal agencies showing the payment from AY 2004-05 to AY 2005-06. (pages nos. 62 and 63 of paper book ) 3) Ledger Account of Sunil Kumar K Jain HUF showing the payment from AY 2003-04 to AY 2010-11. (pages nos. 64 to 71 of paper book) 4) Ledger account of Rampion Eyetech Pvt Ltd. from AY 2003-04 to AY 2010-11. (Pages nos. 72 to 79 of paper book) 5) Ledger account of Anuj R Mehta showing the payment from AY 2003- 04 to AY 2005-06. (pages nos. 80 to 85of ....
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....itors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, it was to be presumed that the transactions were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine." 6.2. The AO in the assessment proceedings has treated the entire amount of loan shown by the assessee in its balance sheet for Rs. 4,48,03,196/- as unexplained cash credit. But the AO in his remand report has given a finding that the assessee has taken fresh loan of Rs. 3,89,81,726/- only during the year. Thus the assessee in effect gets the relief for the amount of Rs. 58,21,470/-. 7. Now taking up the matter further, we note that the assessee has taken the loan through the banking channel as well as in cash from the parties detailed as under: S.No. Lender Name Total fresh Loan Amount Cash element i. Rampion evetech 2,00,00,000/- ....
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....his the amount of interest expenses borne by the company on its loans and deposits during the year under consideration is to the tune of Rs. 35,05,817/-. During the year assessee company is paying interest @ 12# on unsecured loans and deposits accepted by it. It's a known fact that no prudent assessee would resort to such type of accounting principles wherein it incurs interest expenses on the funds borrowed from outside agencies but doesn't charge interest on its own funds passed on to outside agencies or be it, to ones own associate concern. Accordingly, for the reasons as aforesaid and the stand adopted by the assessee in not furnishing the details/reasoning for having not charged interest on such loans and advances passed on to an associate concern, as amount equal to 12% out of such loans and advances advanced is disallowed u/s.36(1)(iii), treating the same as being incurred for non-business purposes." 7.3. Now coming to the loan accepted from Sunil Kumar K Jain HUF, we note that the assessee has filed the confirmation along with the PAN, copy of the ITR, ledger account of the assessee in the books of Sunil Kumar K Jain HUF and ledger copy of assessee's books which are plac....
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.... by account payee cheques." 7.9. We also conscious to the fact that the assessee has furnished the basic details about the loan taken from all the parties as discussed above such as, confirmation along with address, ledger copy of ITR , but the AO has not made any verification from such parties and arrived at the conclusion that the impugned amount represents unexplained cash credit under section 68 of the Act. 7.10. We also note that there is no prohibition to accept the loan in cash under the provisions of section 68 of the Act. As such the provision of section 68 of the Act has not differentiated the amount of cash credit accepted by the assessee through the cash and cheque. It means the test laid down to justify the cash credit under section 68 of the Act is same when the loan is taken in cash and through banking channel. 7.11. In our considered view, once the assessee has discharged primary onus by proving the identity of lender, genuineness of transaction and capacity to advance the loan then it is the burden of the Revenue to prove it otherwise. In this regards we drew guidance and support from decision of Hon'ble Madhya Pradesh High Court in the case of CIT vs. Met....
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....found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68." 7.13. Thus, in the present facts and circumstances, all informations were available about the loans but AO did not make further inquiry. If he has any doubt on unsecured loan of all above mention parties, the AO could have conducted necessary enquiries. But the AO failed to do so. However assessee has discharged its onus by providing the documents such as confirmation, ITR, address of the lender, ledger copy of the lender. The AO has not pointed out any specific defect in documents furnished by the assessee. In view of the above, we find no reason to interfere in the order of Ld. CIT (A) to the extent of the loan from the parties as discussed above. 7.14 Now, coming to the amounts of loans for Rs. 1,31,00,000/- which were accepted by the assessee during the year from the parties and squared up in the year under consideration. The details of such parties stand as under: S.NO. Lender Name Amount....
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....assessee as on 31 March 2003. It is also a fact on records that the assessee has duly furnished the details of the loans which were squared up in the year under consideration in its tax audit report available on record. But the AO either in the assessment proceedings or remand proceedings required the assessee to furnish detailsof such loans squared up during the year. Thus the assessee never got the occasion to furnish the details about such squared up loans. 7.18. From the above letter dated 26 October 2012, it is transpired that the learned CIT (A) never enquired about the loans which were squared up in the year under consideration. Thus, the controversy arises whether the AO can extend the scope of dispute beyond the direction provided by the learned CIT (A). The answer stand negative in view of the judgement of Hon'ble Gujarat High Court in the case of Saheli Synthetics Pvt. Ltd Vs. CIT reported in 302 ITR126 wherein it was held as under: "Similarly even where an assessment is set aside simpliciter, without any enhancement proposal, it is always in the context of the appeal against an order of assessment and cannot be read to mean that the appellate authority grant....
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.... submitted by it to substantiate its claim. However, the loan to the subsidiary increased over the period of time to Rs. 71,64,664/- 10.1. The assessee further submitted that the subsidiary has incurred loss in the AY 2001-02. Therefore it is not possible even to recover the principal amount from the subsidiary. Accordingly the assessee has not made provision for the interest. 10.2. The Ld. CIT(A) after considering the submission of the assessee deleted the addition made by him by observing as under: "2.2. I have perused the observations and contentions of the A.O. as well as the appellant. The disallowance of interest of Rs. 11,23,686/- has been made u/s.36(1)(iii) on account of interest free loans of Rs. 74,91,240/- given to its sister concern/subsidiary company namely M/s.Ramprasad Trading and investment Pvt.Ltd. The A.O. in the remand report has alleged that the appellant has not been able to furnish any evidence to establish the business purpose as well as no evidence of the said company acting as distributor have been furnished. It is pointed out by the appellant that the same issue had arisen during the A.Y. 2002-03. On perusal of the assessment order....
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....tions and perused the materials available on record. In the instant case, the AO made the disallowances of the interest expenses on the ground that the borrowed fund has been diverted to the interest free loans and advances. However, on perusal of the balance sheet, we note that own fund including non-interest bearing fund exceeds the amount of loans and advances as detailed under: "SOURCES OF FUNDS SCHEDULE 31-3-2002 Rs. Rs. Rs. Shareholder's Funds : Share Capital I 29,998,500 29,998.500 Reserves & Surplus II 65,471.667 70,630,921 95,470,157 100,629,421 Loan Funds: Secured Loans III 40,050.236 57,774.375 Deferred Payments Credits (Guaranteed to Vijaya Bank Against hypothecation of Specific machinery and third Charge over existing Plant & Machineries and other Assets of the company) 4,391,306 4,285,506 Unsecured Loans IV 44,803,196 26,096,221 Deferred Tax Liability (See Note No.17 of Sch....
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....dition made by the AO by observing as under: "3.2. I have perused the observations and contentions of the A.O. as well as the appellant. It can be seen from the remand report that during the visit of the concerned person abroad certain personal expenses cannot be ruled out. The appellant had submitted the relevant documents for the foreign tour undertaken by Shri Anuj R.Mehta, Director of the appellant company. Nothing has been brought on record by the A.O. to substantiate that foreign travel was for personal use. Hence the addition of Rs. 2,21,082/- is hereby deleted." Being aggrieved by the order of the Ld. CIT(A) the Revenue is an appeal before us. 13. The Ld. DR vehemently supported the order of the AO. 14. The Ld. AR drew our attention on the details filed in support of the expenses such statement of foreign travelling expenses, JK industries Bill regarding purchase of Foreign exchange, Receipt of LKP Finance Merchant Financing Ltd. which are available on record. 15. We have heard the rival contentions and perused the materials available on record. In the instant case, the AO made the disallowances of the foreign travelling expenses on th....