TaxTMI 
TaxTMI 
2021 (1) TMI 918
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....e addition u/s 68 simply for the reason that the bank statements of the lenders were not provided to her. 4. That in any case and in view of the matter, order of Ld. CIT (A) in confirming the impugned addition u/s 68 is bad in law and unjustified as the identity of lenders, genuineness of transactions and creditworthiness of the lenders have been duly proved." 2. We have heard the Learned Representative of both the parties through video-conferencing and perused the material available on record. 3. Briefly the facts of the case are that the assesseecompany has filed its return of income on 30.10.2007 declaring income of Rs. 27,78,790/- in the computation of income. The assessee-company is engaged in the business of Investment and Trading in Shares. The A.O. noted that assessee-company has taken loan from 11 parties in assessment year under appeal. The A.O. issued notices under section 133(6) of the Income Tax Act to all the parties requiring them to furnish copy of the bank statements, PAN etc., The A.O. noted that notices could not be served upon M/s. Alter Investment Pvt. Ltd., [Rs. 36,19,25,209/-] and M/s. Ilac Investment Pvt. Ltd., [Rs. 12,29,99,000/- hereinafter ....
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...., learned counsel relied upon the findings of the CIT(A) to say that when the accounts were accepted in respect of overwhelming number of creditors, there was no occasion to reject the credits of two parties. He also submitted that as a matter of fact, relevant details in the form of balance sheets, profit and loss statements, bank accounts etc were part of the record which was sought to be produced under Rule 46 (A). This Court has considered the submissions. From the materials which appear to have been considered, facially, it appears that the Revenue's grievance is that there was nothing to support the creditworthiness of the parties and the genuineness of the transactions. However, that is not the end of the matter. It is an established matter of record that in appellate proceedings before the CIT (A), the assessee had produced copies of the balance sheets, profit and loss statements and bank accounts pertaining to the concerned parties, i.e., M/s Alter Investments Pvt. Ltd.& M/s Iliac Investments Pvt. Ltd. This was in addition to the extracts of its own ledger records to say that there was regularity in the transaction between those parties and consequently a....
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....which it was having total income of Rs. 12,56,696/- only. Perusal of the copy of the final accounts of M/s. Ilac Investment Pvt. Ltd. for the year ended 31st March, 2007 shows total receipts of Rs. 1,66,06,895/- in the profit and loss account from profit on sale of shares, dividend and hire charges, besides other income of Rs. 1,13,605/-. There is no interest income but interest and financial charges to the tune of Rs. 67,05,271/- have been debited to the profit and loss account. As on 31.03.2007, the company had paid up capital of Rs. 5.28 crores, reserves and surplus of Rs. 5.21 crores and sundry creditors had gone up from Rs. 95.99 lacs in the immediately preceding year to Rs. 6.64 crores. Advances recoverable by the company stood at Rs. 21.02 crores as on 31.03.2007 in which the amount recoverable of Rs. 12.29 crores from the appellant is claimed to be included. It is beyond one's comprehension why a company which had to pay interest/financial charges of Rs. 67,05,271/- did not charge a penny of interest from the appellant or from any other party from whom large amounts were due to it. The purpose and nature of the transactions between M/s. Ilac Investment Pvt. Ltd. an....
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....nal interest/financial charges of Rs. 7,028/- have been claimed in the P & L account. Investment in shares/units as on 31.03.2007 stood at Rs. 78.01 lacs (at cost) and Rs. 90,88,300/- (at face value), on which dividend income of Rs. 67.12 lacs has been received during the year. As in the case of M/s. Ilac Investment Pvt. Ltd., there was only receipt of huge amount of funds by the appellant from M/s. Altar Investment Pvt. Ltd. during the year and part repayment to it, resulting in M/s. Altar Investment Pvt. Ltd. being a creditor of the appellant at the end of the year during appeal to the tune of Rs. 36.19 crores. Once again, the bank statement of M/s. Altar Investment Pvt. Ltd. has not been produced by the appellant so that the source of heavy infusion of funds into the appellant company during the year (aggregating to Rs. 45.02 crores) is not known. Thus the creditworthiness of the company, which filed a return of nil income during the year, remains un-established. Further, both in the case of M/s. Ilac Investment Pvt. Ltd. & M/s. Altar Investment Pvt. Ltd., the nature of their transactions with the appellant company is not clear. Year after year, there is inflow of funds....
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....e filed in the paper book to show that these creditors were dealing with the assessee-company in subsequent assessment year as well and on the same pattern of taking loan by the assesseecompany from both these creditors. The A.O. did not take any adverse inference against the assessee-company in the order under section 143(3) of the Income Tax Act, 1961. Accordingly, Learned Counsel for the Assessee was directed to file copy of the audited accounts of the assessee-company for subsequent A.Y. 2008 2009 which is placed on record. Learned Counsel for the Assessee, therefore, submitted that initial burden upon the assessee to prove creditworthiness of the creditors and genuineness of the transaction have been discharged. Learned Counsel for the Assessee in support of the above contention relied upon the following decisions in the paper book. 1. PCIT vs., E Smart Systems (P.) Ltd., [2019] 105 taxmann.com 158 [Del.-HC]. 2. PCIT vs., Hi-Tech Residency (P) Ltd., [2018] 96 taxmann.com 402 [Del.-HC]. 3. Mod Creations (P.) Ltd., vs., ITO [2013] 354 ITR 282 [Del.-HC]. 4. Flourish Builders & Developers (P.) Ltd., vs., DCIT [2019] 176 ITD 409 [Del.Tribu.....
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....rs. Therefore, the whole premise of the findings given by the Ld. CIT(A) is wholly incorrect and baseless and it appears that the Ld. CIT(A) without any justification has ignored the copy of the bank statements of both the creditors already on record before her. Thus, the finding of the Ld. CIT(A) cannot be sustained in Law. Why the interest have been debited to the profit and loss account has no concern whatsoever with the ingredients of Section 68 of the Income Tax Act, 1961. Thus, on this reason itself the Order of the Ld. CIT(A) is liable to be set aside. However, we also consider the material and evidences on record to consider the creditworthiness of the creditors and genuineness of the transaction in the matter. It is an undisputed fact that assessee-company has filed copy of the conformations of the creditors along with their ledger accounts, their ITRs, balance-sheets, PAN and bank statements before the authorities below. Copy of the same are also produced in the paper book. The Ld. CIT(A) in his findings have specifically noted from the perusal of the ledger account of M/s. Ilac Investment Pvt. Ltd., show that this party has made payments aggregating to Rs. 15.67 crore....
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....sheet for subsequent A.Y. 2007-2008 which is placed on record, which shows that even in subsequent assessment year assessee-company has been dealing with both these creditors and payments and loans have been received and repayment have been made by the assessee-company. In the case of M/s. Alter Investment Pvt. Ltd., ending on 31.03.2008 there is a debit balance of Rs. 40,00,80,209.30ps and in case of M/s. Ilac Investment Pvt. Ltd., through-out the year there are transactions with this creditor and from opening credit balance of Rs. 12,29,99,000/- at the year end on 31.03.2008 there is a debit balance of Rs. 37,55,93,917.73ps. These facts would clearly show that both the creditors have transactions with the assessee-company in subsequent A.Y. 2008-2009 of the identical nature and the A.O. accepted the creditworthiness of the creditors and genuineness of the transaction of higher amounts of credits and no additions have been made under section 143(3) in respect of the same creditors in A.Y. 2008-2009. Thus, the assessee-company has been able to prove that both the creditors have availability of sufficient funds to give loan to the assessee-company in assessment year under appeal. Me....