TaxTMI 
TaxTMI 
2021 (2) TMI 281
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....ls submitted during the course of hearing that the assessee has received unsecured loans from various companies out of which according to AO, are paper companies (13 in numbers) the details of which he has given in a chart at page 2 and 3 of the assessment order ;and according to AO from these 13 companies assessee had received Rs. 4.50 cr. and has shown to have made the payment of Rs. 74,30,571/- as interest. In the chart after giving the Sl. No., name and address of the parties and the loan received and the interest paid, the AO notes that the physical verification done by the Income-tax Inspector could not find the said entity at the given address. According to AO, he brought this matter to the notice of the assessee by issuing notice and thereafter he reproduced the reply given by the assessee dated 22.12.2017 which is found at page 4 and 5 of the assessment order. Thereafter, the AO explained the modus operandi followed by paper companies for routing the black money in the guise of unsecured loans. According to him, these transactions are nothing but accommodation entries and these are not real transactions. According to him, merely by filing PAN details, Balance Sheet and rec....
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....s. 74,30,571/- on the loans. Therefore, the corresponding interest expenses of R.s74,30,571/- according to him, cannot be allowed as genuine expenditure. So, he disallowed the same and added to the total income of the assessee. 4. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who noted that the loans were squared off in the same year (i.e. AY 2015-16) and that all the loan creditors pursuant to the notice issued u/s. 133(6) of the Act by the AO have confirmed to have provided loan to the assessee. The Ld. CIT(A) after perusal of the loan confirmations and the loan schedule, gave a finding that the assessee during the year had ended up having zero balance credit, since the money which was received, had been repaid in the same year. Thus, according to him, it is difficult to assume that the loans in question are in the form of accommodation entry, since they effectively accommodate zero value at the end of the year and relied on the decision of the Hon'ble Gujarat High court in the case of CIT Vs. Chandra Shekhar . Thereafter, the Ld. CIT(A) notes that interest has been paid @ 12% per annum in most cases with proper TDS deduction. According to Ld. CIT(A), the b....
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....that the assessment order is bad inter-alia, for violation of natural justice also and therefore according to him additions cannot be sustained. Therefore, he deleted the addition made against the loan of Rs. 4,50 crores and interest thereon of Rs. 74,30,571/-. 5. Aggrieved the revenue is before us. 6. We have heard both the parties and perused the records. The Ld. D.R Shri Dhrubajyoti Roy assailing the action of the Ld. CIT(A) contended that the AO has made detailed enquiries through Inspector whose physical verification could not trace out the lender companies in the addresses furnished. According to him, AO has given show cause notice to the assessee pointing out the adverse observations made by the Inspector and pursuant to which the reply was given which has been reproduced by the AO in the assessment order which shows that the assessee had replied only in respect of one (1) lender company M/s Fast Glow Distributors, when the fact remains that the assessee had taken loan from thirteen (13) lenders. According to Ld. D.R, the assessee has taken loan from the lender company called M/s Fast Glow Distributors which is a paper company operated by entry provider Shri Ashish Kumar A....
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.... of M/s Sreeleathers [PAN: AAKFS 2993 L] for the Assessment year 2015-16 - matter regarding 2. During the course of assessment proceedings, you have submitted a list of unsecured loans in respect of your claim of liability. Notices u/s 133(6) of the Income Tax Act, 1961 were issued to various parties calling for information for verification of the transactions claimed by you. Replies / confirmations were obtained from them and the same have placed in the assessment records. 3. On perusal of the accounts and details submitted during the course of hearing, it is noticed that during the year under consideration, that you have received unsecured loans from various companies out of which one (1) company have been found to be paper company having no worth as mentioned in table below: Sl. No. Name and address of the Party Loan Received Interest 1 Fast Glow Distributors 50,00,000 12,79,268 4. You are requested to prove identity of lenders, genuineness of transaction, and creditworthiness of lenders, failing which adverse inference would be drawn. 5. Your case is re-fixed for hearing at 12.30 PM on 22nd December, 2017 at the office of the undersigned. If you do not wis....
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..../s Fast Glow Distributors 10. According to Ld. A.R when the assessee received assessment order dated 26.12.2017, the assessee was shocked to note that even though the AO expressed his doubts of M/s Fast Glow Distributors from which the assessee borrowed Rs. 50 Lakhs, the AO has made the addition of the entire loan transaction of this assessment year to the tune of Rs. 4.50 crores, which according to Ld. A.R is arbitrary and whimsical. Moreover, according to Ld. A.R he was surprised that the adverse view of AO has taken against the lending companies based on a statement recorded by the Investigation Wing i.e. DDIT(Inv) dated 27.01.2015 which is two years prior to framing of assessment. According to Ld. A.R, the statement cannot be relied upon for two reasons. According to him, the statement of Shri Ashish Kumar Agarwal has been recorded during survey u/s 133A of the Act and that on oath which is not in accordance to law and therefore does not have any evidentiary value as held by the Hon'ble Supreme Court in S. Khader Khan Sons (supra). According to Ld. A.R., the copy of the survey statement which the AO has relied upon has not been given to the assessee before framing of assessme....
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....ith M/s Fast Glow Distributors from whom the assessee had taken Rs. 50 Lakhs and has incurred interest expenditure to the tune of Rs. 12,79,268/-. Pursuant to the SCN, the assessee had replied and given all the documents to the AO which he has reproduced at page 4 & 5 of assessment order (refer Page 126-148 of PB). Thereafter, the AO has framed the assessment by relying on the statement of Shri Ashish Kumar Agarwal which was recorded u/s 133A of the Act (on oath) dated 27.01.2015 in a third party case and thereafter made an addition of Rs. 4.50 crores and disallowed interest expenditure of Rs. 74,30,571/-. On appeal, the Ld. CIT(A) had deleted the addition, which action of Ld. CIT(A) is under challenge before us. We find that in this assessment year, the assessee which is a leading shoe manufacturing State of West Bengal had taken loan of Rs. 4.50 crores from eleven (11) lender companies and squared up the loan (except 15 Lakhs) with them, which finding of fact of Ld. CIT(A) has not been challenged by the Revenue by preferring any grounds of appeal, so this fact attains finality. We find that AO in order to examine the identity and genuineness of the ibid loan transaction had issue....