TaxTMI 
TaxTMI 
2021 (5) TMI 343
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....ces of the case. The interconnected issue involved therein is whether the ld CITA was justified in deleting the disallowance of interest paid on such unsecured loans in the sum of Rs. 13,08,903/- in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a private limited company engaged in the business of trading of agricultural commodities like wheat, pulses etc. It had filed its return of income for the Asst Year 2014-15 on 29.9.2014 declaring total income at Rs. 1,46,880/-. We find that the ld AO observed that on perusal of the financial statements of the assessee, it had received unsecured loans from the following parties and paid interest thereon as under:- Name and address of the lenders Loan amt Interest Shresth Builders Pvt Ltd, 9/12, Lal Bazar Street, Mercantile Building , 1st Floor, Block - D, Kolkata 95,00,000 8,01,020 Haridarshan Pvt Ltd, 28, Strand Road, 2nd Floor, Kolkata - 700001 25,00,000 54,658 Withal Commercial Pvt Ltd, 27, Brabourne Road, 3rd Floor, Room No. 305, Kolkata - 700001 20,00,000 1,84,685 Mahasati Investment Pvt ....
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....he bank statements of the lenders that before each loan entry , there were immediate credit entries received from some parties giving an impression of circular transactions. e) Information is not found anywhere on the website of Registrar of Companies for Shresth Builders Pvt Ltd f) The directors were also directors in several other companies. 3.3. We find that the ld AO further recorded a statement on oath u/s 131 of the Act from the Director of the assessee company on 2.12.2016 wherein the director denied initially having any knowledge about the aforesaid 4 lender companies. However, the said director stated that one Shri Amulya Baheti and his father had introduced the aforesaid 4 companies to the assessee company vide reply to Question No. 22 in the statement on oath recorded on 2.12.2016. Later the ld AO issued a show cause notice to the assessee on 15.12.2016 fixing the case on 19.12.2016 stating as to why the aforesaid loans should not be treated as unexplained cash credit u/s 68 of the Act by treating them as non-genuine transactions. We find that the assessee vide reply dated 20.12.2016 filed before the ld AO to prove the genuineness of inter corporate ....
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....mmercial Pvt Ltd and MIS, Mahasati Investment Pvt Ltd as cash credit u/s 68 of the IT Act. 2 4 2 The Ld AO has mentioned that the identity and creditworthiness Of M/s Shresth Builders Ltd (Rs. 95,00,000/-) Haridarshan Pvt Ltd (Rs. 25,00,000/-) M/s Withal commercial Ltd (Rs. 20,00,000/-) and M/S Mahasatj Investment Pvt Ltd (Rs. 50,00,000) being the benami concerns are not proved by the company nor the genuineness of the transactions in the form of unsecured loan raised by the company from the respective entities The entire gamut shows that the total funds Of Rs. 1,90,00,000/- have been brought by of unsecured Loans in the name Of respective entities, whose very existence could not be established nor the sources of these funds by the assessee company. 2 4 3 Accordingly, the AO has treated the amount brought in by assessee in its books as unsecured loan Of Rs. 1,90,00,000/- as unexplained credit within the meaning of sec 68 of the Act and added to the total income of the assessee. 2 4 4 The AR has vehemently argued that the AO has erred on the facts and circumstances of the case The ld. AR, has submitted in the grounds that the appellant company submitted th....
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....ns relied on by the AO and the ld. AR. During the course of assessment proceedings the appellant has filed several details required to prove the identity and creditworthiness of the persons, and the genuineness of the transaction in the form of PAN cards, IT return copies, bank statements, confirmation, audited accounts etc. as is evident from the records and claimed that it has discharged its onus. The ld. AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of loan need not be doubted. The excessive reliance was placed on the enquiry report of DDIT (Investigation), Kolkata stating that the companies did not exists on the said addresses and the relevant enquiries with the local people in the vicinity of the companies. 2.4.6. In the instant case, however, as seen from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence in the receipt of loans from the parties. In such circumstances, to allege that the unsecured loans of the appellant company are not genuine would require strong evidences. The impugned transactions are of Rs. 1,90,00,000/- and the ....
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....als of the parties, it can be seen that the parties had sufficient creditworthiness to lend Rs. 1,90,00,000/- to the appellant company. Next genuineness of the transaction was demonstrated by the appellant by explaining the business of the appellant, requirement of the loans in the business of the appellant, details of deduction of TDS on interest payment, loan confirmation from the parties and the ledger account of the parties whereform it was substantiated that the loans had been squared off in the subsequent year. More over, the parties have confirmed the transaction to the AO, in reply to summons issued. The AO has not answered several valid points raised by the appellant nor proved how the details like PAN, the IT reruns, confirmation letters, bank statements of the creditors, audited balance sheet of the creditors cannot be taken note of. Thus, from the above discussion, I consider that the Appellant company had produced enough evidences to discharge the onus laid upon it under the Act. 2.4.9. If the said statements and the evidences are kept in juxtaposition with the documents, details and records produced by the Appellant company it can be seen that the Appellant c....
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....ed for while making inquiry under section. (iv) In the matters related to section 68 burden of proof cannot be discharged to the hilt-such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the maternity of evidences, is the basis for deciding the cases falling under section 68. (v) Confirmatory letters or A/c. payee cheques do not prove that the amount in question is properly explained for the purpose of Section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive. (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. Of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by sowing that the money was received by an account payee che....
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....he loan taken by the appellant from the said concern M/s. Shresth Builders Pvt. Ltd., M/s. Haridarshan Pvt. Ltd., M/s. Withal Commercial Pvt. Ltd., and M/s. Mahasati Investment Pvt. Ltd., cannot be doubted and the addition made by the AO u/s.68 of the Act cannot survive the test of appeal. I, therefore, direct the AO to withdraw the addition. This ground is allowed. 2.4.12. Ground No.2 is on account of disallowance of interest paid on unsecured loan taken. The AO has disallowed the interest expenditure amounting to Rs. 13,08,903/-incurred on unsecured loan form the above mentioned four parties under section 69C of the Act. Since, I have allowed Ground No.2, this Ground is in favour of the Appellant. I, therefore, direct the AO to withdraw the addition. The ground is allowed. 5. We find that the following documents were submitted by the assessee before the ld AO which are not in dispute :- a) Copy of Income Tax Returns (ITRs) of all the lenders b) Copy of Balance Sheet & Profit and Loss Account of all the lenders c) Copy of relevant extracts of the bank statements of all the lenders including the details of immediate source of credit ....
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....that the said inter corporate deposits did carry interest and assessee had duly paid the same after deduction of due tax at source at the applicable rates thereon. It is not in dispute that the loans were fully repaid by the assessee company to all the lenders in Feb 2016. 5.3. It is not in dispute that all the 4 lenders had sufficient net worth with adequate sources to advance inter corporate deposits to the assessee company which is evident from the table below:- Sr. No. Particulars Net Worth (Rs. (As on 31/03/2013) Amount of ICDs given during the year to the company 1. Haridarshan Sales Pvt. Ltd., 75,89,81,917.00 25,00,000.00 2. Shresth Builders Private Limited 22,30,74,892.00 95,00,000.00 3. Shri Mahasati Investment Limited 13,47,94,370.00 50,00,000.00 4. Withal Commercial Private Limited 35,34,65,022.00 20,00,000.00 We find that the ld AO had observed that these lenders had shown negligible income in their ITRs. This is absolutely irrelevant as there is no requirement in the statute that inter corporate deposits should be advanced only out of income of the lender companies. It can also be done out of their borro....
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....sessing Officer would not negate the case of the assessee. Therefore, the addition was liable to be deleted. We find that the case of the assessee before us is even better in as much as the parties had directly responded to the summons issued u/s 131 of the Act before the ld AO by furnishing the requisite details. 5.7. We find that the entire addition has been made by the ld AO out of mere suspicion, surmise and conjecture and by ignoring completely all the relevant statutory documents filed by the assessee before him. We find that the ld AO had not found any deficiencies/ defects in the documentary evidences submitted by the assessee in the instant case. We also find that the ld CITA in page 12 of his order had stated that the ld AO had issued summons to the lender companies in the course of assessment proceedings to verify the loan transactions and that all the lender parties had duly replied to the summons by submitting the relevant details before the ld AO . This factual finding given by the ld CITA had not been controverted by the ld DR before us. We find that the ld AO had not appreciated the fact that when the loans received by the assessee were bogus, then there is no....