TaxTMI 
TaxTMI 
2021 (6) TMI 364
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.... Commissioner of Income Tax (Appeals) erred in upholding the disallowance of unsecured loans of Rs. 3,26,00,000/- from C.K.Exports (Prop Prema U Mehta), Mehta Motors & General Finance Co (Prop C Umedmal HUF) and Swastik Trading Corporation. 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the unsecured loans are genuine and the disallowance of the same is not warranted in the facts and circumstances of the case. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 68 are not invocable in the facts and circumstances of the case." 3. Brief facts of the case are that assessee company engaged in the business of dealing in drugs, chemical ingredients etc. filed its return of income for the assessment year 2009-10 on 29.09.2009 declaring total income of Rs. 36,45,533/-. The case was taken up for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that assessee has received unsecured loan to the tune of Rs. 9,90,56,567/- from several persons. Therefore, he called upon the assessee to file necessary information including name and address of persons from....
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.... Supreme Court in the case of M/s. Kachwala Gems Vs. JCIT (2006) 206 CTR (SC) 585 held that payment by account payee cheque is not sufficient to establish genuineness of transactions. What is relevant to see is transactions are passed the test of genuineness in real sense, that means the assessee should prove beyond doubt the nature of credits and source for such credits. In this case, it is admitted fact that the assessee has routed its unaccounted income in the form of unsecured loans through various group concerns, which is nothing but sham transaction. Therefore, he opined that there is no error in the findings recorded by the Assessing Officer to disallow unsecured loan received from three entities as undisclosed income of the assessee. The relevant findings of the learned CIT(A) are as under:- "7. I have carefully considered the observation of the AO under para 5 and the submissions of the appellant under para 6. The appellant's submission that the above mentioned sums have not been added in the search assessment u/s 153A, therefore the addition made prior to search must be deleted is not acceptable. The original assessment was made prior to the search. It is altoget....
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....are genuine which are supported by necessary evidences. The AR for the assessee referring to paper book filed by the assessee submitted that the assessee has filed ledger account copies of loan creditors along with bank statements and established that all transactions are routed through proper banking channel . The assessee has also explained source of income for unsecured loans, as per which a sum of Rs. 1,75,00,000/- received from M/s. Mehta Motors & General Finance Company represented by Umed Mehta HUF was out of commission received from M/s. Kawarlal & Sons, a group company of the assessee by cheque dated 03.11.2008. The said sum of Rs. 1,75,00,000/- was received from M/s. Kawarlal & Sons has been routed through Umed Investments & Marketing Co. Pvt. Ltd. Further, said sum has been finally transferred to assessee company by Umed Investments & Marketing Co. Pvt.Ltd vide cheque No.932791. Similarly, unsecured loan received from M/s. C.K.Exports was once again received from M/s. Kawarlal & Sons routed through Kesaria Marketing Pvt. Ltd. Likewise, unsecured loan received from M/s. Swastic Trading Corporation was also out of commission income received from M/s. Kawarlal & Sons. All t....
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....tial burden of proving all three ingredients are discharged, then burden shifts to the Revenue to prove otherwise that the said unsecured loans are unaccounted income of the assessee. 9. In this legal background, if you examine facts of this case, we find that the assessee has received a sum of Rs. 1,75,00,000/- from M/s. Mehta Motors & General Finance Company, a proprietary concern of Mr. Umed Mehta (HUF). The assessee has filed various details including bank statement and financial statement of creditor. From the details filed by the assessee, we find that a sum of Rs. 1,75,00,000/- was received from Umed Investments & Marketing Co. Pvt.Ltd. on 03.11.2008 by cheque No.932791. The said sum was received from M/s. Kawarlal & Sons by Umed Investments & Marketing Co. Pvt. Ltd. Further, the said sum has been finally paid to the assessee by Umed Investments & Marketing Co. Pvt.Ltd. All these transactions are routed through proper banking channel. The assessee has also proved source of income for said sum of Rs. 1,75,00,000/-, which is out of commission received from M/s. Kawarlal & Sons by Umed Investments & Marketing Co. Pvt.Ltd. Therefore, from the above details, it is very c....