TaxTMI 
TaxTMI 
2021 (9) TMI 1018
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....the facts of the case and submissions ad made before him. 2. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in maintaining the disallowance of Rs. 60,61,225/- as made by the assessing officer on account of interest paid without properly appreciating the facts of the case and submission made before him. 3. That the appellant reserves its right to add, alter and modify the grounds of appeal as taken. The assessee has raised following grounds of appeal in ITANo.336/Ind/2018: 1. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in maintaining disallowance of Rs. 35,12,470/- as made by the Assessing Officer on the account of interest paid without properly appreciating the facts of the case and submissions ad made before him. 2. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in maintaining the disallowance of Rs. 35,12,470/- as made by the assessing officer on account of interest paid even when the appellant has properly discharged onus lying on it. 3. That the appellant reserves its right to add, alter and modify the grounds....
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....g copy of PAN, audited balance sheet, bank advice for the amount transferred to the assessee company, confirmation and other relevant details. However, Ld. Assessing Officer was not satisfied with the submissions made by the assessee and doubted the genuineness of the transaction and creditworthiness of the cash creditors and accordingly made the addition u/s 68 of the Act at Rs. 2,70,00,000/-. 5. Ld. Assessing Officer also called the information about the deduction of prior period interest of Rs. 60,61,225/- claimed by the assessee to have been paid on term loan from HDFC bank. The assessee claimed that this sum of interest of Rs. 60,61,225/- is allowable u/s 43B(d) of the Act. However, assessee failed to find any favour from the Ld. Assessing Officer. As Ld. Assessing Officer making detailed observation as appearing at 45 to 52 of the assessment order dated 07.03.2014 denied the claim and made the addition of Rs. 60,61,225/-. Ld. Assessing Officer also disallowed interest claim of Rs. 24,47,865/-, since it was not paid before due date of filing the return. After making the aforesaid additions income assessed at Rs. 3,77,69,020/-. 6. Aggrieved assessee preferred an appeal be....
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....-do--- 1.5 Copy of intimation as passed by the CPC clearly mentioned the address of the lender 132-135 ---do--- 1.6 Abstract of the master of the lender company as downloaded from the site of ROC 136-137 ---do--- b. M/s AXIOM COMMODEAL P LIMITED [ Loan of Rs. 45,00,000/-] S.No Particulars Page no Reference in the assessment order 1.1 Confirmation of unsecured loan 138 Inner Page No 12 ofthe assessment order 1.2 Advice of bank regarding transfer of amount to the bank account of the assessee 139-140 ---do--- 1.3 Copy of PAN Card 141 ---do--- 1.4 Copy of audited balance sheet of the loan creditor as on 31.03.2011 142-151 ---do--- 1.5 Cop[y of Acknowledgment of IT Return 152 ---do--- 1.6 Abstract of the master of the lender company as downloaded from the site of ROC 153-154 ---do--- c. M/s CONTRA VANJIYA PVT LIMITED [ Loan of Rs. 50,00,000/-] S.No Particulars Page no Reference in the assessment order 1.1 Confirmation of unsecured loan 155 Inner Page No 9 of the assessment order 1.2 Advice of bank regarding transfer of amount to the ....
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....ited in the account of the loan creditors 4 TDS on the amount of Interest was also deducted and deposited with the Income Tax department. 5 The said amount of TDS as deducted duly reflected in Form No 26AS of the deductee / Payee and credit of the same ought to be claimed by the appellant 6 Copy of account of the appellant in the book f the loan creditor was filed wherein the amount of loan as taken by the appellant was duly reflected 7 Copy of PAN No of the loan creditors 8 Copy of Bank statement of the loan creditors wherein the amount as advanced to the appellant was duly reflected 9 Copy of Income Tax return/ Intimation as passed in the loan creditors was filed 10 Copy of Audited financial statement of the loans creditors for the Year ended on 31.03.2011 was filed 11 Copy of Master records as downloaded from the site of MCA was also filed 12. Thereafter Ld. Counsel for the assessee took us through the summary of loans received from the alleged five companies which were repaid subsequently and interest was debited and tax deducted at source consistently. It was stated that loan from Advantage Deal Trade P. Ltd. at Rs. 50,00,000/....
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.... for the assessing officer to disbelieve on the same. 1.10.1] The assessing officer summarized the reason for nonaccepting the loans as received by the assessee as genuine on inner Page No 36 of the assessment order, the reason of the assessing officer and its reply/ explanation from the side of the assessee is as under: - S.No Observation of the assessing officer Explanation of the appellant 1 Letter as issued u/s 133[6] of the Act but no reply was received from the creditors. Hence, the credit worthiness and genuineness of the transaction remained unproved. The assessing officer himself accepted the identity of the loan creditor and disputed about the credit worthiness and genuineness of the loan transactions. The assessee with the help of bank statement, Balance sheet and Income Tax return proved the credit worthiness and genuineness of the loan transactions which was not disbelieved by the assessing officer himself. 2 On the basis of ADIT [ Inv] unit- (iii), Kolkata, since the summon was not served upon to the loan creditors the assessing officer reached to a conclusion that these companies are not in existence. That all the loan creditors ar....
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....t by the Investigation wing and jumped to a conclusion that most of the companies based from Kolkata and Mumbai provided accommodation entries to the local indore base companies. The assessing officer some investigation carried out by the Investigation wing but the said investigation carried out in which context is not known to the assessee whether the name of the assessee or loan creditor of the assessee was found place in the said investigation was also not known to the assessee. Hence, the assessing officer was grossly erred in making this type of casual remarks in the assessment order which supposed to be passed on the basis of material available before him. 7 The assessing officer ignored the judicial decisions as referred by the assessee during the course of assessment proceeding by stating that the same are distinguishable on the facts of the present case. The assessing officer has utterly failed to mentioned why the decisions as referred by the assessee was distinguishable on the facts of the present case of the assessee. That decisions as referred by the assessee squarely applicable on the facts of the present case, as discussed by the assessee in this letter. ....
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....d as explained as held in the following decisions: S.No Reference Citation 1 CIT Vs Rock Fort Metal & Minerals 198 Taxmann 497 (Delhi) 2 CIT Vs Winstral Petrochemicals (P) Ltd 330 ITR 603 (Delhi) 3 CIT Vs Oasis Hospitalities (P) Ltd 333 ITR 119 Delhi) 4 CIT Vs Gangour Investment Ltd 335 ITR 359 (Delhi ) 5 CIT Vs Tulip Finance Ltd 015 DTR 185 (Delhi) 16. Quoting the above decision Ld. Counsel for the assessee submitted that it is a settled position of law that once the assessee has proved the identity of the creditors, in that case there is no justification for making any addition to the income of the assessee. If the assessing officer has any doubt about the genuineness of the loan in that case also addition should be made in the case of that creditor and not in the case of the assessee. He also submitted that in case where the amount received by the assessee is in the form of unsecured loan and loan creditor is regularly assessed to tax, then, it is the duty of the assessing officer to write a letter to the assessing officer having jurisdiction on the unsecured loan creditors. That once the onus as lying on the assessee is d....
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....nal High Court in the case of Ashok Pal Daga Vs CIT reported in 220 ITR 452 7.Hon'ble Jurisdictional High Court in the case of CIT Vs Barjatiya Children Trust as reported in 225 ITR 640 8. Hon'ble Jurisdictional High Court in the case of CIT Vs Metachem Industries as reported in 245 ITR 160 9.Hon'ble Gujarat High Court in the case of CIT Vs Ranchhod Jivabhai Nakhava as reported in 21 taxmann.com 159 10. Hon'ble Gujarat High Court in the case of DCIT Vs Rohini Builders as reported in 256 ITR 360 11.Hon'ble Calcutta High Court in the case of M/s Hindustan Tea Trading Co Limited as reported in 263 ITR 289 12. That Hon'ble ITAT Mumbai Bench in the case of Income Tax Officer 9(1)-1 Vs Anant Shelters (P) Ltd reported in 20 taxmann.com 153 13.Hon'ble Delhi High Court in the case of Gangeshwari Metal Pvt Ltd [ITA No 597/2012] 20. Per contra Ld. DR vehemently argued supporting the finding of both lower authorities. He also took us through the finding of Ld. CIT(A) appearing at para 4.2.2 to 4.2.6 at page 21 to 29 of the impugned order wherein Ld. CIT(A) has also referred to various judgements in favour of the revenue.....
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....f Bank statement of the loan creditors wherein the amount as advanced to the appellant was duly reflected 9 Copy of Income Tax return/ Intimation as passed in the loan creditors was filed 10 Copy of Audited financial statement of the loans creditors for the Year ended on 31.03.2011 was filed 11 Copy of Master records as downloaded from the site of MCA was also filed 24. We also notice that all the documentary evidences filed by the assessee and contents appearing therein have not been found to be incorrect by the lower authorities at any stage. Ld. Assessing Officer has treated the alleged cash creditors as an unexplained merely on the basis of an investigation report which is never confronted to the assessee nor any opportunity of cross examination was provided which in itself defies the principles of nature justice. 25. Provision of section 68 reads as follows: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may b....
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....to prove the source of alleged cash credits before the Ld. Assessing Officer. Thereafter the burden shifts on to the revenue authorities to disprove such documents or to find any discrepancy in such documents, which has not been found by the revenue authorities in the instant appeal. The PAN No. of the alleged cash creditors was very much available with the Ld. Assessing Officer. No reports seem to have been called from the counterpart Ld. Assessing Officer having jurisdiction over the alleged cash creditors. The assessee has limited means to call for elaborate information required by Ld. Assessing Officer. Looking to the list of documents filed by the assessee to explain the cash credit we find that nothing more could have been possible for assessee to explain the identity and creditworthiness of the cash creditors and genuineness of the transactions. 28. We also notice that the issue of identity, genuineness and creditworthiness of the alleged cash creditors namely Advantage Dealtrade P Limited, Axiom Commodeal P Limited ,Contra Vanijya P Limited ,Dhanlabh Trade Link P Limited ,Spangle Dealtrade P Limited. Came up before the Coordinate Bench Jaipur in the case of M/s Motisons ....
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....initial burden lies, produces bank certificate to establish that the transaction was carried out through account payee cheques thus is closing the identity of the creditors as also the source of income, the burden shifts on to the department and the department cannot add the cash credits to his income from undisclosed source. 12. The Hon'ble Supreme Court in Nemi Chand Kothari (supra) observed that in order to establish the receipt of a cash credit, the assessee must satisfy three conditions i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. In the instant case by virtue of the fact that the transaction was completed by cheque payments, the appellant has contended that it had satisfied all the three tests. 13. In Kishanchand Chellaram (supra) wherein the Supreme Court observed that the revenue authorities had not recorded the statement of the Manager of the bank and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue. 14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inas....
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.... account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CIT (A) and the Tribunal vulnerable. In our view the assessee was bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th February, 1996 seeking an opportunity to cross examine the deponent and furnish the assessee with copies of statement and disclose material, these were denied to him. In this view of the matter we are inclined to allow the appeal on this very issue. 18. Once we take this view it is not necessary to consider the second question as to whether or not the Tribunal had erred in law in holding that the amendment to secion 147(3) with effect from 1st April, 1989 were applicable to reassessment edings against the appellant in respect o....
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.... making any further enquiry, disbelieving the evidence of the assessee made addition. ITAT held the additions not justified as the assessee discharged the onus. High Court held that Tribunal is justified in deleting the addition and 32. In ITO v Suresh Kalmadi [1988] 32 TTJ (Pune) TM 300, it was held that where identity of creditor is established and entry shown to be not fictitious, the burden shifts on to the department to show as to why the entry still represented the suppressed income of the assessee. The assessee cannot be called upon to prove the worth of his creditor's creditor. The fact that in the books of the creditors the same amounts had been credited in the name of other parties and that immediately after repayment, the creditors withdrew the money could not lead to any adverse inference when this was their modus operandi and assessee's case was not the solitary transaction. 33. We find that Hon'ble Apex Court in the case of CIT Vs Orissa Corporation (P) Ltd as reported in 159 ITR 78 has held that: "13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said c....
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....documents and the record of the IT Department itself. I find no infirmity in the order of the Deputy CIT (A.). It is sustained." 4. On application under s. 256(1) of the Act, the Tribunal held that it correctly reached the conclusion that the addition was unwarranted and no referable question of law arose out of the conclusion reached on appreciation of facts properly. 5. In our view, the finding about the genuineness is a finding of fact based on proper appreciation of facts and does not manifest any illegality or perversity." 36. We also find that Hon'ble Jurisdictional High Court in the case of CIT Vs Metachem Industries as reported in 245 ITR 160 has held that [Refer Para 3 to 6]: "3. We have heard learned counsel for the parties. Sec. 68 of the Act of 1961 says that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source, thereof or the explanation offered by him is not, in the opinion of the ITO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. Therefore, according....
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....rm has satisfactorily explained the aforesaid entries. 6. We are, therefore, of the opinion that the view taken by the Tribunal is correct and the aforesaid question is answered against the Revenue and in favour of the assessee." 37. We find that Hon'ble Gujarat High Court in the case of CIT Vs Ranchhod Jivabhai Nakhava as reported in 21 taxmann.com 159 has discussed the issue of cash credit in detail and held that [Refer Para 15 to 18]: "15.In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessee whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. 16. Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amounts of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the len....
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.... submissions and have also gone through the order Passed by the Assessing Officer, the relevant portion of which we have also extracted in para. 2 above. The Commissioner of Income-tax (Appeals) more or less confirmed the addition on the reasoning given by the Assessing Officer in the assessment order. A perusal of the chart given by us in para. 3 above indicates that out of 21 creditors the Assessing Officer has recorded the statements of only six creditors, viz., creditors at serial Nos. 1, 2, 3, 4, 6, and 7. However, in respect of all the 21 creditors the assessee has furnished their complete addresses along with GIR numbers/permanent account numbers as well as confirmations along with the copies of assessment orders passed in the cases of creditors at serial Nos. 1, 2, 4, 5, 6, 7, 9, 10, 11, 12 and 16. In the remaining cases where the assessment orders passed were not readily available, the assessee has furnished the copies of returns filed by the creditors with the Department along with their statement of income. All the loans were received by the assessee by account payee cheques and the repayments of loans have also been made by account payee cheques along with the interest ....
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....ck of creditworthiness and mere noncompliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee. In the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 8. Further, we may point out that section 68 under which the addition has been made by the Assessing Officer reads as under : "68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged ....
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....dvantage Dealtrade P Limited, Contra Vanijya P Limited ,Dhanlabh Trade Link P Limited & Spangle Dealtrade P Limited. are active companies and have duly filed their balance sheet up to 31.03.2019 and are marked as active companies. Also for the remaining company namely Axiom Commodeal P Limited we find that this company has merged with Contra Vanijya P. Ltd. under the order of Hon'ble High Court of Delhi pronounced on 16.01.2017. These facts also supports our view that all the alleged five cash creditors are genuine cash creditors as their identity is proved beyond doubted, creditworthiness is proved with the banking transactions and genuineness is proved as the loans taken from all these five companies have been repaid. We, therefore, in the light of the various judgments and decisions referred hereinabove, more particularly the decision of Coordinate Bench Jaipur in the case of M/s Motisons Entertainment (India) Pvt. Ltd. vs. ACIT(Supra) having dealt with various cash creditors including the alleged five cash creditors referred in the instant appeal, are of the considered view that the assessee has successfully discharged its onus by explaining source of cash credit of loan of....
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....lement of principal and interest were debited to the loan account and no claim of interest was made during the F.Ys.2007-08 to 2009-10. When this mistake was detected the interest paid for F.Ys. 2007-08 to 2009-10 amounting to Rs. 60,61,225/- was claimed as prior period expenditure. Interest of Rs. 24,47,865/- for current year i.e. F.Y. 2010-11 was also claimed. We find that ld. CIT(A) has allowed the interest claim of Rs. 24,47,865/- treating it as business expenditure. Ld. CIT(A) has not doubted the utilization of loan for the business purpose. Ld. DR failed to controvert this fact that the loan taken from HDFC bank has been utilized for any other purpose other than for business of the firm. Audited balance sheet supports the contention made by the assessee and also there is no difference in the ultimate tax liability as it was subject to tax on the same rate in the preceding years as in the current year. Our view is supported by the judgment of Hon'ble Apex Court in the case of Glaxo Smithline (Asia) P Limited reported in 226 CTR 133. 45. Under these given facts and circumstances of the case, we are of the considered view that the claim of prior period interest of Rs. 60,....