TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 137
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.... the assessee failed to offer any satisfactory explanation about the bogus unsecured loan credited in the books of accounts of the assessee . 2.That in the facts and circumstances of the case, Ld. CIT(Appeal), has erred in deleting the addition of Rs. 56,36,542/ - in respect of interest payments on the unaccounted loans as a consequential effect on deletion of addition of unsecured loan of Rs. 12,56,40,000/- made by assessing officer u/ s 68 of the Income Tax Act,1961. 3. That in the facts and circumstances of the case, Ld. CIT(Appeal), has erred in deleting the addition of Rs. 27,034/ - on account of delayed payments of interest on service tax and TDS, without considering the fact that the assessee failed to produce any valid/ tenable explanation in this regard. 4. The appellant craves leave to add, alter or withdraw any ground/ s of appeal before or at the time of hearing. Ground no. 1: 3. Vide ground no. 1, the Revenue has agitated the action of the ld. CIT(A) in deleting the addition of Rs. 12,56,40,000/- made by the Ld. AO in respect of loan received from 11 parties. 4. During the assessment proceedings the Ld. AO noted that the assessee received unsecured loans from ....
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....e appellant, the evidences and the findings of the AO. Ground no. 1 is general in nature and does not require any adjudication. Ground Nos. 2 to 7 are against the addition of unsecured loans of Rs. 12,56,40,000/- taken during the year and the same are taken together. The fact of the case is that the assessee firm received loan from various individuals and companies during the year. In response to the notice issued by the AO, the assessee filed details containing the name, address and PAN of the lenders and the amount of opening balance, amount received, interest credited, TDS deducted, interest repaid and closing balances. The name, address, PAN of the loan creditors from whom loan was received and amount repaid was also available in Form 3CD uploaded by the assessee. In course of the assessment proceedings, the AO issued notices u/s. 133(6) to the loan creditors which were served and complied by them confirming the amount of loans advanced by them and filing copies of their returns of income, audited financial statements, bank statements and explaining their sources of funds and natue of receipts. The AO subsequently issued Show Cause Notice to the assessee stating that 9 ....
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....ose statement the AO wished to rely upon against the assessee and to produce the parties for cross examination of the assessee. However, the Assessing Officer without providing copy of any material whatsoever to the assessee assessed the loans received during the year from the 12 loan creditor companies as unexplained cash credit on the following grounds. i. Accurate Vintrade Pvt. Ltd/New Town Mercantiles Pvt. Ltd/Purojit Vinimay Pvt. Ltd/Rotomac Vinimay Pvt. Ltd./ Singrodia Holdings Pvt. Ltd *. Statement of Shri Krishna Murari Natia who as per the AO in his statement dated 23-4-2014 admitted that he had provided accommodation entries in lieu of commission in the form of bogus bills and loans. The relevant portion of his statement were stated to be attached with assessment order as KMN-1, KMN-2 and KMN-3. * Replies to notices s 133{6) was received from address other than the address at which notice was issued. * As per Inspector report there was no physical existence of the company at both the address. ii. Carmel Merchants Pvt. Ltd./Everest Commerce Pvt. Ltd. * Statement of Shri Ram Kishan Ajitsaria dated 21-05-2014 who proved that he provide accommodation entries throu....
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....l has been brought on record by the AO Regarding receipt of replies from address other than the address at which notices were served, the appellant submitted that the assessee had provide the addresses as available in its records and subsequently the said companies changed their address. The notices issued by the AO at the old address were served but the creditor filed their replies mentioning the present address which is as per requirement of the law. Regarding physical existence at old address, the appellant submitted that since some of the loan creditors had shifted to new address as such the question of existence at old address does not arise. Regarding physical existence of loan creditors at new address, the appellant firstly stated that all the above Loan creditor's are companies registered under the Companies Act, 1956 and are regularly filing their statutory returns which is evident from the fact that their status on MCA is ACTIVE COMPLIANT. It is stated that the Active Complaint Status is given only to companies who uploads photo of the building where the office of the company is situated, photo of the registered office of the company along with the photo of the ....
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....mation of account and statements showing source of funds and nature of receipts in respect of each of the loan creditors along with copies of the assessment orders of the loan creditors. The asses ee also ensured compliances from parties who although received notices but did not comply with the same. As such the assessee duly discharged the initial onus lying upon it to establish the identity and creditworthiness of the loan creditors and genuineness of the transactions and shifted the onus on the revenue. Thereafter, the AO did not bring any adverse material on record and sought any explanation from the assessee. As such I find that the assessee duly discharged the onus lying upon it. In this regard reference is made to the decision in the following cases:- a. S.K. Bothra & Sons, HUF v. Incometax Officer, Ward46( 3), Kolkata [201]15 taxmann.com 298 (Calcutta) Where assessee had produced loan confirmation certificates signed by creditors, disclosed their permanent account numbers and address. loans taken by assessee could not be held to be not genuine without giving further opportunity to assessee to explain information basis of which such conclusion was arrived at. b. Fort P....
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....ssioner of IncometaxII, Indore v. Vaibhav Cotton (P.) Ltd.[2013] 36 taxmann.com 429 (Madhya Pradesh) In this case, Tribunal on its own independent analysis of matter had reached to factual conclusion about genuineness of unsecured loan transaction and in this process Tribunal had taken note of fact that detailed account of concerned parties were filed by assessee and through account payee cheques. source of deposit in bank was not in dispute and identity established and also creditworthiness was established -Whether since finding which had been recorded by Tribunal was essential finding of fact and since revenue had failed to point out any error or perversity in said finding of fact, order of Tribunal was to be upheld-Held, yes h. Commissioner of IncometaxI v. Kapoor Chand Mangesh Chand[2013] 38 taxmann.com 239 (Allababad) Where there was sufficient funds in lender's account and loan was taken and repaid through cheques, there was no unexplained cash credit. i. Commissioner of lncometaxI v, Patel Ramniklal Hirji [2014[41 taxmann.com 493(Gujarat) Where assessee received loan through account payee cheques, and, in support of loan transaction he also brought on record copy o....
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....nd Singha referred to in the assessment order by the AO were recorded by another assessing officers long before the transactions with the assessee and as such the said statements have no relevance in so far transactions with the assessee are concerned. Unless the statements relied upon contains the name of the assessee, no addition can be made. The above view is supported by the decision of the Hon'ble jurisdictional Calcutta High Court in the case of S. P. Agarwalla alias Sukhdeo Prasad Agarwalla v ITO 119831 140 ITR 1010 (Cal) held that a mere confessional statement by a third party (who is a lender to the assessee) that he was a mere name lender and that all his transactions of loans were bogus without naming the assessee as one who had obtained bogus loans, would not be sufficient to hold that income has escaped assessment. Similarly in the case of CIT v. Priyanka Ship Breaking Co. (P.) Ltd. [2012] 26 taxmann.com. 321/21 Taxman 20 (Delhi)(Mag.), it has been held that where entry operator in his statement u/s 132(4) did not refer to the name of the assessee, the recipient of credit entry, and merely stated that given only loan after taking cash and deducting commission. it was....
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....survey in his premises, there was no other material either in form of cash, bullion, jewellery or document in any other form to justify said statement. addition m e of said income in hands of assessee under section 69B was to be deleted. Moreover. the AO has not brought any evidence to show that any cash has emanated from the offers the assessee. In the case of Hon'ble Delhi High Court in the case of CIT v Value Capital Services P Ltd reported in (2008) 30 ITR 334 (Del), has held that the additional burden.. the department to show that even if the hare applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so..enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. Similarly it has been held in the case of ITO v. Neelkanth Finbuild Pvt. Ltd. (2015) taxmann.com 132 (Delhi Trib.) that where Assessing Officer was not able to bring anything on record that it was assessee-company's own money which was routed in form of share application money, addition under section 68 was to be deleted. 3. As per Section u/s 12 of the Companies Act, 2013, the compan....
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....the assessee that the Show Cause notices are issued before passing of final assessment order to meet the principles of natural justice i.e. audi alter partem. It is quite practical for the assessee to approach the parties upon whom the notices are served but not complied and request them to make compliance. Merely for the reason that the parties made compliance after issuance of Show Cause Notice to the assessee, 1 find no reason to hold that the replies were 'manufactured' particularly where no deficiencies have been found in the replies of the loan creditors and documents filed by them. 6. No loans have been taken by the assessee from the following parties during the year under consideration and the unsecured loan taken earlier had been accepted in regular assessment for the Assessment Year 2015-16 i. Cosmos Real Estates Pvt. Ltd. ii. Everst Commerce Pvt. Ltd. iii.Navana Trading Company Pvt. Ltd As such there is no reason to disallow the interest in respect of loans received from the said parties since the loan taken from the said parties have already been accepted in regular assessment in earlier year. 7. Regarding allegation of paper company, I find that the....
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....ted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 8. I further find force in the that the loan creditors had sufficient net worth to invest as show under:- Name of Company Capital Reserves Net Worth Closing balance % of Net Profit Accurate Vintrade Pvt. Ltd 5,505,000 674,387,861 679,892,861 17,262,113 2. Carmel Merchants Pvt. Ltd 12,553,000 1,410,028 13,963,028 10,259,988 73 Century Ply & Boards Pvt. Ltd 62,600,000 91,454,239 154,054,239 22,718,200 14 Cosmos Real Estates Pvt. Ltd 28,110,000 179,993,030 208,103,030 634,686 0.3 Everest Commerce Pvt. Ltd 32,720,000 210,822,936 243,542,936 542,228 0.2 Growfast Advisory Pvt. Ltd 914,980 39,799,628 40,714,608 500,000 1.2 Navana Trading Company Pvt. Ltd 11,556,020 46,602,111 58,158,131 1,269,375 2.1 Newtown Mercantile Pvt.Ltd 3,928,500 551,422,419 555,350,919 16,213,899 2.92 Purujit Vinimay Pvt. Ltd 5,310,000 595,252,811 600,562,811 13,115,545 2.18 Rotomac Vinimay Pvt. ....
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.... ingredient is genuineness of the transactions, for which it is found the monies had been directly paid to the assessee-company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the assessee has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee-company as share application. Hence, the source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s. 133(6) and have also confirmed the payments which are duly corroborated with the respective bank statements and all the payments are by account payee cheques.[Para 23] Thus, in this case in hand, the assessee had discharged it onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to d....
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....ained cash credits as the Books of Accounts itself indicate the capacity to advance loan, the parties are identified and there is no further need to prove the creditworthiness of the creditors. In the case of Raichand Kothari (HUF) vs. CIT (1997) 139 CTR (Gau) 329; (1997) 223 ITR 250(Gau) relied on CIT vs. Shree Gopal & Co. (1994) 117 CTR (Gau) 357 (1993) 204 ITR 285 (Gau) applied CIT vs. Laul Transport Corporation (2009) 180 Taxman 185(P&H), it has been held that finding recorded by the tribunal accepting the identity and creditworthiness of the creditors to advance money and genuineness of cash credits is a pure finding of fact, and the appellant having not pointed out any illegality or perversity in the said finding of fact, no interference is warranted. In the case of Jalan Timbers vs CIT[1997] 223 ITR 11(Gau) it has been held that where, in respect of certain cash credits, the asessee had not only disclosed them in his return of income but also produced confirmatory letters from the creditors, and the creditors had also declared the amounts in their income-tax returns which were accepted by the ITO, addition made a cash credit by ignoring the aforesaid facts would not be j....
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....ssee had proved creditworthiness and genuineness in respect of unsecured loans taken from the parties, addition made under section 68 as unexplained cash crfedit was not justified. Assessee company took unsecured loan from 12 companies. AO initiated inquiry and in view of the inquiry report, companies from whom assessee took loan were reported as jamakharchi/paper companies. Hence, AO treated the above said loan amount as unexplained cash credit under sections 68 and added the same to the income of the assessee. Held: Transactions had duly been proved by assessee by furnishing various evidences i.e copy of loan Confirmation copy of bank statement, copy of return of income filed by these parties, copy of audited financial statements of the aforesaid 12 parties. In view of the availability of the Pan, copy of Acknowledgement of returns, identity of the parties was established. Further the assessee has also filed confirmation letters in this regard. Therefore the creditworthiness of these parties was also placed upon it under section 68. Therefore, addition made under section 68 was not justified-Yash Developers v. DCIT (2018) 159 TR(A) 416(Mum-Trib): 2017 TaxPub(DT)4765(Mum-Trib). ....
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....as prior to the said loan transactions. The Ld. Counsel has further submitted that the alleged persons on whose statement has been relied upon by the Ld. AO were neither operating nor controlling the said concerns at the time of the transactions done by the assessee. The Ld. Counsel in this respect has also relied upon the balance sheets and submitted that the creditors had sufficient net worth to advance loans to the assessee, He has submitted that the Ld. CIT(A) considering the entire facts and circumstances of the case has rightly deleted the addition so made by the ld. AO. 10. Having gone through the impugned order of the ld. CIT(A) and considering the submissions of the ld. Counsel of the assessee, which the ld. DR could not rebut, we do not find any justification to interfere in the order of the ld. CIT(A) on this issue, the same is accordingly upheld. This ground of revenue's appeal is dismissed. 11. Ground no. 2 is relating to the interest payments made by the assessee on the unsecured loans. 12. The ld. CIT(A) decided this issue in favour of the assessee observing that since the loan transaction has been accepted, the issue of payment of interest is consequential in nat....