AI Drafter 
TaxTMI 
TaxTMI 
2021 (11) TMI 137
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....f organised scam, without considering the facts that 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 assessmen....
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....sion I have carefully gone through the assessment order and submissions made on behalf of the 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 th....
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....lleged the 9 loan creditors and paper companies for rebuttal by the assessee and further requested to provide copies of statement of any parties on whose 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 addre....
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....o does not and cannot relate to the transaction of the assessee. v. The parties had no capacity to depose on behalf of the company. vi. The statements recorded u/s. 131 per se without any corroborative material has no evidentiary value. vii. Barring statements no other material 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 th....
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....he following facts emerges:- 1.The assessee submitted that name, address, PAN. Opening Balance, Loan taken during the year, interest. TDS, Loan repaid and closing balance. Subsequently on receipt of the Show Cause Notice the assessee tiled copies of PAN Card, Acknowledgement of returns of income, audited financial statements, bank statements, confirmation 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), K....
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....furnished by assessee and also identity of cash creditors were established- Whether addition was not justified-Held, yes. f. Commissioner of Incometax, AhmedabadIV v. Sachitel Communications (P) Ltd. [2014] 51 taxmann.com 205(Gujarat). Where assessee proved identity of creditor, its capacity and further transaction, was made through bank, any addition as unexplained unsecured loans would be unsustainable. g. Commissioner 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 ....
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....filed return of income. bank statement and balance sheet wherein, loans to assessee were reflected - Whether. assessee had discharged its burden under section 68 and cash credits were to be treated explained - Held, yes n. Commissioner of Incometax, Ajmer v. H. S Builders (P.) Ltd. 120121 26 taxmann.com 86 (Raj.) Confirmations by creditors and production of their balance sheets. accounts. etc.. proven is enough evidence to justify deletion of cash credits. 2. Shri Krishna Murari Naita, Shri Ram Kishan Ajitsaria and Shri Anand 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....
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....o. 286/57/2002-IT(lnv) dated 03.07.2002, CBDT Letter F. No. 286/98/2013-IT(Inv) dated 10.03.2003, CBDT Letter F. No. 286/98/2013-IT(lnv ) dated 09.01.2014, CBDT Letter No. F. No. 286/98/2013-IT(Inv) dated 18.12.2014. Reference in this regard is made to the decision of the Hon'ble Supreme Court in the case of CIT v Mantri Share Brokers Pvt. Ltd. [2018] 96 taxmann.com 280 (SC) dated 03.07.2018 wherein the department filed by the revenue against the decision of the High Court holding that where except statement of director of assessee-company offering additional income during 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 th....
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....count payee cheques. etc ., it could be said that assessee had discharged its initial onus and just because some of creditors/share applicants could not be found at address given, it would not give revenue a right to invoke section 68 without any additional material to support such a move - Held, yes 5. In respect of the following 3 loan creditors the only allegation is that the said companies filed their replies after issuance of Show Cause otices issued to the assessee. i. Century Ply & Boards Pvt. Ltd. ii. Navana Trading Company Pvt. Ltd. iii. Sthavistha Mercantiles Pvt. Ltd I agree with the contention of 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 i....
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....itor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as worthy of credence. So long it is not established that the return submitted by the creditor has been accepted by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted 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 5,505,000 674,387,861 679,892,86....
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....d creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and returns. With regard to the creditworthiness of share applicants, it was noted that those applicant companies were having capital in several crores of rupees and the investment made in the assessee company was only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers which has not been done, so no adverse view could have been drawn. Third 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 th....
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.... In the above case, the AO issued summons under section 131` to companies from whom share capital was stated to be received. The summons were returned unserved with the remarks ' no such company', which was confirmed by the Inspector sent to the addresses for verification. Whereas in the instant case, admittedly the notices issued u/s. 133(6) of the loan creditor's which were duly served upon and complied with. CIT, Central-1, Kolkata Vs. Maithan International [2015] 56 taxmann.com 283 (Calcutta) The above case is related to section 263 of the I.T Act, 1961 in which the ld. AO have not done proper enquiries. As such the above case has not application to the instant case. In the case of CIT vs. Tania Investments (P) Ltd (2010) 322 ITR 394 (Bom.), it has been held that tribunal was right in deleting the addition made by the AO towards unexplained 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....
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....on appreciation of evidence and material on record and, therefore, assessee has discharged its onus of providing genuineness, nature and source of the deposits, satisfactorily, addition rightly deleted. In the case of CIT v. Rhombus Intrnational Pvt. Ltd ITA No. 223/13: ITA No. 494/Del/2016, CIT v. Gangeshwari Metal p.Ltd (2014) 361 ITR 10, CIT v. Kamdhenu Steel & Alloys Ltd. SLP (CC) No. 15640 of 2012, dt. 17- 09-2012; CIT v. Harishbhai Raojibhai Patel HUF (2013) 219 Taxman 125 (mag). Distin guished CIT v. Empire Buitech (P) Ltd 366 ITR 110; Vam- Hi-Fashion Garments P. Ltd V. Asst CIT(2016) 151 TR(A) 408 (Del ' C'- Trib): 2016 Taxpub(DT) 1579(Del ' C' -Trib), it has been held that Assessee discharge primary onus to prove that credit entry was not accommodation entry. In the case of Yash Developers v. DCIT (2018) 159 TR(A) 416 (Mum- Trib): 2017 TaxPub(DT) 4765(Mum-Trib), it has been held that since assessee 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 v....
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....ctions with the aforesaid parties were accepted by the Ld. AO. He in this respect has relied upon/on the copy of the assessment order dt. 05-12-2019 relevant to the A.Y 2017-18 and copy of the assessment order dt.20-03-2017 relevant to the A.Y 2015-16. The ld. Counsel has further submitted that the assessee has old running accounts with the aforesaid parties. He has further submitted that the alleged report of the inspector in respect of the three parties was never confronted to the assessee. The assessee was never asked to produce any other information by the Ld. AO before arriving at the conclusions. The statement recorded of some persons/parties relied on by the Ld. AO was never confronted to the assessee. Even the alleged statements recorded in some other cases were allegedly recorded in the year 2014, whereas, the assessee had taken loan in the FY 2015-16 from the said parties, hence, the alleged statement relied upon by the Ld. AO was 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 do....