2022 (1) TMI 1209

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....of unexplained Cash Credit." 3. The facts in brief are that the assessee in the present case is a Private Limited Company and engaged in the business of Trading and investing in shares. The assessee in the year under consideration has obtained fresh loan of Rs. 66.81 crores from various parties including the parties as discussed below: i. M/s. JA Infracon Pvt. Ltd. Rs. 8,50,00,000/- ii. M/s. Satya Retail Pvt. Ltd. Rs. 23,70,00,000/- 4. The assessee in support of the fresh loan obtained from the above parties has furnished the copy of the ledger, contra confirmation, and bank statement of the lender party, return of income and the balance sheet of the lender parties. Accordingly, the assessee contended that it has satisfied all the ingredients of the provisions of Section 68 of the Act. 5. The assessee during the assessment proceedings also contended that the amount of loan was taken by it for the purpose of the business which was repaid in the subsequent assessment year. The assessee in support of his contention has filed the copy of the ledger account of both the parties where the details of the payment of the loan were reflecting. 6. However, the AO ....

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....company, have taken accommodation entries by way of one time share capital along with premium from the group of companies controlled and managed by Shri Shirish Shah. There was the statement under Section 132(4) of the Act dated 13th April 2013 wherein Shri Shirish Shah admitted that M/s Satya Retail Pvt. Ltd. / J A Infracon Pvt. Ltd. have taken accommodation entry by way of share capital from the companies controlled and managed by him which were engaged in providing accommodation entries. The list of such company was also furnished which is appearing on page 8 of the order of the AO. 9. Both the companies which have advanced loan to the assessee have not filed the income tax returns for the assessment year 2013-14 and 2014-15. 10. The AO with respect to the repayment of the loan found that there was no bank statement furnished by the assessee evidencing that the loan has been repaid by the assessee. As such, merely the ledger copies are not sufficient enough to prove the repayment of the loan. As per the AO, even the repayment of the loan shall not provide any relief to the assessee. It is for the reason that under the provisions of Section 68 of the Act, the assessee has t....

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....f the funds in the hands of the loan parties. In other words, the assessee has discharged its onus by furnishing the details about the source of funds in its hands. If there is any doubt about the source of fund in the hands of the loan parties, the same can be added in the hands of the loan parties and not in the hands of the assessee. 17. The Ld. CIT-A after considering the submission of the assessee deleted the addition made by the AO by observing as under: "3.13 On going through the detailed submissions, it is found that the main reason for making the addition by the AO was the source of the loans taken by the appellant company from both the companies. As per the information received from ITO, Ward - 4(1)(1), Ahmedabad regarding the accommodation entries claimed to have been taken by the lender companies from the group companies of Shri Shirish Shah and subsequently, the lender companies have given the loan to the appellant company as a final beneficiary is without any basis. First of all, the appellant company has taken the loans from both the companies which has been given by them out of their sources which is duly explained from their bank account statements. As ....

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....en made by the appellant to both the lender companies. On the contrary, their accounts have been settled and squared up in the subsequent year as discussed in the preceding paras of this order, which itself disproved the allegation of the Assessing Officer. 3.16. So far as identity of the lender companies is concerned, the complete address and their PAN No. besides Income Tax Return and computation along with audited final accounts have been submitted, therefore, the same does not remain in doubt. With regard to the I genuineness of the unsecured loans, the lender companies have provided their bank account statements highlighting the withdrawals towards the account payee cheque given as a loan to the appellant company. Therefore, the same cannot be doubted. Further, with regard to the creditworthiness, the lender companies have submitted the details with regard to sources of the lendings given to the appellant out of the share capital and share premium received from the other companies which have been credited in their bank accounts. Thus, the immediate sources of the lendings to the appellant company have been duly explained by the lender companies. The AOs observation th....

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.... High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: "It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. " 20. Now first we proceed to understand the identity of the party. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. 21. The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not a mask to cover the actual transaction or designed in way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of th....

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...., genuineness of the fund received by them were not established. In other words, the loan parties were held as engaged in the activity of accommodation entry provider in consideration of commission income. As such these companies were acting as a conduit to convert the unaccounted money into accounting form. In the given facts and circumstances the genuineness of the transactions is not free from doubts. 25. In the given facts and circumstances, once the genuineness of the transaction is not free from doubt, it is implied that the creditworthiness of the parties was not satisfactory so as to advance the loan to the assessee. 26. Be that as it may be, the undisputed fact that the amount of loan received by the assessee was refunded to the loan parties. It implies that the assessee was not the beneficiary of the loan received by it as alleged by the AO. Though the loan has been repaid by the assessee in the subsequent year, but it is difficult to hold that the assessee was the ultimate beneficiary of the impugned amount. Thus, we can assume that the impugned transaction was the business transactions between the assessee and the loan parties. 27. It is also pertinent to note ....