TaxTMI 
TaxTMI 
2022 (12) TMI 179
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....s raised following grounds of appeal: "(i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 91,38,649/- made on account of disallowance of interest expenses on bogus unsecured loans without appreciating the fact that such loans were arranged by the assessee from the entry providers who have accepted the modus operandi of providing of bogus entries before the Income Tax Department? (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 85,86,709/- made on account of disallowance of interest payments to M/s Meenahar Gems Pvt. Ltd. (Rs. 55,62,670/-) to Vijay Exports (Rs. 15,51,699/-) and to Aavishkar Murli Agarawal (Rs. 14,72,340/-) without appreciating that the fact that said parties have not complied with the notice issued under Sec. 133(6) of the Act to prove the identity of the lender and genuineness of the transactions inasmuch as that the assessee has made factually incorrect submissions regarding receipt of response from aforesaid party during the course of assessment proceedings as well as during the course....
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....paid against unsecured loans. The Assessing Officer issued notice to all these three parties under Section 133(6) of the Income Tax Act, 1961 (in short, the Act). No reply was received from such parties. 4. The Assessing Officer further noted that the assessee shown interest free loan and advance of Rs. 60.00 lacs to Dimar Construction Pvt. Ltd. and Rs. 8,16,13,678/- to H.V. Construction P Ltd, which are group concern of assessee. The assessing officer was of the view that on one hand the assessee has paid interest on unsecured loan and on the other hand advanced interest free loans to its group concerns. On perusal of rate of interest, the assessee claimed from such concerned, the assessee have claimed interest expenses @ 7% from whom the assessee has availed loan. However, the assessee has given interest free loan to Dimar Construction Pvt. Ltd. and H.V. Construction P Ltd. The Assessing Officer asked the assessee to show cause as to why proportionate interest at the average rate of 7% should not be disallowed. 5. The Assessing Officer issued detailed show cause notice for proposing the disallowance of interest expenses as well as disallowance of proportionate interest rate....
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....d from such parties. The Assessing Officer issued show cause notice to the assessee. The assessee filed reply. The contents of reply of assessee is recorded in para 6.2 of assessment order. The assessee in its reply submitted that they are informed by the assessee that the notice of Assessing Officer under Section 133(6) were complied. The assessee stated that they were already filed copy of confirmation, ledger account of these parties. The assessee further stated that in preceding year, similar interest expenses were allowed in assessment under Section 143(3) of the Act. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer noted that non-compliance of notice under Section 133(6) shows that the interest expenses are not genuine and not allowable. Hence, the aggregate of interest expenses paid to Meenahar Gems, Vijay Exports and Aavishkar Murli Agrawal of Rs. 85,86,709/- were disallowed. 8. On the interest free advances, the Assessing officer held that the assessee has given interest free loan to their group concern i.e. Rs. 60.00 lacs to Dimar Construction P Ltd. and Rs. 8.16 crores to HVK International Pvt. Ltd. The Assessing Officer on his ob....
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....ted that the assessee has paid interest to P.K. Enterprises which the Assessing Officer considered to be part of 19 parties about whom, the HVK International Pvt Ltd. in its settlement application accepted such loan to be bogus and consequential interest paid to such loan was disallowed under Section 57 of the Act. The assessee before him contended that the loan taken from three parties i.e. Mayur Gems, Paras Gems and Piyush Gems are genuine loan hence consequential interest cannot be disallowed. So far as interest paid to P.K. Enterprises is concerned, the assessee stated that the said party was not a part of 19 parties and that the land was received from P.K. Enterprises was genuine loan received through account payee cheques and the consequential interest cannot be disallowed. It was also stated by assessee that the interest paid on such loan to Mayur Gems, Paras Gems and Piyush Gems were already considered as genuine in earlier years and the interest disallowance was deleted by the ld. CIT(A) in his order for A.Y. 2009-10 to 2013-14, 2014-15 to 2015-16 and 2017-18. The ld. CIT(A) held that loan taken from Mayur Gems, Paras Gems and Piyush Gems has already been considered to be ....
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....ing loan was taken after that period. Further, the assessee has own capital and are far excess. There is no change in the facts with regard to earlier assessment year, therefore, considering the fact that no such disallowance was made in earlier years. The ld. CIT(A) deleted the interest disallowance of Rs. 61,32,957/-. Aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before this Tribunal. 13. We have heard the submissions of learned Senior Departmental Representative (ld. Sr. DR) for the revenue and the learned Authorised Representative (ld. AR) of the assessee and have gone through the orders of the lower authorities. Ground No. (i) of the appeal relates to deleting the disallowance of Rs. 91,38,649/-. The ld. Sr. DR for the revenue supported the order of Assessing Officer. The ld. Sr. DR submits that the ld. CIT(A) decided the issue in favour of assessee on the basis of decision of his predecessor in assessee's own case wherein similar issue was involved. The ld. Sr. DR submits that the department has not accepted the order of ld. CIT(A) in those year, however, the income tax effect in those years were less than the monetary limit for filing app....
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....ssment year, the Assessing Officer noted that on verification of return of income submitted by assessee, it is seen that assessee has received unsecured loan from various parties having poor credentials. The assessee has received unsecured loan from Diasqua Exports, Madhav Gems, Mayur Gems and Paras Gems respectively. The Assessing Officer further recorded that these firms are bogus proprietary concerned and entry provider like Madhav Gems and Mayur Gems and Paras Gems that they are of loan providing accommodation entries. The assessee in response to show cause notice submitted that he has taken loan from Paras Gems who is not the same as mentioned in the statement of Praveen Jain. The assessee has availed loan from Prakash Nahar who is proprietorship firm is coincidentally not connected with Praveen Gems. In response to notice under section 133(6), Prakash Nahar submitted that bank statements, ledger account and confirmation and annual accounts regarding Madhav Gems, the assessee submitted that he has taken loan from Madhav Gems, from Madjav Gems is not same as mentioned in the statement of Praveen Jain. He stated that Sushil Jain is the proprietor of Mayur Gems. Further notice un....
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..... 89 taxmann.com 1 and PCIT vs. Sanghi Fincap Ltd. The Ld. CIT(A) held that no addition in absence of incriminating material can be made in the unabated assessment. 12. We find that Ld. CIT(A) also examined the case of unsecured loan on merit and recorded that Assessing Officer made addition by adopting peak credit theory and made addition of Rs.4.15 crores of three parties being Mayur Gems, Paras Gems & Madhav Gems. The assessee has furnished ledger account of those parties, confirmation along with PAN, full addresses, bank statement and other relevant documentary evidence. The ld CIT(A) held that the Assessing Officer issued notice under section 133(6) and in response thereto parties have admitted such loan to the genuine and also provided necessary evidence. Such evidence was not found to be incorrect. The assessee has clearly discharged his onus of under section 68 that there is no addition can be made merely on the basis of presumption. The Ld. CIT(A) also relied on the decision of Hon'ble jurisdictional High Court in the case of CIT- 1 vs. Dharmadev Finance (P.) Ltd. [2014] 43 taxmann.com 395(Guj); PCIT vs. RSA DIGI Prints (Tax Appeal No.503 of 2017 dated 06.09.2....
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.... furnished by the lenders party. 19. On the other hand, the ld. AR of the assessee submits that the allegation of Assessing Officer that lender parties have not made compliance to his notice under Section 133(6) is factually incorrect that all the parties have duly complied the said notice. The assessee also filed confirmation of all the parties as well as copy of ledger account and bank statement showing the payment of interest. All such details are now placed on record. The ld. AR of the assessee submits that the similar interest expenses were allowed in earlier years in the assessment order passed under Section 143(3). The ld. CIT(A) granted relief to the assessee by following the orders of earlier years. In alternative submission, the ld. AR submits that no addition under Section 68 can be made merely because the lender of loan could not respond to notice under Section 133(6) of the Act wherein the assessee has duly discharged his onus by filing all necessary evidence to substantiate such interest expenses. To support such submission, the ld. AR of the assessee relied upon the decision of Delhi Bench of Tribunal in Vidya Education Investment (P) Ltd. Vs DCIT (2021) 129 taxma....
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.... the assessee submits that the assessee was having sufficient interest free fund available with him. Most of the loans and advances were made before A.Y. 2010-11 and interest bearing loan was taken thereafter. The ld. AR further submits that this ground of appeal is also covered by the decision of the Tribunal in assessee's own case for A.Y. 2017-18 in ITA No. 48/Srt/2021 dated 25/05/2022. 23. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the Assessing Officer made addition of notional interest by taking a view that the assessee has given interest free loan to its group concerned i.e. Rs. 60.00 lacs to Dimar Construction Pvt. Ltd. and Rs. 8.16 crores to HVK International Pvt. Ltd. The Assessing Officer on his view has observed that the assessee has borrowed the interest bearing funds and paid interest @ 7% to such lenders. The Assessing officer after giving show cause notice and considering the submission of assessee, made proportionate disallowance of interest @ 6% on the aggregate advances of Rs. 8.76 crores and worked out the addition/disallowance of Rs. 61,32,957/-. We find that ....
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....result, this appeal of the revenue is dismissed. 27. Now we take ITA No. 109/Srt/2022 for the A.Y. 2018-19 wherein the Revenue has raised following grounds of appeal: "(i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 72,84,269/- made on account of disallowance of interest expenses on bogus unsecured loans without appreciating the fact that such loans were arranged by the assessee from the entry providers who have accepted the modus operandi of providing of bogus entries before the Income Tax Department? (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 79,84,048/- made on account of disallowance of interest payments to M/s Aarav Gems without appreciating that the fact that said parties has not complied with the notice issued under Sec. 133(6) of the Act to prove the identity of the lender and genuineness of the transactions inasmuch as that the assessee has made factually incorrect submissions regarding receipt of response from aforesaid party during the course of assessment proceedings as well as du....