TaxTMI 
TaxTMI 
2020 (10) TMI 1370
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....CIT-1(1), Indore. M/s Agrawal Transport Corporation Pvt. Ltd, ITA No. 651/Ind/2019 Assessment Year 2010-11 2. The Revenue has raised following grounds of appeal; 1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made by the AO of Rs. 2,71,66,288/- being unsecured loan from M/s Aereo Dealcom Pvt Ltd and interest paid thereon. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance made by the AO of Rs. 3,46,76,137/- being unsecured loan from M/s Chamak Trexim Pvt. Ltd and interest paid thereon. The appellant craves leave to add or deduct from or otherwise amend the above grounds of appeal. Cross Objection No. 35/Ind/2019 In Appeal No. 651/Ind/2019 Assessment Year 2010-11 3. The Assessee has raised following grounds of appeal 1. The Learned CIT(A) erred in holding that the reopening proceedings were properly and validly initiated in this case. That on the facts and in the circumstances of the case and in law, the reassessment proceedings initiated in this case ....
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....ircumstances of the case the addition is wrong and uncalled for and is prayed to' be deleted now. 2.1 That the Learned CIT(A) in erred Confirming the disallowance of interest paid to' M/s Aereo Dealcomm Pvt. Ltd. of Rs. 32,93,424/- made by the AO. That on the facts and in the circumstances of the case, the disallowance of interest is wrO.ng and uncalled for and is prayed to' be deleted now. 3. That the Learned CIT(A) erred in maintaining the addition of Rs. 1,08,75,000/- made by the AO u/s 68 on account of loan taken from M/s Chamak Trexim Pvt. Ltd. That on the facts and in the circumstances of the case, the said addition is wrong and uncalled for and is prayed to' be deleted now. 3.1 That the Learned CIT(A) erred in upholding the action of the AO of disallowing the interest of Rs. 28,65,473/- paid to' M/s Chamak Trexim Pvt. Ltd. That on the facts and in the circumstances of the case, the disallowance of interest is wrong and uncalled for and is prayed to' be deleted now. 4. That the Learned CIT(A) erred in upholding the action of the AO of making disallowance of Rs. 6,75,000/- and Rs. 6,00,000/- o....
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....d 2010- 11 No.651/Ind/ 2019 (Dep.) Aereo Deal Com Pvt. Ltd - Loan Aereo Deal Com Pvt. Ltd - Interest Chamak Traxim Pvt. Ltd- Loan Chamak Traxim Pvt.Ltd-Interest 2,68,00,000 3,66,288 3, 42,00,000 4,76,137 Allowed Allowed Allowed Allowed 2 Admanum Finance Ltd 2009- 10 No.331/Ind/ 2018 (Assessee) Aereo Deal Com Pvt. Ltd - Loan Aereo Deal Com Pvt. Ltd - Interest Chamak Traxim Pvt. Ltd- Loan Chamak Traxim Pvt. Ltd- Interest 36,00,000 32,93,424 1,08,75,000 28,65,473 Confirmed Confirmed Confirmed Confirmed 3 Available Finance Ltd 2014- 15 No.895/Ind/2019 (Department) Aereo Deal Com Pvt. Ltd - Loan Aereo Deal Com Pvt. Ltd - Interest Chamak Traxim Pvt. Ltd- Loan Chamak Traxim Pvt. Ltd- Interest 13,00,000 16,62,641 56,00,000 35,30,521 Allowed Allowed Allowed Allowed 8. Since the issue is common relating to loan taken and interest paid to M/s. ADCPL and CTPL, as agreed by both the parties we will be adjudicating the issue on the basis of facts of M/s. Agrawal Transport Corporation Pvt. Ltd and our decision shall apply mutandis mutandis on the grounds rai....
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....hat both the cash creditors were regularly assessed to tax and were subjected to assessment proceedings u/s 143(3) of the Act on several occasions and nowhere the cash creditors namely M/s ADPL and M/s. CTPL were held to be bogus/shell/accommodation entry provider. Ld. CIT(A) also appreciated the fact that both the cash creditors are registered as Non Banking Finance Companies (In short NBFC) and have sufficient base of share capital and free reserve and surplus and are almost regularly offering positive income in the Income Tax Returns. Ld. CIT(A) accordingly decided the legal ground challenging the reassessment proceedings against the assessee and the remaining grounds on merits were allowed in favour of the assessee and the additions u/s 68 of the Act as well as the disallowance of interest was deleted. Now the Revenue is in appeal before the Tribunal. 11. Ld. Departmental Representative vehemently argued supporting order of Ld. A.O in the case of three assessee's namely, M/s. Aereo Deal Com Pvt. Ltd, M/s Admanum Finance Ltd and M/s Available Finance Ltd and also supported the finding of Ld. CIT(A) in the case of M/s Admanum Finance Ltd. It was also submitted that the nexus o....
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....urce of source duly explained. On the basis of these evidences creditworthiness of the lender companies were accepted. 13. As far as the genuineness of the transactions are concerned, Ld. Counsel for the assessee submitted that Mr. Deepak Kalani has good friendship with the Directors of Agrawal Transport Corporation Ltd for last many years. In the past also unsecured loans were given by Mr. Deepak Kalani through its companies to the assessee's other group companies and has charged interest. All the transactions have been carried out through banking channel and loans have been repaid along with the interest accrued there on. Ld. Counsel for the assessee further revealed an important fact that in the assessee's another group concern M/s Agrawal Coal Corporation Pvt. Ltd also loans were taken from the same lenders namely M/s ADPL and M/s. CTPL. Genuineness and creditworthiness of the loans taken by M/s. Agrawal Coal Corporation Ltd travelled up to the Hon'ble Tribunal and were decided in favour of the assessee and the addition u/s 68 of the Act for unexplained cash credit for unsecured loans taken from M/s ADPL and M/s CTPL stood deleted by the Hon'ble Tribunal vide order dated 27.....
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....Indore (iii) M/s. Pramila Investment and Finance Limited Vs. ITO (2013)22 ITJ 149 (iv) CIT vs. Navodaya Castles Pvt. Ltd.(2014) 367 ITR 0306 (v) CIT vs. N Tarika Properties Investment Pvt. Ltd. (2013)86 CCH 0368 (vi) ITO vs. Vaibhav Cotton Pvt. Ltd. (2012) 20 ITJ 422 Trib. - Indore (vii) ITO vs. M/s. Saaj Plastic Industries Pvt. Ltd. (2012) 20 ITJ 103 (Trib.) Indore 15. Ld. Counsel for the assessee submitted that facts in the case of assessee(s) are distinguishable because both the lender companies are registered as Non Banking Finance Companies by Reserve Bank of India having sufficient share capital and reserve in surplus and both the lender companies were regularly assessed to tax and are showing substantial income. Genuineness of transaction is proved since the loan transactions have taken place with other group companies with same lenders and have been held to be genuine by Hon'ble Tribunal in the case of Agarwal Coal Corporation Pvt. Ltd (supra) ITA No. 202 & 294/Ind/2012 & Others dated 27.6.2016 and also the source of source have been proved as the loan which was repaid back to the lender companies by the assessee's sister....
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.... Chamak Traxim Pvt. Ltd- Loan Chamak Traxim Pvt. Ltd- Interest 13,00,000 16,62,641 56,00,000 35,30,521 Allowed Allowed Allowed Allowed 18. From perusal of the finding of Ld. CIT(A) in the case of M/s Agrawal Transport Corporation Pvt. Ltd for Assessment Year 201011 we find that the issue of genuineness and creditworthiness of loans taken from M/s Aereo Deal Com Pvt. Ltd and M/s Chamak Traxim Pvt. Ltd has been dealt in detail considering all necessary material facts and after discussing the finding of predecessor of Ld. CIT(A) deciding against the assessee namely M/s. Admanum Finance Ltd for similar type of transactions for the loan taken from M/s ADCPL and M/s CTPL during Assessment Year 2009-10. After detailed discussion about the identity, genuineness and creditworthiness of the cash creditors, source of the loan given to the assessee, linkage of the transaction with the search conducted u/s 132 of the Act in the case of Mr. Deepak Kalani on 4.9.2015 along with Mittal Group of Indore and considering the fate of assessment proceedings carried out in the case of lender companies (post search on 4.9.2015 and post report by DDIT (Investigation) ....
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....e appellant u/s 153C instead of section 147 of the Income Tax Act, 1961. 4.1 1 have gone through the submissions of the appellant on this legal ground and after taking in to account facts and circumstances of the case, I am of considered view that the same are devoid of merits. A search was conducted in the Mittal Group of cases in Indore on 04.09.2015 by the Investigation Wing, Indore in which Mr. Deepak Kalani was also covered. On the basis of certain documents seized from the possession of Mr. Deepak Kalani, the investigation wing passed on certain information to the then AO, on the basis of which the AO initiated the proceedings after recording proper reasons and after issuing a valid and proper notice under section 148 of the Income Tax Act, 1961. 1n response to the same the appellant also filed the return of income. The reasons so recorded, were duly supplied by the AO to the appellant, against which the appellant had also raised the objections. The AO, then disposed off the objections so raised by the appellant, by passing a speaking order subsequently, the appellant participated in the reassessment proceedings and the same were completed after taking in to account ....
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....nnaire issued u/s 142(1) was required to file copy of bank statement, ITR acknowledgement and tax audit report of the fresh loan depositors alongwith copy of account and was required to prove the identity, creditworthiness and to furnish the details of mode of transactions. The appellant was also required to explain as why the loan taken from M/s Chamak Trexim Pvt. Ltd. and MIs Aereo Dealcomm Pvt. Ltd. be not added back u/ s 68 of the Income Tax Act, 1961. 5.2 The detailed written submissions have been found filed by the appellant in support of it's contentions. The AO also called for information u/s 133(6) of the Income Tax Act, 1961 and has observed in Para 5 of the assessment order that the lenders have furnished the required information which were placed on record. The AO has also discussed in detail at para nos. 6 to 6.4 about the company M/s Aereo Dealcomm Ltd. and at para nos. 7 to 7.4 about the company M/s Chamak Trexim Pvt. Ltd. and broadly the observations of the AO in respect of both the companies in para 6 to para 6.4 and in para 7 to 7.4 are identical. 5.3 It is found that the AO has recorded that the assessee has furnished the copy of ITR of both....
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....oup concerns have taken loans from these two companies i.e M/s Aereo Dealcomm Pvt. Ltd. and M/s Chamak Trexim Pvt Ltd., but creditworthy and the genuineness of transactions of these companies were not established. 5.7 Before discussing the observations of the AO made in the assessment order while making the impugned additions, It would be imperative to discuss the various factual aspects of both the companies from whom the appellant has taken loans during the relevant year and which have been added by the AO under section 68 of the Income Tax Act, 1961 and interest paid there on has also been disallowed. 5.8 It is seen from the assessment order passed in the present case that the AO has only doubted the creditworthiness of the lender and the genuineness of the transactions and has not disputed the identity of the loan creditors. The AO carried out independent enquiries from both the lender companies, which were also duly complied with by them by filing all the details required from them by the AO, as per the facts noted in the assessment order. There are no adverse remarks in respect of the compliances made by both these companies. 5.9 It is also evident ....
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.... taken by the credit or in any of these years. All the above facts cumulatively establish the creditworthiness of this company. 6.4 It is also seen from the balance sheet of Chamak for F.Y. 2009-10 (at page no. 10 of PB-Bl) that the impugned loans advanced to the appellant are reflecting under Schedule-E of Loans and Advances. 6.5 Further, the assessments of this company for various years have been completed by its AO. In the case of Chamak Trexim Private Limited in the order passed for A.Y.2010-11 on 29/12/2016 u/s 148 of the Income Tax Act, 1961has been enclosed by the appellant at page nos. 51 to 55 of its paper' book. The AO of this company i.e. the ITO Ward 6(1), Kolkata has made the following observations citing the reasons for the reopening of the case of Chamak for the AY 2010-11: "Information has been received from DDIT {Inv-I, Indore vide letter No: DDIT {Inv-I)-I/Ind/Mittal Group/2015-16/2926 dated 17.03.2016 along with enclosure from wherein it was written that a search & seizure operation u/s 132 was conducted on Mittal Group Indore on 04.09.2015. Original share certificates of M/s Chamak Trexim. Private Limited were in the course of sear....
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....g deposits in bank account A/ R said that opening and closing balance of capital were Rs. 69455633/ - and Rs70658347/- respectively. Capital was applied in investment and providing loan and advances. Opening and closing balances of asset reported under the head loan and advances were Rs 6,33,83,839/- & Rs 6,64,98,528/- respectively. Amount of loans and advances is given to parties changed from time to time. In some cases loans where recovered from one party and given to others. Since monetary transactions were carried through banking channels, reflection in statement of deposits and withdrawal in bank account was obvious, further, total sum credited in bank account also appears greater than gross revenue. These statements related to realization of part of loan and offering same to others as loan against interest. In support of claim statement of loans and r:onfinnation accounts with PAN furnished. On verification of accounts and document it was seen that Sri Deepak Kalani being the director of company located in Indore and Kolkata had to look after official works of both companies. Sri Deepak Kalani sometime carry the documents or other paper works from one office to ....
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....AY 2011-12 was also reopened by its Jurisdictional AO at Kolkatta on identical grounds referring to the same information received from DDIT Inv. Wing, Indore as above, making similar observations. The relevant abstract of the order dated 29.12.2016 passed by same ITO ward 6(1) Kolkatta, copy enclosed by the appellant at page no. 56 to 60 of its paper book is abstracted as under: "Information has been received from DDIT (Inv) - I, Indore vide letter No: DDIT (Inv-I)-I/Ind/Mittal Group/2015-16/2926 dated 17.03.2016 along with enclosure from wherein it was written that a search & seizure operation u/ s 132 was conducted on Mittal Group Indore on 04.09.2015. Original share certificates of MI s Chamak Trexim Private Limited were also seized which surprisingly found intact in the bound book even though at different point of times there have been different shareholders. Sri Deepak Kalani present Director of Mitral Group and also director of M/s Chamak Trexim Private Limited failed to provide any details and further the financial transaction of the company are found to be dubious in nature. Analysis of financial data, prima-facie of M/s Chamak Trexim Private Limited establishes th....
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....that Sri Deepak Kalani was associated with two companies located in Indore and Kolkata as director and sometime carry the documents or other works from other office. Information related was whether shares certificates where meant for issue or was it related to M/s Chamak Trexim Private Limited. Information as provided not related to involvement of amount escaped from assessment. Issue of duplicate copy of share certificate related to office proceeding and updation of official records. On verification of ITD/AST value of paid up capital reported for AY 2011-12 was brought forward from AY 2007-08 and no change in quantum of capital found till 31.03.2016. Assessee company accepted the fact that share certificate as seized was related its company and furnished list of shareholders to whom it was to be issued. Hence, on the circumstances as slated above no adverse view taken" 6.10 Therefore the cases of Chamak for A.Y.2010-11 and A.Y. 2011-12 were also reopened on the basis of same information of the Investigation Wing of Indore and same allegations were made raising doubts on the loan transactions with the appellant and other group companies and were....
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....0 of the Paper Book PB-BI). Further in the said order, the issuance of the fresh capital issued during AY 200405 was examined by the AO of Chamak and was found in order. As per the assessment order of Chamak for the AY 2004-05 dated 31.05.2006 passed under section 143(3) by ITO Ward '9(3), Kolkatta,it is observed that the AO of Chamak has specifically dealt the issue of fresh share capital in that year and accepted the returned income of Chamak It was observed in the assessment order as abstracted under: "During the year, Assessee Co. increased Share Capital lo the tune of Rs. 64,60,000/- and by way of Share premium receipt to the tune of Rs. 5,81,40,000/- notice u/s 133 (6) were issued to 18 parties/concerns and replies of the above were examine in some seven case summons u/s 131 were also issued to verify their books of AI cs., bank statements which were also test checked, Confirmations from Loan debtors were also obtained The assessee Co. invested to the tune of Rs. 5,99,00,000/- to different concerns. A/ R Sri Sarda produces computerised books of A/cs., Bills, Vouchers, Bank statements etc. for necessary evidence of investment mode. On going....
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....he A.Y. 2011-12. 7.3 It is also evident that there are no borrowings or loans were taken by the loan creditor in any of these years. All the above facts establish the creditworthiness of this company. 7.4 It is seen that in the case of M/ s Aereo Dealcom Private Limited also, the appellant has filed copies of its assessment orders for AY 2002-03, 2009-10 and AY 2010-11 at page no. 142 to 149 of the PB-B1. 7.5 In the A.Y.2003-04 the assessment order was passed under section 147/143(3 dated 28.06.2007 by ITO ward 1(1) Kolkatta. The financials of this company were properly analyzed and particularly the issue of share capital raised by it during this year was also categorically examined by the AO. It will be worthwhile to refer to the particular observations made in the assessment order in this regard which is abstracted as under: "From the enclosed Balance Sheet! Profit & Loss Account and other enclosures, if appeared that this is the first return submitted by the assessee Company and the source of income of the assessee was from miscellaneous sources. It also appeared from the, said documents that assessee Company had infused Fresh Share capital fo....
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.... also furnished explanation of each Debit and Credit entry in cash book / bank book of these two companies (Question answer No. 8 of the said statement _ Page 157 of PB-B1) and also the trail of transactions with respect to movement of funds within the Agarwal Group of companies since FY 2008-09 (answer to Question No. 11 of the said statement Page. 158 of PB-Bl). Another statement of Shri Deepak Kalani was recorded on 08/12/2016 by the AO wherein he submitted the Auditor's report of both the companies from FY 2008-09 (AY 2009-10) to FY 2013-14 (AY 2014-15)(answer to Question o. 02 of the said statement Page. 159 of PB- B1). Thus the complete financial details of both these companies were made available on record. 7.9 In view of above factual aspects of both the loan creditors, considering their financials from FY 2007-08 till FY 2016-17, their revenue generations as well as profitability, the fact that there are no borrowings/ loans taken by both these companies, funds have been advanced to the appellant out of their own capital and reserves and also in view of the fact that the assessments of both the companies have been completed by their respective AOs, there remai....
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....lani who is prominent financial consultant having establishment at Indore and Kolkatta. Mr. Deepak Kalani is a close friend of Mr. Vinod Agarwal (the promoter of the Agarwal Group of companies) and is associated professionally with the Agrawal Group since long as a financial consultant. It is also su bmitted by the appellant that Mr. Deepak Kalani is also a man of means as he has promoted several companies and is also a partner in P Kalani &, Associates which is a leading financial consultancy firm. 8.2 It is further explained by the appellant that Mr. Kalani and Mr. Agarwal both basically hail from Kolkata. My. Kalani is born and brought up in Kolkata and Mr. Agarwal along with his father was also settled in Kolkata earlier, before they came to Indore. 8.3 It is further stated that the appellant also brought these facts before the AO that the lender companies i.e. Chamak and Aereo have shifted their offices from Kolkatta to Indore, and' now stand registered at 116-117 Milinda Manor, 2 RNT Marg , Indore. This is the office premises of Shri Deepak Kalani from where his all business operations are being carried out. The notices sent to Chamak and Aereo under sec....
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....up and for securing their investments, the lender companies have mainly invested in the various companies of Agrawal Group, which contention has also not been disapproved It is the sole prerogative of any business man to see how he conducts his business and the AO cannot step into the shoes of the business man. Therefore, this contention of the AO is devoid of merits. 8.7 With regard to the next contention raised in the assessment order that providing loans only to the appellant group companies raises a doubt that both the lender companies are controlled and managed by the Agrawal group, the appellant has submitted that this allegation is ill founded and without any basis, which contention of the appellant also find support from the fact that the AO himself has merely raised doubts and did not has any cogent material which could support his this contention. The appellant emphasized the fact that the appe11ant company or its associates have neither any ownership interest nor any say in the management of these lender companies and further stated that these companies are independently running their business, making advances and investments earning substantial taxable income a....
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....ertificates of both these companies in the possession of Shri Deepak Kalani and other reason being the financial structure -of both the lender companies. The conclusion drawn in the 'reasons' are that the presence of the intact Original Share Certificates and with the appointment of Shri Deepak Kalani as a director and due to change in the business profile of the lender companies it is concluded that both these companies are used for providing accommodation entries. Both these issues are discussed in detail here under.- 8.11 In respect of original share certificates found at the time of search, the appellant submitted that the original share certificates of M/s Aereo Dealcomm Pvt. Ltd. and Mls Chamak Trexim Pvt. Ltd. were found intact in the bound book during search proceedings at 116-117, Milinda Manor, 2, RNT Marg, Indore which were seized as BS 2, BS 3 and BS 4 and further, it was observed that the shares certificates were not issued to any share holders. The appellant further submitted that the issue was explained by Shri Deepak Kalani through a written submission dated 07/12/2016 filed by him on 08.12.2016 before the then AO at the time of recording his statem....
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....ed and were finally issued to the respective share holders. He had also filed the documents to substantiate his contention including request letter filed by existing shareholders, copy of resolution passed by the Board of Directors for issue of duplicate certificate along with copy of Pan card and copy of Indemnity bond of shareholder companies etc at the time of recording of his statement on 08.12.2016 which have been enclosed along with submission dated 07.12.2016 at page no. 187 to 225 of PB-B1 in case of Chamak and at page no. 298 to 334 of PB-B-1 in case of Aereo. 8.14 A perusal of these documents/correspondence corroborate the contention of Mr. Deepak Kalani and also show that duplicate share certificates were already issued to the share holders prior to the search on Mr. Deepak Kalani. The above submissions and the corroborative documents filed by Mr. Deepak Kalani have not been controverted by the then AO while recording the reasons for reopening of the case. Therefore, the contention of Mr. Deepak Kalani that the original share certificates seized were the ones which were held back due to technical errors, which were found and seized during the search comprising o....
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....he investigation wing as well as the AOs, even if it is again viewed in light of the explanations given by the directors of the lenders there seems no reason, apparent or otherwise, to raise any doubt, as the original share certificates found were not of any use for them and were found from own premises of the lenders. Thus the doubts raised by the investigation wing in this respect have been found misconceived and cannot be used for doubting the genuineness of the transactions of the appellant with the lender companies. 8.17 In view of above discussion and documentary evidences, the doubts raised by the investigation wing and relied upon by the AOs for reopening of the case and also for making the additions by doubting the genuineness of the transactions, do not hold ground and are not based upon any cogent material. On the contrary the appellant has successfully demonstrated that its transactions with both the lender companies were genuine and deserve to be accepted. The appellant's case is well supported by the following reasons: - Mr. Deepak Kalani and Mr. Vinod Agarwal are very well known to each other and are also professionally related since 1990; both ....
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....d. - Similarly the immediate source i.e. source of source of making advances by both the corn parries to the appellant is also properly explained and substantiated on records by filing the bank statement and flow of funds of various years of both these companies. No adverse comments have been found made by the AO raising any doubt on these very crucial facts which go to the root of genuineness of the transaction at any stage It is seen that both these lender companies have advanced loans to other group concerns of the appellant in earlier years, which funds were repaid back to the lenders during the year under consideration, out of which the lender companies have again advanced loans to the appellant, this fact is categorically established through the bank statements as well as the ledger accounts and fund flow trail of the funds with the lender companies. - The appellant has also submitted that the funds advanced in earlier years to the group companies were added under section 68 of the Income Tax Act, 1961 in the respective group company in their regular assessment proceedings made under section 143(3) of the Income Tax Act, 1961, which additions were deleted no....
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....ses of the appellant for AY 2008-09 i.e. M/s Admanum Finance Ltd., M/s Agrawal Coal Corporation Ltd. etc. These additions were made on account of loans received by these assessees from Chamak and Aereo u/s 68 in the regular order passed u/s 143(3) of the Income Tax Act, 1961. The appellant has filed a copy of the assessment order dated 30.12.2010 at page nos. 784 to 819 of PB - B - II in the case of Admanum Finance Ltd. and has also filed a copy of the order of CIT(A) - II Indore dated 07.03.2012 passed against the said assessment order at page 700 to 783 of PB - B - II and also a copy of Hon'ble ITAT Indore Bench dated 27.06.2016 at page 496 to 699 of PB - B - II. It is seen that the AO in AY 2008-09 conducted enquiries through his inspector and also by issuing notice u/ s 133(6) and also through DDIT Investigation Kolkatta by issuing commission to him. The result of all the enquiries was that both the companies were found existing at their respective addresses where the director or the staff present accepted the loan transactions with Admanum Finance Ltd and also filed the confirmations, balance sheet, bank statement etc. Still additions u/s 68 were made by the then A0 doubti....
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....istence on the given addresses and some other companies were also operating on the same addresses but they have expressed doubt about their creditworthiness...... "M/s Aereo Deal Comm. Put Ltd & M s Chamak Trexim Put: Ltd are functioning at the given address. The copies of the returns are also enclosed. Shri Ravin Umarethiya is the Accountant to both these Companies and in his Statement he has admitted that these Companies have not applied for any shares in M/ s Admanum Finance. Ltd., In.dor e but: have provided unsecured loans/ advances to it ............. 4.1.7 In the aforesaid factual back ground it has to be now decided whether the appellant has been able to discharge the onus cast u/s 68 and whether the addition made u/s 68 was justified on the facts of this case. It should be appreciated that degree of onus to explain the cash credit transaction cannot be uniform and rigid in all the situations. Degree of onus regarding genuineness of transaction in respect of receipt of share capital at huge premium in unlisted companies otherwise through public issue cannot be viewed but with suspicion and the appellant may be required to justify such receipt of money on h....
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....of DDITs report is merely based upon non appearance by the Directors of the said company. In response to the AO's notices u/s 133(6) the said lender company replied vide letter dated 07.12.2010 at page 581 stating that it has advanced loans to the appellant and also filed copy of its ledger for the impugned year, copies of ITR acknowledgement along with computation for AYs 2006-07 to 2008* 09 as was required by the AO. The company is holding PAN AACCA5934G and is active registered private limited companies vide registration no. UG1109WB1994PTC066871 with the Ministry of Corporate Affairs Government of India. The copy of audited accounts of the said company, along with copy of bank statement, confirmation, ITR acknowledgement etc are included in compilation by the appellant from page 303 to 328. The main source of the said company is from gross interest income of Rs. 47,83 Lacs. The net profit of the company is reflected in the head as 'Schedule 7 to Balance Sheet under 'Loans and Advances' details of which are at page 323. Thus it could not be said that the financial position of the company was dubious and nominal returned income was disclosed. The appellant ha....
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....loan of Rs. 90 lacs from Chamak Texim Put. Ltd. which is also a registered NBFC as per the certificate issued by the Reserve Bank of India, it is noted that. the appellant has no opening balance with this party and it received during the year under consideration Rs. 90.00 Lacs as loan. Interest of Rs. 9,25,680/- was paid / provided and an amount of Rs. 3,29,640/- was paid to the said party. As per the repayment chart in the paper at 394-395 of paper book the loan stand duly repaid in Dec 2010. The position in respect of enquiry report submitted by Inspectors and compliances made before DDIT' is exactly. the same as noted in the case of Aereo Dealcomm Pvt. Ltd. above. The company is holding PAN AABCC1003H, and is active registered private limited companies vide registration no. U51109WB1994PTC06Z349 with the Ministry of Corporate Affairs Government of India. As per relevant .final accounts and other documents of this company are concerned, the same are filed in the compilation from page 329 to 358. In this company also the main source of income is interest and gross amount is reflected at Rs. 85.30 lacs and net profits in excess of Rs. 14 lacs and l....
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....said unsecured loan. Notices were issued u/s 133(6) to the lenders calling for documentary evidences in support of the amounts advanced. Secondly, the Income-tax Inspectors were deputed personally to visit and make enquiries. The Commission was also issued to DDIT, Kolkata u/s 131 of the Act and Income tax inspectors were again deputed to personally visit and make enquiries at Kolkata and lastly the assessee was directed to furnish documentary evidences in support of the unsecured loan. The AO has issued notices directly U/S 133(6) to lenders calling for documentary evidence in support of the amounts advanced. The lender companies, in return, filed the various documents in the form of confirmations, income tax returns, bank statements etc. Income Tax Inspectors were deputed by the AO to make enquiries at Kolkata, who vide report dated 10.12.2010 confirmed' existence of most of the lenders. Thereafter, Commission was issued to DDIT, Inv., Kolkata under section 131 of the Act, who independently conducted investigation and sent his report dated 20.12.2010 and most of the parties appeared and filed documentary evidences as required by DDIT(Inv}, Kolkata, thereby confirming the tran....
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....nnual account, photocopy of the bank statement and confirmation. Therefore the Inspector and DDIT have confirmed the existence of such company. The assessee has also filed copy of the assessment order for assessment year 2002-03 of the said lender company, wherein the shareholder funds being shareholder capital and share premium account was examined and found to be verifiable. AO found that the said lender company had share capital of Rs. 47, 75,000/- and it has received share premium of Rs. 4,29,75,000/on account of share allotment. The AO of the lender company has also verified the shareholder on test check basis and shareholders' bank accounts were also verified. Therefore, we are of the view that the assessee has proved the identity, creditworthiness of this lender company and also the genuineness of the transaction with the said company with sufficient evidence. 25. In the case of Chamak Trexim Private Limited, the assessee has filed documentary evidence like confirmation" bank statement, income tax return, audited report, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. The existence of the Company was ....
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....otices issued u/s 133(6), but most of them were also found existing by the Inspectors and most of them also presented before the DDIT (Investigation) Kolkata. Therefore, the facts: are clearly distinguishable. Moreover, in the case of CIT vs. Navodaya Castles Pvt. Ltd., also the party was not present and the summons issued u/s 131 returned unserved. In that case, the assessee was asked to produce the shareholders to substantiate the claim of genuineness but the assessee was unable to produce them. But, in the instant case, we have gone through the case records and we found that the AO has made the various enquiries himself. Moreover, he has also deputed the Inspector and in most of the cases, the Inspectors confirmed the existence of the creditors. Thereafter, if the AO had any doubt, he should have issued show cause notice to the assessee to produce the creditors before him. The AO did not require the assessee to produce the creditors. Therefore, we have to decide the matter as per the facts available on record. 37. The entire addition under section 68 of the Act is, thus, without any basis and is legally unsustainable. 38. The view of the Id. CIT(A) that the loa....
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.... CIT(A) and also while holding that the identity and creditworthiness of the lender companies and also the genuineness of the transactions has been proved by the assessee with sufficient evidence. (i) In Para 22 of its order the Hon'ble ITAT has discussed the nature and extent of enquiries conducted by the then AO in the group cases of the appellant and concluded that, the AO had made extensive enquiry, (ii) In Para 23 of the order, the Hon'ble ITAT has discussed the issue of loans taken from Aerco Dcalcornm Pvt . Ltd. and found that the existence of the company was inspected by the inspector on 10.12.2010 which is not disputed by the AO, A categorical finding has been rendered that the company has shown interest income of Rs. 47.83 Lacs and profit of Rs. 11.2 Lacs in AY 2008-09 reflecting a healthy financial position. (iiii) In para 24 of the order it is further observed that the opening balance of Rs. 98,73,663/- in. 2007-08 has been accepted by the department and no addition was made in that year. [iv] In same Para 24 it is stated by the Honourable ITAT that the loan received from Aereo was repaid in February 2010. It is als....
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....ein the present appellant has taken loans from Chamak and Aereo in February 2010 as also evident from the confirmation of account filed respectively at page no. 108 and 138 of PB-A. Thus the impugned loan transactions which are the subject matter of addition u/s 68 in the present appeal are emanating from the earlier loan transactions in group cases of the appellant which were added u/s 68 in the respective cases and stand deleted by the CIT(A) - II Indore as well as by the Hon'ble ITAT in those cases. 9. It will be worthwhile also to consider and discuss another fact, which the appellant has also brought on record that in two other group concerns my predecessor in office has taken an adverse view and confirmed the additions made by the then AO u/s 68 of the Income Tax Act, 1961 in respect of loan transactions with Chamak and Aereo in those cases. The copies of the first appeal orders passed in these two cases have also been filed by the appellant on record and the second appeal filed by it before the Hon'ble ITAT has not yet been decided. The appellant has also made a detailed submission through which it has controverted the observations made by my predecessor whi....
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....n appreciated and considered by them. 9.3 The fact that Mr. Deepak Kalani explained the reasons of advancing loan/making investments with concerns of Agrawal Group considering his long professional relationship with the group and also considering the reputation and credibility of the group, he' found the same to be most safe and lucrative commercial proposition, in the statement recorded by the DCIT 1 (1) Indore, it seems has not been noticed by my predecessor. 9.4 It is concluded that the source of transactions was properly substantiated by filing the bank statements of both the companies and' also by explaining and substantiating the source, and source thereof. The contention of the appellant that the source of loans was receipt of money from other Agrawal Group concerns as repayment of loans and payment of interest is duly supported by the bank statements as well as other documents such as ledger accounts etc in the books of other group concerns confirming such repayment of loans. These important facts have been not been considered by my predecessor. 9.5 Another very crucial fact that additions made u/s 68 in respect of transactions of Agrawal ....
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....ischarged in those cases. 9.8 Further, I also agree with my predecessor that in such cases the onus u/s 68 of the Income Tax Act, 1961 is very heavy and that mere submission of the name and addresses, income tax returns, balance sheets and bank statements are not sufficient as the AO is to be satisfied cumulatively as to their identity, creditworthiness and the genuineness of the transactions entered into. However, it is found that the appellant had properly and effectively discharged the onus and has cumulatively satisfied by establishing the identity, creditworthiness of the parties and also the genuineness of the transactions. The loan creditor's were produced and detailed statements were recorded by the then AO in the group cases, books of accounts and bank statements of the loan creditors were produced arid verified by the AO, assessment orders of the loan parties were also placer: on records, the loan parties have substantial business transactions and have offered considerable income in their returns. All these facts have been completely ignored by the then AO in those cases and have also not been considered by my predecessor appropriately. 9.9 The appel....
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....endorse the view and observation of my predecessor that as held by various courts every transactions involving application of section 68 of the Income Tax Act, 1961 and whether the onus of the assessee has been discharged or not has to be appreciated on totality of evidence available on record and surrounding facts and circumstances of the case and I find that the onus in this case has been properly discharged on overall facts as discussed above. 9.14 Further, I also subscribe to the observation of my predecessor that the creditworthiness or genuineness of transactions depends upon whether the parties are related or known to each other, manner or mode by which he approached each other, creditworthiness of recipients, object and purpose etc. I find that the appellant has brought on record that Mr. Deepak Kalani director of the lender company is very well known to Shri Vinod Agrawal of appellant Group. Mr. Kalani is associated professionally with the group since long as a finance consultant and considerable amount of professional fees is paid by various AgrawaI group companies for his services. Similarly the creditworthiness of the recipients i.e. the Agrawal Group Cannot be....
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....production of director of the loan creditor along with books of accounts and other documents etc. 9.19 The appellant has also filed in a tabular form the distinguishing facts of its case with those of the case laws relied upon by my predecessor. It is e case laws relied upon by the CIT(A), the adverse view has the appellate authorities for the reason that either the loan the share applicants were not found or the summons and notices s 133(6) were returned back unserved and the assessees in those cases could not produce the loan creditors during the assessment proceedings. In some of the cases there is a finding that cash was deposited in the bank accounts of the lenders immediately before issuing cheques to the assesses in those appeals. I, however, wish to differ from the view adopted by my predecessor as the facts in all those case laws which have been relied by my predecessor are substantially different. 9.20 In the present appeal, it is not a case where the loan creditors were not found nor it is a case where notices / summons were returned unserved. On the contrary, in the group cases of the appellant, the director of the loan creditors companies i.e. Shri De....
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....On the contrary, the propositions laid down in the various judicial pronouncements support the case of the appellant. 9.22 In view of detailed discussion held as above, I wish to differ from the view taken by my predecessor in respect of two appeals of the group concerns of the appellant on identical issue. 10. The appellant, in my considered opinion has discharged the onus of establishing the identity, creditworthiness of the loan creditors and genuineness of the transactions. The identity is undisputed. The lenders are validly registered corporate entities. The copies of certificate of registration, memorandum etc are on records. These lenders hold valid and active PAN, Both the lenders are registered Non Banking Finance Companies (NBFC) registered with the Reserve Bank of regulatory norms, as notified by the RBI. The Directors of both the lender companies are known and renowned citizen. Both the lender companies were found functioning at the offices and the departmental representatives have confirmed their existence time and again. The directors of these companies regularly participated in the enquiries conducted from time to time and appeared before the invest....
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....rom time to time. There is no denial of this fact by assessing authority. The source of the funds with the lenders are properly established and explained before the authorities and are on records. There is no doubt or ambiguity regarding the source of funds advanced to the appellant. 10.3 In view of above discussion and keeping in view entirety of facts and circumstances, the identity and creditworthiness of the loan creditors having properly been established and substantiated and so also the genuineness of the transactions, it is held that the AO was not justified in making of impugned additions u/s 68 of the Income Tax Act, 1961. Therefore, the additions are directed to be deleted. Accordingly, the ground nos. 2 & 3 are allowed. 19. On going through the above finding of Ld. CIT(A) we find that he has thoroughly analysed and examined various documents, financial statements, Income Tax Returns, Assessment Order of lender companies and also distinguished the fact of the case in hand with those of the facts of the judgments referred and relied by his predecessors of Ld. CIT(A) in the case of M/s. Admanum Finance Ltd has given his finding that both the lender companies i.e....
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....tors, has confirmed having advanced unsecured loans to the Appellant and also in response to the AO's notices u/s 133(6) the said lender company replied vide letter dated 09.12.2010 at page839 stating that it has advanced loans to the appellant and also filed copy of its ledger for the impugned year, copies of ITR acknowledgement along with computation for AYs 2006-07 to 2008-09 as was required by the AO. Before DDIT (Inv.), Kolkata also against issue of summons u/s 131 compliances were made by filing of copies of audited annual accounts, photo copy of Bank statement and confirmation letters. Thus, it cannot be said that Inspectors and DDIT(Inv.) have expressed any doubt about the existence of such company. The doubt expressed by Inspectors and DDIT (Inv.) both of them are apparently subjective and in case of DDIT's report is merely based upon non appearance by the Directors of the said company. The copy of audited accounts of the said company, along with copy of bank statement, confirmation, ITR acknowledgement etc. are included in compilation by the appellant from page 160 to 200. The main source of the said company is from gross interest income of Rs. 47.83 lacs. Th....
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....h Court as relied and referred by appellant in the written submissions decided in the case of CIT Vs. Data Ware Pvt. Ltd. on 21st September, 2009, wherein Hon'ble Calcutta High Court categorically held - "After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor 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 unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected 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." 4.3.4 In view of above factual and legal position wherein even the sources of the funds of the creditor company have been found and verified by the concerned AO and the transactions duly ge....
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.... unsecured loan aggregating to Rs. 6,69,00,000/- from 12 Kolkata based companies, the details of which are as under :- S. No. Name Opening Balance Loan Taken Interest paid TDS on interest Amount Repaid Balance 1. Aereo Dealcomm. Pvt Ltd. 98,73,663 3,26,00,000 33,04,583 6,80,745 42,93,663 4,08,03,838 2. Chamak Trexim Pvt Ltd. 3,91,86,415 25,00,000 59,19,345 12,19,384 78,86,415 384,99,961 3. Reward Consultants Pvt. Ltd. 16,39,608 12,00,000 3,76,804 77,622 1,39,608 29,99,182 4. Pushpak Trading & Consultancy Pvt. Ltd - 50,00,000 2,41,803 49,881 - 51,91,922 5. Savera Distribution Pvt. Ltd. - 50,00,000 3,10,656 63,995 - 52,46,661 6. Paradise Garments P. Ltd. - 25,00,000 31,762 6,543 - 25,25,219 7. Khatu Vanijya Pvt Ltd. - 50,00,000 34,631 7,134 - 50,27,497 8. PanchnanVanijya Pvt. Ltd. - 35,00,000 25,615 5,277 - 35,20,338 9. Kamal Nayan Commercial Pvt. Ltd. - 15,00,000 7,992 1,646 - 15,06,345 10. Ranchhod Agencies Pvt. Ltd. - 14,0....
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....om Aereo Dealcomm. Private Limited. The assessee has submitted documentary evidence like confirmation, bank statement, income tax return, audited accounts, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. The existence of the Company was inspected by the Inspector on 10.12.2010 and the Rs. has not disputed about the existence. During the course of investigation, statement of accountant was recorded by the Inspector, wherein he has confirmed the loan transaction in assessment year 2002-03. The source of fund of Creditor Company was examined. The Rs. has also examined the opening balance, which stands accepted, since no addition was made in the assessment year 2007-08. The Company has also shown the interest income of Rs. 47.83 lacs and profit of Rs. 11.20 lacs in assessment year 2008-09 reflecting a healthy financial position. 24. During the course of hearing, the ld. Authorized Representative for the assessee submitted that in assessment year 2007-08, the opening balance of the company was AO. 98,73,663/- which has been accepted by the department as no addition was made in that year and this year intere....
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....arter Private Limited merged with M/s. Middleton Good Private Limited in April, 2009. In respect of these six companies, the assessee has filed documentary evidence like confirmations, bank statements, income tax returns, audited reports, TDS certificates, Master data of the Company with Registrar of Companies, Memorandum of Association, the copy of merger order passed by the Hon'ble Calcutta High Court, which have been also placed on record. The existence of these companies have been accepted by the Inspector in his report dated 10.12.2010. The AO has also not disputed the existence of this company. The Inspector recorded statement of brother of the Director, wherein he confirmed the loan transaction with the assessee. The inspector also reported that loan transactions are genuine. The fact that the companies were merged pursuant to the order of the AO'ble High Court after all regulatory compliances, establishes the identity and existence of the erstwhile creditors. Similarly, in all the other cases, namely, Reward Consultants Private Limited, Pushpak Trading & Consultancy (P) Limited, Savera Distribution Private Limited and Paradise Garments Private Limited, the assessee has file....
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.... the AO. Section 68 of the Income-tax Act, 1961, which is reproduced 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 to income-tax as the income of the assessee of that previous year." 27. In terms of the aforesaid provisions of section 68 of the Act the primary onus to explain the nature and source of the amount so found to be credited is on the assessee. The expression 'nature' encompasses bringing on record, evidence about nature of the receipt, be it loan, advance, share application money, etc. The expression `source' envisages establishing the identity and creditworthiness of the source/ person from whom the amount is received. However, once reasonable explanation is furnished by the assessee, the onus, shifts to the Revenue. 28. We find that in the case of Orissa Corporation (P) Limited, 159 ITR 78, in the context of requirement of the assessee to discharge primary onus under section ....
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.... the amount should be taken to be the income of the assessee. In the present case, the Assessing Officer did not feel satisfied with the explanation given by the assessee and, accordingly, assessed all the three credit entries to the account of the assessee as the income." The Hon'ble Court further held that once satisfactory explanation is adduced by the assessee, then, addition cannot be made and the amount may be taxed in the hands of the person who has deposited the amount. The relevant observations of the Court are as under: "5. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be income of the firm for the purposes of income-tax. It is open for the Assessing Officer to take appropriate action under section 69 of the Act against the person who has not been able to explain the investment. In the present c....
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....tion of Mr. Khaitan that on the basis of the report submitted by such Inspector, the Assessing Officer could not straightway arrive at the conclusion that the transactions were not genuine without giving further opportunity to the appellant to explain the alleged information disclosed by the Inspector to the Assessing Officer. .........." 31. We also find that in the case of CIT v. KishoriLal Construction Ltd. 191 Taxman 194, Hon'ble Delhi High Court has observed as under: "After considering the arguments of both the sides, we find ourselves in favour of the submission made by learned counsel for the respondent. As mentioned above, the assessee had produced the following which would clearly demonstrate it has discharged its initial burden:- (a) The identity of M/s. Yadav and Company, by filing their confirmation and their assessment particulars. (b) Genuineness of the transaction by pointing out that the assessee had sold shares to M/s. Yadav and Company in the immediately preceding year (which has been accepted by the Department) and that the payment received during the relevant previous year was against the debt due from M/s. Yadav....
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....The Court observed as under: "Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but instead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor 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....
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....tmental Representative, the creditors were not traceable, which is not the fact in the present cases. On the contrary, in the present case all the creditors not only responded to the notices issued u/s 133(6), but most of them were also found existing by the Inspectors and most of them also presented before the DDIT (Investigation) Kolkata. Therefore, the facts are clearly distinguishable. Moreover, in the case of CIT vs. Navodaya Castles Pvt. Ltd., also the party was not present and the summons issued u/s 131 returned unserved. In that case, the assessee was asked to produce the shareholders to substantiate the claim of genuineness but the assessee was unable to produce them. But, in the instant case, we have gone through the case records and we found that the AO has made the various enquiries himself. Moreover, he has also deputed the Inspector and in most of the cases, the Inspectors confirmed the existence of the creditors. Thereafter, if the AO had any doubt, he should have issued show cause notice to the assessee to produce the creditors before him. The AO did not require the assessee to produce the creditors. Therefore, we have to decide the matter as per the facts available....
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.... 6 2012-13 16.12.18 143(3)/147 38,65,530 71-75 Assessment details of M/s Aereo Dealcomm Pvt. Ltd S. No AY Date of order Passed u/s Income assessed Page No. PB-B-I Remarks 1 2003-04 28.06.07 147/143(3) 32,240 142143 Last share capital assessed was accepted 2 2009-10 30.12.16 147/143(3) 18,42,160 144148 Cases concluded after searching of DDIT(Inv), Indore and no adverse opinion was formed 3 2010-11 16.11.17 147 8,86,387 149 23. It is also noteworthy that the loans taken by M/s Agrawal Coal Corporation Pvt. Ltd from two lender companies namely M/s ADCPL & M/s CTPL which were held to be genuine by the Coordinate Bench were repaid back and on the very same day of receiving the loan which repaid by M/s Agrawal Coal Corporation Pvt. Ltd the lender companies have used the same fund for advancing loan to M/s Agrawal Transport Corporation Pvt. Ltd. We have verified this fact and found that on 23.02.2010 sum of Rs. 2,68,40,000/- was repaid by M/s Agrawal Coal Corporation Pvt. Ltd to M/s Aereo Deal Com Pvt. Ltd. This sum was received in UCO Bank account in case of M/s Aereo Deal....
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..../-. We also confirm the finding of Ld. CIT(A) in the case of M/s Available Finance Ltd deleting the addition for unexplained cash credit u/s 68 of the Act at Rs. 69,00,000/- and deleting the disallowance of interest paid on such unsecured loans at Rs. 51,93,162/-. We also set aside the finding of Ld. CIT(A) in the case of M/s Admanum Finance Ltd and delete the addition of unexplained cash credit u/s 68 of the Act for the unsecured loan taken from the above referred two lender companies totalling to Rs. 1,44,75,000/- and we also direct the revenue authorities to allow the claim of interest expenditure of Rs. 61,58,897/-. We thus dismiss Ground No. 1 & 2 of Revenue's Appeal in the case of M/s Agrawal Transport Corporation Pvt. Ltd for Assessment Year 201011 allow Ground No. 2 & 3 of the assessee's appeal in case of M/s Admanum Finance Ltd for Assessment Year 2009-10 and dismiss Ground No. 2 of Revenue's appeal in the case of M/s Available Finance Ltd for Assessment Year 2014-15. 24. As regards the Cross Objection filed the assessee in the case of M/s Agrawal Transport Corporation Pvt. Ltd for Assessment Year 2010-11, at the outset Ld. Counsel for the asses....
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.... During the preceding years when the actual loan was taken the same were accepted as explained by the revenue authorities in the regular assessment proceedings. Further the loan from M/s Jayant Securities & Finance Ltd was repaid in the immediately subsequent year. The loan balance of M/s Lunkward Media Entertainment Ltd along with the impugned interest was offered to tax in the subsequent year by the assessee itself on account of certain dispute with the lender and thus the addition made during the year under appeal resulted into double addition. 30. Per contra Ld. Departmental Representative vehemently argued supporting the orders of both the lower authorities. 31. We have heard rival contentions and perused the records placed before us and also gone through the decision of Hon'ble Coordinate Bench of Indore in the case of M/s Agrawal Corporation Pvt. Ltd (supra) relied by Ld. Counsel for the assessee. Through Ground No. 4 the assessee namely M/s Admanum Finance Ltd is aggrieved with the finding of Ld. CIT(A) confirming the disallowance of interest of Rs. 6,75,000/- and Rs. 6,00,000/- paid to M/s Jayant Securities & Finance Ltd and M/s. Lunkward Media Enterta....
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....31.3.2013. The auditor of the company worked out the disallowance at Rs. 7481/- u/s 14A of the Act. The assessee had paid interest of Rs. 88,41,366/-. However during the year assessee had a positive interest income and total interest received was higher than the interest paid. However, Ld. A.O only considered the interest paid at Rs. 88,41,366/- and the average value of investment at Rs. 11,01,46,222/- and computed the disallowance u/s 14A of the Act applying the method provided under Rule 8D of I.T. Rules r.w.s. Section 14A of the Act and computed disallowance at Rs. 38,90,444/-. Against this disallowance u/s 14A assessee preferred appeal before Ld. CIT(A). The assessee got substantial relief as Ld. CIT(A) sustained the disallowance u/s 14A of the Act only to the extent of Rs. 7481/- which the Auditor of the company has worked out. Now the revenue is in appeal before the Tribunal. 34. Ld. Departmental Representative supported the order of Ld. A.O. Ld. Counsel for the assessee supported the finding of Ld. CIT(A) and also submitted that Ld. CIT(A) has rightly held that disallowance of interest was not called for since at the end of the year it earned....
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....rrowed funds have not been utilised for making these investments and nothing contrary has been brought to our notice by the revenue authorities. Therefore we confirm the finding of Ld. CIT(A) to the extent of that no interest disallowance was called for u/s 14A of the Act in the case of the assessee and thus the interest disallowance of Rs. 33,39,713/- has been rightly deleted. 37. Now we come to the remaining portion of Rs. 5,57,531/- computed by the Ld. A.O applying 0.5% on the average investment of Rs. 11,01,46,222/-. Ld. CIT(A) while adjudicating this issue has observed that only Rs. 5 crores of fresh investment was made by the assessee in debenture of group companies on which interest has earned and out of the remaining investment only Rs. 14,96,222/- is only made in the shares of the listed companies and all the remaining investments are old investment in equity shares of unlisted companies. We however are of the view that the word average investment referred in Rule 8D of I.T rules certainly does not include the investments made for earning taxable interest income but for sure includes the investment fetching tax free interest and those made in eq....