TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 650
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....nd financial activities and has filed its return of income at Rs. 96,19,580/- on 26.09.2015 for AY 2015-16 in question. The case was selected for limited scrutiny. As per paragraph 2 of the assessment order, The AO averred that the assessee duly complied with notices, attended before the AO and filed necessary details. The books of account were also produced and test checked as per CASS reasons. 4. In the course of the assessment, from the tax audit report, the AO inter-alia observed that the assessee has shown squared off unsecured loans to the tune of Rs. 47,72,95,676/- allegedly received from an entity named M/s. Pioneer Fincon Services Pvt. Ltd. (PFSPL). 4.1 To vindicate the propriety of loan transactions eventually squared up before the closure of the financial year, the assessee presented the books of account, the ledger account of PFSPL as appearing in its books, financial statement of PFSPL etc. to explain the nature of debit and credit entries. It was submitted that similar to earlier years, the assessee in pursuit of its business, advanced money from time to time and similarly recouped after a brief period in ordinary course during the financial year relevant to Assessm....
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....CFO was recorded by the AO and reproduced in the assessment order. The AO ultimately concluded that PFSPL is a mere paper company which was used only to route money to the assessee. 4.4 It was alleged that the assessee has failed to discharge onus cast upon it under Section 68 to prove identity, creditworthiness and genuineness of transactions. The assessee has failed to produce the Director and the statement of a low rung Accountant does not carry much credence. 4.5 The Assessing Officer accordingly considered an amount of Rs. 47,72,95,676/- received from PFSPL and credited in the books of the assessee an unexplained credit and added the same total income to the assessee. 5. Aggrieved, the assessee preferred appeal before the CIT(A) to assail the action of the AO towards additions made under S. 68 of the Act. 6. The CIT(A) took note of gist of submissions made on behalf the assessee. The application for admission of additional evidences placed by the assessee was entertained and a remand report thereon from the AO was obtained. The rejoinder on remand report filed by the Assessee was also taken note of. 6.1 On consideration of the material available on record, the CIT(A) answ....
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....out distinguishing between the entries in the form of repayments received by the appellant from M/s Pioneer Fincon Services and given by the appellant to M/s Pioneer Fincon Services. The A.O. ignored tie Tax Auditor's Report, through which the maximum amount outstanding at any time during the year was reported at Rs. 2,06,00,000/-. The A.O. also ignored the fact that the appellant earned interest from M/s Pioneer Fincon services on the amounts advanced by the appellant to M/s Pioneer Fincon Services. As per the P & L A/c of the appellant, interest income of Rs. 8,36820/- (including interest of Rs. 2,39,640/- received by the appellant from M/& Pioneer Fincon Services) was credited. 3.6 The A.C. did not appreciate that if the appellant had taken loan from M/s Pioneer Fincon Services, then the appellant would had paid interest to M/s Pioneer Fincon Service. Receiving interest by the appellant from M/S Pioneer Fincon Services was an indication that the loans were given by the appellant to M/s Pioneer Fincon Services and not vice versa. I have carefully examined and analyzed the transactions between the appellant and M/s Pioneer Finco1 Services, and also the answers given by Sh. S....
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....ng its ITRs year after year till A.Y. 2017-18. M/s Pioneer Fincon Services had electronically filed, its IRs for 2015-16 on 27.09.2015. The appellant vide point no 4 of its letter dt. 04.05.2018, further clarifier that M/s Pioneer Fincon Services could not upload its annual return /balance sheet on the MCA Portal because the system was not accepting the data, while stating that M/s Pioneer Fincon Services was a company which was incorporated with unlimited liability and no capital clause and had no authorized capital. Due to failure of appellant to upload is annual return /balance sheet on MCA Portal, the name of M/s Pioneer Fincon Services was stricken off. Hence the presumption by the AO is found to be incorrect. 3.9 Considering the above discussion, I conclude that the A.O. made addition of Rs. 47,72,95,676/- without properly appreciating the factual and legal matrix of this case. The identity of M/s Pioneer Fincon Services is established from the fact that it was regularly filing its ITRs and its assessments were also done u/s 143(3) for A.Y. 2012-13 and F.Y. 2013-14. The genuineness of the transactions between the appellant and M/s Pioneer Fincon Services stands proved from ....
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....sion that the account has been used only for routing funds and the credentials of the PFSPL to the transactions are obscure and unknown. The assessee has received substantial fund from PFSPL but however only an accountant namely Mr. Manish Kumar Verma attended for PFSPL in the inquiry proceedings before the Assessing Officer. Having regard to the indifference shown to the assessment proceedings, a summon under Section 131 was thus issued to enforce the attendance of the Principal Officer of PFSPL. Despite summon under S. 131, no Director appeared before the assessee and one Mr. Sagar Ramdas Bomble appeared and claimed to be Principal Officer (Finance) of PFSPL. Mr. Bomble expressed inability of attendance of Director on the ground that PFSPL has wound up and the name of the company and striken off and no Principal Officer exists as of now. The ld CIT-DR thus quipped that the disregard to the summons under S. 131 is anything but bonafide. The ld. DR thereafter argued that the loan interchanged between the assessee and PFSPL is not backed by any formal agreement viz; loan agreement etc. to discern the terms of such transaction. The ld. DR thus asserted that PFSPL is merely a paper co....
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....the AO further failed to provide perspective to glaring facts such as (a) The transactions were embedded with commercial intent and character and interest of Rs. 2,39,640/- was charged on such Short Term Loan Transactions by the assessee and TDS on interest payments were also deducted by PFSPL (b) the crucial fact of total repayment and square up of loan extended to PFSPL before the end of financial year in question (c) The amounts credited in the books of account of the assessee under question are repayment of pre-existing loan by PFSPL and therefore, the nature of credit i.e. receipts against loan given is self-explanatory (d) the documentary evidences as well as the depositions made by the Accountant and CFO of the borrower Co. brings the facts abundantly clear which was conveniently ignored by the AO (e) extenuating circumstances attached towards non-attendance of director of a non-existing co. were sidestepped and it was also not pointed out as to what assistance was not facilitated by CFO of PFSPL in the matter of enquiry in response to summons and debilitating impact, if any, of non presence of a director per se; (f) There is nothing adverse available agains....
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....ipt, i.e., credit is thus abundantly clear. Ostensibly, the credits for the purpose of s. 68 are recoupment of the earlier advances. The nature of the credit is thus obvious case of repayment of existing loans. On facts, the AO has obviously misunderstood the true purport of nature of credits. The Assessing Officer has thus misdirected himself in law in proceeding against the assessee on a wholly wrong footing. 12.1 On a broader reckoning, the Assessing Officer failed to understand that firstly, the credits represent the repayment of loan to the assessee and secondly, the outstanding at any point of time is only Rs. 2.06 crore. The Assessing Officer has made high pitched additions on misplaced assumption of facts. The transactions have been carried out through banking channel and both, the assessee as well as the borrower PFSPL, are regularly assessed to tax. The so called loans have been ultimately repaid by PFSPL and there is no outstanding at the end of the year. 12.2 A perusal of the order of the CIT(A) clearly brings out the fact that PFSPL is not a stranger entity to the assessee. M/s. PFSPL has availed loans from the assessee on commercial considerations, and the interest ....