TaxTMI 
TaxTMI 
2023 (3) TMI 1434
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....llegal and arbitrary, the same deserves to be quashed/annulled and set aside. 2. On the facts and the circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the action of the Ld. AO in disallowing a sum of Rs. 33,86,993/- u/s 14A of the Act being the disallowance computed as per Rule 8D of the Income Tax Rules, 1962 ("the Rules"). 3. The Appellant prays that the AO be directed to delete the disallowance u/s 14A of the Act amounting to Rs. 33,86,993/- or the disallowance be appropriately reduced. 4. Without prejudice to the above, where the assessee has sufficient interest-free funds exceeding tax-free investments, it is presumed that investments are made out of such interest-free funds and therefore no disallowance u/s. 14A r.w.r. 8D(2)(ii) of the Rules is called for; 5. Without prejudice to the above, while computing average investments for Rule 8D of the Rules, only those investments from which exempt income has been earned during the year should be considered; 6. On the facts and in the circumstances of the case and law, the Ld. CIT(A) has erred in upholding the computation under clause (f) of Explanation to section 115JB(2) ma....
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....tion without allowing the cross-examination of the assessee is against the principles laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com and, thus, the sustaining of addition, is against the facts and circumstances of the case. 7. That the confirmation of addition by the CIT (A) on human probabilities is not proper and is against the documentary evidence furnished before the authorities below, which has not been doubted at all. 8. The Ld. CIT (A) has erred in confirming the disallowance of Corporate Social Responsibility (CSR in short) expenses of Rs. 17,50,000/- u/s 80G of the Income tax Act when the same was allowable according to the decision of the Hon'ble Kolkata Bench of the Tribunal in the case of M/s JMS Mining Pvt Ltd Vs PCIT, Kolkata in I.T.A. No. 146/Kol/2021 in the A.Y. 2016-17 Order dated 22.07.2021. 9. The Ld. CIT (A) has erred in confirming the disallowance of CSR expenses on the ground that in spite of sufficient opportunity the assessee failed to produce receipt evidencing the sum was donated to the trust approved u/s 80G for the relevant assessment year." ITA No. 660/KOL/202....
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....86,993/- facts in brief are that the assessee earned exempt income in the form of (i) dividend at Rs. 43,40,324/-, (ii) long term capital gain on venture capital fund at Rs. 2,43,893/-, (iii) long term capital gain on shares at Rs. 1,13,56,149/-. 6. Ld. AO on examining the details about the exempt income earned by the assessee during the year, and investments appearing in the balance sheet both current and non-current, quoted and unquoted resorted to apply Rule 8D of the Income Tax Rules, 1962 and made NIL disallowance under Rule 8D(i) of the Rules, disallowed interest expenditure at Rs. 14,74,087/- under Rule 8D(ii) of the Rules, disallowed Rs. 19,12,906/- under Rule 8D(2)(iii) of the Rules. The finding of ld. AO stands confirmed by ld. CIT(A). Before us ld. Counsel for the assessee has submitted that the assessee company has sufficient share capital and reserve to cover up the investments made in the equity shares and mutual funds. Therefore, in view of the judgment of Hon'ble Supreme Court of India in the case of CIT vs. Reliance Industries Ltd. (2019) 410 ITR 466 interest disallowance is uncalled for u/s 14A of the Act. As regards under Rule 8....
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....e average investment made under Rule 8D(2)(iii) of the Rules the contention of the assessee taking shelter of the judgment of the Hon'ble Jurisdictional High Court in the case of REI Agro Ltd. (supra) is that such disallowance should be made only in relation to income which does not form part of total income and this can be done only taking into consideration the investment which has given rise to such income which does not form part of total income. In the instant case we notice that the exempt income is not only from dividend but also from long term capital gain from sale of equity shares. No specific details have been filed by the assessee in support of its contention and prayer is made to restore the issue to ld. AO which will keep the issue live. We, on perusal of the audited balance sheet placed at page 22 to 49 of the paper book notice that the investments constitute investment in equity shares at Rs. 10.10 Cr, investment in mutual funds and venture capital funds at approx. 6 Cr and other investments in quoted and unquoted investments. So far as the investments in mutual funds are concerned the assessee is charged by such mutual fund companies for maintaining the i....
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....iscussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962." The ratio laid down by the Hon'ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act. However, it is also clear that the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit. In holding so, we draw support from the judgment of Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No. 1501 of 2014 (ITAT No. 47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- "We find computation of the amou....
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....nce u/s 14A of the Act which is to be considered for computing total income under the normal provision of Income Tax Act and it cannot be considered for the purpose of computing book profit u/s 115JB of the Act, however, taking note of Clause 'f' to Explanation '1' of Section u/s 115JB of the Act which provides that for purpose of computing book profit the same should be increased by the amount or amounts of expenditure relatable to any income to which Section 10 (other than the provisions contained in clause (38) thereof) or Section 11 or Section 12 apply and therefore, for the purpose of Clause 'f' to Explanation '1' of Section 115JB of the Act an ad-hoc disallowance is made at Rs. 3 lakh and the same should be added to the book profit for the purpose of Section 115JB of the Act. Therefore, ground No. 6 raised by the assessee is partly allowed. 12. Now, we take ground nos. 7, 8 & 9 of the assessee's appeal for AY 2012-13 which leads to addition u/s 68 of the Act for unexplained share capital and share premium of Rs. 1,62,80,000/-. We notice that during the year under consideration the assessee company issued equity shares to the following companies at a face va....
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....mar Agarwal in ITA No 179/2008 order dated 17.11.2009. It was also submitted that if the share subscribers did not comply with the summons issued for their presence before ld. AO, he had the entire machinery at his disposal to enforce their attendance which he did not utilize and has blamed the assessee. However, submissions of the assessee could not satisfy ld. CIT(A) and he confirmed the view of ld. AO and confirmed the addition u/s 68 of the Act and the crux of the finding of ld. CIT(A) is in para 6.18 of the impugned order and the same reads as follows: "6.18 Thus, clued into the above judgements, the ratio decidendi espoused in them and the facts of the case on record, the appellant's contention that the AO did not conduct any independent enquiry and the assessee had successfully discharged its initial onus is hollow and without logic. Huge sums of money have been received as credits from parties which are very well known and close to the assessee. Yet it could not demonstrate any attenuating circumstances whereby it fails to produce these parties before the authorities or give them their current addresses. In fact, by not producing the parties the appellant has thwarted the....
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....gh Court in the case of Pr. CIT vs. Apeak Infotech & Others reported in [2017] 397 ITR 148 (Bom). It was also submitted that all the share subscribers have sufficient creditworthiness in the form of share capital and share premium to explain the investment and most of the share subscribers have huge turnover and are paying taxes. Further, reliance was placed on the decision of this Tribunal in the case of M/s. Eastern Trade Centre vs. ACIT in ITA No. 2427/KOL/2017 order dated 06/09/2019 wherein also the addition u/s 68 of the Act were made on account of unsecured loans received from some of the alleged share subscribers and the Revenue authorities also relied on the statement of Shri Rajkumar Kothari recorded on 02.03.2016 and this Tribunal held in favour of the assessee. 1. Decision of Hon'ble Supreme Court in the case of Commissioner of Incometax (Large Taxpayer Unit) -Vs- Reliance Industries Ltd reported in [2019] 410 ITR 466 (SC) Order dated 02.01.2019. 2. Decision of Hon'ble Ahmedabad "D" Bench of the Tribunal in the case of DCIT, Circle-1 (1)(1), Ahmedabad -Vs-Adani Wilmer Ltd in ITA No. 1761/Ahd/2016 with C.O. No. 133/Ahd/2016 vide Order dated 19.08.20....
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....ddition made u/s 68 of the Act at Rs. 1,62,80,000/- received from the following persons against the issue of equity shares at face value of Rs. 10/- and share premium of Rs. 990/- for each share:- Detail of Share Subscriber Detail of Allotment of Shares Name of the Party PAN No of Shares Face Value @ 10 Share Premium @ 990 Share Capital & Premium Vivek Tracom Pvt Ltd AAACY8670J 6,200 62,000 61,38,000 62,00,000 Stardox Vinimay Pvt Ltd AAECS0352C 4,000 40,000 39,60,000 40,00,000 Divya Electronics Pvt Ltd AAACD9721C 3,050 30,500 30,19,500 30,50,000 Ranbhumi Marketing Pvt Ltd AAECR5842G 2,000 20,000 19,80,000 20,00,000 Prativa Suppliers Pvt Ltd AAFCP2862F 1,000 10,000 9,90,000 10,00,000 Potential Electrical & Electronics Pvt Ltd AABCP5014D 30 300 29,700 30,000 TOTAL 16,280 1,62,800 1,61,17,200 1,62,80,000 17. We notice that all the share subscribers are non-banking finance companies. Share subscribers namely Vivek Tracom Pvt. Ltd. & Stardox Vinimay Pvt. Ltd. gave a part of the share application money at Rs. 35 lakh & 15 lakh respectively in the preceding year itself. The assessee has discharged the primar....
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....letely been ignored by the Revenue authorities. It is also pertinent to note that the share subscribers are non-banking finance companies and are regulated by the norms of the Reserve Bank of India. Ministry of Corporate Affairs also keeps regular watch on the companies registered with the Registrar of Companies. Annual returns are to be filed. Income tax returns have also been filed by the share subscribers. So, one cannot dispute the identity of the share subscribers and since genuineness of the transactions is proved with the good financials of the assessee company which seems to be a good investment for the share subscribers and creditworthiness is proved with the funds available with the share subscribers. 19. Therefore, under these given facts and circumstances invoking provisions of Section 68 of the Act was uncalled for. We find support from the recent decision of this Tribunal in the case of ITO vs. M/s. Kemex Engineering (P) Ltd. in ITA No. 75/Kol/2021 order dated 01.02.2023 wherein also the identity, creditworthiness and genuineness of some of the share subscribers were doubted by the Revenue authorities and this Tribunal after examining the facts in detail held in....
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.... & reserves which were several times more than the share subscription amount paid to the appellant. In find that only a fraction of the net owned funds of the respective subscribing companies was invested in assessee's equity shares. The investments made by each of the share subscribers were paid by way of account payee cheques and/or RTGS and there was no prior cash deposit in their bank accounts. In view of the aforesaid facts it can be safely inferred that the assessee had discharged its onus of substantiating the creditworthiness of the shareholders. The shareholders had also furnished copies of their share allotment advices. They had also explained the nature of their respective source of funds. All these facts considered cumulatively substantiate the genuineness of the transactions involving subscription of share capital. 4.6. It is noted that in the impugned order much emphasis was placed on the act that the shareholders did not respond to the notices u/s. 131. I however, find that although the share subscribing companies did not appear before the AO yet the material documents requisitioned by the AO in his notice u/s. 131 had already been furnished before the AO by the s....
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....rofit and loss account of these persons disclosed that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. The judgment in case of Gagandeep Infrastructure (P) Ltd. (supra) would be applicable in the facts and circumstances of the present case." 4.8. There is per se no quarrel with the proposition put forth by the AO that m tax proceedings the AO is not required to accept apparent as real. The AO has both duty as well as obligation to bring out the truth and present the real facts. For that purpose the AO is permitted to undertake investigation and enquiries so as to unearth the actual and real facts. The AO has been given power by the Legislature to prove that apparent is not real and thereafter make the assessment with reference to actual state of affairs. There is also no denial that the AO while assessing the income is permitted to take into consideration the human probabilities and if he proves that the conduct of the parties is not in conformity with the actions of....
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....ssessee's favour. All these facts and documents considered cumulatively establish that the assessee had discharged the onus of proving creditworthiness of the share sub subscribers and the genuineness of the transactions. I therefore hold that the AO was not justified in making the impugned addition of Rs. 1,82,50,000/- u/s. 68 of the Act which is accordingly deleted. These grounds are therefore allowed." 7.3. Before arriving at our finding, we refer to the following judicial precedents to buttress our observations and conclusions: i) The decision of Hon'ble Jurisdictional High Court of Calcutta in the case of CIT v. Dataware Pvt. Ltd. in ITAT No. 263 of 2011 dated 21.09.2011 wherein Hon'ble jurisdictional High Court held that "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 u....
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....mpanies along with relevant documentary evidence and details which was not complied with in full. Ld. Counsel submitted that mere non-appearance of directors is no basis for invoking provisions of section 68 of the act for which he placed reliance on the decision of Hon'ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) wherein it was held as under: "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said ....
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....e Act 2012 is effective from 01.04.2013, it is not applicable on the case before us. Even otherwise, it is not in dispute that the assessee has filed all the relevant documents of the share subscriber companies and further, in order to prove the source of source, copies of bank statements, audited balance sheets of all the nine subscriber companies are placed on record. 10. As far as the decision of Coordinate bench of ITAT, Kolkata in the case of Bishakha Sales Pvt. Ltd. (supra) referred by the Assessing Officer in making the addition, in our view, it does not support the addition as the said decision is delivered in the context of proceedings u/s 263 of the Act on the issue of enquiry regarding huge premium received on share application. 11. Further, in respect of ground nos. 3, 4 and 5, reference to the judgment of Hon'ble Supreme Court in the case of NRA Iron & Steel Pvt. Ltd. (412 ITR 161) is found to be distinguishable on facts in as much as in the said decision, Ld. AO has made extensive enquiries and some of investors were found to be non-existent. Upon going through the facts involved in that judgment, it is noted that, in the decided case the AO had made extensive e....
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....ly, the assessee was asked to bring those creditors who were alleged to have advanced the amount of cash as against the supply of bidis. On failure of production of those creditors summons were issued under section 131 but none of the creditors appeared and in some cases summons were returned with the endorsement made by the postal authority "no such person concerned was found". The Commissioner (Appeals) found that there were sufficient materials to hold that the cash -credits received by the assessee were genuine and these were received as against the supply of bidis. During the same assessment year or subsequent assessment year the necessary challans, vouchers, and other confirmatory letters were also considered by the Commissioner (Appeals). After analysing everything he accepted the explanation and also the evidence of the creditworthiness of the creditors and granted relief. The Tribunal found that the Commissioner (Appeals) had erroneously held that the summons were -issued after assessment was done. Only on that ground it was held that the assessee could not establish by producing evidence that the credit was -received from customers. The order of the Income-tax Officer was....
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....s. 4,59,081/- but as per Exim data received from CBEC the assessee has received duty drawback of Rs. 6,53,560/-. The difference of the two i.e. Rs. 2,03,823/- was added to the income of the assessee for unaccounted duty drawback. We, on perusal of the details filed by the assessee in the form of the paperbook containing 97 pages as well as details of duty drawback as on 31.03.2020 filed vide paperbook dated 30.01.2023 on examining the complete details of the duty drawback found that the alleged sum of Rs. 2,03,823/- was sanctioned by the appropriate authority in the subsequent year and has been offered to tax in the return of income for AY 2019-20. The details of income for AY 2019-20 have been filed before us and we, on perusal of the same find merit in the statement made by the assessee and are inclined to hold that the alleged sum of Rs. 2,03,823/- though was applied for duty drawback during AY 2018-19 but it was finally received by the assessee during AY 2019-20 after being sanctioned by the appropriate authority and the same has been duly offered to tax in the income for AY 2019-20. Therefore, no addition of Rs. 2,03,823/- is called for unac....
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....s that the Ld. CIT (A) erred in confirming the order of the Assessing Officer making an addition of Rs. 8,61,00,000/- u/s 68 of the Act. 33. The facts of the case are that the assessee has taken an unsecured loan from 7 body corporates for an amount of Rs. 8,61,00,000/-, the details are as follows: Sl No Name of the party PAN Opening balance Loan Taken (In Rs. ) Closing Balance (In Rs. ) Interest (In Rs. ) 1 M/s Prativa Suppliers Pvt Ltd. AAFCP2862F NIL 18250000 500000 277644 2 M/s Divya Electronics Pvt Ltd AAACD9721C NIL 2000000 2000000 159781 3 Albright Viniyog and Nirman Pvt. Ltd AAECA0590N NIL 7800000 NIL 147551 4 Rajshree Developer Entrepreneurs Pvt Ltd AABCR2000D NIL 11200000 1000000 289134 5 Zigma Electricals Pvt Ltd AAACZ0831B NIL 3700000 NIL 153419 6 Paritosh Electricals Pvt Ltd. AABCP5013E NIL 34600000 NIL 1635066 7 Potential Electricals and Electronics Pvt Ltd AABCP5014D NIL 8550000 NIL 200268 TOTAL 8,61,00,000 28,62,863 34. The Assessing Officer issued Summon u/s 131 of the Act to all the loan creditors for verification and to verify the address of the p....
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.... year itself. Notices given by ld. AO u/s 133(6) of the Act to the alleged cash creditors were duly served and they all have responded to ld. AO enclosing all the relevant details to prove the identity and creditworthiness of the lenders and genuineness of the transaction. Further, with regard to the statement of Shri Rajkumar Kothari recorded on 02.03.2016 and heavily relied by ld. AO it is submitted that the stands retracted by Shri Rajkumar Kothari filing an affidavit and therefore, placing reliance on a retracted statement is not valid and further, no opportunity of cross examination was given to the assessee by ld. AO before making addition based on such statement. Reference was also made to the financials of the cash creditors stating that they were having sufficient funds to explain the alleged loans. Reliance placed on various judgments. However, ld. CIT(A) was not satisfied with these submissions and held against the assessee and the crux of the finding of ld. CIT(A) given in para 5.7 of the impugned order reads as under: "5.7 Thus, clued into the above judgements, the ratio decidendi espoused in them and the facts of the case on record, the appellant's contention that t....
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....eived by account payee cheques so also the same was repaid by account payee cheques. The assessee paid interest on the loan on which tax was deducted at source, which tax was claimed by the creditors as tax credit in their returns and such tax credit was allowed, (the copy of loan confirmations attached) The Ld AO issued notice u/s 133(6) to all the seven parties. A sample copy of the notice u/s 133(6) is enclosed herewith. Such notices were duly served on the given address. Not only that all the parties responded to the notices and filed their reply on all the specific points raised by the Ld. AO. However, the Ld. AO at his own wisdom alleged to have deputed his inspector and obtained a report that the parties were not existing at the given address. The AO therefore concluded that the parties are accommodation entry providers. For this proposition he also relied on the statement of Sri Rajkumar Kothari carrying on business at 32 Ezra Street Kolkata observing that Sri Kothari in his statement recorded on 2.3.2016 admitted that he and the companies managed by his were mere accommodation entry providers. It is surprising that the inspector could not locate the companies at 32, Ezr....
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.... companies was found at the given address. However, it is strange that when notices u/s. 133(6) of the Act could be serviced on the loan creditors how can notice u/s. 131 of the Act could not. Also, all the documents needed to prove the genuineness of the transactions was submitted before the Ld. AO namely the copies of loan confirmations, bank statements audited accounts, ROC documents which showed that the loan creditors were active companies. The assessee also filed their own bank statement. Further none of these documents were controverted by the Ld. AO. The interest payments on loan were made through banking channels and as mentioned above the bank statements were already submitted to the Ld. AO. On one hand the AO relied on the statement of Raj Kumar Kothari recorded by some other authority, which is the sole basis of the addition, on the other hand no chance to cross examine Sri Kothari was allowed to us. It has been held by the Hon'ble Supreme Court in the case of Andaman Timber Industries v CCE dated 02.09.2015 that statement of third party should not be relied on unless opportunity to cross examine is allowed. Moreover, all the creditor companies are assessed to tax till ....
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.... the capital and reserves of the loan creditors were more than sufficient to prove their creditworthiness. Moreover, all the loan creditors are NBFC companies duly registered with RBI and their registration still stands. Therefore, the identity, genuineness and creditworthiness is proved. The addition may please be deleted." 40. Further, reliance was placed on the decisions of Hon'ble Jurisdictional High Court in the case of PCIT vs. Sree leathers reported in [2022] 448 ITR 332 (Calcutta), CIT vs. Odeon Builders Pvt. Ltd. reported in [2019] 418 ITR 315 (SC), Andaman Timber Industries vs. CCE reported in [2016] 38 GSTR 117 (SC), PCIT vs. Oriental Power Cables Ltd. reported in [2022] 143 taxmann.com 371 (SC), Kishinchand Chellaram reported in AIR 1980 14 SC 2117, Eastern Commercial Enterprise reported in (1994) (Cal) [210 ITR 103], CIT vs. Smt. Sunita Dhadda reported in [2018] 406 ITR 220(Raj), PCIT vs. Ambe Tradecorp (P.) Ltd reported in [2022] 145 taxmann.com 27 (Guj), ACIT vs. M/s. Overtop Marketing Pvt. Ltd. in ITA No. 686/KOL/2019 order dated 15.03.2021. 41. On the other hand, ld. D/R vehemently argued supporting the detailed finding of both the lower authorities an....
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....ported in various Tax Journal. It is submitted that each judgment is delivered on its peculiar facts. In the assessment order, the Assessing Officer has not explained how the facts on those judgments are identical to the facts in the case of the appellant. Therefore, the reliance on those judgments by the Assessing Officer is misplaced and the addition made u/s 68 of the Act and on account of the disallowance of interest payments cannot be sustained in law. 45. Further, we notice that the Assessing Officer has relied on the statement of one Sri Raj Kumar Kothari dated 02.03.2016 wherein he deposed before the department that he was providing accommodation entry to the beneficiaries in the guise of share capital, share premium, unsecured advances/deposits, bogus billing, etc. It is submitted by ld. Counsel for the assessee that the assessee was not supplied a copy of the statement. The Hon'ble Supreme Court in the case of CIT vs. Odeon Builders Private Limited [2019] 418 ITR 315 (SC) has held that Addition or disallowance cannot be made solely on third-party information without independently subjecting it to further verification by the Assessing Officer. We note that the complia....
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....him. This necessarily also postulates that he should cross-examine the witness hostile to him." 49. A similar view was also taken by the Hon'ble High Court of Rajasthan in the case of CIT vs. Smt. Sunita Dhadda reported in [2018] 406 ITR 220(Raj) wherein the Hon'ble Court has considered the judgment of the Hon'ble Supreme Court in the case of M/s Andaman timber Industries vs. CCE (supra) and confirmed the view taken by the Tribunal holding that "if the assessee is not provided any opportunity to cross-examine the person who stated to have received 'on-money' is a violation of principles of natural justice which, thus called for the deletion of addition so made by the Ld. Assessing Officer." 50. Further, we observe that similar type of addition was made in the case of another assessee namely M/s. Overtop Marketing Pvt. Ltd. for AY 2015-16 based on the statement of Shri Rajkumar Kothari and this Tribunal in its order dated 15.03.2021 in ITA No. 686/KOL/2019 after observing that the assessee was not provided opportunity of cross examination Shri Rajkumar Kothari regarding his original statement given on 02.03.2016 accepting to be an accommodation entry provider (t....
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....d branded them as shell/paper companies on the strength of the statement of Shri Raj Kumar Kothari and Shri Bijay Kumar Dokania whose statements were recorded u/s 131 of the Act on 02.03.2016 and 28.05.2014 by the Investigation Wing u/s 131 of the Act in third party proceedings and of course behind the back of assessee. The Ld. AR of the assessee brought to our notice that from a perusal of the statement of Shri Vijay Kumar Dokania it can be noted that the A.O has reproduced only selected questions and answers i.e. questions and answers No. 4,6 & 12 and from the answers given it would be clear that his companies are engaged in giving bogus shares/LTCG and also he earns from Tax Consultancy and so, in the statement he [Shri Vijay Kumar Dokania] did not say anything about his companies involvement in giving accommodation entry in the form of loans. It was pointed out by the Ld. AR that he has stated that his main source of income was from commission for providing accommodation entries by forming jama-kharchi companies and selling them in lieu of commission and he has elaborated his modus operandi by stating that he gives entry in the form of LTCG (long-term capital gain). Thus a....
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....in Andaman Timber v. CCE (2015) 62 taxmann.com 3 (SC). 13. We note that the Ld. CIT(A) has taken note of the fact that all the nine lender companies are income-tax assessees, and the interest paid by the assessee on the loan taken by it are duly subjected to TDS and the lender companies have shown the said interest income on which they have paid tax. The Ld. CIT(A) has noted that all the nine lender companies are corporate entities which are incorporated by the ROC and according to him the existence and status of them can be seen by the A.O from the master data available in the public domain/website of ROC; And that these companies are still 'active' companies which are discernible from ROC website. According to Ld. CIT(A), all the lender companies PAN and the jurisdiction under whom they are assessed are available in the ITR filed by them directly to the A.O pursuant to the section 133(6) notice issued by the A.O and transactions have been made through account payee cheques and the Hon'ble Calcutta High Court has said that A.O of the assessee who borrows or is in receipt of credit/loan (like assessee in this case) cannot brand the lender company as lacking in creditworthiness, ....
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.... M/s. Paritosh Electricals Pvt Ltd. 11,91,92,856 1,93,05,986 41,50,000- 3,84,123/- 4 M/s. Potential Electricals & Electronics Pvt Ltd. 10,49,86,852 1,64,73,594 40,00,000 4,65,205/- 5 M/s. Ranbhumi Marketing Pvt Ltd. 3,01,62,434 1.24,73,183 20,00,000/- 1,44,247/- 6 M/s. Shresth Builders Pvt Ltd. 28,68,59,333 3.61,44,953 NIL 5,33,425/- 7 Vivek Barter Pvt Ltd. 10,90,00,950 1,69,32,938 73,50,000/- 6,79,911/- 8 Vivek Tracom Pvt Ltd. 15,82,29,903 3,46,69,711 80,00,000/ 27,08,014/- 9 Rajshree Developer Enterprises Pvt Ltd. 10,58,86,318 1,38,12,003 58,00,000/- 1,32,553/ Total 4,51,00,000/- 53,70,163/- 15. Thus from a perusal of the above details, it can be seen that the lender companies have sufficient creditworthiness to give loan to the assessee company and cannot be termed as shell companies by simply basing his (A.O) conclusion on the strength of selected questions and answers given by two persons and that too recorded on third party proceedings and which were admittedly recorded behind the back of the assessee. Moreover, Shri Raj Kumar Kothari has retracted the statement within ten (10) days as discussed su....
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....iding the entire statements to assessee and the statement not tested on the touch-stone of cross-examination, cannot be the basis to draw adverse inference against the assessee. Therefore, no addition was warranted. To come to my aforesaid decision, I rely on the ratio of the decision of the Hon'ble Supreme Com! in the case of CIT Vs. M/s. Odeon Builders Pvt. Ltd. in Review Petition (C) Diary No. 22394 of 2019 in Civil Appeal Nos.9604 & 9605 of 2018 dated 21.08.2019 wherein the Hon'ble Supreme court has held as under: "We have perused the review petition and find that the tax effect in this case is above Rs. 1 crore, that is, Rs. 6,59,27,298 Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs. 1 crore. However, ongoing through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866 - was based solely on third party' information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire dis....
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....factual infirmity in the impugned order of the Ld CIT(A), so we decline to interfere. So the impugned action of Ld. CIT(A) to delete the section 68 addition of Rs. 4.51 crores and [the interest paid by assessee to lenders] Rs. 53,70,163/- is confirmed. So, the Revenue's appeal stands dismissed. 18. In the result, the appeal of the Revenue is dismissed." 51. We, therefore, respectfully following the decision of this Tribunal referred herein above and other judgments of Hon'ble Courts referred (supra) are of the considered view that the legal issue raised by the assessee deserves to be allowed as the basis of the impugned addition is the statement of Shri Rajkumar Kothari u/s 131 of the Act dated 02.03.2016. No opportunity of cross examination was provided to the assessee by ld. AO and also the said statement was retracted within ten days by Shri Rajkumar Kothari and therefore, making the addition based on such retracted statement and that too without giving any opportunity of cross examination to the assessee in whose case addition has been made on the basis of a statement of a third person deserves to be deleted and, thus, the legal issue raised by the assessee c....
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....r, Kolkata: 700001 - 20,00,000 - 20,00,000 3 Alright Viniyog And Nirman Pvt. Ltd. AAECA0590N 32 Ezra Street, 4th Floor, Kolkata: 700001 - 78,00,000 78,00,000 - 4 Rajshree Developer Enterprenuers Pvt. Ltd. AABCR2000D 34 Ezra Street, 4th Floor, Kolkata: 700001 - 1,12,00,000 1,02,00,000 10,00,000 5 Zigma Electrical s Pvt. Ltd. AAACZ0831B 34 Ezra Street, 4th Floor, Kolkata: 700001 - 37,00,000 37,00,000 - 6 Paritosh Electrical s Pvt. Ltd. AABCP5013E 34 Ezra Street, 4th Floor, Kolkata: 700001 - 3,46,00,000 3,46,00,000 - 7 Potential Electrical s And Electronic Pvt. Ltd. AABCP5014D 32 Ezra Street, 4th Floor, Kolkata: 700001 - 85,50,000 85,50,000 - - 8,61,00,000 7,81,00,000 80,00,000 54. A perusal of the same shows that out of the total loan of Rs. 8,61,00,000/- taken, a sum of Rs. 7,81,00,000/- was repaid during the year itself and the remaining balance was a small amount of Rs. 80,00,000/-. It is the submission that as the loan was repaid during the year itself, the appellant not being a beneficiary to the said loan the addition made cannot be sustained and is liable to be deleted. The appel....
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.... purpose, ld. Counsel for the assessee draws support from the judgement of the Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) where it is held as follows: "Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that 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. The crucial words in the provision are "the assessee offers no explanation". This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, the assessee h....
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....ed cash credit of 4 of such body corporates namely i) Divya Electronics Pvt. Ltd., ii) Paritosh Electricals Pvt. Ltd., iii) Potential Electricals and Electronic Pvt. Ltd. & iv) Rajshree Developer Entrepreneurs Pvt. Ltd. were the subject matter before this Tribunal in case of M/s. Overtop Marketing Pvt. Ltd. (supra) and the decision of this Tribunal stands extracted (supra) wherein the facts are almost identical and on merits of the case this Tribunal has given relief to the assessee accepting the identity and creditworthiness of the alleged loan creditors and genuineness of the alleged transaction. 57. Further, we notice that in another decision of this Tribunal in the case of M/s. Eastern Trade Centre vs ACIT in ITA No. 2427/Kol/2017 for AY 2014-15 dated 06.09.2019 similar issue of unexplained cash credit from some of the alleged cash creditors was adjudicated and there also the basis was the statement of Shri Rajkumar Kothari and this Tribunal dealt with the merits of the case and held in favour of the assessee observing as follows: "7. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnish....
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....the above, the identity of all the parties stands duly proven. 9. Genuineness and Creditworthiness of the Transaction: We note that regarding the genuineness of the transaction, it was stated by the ld Counsel that all the said loans received during the year were duly routed through the regular banking channels of all the companies and also of the assessee company. To substantiate the genuineness of the transactions and the identity and creditworthiness of the parties, following documents were submitted by the assessee: i) ITR Acknowledgment, Relevant Bank statements of the loan creditors evidencing that loans given to the assessee were through normal banking channels. ii) Audited Accounts of the loan creditors and parties from whom the creditors received fund (being source of source of funds) iii) Copies of loan confirmations received from loan creditors These documents clearly prove the genuineness of the transactions and the identity and creditworthiness of the parties. Further, we discuss the genuineness of the transactions, identity and creditworthiness of these three parties one by one: (1). Vivek Tracom Pvt Ltd We note that the assessee had taken loan amoun....
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....td had received Rs. 20,00,000/- from Machinery Agencies (India) on account of refund of loan as shall be evident from the bank statement of Paritosh Electricals Pvt Ltd. A copy of confirmation of loan taken by Machinery Agencies (India) from Paritosh Electricals Pvt Ltd along with bank statement of Machinery Agencies showing the same is enclosed at page 123 to 125 of the paper book. Thus, the source of source of the fund also stands proven. 3. Ranbhurni Marketing Pvt Ltd We note that the assessee had taken a loan of Rs. 20,00,000/- from Ranbhumi Marketing Pvt Ltd during the relevant year through proper banking channel (vide cheque No. 0405125). In this regard a copy of the confirmation of loan given by Ranbhumi Marketing Pvt Ltd to the assessee is enclosed at page 130 of the paper book and a copy of the bank statement of Ranbhumi Marketing Pvt Ltd evidencing the loan of Rs. 20,00,000/- given to the assessee is enclosed at page 131 to 132 the paper book. The company is a regular income tax assessee. A copy of the ITR Acknowledgement and Audited accounts of Ranbhumi Marketing Pvt Ltd is enclosed at pages 70 to 90 of the paper book. As regards the source o....
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.... note that the Ld Assessing Officer had again pressurized the director namely Shri Biswanath Basak to depose that he was a dummy director in the said companies but Mr. Biswanath Basak had later filed retraction. The detailed chart showing the parties and amount of interest paid is as follows: Sr No. Name of the Company Interest paid (in Rs. ) 1. M/s Divya Electronics Pvt Ltd 6,50,000 2. M/s Maheshwari Merchants Pvt ltd 2,50,000 3. M/s Rajshree Developers Entrepreneurs Pvt Ltd 2,50,000 4. M/s Vivek Barter Pvt Ltd 1,00,000 5. M/s Stardox Vinimay Pvt Ltd 4,99,569 6. M/s Raina Vyapar Pvt Ltd 1,86,344 7. M/s Tanjore Vanijay Pvt Ltd 6,85,042 8. A. K. Construction Pvt Ltd 3,00,000 9. R.C Suppliers Pvt Ltd 1,85,026 TOTAL 38,59,987 The Ld Counsel for the assessee submitted before us that with regard to the interest paid on outstanding loans taken in earlier year from the parties mentioned in the table above, the confirmations of loans from these parties and their bank statements showing the same are enclosed at pages 137 to 148 of the paper book. The Income Tax Return Acknowledgements and Audited accounts of the parti....
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....egister, etc., it would constitute acceptable proof or acceptable explanation by the assessee." The Hon'ble Delhi High Court in the case of CIT vs Oasis Hospitalities Pvt Ltd and others reported in [333 ITR 11] held as follows: "The initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee. In order to discharge this burden, the assessee is required to prove (i). the identity of the share-holder, (ii) the genuineness of the transaction, and (c) the creditworthiness of the shareholders. In case the investor/shareholder is an individual, some documents will have to be filed or the shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc., can be furnished. When the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction could be copies of the shareholders register, share application forms, share transfer register, etc.....
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....n the totality of the facts discussed as above and in view of the case laws discussed above, it is well established that the assessee by producing necessary documents viz., ITR Acknowledgements, audited accounts, bank statement copy, PAN Number and confirmations etc has sufficiently established the identity, creditworthiness and genuineness of the loan creditors and interest paid. Therefore, we delete the addition of Rs. 88,59,987/- (Rs.50,00,000 + Rs. 38,59,987). 13. In the result, the appeal of the assessee is allowed." 58. We, therefore, under the given facts and circumstances of the case, are of the considered view since the assessee has successfully discharged its onus of proving the identity of the loan creditors which are body corporates in the instant case duly registered with Ministry of Corporate Affairs, having PAN and regularly filing the returns, further creditworthiness of the transaction is proved with the fact that they have been carried out through banking channel and sufficient funds in the form of share capital and reserve and surplus available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is pr....
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....ITA No. 146/KOL/2021 order dated 22.07.2021 has allowed the deduction u/s 80G of the Act on CSR expenses. The relevant finding of this Tribunal is reproduced below: "23. As discussed supra, we concur with the contention of the assessee that since Parliament intended certain restrictions to only CSR expenditure in respect of two donations included by an assessee as CSR expenditure i.e. [Swachh Bharat Kosh and Clean Ganga Fund] has impliedly not made any prohibition/restriction in respect of claim of CSR expenses in other cases if it is otherwise eligible under Section 80G of the Act. In this context we find that the assessee has made donation of Rs. 1.25 crores on 20.01.2016 by RTGS dated 19.01.2016 through UCO Bank which is evident from page 18 of PB which is received by Shree Charity Trust which was 80G(5)(vi) certificate of the Department dated 15.01.2009 placed at page 17 of PB. The assessee has also made payment of Rs. 10 Lakhs to Pt. Jashraj Music Academy Trust which is found placed at page 22 & 23 and the approval u/s 80G (5)(vi) of the Act in respect of Pt. Jashraj Music Academy Trust is found placed at page 19 of PB dated 30.03.2012 given by Director of ....