TaxTMI 
TaxTMI 
2023 (3) TMI 1434
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....e impugned order passed by the Ld. CIT(A) is bad in law, illegal 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 e....
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.... allowed to the assessee and, thus, the statement recorded at the back of the assessee has no evidentiary value. 6. That the confirmation of addition 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 opp....
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....Act (ground No. 6) iii) Addition u/s 68 of the Act for unexplained share capital at Rs. 1,62,80,000/- (ground nos. 7 to 9) 5. As regards the first issue for disallowance u/s 14A of the Act at Rs. 33,86,993/- 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 mutu....
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....ee funds have been applied for the purpose of making investments in shares and therefore, interest disallowance of Rs. 14,74,087/- is uncalled for and the same is deleted. 9. As regards the disallowance at the rate of 0.5% of the 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 ....
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....xmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: "In view of above discussion, 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 1....
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....come as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the assessee is partly allowed. In the result, the CO. of the assessee is partly allowed." 11. Respectfully following the above decision, we are inclined to hold that so far as the disallowance 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 n....
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....in the equity shares of the assessee company. Mere non-appearance of the directors cannot justify the addition u/s 68 of the Act and for this contention reliance placed on the decision of the Coordinate Bench in the case of M/s. Cygnus Developers (I) Pvt. Ltd. in ITA No. 282/Kol/2012 order dated 02.03.2016 and also the judgment of Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar 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 successf....
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....ting the proviso has come into effect from AY 2013-14. Reliance placed on plethora of decisions referred in the brief note which mainly includes the judgment of Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure (P) Ltd reported in [2017] 247 Taxman 245 (Bom), decision of this Tribunal in the case of M/s. Cygnus Developers (I) Pvt. Ltd. (supra), judgment of Hon'ble Bombay High 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. ....
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.... 334 (Delhi) 14. Decision of Hon'ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd Vs Commissioner of Income-tax [2013] 353 ITR 171 (Cal) 15. Decision of Hon'ble Supreme Court in the case of Andaman Timber Industries Vs CCE [2016] 38 GSTR 117 (SC). 15. On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities. 16. We have heard rival contentions and perused the records placed before us. The assessee is aggrieved to the addition 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 2,0....
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.... 1,62,80,0 00 18. The above details clearly show that the share subscribers has sufficient creditworthiness to make the investment in the equity share capital of the assessee company. We also note that the assessee company is having a turnover of approx. 91.71 Cr and profit before tax is at Rs. 8.41 Cr and the assessee company also has fixed assets of approx. 13.17 Cr and various other investments in the nature of current and non-current long term loans and advances. It shows that the share subscriber companies had genuine reason to make investment in the assessee company. It is not the case that investment is being made in such company which has poor financials. This aspect has completely 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 shar....
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....from the following paras are extracted as under: "4.5. To sum up the foregoing, it is observed that all the notices u/s. 133(6) were served at the respective addresses of ach of the five shareholders by registered post. The share subscribers had furnished copies of income-tax Acknowledgments which showed that each of them were regular income-tax assessees who were assessed in their own rights with reference to their audited financial results. These facts established the identity of the share applicants. It is further noted that each of the share subscriber had furnished copies of the audited accounts for the FY 2011-12. Examination of these accounts revealed that each share subscribing company was having substantial own funds in the form of capital & 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 ....
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....ribers did not appear before the AO for verification. Gainful reference in this regard may be made to following observations made the Hon'ble Bombay High Court in the case of CIT Vs. Orchid Industries Limited (397 ITR 136). "6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit 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....
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....ate genuineness. If these touchstones are applied to the appellant's case then I find that the copies income tax acknowledgments and service of notices at their addresses established the identity of all the share subscribers. In the balance sheets of the respective share subscribers, the investments in assessee's share were recorded and each subscriber in its balance sheet had disclosed sufficiently large investible funds. The assessee had also filed copies of the bank statements of the respective share subscribing companies which established that the share subscription amounts were received through banking channel. The sources of making payment were also furnished and the entries in bank statements indicated that there was no deposit of cash prior to clearance of the cheques in assessee'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." ....
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....at event, the Assessing Authority has to examine the same and arrive at his own conclusion. The inbuilt safeguard provided in section 68 cannot be ignored by the Assessing Authority at his sweet will. The Assessing Authority can add the share capital as undisclosed income if no explanation is offered by the assessee. But since the details/explanations were offered, it was incumbent on the Assessing Authority to examine the same and arrive at a cogent conclusion. Assessing Officer having failed to discharge such obligation the addition is not sustainable in law.., case of CIT vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC) that where share application money." 7.4. In the course of assessment proceeding, Ld. AO directed the assessee to produce the director of the assessee and also the directors of the subscriber companies 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) where....
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....mining the source of source under the provisions of section 68 of the Act has been brought in by Finance Act 2012 w.e.f. 01.04.2013 as per which "where an assessee is a company (not being a company in which public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee company shall be deemed to be not satisfactory unless: a) the person being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited and b) such explanation in the opinion of the Assessing Officer has been found to be satisfactory." Since the instant appeal pertains to assessment year 2012-13, and the said amendment brought in by Finance 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 co....
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....334 (Delhi) held as under: "The Court in that case held that the additional burden was on the Department to show that even if share application did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable is to be treated as the undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of the assessee under Section 68 of the Act." 21. The Hon'ble Calcutta High Court in the case of Crystal Networks Pvt. Ltd vs. CIT [2013] 353 ITR 171 (Cal) has held as under: "The assessee was trading in bidis. In the assessment year 1994-95, it showed cash advances of Rs. 8,50,000. The Income-tax Officer held that the assessee under section 68 of the Income-tax Act, 1961, failed to establish the identity of the creditors of the cash advance. Initially, 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 ....
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....been made only on the basis of the observation of ld. AO from the documents filed by the assessee as well as non-appearance of the principal officers of the share subscribers. Therefore, ground nos. 8 & 9 are dismissed being infructuous. 24. Ground nos. 1 & 10 are general in nature which need no adjudication. 25. In the result, the appeal filed by the assessee in ITA No. 641/KOL/2022 for AY 2012-13 is partly allowed. Now, we take up ITA No. 660/KOL/2022 for AY 2018-19: 26. The first issue for our consideration in ground No. 2 is regarding the addition of Rs. 2,03,823/- made by ld. AO on account of unreconciled duty drawback. 27. We have heard rival contentions and perused the records placed before us. We notice that during the course of assessment proceedings carried out by NFAC, Delhi it was pointed out that the assessee has declared income from duty drawback at Rs. 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 ....
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....(10 taxmann.com 73) (All HC) CIT Vs Morgan Securities Limited (162 Taxman 124) (Del HC) CIT Vs D.C.M. Limited (167 Taxmann 160) (Del HC) CIT Vs Autometers Limited (292 ITR 345) (Del HC) Suresh Gaggal Vs ITO (180 Taxman 90) (HP HC) DCIT Vs Oman International Bank SAOG (100 ITD 285) (Mum SB) 29. Thus, respectfully following the ratio laid down in the decisions referred herein above, we are inclined to hold that the assessee has made a justified claim of bad debts u/s 36(1)(vii) of the Act and the same deserves to be allowed. Thus, ground nos. 2, 3 & 4 raised by the assessee are allowed. 30. Other grounds of appeal are general in nature which need no adjudication. 31. In the result, the appeal filed by the assessee in ITA No. 660/KOL/2022 for AY 2018-19 is allowed. Now, we take up ITA No. 650/KOL/2022 for AY 2017-18: 32. Ground No. 2 to 7 of the appeal the grievance of the appellant is 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....
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.... 8.61 crore an amount of Rs. 7.81 crore was repaid during the year itself and balance sum of Rs. 80,00,000/- was repaid subsequently. It was also explained that TDS was deducted from the interest and deposited to the credit of the Central Government. The assessee also filed copies of loan confirmation. 37. The Assessing Officer observed that filing corroborative documentary evidence such as KYC Forms, loan confirmations, copy of bank statements does not make a sham transaction genuine. Thereafter he relied on several judgments of different High Courts wherein the addition of loans and share capital u/s 68 was held as justified. Ld. AO accordingly made the addition u/s 68 of the Act for unexplained unsecured loan of Rs. 8.61 Cr and also disallowed the interest paid on alleged loan at Rs. 28,62,863/-. 38. Aggrieved, the assessee preferred appeal before ld. CIT(A) and reiterated the submissions filed before ld. AO stating that the loans were taken for the immediate business needs from seven parties and major portion of the alleged loan was repaid during the year itself. Notices given by ld. AO u/s 133(6) of the Act to the alleged cash creditors were....
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....with respect to the identity, creditworthiness, genuineness of the transaction, no faults can be attributed to the addition of the impugned sum under section 68 of the IT Act 1961. Thus, the grounds 4-6 cannot be sustained and accordingly dismissed." 39. Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee firstly referred to the written submissions filed before ld. CIT(A) and the same reads as follows: "For these grounds, it is submitted that the assessee took short terms loan of Rs. 8,61,00,000/- for immediate business needs from seven parties during the year as stated in the assessment order out of which loan of Rs. 8,36,00,000/- was repaid during the year itself as appears from para 5.2 of the assessment order. The balance payable as at the end of the year was Rs. 35,00,000/- which too was repaid in the next year. In support of the said loans, the assessee filed loan confirmation letters from all the seven along with their PAN and address, duly signed by the director Sri Rajkumar Kothari or Smt. Sangeeta Kothari. The loan was received by account payee cheques so also the same was repaid by account pay....
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....ever, the Ld. AO grossly failed to appreciate that Shri Raj Kumar Kothari had already filed an affidavit before the 1st class Magistrate retracting the statement given by him on 02.03.2016 before the DDIT(Inv), Unit-3(1) relying on which the Ld. AO has treated the genuine loan transactions as bogus. He had also informed the department about the same. For the aforesaid submissions the assessee invites the attention to the judgement of the Hon'ble ITAT "C" Bench Kolkata in the case of M/s. Eastern Trade Centre Vs. ACIT, Circle-34, Kolkata wherein the Hon'ble ITAT deleted the addition of loan amount and consequently the interest expense on the same allegation of the loan being bogus merely relying on the alleged statement given by Shri Raj Kumar Kothari before DDIT (Inv), Unit-3(1) on 02.03.2016 which were later retracted. The copy of the said order is enclosed herewith. Further, the Ld. AO has alleged in its assessment order that for knowing the whereabouts as well as service of notice of summon u/s. 131 to be given to loan creditor companies, a departmental inspector was deputed but as per the Inspector's report no such companies was found at the given address. However, it ....
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.... identity of the parties cannot be doubted or disputed. As far as the genuinity of the transaction is concerned, there is no dispute that the transaction took place by account payee cheques. Therefore, the genuinity of the transaction cannot be disputed. As far as the creditworthiness is concerned, it is submitted that the AO has relied on the income declared by the loan creditors. From the balance sheet of the shareholders the following important points may be noted: Name Share capital and reserves Any other feature of the company Prativa Suppliers P Ltd. 1,59,86,136/- Profit during the year 4,97,372/- Divya Electronics P Ltd. 13,90,60,593/- Profit during the year 16.52 lakhs Albright Viniyog and Nirman P Ltd. 20,59,621/- profit during the year 3.66 lakhs Rajshree Developer Entrepreneurs Pvt Ltd. 11,51,78,112/- Profit during the yar 38,94,021/- Zigma Electrics P Ltd. 7,62,16,792/- includes bank balance of 54,63,682/- Paritosh Electricals P Ltd. 12,97,09,739/- Profit during the year 64,59,932/- Potential Electricals and Electronics P Ltd. 11,38,23,116/- Profit 30.99 lakhs. Th....
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....IT(A) has confirmed the addition made by ld. AO. 43. Before us, the assessee has made two-fold contentions; firstly, stating that the principle of natural justice has not been followed by the lower authorities and no opportunity to cross examine Shri Rajkumar Kothari was given by ld. AO whose statement has been recorded for making addition in the hands of the assessee and also ld. AO ignored the fact that Shri Rajkumar Kothari has retracted its statement dated 02.03.2016 by filing an affidavit before the Investigation Wing. Second-fold of the contention is on merit stating that the assessee company is carrying out regular business activities and the income for the year is declared at Rs. 39,59,66,130/-. For the business needs unsecured loan from body corporates was taken. Tax deducted at source on the interest paid to such body corporates and out of the unsecured loan of 8.61 Cr taken during the year, the assessee had repaid 7.81 Cr during the year itself and the balance sum of Rs. 80 lakh has been paid subsequently. 44. It is submitted before us by ld. Counsel for the assessee that the Assessing Officer has relied on the judgments by quoting from the head note of....
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....ious flaw which renders the order a nullity. 47. In the case of Kishinchand Chellaram (AIR 1980 14 SC 2117), the Hon'ble Supreme Court of India on the aspect of cross-examination held as follows: "It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him." 48. The Hon'ble Calcutta High Court in Eastern Commercial Enterprise, (1994) (Cal) [210 ITR 103] at page-111: Held as under: "Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied with the contents of all such evidence, both oral and documentary so that he....
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.... the A.O that they are legal entities/corporate registered with the Registrar of Companies (ROC) and have their respective registered addresses in the public domain. The amounts in question were credited through banking channels. The names, PANs and loan amounts and the interests paid for which TDS has been deducted are as under: Sl. Name PAN Loan as on 31.03.2015 Interest Paid 1 M/s. Bhiksu Barter Pvt Ltd. AABCB1315M 3,00,000 1,726/ 2 M/s. Divya Electronics Pvt Ltd. AAACD9721C 1,35,00.000/- 9,20,959/ 3 M/s. Paritosh Electricals Pvt Ltd. AABCP5013E 41,50,000/- 3,84,123/ 4 M/s. Potential Electricals & Electronics Pvt Ltd. AABCP5014D 40,00,000/- 4,65,205/- 5 M/s. Ranbhumi Marketing Pvt Ltd. AAECR5842G 20,00,000 1,44,247/- 6 M/s. Shresth Builders Pvt Ltd. AADCS7759J NIL 5,33,425/- 7 Vivek Barter Pvt Ltd. AAACV8952B 73,50,000/- 6,79,911/- 8 Vivek Tracom Pvt. Ltd. AAACV8670J 80,00,000/- 27,08,014/- 9 Rajshree Developer Enterprises Pvt Ltd. AABCR2000D 58,00,000/ 1,32,553/- Total 4,51,00,000/- 53,70,163/- ....
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....in him and his family. In the back-drop of the aforesaid threat and coercion, he made the statement in accordance to their wishes, and which was not the truth of the contents recorded. And we note that within 10 days (after giving the statement to Investigation Wing), he has retracted the statement by swearing the affidavit which is placed at page 45 to 48. Therefore, according to the Ld. AR, the statement of Shri Raj Kumar Kothari which was the only basis of which the A.O branded the lender companies as shell/paper companies could not have been used against the assessee and in any case does not have any evidentiary value, since retracted and could not have been acted upon against the assessee. Moreover, according to Ld.AR both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania has not been summoned by the A.O and their statements were not recorded directly by the A.O before drawing adverse inference against the lender companies. According to the Ld. AR, neither the A.O gave the full statement of both these persons nor gave an opportunity to the assessee to cross-examine them (Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania). So, according to Ld. AR, in any case ....
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....editor 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. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." 14. Further the Ld. CIT(A) has noted that pursuant to the notice u/s 133(6) of the Act, the lender companies have directly fded before the A.O., the balance sheet, relevant bank statement etc. We note from a perusal of the balance sheet of the lending companies the following facts which are noted as under: Sl. Name Reserves & Surplus Turnover assessee as on 31.....
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....hiness and genuineness of the loan transaction, the AO could have disbelieved the transaction only on the basis of reliable material to disprove the same. In this case the AO took the support of the statement given by both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania recorded in third party proceedings to take an adverse view against the assessee. In such a situation, the AO ought to have confronted the assessee with the entire statement of both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania or material against the assessee if any with him rather than giving only selective question and answer; and if the AO felt that these two persons, oral testimony is incriminating against the assessee, then in all seriousness he should have summoned them before him and elicited the direct oral evidence against the assessee and thereafter gave a copy of the recorded statement and then afforded an opportunity to assessee to cross-examine the makers of the incriminating oral testimony and thereafter the AO would be justified in using against the assessee, which in this case AO has not done, for reason best known to him; and so the selective questions and answers of the two....
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....s directed to be deleted. " The ITAT by its judgment dated 16th May, 2014 relied on the self same reasoning and dismissed the appeal of the revenue. Likewise, the High court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT." 17. So, the A.O in this case, erred in relying on the statement of two persons who were not allowed to be cross-examined as held by the Hon'ble Apex Court in Andaman Timber (supra) and Odeon Builders Pvt. Ltd. (supra). So from any angle, one looks, the statement of these two persons cannot be used against the assessee. And when we remove these two statements with the legal infirmities discussed supra, there is no material at all against the assessee and the AO having failed to find any infirmity with the documents filed by the assessee/lenders to prove the loan transactions as discussed supra, no adverse view was legally tenable. And having gone through the impugned order and the Paper Book filed before us, we....
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....bsp; Party Name CIN No Paid Up Capital Reserve & Surplus Networth Sale PBT Tax 1 Partiva Suppliers Pvt Ltd U51909WB200 9PTC133490 16,35,000 1,43,51,136 1,59,86,136 1,14,58,637 4,97,372 1,48,564 2 Divya Electronics Pvt Ltd U32102WB199 5PTC072383 56,34,500 13,34,26,094 13,90,60,594 1,50,60,943 16,52,213 4,93,515 3 Albright Viniyog & Nirman Pvt. Ltd. U67120WB199 4PTC062329 25,00,000 (4,40,380) 20,59,620 88,75,740 3,66,536 1,01,478 4 Rajshree Developer Entrepreneurs Pvt. Ltd. U51109WB199 5PTC075063 61,53,950 10,90,24,163 11,51,78,113 4,79,59,882 38,94,021 11,63,150 5 Zigma Electricals Pvt. Ltd. U51909WB199 5PTC076038 28,17,000 7,33,99,791 7,62,16,791 1,86,84,307 13,91,129 4,15,530 6 Paritosh Electricals Pvt. Ltd. U27203WB199 5PTC076134 52,76,480 12,44,33,259 12,97,09,739 6,75,83,295 64,59,932 19,29,582 7 Potential Electricals And Electronic Pvt. Ltd. U27203WB199 5PTC073361 60,85,000 10,77,38,116 11,38,23,116 4,71,06,041 30,09,856 8,99,050 53. Further, we notice that out of ....
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.... that there is no infirmity in the order of the Ld. CIT(A)." 55. Further, it is submitted by ld. Counsel for the assessee that section 68 of the Income-tax Act, 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 explains the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, bank statements, audited financial statements the assessee has discharged the initial burden and, therefore, the burden shifts on th....
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....to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee's transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his in....
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....ered 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." A bare reading of Section 68 of the Income Tax Act, 1961, suggests that for a sum so credited to be charged to income-tax, as the income of the assessee of the previous year by the A.O., the following have to be present: i) there has to be an amount credited in the books maintained by the assessee ; ii) such credit has to be a sum of money received during the previous year; and iii) either a) the assessee offers no explanation about the nature and source of such credits found in the books or b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. Thus, it is clear from above that in order to establish the receipt of the sum as unexplained cash credit, as required under Section 68 of the Income-tax Act, 1961, the assessee must satisfy three conditions, viz., (i) identity of the creditor, (ii) genuineness of the transaction, and (iii) creditworthiness of the creditor. All these three conditions lai....
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....to the assessee and its receipt by the assessee is enclosed at page 114-116 the paper book. The company is a regular income tax assessee .A copy of the ITR Acknowledgement and Audited accounts of Vivek Tracom Pvt Ltd is being enclosed at pages 91 to 112 of the paper book. As regards the source of Rs. 20,00,000/- it is submitted that Vivek Tracom Pvt Ltd had received interest on loan from the following companies: a. Samridhhi Investments Co Pvt Ltd Rs. 4,06,110/- b. Chandan Mal Raijada Rs. 90,247/- c. Vineet Enterprises Rs. 19,971/- d. Ujjal Business and Investment Pvt Ltd Rs. 1,80,493/- Apart from the above-mentioned interest received by Vivek Tracom, it had also received an amount of Rs. 10,00,000/- from Amco Electrical Eng Co. on account of refund of loan given to them earlier. In support of the aforesaid, confirmation of accounts of all the said parties are enclosed at pages 117 to 122 of the paper book. Thus, with the submission of these documents showing the source of source of funds and the fact that all the transactions took place through proper banking channels, the genuineness, creditworthiness and identity of the transaction st....
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.... the bank statement of Ranbhumi Marketing Pvt Ltd as is enclosed at page 131-132 of the paper book. Thus, all the transactions took place through proper banking channels and the documents submitted also duly prove the source of source of the funds. We note that Ld AO and CIT(A) ignored all of the said documents submitted before them and they merely relied upon the statement of Shri Raj Kumar Kothari without considering the fact that it was retracted by him before the 1st Class Magistrate ( a copy enclosed at pages 9 to 12 of thep/b) from which it is evident that the DDIT had acted against the principles of law by threatening and coercing the said Shri Raj Kumar Kothari to give false statements. The DDIT had also acted in violation of law by dictating the statements and making the witness (Shri Raj Kumar Kothari) sign on it forcefully without even letting him read the contents of the statement. When these facts were recorded in the retraction statement of Shri Raj Kumar Kothari and submitted before the Ld CIT(A), the Ld CIT(A) erred in completely ignoring all these facts mentioned. Furthermore, the facts as enumerated above clearly show that even otherwise the original statement wit....
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.... years. Therefore with the submission of the said documents the assessee's onus of proving the identity of the parties and genuineness of its transactions with the parties [which had been disputed by the Ld AO and CIT(A)] stands duly fulfilled. The department having accepted the transaction of loans in the past years cannot dispute the payment of interest in a subsequent year without doing anything to disturb the status of the assessment in the past years. The loans were not received during the year and therefore the A.O. could not have examined their genuineness during the year. Furthermore, the A.O. has nothing to examine their genuineness even otherwise and has simply relied on the retracted statement of Shri Rajkumar Kothari to draw his conclusion. Therefore addition made by Assessing Officer in respect of interest paid is hereby deleted. 11. At the cost of repetition, we state that the assessee had filed with the Ld CIT(A) the bank statements, audited accounts and loan confirmations of the entities concerned. Hence, the assessee has successfully proven the genuineness, identity and creditworthiness of the transactions. In such a scenario, when all the documents ha....
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....ance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinise the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aspects, there have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion." On appeal: "Held, dismissing the appeal, that the assessee had filed copies of PAN, acknowledgment of filing Income-tax returns of the companies, their bank accounts statements for the relevant period but had not produced the directors of the companies. The addition made by the Assessing Officer could not be sustained as the primary onus was discharged by the assessee. The Assessing Officer had not investigated whether the modus operandi by the entry operator discussed by the Investigation Wing existed in the case or not. Even the bank statements as claimed by the Assessing Officer revealed that the assessee had received chequ....
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....d the major portion of the unsecured loan has been repaid in the year itself and only a minor sum was paid in the subsequent year and all transactions were carried out through banking channel, interest paid on the loans and tax at source has been deducted and duly reflected by the alleged loan creditors in their income tax return and therefore, we fail to find any justification in the action of ld. AO invoking the provisions of Section 68 of the Act. We, thus, set aside the finding of ld. CIT(A) and delete the addition made u/s 68 of the Act at Rs. 8.61 Cr and further hold that invoking the provisions of Section 115BBE of the Act was not justified and further, since provisions of Section 68 of the Act are held to be wrongly invoked and the alleged transaction is held to be genuine, the interest expenditure incurred on alleged loans is also allowable to the assessee. Thus, ground nos. 2, 3, 4, 5, 6 & 7 of the assessee's appeal are allowed. 59. Now, we take ground No. 8 for AY 2017-18 wherein deduction u/s 80G of the Act at Rs. 17.50 lakh was not provided. We notice that the assessee incurred CSR expenses of Rs. 35 lakh and the same was disallowed while com....