TaxTMI 
TaxTMI 
TaxTMI 
2024 (2) TMI 151
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....ndependent inquiry whereas the AO issued notices u/s 133(6) and also financial (Statements were analysed by him which established that loan creditor's identity were not genuine and they had not creditworthiness and transactions were not genuine. 3. Whether on the facts and circumstances of the case, the CIT(A) erred in law in holding that the assessee had established the identity and creditworthiness of the loan creditors and genuineness of loan transaction which is contrary to observations of the Hon'ble Apex Court in case of NRA Iron & Steel P Ltd 103 Taxmann.com 48, as the inquiry and analysis made by the AO established the opposite, 4. Whether on the facts and circumstances of the case, the CIT(A) erred in law in deleting the addition of Rs. 63,00,000/- made as bogus donation as expenditure claimed u/s 35(l)(ii) of the I.T. Act, 1961, as on the same ground of similar nature of disallowance M/s Deesha Vinimay, Pvt. Ltd, (amalgamated with M/s. Navin Construction & Credit Pvt. Ltd.) accepted default by submitting petition under The Direct Tax Vivad Se Viswas Act, 2020 dated 01.03.2021. 5. Whether CIT(A) erred in law by ignoring the facts that CBDT vide notification d....
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.... assessee to delay the filing of the cross-objection. Reliance has also been placed on the judgment of the Hon'ble Apex Court in the case of Improvement Trust vs. Ujagar Singh & Ors. (2010) 6 SCC 786 (SC) as well as in the case of Collector, Land Acquisition vs. Mst. Katiji (1987) 1987 taxmann.com 1072 (SC). Though the ld. D/R opposed the request of admitting the cross- objection, we find merit in the contention of the ld. Counsel for the assessee and hence condone the delay and admit the cross-objection for adjudication. 5. Facts in brief are that the assessee is a private limited company. Income of Rs. 45,44,400/-, was declared in the e-return for Assessment Year 2015-16 filed on 29/09/2015. The same was subsequently revised. The case of the assessee was selected for limited scrutiny for the reason Unsecured loans from persons who have not filed their Return of Income. For this reason, notice u/s 143(2) and 142(1) of the Act was issued. The ld. Assessing Officer came to notice that four companies, namely, Sagar Vincom Pvt Ltd., Padmavati Vinimay Pvt Ltd., Tirumala Suppliers Pvt. Ld., and Deesha Vinimay Pvt Ltd., have been amalgamated to the assessee company. On examining the pos....
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....es to be deleted. 9.1. On the other hand, the ld. D/R, though opposed to the contentions made by the assessee but failed to controvert this fact that the ld. Assessing Officer has not taken prior approval from the concerned PCIT for enlarging the scope of limited scrutiny. 10. We have heard and rival contentions and perused the material placed before us. We have also gone through the decision in the case of Tirumani Investment Private Limited (Formerly Baccate Securities and Marketing Private Limited), Kolkata v. Dy. commissioner of Income Tax, Circle-13(2), Kolkata in ITA 2130/KOL/2019 Assessment Year 2015-2016, order dt. 08-01-2023, which has been relied on by the ld. Counsel for the assessee in support of its contention that in case of limited scrutiny, the ld. Assessing Officer cannot make addition/disallowance on issues other than those taken up for limited scrutiny, without first obtaining prior permission from the PCIT. It remains an uncontroverted fact that the case of the assessee was selected for limited scrutiny for the reason Unsecured loans from persons who have not filed their Return of Income. Apart from this there is no mention of any other approval taken by the A....
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....eady filed a valid revised return within the statutory period and has also explained the issues satisfactorily to the Assessing Officer for which the return was selected for limited scrutiny. In view of this, the impugned order of the CIT(A) is set aside and the Assessing Officer is directed to accept the income of the assessee as per the revised return of income. 11. Respectfully following the above decision and in view of the given facts, we are of the considered view that in absence of any prior permission from competent authority for enlarging the scope of limited scrutiny or changing the same to complete scrutiny, the ld. Assessing Officer was not within his jurisdiction to make the disallowance u/s 35(1)(ii) and 14A of the Act. Thus, Ground Nos. 1 & 2 raised in the cross-objections are allowed. 12. Ground No. 3 is general in nature and needs no adjudication. 13. In the result, the cross-objection raised by the assessee are allowed. 14. Now, we take up the revenue's appeal in ITA No. 580/Kol/2022. 15. Though the revenue has raised seven grounds but Ground Nos. 4, 5 & 6 relate to scientific research expenditure regarding deduction u/s 35(1)(ii) and disallowance u/s 14A of ....
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....er authorities. It was also submitted that most of the alleged cash creditors have also finally merged with the assessee group companies. However, no documentary evidence has been filed to prove that most of such cash creditors have been merged with the group creditors/assessee company. We further notice that the ld. CIT(A) after considering the facts of the case and details filed by the assessee explaining the source as well as the source of source of the alleged unsecured loan and deleted the addition of observing as follows:- "7. I have carefully considered the relevant and material facts on record, in respect of this ground of appeal, as brought out in the assessment order and submissions made during appeal proceedings. The moot point for adjudication is whether the AO was justified in treating the unsecured loans of Rs. 10,07,00,000/-raised by the appellant company, and the amalgamating companies, from certain bodies corporate, as unexplained cash credits under section 68, in the light of evidence brought on record. I find that the appellant, in the course of assessment proceedings, has brought on record the particulars of loan creditor companies including name, complete add....
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....ic, relevant and material evidence adduced by the appellant to substantiate the loan transaction, I am not inclined to agree with the adverse findings of the AO regarding genuineness of loan transactions. 7.2 I find considerable force in the plea taken by the appellant that the appellant could not be expected to have continued relationship with the lender companies, and have information about "source of source of funds" in the hands of lenders, or their present addresses, particularly so when the loans have already been repaid. In this context, it is pertinent to refer to the proviso to section 68, which provides that in cases where assessee is a closely held company, and any sum is found credited by way of share capital, share application money, share premium etc., the "source of source of such credits" is also required to be explained satisfactorily. It is noteworthy that this statutory obligation to explain not only the credit in the hands of the assessee, but also source of such credit in the hands of the creditor, is applicable only for credits in the nature of share capital, share application money etc., where it is reasonable to presume a continued relationship with the cr....
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....s and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a causal manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section. (iv)In the matters related to section 68, burden of proof cannot be discharged to the hilt -such matters are decided on the particular facts of the case as weil as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under Section 68. (v) Confirmatory letters or A/c payee cheques do not prove that the amount in question is properly explained for the purpose of section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive. ' (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the boo....
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....of the loan creditors and genuineness of the transactions with the help of relevant supporting evidences is found to be in order. 7.6 On similar facts, Hon'ble Bombay High Court in the case of Rushabh Enterprises Vs ACIT (60 taxmann.com 134) (2015) (Bombay) has held that loans taken in the regular course of business through account payee cheques were ordinarily to be treated as bonafide. Though the judgement has been rendered on validity of reassessment proceedings, Hon'ble High Court has observed at Para 8 of its judgment as under- "8. . On behalf of the revenue, Mrs. Bharucha submitted that all the four parties concerned had facilitated accommodation entries. They were not genuine and bona fide loans advanced to the Petitioner. She has supported the order of the Assessing Officer. The Commissioner of Income Tax while rejecting the objections on 19th December, 2012 once again reiterated that the Petitioner has routed unaccounted cash through bogus loans and has been found in the books of account of the Petitioner. According to her, the revenue has received information from the Director General of Income Tax (Inv) that the assessee has taken unsecured loans from the abo....
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.... the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs." 7.9 On similar facts, Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd (394 ITR 680) (2018) (Bombay), has relied on the Apex Court decision in case of CIT Vs Lovely Exports (supra) and held as under,- "In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in Lovely Exports (P.) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been rece....
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....) Ltd." (supra) is concerned, we note that the Hon'ble Supreme Court in the said case has taken note of the observations made by the Supreme Court in the "the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and creditworthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source." Thereafter the Hon'ble Supreme court summed up the principles, which emerged after deliberating upon various case laws, as under: "11. The principles which emerge where sums of money are credited as Share Capital/Premium are : i. The assessee is under a leg....
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....ection 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 has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee o....