TaxTMI 
TaxTMI 
2024 (11) TMI 312
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....he Ld. CIT(A) erred in deleting the addition of Rs. 8.50 crore made as unexplained cash credit u/s 68 of the Act merely by relying on the fact that four (4) out of the six (6) loans were repaid by the assessee during the relevant year and the other two loans were repaid by the assessee during the subsequent financial years. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance made u/s 14A to Rs. 15,89,749/- instead of Rs. 25,99,737/- without considering the fact that the entire expenditure was incurred in relation to income not forming part of the total income and hence the entire amount should have been disallowed. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,37,962/- made by the AO by disallowing the same out of the interest of Rs. 18,38,643/- debited as interest payment on borrowed funds. The Ld. CIT(A) has failed to appreciate the fact that the assessee has not substantiated its claim that the amount of Rs. 17,85,24,650/- was advanced to different parties out of its non interest bearing funds. 5. On the facts and circumstances ....
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....ceedings. It has been noted at Para-5.1.4 that notice under section 133(6) of the Act were issued to all the parties on 15/11/2016, and such parties were asked to furnish loan confirmation, copies of their return of income and bank statement by 25/11/2016. It has been noted that five parties responded and furnished the requisite details. In respect to others, no reply was received. The Assessing Officer at Para-5.1.5 has noted the issue of show cause notice dated 06/12/2016, in respect to seven parties as detailed at Para-5.1.4 of assessment order. At Para-5.1.6, the Assessing Officer has noted that after the show cause notice, reply has been received from M/s. Kredence Multi Trading Ltd., pursuance to notice under section 133(6) of the Act, therefore, the loan transaction from such party is considered as explained. In respect to loan transactions from balance six parties, it has been held that the same is liable to be assessed to tax as unexplained credit under section 68 of the Act. 5. The learned CIT(A) has discussed the subject matter of addition challenged before him under section 68 of the Act at Rs. 850 lakh at Para-3 and Para-4.1 of the appellate order. At Para-3, the le....
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....on made for the reasons discussed at Para-4.1 at Page-59 to 63 of appellate order. 6. Before us, the learned Departmental Representative, Shri Sandipkumar Salunke, ("the learned D.R.") submitted that the deletion of addition made by the learned CIT(A) is unjustified as addition is deleted by picking and choosing part of remand report. Entire remand report of the Assessing Officer is not considered while granting relief in the case of assessee. It is further submitted by Shri Salunke, that on loan transactions interest has not been paid by assessee and this fact is given in the remand report which justifies the action of the Assessing Officer to make addition under the provisions of section 68 of the Act. The learned D.R. thus argued that addition deleted by the learned CIT(A) is improper and unjustified. He, therefore, prayed to restore the order of the Assessing Officer by allowing the grounds of appeal raised by the Revenue. 7. The learned Counsel, Shri Kishore P. Dewani, appearing for the assessee, on the other hand, submitted that the addition deleted by learned CIT(A) is fair and proper. It is submitted that the addition has been correctly deleted by the learned CIT(A). ....
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.... assessee company including repayment received of advance given by lenders. Legal evidence obtained in independent verification during the course of assessment proceedings/remand proceedings corroborate the transaction of loan received. Assessee has discharged its onus to explain identity, creditworthiness and genuineness of transaction of loan. Addition made by A.O. u/s 68 of I.T. Act 1961 is unjustified. C) A.O. in remand report reproduced at Page 14 to 20 of order of CIT(A) has made no adverse observation as to receipt of loan from such parties to justify addition u/s 68. No shred of evidence is brought on record or any adverse finding is recorded to discredit legal evidence on record. D) Onus to explain the credits has been satisfactorily discharged. No adverse evidence is available on record for which addition can be made u/s 68 of I.T. Act 1961. E) In the case of M/s. Vibrant Global Trading Pvt. Ltd. PAN AACCG5841J for same assessment year addition was made for loan obtained by associate company from M/s. Hindustan Chemical Industries and M/s. Lok Chemicals Pvt. Ltd. which are also lenders to assessee company. Addition made by A.O. was deleted by CI....
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.... Pal Daga vs. CIT (P- 54 to 56) [Vol. - V] (55, 56) ix) Hon'ble Gujrat High Court in Tax Appel No.992/Guj/2013 in case of Ayachi Chandrashekar Narsangjivide vide order dated 02/12/2013. (P- 57 to 59) [Vol. - V] (58) x) (2023) 290 Taxmann 471 (Guj) CIT v/s Ambe Tradecorp Pvt.Ltd. (P- 60 to 62) [Vol. - V] (61) xi) (1999) 237 ITR 0570 (SC) CIT v/s SMT.PK.Noorjahan. (P- 63 to 66) [Vol. - V] (65, 66) xii) (2007) 291 ITR 0278 (SC) CIT v/s P. Mohankala & Ors (P- 67 to 75) [Vol. - V] (73, 74) xiii) (2023) 152 Taxmann 663 (Del) PCIT v/s Wel Intertrade (P.) Ltd. (P- 76 to 84) [Vol. - V] (82, 82)" 8. We have perused the orders of lower authorities in particular remand report furnished by the Assessing Officer on the evidence submitted by the assessee. It is clear that the Assessing Officer has been provided with confirmation of loan creditors indicating address and PAN details. The aforesaid documentary evidence was substantiated by submitting bank statements and financial statements of loan creditors. Transaction of loan is through proper banking channel. Evidence placed on record was verified by the Assessing Officer by issuance of notice unde....
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....Ledger Confirmation 1 2. Relevant Period Bank Statement 2 - 41 3. ITR Acknowledgement 42 4. Computation of Income 43 5. Audited Financial Statement 44 - 63 6. Tax Audit Report 64 - 71 E. Satguru Enterprises Sr. no. Particulars Page no. 1. Ledger Confirmation 72 2. Relevant Period Bank Statement 73 - 86 3. ITR Acknowledgement 87 4. Computation of Income 88 5. Audited Financial Account 89 - 97 6. Tax Audit Report 98 - 107 7. Response submitted in respect to notice u/s 133(6) of I.T. Act 1961 108 - 123 F. Brahmachari ni Vyapaar Pvt. Ltd. Sr. no. Particulars Page no. 1. Ledger Confirmation 124 2. Relevant Period Bank Statement 125 - 126 3. Form 3CA Acknowledgment 127 4. Computation of Income 128 - 130 5. Annual Report 131 - 155 5. Tax Audited Report 156 - 172 9. It is seen from the record that the learned CIT(A) has considered the entire remand report and appreciated the observation of the Assessing Officer correctly and no fault could be found with the order of the learned CIT(A) whil....
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....nd not giving sufficient time to the loan creditors to respond with relevant documents. Thus nothing could have been achieved by issuing the summons at the fag end of the limitation period of framing the assessment. Therefore, when the AO himself has failed to conduct any inquiry to disprove the documentary evidence filed by the assessee then the assessee cannot be held guilty for no response of the loan creditors to such summons issued by the AO. Once the assessee has produced all the relevant evidence then the primary onus of the assessee u/s 68 of the Act stand discharged to prove identity and creditworthiness of the loan creditors as well as genuineness of the transactions. Except raising the issue of non-filing of balance sheet and in two cases deposited of cash in the bank account the AO has not disputed the evidence produced by the assessee. Even if it is considered as a serious aspect where the cash is found deposited in the bank account the AO ought to have conducted inquiry to find out the correct facts. In the absence of any inquiry the cash deposit in bank account of two creditors would not epso facto lead to the conclusion that the transactions of all the unsecured loa....
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....m. If that person owns that entry, then the burden of the assessee-firm is discharged. It is open to the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. 6. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is an income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives a satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purposes of income-tax. It is open to the Assessing Officer to take appropriate action under Section 69 of the Act, against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the Commissioner of Income-tax (Appeals) as well as of the Tribunal that the firm has satisfactorily explained the aforesaid entries, 7. We are, therefore, of the opinion that the view taken by the Tribunal is correct and the aforesaid question is answer....
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.... arrive at such a conclusion, however, the Department has to be in possession of sufficient and adequate material. 7. As the applicant satisfied the authority as to the identity of the third party and also supplied the relevant evidence showing prima facie that the entries were not fictitious, the initial burden can be said to be discharged by the applicant- assessee. In view of the facrial matrix and legal position, we are satisfied that the aforesaid two questions are questions of law arising out of the order and are required to be referred for our opinion." 5.5 Thus, the onus of the assessee is to satisfy the authorities as to the identity of the third party and also supply the relevant evidences to show prima facie that the entries were not fictitious the initial burden is said to be discharged by the assessee. The burden then shifted on the Department to show as to why the assessee's case cannot be accepted and why it must be held that entry, though purporting in the name of the third party still represent income of the assessee from suppressed source. The Hon'ble Gujarat High Court in CIT v/s Dharamdev Finance P. Ltd. (supra) has considered the issue of ....
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....ated as unexplained. We also feel that since this amount has come to the assessee's account through banking channels which is verifiable from the bank statement of the creditor (which is on record), the source of the credit and genuineness of the transaction is established. The identity of the person is already established as he is having PA Number. In rebuttal of this position, nothing has been brought on record by the Revenue. Therefore, we are not inclined to interfere with the order of learned CIT(A) and the same is hereby upheld. s Grounds nos. 4 and 5 of the Revenue's appeal are dismissed." 7. As could be noticed from the orders of both the CIT(Appeals) and the Tribunal, in this entire addition of 's.3.55 crore(rounded off), the names of 52 persons were reflected in the books of assessee respondent. The authorities having found the material on record, confirmed the names and addresses as well as the details of the accounts as also in the most of the Cases PAN numbers, coupled with the fact that amounts were received by wy o account payee cheque, chose not to question the said amount. Question essentially based on factual natrix presented before the author....
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....r of Satya Developers. Only on the ground that some loose papers were found from the office premises of this respondent i.e. Dharamdev Finance, the Assessing Officer in the instant case appear to have concluded that financial transaction concerned the assessee. In absence of any contrary material having been brought either before both the authorities or before this Court, neither CIT nor the Tribunal committed any error in appreciating the facts which were presented before both of them. As the amount had already been owned by the proprietor of Satya Developers who had not only accepted such amount but had also offered the same for the purpose of tax which were duly recorded in the books of Satya developers the same cannot be taxed twice. Thus, no question of law arises." 5.6 Once the assessee has produced the PAN and confirmation of the creditor as well as bank account statement, the assessee discharged its initial onus to prove identity and creditworthiness of the loan creditors. When the transactions are verified from the bank account of the creditors as well as of the assessee, then the genuineness of the transactions are also established in the absence of any contrary ....
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....that the assessee is not required to establish the source of source. The Hon'ble Jurisdictional High Court in Gaurav Triyugi Singh v/s ITO (supra) has considered this issue in Para-12 to 16 as under:- "12 At this stage, it would be apposite to advert to section 68 of the Act, relevant portion of which reads as under : "68. Where any sum is found credited in the books of an assessee maintained from 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............" 12.1. From a reading of section 68, as extracted above, it is that if an amount is credited in the books of an assessee maintained from 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 the relevant previous year. 13. Section 68 of the....
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....cash credit under section 68 of the Act." 5.8 Therefore, the onus is on the assessee to prove prima facie the transactions which result in the cash credit in the books of account by producing the proof of identity and capacity of the creditor as well as genuineness of the transactions. The Hon'ble High Court has held that it is not required from the assessee to explain source of source, once the assessee has discharged its primary onus by producing the proof of identity and creditworthiness of the creditor as well as genuineness of the transactions and the burden is shifted on the AO to prove the contrary. The amendment in section 68 of the Act by Finance Act 2022 is applicable w.e.f 01/04/2023 and, therefore, the same is not applicable for the assessment year under consideration. 5.9 In the grounds of appeal, the Revenue has relied upon the judgment of Hon'ble Supreme court in CIT v/s P. Mohankala (supra). It is pertinent to note that the Hon'ble Supreme Court in CIT v/s P. Mohankala (supra), has not disputed the ratio of the judgment rendered in CIT v/s Orissa Corporation P. Ltd. (supra) as well as in CIT v/s P.K. Noorjahan (supra) vide Para-14 & 17 as u....
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....l came to the conclusion that the assessee had discharged the burden that lay on him. This Court held that the Tribunal's conclusion was not unreasonable or perverse or based on no evidence and accordingly further held that no question of law as such had arisen for consideration 5.10 Thus, it is clear that the issue involved in CIT v/s P. Mohanakala (supra) was entirely different and based on different set of facts. Accordingly, the said judgment of the Hon'ble Supreme Court is not applicable to the facts of the present case rather the ratio laid down in CIT v/s P. K. Noorjahan (supra) and CIT v/s Orissa Corporation P. Ltd. (supra) are applicable in the present case in hand. After considering all these facts and case law cited by the assessee, the CIT(A) has given its concluding finding in Para-7.8 which is reproduced below:- "7.8 In the case of appellant loan creditors are all assessed to tax of loan received is through proper banking channel. Amount Confirmation of loans are submitted. Loan creditors have owned up the transaction of loan given by giving confirmation. No shred of evidence is brought on record to discredit legal evidence. Loan creditors ar....
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....unal, Mumbai Bench, in Surya India Fingrowth Pvt. Ltd., ITA No.4809/Mum./2023, vide order dated 23/07/2024, has considered the addition under section 68 of the Act. The relevant operative portion of the said decision is reproduced hereunder:- "11. The Hon'ble Hight of Bombay in the case of Gaurav Triyugi Singh Vs Income Tax Officer (423 ITR 531 (Bombay) has dealt and observed as under: "12. At this stage, it would be apposite to advert to section 68 of the Act, relevant portion of which reads as under: "68. Where any sum is found credited in the books of an assessee maintained from 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..." 12.1. From a reading of section 68, as extracted above, it is seen that if an amount is credited in the books of an assessee maintained from any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in ....
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....w that the Tribunal was not justified in sustaining the addition of Rs. 14 lakhs to the total income of the assessee as undisclosed cash credit under section 68 of the Act. 17. Consequently, finding of the Tribunal to the above extent is set aside. The question framed is answered in favour of the assessee and against the Revenue. 18. Appeal is accordingly allowed but with no order as to cost. 12. The Hon'ble High of Delhi in the case of (CIT Vs. Shiv Dhooti Pearls & Investment Ltd., 2015) 64 taxmann.com 329 (Delhi) has observed as under: The assessee filed its return declaring certain taxable income. In the course of scrutiny assessment, the Assessing Officer noticed that the balance sheet of the assessee showed the receipt of unsecured loans. The assessee was asked to furnish the evidence regarding identity, creditability and genuineness of the source of its income. Pursuant thereto, the assessee disclosed that the amount was borrowed from TIL. The acknowledgement of the return filed by TIL showed that it had returned an income of Rs. 2,904 in the assessment year in question and a loss of Rs. 18,677 in the assessment year 1996 97 which ....
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....aced at page 286 to 289 of the paper book. The Ld.AR demonstrated the bank statement of the Lender company having opening balance Rs. 23 Crore (appx) before granting Unsecured loan/ inter corporate deposit of Rs. 20 Crore in September 2014. Further the Ld.AR has filed the audited financial statements of the lender company for F.Y.2014-15 & F.Y.2015-16 to substantiate the identity and Net worth of the company and at page 109 of the paper book, the lender company has disclosed the loan under "Long Term Loans and Advances". The Ld.AR demonstrated the copy of bank statements reflecting the repayment of unsecured loan/inter corporate deposit at page 290 to 292 of the paper book which is not disputed by the revenue. Further, the A.O has failed to make further enquiries and over looked the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 of the Act. Further the A.O. dealt on the loan transactions and alleged as non genuine and treated as unexplained cash credit U/sec68 of the Act. Whereas the unsecured loan was repaid through account payee....
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....rely applies to the facts in the case of the assessee. The Hon'ble Gujarat High Court has also, in the recent decision rendered in PCIT v/s Merrygold Gems Pvt. Ltd., 164 taxmann.com 764 (Guj.) in its judgement dated 11/06/2024 has taken similar view and it supports the case of assessee. Considering the totality of facts and circumstances in the case of assessee it is held that assessee has satisfactorily discharged its onus to explain the credit and there remains no scope to make any addition under section 68 of Act. The addition made has been correctly deleted by the learned CIT(A) after giving detailed reasons in support of the same. Consequently, we find no merits in grounds no.1 and 2, raised by the Revenue and accordingly they are dismissed. 16. In ground no.3, the Revenue has challenged the addition deleted by learned CIT(A) at Rs. 10,09,988, made under section 14A of the Act. 17. The Assessing Officer has discussed the addition at Para-5.2 to 5.2.7 at Page-6 to 9 of the assessment order. The Assessing Officer has computed disallowance to be made under section 14A of the Act at Rs. 25,99,737. The aforesaid sum comprising of two amounts being Rs. 10,09,988, on account of....
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....record that the assessee has own funds and non-interest borrowing fund at Rs. 62.55 crore. Investment made in securities as computed by the Assessing Officer is Rs. 31.79 crore. Entire investment could be considered as explained out of available fund comprising on own fund and non-interest borrowing. The Hon'ble Apex Court in Reliance Industries Ltd. (supra) has held as under:- "7. Insofar as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. The Tribunal has also followed its own order for Assessment Year 2002-03. 8. In view of the above findings, we find no reason to interfere with the judgment of the High Court in regard to the first question. Accordingly, the appeals are dismissed in regard to the first question." 21. The ratio laid down by the Hon'ble Apex Court in its judgment and the decision of the Hon'ble Jurisdictional High Court in HDFC Bank Ltd. v/s DCIT [2016] 383 ....
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....out of interest paid at Rs. 5,37,962/-. B) Interest free advance stands reasonably explained out of share capital, reserve & surplus and interest free funds. No justification for making addition in respect to interest paid. Reliance on : i) (2019) 410 ITR 466 (SC) CIT vs. Reliance Industries Ltd. (P- 62 to 65) [Vol. - IV] (64)" 26. We have heard the rival submissions and perused the material on record. It is undisputed fact on record that the assessee has own funds and non-interest borrowing fund at Rs. 62.55 crore. Advances given interest free are noted at Rs. 17.85 crore. Entire advances could be considered as explained out of available fund comprising of own fund and non-interest borrowing. The Hon'ble Apex Court in Reliance Industries Ltd. (supra) has held as under:- "7. Insofar as the first question is concerned, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. The Tr....
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....lakh in the course of business in assessment year 2012-13 and ledger account as well as bank statement for advance given is at Page-1 & 2 of Paper Book Vol.III. The documentary evidence relating to giving advance to the above said party in the shape of mail is also placed in the paper book. The assessee company wanted to make investment of aggregate sum of Rs. 600 lakh in a project. The subsequent discussion with the aforesaid company did not get carried forward and under the circumstances it was decided to abandon the project. It is on account of this fact that it was decided to write-of the amount in books of account. In the order passed by the learned CIT(A), the submission of the assessee in the remand report has been reproduced at Page-52 to 56. The detailed submissions made by the assessee clearly indicate that advance was given in the course of business and on abandonment of project which was written-of in its books of account. The ratio relied upon by the learned CIT(A) and extract reproduced in the appellate order fully supports the case of assessee. Extract of order of the learned CIT(A) at Para-4.5 is reproduced hereunder for ready reference:- "4.5 The ground of....
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....ecided the matter in assessee's favour. The relevant portion of the judgement is as under. "Following the judgment in the case of Gajapathi Naidu (supra) the question to be asked is when did the expenditure claimed by way of deduction arise? There would have been no occasion to claim the deduction if the work-in-progress had completed its course. Because the project was abandoned the work-in-progress did not proceed any further. The decision to abandon the project was the cause for claiming the deduction. The decision was taken in the relevant year. It can therefore be safely concluded that the expenditure arose in the relevant year. Reference in this regard may be made to the decision in the case of CIT Vs. Indian Mica Supply Co. P. Ltd. reported in (1970) 77 ITR 20 (SC) wherein the Supreme Court in considering a claim for deduction on arrear lease rents, ascertained subsequently consequent to a compromise arrived in the suit and paid in the relevant assessment year held, inter alia, as under: "The Tribunal, in the present case, had clearly found that it was only as a result of the compromise that the respondent became entitled to remain in possession of the demised land.....