TaxTMI 
TaxTMI 
2025 (7) TMI 1371
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....t Year 2016-17. 2. Brief facts of the case are that the assessee is a private limited company and is engaged in the business of property developers. Return of income was originally filed electronically on 01.08.2016, declaring the net loss of INR 84,01,580/-. The return of income was processed u/s 143(1) of the Act. Consequent to search and seizure action u/s 132 of the Act in the case of Filatex India Ltd. group on 01.09.2021 including the assessee, proceedings u/s 147 were initiated and notice u/s 148 of the Act was issued on 13.02.2023 through e-filing Portal. In response to the notice u/s 148, return was filed on 04.07.2023 at a loss of Rs. 84,01,580/-. Thereafter notice u/s 143(2) and 142(1) of the Act were issued from time to time to the assessee. The copies of books of account or documents, that pertains to or pertain to, or any information contained therein relate to, the assessee, which suggest that the income chargeable to tax has escaped assessment in the case of assessee found from the material seized during the course of search action were also provided to the assessee. In response to the statutory notices issued, the assessee required details alongwith written subm....
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....ntire loans of INR 96,940/- u/s 37(1) by treating the same as bogus expenditure. The AO further made an addition of INR 57,250/- by holding the same as unexplained expenditure u/s 69C of the Act by alleging that the same was paid as commission @ 0.25% to obtain the bogus accommodation entries of receipt of loans of INR 2.29 crores as unexplained expenditure. 6. Aggrieved by the said order, the assessee preferred the appeal before Ld. CIT(A) who vide impugned order dated 31.08.2024 in Appeal No. CIT(A), Delhi 23/10963/2015-16 passed u/s 250 of the Act has partly allowed the appeal of the assessee wherein the additions made towards unsecured loans by treating them as bogus, disallowance of interest paid on unsecured loans and further addition u/s 69C of the Act towards alleged payment of commission to obtain accommodation entries were deleted by observing that the assessee has proved the identity and the creditworthiness of the parties and therefore, no addition could be made. 7. Against such order, the Revenue is in appeal before the Tribunal on the strength of the following grounds of appeal:- 1. The Ld. CIT(A) has erred in deleting the addition of Rs. 2,29,00,000/- ....
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....A) has failed to appreciate that the evidence collected clearly reveals the cash trails and in reply to notice u/s 133(6) of the Act the entry operators are not expected to accept that loan transactions are not genuine. 11. The Ld. CIT(A) erred in deleting the addition of Rs. 96,940/- without appreciating the fact that interest paid on account of bogus unsecured loan is also bogus in nature, therefore, the interest paid by the assessee to the tune of Rs. 96,940/- is not genuine expense. 12. The Ld. CIT(A) erred in deleting the addition of Rs. 57,250/- without appreciating the fact that the accommodation entries to the tune of Rs. 2,29,00,000/- were taken during the year under consideration and commission must have paid to accommodate such entries. 13. The appellant craves to add or amend any/all the grounds of appeal before or during the hearing of the appeal. 8. The assessee also filed C.O. wherein the following objections are taken by the assessee:- 1.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) should have quashed the assessment order as illegal, not tenable, void and without jurisdiction. 1.2 ....
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....sment years. The issue was discussed in revenue's appeal for AY 2013-14 in ITA NO. 4635/Del/2024 and CO No. 11/Del/2025 wherein after considering the allegations and observations made by the AO and also after considering the submissions of the assessee and after placing reliance on various judicial pronouncements we hold the unsecured loans taken as genuine and delete the additions made u/s 68 of the Act towards unsecured loans and also u/s 69C of the Act towards the alleged payment of commission. The relevant observations made in para 14 to 41 of the said order are reproduced as under: 14. Heard both the parties and perused the material available on record. From the perusal of the order of Ld. CIT(A), it is found that Ld. CIT(A) after considering the submissions of the assessee and the observations made by the AO in the assessment order and further by following the judicial pronouncements relied upon and after referring the WhatsApp chat etc. deleted the additions made by the AO towards the unsecured loan and interest paid thereon and alleged payment of commission. The relevant conclusion drawn by the ld. CIT(A) in para 130 of the order is as under: 130. "In view....
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....ither under Section 133(6) or 131 of the Act. (vi) While making the addition Assessing Officer has relied upon various WhatsApp chats but such chats nowhere prove that those cash has been exchanged against any specific loan taken by appellant. Though such evidences found during the course of search does give rise to suspicion but such suspicion alone cannot be the basis to reject all the documentary evidences filed by appellant in support of loans taken by it. (vii) Though according to Assessing Officer, Shri. Ankit Bhageria is an entry provider or he is operating shell companies, but what is required to be seen is whether in the case of Assessee the documents found during the course of search at their premises or from the premises of Shri. Ankit Bhageria or otherwise show that Assessee was beneficiary of any accommodation entry or not. In the present case, the A.O. sans any specific link about loan taken from ANM, RMP, Bhageria Finance and RKG with any cash trail and on the contrary ANM, RMP, Bhageria Finance and RKG in reply to notice u/s 133(6) has accepted that genuine loan was given to appellant. The A.O. has failed to prove any direct nexus linking the Asses....
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....of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,- (a) the person in whose name such credit is recorded in the books of such assessee 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 aforesaid has been found to be satisfactory: Provided further that where the assessee is a company (not being a company in which the 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 aforesaid has been found to be satisfactory: Provided also that nothing contained in the first proviso or second pr....
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.... Table - A S.No Name of Party Amount Received (Rs. In Lakhs) PAN Bank Name Bank Account Number 1 ANM Fincap Private Limited 2,00,00,000 AMACA9489Q Corporation Banke CA/01/003237 2 RMP Holdings Private Limited 1,65,00,000 AAACR5533N Corporation Dank CA/01/003766 3 Bhageria Finance & Investment Private Limited 50,00,000 AAACB413OF Corporation Danke CA/01/003038 4 RKG Finvest Limited 1,75,00,000 AAACK3749Q Axis Bank 248102000005265 Total 5,90,00,000 Table - B Source of ANM Name of Party Amount Received (Rs. In Lakhs) Party Name PAN Bank Name Bank Account Number ANM Fincap Private Limited 85,00,000 Transnational Growth Fund AAACTO610Q Oriental Bank of Commerce 1391131001400 45,00,000 Vimal Enterprises prop vimal Bhagerla AADPD7652C Corporation Dank 28300501120006 50,00,000 Purus Marketing Private Limited AAECP2129A IDBI Bank 201102000014216 50,00,000 Great fin leasing credit Limited AAACG5265C Axis Bank 912020030387863 Total 2.30,00,000 ....
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....respect of loans is applicable from A.Y. 2023-24 and subsequent years. Reliance in this regard is placed on coordinate bench of Delhi ITAT decision dated 31.05.2022 in the case of M/s Mall Hotels Ltd. Vs. CIT (ITA No. 2688/DEL/2014). The coordinate Delhi Bench of ITAT in the case of ACIT v Smt. Prem Anand (ITA No. 3514/Del/2014) vide its decision dated 13.04.2017 has held that amendment made in section 68 of the Act w.e.f. 01.04.2013 empowers the A.O. to examine source of source in case of share application money / share capital / share premium from 01.04.2013 and this amendment does not give power to the A.O. to examine source of source of non-share capital cases. 22. It is clear that the assessee has furnished source of source and if the AO has any doubts with respect to the source of source in the hands of the loan creditor, it could have made further enquiries from all such parties even after receiving their replies in response to the notices issued u/s 133(6) of the Act. 23. The Hon'ble Supreme Court in the case of Orissa Corporation reported in [1986] 159 ITR 78 (SC) has held that when the assessee furnishes names and addresses of the alleged creditors and t....
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....nding circumstances, it is observed that while making addition u/s 68 of the Act, the AO has doubted the financial capacity of loan creditors but such addition cannot be made on preponderance of probability and there has to be some evidence and substance in contention. The Assessing Officer has not brought anything on record to establish that the sources in the hands of loan creditors is non-genuine. Merely because they have shown meager income or no sufficient sources as presumed by Assessing Officer, loan taken by appellant from them cannot be held to be accommodation entries. It is well-settled position of law that no matter how strong suspicion is, it cannot take place of the evidence. Therefore, in the absence of any evidence showing that in fact, appellant has given cash in lieu of unsecured loan taken, merely on the basis of suspicion, no addition can be made for which reliance is placed on decision of Hon'ble Supreme court in the case of Daulatram Rawatmull, (1964) 53 ITR 574. 28. The Hon'ble Allahabad High Court in the case of Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd. reported in [2024] 162 taxmann.com 792 (Allahabad) held as under:....
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....iate to reproduce the relevant operative part of first appellate order as follows:- The appellant company has received Rs. 3,60,00,000/- from M/s Fennie Commercial Pvt. Ltd. as unsecured loan / share application money during the year. The same was added by the AO on the ground that appellant has failed to file confirmation as well as other supporting documents of the lender party before AO to prove identity, genuineness and creditworthiness of the party. During the course of appellate proceedings, appellant filed an application under Rule 46A and filed following documents to prove identity, genuineness and creditworthiness of the party: i. Copy of Acknowledgement of IT. Paper Book page no. 48. ii. Copy of Audited Financial Statements along with all the annexures. Paper Book page no. 49-60. iii. Copy of Confirmed ledger account. Paper Book page no. 61. iv. Copy of Bank Statements reflecting the amount given to the assessee company. Paper Book page no. 62-63. v. Copy of confirmation. Paper Book page no. 64. These documents were forwarded to the A for carrying out necessary enquiry with reference to the lender party. The A....
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....has also furnished a copy of the intimation us 143(1) in its case, issued by CPC, Bangalore, in response to the specific query regarding furnishing copy of assessment order passed in its case for AY 2011-12. 7. As regards the present position of the said money advanced by MIs Fennie Commercial Pvt. Ltd. to the appellant company, it has been stated that they have not received any shares from M/s Alfa Contech Private Limited till date and the said Sum is lying as Loans & Advances in their books. However, this company has not furnished copy of its latest IT filed as well as copy of Audit Report, Balance Sheet and P & L Account despite being specifically called for in the letter issued us 133(6) to it. 8. It is also submitted here that as per the Balance Sheet of the appellant company for the AY 2011-12, it has shown a sum of Rs. 3.60 crores as "Loans from Body Corporate", as per Schedule 3 annexed to the Balance Sheet and not as Share Application Money. Also, as per details filed by the appellant vide its letter dated 03.02.2014 during the course of the assessment proceedings in its case for AY 2011-12, it has furnished the name of Ms Fennie Commercial Private Limite....
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....find that the AO has not been able to bring on record any evidence to negate the genuineness of the transaction done by the appellant. Therefore, the addition cannot be sustained only on suspicion and surmises. Considering the fact that the identity, genuineness and creditworthiness of the lender company duly established, the addition made by the A cannot be upheld and hence the AO is directed to delete the addition of Rs. 3,60,00,000/- made on account of unexplained income us 68 of the I.T. Act. In support of my above decision, reliance is placed on following judicial pronouncements: a. CIT Vs. Fair finvest Itd. [ 2014 ] 44 taxmann.com 356 (Delhi) HIGH COURT OF DELHI "Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2002-03 - Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application and affidavits of directors, Assessing Officer could not make addition on account of share application money solely on basis of investigation report [In favour of assessee. Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it and ....
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....nce the identity of the shareholder have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. The learned first appellate authority has examined the documentary evidence filed by the assessee before the Assessing Officer as well as before him and held that the assessee has provided confirmations from all the parties as well as various evidences to establish the genuineness of the transaction, the assessee has also relied upon the judgment of Nemi Chand Kothari v. CIT [2003] 264 IT 254/[2004] 136 Taxman 213 (Gau.) wherein it has been held that it is a certain law that the assessee is to prove the genuineness of transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of the assessee to find out the source of money of creditors. Similar observation has also been given in the case of S. Hastimal v. CIT [1963] 49 ITR 273 (Mad.) and CIT v. Daulat Ram Rawatmull [1973] 87 IT 349 (SC). The learned first appellate authority has cited various decisions rendered....
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.... in the present case the Revenue has not doubted the identity of the share applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the A by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders. 4. The Court is of the view that the Assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promo....
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.... genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the ASSESSING OFFICER that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala Ride. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.0. had any doubt about the material placed on record, which was largely bank statements or the creditors and the....
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....case of PCIT vs Ojas Tarmake 150 taxmann.com 75 has observed as under: "where the appellant showed unsecured loans received during the relevant AY and AO made addition on the ground that appellant failed to discharge onus of liability as laid down u/s 68 of the Act since amount of loan received by the appellant was returned to the loan period during the year itself and all the transactions were carried out through banking channel, impugned addition was to be deleted." 36. In view of above facts and the circumstances of the case, we are of the considered view that the decision of the Ld. CIT(A) deleting the additions made is based on the appreciation of fact that all the relevant documentary evidences were produced by the Assessee to establish the identity and creditworthiness of the lender companies and genuineness of the transactions. Further based on the legal precedents and the fact that the loans were received and repaid through banking channel had deleted the additions under consideration. We further observed that that Hon'ble Jurisdictional High Court in various cases has dealt with the fact that where assessee has discharged its burden by filing all the....
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....ived from these lender companies, the AO has despite of doubting their creditworthiness, had made the addition of INR. 5.90 crores only meaning thereby the creditworthiness for the remaining amount is not doubted though the facts and the circumstances while granting these loans remained the same. This creates serious doubts about the mode and manner of the additions made by the AO. Once it is accepted that the lender has creditworthiness for part of the amount, the remaining amount cannot be held as unexplained. There is no case of any cash deposition in the account of any of the lender companies at the time of issuing cheques/RTGS in favour of the Assessee. Therefore, Appellant has duly discharged the burden casted upon it u/s 68 of the Act. 40. It is trite law that suspicion, howsoever strong, cannot take the place of proof as held in Umacharan Shaw & Bros. vs. CIT (1959) 37 ITR 271 (SC). The Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd v. Commissioner of Income Tax (1954) 26 ITR 775 (SC) has observed that powers given to the Revenue authority, howsoever, wide, do not entitle him to make the assessment on pure guess without reference to any eviden....
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....9/Del/2024 and C.O.No.29/Del/2025 of the assessee are dismissed. ITA No.4737/Del/2024 (Revenue Appeal) CO No.-30/Del/2025 (AY 2017-18) 15. The appeal filed by the revenue and cross objection filed by the assessee for AY 2017-18. 16. From the perusal of the assessment order, it is seen that an addition of INR 78,00,000/- was made by holding the same as accommodation entries u/s 68 of the Act received during the year from one lender companies M/s Satsai Finlease Pvt. Ltd. The AO further observed that the assessee had paid interest of INR 40,881/- on the entire loan amount which was also disallowed. Besides this, an addition of INR 41,750/- was made on account of alleged commission @ 0.25% on the loans received of INR 78,00,000/- as unexplained transactions. 17. The facts and circumstances existed in the year under appeal and the observations and allegations made by the AO while making the additions/disallowance are the same, as were made in the assessment order passed for AY 2013-14 in the case M/s Filatax India Ltd. Further, Ld. CIT(A) also made similar observation as were made in the case M/s Filatax India Ltd. in AY 2013-14 while deleting the additions/disallowances to....
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.... is also dismissed. 25. Since we have already dismissed the grounds of appeal taken by the revenue, the objections raised in the C.O. of the assessee become academic and thus not adjudicated and is dismissed. 26. In the result, appeal of the Revenue in ITA No.4740/Del/2024 and C.O.No. 31/Del/2025 of the assessee are dismissed. ITA No.1389/Del/2024 (Revenue Appeal) CO No.-92/Del/2024 (AY 2021-22) 27. The appeal filed by the revenue and cross objection filed by the assessee for AY 2021-22. 28. From the perusal of the assessment order, it is seen that an addition of INR 2,62,50,000/- was made by holding the same as accommodation entries u/s 68 of the Act received during the year from one lender companies M/s Satsai Finlease Pvt. Ltd. The AO further made the addition of INR 65,625/- on account of alleged commission @ 0.25% on the loans received of INR 2,62,50,000/- as unexplained transactions. 29. The facts and circumstances existed in the year under appeal and the observations and allegations made by the AO while making the additions/disallowance are the same, as were made in the assessment order passed for AY 2013-14 in the case M/s Filatax India Ltd. Further, Ld. C....