TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 359
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....d loans from various parties and in order to verify the same, a separate notice was issued to the assessee to substantiate the transactions in view of section 68 of the Act. In response, assessee submitted the same as under :- S. No. Name of the party Amount taken as loan Returned Income 1 Aromatic Alloys & Allied Pvt Ltd Rs. 64,60,000/ Loss of Rs. 11,14,500/- 2 Bazigar Trading Pvt Ltd Rs. 14,50,000/- No information provided by the assessee 3 D Mall (Green World International (P) Ltd. ) Rs. 16,00,000/- No information provided by the assessee 4 Rakshit Chemicals Industries Ltd. Rs. 62,00,000/- Income of Rs. 45,541/- 5 SG Art & Entertainment Rs. 7,50,000/- No information provided by the assessee 6 Ambey Capital Private Limited Rs. 67,40,000/- Loss of Rs. 473/- Total Rs. 2,32,00,000/- 3. After considering the above, the Assessing Officer also observed that assessee has received an amount of Rs. 2.32 crores as loan which remained unverified to his satisfaction and all the parties have filed their return either with losses/meagre income or no information was submitted. He fur....
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....ns of the assessee and partly allowed grounds raised by the assessee by providing partial relief to the assessee to the extent of transaction with Bazigar Trading by observing as under :- "7.2.3 In the instant case, the explanation offered by the appellant about the unsecured loans found credited in its books of accounts is found not satisfactory to the AO. It is needless to say that the onus of proving the source of a sum of money found to have been credited in the books of the appellant is on him and when the nature and source of such credit cannot be satisfactory explained, the same is to be treated as unexplained credit and no further burden lies on the revenue to show that the income is from any particulars source. It goes without saying that unless the appellant discharge this onus cast upon it, the same do not gets shifted on the AO. In the written submission made the appellant has relied on plethora of judgements however failed to show a3 to how the rulings of Hon'ble Courts in those judgements are applicable to its case. On perusal of the same it is found that the facts in the instant case are distinguishable from the facts in these case laws relied upon by th....
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....the loan creditor for relevant previous year that this loan creditor company is not carrying out any business activity and the only source of income is income from other sources in the nature of interest income. The balance sheet of the loan creditor company further reveal that this company is loss making company having accumulated loss to the extent of Rs. 1,82,73,800/-. It is further seen from the balance sheet that the loan creditor company is not having his own funds for advancement of interest free loans but the loans have been advanced mainly out of borrowed funds. Considering the above facts off the case, I am of the considered view that the appellant has not discharged onus cast upon it of proving creditworthiness of this loan creditor as also the genuineness of loan transaction. I therefore concur with the view of the A.O. that this amount of loan is liable to be taxed u/s. 68 of the I. T. Act. Addition made by the A.O. to the extent of Rs. 67,40,000/- is therefore confirmed. (ii) Aromatic Alloy and Allied Pvt. Ltd. Rs. 64,60,000/- It is found from the copy of loan confirmation filed by the appellant that the opening balance of loan taken by the ....
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....d loan taken by the appellant of Rs. 14,50,000/- is therefore found not justified. The A.O. is therefore directed to delete the same. (iv) Loan from Green World International Pvt. Ltd. Rs. 16,00,000/- The appellant has filed copy of confirmation of loan in respect of this loan creditor. The appellant has also filed copy of bank statement of loan creditor from which it is found that the advancement of loan of Rs. 16,00,000/- to the appellant is out of transfer of funds. The appellant has not filed copies of financials of this company to establish its creditworthiness and genuineness of transaction. Considering these facts, I am of the considered view that the appellant has failed to discharge onus cast upon it by provision u/s. 68 of the I. T. Act of proving the creditworthiness of this loan creditor and the genuineness of loan transaction. The addition made by the A.O. in respect of this unsecured loan taken by the appellant of Rs. 16,00,000/- is therefore found to be justified. The same is therefore confirmed. (v) Rakshit Chemicals Industries Ltd. Rs. 62,00,000/- The appellant has filed copy of loan confirmation letter, copy of bank sta....
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....00/- is therefore found to be justified. The same is therefore confirmed." 7. With regard to bad debts, ld. CIT (A) dismissed the grounds raised by the assessee by observing following observations := "9.2.1 The appellant has filed copies of ledger account of export sale for the financial year 2014-15 and 2015-16 wherein it is seen that the total export sale is of Rs. 13,16,18,533/- and Rs. 2,57,32,154/- respectively. The appellant has also filed copies of ledger account of M/s. SC Formulator Co. Ltd. for the period from 01.04.2014 to 31.03.2015 and 01.04.2015 to 31.03.2016. It is noted from this ledger account that the total amount outstanding receivable from M/s. S.C. Formulator as on 31.03.2015 is of Rs. 1,91,03,814/- and as on 31.03.2016 is at Rs. 1,91,02,914/-. The appellant has not filed copy of ledger account of M/s. S. C Formulator Co. Ltd. for the relevant previous year i.e. for financial year 2016-17. In the absence of the ledger account of M/s. S. C. Formulator Co. Ltd. for the relevant previous year it is not shown by the appellant that the amount of bad debts is actually been written off in the books of the appellant company which is one of the conditions gi....
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.... Ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case while sustaining the addition made by the ld. Assessing Officer of Rs. 3,95,040/- under section 40(a)(ia) of the Act without appreciating the facts of the case and submissions of the appellant. As such, the addition of Rs. 3,95,040/- is bad in law and may pleased be deleted." 9. At the time of hearing, ld. AR of the assessee submitted as under :- "ISSUE -1: ADDITION UNDER SECTION 68 AMOUNTING TO Rs. 2,17,50,000/- 1. Section 68 provides that where any sum is found credited in the books of account and the nature and source of such credit is not explained by the assessee, such credit will be taxable under the provisions of the Act. In order to discharge onus under section 68, the assessee is required to satisfy following. three Limbs in respect of each transaction of loan: - Identity of the party - Genuineness of the transaction - Credit worthiness of the party 2. The appellant had duly discharged its onus of proving identity and creditworthiness of the lender as well as genuineness of the transaction by submitting various documents in respect of th....
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.... adverse inference can be drawn in case of the creditor and not in the case of Appellant company. 6. The remarks of the Ld. AO that "as all the parties have filed their return either at Losses/ meager income or no information as called for from the assessee was provided to the undersigned. Further, perusal of the bank statement of the parties revealed that prior to credit to the assessee company, the account of the parties were credited with same amount from unknown sources/parties" is no ground for making the addition u/s 68 of the Act. It is humbly submitted that there is no requirement under the law that Investor has to made the investment out of income only or the loan creditor has to keep funds idle in bank accounts for some period before giving loan to others. Reliance is being placed on the decision of Hon'ble Delhi Tribunal in Addl. CIT vs Prayag Poly tech Pvt. Ltd., ITA No. 5970/DEL/2017, Date of Order: 18/06/2019, wherein it has been held as under: "We are of the view that there is no such condition in section 68 that loan can only be advanced out of the taxable income of the current year. The requirement of section 68 are 3 i.e. identity, creditwort....
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....ut tangible basis. ISSUE - 2: DISALLOWANCE UNDER SECTION 36(1)(VII) OF THE ACT AMOUNTING TO Rs. 1,91,02,914/- IN RESPECT OF BAD DEBT WRITTEN OFF 1. The Appellant had made Export Sales to M/s. S&C Formulator Co. Ltd., Thailand during the period from FY 2012-13 to FY 2015-16 aggregating to more than Rs. 40 crores. Due to some quality differences, the party refused to make payment to the extent of Rs. 1,91,02,914/-. The Appellant made its best efforts for the recovery of the amount, however, could not recover. The copy of ledger account for the period from FY 2012-13 to FY 2016-17 was submitted before the Ld. AO vide Letter dated 19-12-2019 [PB No. 86-88 & 146-150]. 2. Consequently, the amount of Rs. 1,91,02,914/- was written off as Bad debts in the books of account and was reported under Note No. 22 'Other Expenses' as 'Discount' in the Profit & Loss Account [PB No. 61-78, relevant at PB No. 77]. 3. Section 36(1)(vii) of the Act provides that any bad debt written off in the books of account as irrecoverable is an allowable deduction. It has been settled by the Apex Court in TRF Ltd. v. CIT [2010] 323 ITR 397 that writing off of debt....
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.... relevant information for six parties and ld. CIT (A) has analysed the individual cases and found that only in the case of Bazigar Trading, assessee has submitted copies of evidences of the creditors and found that the loan creditor is having its own sufficient fund for the advancement of loan of Rs. 14,50,000/-. With regard to other parties, he found that assessee has not submitted and discharged the onus cast upon them We observed from the findings of the ld. CIT (A) with regard to Ambey Capital Pvt. Ld. that ld. CIT(A) observed that it is a related concern having common Directors and shareholders. The loan advanced to the assessee is out of loan transferred from loan creditors other bank account to the bank account from which loan amount is transferred to the assessee on the same date. It is not known as to why the loan amount was not transferred to the assessee from such other bank account of the loan creditor which could have shown the availability of funds with the loan creditor and could have proved the genuineness of the loan translations. He rejected this party with the observations that the company has declared loss and also having huge accumulated loss. We observed that ....
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....verified the documents, therefore, we are inclined to remit this issue back to the file of AO to verify the document in line of the documents available on record. In this regard, various courts have held that capacity is not dependent on earning capacity of creditor rather it is on availability of funds with the creditor based on the ability to make or arrange funds for lending and also not analysed the transaction on the basis of related concerns transactions and also not analysed the aspect whether the assessee has to prove the source of source in this assessment year. In the result, ground nos.1 & 2 raised by the assessee is allowed for statistical purposes and we direct the AO to verify the information available on record as per law after giving proper opportunity of being heard to the assessee. 14. With regard to ground nos.3 & 4, we observed that assessee had made export sales to M/s. S & C Formulator Co., Ltd. during the period FY 2012-13 to FY 2015-16. It is brought to our notice that due to quality differences, the party refused to make payment to the extent of Rs. 1,91,02,915/-. As per the ledger account brought on record, we observed that assessee in fact exported the....