AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1179
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....5,600/- received as interest free security deposit from Amity Properties Pvt. Ltd. as a business venture & thereby erroneously confirming the same as 'Unexplained Cash Credit' as per provision of Section 68 of the Act even though audited financials of Amity Properties Pvt ltd were also submitted. b. The Learned CIT(A) erred in not considering a sum of Rs. 1,04,50,000/- received as interest free security deposit from Neelkanth Realty Pvt. Ltd being balance of security deposit as a liability & thereby erroneously confirming the same as "Unexplained cash credit" u/s 68 of the Act presumed by the learned Assessing officer. 2) On the facts and in the circumstances of the case and in law, the Learned AO and later the CIT(A) - NFAC erred in considering the above mentioned unpaid Security Deposits as Cash Credit in spite of the fact that the source of these funds were fully explained and identity. genuineness and creditworthiness was proved, both to the learned Assessing Officer as well as to the Learned CIT(A). 3) On the facts and in the circumstances of the case and in law, the learned CIT(A) and learned AO erred in overlooking to the detailed submissio....
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....0/-; unexplained cash credit under section 68 of the Act amount to Rs. 6,52,35,600/- for interest free security deposit from M/s Amity Properties Pvt Ltd (in short, 'APPL'); amount of Rs. 1,04,50,000/- received as interest free security deposit from Neelkanth Realty Pvt Ltd (in short, 'NRPL') and the disallowance was made under section 37(1) of the Act related to expenses amount to Rs. 1,67,495/-.The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A) dismissed the addition U/s 2(22)(e) of the Act. But related addition U/s 68 of the Act & U/s 37(1) of the Act grounds of the appeal are dismissed. So, the Ld. CIT(A) partly allowed the appeal. Being aggrieved on the appeal order, the assessee filed an appeal before us. 4. During the hearing, the Ld.AR filed a written submission of 147 pages which is kept in the record. The addition was made through two parties related to receiving of interest free security deposit amount to Rs. 6,52,35,600/- from APPL. The assessee also received the amount of Rs. 8,26,25,000/- from NRPL, but out of that during the alleged year, the assessee repaid the amount of Rs. 7,21,75,000/-. So, the balance amount of Rs. 1,04,50,000/- was a....
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....ssued by Ld. AO along with proof of speed post. therefore, the finding of the Ld. AO is incorrect. G) The Ld. CIT(A) has confirmed the additions only the accounts of the appellant are not audited, despite the appellant being liable for statutory audit as per provisions of the Income tax Act, 1961 and APPL did not have any revenue from operations or reserves. the only source of funding was long term borrowings, which are not identifiable, as per ITR filed as there is a loss of Rs. 34,038/-. Hence, the creditworthiness of the party seems not to be genuine. in fact, for section 68 of the act, identity, creditworthiness of the borrowers is to be seen, and assessee has proved with overwhelming evidence. H) Ld. AR submitted that source of fund for payment of security deposit is long term borrowing obtained by APPL. In written submission filed before us, Ld. AR of assessee has demonstrated source of fund given by APPL in tabular format as below along with ledger of NRPL in the books of APPL wherein details of payment by NRPL to APPL is mentioned, signed and confirmed by both APP Land NRP Land bank statement of APPL wherein transaction as mentioned in the bank book of APP....
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.... written submission wherein Rs. 1,04,50,000/- given to assessee is shown as asset. D) Ld. AR of assessee has demonstrated that assessee has submitted copy of MoU during assessment proceedings vide submission dated 27.12.2017. Further, Ld. AR of assessee has also submitted due to objection raised by one of the shareholders, financial statement was not signed by the statutory auditors and hence accounts of the assessee are not audited. Ld. AR of assessee has also demonstrated source of fund given by NRPL. E) Ld. AR has brought to attention that during the year under consideration appellant has received Rs. 8,26,25,000/- pursuant to MoU executed with NRPL on 09/09/2014 and out of the same Rs. 7,21,75,000/- is repaid during the year only. The balance amount of Rs. 1,04,50,000 which AO has assessed as undisclosed cash credit u/s 68 is also repaid back to NRPL in subsequent year by July 2015 by account payee cheque. Copy of Bank Statement of NRPL and appellant showing details of transactions and copy of bank statement of subsequent year for payment of outstanding balance is also submitted in the paper book at page no 111-134. F) Further, it is also brought to o....
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..... Computation of Income and Income Tax Return f. Memorandum of Understanding executed between parties. g. Bank statement of APPL and appellant showing details of transaction h. Reply to summons issued u/s 133(6) of the act along with acknowledgement of post. i. Statement showing details of receipt by appellant from APPL and source of fund of APPL. j. Copy of ledger account of NRPL in the books of APPL showing source of fund along with copy of Bank Statements 12. In respect of observation of AO that notice issued u/s 131(1) has remained unanswered, Ld. AR of assessee filled copy of reply filled by APPL against notice by the Ld. AO along with proof of speed post. Thus, the reasons of the Ld. AO that there is no response by the assessee is devoid of any merit. In respect of findings by the Ld. CIT(A) that APPL does not have any revenue to make payment of security deposit to assessee. Ld. AR submitted that source of fund for payment of security deposit is long term borrowing obtained by APPL. In written submission filed before us. The Ld. AR of assessee has demonstrated source of fund given by APPL in tabular format as below along with Le....
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....ditworthiness of the Borrowers is to be seen and assessee has proved with substantial evidence. 16. In view of the above facts, we do not find any reason to sustain the addition u/s 68 of the act as the assessee has discharged its onus of proving identity, creditworthiness and genuineness of the transaction by producing details of the depositor which are neither controverted by the Ld. AO or Ld. CIT(A) and failed to make any inquiry to throw onus back to the assessee. In fact, assessee has shown source of source of funds available with depositor. Accordingly. The orders of the revenue authorities are reversed, and Ld. AO is directed to delete the addition of Rs. 6,52,35,600/- from APPL. 17. With respect to addition u/s 68 in respect of closing balance of fund received from NRPL facts shows that the assessee has received Rs. 8,26,25,000/- from NRPL as security deposit for purchase of properties and repaid Rs. 7,21,75,000/- and closing balance at the end of year is Rs. 1,04,50,000/-. The assessee has submitted copy of MoU executed between assessee and NRPL. In fact, assessee has submitted following documents to prove identity, creditworthiness, and genuineness of the transactio....
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....ted due to objection raised by one of the shareholders, financial statement was not signed by the statutory auditors and hence accounts of the assessee are not audited. Ld. AR of assessee has also demonstrated source of fund given by NRPL, the same is tabulated below: - Date Amount Source Source Amount and Date 24/11/2014 1,35,00,000 Loan from Director - Bhavik Bhimjyani 24/11/2014 - Rs. 1,35,00,000 24/11/2014 1,35,00,000 Loan from Director - Bhavik Bhimjyani 24/11/2014 - Rs. 1,35,00,000 24/11/2014 1,35,00,000 Loan from Director - Bhavik Bhimjyani 24/11/2014 - Rs. 1,35,00,000 24/11/2014 26,75,000 Loan from Director - Bhavik Bhimjyani 24/11/2014 - Rs. 26,75,000 25/11/2014 50,00,000 Loan from Director - Bhavik Bhimjyani 24/11/2014 - Rs. 50,00,000 17/06/2015 Cheque issued on 31/03/2015 1,00,00,000 Advances from R. Tulsidas Agro Exports Pvt Ltd 17/06/2015- Rs. 1,00,00,000 17/06/2015 Cheque issued on 31/03/2015 1,00,00,000 Advances from R. Tulsidas Agro Exports Pvt Ltd 17/06/2015- Rs. 1,00,00,000 17/06/2015 Cheque issued on 31/03/2015 48,00,000 Advances from R. T....
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....e assessee. Substantial evidence produced by the assessee proves the source and nature of receipt by the assessee. Thus, the orders of the revenue authorities with respect to above addition u/s 68 of the act is not correct. Thus, the order of the Ld.CIT(A) is reversed, and ld. AO is directed to delete the addition u/s 68 of the act of Rs. 1,04,50,000/-. 24. Based on the above discussion we delete addition u/s 68 in respect of amount received from Amity Properties Private Limited and Neelkanth Reality Private Limited allow Ground no 1 of the appeal of the assessee. 25. Ground no 2 to 5 are supportive in nature and does not require separate adjudication and in view of our decision on Ground no 1 are allowed. 26. Ground no 6 and 7 are with respect to disallowance of expenditure u/s 37(1) of the Act. Facts shows that during the year appellant has sold land and accordingly opening stock of work in progress is reduced. This opening stock of work in progress comprises of purchase cost of land, other expenses incurred for acquisition of land and interest expenses capitalized. Ld. AO has considered these expenses as ingenuine and exclusively for the purpose of business in absenc....