TaxTMI 
TaxTMI 
2023 (5) TMI 1464
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....ation period in filing appeal between 15.03.2020 till 28.02.2022 has been excluded for calculating the limitation period. Since the period of limitation in the case of the Revenue falls during this period, the same deserves to be extended and we, therefore, condone the delay and admit the appeal for adjudication. 3. The Revenue is in appeal before this Tribunal raising the following grounds: "1) Whether on facts of the case and in law, Ld. CIT(A) has erred in allowing assessee's appeal in respect of addition of unsecured loans made u/s 68 of the Act along with disallowance of corresponding interest expenses, without appreciating full facts available on record? 2) Whether on facts of the case and in law, Ld. CIT(A) has erred in deleting addition of Rs. 1,00,00,000/- made by AO u/ s 68 along with disallowance of interest expenses thereon of Rs. 1,94,958/-, by merely relying on the form rather than the substance of impugned unsecured loan transactions? 3) Whether on facts of the case and in law, CIT(A) has erred in allowing assessee's appeal on addition made in respect of unsecured loans from three parties along with disallowance of corresponding ....
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....ld. CIT(A) and partly succeeded. 6. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R vehemently argued supporting the order of ld. AO and further added that the assessee failed to explain the source of unexplained cash credit since the alleged creditors did not appear before ld. AO to explain the genuineness of the transaction. 7. On the other hand, ld. Counsel for the assessee vehemently argued relying on the detailed finding of ld. CIT(A) and further referred to the paperbook containing 116 pages which includes the audited financial statement, computation of income, extract of bank statement evidencing the receipt and repayment of inter- corporate loans through proper banking channel and financial statement of the alleged creditors. 8. We have heard rival contentions and perused the records placed before us. First issue for our consideration raised by the Revenue in ground nos. 1, 2 & 3 relates to addition u/s 68 of the Act at Rs. 1 Cr and disallowance of interest expenses at Rs. 1,94,958/- paid on the alleged unsecured loan. 9. We notice that the disputed unsecured loan of Rs. 1 Cr was received by the assessee from the following three companies: ....
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.... and investment. In the relevant previous year, the appellant has borrowed from bodies corporate to the tune of Rs.39.17 crores. The said borrowings were made from 10 bodies corporate. In the audited accounts as also in the tax audit report information was disclosed to the effect that the loans were taken by the appellant from bodies corporate. 4.2 In the course of assessment proceedings, the appellant was called upon to furnish the particulars of loans received during the relevant year. In response, the appellant had furnished required particulars, which inter alia included names, address and income tax PAN of each of the loan creditors. Appellant had also furnished the mode of receipt of loans and also produced copies of its own bank statement to prove that the loans were received through banking channels and not by cash. The entries in the appellant's bank statement also established that immediately after the receipt of the loan funds, these were utilized by the appellant in its regular course of business. Based on the information furnished by the appellant, the AO observed that he had found that four of the loan creditors were managed and operated by alleged entry ....
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....ccept the genuineness of transactions and their identity and creditworthiness of 7 loan creditors who had advanced loans to the appellant. However, the AO disbelieved the identity, creditworthiness and genuineness of the remaining 3 loan creditors and accordingly made the addition of Rs. 1,00,00,000/ - u/s 68 of the Act. The appellant submitted that on the same set of facts which were discernible from the assessment records in respect of all the loan creditors, the AO chose to disbelieve only 3 loan creditors and accepted the transactions with remaining 7 loan creditors. 4.4 It is relevant to mention that the AO had made enquiries u/s 131 from all the three loan creditors. Each of the loan creditors furnished complete details as requisitioned in notice u/s 131. These loan creditors had furnished before the AO, copies of their Bank statements which reflected the transaction of loans advanced by them. The loan creditors had also furnished their explanations with regard to the immediate source from which payments were made to the appellant. It was evident from the Bank statements that no cash was deposited in the accounts of these loan creditors prior to encashment of cheques....
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.... been allowed any opportunity to cross examine Mr Jivendra Mishra to ascertain as to whether he had provided any such alleged accommodation entries specifically to the appellant. The AO should have specifically asked Mr Jivendra Mishra as to whether the appellant has in anyway benefitted from his activities of alleged rotation of monies or whether he had used these three companies for the purpose. The AO further should have enquired from the AO of the respective lender companies regarding the genuineness of the transactions. The fact that there are no cash deposits prior to lending of money to the appellant by the three companies and there is no evidence of so-called cash had been rotated and brought back into books of the appellant, the statement of Mr. Jivendra Mishra looses significance or no relevance or not reliable piece of evidence in arriving at conclusion that the transactions made by the companies are non- genuine and bogus. When these circumstantial evidences do not prove anything adverse, the AO simply cannot disregard the documents produced as stage managed and resort to addition on the theory of human probabilities. 4.6 On the contrary, the appellant had file....
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....ash deposits were made and funds were routed through loan creditors. In none of the cases, the AO however could validly prove or bring anything on record that cash deposits were made which were ultimately routed through the loan creditors. The allegation of the AO seems to have no relevance or remote connection with the jurisdictional facts of the case. The AO was also unable to point out any defect or infirmity in the details & paperwork furnished by the appellant and the documents obtained from the loan creditors. 4.8 The appellant submitted that Section 68 of the Income-tax Act, 1961 provides that any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the loan received was fully explained by the appellant. The appellant had conclusively proved the identity, creditworthiness and genuineness of the loan creditors. The PAN details, bank account statements, financial statements and I.T. acknowledgments of all loan creditors were placed on AO's record. The entries in the bank statement established that each loan wa....
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....tors together with the copies of balance sheets and income tax returns. The three loan creditors responded to the notice under section 133(6) of the Act and complied with all thew information requisitioned by the AO. The companies are regularly assessed to tax and filing returns of income. With regard to the creditworthiness of loan creditors, these companies are having sufficient funds in the form of capital and reserves. These transactions are also duly reflected in the balance sheets of the loan creditors as under (in INR) Name Amount Net Worth Reflected in Note of Accounts FY 2014-15 Akansha Advisory Pvt Ltd 40,00,000 21,42,76,805 Note No. 10 Ascent Dealmark Pvt Ltd 30,00,000 32,00,61,356 Note No. 2.6 Wise Dealmark Pvt Ltd 30,00,000 48,37,52,919 Note No. 7 4.11 By this, the creditworthiness of loan creditors is also proved beyond doubt. With regard to genuineness of transactions, the monies have been directly paid to the appellant company by account payee cheques out of sufficient bank balances available in their respective bank accounts. I find that the appellant had even proved the source of money deposited into the ....
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....any 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 further] that nothing contained in the first proviso [or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." 12. From perusal of the above Section, we observe that Section 68 of the Act is invoked if any sum is found credited in the books of an assessee for which the assessee either does not offer any explanation about the nature and source thereof or the explanation offered by him is not found to be satisfactory in the opinion of ....
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....ctional High Court of Calcutta in the case of Crystal Network Put. Ltd. vs. CIT (supra) which held as under: "We find considerable force from the submissions of the learned counsel for the appellant that the Tribunal has merely noticed that since the summons issued before assessment returned unserved and no one came forward to prove. Therefore, it shall be assumed that the assessee failed to prove the existence of the creditors or for that matter creditworthiness. As rightly pointed out by the learned counsel that the CIT(Appeals) has taken the trouble of examining of all other materials and documents viz., confirmatory statements, invoices, challans and vouchers showing supply of bidi as against the advance. Therefore, the attendance of the witnesses pursuant to the summons issued in our view is not important. The important is to prove as to whether the said cash credit was received as against the future sale of the produce of the assessee or not. When it was found by the CIT(Appeal) on fact having examined the documents that the advance given by the creditors have been established the Tribunal should not have ignored this fact finding." 10. We also take note of ....
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....g to an adverse conclusion against the appellant. On an overall analysis of the issue, I find that the AO has not made out his case with cogent material on record that the appellant could come under the purview of section 68 of the Act with regard to share capital as reflected in the balance sheet when there is no finding with any cogent material evidence that the same was actually bogus in nature. It is accordingly observed that creditworthiness of the share subscribers to make investment in the share capital of the appellant company cannot be a disputed matter as per material facts on record. The aforesaid facts underlined by evidences clearly prove the identity of the share applicants, their creditworthiness and source of funds, as well as the genuineness of the transactions being investments in the share capital issued by the appellant, which was subscribed to by each of them. Thus, it is proved beyond any-doubt or dispute that the share applicants are actually found to have subscribed to the share capital issued by the appellant during the year under consideration as clearly evident not only from their respective books of accounts but also from their audited accounts filed wit....
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.... High Court succinctly dealt with the aspect whether notices u/ s. 133(6) of the Act are issued which are duly acknowledged or responded but ignored by the AO leads to perversity in the assessment order. Relevant extract from the said decision is reproduced as under: " ... Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/ s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22.12.2017. The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely....
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....rded so with reasons. We find that there is no discussion on the explanation offered ITAT 18 OF 2022 by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22.12.2017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed with the CIT(A). Th....
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....verify the genuineness of the credit entries. In the present case, the Assessing Officer made an independent and detailed enquiry, including survey of the so-called investor companies from Mumbai, Kolkata and Guwahati to verify the credit-worthiness of the parties, the source of funds invested, and the genuineness of the transactions. The field reports revealed that the share-holders were either non-existent, or lacked credit-worthiness." 11.2. Thereafter, Hon'ble Supreme Court summed up the principles which emerged by 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 legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Office is duty bound to investigate the credit- worthiness of the creditor/subscriber, verify the identity of the subscribers, and ascertain whether the transactio....
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....nue is dismissed." 14. So far as reliance placed by ld. D/R on the judgment of the Hon'ble Supreme Court in the case of PCIT, (Central)-1, Kolkata vs. NRA Iron & Steel Put. Ltd. reported in 412 ITR 161, we find that the same is not applicable on the facts of the present case. We find that the Hon'ble Supreme Court in para 8.2 of the said decision has made the following observations: "8.2 As per settled law, the initial onus is on the Assessee to establish by cogent evidence the genuineness of the transaction, and credit- worthiness of the investors under Section 68 of the Act. The assessee is expected to establish to the satisfaction of the Assessing Officer CIT v. Precision Finance (P.) Ltd. [1995] 82 Taxman 31/[1994] 208 ITR 465 (Cal.): Proof of Identity of the creditors; Capacity of creditors to advance money; and Genuineness of transaction This Court in 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) laid down 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 as....
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....documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same. However, as noted above, ld. AO in this case has not made any independent enquiry to verify the genuineness of the transactions. The assessee having furnished all the details and documents before ld. AO and ld. AO has not pointed out any discrepancy or insufficiency in the said evidences and details furnished by the assessee before him. As observed above, the assessee having discharged initial burden upon him to furnish the evidences to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction, the burden shifted upon ld. AO to examine the evidences furnished and even make independent inquiries and thereafter to state that on what account he was not satisfied with the details and evidences furnished by the assessee and confronting with the same to the assessee. In view of this, the aforesaid decision of the Hon'ble Supreme Court in the case of PCIT vs. NRA Iron and Steel Put. Ltd. (supra), in our humble view, is not applicable to the facts and ci....