TaxTMI 
TaxTMI 
2025 (12) TMI 592
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....2) and 142(1) of the Act alongwith questionnaires were issued from time to time. In response to these notices, the assessee furnished various details/documents/information including bank statements. The AO asked the assessee to furnish the details of loans received from different sources. It is observed by the AO that during the year, assessee has received a loan of INR 10.60 crores from M/s Hallow Securities Pvt. Ltd. and paid interest of INR 31,00,340/- on the same. To establish the genuineness and creditworthiness of the loan, assessee furnished confirmation, ITR, financial statements and bank statement of the lender. The AO vide assessment order dated 31.12.2022 passed u/s 143(3) of the Act made the addition of Rs. 9,85,00,000/- u/s 68 r.w.s. 115BBE of the Act on account of loan taken from M/s. Hallow Securities Pvt. Ltd. of the INR 9,60,00,000/- and further added INR 25,00,000/- from M/s. Dhankalash Distributors Pvt. Ltd and disallowance of INR 28,07,855/- was made on account of interest expenses claimed on the loan taken from M/s Hallow Securities Pvt. Ltd. 3. Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 09.04.2025, allowed the ap....
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.... group entities. 5. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3, Noida has erred in deleting the disallowance of interest of Rs. 28,07,855/- made on account of interest paid on unsecured loan to M/s Hallow Securities Pvt. Ltd., ignoring the fact that the impugned transaction was not genuine, since the assessee failed to discharge its onus with regard to creditworthiness and genuineness of the loans appearing in its books of accounts from shell entity. 6. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)-3, Noida has erred in law by admitting the additional evidences filed under Rule-46A of the Income Tax Rules, 1962, F without referring the reasonable cause which prevented the assessee to produce the same during the assessment proceeding. 7. That the order of CIT(A) being erroneous in law and facts be set aside and order of the A.O. be restored. 8. That the above grounds are without prejudice to each other and appellant craves leave to add, alter OR amend any other more ground of appeal as stated above as and when needs for doing so may arise." 5. Ground of appeal Nos. 1, 2, 4, 6 & 7 rais....
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....ourse of assessment proceedings, assessee had submitted copy of ITR, bank statement, Audited Balance Sheet of M/s Hallow Securities Pvt. Ltd to establish the identity, genuineness of transaction and creditworthiness. Assessee further established that M/s Hallow Securities Pvt. Ltd. had sufficient funds available in its bank account as and when the funds were transferred to the assessee. 22. The AO admitted that M/s Hallow Securities Pvt. Ltd. is registered NBFC however, alleged that it is also engaged in providing accommodation entries of loan to various business houses. Assessee claimed that M/s Hallow Securities Pvt. Ltd has received CCDs amounting to Rs. 300 crores from M/s Teesta Retails Pvt. Ltd. during various financial years which is one of the group company of Reliance group. The AO observed that M/s Hallow Securities Pvt. Ltd. is a shell company as per the Press Release dated 08.06.2018 by Ministry of Finance. The AO has accepted part loans as genuine and made the addition of 17,74,00,000/- by doubting the source of this amount in the hands of the lender company M/s Hallow Securities Pvt. Ltd. 23. It is the contention of the assessee that no incriminating....
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....rectors of the Hallow Securities Pvt. Ltd. and the ACE Group le. Sh. Prakash Kumar Jha and Sh. Pratap Singh Rathi which were contrary to the statements of Nishant Chajjar and Vishal Kumar have not been reproduced in the assessment order, It is important for the Assessing Authority to analyze all the evidences available before him. Moreover, the statement of Nishant Chajjar makes no reference of advancing of bogus loan to the appellant meaning thereby that, even if, Hallow Securities Pvt. Ltd. was engaged in providing & receiving bogus loans apart from the regular business of NBFC (being a company of mixed conduct as established by the AO), still documentary evidence needed to be there to prove that funds advanced to the appellant were ingenuine. Such documentary evidence is conspicuously absent in the assessment order despite the fact that both the assessee group and M/s. Hallow Securities Pvt. Ltd. were searched. It is pertinent to mention here that the standalone statement relied upon by the Assessing Officer cannot itself be considered as sufficient evidence to reach the conclusion as drawn by the AO in the assessment order, more so, for the reason that the said stateme....
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.... taxmann.com 346 (Gujarat) has held as under: "Where pursuant to a survey, unsecured loans taken by assessee from GCSL were deemed non-genuine by Assessing Officer on basis of statement of director of GCSL, since apart from said statement, there was no other evidence against assessee and moreover, assessee had filed evidence in form of confirmation from creditor, audited accounts of creditor and copies of banks accounts to prove genuineness and creditworthiness of creditor which was within parameters of section 68, impugned addition made in that respect to be deleted" Further, in the judgment of Hon'ble HIGH COURT OF CALCUTTA in the case of Principal Commissioner of Income-tax vs. Sreeleathers reported at [2022] 143 taxmann.com 435 (Calcutta) it has been held as under: It was noted that show-cause notice issued on assessee was only in respect of one lender company, namely, FGD - Assessee provided various documents in form of PAN card, income-tax acknowledgement, copy of bank statement, certification of incorporation, master data from register of companies, certificate of incorporation and annual account to prove FD's identity and creditworthiness ....
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....s) - Assessment years 2007-08 and 2012-13 - Assessee-company took unsecured loans from two companies - On basis of statement of one PKJ recorded during search and seizure operation that he had provided accommodation entries to assessee, Assessing Officer treated said loans as fake - Whether since Assessee had submitted all evidence to substantiate loans in question, including confirmation from creditors and loans were taken and repaid through banking channels, Assessing Officer was not justified in treating said unsecured loan as fake and making addition of interest paid on said loan to assessee's income - Held, yes [Para 8] [In favor of assessee) As has already been discussed above, the AO has relied upon statement of Nishant Chajjar and Vishal Kumar in the assessment order whereas, the statements of Prakash Kumar Jha and complete statement of Pratap Singh Rathi have not been discussed in the assessment order. It is also seen that the Investigation on the basis of source to source has been applied only to the funds received from Teesta Retails Pvt. Ltd. and HFCL but no such source-to-source investigation has been conducted with respect to the funds other than those re....
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....o revenue. Further, the Ld. ITAT Bench of Delhi in the case of HCL SINGAPORE PTE. LTD. C/O HCL TECHNOLOGIES LTD. VERSUS ASST. CIT CIRCLE INTERNATIONAL TAXATION 2(1) (1), DELHI reported at 2024(1) TMI 309 - ITAT DELHI has held as under: From the perusal of the aforesaid statements of various employees which were recorded during the course of survey by the TDS officers, which were heavily relied upon by the Id. AO by cherry picking some of the questions and answers alone given by them, we find that prima facie all the statements of employees actually support the contentions of the assessee herein. Further, the Ld. ITAT Bench of Bangalore in the case of M/S. HASSAN HAJEE & CO. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, MANGALORE (VICE VERSA) reported at 2022(9) TMI 1480 - ITAT BANGALORE has held as under: The AO has taken notice of this statement. However, he intentionally ignored it as it was in favour of the assessee. The A.O. could not do cherry picking, if the Ld. AO considered the statement of Shri B. Kunhi where he has stated that payment of speed money was at Rs. 35 per M.T., there could be no addition on this count. In view of the ab....
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....the lender company but further prove the source of source of the loan given to it by explaining each credit entry in the table submitted before then ld. CIT(A) as appearing at pages 100-102 of the order which is reproduced as under for sake of convenience:- 29. It is also relevant to state that an amendment is made vide Finance Act, 2022 wherein second proviso to section 68 is added so as to provide that the nature and source of any sum, whether in the form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or loan provider. However, this additional onus to prove satisfactorily the source in the hands of the creditor, would not apply if the creditor is a well-regulated entity, i.e., it is a Venture Capital Fund, Venture Capital Company registered with SEBI. This amendment has taken effect from 1^st April, 2023 and accordingly applies in relation to the assessment year 2023-24 and subsequent assessment years. The year before us is AY 2020-21 thus this amendment is not applicable, yet the assessee has been able to establish the same as per t....
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.... Ministry of Finance dt.08.06.2018 and further no opportunity was given to the Ao to rebut the evidences filed by the assessee which are in the nature of additional evidences u/R 46A of the Act. In this context, it is seen that in order to verify this fact, ld. CIT(A) has made direct enquires from SFIO u/s 250(4) of the Act, who is the nodal agencies in this regard. The SFIO vide reply dt. 23.01,2025, as reproduced herein above, in clear terms has stated that no investigation is initiated/pending/disposal against the company i.e. M/s Hallow Securities Pvt. Ltd. the conclusion drawn by ld. CIT(A) on the basis of aforesaid report of SFIO are fully convincing and we concur these findings given by ld. CIT(A) which are reproduced as under: "From the above press release, following conclusions can be drawn: a. The red flagged companies which had not filed returns for last 2 years were deregistered from the ROC. b. Directors of those companies which had not filed annual returns were disqualified. c. The struck-off companies were restricted from using their bank accounts. d. Genuine corporates were given benefit of condonation of delay scheme for....
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....assessee/third parties furnished the relevant evidences. The said evidences were called for under the powers of enquiry with the office of Commissioner Appeal). Hence, the assessee/third parties have not produced any additional evidence but have only furnished evidences as called tor during enquiry made by this office. In case, the AO is not able to collect complete material and take the issue to logical end, the evidence collected by the appellate authority from the assessee/third parties in continuation of the same trail initiated by the AO would be clarificatory evidence. The clarificatory evidence would only remove the doubts arising in the mind of the appellate authorities from the documents on record so that the issue under consideration is taken to a logical conclusion by making the argument more explicit so that the real income can be arrived at. On the said issue, the Hon'ble High Court of Delhi in the case of Commissioner of Income-tax, Central-l vs. Manish Build Well (P.) Ltd. reported at [2011) 16 taxmann.com27 (Delhi) has held as under: "Whether a distinction should be recognized and maintained between a case where assessee invokes rule 46A to add....
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.... He can do what the ITO can do. He can also direct the ITO to do what he failed to do. The power conferred on the AAC under the said subsection being quasi-judicial power, it is incumbent on him to exercise the same if the facts and circumstances justify. If the AAC fails to exercise his discretion judicially and arbitrarily refuses to make enquiry in a case where the facts and circumstances so demand, his action would be open for correction by a higher authority. On a conjoint reading of section 250 and rule 46A, it is clear that the restrictions placed on the appellant to produce evidence do not affect the powers of the AAC under sub-section (4) of section 250. The purpose of rule 46A appears to be to ensure that evidence is primarily led before the ITO. .............. The AAC should have considered this evidence in exercise of his powers under sub-sections (4) and (5) of section 250 which he failed to do. Thus, it was a fit case where the AAC should have exercised the powers conferred upon him and taken on record the zerox copies of the cheque, the certificate from the bank and the copy of the account of the assessee with the said bank and consid....
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.... that "the power conferred on Appellate Authority by Section 246 which is exercised in accordance with procedure with Section 250 indicate and amplitude and width which is no less wide than that of an ITO and the Appellate Authority could substitute the order of the ITO by one of his own." 36. In view of the above clear observations of ld. CIT(A) we find that despite of repeated opportunities to the AO, no response was given thus the ld. CIT(A) had proceeded to decide the issue after making necessary enquires at his end. Accordingly, we find no error in such findings of ld. CIT(A) and accordingly this plea of the revenue is not acceptable. 37. Another important aspect which has been considered by ld. CIT(A) is that the loans were repaid by the assessee in subsequent years and assessee has also field the copies of the relevant ledger accounts before us which are placed in the paper book. The assessee also filed a chart in this regard which is reproduced as under: 38. While accepting the plea of the assessee, Ld. CIT(A) has made following observations at page 109 of the order : Repayment of Loan "The AR further submitted that the loans und....
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....ndation reported at [2023] 148 taxmann.com 372 (Gujarat) has held as under: It was noted that Commissioner (Appeals) had observed that assessee had discharged its onus by furnishing necessary details such as a copy of PAN, bank details and ITR etc. in support of identity and creditworthiness of creditor and genuineness of transaction - He further noted that payment of loan to assessee as well as repayment of loan and interest by assessee were made by account payed cheques - Further, both lower authorities had concurrently held that initial burden of proof even if not discharged by assessee at level of Assessing Officer but every transaction was explained by production of documents by assessee before Commissioner (Appeals) where two remand reports were called for - Whether, on facts, impugned addition on account of loan amount made by Assessing Officer was to be deleted - Held, yes [Paras 9 to 11] [In favour of assessee] Further, the Hon'ble HIGH COURT OF GUJARAT in the case of Principal Commissioner of Income-tax vs. Merrygold Gems (P.) Ltd reported at [2024] 164 taxmann.com 764 (Gujarat) has held as under: Section 68 of the Income-tax Act, 1961 - Cas....
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.... Conclusion "Accordingly, in view of the above discussion, following conclusions can be drawn: 1. The money advanced by Hallow Securities Pvt. Ltd. to the assessee company is out of the return back of advances given to other concerns by Hallow Securities Pvt. Ltd. during the earlier years or the year under consideration (or ACE Group meaning thereby that the creditworthiness of entities like Manak routed through the genuine entities like Teesta Retails Pyt. Ltd. and HFCL in Estate & Finance Pvt Ltd, Sundram Consultants Pt Ltd, AKJ Engineers Pvt Ltd, Kanta Credits and Holdings Pvt Ltd. becomes irrelevant. Hence, the application of Section 68 using the source of source theory to the case of the appellant becomes uncalled for in above circumstances. 2. The fund flow statement of M/s. Hallow Securities Pvt. Ltd. from AY 2017-18 to AY 2022-23 reveals that there were sufficient funds available with Hallow Securities Pvt. Ltd. out of additions made by AO which were advanced to findings and discussion, it is observed that the bank credits in the hands of various concerns including the appellant. Without prejudice to the above M/s. Hallow Securities Pvt. Ltd. have....
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....ier years which were advanced to various entities and returned back. In view of the discussion on various issues carried out above, the addition made by the AO is not found to be sustainable and accordingly these grounds of appeal are allowed. 40. In view of the above discussion and further looking to the fact that when all the relevant details and documentary evidences produced by the assessee to establish the identity, creditworthiness and genuineness of the transactions, the said evidences cannot be rejected based on the statements of third party without any contrary documentary evidence. It is seen that transactions have been done through banking channels and on the date of making of loans, there was sufficient balance available in the bank account of the lender company, which proves the creditworthiness and genuineness of the transactions. It is also relevant that out total amount of loans of 27.27 crores received, the AO has despite of doubting the creditworthiness, had made the addition of INR. 17.74 crores only meaning thereby the creditworthiness for the remaining amount is not doubted though the facts and the circumstances while granting these loans rema....
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.... Ltd while dismissing the appeal of the Revenue in ITA No.3559/Del/2025 & Others for AY 2020-21 & Others, we held the same as genuine, therefore, by following the said observations made by us which are Mutatis Mutandis applied to the facts of the present case, the addition made of Rs. 9,60,00,000/- u/s 68 of the Act towards the loan taken from M/s Hallow Securities Pvt. Ltd. is hereby deleted. Accordingly Ground of appeal Nos. 1, 2, 4, 6 & 7 raised by the Revenue are dismissed. 10. Ground of appeal No.3 raised by the Revenue is with respect to deletion of loan of INR 25,00,000/- taken from M/s. Dhankalash Distributors Pvt. Ltd. which was made by the AO by holding the same as bogus unsecured loan. 11. We have heard the rival contentions and perused the material available on record. AO has made the addition by doubting the creditworthiness of the lender company and further observed that source of source is not established. AO observed that company has low income as compared to the loan given to the assessee. Accordingly, the AO has made the addition by holding the same as bogus accommodation entries. The claim of the assessee is that during the course of assessment proceedings,....
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....e same is hereby allowed as business expenditure. Accordingly, Ground of appeal No.5 taken by the revenue in present appeal is dismissed. 16. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 27.11.2025. ============= Document 1 Allure Developers Private Limited, A.Y. 2020-21 CIT (Appeal), Noida-3/10020/2019-20 The detailed analysis of funds received from Hallow Securities Pvt. Ltd. by the appellant with respect to the ultimate source as furnished by the AR in his rejoinder is again reproduced below for clarity: Date Credits Immediate Sources Comments Given by Hallow Securities Remarks 14.06.2019 30000000 Dhankalash Distributors Private Limited Unsecured loan 1) No addition in the hands of appellant. 2) The addition was not made as the amount received from Hallow Securities Pvt. Ltd. was considered genuine, given that the funds were ultimately financed by "Teesta Retails Pvt. Ltd." 17.06.2019 20000000 Dhankalash Distributors Private Limited Unsecured loan 1) No addition in the hands of appellant. 2) The addition was not made as the amount received from Hallow Securities Pvt. Ltd. was considered genuine, given that the ....
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....vate Limited Out of Recovery of advances made in earlier years. Addition Made 29.08.2019 9400000 Partly out of funds received of Rs 60 Lakh from Sundram Consultants Private Limited and Partly out of funds received of Rs 2 crores Manak Estate & Finance Pvt Ltd Out of Recovery of advances made in earlier years. Addition Made 16.09.2019 10000000 Dhankalash Distributors Private Limited Unsecured loan 1) No addition in the hands of appellant. 2) The addition was not made as the amount received from Hallow Securities Pvt. Ltd. was considered genuine, given that the funds were ultimately financed by "Teesta Retails Pvt. Ltd." 18.09.2019 10000000 Dhankalash Distributors Private Limited Unsecured loan 24.09.2019 10000000 Dhankalash Distributors Private Limited Unsecured loan 25.10.2019 10000000 Partly out of funds received of Rs 20 Lakh from AKJ Engineers Private Limited on 23.10.2010 and Partly out of funds received from Kanta Credits & Holdings Pvt Ltd on 24.10.19 Rs 50 Lakh and Rs 50 Lakhs on 23.10.19 Out of Recovery of advances made in earlier years to AKJ Engineers and out of Recovery of advances made in current year to Kanta Credits &Holding Pvt Ltd. Addition Ma....
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....red to the SBI account of M/s Hallow on 15.01.2020. Addition Made 267400000 Total Credits Partly out of funds received of Rs 65 Lakh from Sundram Consultants Private Limited on 28.01.20 and Partly out of funds transferred of Rs 98 Lakh from ICICI bank to SBI on 16.01.2020 (internal transfer) Document 4 Details of repayments made in respect of 10 cases of Ace Group are as follows :- AY Nome of Entity ITA No Total loan raised Holow Securities |AO) Amount accepted as genuine by AD Addition mode by AD in respect of Proportionate Interest disallowed Repayment made Repayment ledger Page No. of PB - 19-20 ALLURE DEVELOPER PVT LTD ITA 3558/DEL/2025 10,26,00,000 10,26,00,000 09.06.2022 165-170 20-21 AJAN REALCON INOVA PVT LTD ITA:3560/DEL/2025 15,56,00,000 8.31,00,000 8.25,00,000 10.25.032 25/08.2021 171-17 20-21 ALLURE DEVELOPER PVT LTD TA 3558/DEL/2025 26,74,00,000 9,00,00,000 17,74,00.000 09.06.2022 165-170 20-21 STAR LANDCRAFT PVT LTD JACE Residency and other Ca. were merges) ITA 4116/DEL/2025 102.75,00,000 38,75,00,000 64,00,00,000 2.83.12.326 17.02.2020 ( Star land). 30 06-2023 Ace Residency) 175-188 21-22 ACE RESIDENCY PVT LTD ITA 3493/DE....