TaxTMI 
TaxTMI 
2025 (12) TMI 850
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....ay and admit the appeal for hearing as the reasons cited are bonafide and sufficient. 3. The issue raised in ground no.1 is deletion of addition of Rs. 8,07,00,000/- by the learned CIT(A) as made by the learned AO on account of unsecured loans taken by the assessee during the year. 3.1. The facts in brief are that the learned AO on perusal of the balance sheet observed that the assessee company has shown unsecured loans of Rs. 31.73 crores from various companies. The learned AO noted that the assessee during the year has also taken loans from two parties namely; Rubycam Vyapar Pvt. Ltd. amounting to Rs. 6.50 crores and M/s Limelight Dealers Pvt. Ltd. amounting to Rs. 2.20 crores. The learned AO noted that though the assessee filed the evidences qua these loan creditors, however, the inspector deputed to verify the credentials of the loan creditors but could not locate the whereabouts of these companies. Accordingly, the show cause notice is given on 18.03.2016 to the assessee and the assessee replied on 22.03.2016, submitting that these companies are not bogus and furnished the new addresses of the said companies. The AO issued notices u/s 133(6) of the Act to the loan credit....
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....rector of the company in his submission dated 22.03.2016 to the AO, to provide the opportunity to cross examine the inspector about the details of addresses where, notices u/s 133(6) were returned unserved. But the AO did not provide such opportunity and the request of the appellant was denied. Furthermore, details of the new addresses was also provided to the AO in the submission dated 22.03.2016. But no enquiry was conducted on the said addresses. 4.3.2(c) The appellant further stated that the AO has wrongly stated that both the parties have not shown any loan to the Axis Overseas Ltd. in their audited balance sheet. Whereas fact is that both the parties i.e. M/s Limelight Dealers Pvt. Ltd. and M/s Rubycam Vyapar Pvt. Ltd. have shown the transaction of loan with the assessee as their sundry debtors in their balance sheets. Further, the assessee has shown the said amount, part as unsecured loan and part as sundry creditors in the balance sheet. The details furnished by the appellant regarding the details shown in the balance sheet of both the lender parties and in the balance sheet of the assessee company are as under:- * Justification based on factual position o....
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....ks of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The crucial words in the said provision are "assessee offers no explanation". This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income Tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to Section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, t....
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....ved. The assessee furnished the correct addresses to the AO qua the loan creditors later on. The learned AO again issued notices u/s 133(6) of the Act, which were served and duly replied by these parties. The learned AO noted on the basis of balance sheets that the loans taken by the assessee from these parties were not shown in their balance sheets by them. However, on the other hand, the learned CIT(A) has recorded a clear-cut finding that the assessee was purchasing jute from these parties besides taking unsecured loans. The ld CIT(A) recorded a finding in para 4.3.2(c) in the appellate order that the amount of loans taken from these parties were shown under the head of sundry debtors by the loan creditors whereas the assessee has shown the amount of unsecured loan and sundry creditors separately. The learned CIT(A) after relying on the decision of PCIT vs. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)/[2022] 448 ITR 332 (Calcutta)[14-07-2022], allowed the appeal of the assessee. After perusing the order of learned CIT(A) and the facts on record, we are inclined to hold that the learned CIT(A) has passed a very reasoned order which does not require any interference at our e....
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.... 4.2.2(b) I find merit in the submission of the appellant and relying on the judgement of Hon'ble Supreme Court as cited above and other cases mentioned in the submission of the appellant. The disallowance u/s 14A of the Act is restricted to Rs. 8,774/-. Hence, the assessee gets relief of Rs. 2,33,561/- on this ground. 1. Ground No 8: Addition made u/s 68 as unexplained cash credit in respect to Loan amounting to Rs 8,70,00,000/-: 2. The appellant made following submission on ground no. 8:- "Justification based on assessment records and order sheet: 1. The very basis of the addition rest upon the inspector report. The Ld A.O has laid immense emphasis on the inspector report however there is no mention of such report anywhere in the order sheet maintained by the A.O. The additions were made on the basis of the departmental inspector being deputed for verification of address. Now this false allegation is very much evident from Para 2.2 where in spite of assessee's request to cross examine the inspector, the Ld AO denied the request and additions were made. This shows no enquiry through inspector was conducted and hence there was no ....
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....side of the balance sheet and the mere act of switching of the same from current liabilities to unsecured loan cannot give rise to income, much less undisclosed income. These are merely the book entries and no new funds or any other asset has been introduced in the appellant's accounts which could be considered an attempt for legalizing its undisclosed income. 2. For the purpose of invoking provisions of Sec 68, classification of assets or liabilities into other sub heads does not hold any relevance. Sec 68 is invoked where any sum is found credited and assessee is not able to substantiate the transaction genuineness. The Ld AO in instant case without understanding the nature of transactions has made additions u/s 68 as cash credit. Sec 68 clearly states as under - Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided further....
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....ent of submission made by these entities are enclosed herewith for your perusal. [Marked Annexure-3] 2. Without disputing the ledger submitted by the said entities in respect to transactions undertaken with assessee company, Ld AO remarked that identity, genuineness and creditworthiness of loan creditor is not proved. But the Ld AO failed to demonstrate how the identity, genuineness and creditworthiness of said entities are not proved. 3. It is pertinent to note that both the entities have duly accepted transactions with assessee company. In their respective submissions made, they have endorsed the copy of ledger of assessee in their books of accounts evidencing the identical balance shown by assessee. The Ld AO simply cannot ignore the evidences without bringing any defect into record that the transactions were not genuine based on his own whims. * Reliance is placed on the following judicial rulings: * [2018] 96 taxmann.com 403 (SC) SUPREME COURT OF INDIA Principal Commissioner of Income Tax-4 v. Hi-Tech Residency (P.) Ltd. High Court deleted said addition holding that assessee had discharged its onus of establishing identity, genuinen....
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....planation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source [CIT Versus Mohanakala (P) 5]. The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds (Lal Mohan Krishna Lal Paul Versus CIT 6 and Anil Kumar Singh Versus CIT 7)." [2023] 148 taxmann.com 94 (Calcutta) HIGH COURT OF CALCUTTA Principal Commissioner of Income tax v. Overtop Marketing (P.) Ltd. Where assessee-company had discharged onus to prove identity, creditworthiness and genuineness of its loan transactions with various companies by providing income-tax acknowledgements, audited accounts, etc. and some lender companies had also replied to notice issued on them under section 133(6), since Assessing Officer failed to discharge his onus to prove them wrong, impugned additions made under section 68 treating loan amount as unexplained cash credit was to be deleted [2022] 140 taxmann.com 308 (Amritsar - Trib.) IN THE ITAT AMRITSAR BENCH Greensaphire Infratech (P.) Ltd. v. Income-tax Offi....
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....t the deletion of addition of Rs. 9,20,00,000/- by the learned CIT(A) as made by the learned AO on account of share and securities of unlisted companies. 5.1. The learned AO during the course of assessment proceedings observed that the assessee has sold its current investments comprising share/ securities of unlisted companies to different entities. Accordingly, the assessee was called upon to explain this sale of securities and also show caused to as to why the same should not be added u/s 68 of the Act. The assessee replied on 30.06.2016, by furnishing the details of purchases and their balance sheets, copies of ITRs etc. bills etc. The learned AO noted that the purchasers of shares/ securities of these unlisted companies from the assessee did not show these purchases in the Profit and Loss account and accordingly, held these sales to be bogus. The assessee also provided the names, addresses of the purchasers and amount of shares sold to them alongwith details of sales consideration. The learned AO issued notices u/s 133(6) of the Act to these companies but most of the parties did not reply and were returned back. Finally, the amount was added u/s 68 of the Act to the income o....
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.... assessee failed to discharge its onus to establish identity, creditworthiness and genuineness of the transaction in respect of the money received through cash trail. The CIT(A) in course of hearing the appeal called for a remand report from the Assessing Officer and in the said remand report the Assessing Officer has in no uncertain terms accepted the receipt of the impugned sum on account of sale proceeds of investment. The Assessing Officer verified the investment sold which are shown in the balance-sheet for the financial year 2010-11 in Schedule-4 of the balance-sheet and after considering these facts it was stated that the assessee had sold shares held by way of the investment during the year to M/s. Shivshakti Communications and Investment Pvt. Ltd. and Carnation Tradelink Pvt. Ltd. and it is not a receipt of unsecured loan. This fact, apart from other factual details, were considered by the CIT(A) and by an elaborate order dated 10.5.2023 the appeal filed by the assessee was allowed. The tribunal on its part re-examined the factual position and took note of the findings rendered by the CIT(A) and concurred with the same. We also find that the tribunal has also examined the ....
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....hers in which no details of sellers, transportations are mentioned. All these vouchers are hand written in the same format without mention of date. As per AO, the assessee did not reconcile the impounded documents with purchase bills and regular books of accounts. As per AO, the bills were prima facie appears to be bogus. Further, the AO has also stated that in the post survey enquiry the statement of director of M/s Axis Overseas Ltd. Mr. Aditya Sharda was recorded on 05.02.2013 where he also could not explain the said incriminating documents. The AO disallowed the amount of Rs. 82,00,861/- calculated on the basis of cash vouchers impoundedand marked as AOL/08 u/s 40A(3) of the IT Act. The Appellant in its submission has stated that the AO has erroneously added the amount of Rs. 82,00,861/- u/s 40A(3) of the Act. Because the AO himself has stated in the assessment order that the said documents did not have details of seller, details of transportation and appear to be handwritten without any date. This observation of the AO clearly shows that documents were nothing but dumb documents and no addition can be made on the basis of dumb documents. Furthermore, when the AO himself has st....
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....ould not submit any details the notional interest is calculated @ 12% on the whole total advance for AY 2013-14 amounting to disallowance of Rs. 2,67,75,667/-. Penalty U/s 271(1)(c) is being initiated separately for concealment of income by way of furnishing inaccurate particulars of income. So, for sake of consistency in department stand on the issue, addition of notional interest is made @ 12% amounting to Rs 2,67,75,667/- on total advances of Rs 22,31,30,558/-. 1. It is pertinent to note that on similar issue of notional interest on interest free advances, the Hon'ble CIT(A) -6, Kolkata has granted relief to the assessee vide its order for AY 2014-15 dt 04-03-2019. Copy of the said order passed in favour of assessee is enclosed for your reference. [Marked Annexure - 4] 2. Furthermore, there is no finding by the Ld AO that assessee company has actually received the interest or that the interest had accrued to assessee and the same was not reflected in books of accounts. The only finding recorded was that in the assessee case similar addition were made in earlier years and hence to follow consistency of departmental action, additions are made on....
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....ty to tax such income. 2. The Supreme Court while deciding what is actual income in the case of Morvi Industries Ltd. v. CIT (Central) 6, adapted the dictionary meaning of the word "accrue" and held that income can only "accrue" when it becomes "due" i.e. when it becomes legally recoverable irrespective of whether it is received or not and "accrued income" is that income which the assessee has a legal right to receive. Thus, until the amount is "due", no tax can be levied since there is no "real income". 3. From the above it is clear that what can be taxed as income is the real income earned and accrued to the assessee. No provision in the Act empowers the Ld AO to tax notional income on hypothecation basis. Reliance is placed on following: The Supreme Court in the case of Poona Electric Supply v. Ld. CIT(Appeals) (1965) 57 ITR 21 (SC) held that "income-tax is a tax on the real income, i.e., the profits arrived at on commercial principles subject to the provisions of the Income-tax Act". Supreme Court in Godhra Electricity Co. Ltd. V. CIT (225 ITR 746 (SC) laid down this ratio and held that under the Income Tax Act, the income chargeable....