TaxTMI 
TaxTMI 
2025 (12) TMI 1638
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....identiary value and cannot be ignored. The statements clearly state that loan of Rs. 35.00 Crore was given by the assessee at interest of @ 12%. Out of this, the loan of Rs. 10.00 Crore only was taken by cheque. No satisfactory explanation was given by the assessee in respect of remaining amount of Rs. 25.00 Crore taken in cash. 2. On facts and circumstances of the case, the L'd CIT(A)-IV, Kanpur has erred in relying the loan agreement furnished by the assessee, however, the loan agreement was only prepared for the amount of loan received through cheque. The amount of cash loan cannot be included in the formal agreement. 3 On facts and circumstances of the case, the L'd CIT(A)-IV, Kanpur has erred in admitting the additional evidences at the stage of appeal, ignoring the fact that the assessee failed to furnish any reply to the queries despite providing numerous opportunities during the course of assessment proceedings. 4. That the appellant craves leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other. 3. Facts, in brief, are that for A.Y. 2015-16 ....
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....e rate of interest on such loans was. 12% per annum. In the reasons, a list of such persons is produced from whom loan has been taken. In this list name of Mis. Nivedan Fin-Invest Lease Ltd appears and for interest amount of Rs 35,00,000/- per month, by considering rate of interest of 12% per annum, total amount of loan has been estimated as Rs. 35 crores In the reasons of reopening, Ld. AO states that search was conducted in case of Air Will Group of Companies on 30.09.2015 and during post search investigation, statement of Sh. Manoj Kumar Chaudhary director of Air Will Group of companies was recorded on oath u/s 131(1)(a) of IT Act on 07.12.2015 During the statement, he was confronted with his mobile phone data for the period of July August & September, 2015. Ld. AO states that during the statement Sh. Manoj Kumar Chaudhary admitted the names as mentioned in the mobile phone/ whatsapp/ message details of different investors of his group and replying to question no. 10 of his statement, Sh. Manoj Kumar Chaudhary has provided the total unaccounted interest and amount of loan taken from various lenders In the reasons recorded there is a list of 8 persons, of such lenders, w....
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....f Air Will Group is 12% per annum, total amount of loan taken from M/s. Nivedan Fin-Invest Lease Ltd should be Rs. 35 crore and since Rs 10 crores have been taken through cheque and the same are reflected in the books of accounts, balance amount of Rs 25 crores should be in cash. And hence addition of Rs. 25 crore has been made u/s 69A of IT Act 6.7 On the other hand Ld. AR submits that appellant is an NBFC company engaged in the business of financing activities ie obtaining loans and giving loans and the main source of its income during the year is interest. Ld AR submits that the original assessment proceedings were undertaken as per CASS for complete scrutiny by issuing statutory notices u/s 143(2) of the Income Tax Act and all the details as sought by the Ld AO for carrying out complete scrutiny were furnished and examined by the Ld. AO as noted in Para 2 & 3 of the Assessment Order u/s 143(3) dated 20 12 2017. Assessment proceedings u/s 143(3) of IT Act were completed at a taxable income of Rs 83,04,340/- by disallowing certain amounts by which the declared income of Rs. 78.80.197/- was enhanced by the said amount of addition Ld AR submits that as per reasons....
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.... submits that the short term loan is advanced for the interest @ 42% per annum and whole of the interest of Rs. 35 Lacs per month which was being received, has been duly accounted for in the books of accounts of the appellant company. 6.8 Ld. AR submits that copy of Agreement of Loan of Rs. 10 Crores to M/s J B. K Developers Ltd. was also provided during the recording of such statement u/s 131(1)(a) of IT Act of Sh. Virender Pal Singh, Director of this assessee company on 10 12 2015 Ld AR submits that in the reasons recorded, it is mentioned that Sh Manoj Kumar Chaudhary and Sh. Vikas Bhagat who were claimed to have been main persons of Airwill Group have admitted that cash loan was taken by J. B. K Developers Pvt Ltd., however fact is that the entire amount of loan of Rs. 10 crore was accounted for. It is submission of Ld. AR that in the reasons of reopening certain details of some Sh. Ramesh Chand Aggarwal etc, have been given, which are not concerned with the assessee It is submission of Ld. AR that Ld. AO could not appreciate that there are short term lendings, which bear abnormal interest rates and in case of appellant there are many other borrowers which have taken s....
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....d 22.03.2022 and due date for filing response to the show cause notice was fixed for 24th March 2022 le only 2 days time was given for making addition Rs 25 Cr as per show cause notice and before the assessee could fie the response to the said show cause notice, even in such short time, the AO has already passed income escaping assessment order uis 147 rw.s. 143(3) of IT Act dated 23 03 2022 without waiting for the assessee's reply. Ld AR submits that the writ before Hon'ble Allahabad High Court was withdrawn subsequently as the same became in-fructuous on passing of the assessment order by Ld. AO 6.9 Ld., AR submits that in the case of the assessee the, notice u/s 148 for the AY 2015-16 empowering the AO to reopen an assessment was issued to the assessee on 31.03.2021 le after 31.03.2020 le after the expiry of four years and since the assessee has neither failed to file a retum as required under the law nor has the Ld. AO alleged that the assessee failed to disclose any material facts at the time of assessment, both the specified conditions are satisfied. Ld AR submits that the assessee furnished the detail of advances paid/ outstanding during the year vide reply ....
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.... that the statement of outsiders have been believed that unaccounted interest has been charged on the unaccounted loans but statement of director of appellant company has been disbelieved, which is duly backed by documentary evidences. It is submission of Ld AR that since Ld. AO had all such cross claims through the statements, he should have allowed opportunity of cross examinations of the persons whose statements have been relied upon. 6.11 Ld AR submits that based on such statements, which the department has claimed to have recorded, it has been found that there is difference in the versions on the statements of 2 persons of Airwill Group, who claim payment of interest @12% per annum and statement of director of the assessee company, in which he has claimed payment of interest @42% per annum. It is submission of Ld AR that the books of account of appellant show entire amount of Rs. 10 crore as short term loan, from which interest of Rs. 35,00,000/- per month has been charged. Ld. AR claims that in none of the seized material, such evidence is found, from which it may be inferred that cash loan of Rs. 25 crore has been advanced to M/s. JBK Developers Pvt Ltd. Ld. AR subm....
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.... for TDS deducted was claimed and allowed (iv) Vibhor Vaibhav Infra Home (P) Ltd. - Rs. 5 Crores have been granted in the earlier year @ 3.5% per month le 42% per annum from whom the interest income of Rs. 2,37,41,667/- have been received and accounted for in the audited accounts. Credit for TDS claimed and allowed. (v) Rs 2.35,00,000/- to Mis. Metenere Global Ltd towards the end of the year @ interest rate of 3% per month ie. 36% per annum to whom interest during the year for the few days was received @ Rs. 22,742/- during the year and duly accounted for in the audited accounts of the assessee Ld AR submits that from the aforesaid details which were filed during the assessment proceedings, as per the requirement of Ld. AO, it would be noticed that the assessee as an NBFC has granted loans to various companies and individuals at the rates ranging between 36% to 42% and has received interest on such rates only. He submits that even TDS has been deducted by all the borrowers, the credit for which was claimed in the ITR and has been allowed to the assessee 6.13 It is submission of Ld AR that the present notice u/s 148 has been issued on the suspicio....
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.... for this purpose. He submits that the appellant filed its claim in Form C dated 25.01 2021 (PB 83-88) as a Financial Creditor before the RP in response to RP requirement and from Col 5 of the relevant Form, the claim was in respect of Rs 10 Cr only which was given pursuant to Loan Agreement dated 27 03.2015 @ 3.5% per month. The claim amount involves interest rate @ 3.5% as well as penal interest as per Loan Agreement. Ld. AR has furnished copy of Loan Agreement between Nivedan Fin-Invest Lease Ltd. and M/s. JBK Developers Pvt Ltd dt. 27.03.2015, and has drawn attention towards para-1 of the same in which it is stated that the said loan carry interest @3.5% per month compounding on monthly basis. He further submits that RP rejected this claim on technical grounds of delay in filing claim against which the assessee also filed petition before NCLT (PB 89-100) against rejection of assessee's claim on account of delayed filing of claim, wherein also the purpose and the amount of Rs. 10 Cr advanced to Mis. JBK Developers Pvt Ltd was also mentioned in reference to Loan Agreement dated 27.03.2015. This petition is pending as on date Ld. AR claims that this further demonstrates that t....
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....Ltd. of which Shri Mukesh Choksi was a director and thus the assessee failed to disclose fully and truly all material facts due to which assessment to the extent of Rs 3.11.25,000/- escaped assessment We observe that Assessing Officer has no other material to torm the above belief that the said purchases were bogus by the assessee in financial year 2002-03, nor in the statement made by Shri Mukesti Choksi there is any reference of said purchases by the assessee from Mis Talent Infoway Ltd There is nothing in the said statement that said concern issued bogus bills to the assessee in the financial year 2002-03 There is no specific reference/confession in respect of the transaction with the assessee that the said purchases made by the assessee were bogus. In wiew of above decision of the Hon'ble Apex Court (supra), we observe that in the absence of any confession related to the transaction with the assessee, it could not be said that there is a live link or close nexus between the material before the assessing Officer and the statement of Shri Mukesh Choksi to form a belief that there is an escapement of income for assessment year 2003-04 because of assessee's failure or omiss....
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....n Delhi. This ground of appeal is factually incorrect since vide order F. No. PCIT-06/ u/s 127/2017- 18/2149 dt. 03 11.2017, Ld. PCIT-06 Delhi has passed order u/s 127 of IT Act and assigned the jurisdiction of this case to DCIT CC-Noida, In the light of these facts, this ground of appeal is hereby dismissed 7.3 in the ground of appeal no. (iii), the appellant submits that the reopening of the proceedings beyond the period of 4 years without even an allegation that the assessee had failed to disclose truly all facts is bad in law and the order passed is prayed to be quashed. In the ground of appeal no. (iv), the appellant submits that the order passed u/s 147 is based merely on change of opinion as no new information came to the knowledge of AO and is bad in law and is prayed to be quashed In this regard it has been found that from the search conducted on Air Will Group of cases and statement given by Sh. Vikas Bhagat u/s 131(1)(a) of IT Act dt. 29/30.10.2015 and statement of Sh. Manoj Kumar Chaudhary dt. 07.12.2015, it was believed that since the interest amount of Rs 35,00,000/- has been paid in a month and since these persons claimed that interest has been paid....
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....ning it is only to be seen as to whether there was prima facie some material on the basis of which the Department could reopen the case The sufficiency or correctness of the material is not a thing to be considered at this stage Relying on this decision, the Apex Court, in the case of ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC), while considering the issuance of notice under section 147 of the Act has held that the final outcome of the proceedings is not relevant and at the initial stage, what is required to be seen is reason to believe but not established fact of escapement of income. It further held that at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief whether the material would conclusively prove the escapement is not the concern at this stage. In this view of the matter I am of the considered opinion that the issuance of notice in the case on hand is justifiable In the light of these observations, these grounds of appeal are hereby dismissed 7.4 The grounds of appeal no (v) to (x) challenge the addition of Rs 25 crores u/s 69A of....
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....ified that the monthly interest of Rs. 35,00,000/- is all accounted for and the same corresponds to interest rate of 3.5% per month and the same was duly backed by Loan Agreement dt. 27.03.2015, which duly mentioned accounted for loan amount of Rs. 10 crores. After this statement, the onus shifted on Ld AO to bring some positive evidence, which may prove that cash loan is given to the searched group. But without discharging such onus, addition has been made and no inquiries have been conducted which may support conclusions of Ld. AD. This is a fact that opportunity of cross examination of the directors of Airwill Group of Companies have also not been provided to the appellant. Further the appellant furnished details regarding to loans ie, Loan Agreement dt. 27.03.2015 which was signed in judicial stamp paper and as per para-1 of this agreement this loan earned interest @3.5% per month. Further there were Loan Bond, frrevocable power of attorney and Guarantee Agreement dt. 27.03.2015 which supported this Loan Agreement in the light of this Loan Agreement, the interest amount of Rs. 35,00,000/per month was explained in totality and there was no scope of speculation of consid....
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.... per month on the prime amount of Rs. 10 crores The Loan Agreement dt. 27.03.2015 executed in judicial stamp paper, between M/s. Nivedan Fin-Invest Lease Ltd. and M/s JBK Developers Pvt Ltd is a conclusive evidence in this regard and explains interest amount as well as prime amount. Once interest rate of 3.5% per month is applied in the prime amount of Rs. 10 crores in accordance to Para -1 of this Loan Agreement, there remains no scope of any possibility of cash loans. Therefore co-existence of this Loan Agreement and advancement of cash loan of Rs. 25 crores to M/s: JBK Developers Pvt Ltd is not possible Ld. AO failed to prove as to how there was possibility of cash amount of Rs 25 crores without discarding the existence of Loan Agreement dt. 27.03.2015 which was duly agreed upon. There is force in the submission of Ld AR that even the subsequent events speak volume that the Loan Agreement dt. 27.03.2015 was foundation stone of this loan. Ld. AR has explained in detail that M/s JBK Developers Pvt Ltd. went to insolvency and Resolution Professional (RP) was appointed for this purpose and the appellant filed its claim in Form C dated 25.01.2021 as a Financial Creditor befo....
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....evidences to support the statements of Sh. Manoj Kumar Chaudhary and Sh. Vikas Bhagat, specially when the opportunity of cross examination was not given to the appellant. In the assessment order dt. 23.03.2022 Ld. AO simply stated that notice uls 133(6) of IT Act was issued to the borrower company to verify the claim of the appellant made during reassessment proceedings dt 12.03. 2022 but the same remained un-complied Thus the assessment proceedings were not brought to the logical conclusions but were left half baked Thus, on the face of evidences brought on records and in view of the cogent submission filed by the appellant, the approach of the AO cannot be appreciated either on facts or in law. The action of the AO is largely influenced by consideration not borne from records it is settled position in law that suspicion however so strong, cannot be allowed to take the place of proof. The revenue authorities have to be watchful and ensure that conjectures and suspicions do not take the place of legal proof. In various judicial pronouncements it is observed that caution must be borne in mind that in cases depending largely upon circumstantial evidence there is always a dan....
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.... through the orders passed by the authorities below, at the cost of repetition, it is found that the Ld. First Appellate Authority has allowed the assessee's claim, inter alia, by observing as under: "From the aforesaid details it would be noticed that the assessee as an NBFC has granted loans to various companies and individuals at the rates ranging between 36% to 42% and has received interest on such rates only, Even TDS has been deducted by all the borrowers, the credit for which was claimed in the ITR and has been allowed to the assessee. 7.5 Ld. AO has relied on statements of Sh. Vikas Bhagat u/s 131(1)(a) of IT Act dt. 29/30 10.2015 and statement of Sh. Manoj Kumar Chaudhary dt. 07 12 2015 but the appellant furnished detailed explanation of charging of interest amount of Rs. 35,00,000/- per month on the prime amount of Rs. 10 crores The Loan Agreement dt. 27.03.2015 executed in judicial stamp paper, between M/s. Nivedan Fin-Invest Lease Ltd. and M/s JBK Developers Pvt Ltd is a conclusive evidence in this regard and explains interest amount as well as prime amount. Once interest rate of 3.5% per month is applied in the prime amount of Rs. 10 crores in accorda....
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.... of Air Will Group is @12% per annum, total amount of loan taken from M/s Nivedan Fin-Invest Lease Ltd. should be Rs. 35 crore and since Rs. 10 crores have been taken through cheque and the same are reflected in the books of accounts, balance amount of Rs 25 crores should be in cash. And hence addition of Rs. 25 crore has been made u/s 69A of IT Act. This conclusion fails to explain Loan Agreement dt. 27.03.2015 between the appellant and M/s. JBK Developers Pvt Ltd., which duly explains monthly interest amount of Rs. 35,00,000/- due to high interest rate of 3.5% per month The Loan of Rs. 10 Crores to M/s. J BK. Developers Ltd which is based on Loan Agreement dt. 27 03 2015 and statement of Sh. Virender Pal Singh, Director of this assessee company cannot be brushed aside without bringing any other corroborative evidences to support the statements of Sh. Manoj Kumar Chaudhary and Sh. Vikas Bhagat, specially when the opportunity of cross examination was not given to the appellant. In the assessment order dt. 23.03.2022 Ld. AO simply stated that notice uls 133(6) of IT Act was issued to the borrower company to verify the claim of the appellant made during reassessment proceedi....