TaxTMI 
TaxTMI 
2026 (1) TMI 34
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....pled with notices u/s 142(1) of the Act issued from time to time. The assessee made compliances and filed the requisite details. After considering the submissions made by the assessee, AO passed the order and made the addition of INR 1,57,59,722/- u/s 68 of the Act being the amount of loan received from One, M/s Tejas Handloom, a proprietorship firm of HUF of family of the assessee whose Karta is her husband. Besides this, AO estimated the Gross Profit of the assessee and applied GP rate of 1.22% on the gross turnover, resulting into further addition of INR 33,79,725/-. Thus, total income of the assessee was assessed at INR 5,07,38,963/-. 3. Against the said order, assessee preferred an appeal before Ld. CIT(A) who vide impugned order dated 30.10.2023 dismissed the appeal of the assessee, therefore, assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. "That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 1.57,59,722/- on account of unsecured loan received from M's Tejas Handloom u/s 68 and that too by recording incorrect fac....
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....ssment particulars of M/s Tejas Handloom. Ld. AR submits that during the year under appeal, total amount received was of INR 1,57,59,722/- and together with the opening balance of INR 1,13,42,888/-, total outstanding loan was repaid and there was NIL balance at the end of the previous year. Ld. AR submits that the allegation of the AO that M/s Tejas Handloom has no creditworthiness to grant loan of this amount to the assessee is contrary to the fact> he submits that AO as well as Ld. CIT(A) has failed to appreciate that assessee is making regular transactions with M/s Tejas Handloom, where funds were received as well repaid on regular interval and thus the immediate source of funds is the repayment made by the assessee. 6. Ld. AR submits that for examining the creditworthiness, the AO should consider the peak credit balance. For this, assessee filed peak working chart wherein all the receipts and payments related to the year under appeal were taken and peak of INR 20,30,000/- (credit) is worked out on 15.07.2017. Ld.AR submits that such peak balance was submitted as an alternate to the AO to establish that M/s Tejas Handloom gave the funds to the assessee out of the funds repaid....
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....com 75, High Court of Gujarat. * PCIT vs. Neotech Education Foundation, (2023) 292 Taxman 199, High Court of Gujarat. * PCIT vs. Ambe Tradecorp (P.) Ltd., (2023) 290 Taxman 471, High Court of Gujarat. * PCIT vs. Overtop Marketing (P.) Ltd., [2023] 148 taxmann.com 94, High Court of Calcutta. * Pr. CIT vs. Hi-Tech Residency (P.) Ltd., (2018) 257 Taxman 390 (Del). * CIT vs. Real Time Marketing Pvt. Ltd., (2008) 306 ITR 0035 (Del). * CIT vs. Jai Kumar Bakliwal, (2014) 366 ITR 0217 (Raj). * Aravali Trading Co. vs. ITO, (2010) 187 Taxman 0338 (Raj). * CIT vs. Metachem Industries, 245 ITR 160, High Court of Madhya Pradesh. * Nemi Chand Kothari vs. CIT & Anr., (2003) 264 ITR 0254 (Gau). * CIT vs. Shri Ram Narain Goel, (1997) 224 ITR 0180 (P&H). * ACIT vs Dayal Steel (P) Ltd. in ITA 9121/Del./2019, date of order 11-01- 2024. Delhi ITAT. * AO vs Asit Surendrabhai Shah and ors. in ITA 945/Ahd./2018, Date of order 02-08-2023. Ahmedabad ITAT. * Ganesh Hanpat Alim vs ITO in ITA 40/SRT/2022, Date of order 08-05- 2023. Surat ITAT. 9. On the other hand, Ld. Sr. DR vehemently suppo....
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....found to be satisfactory: Provided further that where the assessee is a company (not being a company 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 also 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. As per section 68, onus is on the assessee to establish the three ingredients i.e. (i) identity of the creditors; (ii) genuineness of the transactions; and (iii) creditworthiness of the lender. 13. In the instant case, a....
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....ited 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 entry provider. This amendment has taken effect from 1st April, 2023 and accordingly applies in relation to the assessment year 2023-24 and all subsequent assessment years. The year before us is AY 2018-19 thus this amendment is not applicable in the present case. 16. The coordinate Bench of Delhi bench of Tribunal in the case of ACIT v Smt. Prem Anand in ITA No. 3514/Del/2014 vide order dated 13.04.2017 held that amendment made in section 68 of the Act w.e.f. 01.04.2013 empowers the A.O. to examine source of source in case of share application money / share capital / share premium and thus this amendment does not give power to the A.O. to examine source of source of non-share capital cases. 17. The Hon'ble Allahabad High Court in the case of PCIT vs. Anshika Consultants (P.) Ltd. reported in [2024] 162 taxmann.com 792 (Allahabad) held as under:- "Where assessee had received unsecured interest bearing loans from three corporate entities and had furnished necessary acknowledgement of return, balance sheet, profit and loss account....
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....ed the financial capacity of loan creditors but such addition cannot be made on preponderance of probability and there has to be some evidence and substance in contention. The Assessing Officer has not brought anything on record to establish that the sources in the hands of loan creditors is non-genuine. Merely because they have shown meager income or no sufficient sources as presumed by Assessing Officer, loan taken by appellant from them cannot be held to be accommodation entries. It is well-settled position of law that no matter how strong suspicion is, it cannot take place of the evidence. Therefore, in the absence of any evidence showing that in fact, appellant has given cash in lieu of unsecured loan taken, merely on the basis of suspicion, no addition can be made for which reliance is placed on decision of Hon'ble Supreme court in the case of Daulatram Rawatmull, (1964) 53 ITR 574. 21. On the issue of discharge the onus of establishing the creditworthiness of the loan creditor, the Hon'ble Delhi High court in the case of Mod. Creations (P.) Ltd. v. ITO reported in [2013] 354 ITR 282, has held as under: "It will have to be kept in mind that Section 68 of t....
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....t was dealing with the assessment of the company, i.e., the recipient of the loan and not that its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. " 23. One more aspect needs to be considered is that the entire loan was repaid during the year itself which includes the opening outstanding balance and the same stands accepted by the AO. Eventually, such repayment of funds by the assessee became the source of funds in the hands of M/s Tejas Handloom for making fresh loan to the assessee. This fact is further established from the funds flow statement prepared for peak balance, as discussed above. 24. The Hon'ble Gujarat High Court in the cases of PCIT vs Ojas Tarmake (P).Ltd. [2023] 156 taxmann.com 75, CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj) and CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj) held that when the Department has accepted the factum of repayment, the additions under Section 68 is not sustainable in law. Similar view has been expressed by the jurisdictional high court in the c....
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....alancing of each individual item traded, consequent sales and daily balance of the quantity available alongwith value thereof. The stock register so submitted before the AO is filed before us at page 40 to 185 of the Paper Book. Ld.AR submits that though all these stock records were not produced before the Auditors however, they were produced before the AO who has failed to point out a single defect in any of the entries contained in the stock register which are further supported by respective purchases and sales bills alongwith quantitative tally. Ld. AR submits that merely on the observations of the Auditor that he has not verified the stock record, trading results cannot be doubted on assumptions and presumptions. With respect to the application of G.P. rate of 1.22 %, Ld.AR submits that assessee is having irregular G.P. rate ranging from 0.62% to 0.13% starting from AYs 2014-15 to 2018-19 i.e. year under appeal and the AO has failed to consider such variation in the G.P. rate which has not been doubted in any of the preceding year. Ld. AR also stated that turnover of the assessee had increased multi-fold from INR 8.02 crores in FY 2014-15 to INR 308.94 crores in the year under ....
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....tative terms therefore, we are not in agreement with the observations of the AO that the books of accounts of the assessee does not depict true & fair view of the transaction carried out by the assessee. 32. The Hon'ble Kerala High Court in the case St. Teresa's Oil Mills vs State of Kerala [1970] 76 ITR 365 has held as under:- "Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. The Department has to prove satisfactorily that the account books are unreliable, incorrect or incomplete before it can reject the accounts. The rejection of accounts is not a matter to be done light-heartedly, though it may not be possible to lay down in general terms the exact circumstances in which the accounts should be considered as unreliable or incorrect. The accounts could be rejected as unreliable if important transactions are omitted therefrom or if proper particulars and vouchers are not forthcoming or if they do not include entries relating to one particular class of business. In this connection, it has to be pointed out that the rejection of accounts and assessment t....