AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (1) TMI 354
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....aring total income of Rs. 2,89,51,910/- after claiming deduction of Rs. 25000/- under Chapter VI-A of the Act. Subsequently, the case was selected for scrutiny under CASS. During the course of assessment, the Assessing Officer noted that the assessee had paid interest of Rs. 1,95,44,506/- to ten parties against unsecured loans. No fresh loan was raised during the year under consideration. However, the Assessing Officer doubted the genuineness of these parties and treated the interest as not allowable under section 37 of the Act. 4. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A), after detailed analysis of the facts and submissions, deleted the entire addition made by the Assessing Officer. The relevant portion of the order of the Ld. CIT(A) is reproduced hereunder :- "6. I have carefully considered the facts and submissions filed by the appellant. The brief facts of the case are that the assessee has paid interest on unsecured loan for Rs. 1,95,44,506/- to ten parties. No fresh loan was taken during the year under consideration, the break-up of interest paid to such ten parties are as under: Sr. No. ....
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....m above referred ten parties and claimed that during the year, no fresh loan was taken and only interest payment was credited in depositors' accounts. Necessary TDS was also deducted on such interest payment. The appellant has also dealt with statement of Mr. Jigar Trivedi referred by AO and claimed that statement is general in nature, was recorded in case of a different person and not transaction specific. So far as letter submitted by HJM Fuels Pvt. Limited, it was stated that appellant has not made any transaction with such party nor there is any corroborative evidence to prove that transactions made with parties are non-genuine. So far as news report regarding fake billing scam referred by AO, it was claimed that same was regarding illegal claim of input tax credit and not related to any income tax matter relating to loan given to appellant. It was alternatively claimed before AO that list of ten parties referred by AO includes three parties whose names are not corroborated by statement of third party or other relevant evidences referred by AO. On this basis, appellant has argued that no addition should be made. 6.2 The contention raised by appellant was not accept....
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.... appellant has argued that AO has not referred to any statement of Vikas or Ajaybhai or the person from whom appellant has taken loan nor referred to any incriminating evidences to establish that loan taken from such parties to be bogus hence interest payment to such parties cannot be subject matter of addition. So far as newspaper report in the context of investigation under GST Law in the case of Paresh Chauhan is concerned, appellant has contended that addition cannot be made based upon newspaper report and that too which was in connection with illegal claim of Input Credit under GST provisions and not connected with loan transactions with appellant. On this basis, appellant has contended that addition cannot be made only on the basis of statement of third party or material which do not have any reference to appellant's name. The appellant has relied various judicial pronouncements at para 3.5 and 3.6 of written submission herein above. The appellant has also argued that merely because depositor has shown lesser income does not mean that interest payment made to such party are bogus, for which appellant has relied upon various decisions at para 4.1 of written submission. The....
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.... (ii) Kolkata ITAT in the case of ACIT vs. Overtop Marketing Pvt Ltd in ITA No. 686/Kol/2019 dated 15.03.2021 xxxxx (iii) Kolkata Tribunal in the case of Mani Square Ltd Vs. ACIT [2020] 118 taxmann.com 452 xxxxx (iv) Mumbai ITAT in the case of Abijawala Developers (P.) Ltd. Vs. ITO [2021] 124 taxmann.com 72 xxxxx Considering these facts, AO was not justified in relying upon statement of Mr. Jigar Trivedi and treating interest paid by appellant as non-genuine. 6.6 So far as reliance placed by Assessing Officer on letter submitted by HJM Fuels Pvt. Ltd. to DDIT, Unit-1(3), Ahmedabad, is concerned, it is observed that said letter does not refer to any transactions made by appellant nor appellant has made any transactions with above company. Even such letter is dated 4^th May, 2017 whereas appellant has credited interest in ledger accounts of depositors at year-end. The AO has also referred to Tally ledger account in the name of Vikas, C/o Ajaybhai, CA, but has not established any connection of such person with appellant. Even AO has not referred to any statement of Vikas or Ajaybhai, CA, or HJM Fuels Pvt. Limited w....
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.... 6.8 It is also observed that AO has made interest disallowance with respect to ten parties. However, during the course of assessment proceedings appellant has explained that name of Shri Mukut Developer, Hannah Enterprise Pvt. Limited and Shri AshapuriTradelink Pvt. Limited did not find any mention in any allegation made by AO in assessment proceedings. Their names are not appearing in statement of Mr. Jigar Trivedi or DDIT letter or in GST fake bill scam hence in any case interest paid to such parties cannot be held to be bogus. 6.9 The AO has also observed that various loan provider companies have no significant business activity and very little income which establish the nature of concern being accommodative entry provider. Merely because depositors have shown less income or no activity does not mean that interest provided on loan given by them in year under consideration is non-genuine. The AO has not brought any evidences that such interest is not offered to tax by depositor. The appellant has submitted the confirmation, return of income, financial statement of such depositors and duly discharged its onus as cast under Section 68 of the Act for interest provided....
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....n various decisions that section 68 contemplates that there should be a credit of amounts in the books of an assessee maintained by the assessee, (b) such amount has to be a sum received during the previous year, (c) the assessee offers no explanation about the nature and source of such credit found in the books, or (d) the explanation offered by the assessee is not, in the opinion of the Assessing Officer, satisfactory. The Hon'ble Delhi High Court in the case of CIT v. Novadaya Castles (P) Ltd. 367ITR 306 has considered a large number of decisions including the decision of Hon'ble Supreme Court in the case of CII Vs. Durga Prasad (1971) 82 ITR 540 (SC). According to the Hon'ble Delhi High Court basically there are two sets of judgments. In one set of case, the assessee produced necessary documents/evidence to show and establish identity of the share holder and bank account from which payment was made. The fact that payment was received through bank channels, filed necessary affidavit of the shareholders or confirmations of the directors of the shareholder company. But thereafter no further inquiry was made by the AO. The second set of cases are those where there was e....
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....oncern, responded to the notice received under section 133(6) of the Act. The AO, thereafter did not conduct any inquiry. We deem it appropriate to mention that investigation wing of the department is able to unearth details of various accommodation entry providers mainly Kolkata based companies, but the AO nowhere observed that these concerns were ever engaged in providing accommodation entries, and this fact came to notice of the Department through its investigation wing. Thus, if he has any doubt, he should have called for further information from the share applicants. He should have asked the assessee to produce directors of share applicant companies or Shri Anil Kumar who is brother of one of the directors. The AO could have issued summons under section 131 of the Income Tax Act. But instead of conducting any inquiry, he just draw certain inference for disbelieving the documents produced by the assessee or received by him in response to his notice under section 133(6) of the Act. it is also pertinent to observe that quantum of income mentioned in the return of income cannot be criteria to judge credit-worthiness of share applicants, In the case of M/s Ami Industries (India) P.....
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....at the Assessing Officer failed to establish any direct connection between the assessee and any accommodation entry or cash trail. The Ld. AR placed reliance on several judicial precedents such as Prarthna Construction Pvt. Ltd., Overtop Marketing Pvt. Ltd., Abijawala Developers Pvt. Ltd., Adamine Constructions Pvt. Ltd. (supra), where similar additions based on presumptions were deleted. 8. We have heard the rival contentions and perused the material available on record. The issue under consideration is disallowance of interest paid on unsecured loans amounting to Rs. 1,95,44,506/-. It is not in dispute that (i) no new loans were raised in the year under consideration, (ii) interest was paid on existing loans, against which TDS was duly deducted and (iii) all lender details including PAN, confirmation, and ITRs were placed on record. 8.1 It is pertinent to note that the Assessing Officer has primarily relied upon third-party statements and unrelated materials to conclude that the loan transactions were accommodation entries. However, none of the materials relied upon establish any nexus between the assessee and the alleged accommodation entry providers. The Assessing Officer....