TaxTMI 
TaxTMI 
2026 (6) TMI 666
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....ts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the sum of Rs. 10,92,239/- towards interest paid on unproved unsecured loans on which addition was made u/s 68 of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the sum of Rs. 4,97,83,000/- towards unproved sundry creditors without appreciating the fact that assessee has failed to prove the creditworthiness of sundry creditors concerned and genuineness of transaction. 4. On facts and in the circumstances of the case, the Ld. CIT(A) erred in restricting disallowance made under section 14A to the extent of exempt income earned by the assessee during the year by overlooking the clarification of legislative intent provided by the CBDT vide Circular No. 5/2014 dated 11.02.2014 and to this effect even an amendment was made by Finance Act, 2022 by way of insertion of Explanation to Section 14A of the Income Tax Act, 1961." 5. The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be. The Assessee has raised the following grounds of appeal: 1. On the facts and in the....
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....ce including confirmations, bank statements, and ITR acknowledgements of the loan creditors. Therefore, on the basis of these documents, the additions made by the AO were deleted. 7. We also noticed that when, for the first time, the assessee furnished additional evidence in the shape of loan confirmations, etc., the Ld. CIT(A) called for a remand report from the concerned AO. During the remand proceedings, notices under Section 133(6) of the Act were issued by the AO to the loan parties. Although the parties responded to the notices issued by the AO, the AO was of the view that the replies furnished by the respective parties were unsatisfactory and insufficient to establish the creditworthiness of certain lenders. 8. We noticed that the assessee had placed on record and proved all the details relating to the unsecured loans during the assessment proceedings itself. Moreover, other necessary documents in the shape of confirmations, PAN, bank statements, ITRs, etc. of the loan creditors were also filed as additional evidence under Rule 46A of the Income Tax Rules, 1962 before the Ld. CIT(A). After appreciating the documents, the Ld. CIT(A) concluded that the assessee had taken....
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.... noticed that, in the instant case, the AO had observed during the assessment proceedings and through the initial inquiries carried out during the remand proceedings that the lenders, namely, M/s. Straight Curve Ideas Pvt. Ltd., M/s. MKJ Entertainment Ltd., and M/s. Kanrich Security Solutions Pvt. Ltd., had either nil or negligible income and thus lacked creditworthiness, thereby rendering the loan transactions as non-genuine. The AO relied upon the decisions in CIT vs. P. Mohanakala (2007) 291 ITR 278 (SC) and NRA Iron & Steel Pvt. Ltd. 412 ITR 161 (SC), holding that once the primary transaction is held to be unexplained, any incidental claim such as interest paid thereon must also fail. 16. From the records, we further noticed that the assessee had claimed interest expenditure of Rs. 29,14,385/-, and the AO disallowed Rs. 10,92,239/- on a proportionate basis corresponding to the unproved portion of the loans. Whereas, on the contrary, the assessee contended that the loans were genuine and obtained through proper banking channels, and therefore the corresponding interest expenditure was allowable under Section 36(1)(iii) of the Act. It was submitted that the interest was paid o....
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....rds that during the appellate proceedings, a remand report was sought. During the remand proceedings, the AO issued notices under Section 133(6) of the Act to the following creditors, namely, Alpha Delcom Pvt. Ltd., Jash Housing Pvt. Ltd., and KJV Estates Pvt. Ltd. It was noticed that while responses were received, the AO still noted that all these parties had declared nil income or incurred only nominal or no business expenditure during the year. No credible explanation or financial substance was provided to demonstrate the ability of these entities to extend such loans. It was further held that merely because the transactions were routed through banking channels, the same would not ipso facto establish the genuineness of the transactions. 22. It was submitted that since the creditors lacked the financial capacity to advance the stated sums and the assessee failed to discharge the burden of proving the genuineness of the transactions and the creditworthiness of the creditors, the additions ought to have been upheld by the Ld. CIT(A) and reliance is being placed upon the decision of : * In CIT v. Precision Finance Pvt. Ltd. [(1994) 208 ITR 465 (Cal.)], it was held that ....
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....lone is not a determinative factor for assessing creditworthiness, as loans may also originate from accumulated savings and investments. Since the creditors in the present case were identifiable, had filed their returns, and the transactions were reflected in their financial statements and bank accounts, we are also of the view that the assessee had discharged its initial onus under Section 68 of the Act. 25. Once the assessee had discharged its initial onus, the onus shifted upon the Revenue to rebut the evidence placed on record by the assessee. In the present case, all the sundry creditors had already placed on record the required documentary evidence, as discussed by us above. Therefore, after appreciating the evidence and after calling for the remand report, it was found that no cash was deposited preceding the transfers. Hence, since the assessee had discharged its initial onus under Section 68 of the Act, the Ld. CIT(A) accordingly deleted the entire additions. 26. Before us, no new facts, circumstances, or documents have been placed on record by the Ld. DR in order to controvert or rebut the lawful findings recorded by the Ld. CIT(A). Therefore, we see no reason to in....
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.... inserted by the Finance Act, 2022, the CIT(A) noted that various courts, including the Delhi High Court in Era Infrastructure (2022) 141 taxmann.com 289 and the ITAT Mumbai in Bajaj Capital Ventures Pvt. Ltd., have held that the amendment is prospective. In light of these judgments, the CIT(A) directed that no further disallowance under Section 14A could be made beyond the amount already disallowed by the assessee and accordingly deleted the addition of Rs. 13,64,000/-. The ground was partly allowed. 31. Thus, in light of these judgments, the Ld. CIT(A) rightly directed that no further disallowance under Section 14A of the Act could be made beyond the amount already disallowed by the assessee and accordingly deleted the addition. 32. Before us, no new facts, circumstances, or documents have been placed on record by the Ld. DR in order to controvert or rebut the lawful findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings recorded by the Ld. CIT(A). Hence, we dismiss the grounds raised by the Revenue and uphold the order of the Ld. CIT(A) on these grounds. Now we proceed to adjudicate the appeal filed by the assesse....