2021 (1) TMI 678 - ITAT INDORE

Addition u/s 68 - whether the lender parties were making some paper formalities - loan from dummy/shell/bogus/paper/briefcase entities - CIT-A deleted the addition - HELD THAT:- Assessee had taken loans through banking channels from its own group entities in whose cases too, simultaneous survey proceedings were carried out u/s. 133A of the Act and during the course of such survey proceedings, the lender companies and their directors were duly found in existence. During the course of the search/survey operations, no incriminating material or evidence was found. In the entire body of the assessment order, as also, in the paper book filed by the Revenue before us, there is no reference of any incriminating document.

Entire assessment order is based upon some statements recorded by the Investigation Wing or by some other authorities on some earlier occasions, and the AO has not conducted any independent inquiry at his own from the lender companies, despite the assessee’s making a specific request to him to issue summons u/s. 131 or letters u/s. 133(6) to the lender companies. Recently, the Coordinate Bench of Mumbai in the case of Smt. Kalpana Mukesh Ruia vs. DCIT [2021 (1) TMI 93 - ITAT MUMBAI] has deleted the addition made u/s. 68.

Source of alleged amount was from liquidation of investment made in the earlier years. The dispute about the source of fund utilized for making the investment in earlier years before the tax authorities in itself cannot be the sole basis to make the addition in the hands of the assessee as unexplained cash credit for the amount received from liquidating the investments made in the shares of unlisted companies which were invested in the earlier years and were duly appearing in the audited balance sheet. The alleged sum is received from sale of shares appearing as opening balance in the investment account. There is no dispute about the identity, genuineness and creditworthiness of these companies, the equity shares of which were sold by the assessee during the year and the funds were thereafter utilized to make the fresh investments.

It is a simple case of switch over of investments from one company to another and is not the case of fresh loan received during the year. We thus find no substance in the ground that since the assessee has agitated the addition qua the share capital and share premium shown to have been received by it during assessment year 2008-09 by filing an appeal the assessee cannot claim the availability of such fund for making the investments. It is not in dispute that the matter for Assessment Year 2008-09 is open and the fate of the issue of the addition for that year will have its own process. We thus find no justification in the action of Ld. A.O making the addition for unexplained cash credit and thus find no inconsistency in the finding of Ld. CIT(A) deleting the addition.

Addition u/s. 68 in respect of unsecured loan claimed to have been received by it from M/s. Etima Emedia Ltd. - Assessee had furnished before the AO, copy of PAN, bank account statement of the lender company, audited financial statement, profit and loss account statement, certificate of incorporation, copy of MOA and AOA, details collected from website of Ministry of Corporate Affairs and confirmation of lender. All these documents have also been furnished by the assessee - We find that the Ld. CIT(A) has dealt in depth with the various documentary evidences furnished by the appellant and reached to the conclusion that the appellant had been able to satisfy all the three condition required for genuineness of transactions u/s. 68 of the Act.

We thus find that the assessee had discharged its onus of proving the genuineness of the sum credited in its books of accounts as contemplated u/s. 68 of the Act and since, no inquiry was conducted by the AO, the addition was not sustainable as held in similar case by the Hon’ble Karnataka High Court in the case of M/s. Kumar Nirman and Nivesh Pvt. Ltd. [2020 (3) TMI 340 - KARNATAKA HIGH COURT]

We are satisfied with the identity and creditworthiness of the cash creditor M/s Etima Emedia Ltd and also satisfied with the creditworthiness of the cash creditor - Decided in favour of assessee.