TMI Blog2019 (9) TMI 774X X X X Extracts X X X X X X X X Extracts X X X X ..... or Registrar of Companies by issuing notice u/s. 131 of the Act - we delete the addition on account of sums received as unsecured loan and erroneously held as unexplained cash credit under section 68 - Decided in favour of assessee Addition on account of alleged excess remuneration paid to the partners and disallowed by invoking clause (v) of section 40(b) - HELD THAT:- Remuneration to the working partners are duly authorized by the Partnership deed dated 1.4.2013 and such payment has been made as per clause 7 and 8 of the deed of partnership, working partners and the amount of remuneration payable and the manner of quantifying such remuneration is to be decided mutually between them from time to time. We further note that this disallowance is contrary to the principle of consistency as no disallowance made in the preceding years i.e. from assessment year 2010-11 to 2014-15 and only from the instant assessment year i.e. AY 2015-16 the addition was made which action is not tenable. This view is fortified by the decision of the Hon ble Supreme Court of India in the case of CIT vs. Excel Industries Ltd. [ 2013 (10) TMI 324 - SUPREME COURT] TDS u/s 194C - addition invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,00,000/- Total 62,50,000/- 1.1 That while upholding the addition, the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the assessee had placed on record confirmation alongwith income tax particulars and, the loans had been raised by account payee cheques and interest thereon had already been duly credited to the account of the payees, the initial burden of the assessee stood discharged and therefore, addition sustained on the ground that the assessee has not been able to prove creditworthiness of the above party or they had not complied with notice under section 133(6) of the Act is not based on correct appreciation of the facts and circumstances of the case of the assessee and statutory provisions of law and hence untenable. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining disallowance of ₹ 18,00,000/- representing the alleged excess partners' remuneration paid to the partner by invoking clause (v) of section 40(b) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee filed e-return for the assessment year 2015-16 on 26.09.2015 declaring an income of ₹ 1,13,43,620/-. The Assessing Officer processed the return u/s. 143(1) of the Income Tax Act, 1961 (in short Act ) electronically at returned income and case was selected for Limited Scrutiny through CASS. The case was selected for Compulsory scrutiny through CPC as per guidelines / procedure for selection of cases for scrutiny. Accordingly, statutory notice under section 143(2) of the Act was issued on 19.9.2016. Subsequently, AO issued notice u/s. 142(1) of the Act and in response to the same the AR for the Assessee appeared from time to time and submitted various details/ information called for and examined the same. During the year under consideration, the assessee has derived its income under the heads Income from Business Profession only. As per details filed in Form 3CD, the firm has two partners, namely, Sh. Maninder Jit Singh Bindra and Sh. Inderpreet Singh Bindra. The partners have a profit share ratio of 60% and 40% respectively. The list of 15 persons from whom unsecured loans of ₹ 10,25,00,362/- have been taken during the year is mentioned at page no. 2 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o, vide note sheet entry dated 24.10.2017, notice u/s. 142(1) dated 1.11.2017 and final show cause notice dated 06.12.2017. AO observed that Assessee never bothered to explain and justify the creditworthiness and completely overlooked statutory notices in this regard. AO further observed that assessee has nothing more to say about such transactions. As per AO, Assessee clearly failed to justify the genuineness and creditworthiness of the unsecured loan taken from the parties. The AR of the assessee neither filed the copy of ITR nor filed the bank statement of the parties. None of the parties except two (which also refused that any unsecured loan being given) as mentioned above, replied to the notice u/s. 133(6). Hence, the AR of the assessee has not only failed to furnish the desired details but also failed to establish the creditworthiness and genuineness of the said unsecured loans. Therefore, ₹ 8,22,70,000/- was added to the income of the assessee u/s. 68 of the Act. Further, the AO observed that assessee has debited remuneration amounting to ₹ 18,00,000/- to the P L account and the same is not admissible for deduction as per the provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove creditworthiness of the above party or they had not complied with notice under section 133(6) of the Act is not based on correct appreciation of the facts and circumstances of the case of the assessee and statutory provisions of law and hence untenable and needs to be deleted. He further submitted that learned Commissioner of Income Tax (Appeals) has further erred in sustaining disallowance of ₹ 18,00,000/- representing the alleged excess partners' remuneration paid to the partner by invoking clause (v) of section 40(b) of the Act. It was further submitted that learned Commissioner of Income Tax (Appeals) further erred in holding that the partnership deed mentions the maximum amount payable under section 40(b)(v) but not the amount that has been mutually agreed to be paid as remuneration. The quantum of remuneration to be paid to the individual partners is left undecided, unstipulated and left to the discretion of the two partners to be decided at a future pint in time is factually and legally misconceived and untenable. He further submitted that the remuneration paid to the partners was in terms of the deed of partnership dated 01.04.2013 which had been allowed con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification, impugned amount was rightly brought to tax under section 68. He further relied upon the decision of the Hon ble Supreme Court of India in the case of Principal Commissioner of Income Tax vs. NRA Iron and Steel (P) Ltd. (2019) 103 taxmann.com 48 (SC) wherein the Hon ble Supreme Court reverses the order of the lower authorities holding that where there was failure of assessee to establish credit worthiness of investor companies, AO was justified in passing assessment order making additions under section 68 for share capital / premium received by assessee company. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish creditworthiness of investor companies stood discharged. 5. We have heard both the parties and perused the records, especially the impugned order; Synopsis; Paper Book filed by the Assessee s counsel and case laws relied by both the parties. As regards sustaining of addition of ₹ 62,50,000/- on account of sums received as unsecured loan is concerned, we find that the AO has made sum of ₹ 8,22,70,000/- on account of sum received from 08 parties as mentioned in the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be examined only by the AO of the lenders and not by the AO of the assessee. In this case there is lack of enquiry by the AO to rebut the burden discharged by the assessee as no enquiries were made either from corporate entity providing unsecured loan or enquiry from AO of such corporate entity or its banker or Registrar of Companies by issuing notice u/s. 131 of the Act. We further note that The judicial decisions relied upon by the Ld. DR have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand. In view of above, we delete the addition of ₹ 62,50,000/- on account of sums received as unsecured loan and erroneously held as unexplained cash credit under section 68 of the Act, which was confirmed by the Ld. CIT(A) and accordingly, we allow the ground no. 1 to 1.1 raised by the assessee. 5.1 Apropos ground no. 2 to 2.2 relating to confirmation of addition of ₹ 18,00,000/- on account of alleged excess remuneration paid to the partners and disallowed by invoking clause (v) of section 40(b) of the Act is concerned, we find that this amount was disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is allowed. REVENUE S CROSS APPEAL 6. The Revenue has raised the following grounds:- 1. On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting addition of ₹ 7,60,20,000/-. All these parties did not respond to the notice issued u/s. 133(6). It needs to be that genuineness, creditworthiness and identity of lender/ creditors are deeper and obstructive than mere completion of paperwork or documentation. 2. On the facts and circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that during the course of assessment proceedings two parties namely GST Corporation Ltd. And Mudit Jain did not confirm the transaction and denied that any unsecured loan was given to the assessee which was also confirmed during the appellate proceedings affirms that assessee furnished inaccurate particulars of income. 3. The assessee craves leave to add, alter or amend any of the grounds of appeal before or during the course of hearing of the appeal. 7. The brief facts in this case have already been discussed in Assessee s appeal, as aforesaid, henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was further submitted that assessee had verbally explained in the course of hearing that burden upon assessee has been discharged having regards to evidence placed on record. Further, it was submitted that out of sum of RS.8,22,70,000/-, the sum of RS.5,85,20,000/- are either from the partners or relatives of partners (Jiya Bindra, M.S. Bindra (HUF) and Preetinder Kaur Bindra) and the remaining amount of ₹ 2,37,50,000/- was raised from five outside parties. Out of the said five parties, a sum of ₹ 1.45 crores was raised from Shri Amrik Singh Chawla alone and interest of ₹ 17.17 lacs paid to him was allowed by the AO. It was stated that the loan was also raised in preceding year from the said person which was accepted by the AO and therefore no adverse inference could drawn. Further, in respect of the remaining four parties namely Prem Dua, Multi Bond Trading Corporation, JBL Intervention Associates and G.S.T. Corporation sum aggregating to ₹ 92,50,000/- was raised which was repaid also during the year. It was further contended that in respect of sum received from related parties including partners and one outside party in the respect of whom there was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Company (HUF), is the partner in the assessee firm and has shown returned income of RS.31,83,161/-. He is covered as a related party uls 40A(2)(b) of the Act in the tax audit report. Further, interest of RS.31 ,76,786/- paid to HUF has been allowed by the AO. On perusal of computation of income of HUF for AY. 2015-16, it is noticed that HUF has shown interest from Radius Industries at RS.31 ,76,786/-. On perusal of balance sheet as on 31.03.2015, it was noted that total of assets of HUF amounted to ₹ 10,52,31,554/- which included loans and advances of ₹ 4,84,39,657/- (closing balance as on 31.03.2015) given to Radius Industries. The assessee has also submitted bank statement of HUF reflecting the loan given to the assessee. The assessee has also submitted copy of ledger account of the above creditor in the books of the assessee. It appears that the AO made addition uls 68 of the Act in respect of the above loan only because the said creditor did not respond to 133(6) notice. Considering the facts mentioned above, we find that Ld. CIT(A) has rightly observed that assessee has been able to explain the identity, genuineness of the transaction and the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment reflecting the loan given to the assessee. The assessee has also submitted copy of ledger account of the above creditor in the books of the assessee. It appears that the AO made addition u/s 68 of the Act in respect of the above loan only because the said creditor did not respond to 133(6) notice. Considering the facts mentioned above, we find that Ld. CIT(A) has rightly observed that assessee has been able to explain the identity, genuineness of the transaction and creditworthiness of the creditor and therefore addition of ₹ 1,45,00,000/- was deleted, which does not need any interference on our part. 5. J.B.L. Intervention Associates, New Delhi The assessee has shown unsecured loan of RS.30,00,000/- taken during the year from J.B.L. Intervention Associates and the closing balance as on 31.03.2015 as been shown at NIL. It was noted that J.B.L. Intervention Associates is propriety concern of Kapil Aggarwal HUF has shown returned income of ₹ 24,81,920/-. On perusal of the balance sheet of J.B.L. Intervention Associates as on 31.03.2015, it was noted that total assets amounted to ₹ 29,08,75,855/- which included loans and advance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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