TMI Blog2019 (11) TMI 927X X X X Extracts X X X X X X X X Extracts X X X X ..... een able to prove that the remaining creditors had the capacity to advance money to the assessee company. Further, the AO after examination of the balance sheets and the computation of their total income found that these parties are having meager income. No infirmity in the order of the CIT(A) on this issue. So far as the deletion of ₹ 6 lacs being loan obtained from Mr. Tarun Jain and Mrs. Shivani Jain are concerned we find the AO in the remand report has not made any adverse comments regarding the creditworthiness of the said persons. Further their income tax returns show substantial income have been declared by them, a finding given by the CT(A) and not controverted by the Ld. DR. CIT(A) has also given a finding that their bank accounts do not reveal any credit either by way of cash deposit or transfer immediately before giving loans to the assessee company. We, therefore, find no infirmity in the order of the CIT(A) in deleting the addition of ₹ 6 lacs made by the AO. Addition u/s 68 - HELD THAT:- In the instant the assessee has merely filed the PAN number of M/s. Rishi Promoters alongwith their confirmation and the ledger account of M/s. Rishi Promoters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for extending such huge interest free advances whereas assessee is paying interest to the directors and their relatives on advances received from them. Although the assessee has filed voluminous paper book, however, the audited accounts of the assessee company have not been filed. We, therefore, deem it proper to restore the issue to the files of the AO with a direction to find out the own capital and free reserves of the assessee company. In case the own funds and free reserves of the assessee company are more than the interest free advances given to the sister concerns namely M/s. KMG Investment Private Limited and M/s. KMG Milk Foods Private Limited, the AO is directed to delete the disallowance of interest Grievance of the revenue that the Ld. CIT(A) has admitted the additional evidence under rule 46 A of the IT Act - HELD THAT:- A perusal of the order of the CIT(A) shows that he has given justifiable reasons as to why the assessee was prevented by sufficient cause from submitting the requisite details/ documents. He had given a categorical finding that the AO has passed the order without giving sufficient time to comply with the various requirements made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neously on 19.09.2006. He, therefore, added the unsecured loans from the following parties to the income of the Assessee u/s 68 of the I.T. Act being unexplained cash credit: Name of party Amount Vinita Surana ₹ 4,00,000/- Dhani Devi Surana ₹ 6,00,000/- Radhey Shyam Khemka ₹ 1,60,000/- Shree Lai Vijay Kumar Bagla HUF ₹ 2,75,000/- Bagla Co, ₹ 1,90,000/- Rajesh Kumar Khemka ₹ 1,00,000/- Bagla Store ₹ 7,00,000/- Harsh Surana ₹ 2,40,000/- llonika Surana ₹ 4,90,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year and the balance remained as outstanding. He asked the assessee to file details and documentary evidence in this regard. However, the assessee failed to make compliance. The AO, therefore, held that the said credit amount of ₹ 46,17,000/- remained unexplained by the assessee and, therefore, he added the same to the income of the Assessee u/s 68. 5. The AO further noted that the assessee has made a payment of ₹ 6,17,091/- on account of Commission. He asked the assessee to give details and the basis of commission paid and also to provide confirmation of the same from the recipient. However, despite several opportunities, assessee could not file any details or confirmation. He, therefore, disallowed the commission paid amounting to ₹ 6,17,091/- and added to the income of the assessee. 6. The AO observed that the assessee has received a sum of ₹ 15,00,000/- from M/s. Rishi Promoters (P) Ltd as advance against property. The assessee was asked to give details/ nature and documentary evidence of this advance and as to when this advance was materialized. However, despite several opportunities, assessee filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 5591/Del2010 (Grounds raised by the assessee) 1. The learned CIT(A) erred in law and on facts in confirming the disallowance of ₹ 31,55,000/- u/s 68 for the amounts received as loans from Mrs. Vinita Surana ₹ 4,00,000/-, Mrs. Dhani Devi Surana ₹ 6,00,000/-, Mr. Radhey Shyam Khemka ₹ 1,60,000/-, Shree Lai Vijay Kumar Bagla HUF ₹ 2,75,000/-, M/s Bagla Co. ₹ 1,90,000/- , Mr. Rajesh Kumar Khemka ₹ 1,00,000/-, M/s Bagla Store ₹ 7,00,000/-, Mr. Harish Surana ₹ 2,40,000/- and Ms. Monika Surana ₹ 4,90,000/- ignoring the evidences placed on record to discharge the onus on the appellant. Hence the said addition must be deleted. 2. The learned CIT(A) erred in law and on facts that in directing the assessing officer to disallow interest on above mentioned loans without issuing die statutory show cause of enhancement of income to the appellant. Thus the said directions given must be reversed. 3. The learned CIT(A) erred in law and on facts in confirming the disallowance of ₹ 6,17,091/- on account of payment of commission paid ignor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ₹ 7,26,519/- being the interest paid to the directors of the company. 5.1 The Id. CIT(A) ignored the fact that the assessee paid interest on borrowed capital from its sister concerns. 6. The Ld. CIT(A) ignored the fact that the disallwance was made by AO in accordance with the provisions. 6.1 The ld. CIT(A) ignored the fact that the disallowance was made by AO in accordance with the provision of rule 8D of IT Rules. 7. The Ld. CIT(A) erred in law by accepting the addition evidence under Rule 46A of IT Rules despite having been opposed by the A.O and the fact that the assessee was provided due opportunity during the course of assessment proceedings. 8. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing. 10. Ground of appeal No.1 and 8 by revenue and ground of appeal No. 6 by the assessee being general in nature are dismissed. 11. Ground appeal No. 2 and 2.1 by the revenue and ground appeal No. 1 and 2 by the assessee relate to the part relief granted by the CIT(A) out of the to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Ld. DR. We further find the Ld. CIT(A) has also given a finding that their bank accounts do not reveal any credit either by way of cash deposit or transfer immediately before giving loans to the assessee company. We, therefore, find no infirmity in the order of the CIT(A) in deleting the addition of ₹ 6 lacs made by the AO. The grounds of appeal No. 2 and 2.1 raised by the revenue are accordingly dismissed. 14. So far as the ground raised by the assessee challenging the addition of ₹ 31,55,000/- is concerned we find from the order of the CIT(A) that though the assessee has proved the identity of the creditors but could not substantiate the creditworthiness of the creditors and genuineness of the transactions. He has given a finding that immediately before issuing the cheques to the assessee there are credits in the bank accounts of the creditors and no source thereof has been explained. Further he has given a finding that the parties are having meager income and in some cases the taxable income ranges from ₹ 1,811/-to ₹ 45,464/-. We further find from the remand report of the AO wherein he has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditworthiness of these persons and genuineness of the transactions. We, therefore, do not find any infirmity in the order of the CIT(A) sustaining the addition made by the AO to the extent of ₹ 31,55,000/- out of ₹ 37,55,000/-. The ground of appeal No.1 by the assessee is accordingly dismissed. 16. So far as the ground of appeal No. 2 by the assessee is concerned it is the submission of the ld. Counsel for the assessee that the Ld. CIT(A) without issuing any statutory show cause notice of enhancement to the assessee has directed the AO to disallow the interest paid on the loans / credits claimed in the names of the above persons. However, we do not find any merit in the argument of the assessee since after the order of the CIT(A) the total income does not exceed the assessed income. Since he has given substantial relief to the assessee, therefore, the total income is not enhanced and, therefore, ground raised by the assessee on this issue is dismissed. 17. So far as the ground appeal No.3 by the assessee is concerned the Ld. Counsel for the assessee did not press this ground for which the Ld. DR has no objection. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oposed purchase of property had to be cancelled for unavoidable circumstances, no documentary evidence has been filed suggesting that any decision was ever taken by the board of directors to purchase a property from the appellant company. Therefore, in the absence of requisite/relevant information, it is difficult to agree with the appellant company that the advance in question was received against the sale of immovable property. In the course of appellate proceedings also the appellant company has only filed schedule of fixed assets as appearing in its balance sheet, but nothing has been elaborated about the circumstances leading to cancellation of agreement to sale with Rishi Promoters (P) Ltd. It is also not known as to whether anything was paid to compensate the party whose interest was adversely affected with cancellation of proposed transaction of sale of property. Therefore, in the absence of requisite particulars, it is difficult to grant relief to the appellant company and therefore, the addition of ₹ 15 lacs is being sustained. 20. We do not find any infirmity in the order of the CIT(A) on this issue. The Ld. Counsel for the assessee has not satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hearing both the sides we find the AO made the addition on the ground that the assessee company failed to furnish the necessary confirmation, copy of bank accounts and copy of IT return etc and failed to produce the books of accounts of the creditors. We find before CIT(A) the assessee filed certain additional evidences based on which the Ld. CIT(A) called for a remand report from the AO. We find the AO in the remand report has accepted that the assessee filed the requisite details and proved the creditworthiness of the loan creditors. The relevant observation of the AO in the remand report reads as under :- 2. Addition of ₹ 2,28,75,000/- u/s. 68 for unsecured loans from 3 parties :- Assessee has shown these deposits from 3 parties as under : (a) Shiv Vani Oil Gas Exploration Services Ltd. ₹ 2,00,000/- (b) Basudev Garg, Director of the company ₹ 6,25,000/- (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00000 from SNC Trading DMCC, Dubai. Therefore, I am in agreement with the Id. Counsel for the appellant that there was nothing doubtful or debatable so far as the receipt of the money from Dubai is concerned, as due disclosures and necessary evidences are on record. In the course of appellate proceedings, the appellant company has also produced copy of FIRC issued by the foreign exchange division of Canara Bank wherein the purpose for which the money has been received by the appellant company has been clearly stated as advance against supply of goods. Therefore, in my view, the AO was not justified in bringing to tax a sum of ₹ 4617000 on account of the fact that the assessee company failed to satisfy him with respect to the capacity in which Mr. KS Negi has signed the contract on behalf of the appellant, to produce the copy of bank account of SNS Trading Co. and that whether the assessee company was dealing in skimmed milk in the year under consideration or any of the previous or succeeding years. In my view, while these issues may point certain lapses in procedure followed by the appellant company while entering into agreement with its related concern, namely, SNS Trading, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate Limited and from M/s. KMG Milk Food Limited to whom advances of ₹ 44.43 lacs and ₹ 79.88 lacs respectively have been given and they are also related concerns of the assessee, therefore, the interest paid to the directors and relatives of the directors on loans is not for the purpose of business. We find the Ld. CIT(A) deleted the addition by observing as under :- 10.5 I have carefully considered the findings recorded by the Ld. AO and submissions made on behalf of the appellant company. On consideration, I find that the disallowance in question has been made by the Ld. AO mainly because the appellant company has provided interest free advances to its sister concerns, namely, M/s KMG Investments (P) Ltd and M/s KMG Foods Ltd. According to the ld.AO, the appellant company would have saved payment of interest to the directors and their relatives had it not provided the interest free advances to the aforesaid two sister concerns. Therefore, according to the Id. AO, the loans obtained from the directors and payment of interest thereon was in order to make interest free advances to the sister concerns and, therefore, the interest was not paid wholly and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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