TMI Blog2020 (3) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case, both the nature source of the loan received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the loan creditors. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction were placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. Addition on account of interest payment to bogus loan creditors - AO disallowed the interest expenditure which were paid by the assessee to the aforesaid twelve (12) loan creditors, on the reason that the loan creditors were bogus e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue. - I.TA No. 822/Kol/2018 - - - Dated:- 15-1-2020 - Shri A.T. Varkery, JM And Dr. Arjun Lal Saini, AM For the Appellant : Shri Dhrubajyoti Roy, JCIT, ld.DR For the Respondent : Shri S.S. Gupta, FCA Shri Arvind Agarwal, Advocate, ld.AR ORDER SHRI A.T. VARKERY, JM This is an appeal preferred by the revenue against the order of Learned Commissioner of Income-tax (Appeals) [ in short, the Ld. CIT (A)], Kolkata-4 dated 23-01-2018 for the assessment year 2013-14. 2. The grounds of appeal of the revenue are as under:- 1 That on the facts and the circumstances of the case and in law, the Ld. CIT (A) did not call for Remand Report and erred in deleting the addition of ₹ 2,60,67,315/- u/s. 68 of the Act, only keeping reliance upon submission of the A/R of the assessee. None of the twelve companies could be located on the given address from whom the assessee company had claimed to have taken unsecured loan. 2 That on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of ₹ 12,75,987/- on account of interest payment to bogus loan creditors. 3 That on the facts and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Received Fate of Notice U/s. 133(6) Field enquiry report 1 AMIT REALTORS PVT. LTD 20/1 ASHUTOSH CHOWDHURY AVENUE, 1 ST FLOOR, KOLKATA, WEST BENGAL- 700019 74,795 2,567,315 The company could not be located at the given address 2 AYUSH FINTRADE PVT. LTD, 27 SHAKESPEARE SARANI, GROUND FLOOR, KOLKATA, WEST BENGAL- 700 017. 42,082 1,000,000 Returned back Do 3 BRAIN BUSINESS PVT .LTD. 33 BRABOURNE ROAD, 5 TH FLOOR, PS-HARE STREET, KOLKATA, WEST BENGAL- 700 001. 132,821 4,000,000 Do 4 CAMELLIA VINCOM PVT LTD 1 B NATORE PARK, 4 TH ROAD, KOLKATA-700 039. WEST BENGAL 23,178 1,000,000 Do- 5 GENUINE RETAILS PVT LTD4 G.C AVENUE, 1 ST FLOOR, KOLKATA, WEST BENGAL-700 013 142,520 3,500,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/- u/s. 68 of the Act by observing the following: 3.9 The total of unsecured loans received from bogus companies as mentioned in the table above is ₹ 2,85,67,315/-.The assessee has also repaid back unsecured loans during the year itself to these paper companies and has taken again afresh from the same company or the other paper companies. Hence, a peak has been calculated based on the incoming and outgoing of these unsecured loans of ₹ 2,85,67,315/-, which comes to ₹ 2,60,67,315/-. In the light of the ratio of the decisions as discussed above vis-a-vis the facts and circumstances in the instant case as well as the assessee's inability to discharge its own burden of proof to substantiate the genuineness of introduction of unsecured loans, it is held that the purported unsecured loans aggregating to ₹ 2,60,67,315/- are nothing but the assessee's own money conduced under the garb of fresh unsecured loans into the assessee's business. Therefore, ₹ 2,60,67,315/-. is hereby treated as unexplained cash credit found in the books of the assessee during the A.Y 2013-14 and accordingly added back to the total income of the assessee. 8. Aggr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the ld. AR when all the documents were filed before the AO during assessment proceedings and no new documents were produced before the ld. CIT(A) during the appellate proceedings, therefore, question of the ld. CIT(A) calling for remand report as envisaged in Rule 46A of the Income-tax Rules, 1962 ( hereinafter to in short referred to the Rules ) does not arise. According to the ld.AR from perusal of the grounds of appeal, it is clearly vivid that the revenue has raised a vague and general ground without pointing out, which documents were produced by the assessee before the ld. CIT(A) for the first time and not filed before the AO. Therefore, according to him, the grounds of appeal raised by the revenue lacks merit on the issue of not calling for remand report and since the ld. CIT(A) has gone through each and every document and has recorded a finding that all the 12 (twelve) loan creditors included corporate entities were having their CIN Number given by the Ministry of Corporate Affairs, R.O.C details, PAN, ITRs, which, inter alia, show that all the 12 loan creditors are Income-tax assessees and on perusal of their respective balance sheets would reveal their creditworthin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO issued show cause notice to the assessee and asked the assessee to substantiate the identity, creditworthiness and genuineness of the loan creditors/loan transaction. Thereafter, he has drawn a chart, which has already been reproduced by us (supra) and from a perusal of the same, we note that out of 12 loan creditors, AO notes that two notices u/s 133 (6) of the Act have been returned back, which means the other loan creditors have duly received 133(6) notices. Out of which, one entity M/s. Rajashree Enterprises which is shown as item no. 10, the AO remarks that the address has not been furnished. Thus, the AO himself accepts that out of twelve (12) loan creditors 9 (nine) loan creditors have received notices u/s 133(6) of the Act sent by the AO. Moreover, the AO himself has accepted/endorsed at para 3.1 of the assessment order that the assessee company had filed balance sheets, bank statements and ITRs of some of the loan creditors. From a perusal of paper book Vol-I II, we note that the AO has not been fair while acknowledging that assessee had filed balance sheet, bank statements of some of the loan creditors whereas in fact assessee had filed voluminous paper documentation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 1-147 of the PB, for the year ending 31-03-2014 found placed at pages 148-167 and computation of income as on 31-03-2014 found at page 168 of the PB-I. So, the factual assertion of AO in the chart that the notice sent u/s. 133(6) to M/s. Ayush returned back is perverse and incorrect. 12. Coming next to M/s. Orientation, we also note that AO has given his remark in the chart in respect of M/s Orientation that notice u/s. 133(6) have been returned back. We note that M/s Orientation has filed its reply before the AO, which has also been duly stamped by the O/o the DCIT endorsing the fact that it had received letter on 18-02-2016. We also note that the said M/s. Orientation had filed the aforesaid documents, which is being stated in the case of M/s. Ayush ( in short) at page-482 to 520 of PB-II. 13. Now coming to M/s. Rajashree Enterprise, where the AO has given his remark no address has been given by the assessee . We note that the said proprietary concern, whose proprietor is Shri Akhilesh Agarwal is also director of another corporate loan creditor, M/s. Rajshree Services Sales P.Ltd ( in short, M/s. Rajshree Pvt. Ltd. ) and has duly filed its loan confirmation with bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the notices sent by the AO to the address of the legal entities has been duly served upon them [at least that of nine loan creditors]. And we have found from examination of documents as stated in para 11 and 12 (supra) that all other loan creditors have responded except one (M/s. Rajashree Enterprises) to AO s notice u/s. 133(6) and his office stamp acknowledges that it was received. About M/s. Rajashree Enterprises, we have given our factual finding at para 13 (supra). Therefore, the finding/the conclusion drawn by the AO that loan creditors were not found in the addresses is without any basis/material, so the finding of AO is perverse and that cannot be the basis for drawing any adverse inference against the loan creditors. We note that in order to prove the identity, creditworthiness and genuineness of the transaction, the assessee had filed before us 2(two) voluminous paper book (PB-I PB- II) running more than 653 pages, wherein we note that the assessee had filed the following details of each and every loan creditors before us and Ld. CIT(A) and AO:- a) Reply to Notice U/s. 133(6) b) Company Master c) Loan confirmation with Bank Statement d) Bank state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal raised by the revenue on this issue and so, we confirm the impugned order of the ld. CIT(A) and dismiss the appeal of the revenue. For that, we rely on the following judicial precedents;- 17. The Hon'ble Apex Court in the case of Orissa Corpn. (P) Ltd. (supra) 159 ITR 78 and the Hon'ble Gujarat High Court, in the case of Dy. CIT v. Rohini Builders [2002] 256 ITR 360 /[2003] 127 Taxman 523 , has held that onus of the assessee (in whose books of account credit appears) stands fully discharged if the identity of the creditor is established and actual receipt of money from such creditor is proved. In case, the Assessing Officer is dissatisfied about the source of cash deposited in the bank accounts of the creditors, the proper course would be to assess such credit in the hands of the creditor (after making due enquiries from such creditor). In arriving at this conclusion, the Hon'ble Court has further stressed the presence of word may in section 68. Relevant observations at pages 369 and 370 of this report are reproduced hereunder:- Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that normally, interpretation of a statute shall be general, in nature, subject only to such exceptions as may be logically permitted by the statute itself or by some other law connected therewith or relevant thereto. Keeping in view these fundamentals of interpretation of statutes, when we read carefully the provisions of section 68, we notice nothing in section 68 to show that the scope of the inquiry under section 68 by the Revenue Department shall remain confined to the transactions, which have taken place between the assessee and the creditor nor does the wording of section 68 indicate that section 68 does not authorize the Revenue Department to make inquiry into the source(s) of the credit and/or sub-creditor. The language employed by section 68 cannot be read to impose such limitations on the powers of the Assessing Officer. The logical conclusion, therefore, has to be, and we hold that an inquiry under section 68 need not necessarily be kept confined by the Assessing Officer within the transactions, which took place between the assessee and his creditor, but that the same may be extended to the transactions, which have taken place between the creditor and his subcreditor. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden of the assessee to prove that the subcreditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been. eventually, received by the assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be Judged vis-a-vis the transactions, which have taken place between the assessee and the creditor, and it is not the business of the assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub- creditors, for, these aspects may not be within the special knowledge of the assessee. ********** ... If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had received the said amounts from the creditors aforementioned by way of cheques, the assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter the burden had shifted to the Assessing Officer to prove the contrary. On mere failure on the part of the creditors to show that their sub-creditors had creditworthiness to advance the said loan amounts to the assessee, such failure, as a corollary, could not have been and ought not to have been, under the law, treated as the income from the undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or were owned by, the assessee. Viewed from this angle, we have no hesitation in holding that in the case at hand, the Assessing Officer had failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. In the absence of any such evidence on record, the Assessing Officer could not have treated the said amounts as income derived by the appellant from undisclosed sources. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquire through the Inspector to verify the statements. 21. In a case where the issue was whether the assessee availed cash credit as against future sale of product, the AO issued summons to the creditors who did not turn up before him, so AO disbelieved the existence of creditors and saddled the addition, which was overturned by Ld. CIT(A). However, the Tribunal reversed the decision of the Ld. CIT(A) and upheld the AO s decision, which action of Tribunal was challenged by the Hon'ble High Court, Calcutta in the case of Crystal Networks (P.) Ltd. v. Commissioner of Income-tax 353 ITR 171 wherein the Tribunal s decision was overturned and decision of Ld. CIT(A) upheld and the Hon ble High Court has held that when the basic evidences are on record the mere failure of the creditor to appear cannot be basis to make addition. The court held as follows: 8. Assailing the said judgment of the learned Tribunal learned counsel for the appellant submits that Income-tax Officer did not consider the material evidence showing the creditworthiness and also other documents, viz., confirmatory statements of the persons, of having advanced cash amount as against the supply of bidis. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been established the Tribunal should not have ignored this -fact finding. Indeed the Tribunal did not really touch the aforesaid fact finding of the Commissioner of Income-tax (Appeals) as rightly pointed out by the learned counsel. The Supreme Court has already stated as to what should be the duty of the learned Tribunal to decide in this situation. In the said judgment noted by us at page 464, the Supreme Court has observed as follows: The Income-tax Appellate Tribunal performs a judicial function under the Indian Income-tax Act; it is invested with authority to determine finally all questions of fact. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all the contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. 11. The Tribunal must, in deciding an appeal, consider with due care all the material facts and record its finding on all contentions raised by the assessee and the Commissioner, in the light of the evidence and the relevant law. It is also ruled in the said judgment at page 465 that if the Tribunal does not discharge the duty in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. 23. In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the loan creditors, thereafter the onus shifted to AO to disprove the documents furnished by assessee. The documents furnished by assessee cannot be brushed aside by the AO without cogent reasons. The AO s action to draw adverse view in the light of the documents discussed supra cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that addition cannot be sustained merely based on inferences drawn by circumstance. Applying the propositions laid down in these case laws to the facts of this case, we are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals) 24. To sum up section 68 of the Act provides that if any sum found credited in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere, we note that the assessee, in fact, had remitted the employees contribution of PF/ESI before due date of filing of return of income. Therefore, we confirm the order of the ld. CIT(A) by relying on the decision of the Hon ble Jurisdictional High Court in the case of Vijay Shree Ltd dt. 6-9-2011 in ITAT No. 245 of 2011 and GA No. 2607 of 2011. 28. Ground no. 4 is against the action of the ld. CIT(A) in allowing the amount of ₹ 3,15,107/- which was disallowed by AO being the interest on late payment of TDS. We note that the AO disallowed ₹ 3,15,107/- since this amount has been remitted by the assessee for late payment of TDS. We note that the ld. CIT(A) has given relief taking note of the decision of this Tribunal in the case of M/s. Narayani Ispat Pvt. Ltd ITA No. 2127/Kol/2014 as well as the decision of the Hon ble Allahabad High Court in the case of Triveni Engineering Works Ltd. vs Commissioner Of Income-Tax ( 144 ITR 732). We note that this issue is no longer res integra . This Tribunal in Narayani Ispat P. Ltd. has decided this issue by holding as under: The issue of delay in the payment of service tax is directly covered by the judgment of Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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