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TMI Blog2021 (5) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... lved therein is whether the ld CITA was justified in deleting the disallowance of interest paid on such unsecured loans in the sum of Rs. 13,08,903/- in the facts and circumstances of the case. 3. We have heard the rival submissions and perused the materials available on record. We find that the assessee is a private limited company engaged in the business of trading of agricultural commodities like wheat, pulses etc. It had filed its return of income for the Asst Year 2014-15 on 29.9.2014 declaring total income at Rs. 1,46,880/-. We find that the ld AO observed that on perusal of the financial statements of the assessee, it had received unsecured loans from the following parties and paid interest thereon as under:- Name and address of the lenders Loan amt Interest Shresth Builders Pvt Ltd, 9/12, Lal Bazar Street, Mercantile Building , 1st Floor, Block - D, Kolkata 95,00,000 8,01,020 Haridarshan Pvt Ltd, 28, Strand Road, 2nd Floor, Kolkata - 700001 25,00,000 54,658 Withal Commercial Pvt Ltd, 27, Brabourne Road, 3rd Floor, Room No. 305, Kolkata - 700001 20,00,000 1,84,685 Mahasati Investment Pvt Ltd, 298, Rabindra Sarani, 3rd Floor, Kolkata - 700073 50,00,000 2,68,54 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom some parties giving an impression of circular transactions. e) Information is not found anywhere on the website of Registrar of Companies for Shresth Builders Pvt Ltd f) The directors were also directors in several other companies. 3.3. We find that the ld AO further recorded a statement on oath u/s 131 of the Act from the Director of the assessee company on 2.12.2016 wherein the director denied initially having any knowledge about the aforesaid 4 lender companies. However, the said director stated that one Shri Amulya Baheti and his father had introduced the aforesaid 4 companies to the assessee company vide reply to Question No. 22 in the statement on oath recorded on 2.12.2016. Later the ld AO issued a show cause notice to the assessee on 15.12.2016 fixing the case on 19.12.2016 stating as to why the aforesaid loans should not be treated as unexplained cash credit u/s 68 of the Act by treating them as non-genuine transactions. We find that the assessee vide reply dated 20.12.2016 filed before the ld AO to prove the genuineness of inter corporate deposits (ICDs) and creditworthiness of lenders as under:- a) Status of ROC compliance b) Copy of ledger accounts c) Cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/-) Haridarshan Pvt Ltd (Rs. 25,00,000/-) M/s Withal commercial Ltd (Rs. 20,00,000/-) and M/S Mahasatj Investment Pvt Ltd (Rs. 50,00,000) being the benami concerns are not proved by the company nor the genuineness of the transactions in the form of unsecured loan raised by the company from the respective entities The entire gamut shows that the total funds Of Rs. 1,90,00,000/- have been brought by of unsecured Loans in the name Of respective entities, whose very existence could not be established nor the sources of these funds by the assessee company. 2 4 3 Accordingly, the AO has treated the amount brought in by assessee in its books as unsecured loan Of Rs. 1,90,00,000/- as unexplained credit within the meaning of sec 68 of the Act and added to the total income of the assessee. 2 4 4 The AR has vehemently argued that the AO has erred on the facts and circumstances of the case The ld. AR, has submitted in the grounds that the appellant company submitted that it has discharged its onus and submitted complete details / documents in support of unsecured loans The Appellant company has submitted details like: a. Loan confirmation b. Income Tax return of the party c. Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts etc. as is evident from the records and claimed that it has discharged its onus. The ld. AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of loan need not be doubted. The excessive reliance was placed on the enquiry report of DDIT (Investigation), Kolkata stating that the companies did not exists on the said addresses and the relevant enquiries with the local people in the vicinity of the companies. 2.4.6. In the instant case, however, as seen from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence in the receipt of loans from the parties. In such circumstances, to allege that the unsecured loans of the appellant company are not genuine would require strong evidences. The impugned transactions are of Rs. 1,90,00,000/- and the same has routed through the banking channels and the source cannot be doubted. Further, the said transactions are squared off in the subsequent year, interest has been paid and even tax has been deducted at source on such interest payment. Thus, taking into consideration the entire factum of the case, it would be indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TDS on interest payment, loan confirmation from the parties and the ledger account of the parties whereform it was substantiated that the loans had been squared off in the subsequent year. More over, the parties have confirmed the transaction to the AO, in reply to summons issued. The AO has not answered several valid points raised by the appellant nor proved how the details like PAN, the IT reruns, confirmation letters, bank statements of the creditors, audited balance sheet of the creditors cannot be taken note of. Thus, from the above discussion, I consider that the Appellant company had produced enough evidences to discharge the onus laid upon it under the Act. 2.4.9. If the said statements and the evidences are kept in juxtaposition with the documents, details and records produced by the Appellant company it can be seen that the Appellant company has discharged, as stated above, that the onus laid upon it. It is also held in several cases that whatever may be the strength of presumption it cannot replace evidence and in the present case the Appellant has produced overwhelming evidences to prove its case. 2.4.10. The ITAT Mumbai in the case of Anant Shelters P Ltd. (2012) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) Confirmatory letters or A/c. payee cheques do not prove that the amount in question is properly explained for the purpose of Section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive. (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. Of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by sowing that the money was received by an account payee cheque or by draft. Credit worthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and credit worthiness of the lender onus of proof shifts to the Revenue." Also, the Hon'ble Supreme Court in the case of Lovely Exports Private limited (2008) 216 CTR 195 (SC), has stated that the AO is at liberty to bring to tax the amounts in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO has disallowed the interest expenditure amounting to Rs. 13,08,903/-incurred on unsecured loan form the above mentioned four parties under section 69C of the Act. Since, I have allowed Ground No.2, this Ground is in favour of the Appellant. I, therefore, direct the AO to withdraw the addition. The ground is allowed. 5. We find that the following documents were submitted by the assessee before the ld AO which are not in dispute :- a) Copy of Income Tax Returns (ITRs) of all the lenders b) Copy of Balance Sheet & Profit and Loss Account of all the lenders c) Copy of relevant extracts of the bank statements of all the lenders including the details of immediate source of credit d) Copy of ledger account for the entire period evidencing the loan obtained by the assessee, interest paid and loan repaid to the lenders in subsequent years. e) Copy of ledger confirmation for all the loans obtained from lenders f) Covering letter of reply filed by all the lenders in response to notice issued u/s 133(6) of the Act before the ld AO 5.1. We find that the ld AO had observed that the notice issued u/s 133(6) of the Act was returned unserved by the postal authorities in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of ICDs given during the year to the company 1. Haridarshan Sales Pvt. Ltd., 75,89,81,917.00 25,00,000.00 2. Shresth Builders Private Limited 22,30,74,892.00 95,00,000.00 3. Shri Mahasati Investment Limited 13,47,94,370.00 50,00,000.00 4. Withal Commercial Private Limited 35,34,65,022.00 20,00,000.00 We find that the ld AO had observed that these lenders had shown negligible income in their ITRs. This is absolutely irrelevant as there is no requirement in the statute that inter corporate deposits should be advanced only out of income of the lender companies. It can also be done out of their borrowings or share capital or reserves and surplus or any other source. We find that the ld AO himself had admitted in his assessment order that all the 4 lender companies had disclosed huge turnover in their profit and loss account. Hence the creditworthiness of the lenders is proved beyond doubt in the instant case. 5.4. We find that all the 4 lender companies have duly filed their income tax returns for the relevant assessment year. We find that the assessee had furnished their PAN, income tax return acknowledgements , copy of ROC returns, etc to prove their identity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / defects in the documentary evidences submitted by the assessee in the instant case. We also find that the ld CITA in page 12 of his order had stated that the ld AO had issued summons to the lender companies in the course of assessment proceedings to verify the loan transactions and that all the lender parties had duly replied to the summons by submitting the relevant details before the ld AO . This factual finding given by the ld CITA had not been controverted by the ld DR before us. We find that the ld AO had not appreciated the fact that when the loans received by the assessee were bogus, then there is no question of repayment of the same to them by the assessee. In the instant case, admittedly, the assessee had duly repaid the loans to 4 lender companies. If the loans received by assessee are its own income, then there is no need to make repayment of the same to lender companies. This clinching factual evidence had apparently missed the attention of the ld AO while framing the assessment. Hence it could be safely concluded that the assessee had duly discharged its onus by proving the three necessary ingredients of section 68 of the Act ie. Identity of the lenders, creditworthi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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