TMI Blog2021 (5) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted by the assessee. It is not the case of the revenue that the assessee has continuous transactions with those lenders even after Asst Year 2016-17. Hence merely because the ld AO was not able to serve the notice u/s 133(6) of the Act on those lenders at the last available address with given by the assessee, no fault could be attributed on the assessee for the same. It is not in dispute that all the transactions have been routed through regular banking channels. It is not in dispute that the said inter corporate deposits did carry interest and assessee had duly paid the same after deduction of due tax at source at the applicable rates thereon. It is not in dispute that the loans were fully repaid by the assessee company to all the lenders in Feb 2016. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of business of the assessee company. Hence the interest paid on such borrowings are allowed as deduction. Appeal of the revenue is dismissed. - ITA No.1690/Mum/2018 - - - Dated:- 20-4-2021 - Shri Mahavir Singh, VP And Shri M.Balaganesh, AM For the Assessee : Shri Prakash Junjhunwala For the Revenue : Shri Brajendra Kumar ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.1690/Mum/2018 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-24, Mumbai in appeal No.CIT(A)-24/ITP-15(1)(1)/IT-434/2016-17 dated 21/12/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 27/12/2016 by the ld. Income Tax Officer 15(1)(1), Mumbai (hereinafter referred to as ld. AO). 2. Though the revenue had raised several grounds of appeal before us, we find that the effective issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the addition made u/s 68 of the Act on account of unsecured loans received in the sum of ₹ 1,90,00,000/- in the facts and circumstances of the case. The interconnected issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the same, the learned DDIT (Inv.) Kolkata vide letter dated 7.12.2016 forwarded the enquiry report stating that during the course of enquiry, it was seen that aforesaid 4 companies did not exist on the aforesaid addresses which were provided by the assessee and relevant enquiries made with the local people in the vicinity of the company also revealed that they had not heard about the said companies. 3.2. Thereafter, we find that the ld AO proceeded to examine the various documentary evidences submitted by the assessee earlier. We find that the ld AO had examined each of the parties independently from its financials and concluded that there were few people who were common directors in various companies and all the aforesaid 4 companies did not carry on any genuine business. Some of the common observations made by the ld AO with regard to aforesaid 4 companies on examining their income tax returns, financial statements , bank statements etc are as under:- a) Each company had claimed huge refunds in their income tax returns filed with the income tax department. b) Each company is having huge share capital, huge reserves and surplus, had given huge loans and advances and hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny before him for his examination and accordingly, the assessee had failed to prove the three ingredients of section 68 of the Act viz, identity, creditworthiness and genuineness of transactions. In view of aforesaid observations, the ld AO proceeded to treat the entire receipt of unsecured loans from 4 parties as unexplained cash credit u/s 68 of the Act stating that the genuineness of the transactions and creditworthiness of lenders were not proved by the assessee company. We find that the ld AO also observed that the new address of the lender companies were not provided by the assessee company for verification. Since the loans were added u/s 68 of the Act, the corresponding interest expenditure thereon in the sum of ₹ 13,08,903/- was also disallowed by the ld AO u/s 69C of the Act. 4. We find that the ld CITA deleted the additions / disallowance made by the ld AO by observing as under:- (DECISION) 2 4 I have given my Careful consideration to the rival submissions perused the material on record and duly considered the factual matrix of the case as also the Applicable legal position. 2 4 1 Grounds No l is raised against the AUS action in treating the unsecur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itworthiness of the parties by filing the Financials of all the parties as on 31.3.2014 and the Bank statement of the parties reflecting payment made to the appellant. c. Genuineness of the transaction has been established by the appellant by explaining the business of the appellant, requirement of the loans in the business of the appellant, loan confirmation from the parties and the ledger account of the parties wherefrom it was substantiated that the loans had been squared off during the year under consideration. 3. That apart, it is the contention of the Appellant company that during the assessment proceedings, the AO had issued summons to the lender parties. The lender parties have in fact replied to the summons and submitted the relevant details to the AO. This, in submission of the Appellant company should dispel all doubts. 4. The appellant started to have received all the unsecured loans through banking channels. 5. Further, the Ld. AO has relied upon the enquiry report of the DDIT(Investigation) Kolkata vide letter dated 07.12.2016 about the non-existence of the companies on the said addresses. 2.4.5. I have carefully considered the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies has independent identity at the different addresses and being controlled by different persons and the Ld. AO has not proved any connection between the said companies. As a result, such evidents and statement becomes null and void on the principles of natural justice. The AO has not gathered any additional / independent evidence to show that the transaction with the appellant company was sham, fictitious or artificial except believing the enquiry report of DDIT (Investigation), Kolkata about the non-existence of the companies on the said addresses. 2.4.8. Coming to the other facts of the case, the Appellant, u/s.68 is required to establish the identity, creditworthiness of the parties and the genuineness of the transaction to demonstrate that the cash credit is genuine and that the same cannot be added u/s.68. In the present case, from the records, it can be seen that the Appellant has established the identity of the parties by giving its name, address, PAN and copy of Return of income for A.Y.2014-15. Further, the appellant has established the creditworthiness of the parties by filing the Financials of all the parties as on 31/03/2014 and the Bank statement of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is found unbelievable or false the AO is not required to bring positive evidence on record to treat amount in question as income of the assessee. While considering the explanation of the assessee, the AO has to act reasonably-application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section-nature and sources of such credits should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. Assessee cannot be asked to prove impossible. Explanation about source of source or origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors after subjecting the amount to TDS. 6. Confirmation from the loan creditors. 2.4.11. As seen from the above, the appellant has furnished all the details proving conclusively the three ingredients of identity and creditworthiness of the creditors and genuineness of the transaction. The amount was paid by the creditors from their running bank accounts which was accounted in the books of the appellant as well as the creditors as seen from the audited accounts filed. The transactions were also confirmed by the creditor who is assessed to tax. Further, the appellant has paid interest through banks to the creditors by duly subjecting the interest amount to TDS. Nowhere the AO has challenged the identity, creditworthiness of the lenders and the genuineness of the transactions with any tangible material. I find that the AO was in possession of good information in the form of Enquiry report, to being with, but he could neither succeed to repudiate the evidences filed by the appellant nor he could gather independent evidence even to establish the surrounding circumstances not to speak of leading evidence to prove his hypothesis. In view of the above discussion, I hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee cannot be expected to have all the latest address of all the lenders with whom the transactions have already been completed by the assessee. It is not the case of the revenue that the assessee has continuous transactions with those lenders even after Asst Year 2016-17. Hence merely because the ld AO was not able to serve the notice u/s 133(6) of the Act on those lenders at the last available address with given by the assessee , no fault could be attributed on the assessee for the same. 5.2. We find from the bank statements of the lender companies, that all the lender companies had sufficient sources in the form of available bank balances and cheque credits in their respective bank accounts and admittedly those funds were utilised by them to advance inter corporate deposits to the assessee company. It is not in dispute that the inter corporate deposits advanced by the lender companies were duly reflected in their regular books of accounts and in their final balance sheet which are already forming part of records. It is not in dispute that all the transactions have been routed through regular banking channels. It is not in dispute that the said inter corporate deposits di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der companies had also duly disclosed the fact of advancing inter corporate deposits in their balance sheets and had also duly confirmed the loan transactions with the assessee company by signing the ledger copy of confirmation which is also enclosed in paper book filed before us. The replies to notice u/s 133(6) of the Act duly confirming the loan transactions were also duly submitted before the ld AO which is also acknowledged by the ld AO in his assessment order. Hence the genuineness of transactions had been duly proved by the assessee beyond doubt in the instant case. 5.6. We find that the Hon ble Jurisdictional High Court in the case of CIT vs Orchid Industries P Ltd reported in 88 taxmann.com 502 had held that the assessee had produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. The assessee had also produced the entire record regarding issuance of shares, i.e., allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance-sheet and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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