TMI Blog2021 (9) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... see to explain the identity and creditworthiness of the cash creditors and genuineness of the transactions. Thus the assessee has successfully discharged its onus by explaining source of cash credit of loan of ₹ 2.70 cr. received during the year by placing relevant documentary evidences to our satisfaction which have not been found to be untrue/incorrect by the revenue authorities. We, thus set aside the finding of Ld. CIT(A) and delete the addition of ₹ 2.70 cr. made u/s 68 - Decided in favour of assessee. Disallowance of prior period interest - loan from HDFC bank was taken in the name of one of the partner - Interest payable on this loan from HDFC Bank was claimed as a business expenditure by the assessee as the loan was utilized for business purposes - HELD THAT:- CIT(A) has not doubted the utilization of loan for the business purpose. Ld. DR failed to controvert this fact that the loan taken from HDFC bank has been utilized for any other purpose other than for business of the firm. Audited balance sheet supports the contention made by the assessee and also there is no difference in the ultimate tax liability as it was subject to tax on the same rate in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has properly discharged onus lying on it. 3. That the appellant reserves its right to add, alter and modify the grounds of appeal as taken. The assessee has raised following grounds of appeal in ITANo.337/Ind/2018: 1. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in maintaining disallowance of ₹ 12,00,625/- as made by the Assessing Officer on the account of interest paid without properly appreciating the facts of the case and submissions ad made before him. 2. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in maintaining the disallowance of ₹ 12,00,625/- as made by the assessing officer on account of interest paid even when the appellant has properly discharged onus lying on it. 3. That the appellant reserves its right to add, alter and modify the grounds of appeal as taken. 2. As the issues raised in these appeals are mostly common and relate to same assessee, at the request of all the parties these appeals were heard together and are being disposed of by this common order for sake of convenience and brevity. We will first take up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 43B(d) of the Act. However, assessee failed to find any favour from the Ld. Assessing Officer. As Ld. Assessing Officer making detailed observation as appearing at 45 to 52 of the assessment order dated 07.03.2014 denied the claim and made the addition of ₹ 60,61,225/-. Ld. Assessing Officer also disallowed interest claim of ₹ 24,47,865/-, since it was not paid before due date of filing the return. After making the aforesaid additions income assessed at ₹ 3,77,69,020/-. 6. Aggrieved assessee preferred an appeal before the ld. CIT(A) and partly succeeded as Ld. CIT(A) allowed the claim of interest expenditure of ₹ 24,47,865/- and confirmed the remaining addition u/s 68 of the Act at ₹ 2,70,00,000/- and disallowance of the prior period interest of ₹ 60,61,225/-. Ld. CIT(A) confirmed the addition u/s 68 of the Act observing that the assessee failed to prove the identity and creditworthiness of the alleged lenders and genuineness of the transactions and for observing so placed reliance on certain judicial precedents. 7. As regards the interest expenditure of ₹ 60,61,225/- Ld. CIT(A) was of the view that Shri Vaibhav Rai, working p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.4 Copy of audited balance sheet of the loan creditor as on 31.03.2011 122-131 ---do--- 1.5 Copy of intimation as passed by the CPC clearly mentioned the address of the lender 132-135 ---do--- 1.6 Abstract of the master of the lender company as downloaded from the site of ROC 136-137 ---do--- b. M/s AXIOM COMMODEAL P LIMITED [ Loan of ₹ 45,00,000/-] S.No Particulars Page no Reference in the assessment order 1.1 Confirmation of unsecured loan 138 Inner Page No 12 ofthe assessment order 1.2 Advice of bank regarding transfer of amount to the bank account of the assessee 139-140 ---do--- 1.3 Copy of PAN Card 141 ---do-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lance sheet of the loan creditor as on 31.03.2011 176-185 ---do--- 1.5 Copy of ITR V generated online on submission of ITR-6 on 02-11-2011 vide Ack No 311748621021111 by the lender company ---do--- 1.6 Abstract of the master of the lender company as downloaded from the site of ROC 186-187 ---do--- e. M/s SPANDGLE DEALTRADE PVT LIMITED [ Loan of ₹ 50,00,000/-] S.No Particulars Page no Reference in the assessment order 1.1 Confirmation of unsecured loan 188 Inner Page No 11 of the assessment order 1.2 Advice of bank regarding transfer of amount to the bank account of the assessee 189-190 ---do--- 1.3 Copy of PAN Card 191 ---do--- 1.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed 12. Thereafter Ld. Counsel for the assessee took us through the summary of loans received from the alleged five companies which were repaid subsequently and interest was debited and tax deducted at source consistently. It was stated that loan from Advantage Deal Trade P. Ltd. at ₹ 50,00,000/- repaid on 25.08.2012, loan of ₹ 45,00,000/- from Axiom Commodeal P. Ltd. repaid on 21.08.2012, loan of ₹ 50,00,000/- Contra Vanijya P. Ltd. repaid on 27.08.2012, loan of ₹ 75,00,000/- taken from Dhanlabh Trade Link P. Ltd. repaid up to 21.08.2012 and loan of ₹ 50,00,000/- from Spangle Dealtrade P. Ltd. repaid on 06.09.2012. 13. Ld. Counsel for the assessee also submitted that the appellant had received the entire amount of unsecured loan through banking channels, TDS deducted on the amount of interest wherever applicable and supporting documentary evidences were also filed so as to justify the unsecured loans received by the appellant and therefore onus as casted upon the appellant under section 68 of the Act stands duly discharged and therefore the amount of unsecured loan as received during the year shall be treated as genuine and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction remained unproved. The assessing officer himself accepted the identity of the loan creditor and disputed about the credit worthiness and genuineness of the loan transactions. The assessee with the help of bank statement, Balance sheet and Income Tax return proved the credit worthiness and genuineness of the loan transactions which was not disbelieved by the assessing officer himself. 2 On the basis of ADIT [ Inv] unit- (iii), Kolkata, since the summon was not served upon to the loan creditors the assessing officer reached to a conclusion that these companies are not in existence. That all the loan creditors are companies and duly registered with the Registrar of the companies and also filing their Income Tax return. The assessee has provided copy of Acknowledgment, Intimation as received from CPC, Bank statement, audited final account and Master records as downloaded from the ROC/ MCA site. Hence identity of the loan creditors stands proved beyond doubt. 3 The assessing officer further observed that merely loan amount was received thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation wing but the said investigation carried out in which context is not known to the assessee whether the name of the assessee or loan creditor of the assessee was found place in the said investigation was also not known to the assessee. Hence, the assessing officer was grossly erred in making this type of casual remarks in the assessment order which supposed to be passed on the basis of material available before him. 7 The assessing officer ignored the judicial decisions as referred by the assessee during the course of assessment proceeding by stating that the same are distinguishable on the facts of the present case. The assessing officer has utterly failed to mentioned why the decisions as referred by the assessee was distinguishable on the facts of the present case of the assessee. That decisions as referred by the assessee squarely applicable on the facts of the present case, as discussed by the assessee in this letter. 8 The assessing officer observed that the assessee has no furnished the complete details which includes confirmation and other documents. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as explained as held in the following decisions: S.No Reference Citation 1 CIT Vs Rock Fort Metal Minerals 198 Taxmann 497 (Delhi) 2 CIT Vs Winstral Petrochemicals (P) Ltd 330 ITR 603 (Delhi) 3 CIT Vs Oasis Hospitalities (P) Ltd 333 ITR 119 Delhi) 4 CIT Vs Gangour Investment Ltd 335 ITR 359 (Delhi ) 5 CIT Vs Tulip Finance Ltd 015 DTR 185 (Delhi) 16. Quoting the above decision Ld. Counsel for the assessee submitted that it is a settled position of law that once the assessee has proved the identity of the creditors, in that case there is no justification for making any addition to the income of the assessee. If the assessing officer has any doubt about the genuineness of the loan in that case also addition should be made in the case of that creditor and not in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble ITAT, Jaipur Bench in case of M/s. Motisons Entertainment (India) Pvt. Ltd. (supra), wherein the amount as received from these parties were accepted as genuine. Copy of the said order is enclosed in the paper book. 19. The reliance was placed on the following decisions: 1 Hon ble Jurisdictional Bench of ITAT in the case of M/s. Industrial Filters and Fabrics Pvt. Ltd. Vs ACIT as reported in (2020) 37 ITJ 61 (Trib. - Indore) 2. CIT v. Dolphin Canpack Ltd. [2006] 283 ITR 190 (Delhi), 3. CIT v Sahibganj Electric cables (p) Ltd. [1978] 1151TR 408 (Cal.) 4.ITO v Suresh Kalmadi [1988] 32 TTJ (Pune) TM 300 5.Hon'ble Apex Court in the case of CIT Vs Orissa Corporation (P) Ltd as reported in 159 ITR 78 6.Hon'ble Jurisdictional High Court in the case of Ashok Pal Daga Vs CIT reported in 220 ITR 452 7.Hon'ble Jurisdictional High Court in the case of CIT Vs Barjatiya Children Trust as reported in 225 ITR 640 8. Hon'ble Jurisdictional High Court in the case of CIT Vs Metachem Industries as reported in 245 ITR 160 9.Hon ble Gujarat High Court in the case of CIT Vs Ranchhod Jivabhai Nakhava as reported in 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h banking channels, interest has been charged during the year, tax deducted at source and all the alleged loans have been repaid subsequently through banking channels. 23. On perusal of records filed before us by the Ld. Counsel for the assessee, following common details have been filed with respect to all the alleged cash creditors. S.No Facts of the case 1 The amount of loans was received through RTGS 2 The loan as received was also repaid in the year 2012 prior to the passing of the assessment order or prior to start of inquiry by the assessing officer 3 Interest on loans was credited in the account of the loan creditors 4 TDS on the amount of Interest was also deducted and deposited with the Income Tax department. 5 The said amount of TDS as deducted duly reflected in Form No 26AS of the deductee / Payee and credit of the same ought to be claimed by the appellant 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 26. From perusal of the above provision we find that a proviso was inserted w.e.f. 01.04.2013 after which in case of assessee company if any sum credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless it offers an explanation about the nature and source of such sum so credited and such explanation is found to be satisfactory in the opinion of the Ld. Assessing Officer. In short the assessee is required to explain the source of source to the satisfaction of the Ld. Assessing Officer w.e.f. 01.04.2013. However, this proviso is not applicable in the case of assessee as the issue relates to A.Y. 2011-12. Before the insertion of the proviso to section 68 of the Act w.e.f. 01.04.2013, assessee is only required to prove the source of the sum credited during the year in its books of account. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of M/s Motisons Entertainment (India) P. Ltd. (supra) wherein the Tribunal was satisfied with the identity, genuineness and creditworthiness of the alleged cash creditors in question before us in this appeal. 29. We further would like to refer to the judgment of Hon ble Bombay High Court in the case of H.R. Mehta vs. ACIT reported at 72 taxmann.com 110 wherein Hon ble Court held in favour of the assessee and against the revenue dealing with issue of addition u/s 68 of the Act observing as follows: 11. We have therefore proceeded to hear and decide the matter unassisted by revenue In the course of his submissions Mr. Tralshawala had pressed into service inter alia the decision of the Calcutta High Court in Mather Platt (India) Ltd. (supra) and submitted that merely because a person is not found at an address after several years it cannot be held that he is non existent and that the assessee had discharged his primary onus by identifying the source of the amount paid. The Court observed that once the primary onus is discharged, the onus shifted to the revenue to verify genuineness of the transaction. In the present case no such effort was made by the revenue. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee the order could not be sustained. 15. In Andaman Timber Industries (supm) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which Would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the Such matter of the cross examination and make the remarks such as was done in that case. 16. In the instant case although the appellant assessee has called upon Us to draw an inference that the burden shifted to the revenue in the present case once it Was established that the payments were made and repaid by cheque we need not hasten and adopt that view after having given our thought to various issues raised and the decisions cited by Mr.TralshaWalla and finding that on a very fundamental aspect, the revenue Was not justified in making addition at the time of reassessment without having first given the assessee an op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30. We find that Hon ble Jurisdictional Bench of ITAT in the case of M/s. Industrial Filters and Fabrics Pvt. Ltd. Vs ACIT as reported in (2020)37 ITJ 61(Trib.Indore) has held that : 6. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The revenue has not disputed with regard to the fact that the co-ordinate benches of this Tribunal in respect of share application money received from Javda India Impex Ltd. found that the party is genuine and transaction was treated to be genuine. There is no change in the facts and circumstances. However, in respect of the other share applicants, assessee has not brought any material to rebut the finding arrived by the authorities below, hence we direct the AO to delete the addition of ₹ 25 lakhs in respect of share application money received from Javda India Impex Ltd. The ground raised in this appeal is partly allowed. 31. In the case of CIT v. Dolphin Canpack Ltd. [2006] 283 ITR 190 (Delhi), it was held that: Tribunal, while observing that complete details including confirmation details of bank account, PAN of subscribers to the shares were fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome evidence on which a conclusion could be arrived at, no question of law as such arises. 34. We further find that Hon'ble Jurisdictional High Court in the case of Ashok Pal Daga Vs CIT reported in 220 ITR 452 has held [Refer Para 7]: 7. As the applicant satisfied the authority as to the identity of the third party and also supplied the relevant evidence showing prima facie that the entries were not fictitious, the initial burden can be said to be discharged by the applicant- assessee. In view of the factual matrix and legal position, we are satisfied that the aforesaid two questions are questions of law arising out of the order and are required to be referred for our opinion. 35. We find that Hon'ble Jurisdictional High Court in the case of CIT Vs Barjatiya Children Trust as reported in 225 ITR 640 has held that: 3. We find that the Tribunal dismissed the appeal of the Department and held as under: He found that in the balance-sheet the loan of ₹ 20,000 given to the assessee-trust was mentioned. Under these circumstances, the Department should not have any grievance as to violation of r. 46A. The ITO could have taken pains to exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Gupta was the real owner of the business. The explanation given by the assessee was found to be satisfactory and he deleted the aforesaid three entries. The same finding of fact has been affirmed by the Tribunal. Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment whether the money invested is properly taxed or not. The assessee is only to explain that this investment has been made by the particular individual and it is responsibility of that individual to account for the investment made by him. If that person owns that entry, then, the burden of the assessee-firm is discharged. It is open for the AO to undertake further investigation with regard to that individual who has deposited this amount. 5. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives satisfactory explanation and produces the person who has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a wrong approach. Moreover, we find that those lenders have made in-consistent statement as pointed out by the Commissioner of Income Tax(Appeals) and in such circumstances, we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return of the creditors, took unnecessary step of further examining those creditors. If the Assessing Officers of those creditors are satisfied with the explanation given by the creditors as regards those transactions, the Assessing Officer in question has no justification to disbelieve the transactions reflected in the account of the creditors. In other words, the Assessing Officer had no authority to dispute the correctness of assessments of the creditors of the assessee when a co-ordinate Assessing Officer is satisfied with the transaction. 18. We, thus, find that in the case before us the Tribunal below rightly set-aside the deletion made by the Assessing Officer, based on erroneous approach by wrongly shifting the burden again upon the assessee without verifying the Income Tax return of the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditors by giving their complete addresses, GIR numbers/permanent accounts numbers and the copies of assessment orders wherever readily available. It has also proved the capacity of the creditors by showing that the amounts were received by the assessee by account payee cheques drawn from bank accounts of the creditors and the assessee is not expected to prove the genuineness of the cash deposited in the bank accounts of those creditors because under law the assessee can be asked to prove the source of the credits in its books of account but not the source of the source as held by the Bombay High Court in the case of Orient Trading Co. Ltd. v. CIT [1963] 49 ITR 723. The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques. Merely because summons issued to some of the creditors could not be served or they failed to attend before the Assessing Officer, cannot be a ground to treat the loans taken by the assessee -from those creditors as non-genuine in view of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 10. Thus taking into consideration the totality of the facts and circumstances of the case, and, in particular, the fact, that the Assessing Officer has not disallowed the interest claimed/paid in relation to these credits in the assessment year under consideration or even in the subsequent years, and tax deducted at source has been deducted out of the interest paid/credited to the creditors, we are of the opinion that the Departmental authorities were not justified in making the addition of ₹ 12,85,000 which is directed to be deleted. 11. In the result, the appeal is allowed. 39. We find that Hon ble Calcutta High Court in the case of M/s Hindustan Tea Trading Co Limited as reported in 263 ITR 289 has held that when the assessee has provided the Income Tax file Number it is the duty of the assessing officer to examine the same from the file of the creditors. Since, identity of the creditor is provided from the file Number; no addition can be made in the name of the assessee and also refer that Hon ble ITAT Mumbai Bench in the case of Income Tax Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of installment paid was directly debited in the loan account and the interest expenditure remained to be entered in the books under the head of expenditure. The total of interest for F.Y. 2007-08 to 2009-10 was claimed as interest expenditure during the year and also the interest for F.Y. 2010- 11 at ₹ 24,47,865/- was claimed for the current year. Ld. AO disallowed the interest claimed by the assessee. This issue was challenged before the Ld. CIT(A) who deleted the disallowance of interest of ₹ 24,47,865/- pertaining to year under appeal treating it as allowable expenditure incurred for carrying out for business activities but confirmed the remaining disallowance of prior period interest of ₹ 60,61,225/-. 42. Aggrieved assessee is now in appeal before this Tribunal against the disallowance of prior period interest. Ld. counsel for the assessee vehemently argued referring to written submissions. 43. Per contra ld. DR supported the order of the both lower authorities. 44. We have heard rival contentions and perused the records placed before us. Through ground no.2 assessee has challenged the finding of Ld. CIT(A) confirming the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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