TMI Blog2021 (11) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) considering the entire facts and circumstances of the case has rightly deleted the addition so made by the ld. AO. Having gone through the impugned order of the ld. CIT(A) and considering the submissions of the ld. Counsel of the assessee, which the ld. DR could not rebut, we do not find any justification to interfere in the order of the ld. CIT(A) on this issue, the same is accordingly upheld. This ground of revenue s appeal is dismissed. Delayed payment of interest on service tax and TDS holding the same as penal in nature - CIT-A deleted the addition - HELD THAT:- We find that the ld. CIT(A) has relied upon the decision of the Hon ble Apex Court in the case of Lachmandas Mathura [ 1997 (12) TMI 16 - SUPREME COURT] and further on the decision of Tribunal in the case of DCIT vs. Narayani Ispat Pvt. Ltd [ 2017 (10) TMI 67 - ITAT KOLKATA] wherein it has been held that the delayed payment of interest on service tax was compensatory in nature and the same was an allowable deduction. The Ld. DR could not point out any infirmity in the above observations of the ld. CIT(A). The order of the ld. CIT(A) on this issue is accordingly upheld. This ground of revenue s appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 ( hereinafter, referred to as the Act ) to the said 11 parties calling for information for verification of the said transactions. As per para 4.1 of the assessment order, replies/confirmations were obtained from the said 11 parties and the same were placed on record. 5. The Ld. AO after examining the details held that out of 11 parties, 8 parties were paper companies, whereas three (3) others were not physically existed at the given address. The Ld. AO further observed that in the year 2014, statement of certain persons were recorded in some other cases u/s. 131 of the Act, wherein the concerned parties/persons operating the said 8 companies had admitted that they had provided accommodation entries in lieu of commission in the form of bogus bills and loans. The Ld.AO further observed that reply to the notices issued u/s. 133(6) of the Act were received from other addresses instead of the given addresses of the creditors. In case of remaining 3 parties, the departmental inspectors were deputed for verification of existence of these companies. As per inspector s report, these three companies did not physically exist at the given address. The Ld. AO also observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to whom notices were issued were paper companies, 3 loan creditors (companies) did not comply with the notices issued to them and notices issued to six loan creditors did (individuals and HUFs) returned unserved. As such the AO required the asessee to prove the identity and creditworthiness of the loan creditors and genuineness of the transactions. The AO also required the assessee to explain why interest on delayed payments of TDS and Service Tax should not be disallowed. In response to the said notice the assessee filed written submission stating filed a copy of reply of the CPIO and Deputy Director, Ministry of Corporate Affairs, Government of India dated 16.05.2018 whereby in response to RTI Query dated 24.04.2018 to the Department of Revenue forwarded to it through the coordination Section vide OM dated 04.05.2018, it has been categorically stated that word shell company has not been defined under Companies Act, 2013 and therefore there is no list of shell companies/suspected shell companies. The assessee in order to establish the identities and creditworthiness of the six individual and HUF loan creditors filed copies of their PAN Card, Aadhar Card, Acknowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide accommodation entries through various paper companies. The relevant portion of his statement were stated to be attached with the assessment order as RKA. The AO also stated that the said company was not physically found at its address. iii. Cosmos Real Estates Pvt. Ltd. Statement of Shri Anand Singhania dated 15-07-2014 who controlled the above company and who proved that he provided accommodation entries through various paper companies. The relevant portion of his statement were stated to be attached with the assessment order as AS. Reply to notice u/s 133(6) was received from address other than the address at which notice. The AO also stated that the said company was not physically found at both the address. iv. Century Ply Boards Pvt. Ltd. / Navana Trading Company Pvt. Ltd./ Sthavistha Mercantiles Pvt. Ltd. Reply to notice u/s. 133(6) were manufactured replies as the same were received after issuance of Show Cause Notice to the assessee As per Inspector report there was no physical existence of the company. Regarding annexures being KMN1, KMN2, KMN3, RK and AS stated to have been annexed to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uilding where the office of the company is situated, photo of the registered office of the company along with the photo of the director sitting in the office, geographical location of the company stating the longitude and latitude all digitally signed by all by all the directors of the company and digitally certified by practising company secretary/chartered account. Besides, the companies are having PAN and have filed their returns of income. As such the allegation that the said companies were not found at their address is factually incorrect. The assessee secondly submitted that all the notices issued by the AO were duly served further disapproves the allegation made by the AO. Thirdly and finally, it is submitted that regular assessments have been made in case of all the loan creditors in various years and therefore the allegation of physical non-existence are wholly baseless. The assessee further submitted that the additions has been made relying on the material the copies of which were never supplied to the assessee for rebuttal and the parties were not produced for cross examination by the assessee which is serious flaw and rendered the assessment in nullity. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be held to be not genuine without giving further opportunity to assessee to explain information basis of which such conclusion was arrived at. b. Fort Projects (P.) Ltd. v. Deputy Commissioner of Incometax [2013] 29 taxmann.com 84 (Kolkata Trib.) Where assessee had successfully proved genuineness and source of loan by furnishing requisite evidences in form of IT return and financial statements of creditor evidencing receipt of loan and also confirmation of said party, said amount could not be treated as assessee's undisclosed income. c. Commissioner of Incometax v. Sahibganj Electric Cables (P.) Ltd. [19 78] 115 ITR 408 (CAL.) Loans in question were received b) assessee by cheques and repayments were also made by cheques - Assessee had given confirmation letters of respective parties and in said letters income-tax file numbers of alleged creditors were given - Cheques for repayment of loan were cleared through assessee's banker Tribunal held that assessee had discharged onus prima facie that laid on him and as such amount of loans were not his income from un disclosed sources - Whether order of Tribunal was justified - Held. Yes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit. i. Commissioner of lncometaxI v, Patel Ramniklal Hirji [2014[41 taxmann.com 493(Gujarat) Where assessee received loan through account payee cheques, and, in support of loan transaction he also brought on record copy of book's account, bank statement and income-tax return of lender, transaction in question was to be regarded as genuine and, thus, loan amount could not be added to assessee's taxable income under section 68. j. Commissioner of Incometax v. Mark Hospitals (P) Ltd. [2015] 58 taxmann.com 226 (Madras) Assessee had obtained unsecured loans from agriculturists and submitted their names and addresses, but did not provide their PAN cards - Assessing Officer made addition under section 68- It was found that loans were given to assessee through cheques and all creditors had confirmed that they had advanced loans mentioned against their names to assessee and, disputed - Further, all creditors were agriculturists and therefore, they did not have PAN card- Whether, on facts, no addition could be made- Held, yes k. Commissioner of Incometax15 v. Haresh D. Mehta [2017] 86 taxman.com 22 (Bombay) Where assessee proved loan transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) Ltd. [2012] 26 taxmann.com. 321/21 Taxman 20 (Delhi)(Mag.), it has been held that where entry operator in his statement u/s 132(4) did not refer to the name of the assessee, the recipient of credit entry, and merely stated that given only loan after taking cash and deducting commission. it was held that, this is too general or vague an answer on the basis of which the assessee-company can be condemned. Even otherwise, no addition can be made solely relying on the statements made by third parties. In the case of Pr. CIT v. Kanubhai Maganlal Patel [2017] 79 taxmann.com 257 (Guj.); CIT v. D. Kanta [2012] 19 taxmann.com 92/205 Taxman 115 (Kar.) (Mag.) : Smt. Renu Agarwal v. Asstt. CIT[2017] 88 taxmann.com 872 (JP Trib.); Jawahurbhai Atmaram Hathiwala v. ITO [2010] 128 TTJ 36(Ahd.) (UO) ; Harish Daulatram Innani v. Dy. CfT 120081 24 SOT 541 (Mum.) it has been held that AO was not justified in making addition u/s 698 by solely relying upon statements or deponents that he, had admitted of having received on money in cash. Reference is also made to the decisions in the case of CIT v, Rahul Vineet Traders [2014] 41taxmann.com 86/221 Taxman 46 (All.) (Mag.); CIT v. Vijay Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. (2015) taxmann.com 132 (Delhi Trib.) that where Assessing Officer was not able to bring anything on record that it was assessee-company s own money which was routed in form of share application money, addition under section 68 was to be deleted. 3. As per Section u/s 12 of the Companies Act, 2013, the companies are statutorily required inter alia to mention the address of their present registered office of the company. As such there is no reason to draw adverse inference from the fact that in case of some of the creditors the addresses mentioned in the replies of the loan creditor were different from the addresses that were mentioned in the notices. 4. All the loan creditors are companies and their status on MCA is active complaint, the notices issued to all the loan creditors were duly served by postal authorities and regular assessment of the loan creditors have been disapproves the claim of the AO that there is no physical existence of the loan creditors. In any case, merely for the reason that the loan creditors were not found at their address no addition can be made in the following cases :- a. Commissioner of Income-tax IV v. Dwarkadhish Investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Cosmos Real Estates Pvt. Ltd. ii. Everst Commerce Pvt. Ltd. iii.Navana Trading Company Pvt. Ltd As such there is no reason to disallow the interest in respect of loans received from the said parties since the loan taken from the said parties have already been accepted in regular assessment in earlier year. 7. Regarding allegation of paper company, I find that the loan creditors ae companies and are regularly filing their statutory returns with the ROC and their status of MCA is ACTIVE COMPLAINT. All the loan creditors are having PAN and have filed their returns of income. The notices issued to the loan creditors have been duly served and in compliance thereto the loan creditors have confirmed the transactions with the assessee and have filed copies of their return of income, audited financial statements, bank statements and have also explained their sources of fund and nature of receipts. The transactions have taken place through banking channels and have duly been recorded in their regular books of account and reflected in their audited financial statements. The interest income has been credited in their Statement of Profit and Loss and the TDS have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,553,000 1,410,028 13,963,028 10,259,988 73 Century Ply Boards Pvt. Ltd 62,600,000 91,454,239 154,054,239 22,718,200 14 Cosmos Real Estates Pvt. Ltd 28,110,000 179,993,030 208,103,030 634,686 0.3 Everest Commerce Pvt. Ltd 32,720,000 210,822,936 243,542,936 542,228 0.2 Growfast Advisory Pvt. Ltd 914,980 39,799,628 40,714,608 500,000 1.2 Navana Trading Company Pvt. Ltd 11,556,020 46,602,111 58,158,131 1,269,375 2.1 Newtown Mercantile Pvt.Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and returns. With regard to the creditworthiness of share applicants, it was noted that those applicant companies were having capital in several crores of rupees and the investment made in the assessee company was only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which it is found the monies had been directly paid to the assessee-company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the assessee has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee-com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital was stated to be received. The summons were returned unserved with the remarks no such company , which was confirmed by the Inspector sent to the addresses for verification. Whereas in the instant case, admittedly the notices issued u/s. 133(6) of the loan creditor s which were duly served upon and complied with. CIT, Central-1, Kolkata Vs. Maithan International [2015] 56 taxmann.com 283 (Calcutta) The above case is related to section 263 of the I.T Act, 1961 in which the ld. AO have not done proper enquiries. As such the above case has not application to the instant case. In the case of CIT vs. Tania Investments (P) Ltd (2010) 322 ITR 394 (Bom.), it has been held that tribunal was right in deleting the addition made by the AO towards unexplained cash credits as the Books of Accounts itself indicate the capacity to advance loan, the parties are identified and there is no further need to prove the creditworthiness of the creditors. In the case of Raichand Kothari (HUF) vs. CIT (1997) 139 CTR (Gau) 329; (1997) 223 ITR 250(Gau) relied on CIT vs. Shree Gopal Co. (1994) 117 CTR (Gau) 357 (1993) 204 ITR 285 (Gau) applied CIT vs. Laul Transport Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuineness, nature and source of the deposits, satisfactorily, addition rightly deleted. In the case of CIT v. Rhombus Intrnational Pvt. Ltd ITA No. 223/13: ITA No. 494/Del/2016, CIT v. Gangeshwari Metal p.Ltd (2014) 361 ITR 10, CIT v. Kamdhenu Steel Alloys Ltd. SLP (CC) No. 15640 of 2012, dt. 17- 09-2012; CIT v. Harishbhai Raojibhai Patel HUF (2013) 219 Taxman 125 (mag). Distin guished CIT v. Empire Buitech (P) Ltd 366 ITR 110; Vam- Hi-Fashion Garments P. Ltd V. Asst CIT(2016) 151 TR(A) 408 (Del C - Trib): 2016 Taxpub(DT) 1579(Del C -Trib), it has been held that Assessee discharge primary onus to prove that credit entry was not accommodation entry. In the case of Yash Developers v. DCIT (2018) 159 TR(A) 416 (Mum- Trib): 2017 TaxPub(DT) 4765(Mum-Trib), it has been held that since assessee had proved creditworthiness and genuineness in respect of unsecured loans taken from the parties, addition made under section 68 as unexplained cash crfedit was not justified. Assessee company took unsecured loan from 12 companies. AO initiated inquiry and in view of the inquiry report, companies from whom assessee took loan were reported as jamakharchi/paper companies. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessment order dt. 05-12-2019 relevant to the A.Y 2017-18 and copy of the assessment order dt.20-03-2017 relevant to the A.Y 2015-16. The ld. Counsel has further submitted that the assessee has old running accounts with the aforesaid parties. He has further submitted that the alleged report of the inspector in respect of the three parties was never confronted to the assessee. The assessee was never asked to produce any other information by the Ld. AO before arriving at the conclusions. The statement recorded of some persons/parties relied on by the Ld. AO was never confronted to the assessee. Even the alleged statements recorded in some other cases were allegedly recorded in the year 2014, whereas, the assessee had taken loan in the FY 2015-16 from the said parties, hence, the alleged statement relied upon by the Ld. AO was prior to the said loan transactions. The Ld. Counsel has further submitted that the alleged persons on whose statement has been relied upon by the Ld. AO were neither operating nor controlling the said concerns at the time of the transactions done by the assessee. The Ld. Counsel in this respect has also relied upon the balance sheets and submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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