TMI Blog2022 (12) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the lender parties have not responded to the notice u/s 133(6) - HELD THAT:- We find that no finding was given by Assessing Officer on various documentary evidences furnished by assessee, which consists of confirmation of parties, return of income of lender parties, ledger account of assessee and parties books of account, bank statement of parties and financial statement of lenders. The assessee has also filed copies of reply in response to notice u/s 133(6) - We find that the ld. CIT(A) allowed relief to the assessee by clearly holding that the reply of lender party in response to notice under Section 133(6) is seen on ITBA Website. Similar interest expenses were allowed in earlier assessment years and was never disallowed. We find that the ld. CIT(A) granted relief on appreciation of fact that the assessee made compliance. As earlier noted that tao has not given any finding on the various documentary evidences to substantiate the genuineness of interest expenses. Assessing Officer has not controverted the fact that in earlier years, similar interest expenses were allowed. In view of the aforesaid factual discussion, we do not find any merit in the grounds of appeal raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Income Tax Department? (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 85,86,709/- made on account of disallowance of interest payments to M/s Meenahar Gems Pvt. Ltd. (Rs. 55,62,670/-) to Vijay Exports (Rs. 15,51,699/-) and to Aavishkar Murli Agarawal (Rs. 14,72,340/-) without appreciating that the fact that said parties have not complied with the notice issued under Sec. 133(6) of the Act to prove the identity of the lender and genuineness of the transactions inasmuch as that the assessee has made factually incorrect submissions regarding receipt of response from aforesaid party during the course of assessment proceedings as well as during the course of appellate proceedings? (iii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 85,86,709/- made on account of disallowance of interest payments to Meenhar Gems Pvt. Ltd., M/s Vijay Exports and Aavishkar Murli Agrawal by relying upon the submissions of the assessee that the said party has complied with the notice u/s 133(6) of the I.T. Act issued by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer was of the view that on one hand the assessee has paid interest on unsecured loan and on the other hand advanced interest free loans to its group concerns. On perusal of rate of interest, the assessee claimed from such concerned, the assessee have claimed interest expenses @ 7% from whom the assessee has availed loan. However, the assessee has given interest free loan to Dimar Construction Pvt. Ltd. and H.V. Construction P Ltd. The Assessing Officer asked the assessee to show cause as to why proportionate interest at the average rate of 7% should not be disallowed. 5. The Assessing Officer issued detailed show cause notice for proposing the disallowance of interest expenses as well as disallowance of proportionate interest rate on the interest free loan given to Dimar Construction Pvt. Ltd. and H.V. Construction P Ltd. In response to said show cause notice, the assessee filed its detailed reply. 6. The contents of reply are recorded in para 5.4 of assessment order. The assessee in reply, submitted that the assessee has taken a genuine loan from Mayur Gems and Paras Gems and used the loan for business purpose. Against the loan of Mayur Gems and Paras Gems, the assessee fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther stated that in preceding year, similar interest expenses were allowed in assessment under Section 143(3) of the Act. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer noted that non-compliance of notice under Section 133(6) shows that the interest expenses are not genuine and not allowable. Hence, the aggregate of interest expenses paid to Meenahar Gems, Vijay Exports and Aavishkar Murli Agrawal of Rs. 85,86,709/- were disallowed. 8. On the interest free advances, the Assessing officer held that the assessee has given interest free loan to their group concern i.e. Rs. 60.00 lacs to Dimar Construction P Ltd. and Rs. 8.16 crores to HVK International Pvt. Ltd. The Assessing Officer on his observation observed that on the one hand, the assessee has claimed interest expenses on unsecured loan from various parties and on the other hand, the assessee has given interest free loan to its group concerned. The Assessing Officer was of the view that the assessee has utilized interest bearing fund to its group concerned. The assessing officer noted that assessee claimed that the loan to Dimar Construction P Ltd. of Rs. 60.00 lacs were given prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequential interest cannot be disallowed. So far as interest paid to P.K. Enterprises is concerned, the assessee stated that the said party was not a part of 19 parties and that the land was received from P.K. Enterprises was genuine loan received through account payee cheques and the consequential interest cannot be disallowed. It was also stated by assessee that the interest paid on such loan to Mayur Gems, Paras Gems and Piyush Gems were already considered as genuine in earlier years and the interest disallowance was deleted by the ld. CIT(A) in his order for A.Y. 2009-10 to 2013-14, 2014-15 to 2015-16 and 2017-18. The ld. CIT(A) held that loan taken from Mayur Gems, Paras Gems and Piyush Gems has already been considered to be genuine by his predecessor for A.Y. 2009-10 to 2013-14, 2014-15, 2015-16 and 2017-18. There is no change in the facts. Once the transaction of loan is considered as genuine, the interest on such loan cannot be disallowed. The ld. CIT(A) further held that P.K. Enterprises was not part of 19 parties and the assessee had explained the genuineness of said loan during the assessment. Thus, the interest cannot be disallowed. On such observation, the ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of learned Senior Departmental Representative (ld. Sr. DR) for the revenue and the learned Authorised Representative (ld. AR) of the assessee and have gone through the orders of the lower authorities. Ground No. (i) of the appeal relates to deleting the disallowance of Rs. 91,38,649/-. The ld. Sr. DR for the revenue supported the order of Assessing Officer. The ld. Sr. DR submits that the ld. CIT(A) decided the issue in favour of assessee on the basis of decision of his predecessor in assessee s own case wherein similar issue was involved. The ld. Sr. DR submits that the department has not accepted the order of ld. CIT(A) in those year, however, the income tax effect in those years were less than the monetary limit for filing appeal before the Tribunal, therefore, such appeal was not filed. The fact remains the same that the assesse has availed the loan from entry providers. 14. On the other hand, the ld. AR of the assessee submits that at this stage, the ground of appeal raised by revenue is covered by the decision of Tribunal in favour of assessee in assessee s own case for A.Y. 2017-18 in ITA No. 48/Srt/2021 order dated 25/05/2022. 15. We have considered the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Paras Gems that they are of loan providing accommodation entries. The assessee in response to show cause notice submitted that he has taken loan from Paras Gems who is not the same as mentioned in the statement of Praveen Jain. The assessee has availed loan from Prakash Nahar who is proprietorship firm is coincidentally not connected with Praveen Gems. In response to notice under section 133(6), Prakash Nahar submitted that bank statements, ledger account and confirmation and annual accounts regarding Madhav Gems, the assessee submitted that he has taken loan from Madhav Gems, from Madjav Gems is not same as mentioned in the statement of Praveen Jain. He stated that Sushil Jain is the proprietor of Mayur Gems. Further notice under section 133(6) was served on Sushil Jain, where he has furnished complete bank account, ledger account, books of account and confirmation. Regarding Madhav Gems, the assessee also stated that as per statement of Shri Praveen Jain that he appointed Pankaj Jain as director of Madhav Gems. The assessee explained that Madhav Gems is not the same as mentioned in the statement of Shri Praveen Jain. The assessee explained that in response to notice under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of those parties, confirmation along with PAN, full addresses, bank statement and other relevant documentary evidence. The ld CIT(A) held that the Assessing Officer issued notice under section 133(6) and in response thereto parties have admitted such loan to the genuine and also provided necessary evidence. Such evidence was not found to be incorrect. The assessee has clearly discharged his onus of under section 68 that there is no addition can be made merely on the basis of presumption. The Ld. CIT(A) also relied on the decision of Hon'ble jurisdictional High Court in the case of CIT- 1 vs. Dharmadev Finance (P.) Ltd. [2014] 43 taxmann.com 395(Guj); PCIT vs. RSA DIGI Prints (Tax Appeal No.503 of 2017 dated 06.09.2017 and Rohini Builders vs. Dy. CIT (2002) 76 TTJ 521 (Ahd.Trib) 265 ITR 360 (Guj) and deleted the addition on merit. 13. We find that the Assessing Officer has not made any specific comment on various documentary evidence furnished by assessee nor any independent investigation was carried out. Thus in absence of any adverse material collected by the Assessing Officer during the assessment against the assessee and no addition was warranted. 14. The Hon bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. The ld. AR of the assessee submits that the similar interest expenses were allowed in earlier years in the assessment order passed under Section 143(3). The ld. CIT(A) granted relief to the assessee by following the orders of earlier years. In alternative submission, the ld. AR submits that no addition under Section 68 can be made merely because the lender of loan could not respond to notice under Section 133(6) of the Act wherein the assessee has duly discharged his onus by filing all necessary evidence to substantiate such interest expenses. To support such submission, the ld. AR of the assessee relied upon the decision of Delhi Bench of Tribunal in Vidya Education Investment (P) Ltd. Vs DCIT (2021) 129 taxmann.com 5 (Delhi Trib). 20. We have considered the rival submissions of both the parties and have gone through the orders of authorities below carefully. We have also deliberated on the case law relied by the ld. AR of the assessee. We find that the Assessing Officer disallowed the interest expenses by taking a view that the lender parties have not responded to the notice under Section 133(6) of the Act. We find that no finding was given by Assessing Officer on various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the orders of the lower authorities carefully. We find that the Assessing Officer made addition of notional interest by taking a view that the assessee has given interest free loan to its group concerned i.e. Rs. 60.00 lacs to Dimar Construction Pvt. Ltd. and Rs. 8.16 crores to HVK International Pvt. Ltd. The Assessing Officer on his view has observed that the assessee has borrowed the interest bearing funds and paid interest @ 7% to such lenders. The Assessing officer after giving show cause notice and considering the submission of assessee, made proportionate disallowance of interest @ 6% on the aggregate advances of Rs. 8.76 crores and worked out the addition/disallowance of Rs. 61,32,957/-. We find that before the ld. CIT(A), the assessee made similar submission as made before us. The ld. CIT(A) after considering the submission of assessee noted that there is no direct nexus between the interest bearing loan and interest free loan advanced by assessee. Most of the interest free advances were made prior to 2010-11. The interest bearing loan was given by assessee after that period. The ld. CIT(A) also examined the assessee s own capital, reserve and surplus and find that r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry providers who have accepted the modus operandi of providing of bogus entries before the Income Tax Department? (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 79,84,048/- made on account of disallowance of interest payments to M/s Aarav Gems without appreciating that the fact that said parties has not complied with the notice issued under Sec. 133(6) of the Act to prove the identity of the lender and genuineness of the transactions inasmuch as that the assessee has made factually incorrect submissions regarding receipt of response from aforesaid party during the course of assessment proceedings as well as during the course of appellate proceedings? (iii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 7,76,293/- made on account of disallowance of interest payments to M/s Vijay Exports by relying upon the submissions of the assessee that the said party has complied with the notice u/s 133(6) of the I.T. Act issued by the AO during the course of assessment proceedings, without making any verification or providi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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