TMI Blog2023 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... Hence only a sum of Rs 7,35,70,750/- was utilized by the assessee company for making advances to various parties as is evident from the balance sheet of the assessee company and remaining sum of Rs 10,76,70,050/- on 22/09/2016 was very much available in the form of cash balance with the assessee company which explains the total cash deposits made during 22/09/2016 to 31/03/2017 which includes the demonetization period of 09/11/2016 to 31/12/2016 also. We have no hesitation to hold that the entire cash deposits made by the assessee company stood properly explained by way of available cash balance and hence there is no scope of making any addition towards unexplained cash deposits. AO is hereby directed to delete the addition made in the sum. Accordingly, the Ground No.2 raised by the assessee is allowed. Addition made u/s.68 of the Act in respect of unsecured loans - HELD THAT:- AO did not resort to make any verification of the evidences filed by the assessee by way of issuing notice u/s 133(6) of the Act to the lender company. In this scenario, the only logical conclusion that could be derived is that the assessee company had duly discharged its onus by furnishing all the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Abhyudaya Co-op Bank, Vashi Branch 10.11.16 - 25,00,000 SDC Bank, Vashi Branch 24.11.16 - 3,50,00,000 SDC Bank, Vashi Branch 25.11.16 - 3,00,00,000 SDC Bank, Vashi Branch 09.12.16 - 50,00,000 Abhyudaya Co-op Bank, Vashi Branch 30.12.16 - 2,70,38,500 Abhyudaya Co-op Bank, Vashi Branch Total 10,20,38,500 3.3. When confronted to explain the source of cash deposits, the assessee explained that it had declared a sum of Rs 6 crores as income under Income Declaration Scheme which was utilized for depositing cash in bank accounts. The assessee company further explained that on money received from various customers in the Amar Harmony Project whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclared under IT survey . The ld. AO observed that though Rs 12,12,40,800/- being on money received from customers by the assessee was offered to tax by the assessee, the details of customers with name, address, PAN, amount received was not filed during the survey proceedings by the assessee. The ld. AO observed that there was substantial gap between the income offered during survey proceedings and subsequent cash deposits made during demonetization period. The ld. AO also observed that disclosure made in IDS, 2016 and during survey proceedings were not brought into the books of accounts of the assessee and hence availability of cash balance with the assessee cannot be believed. With these observations, the ld. AO proceeded to conclude that the cash deposits made during demonetization period remains unexplained cash credit u/s 68 of the Act by way of deeming fiction for want of satisfactory explanation. This was sought to be taxed at the rate prescribed u/s 115BBE of the Act by the ld. AO. 3.5. Before the ld. CIT(A) , the assessee reiterated its submissions apart from stating that the income declared under IDS, 2016 and income declared during survey proceedings in the sum of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had further explained that post demonetization on 08/11/2016, the assessee company had deposited Rs 10,20,38,500/- during the period 09/11/2016 to 31/12/2016. Out of the said amount deposited, a sum of Rs 4,76,70,050/- pertains to amount declared during survey proceedings and the balance of Rs 6 crores pertains to amount declared under IDS, 2016. The balance cash of Rs 7,35,70,750/- (60000000+121240800-107670050) was already advanced to various parties and the same was grouped in the financial statements under Sundry Assets in the Balance Sheet as on 31/03/2017 in Schedule 17 Other Current Assets . 3.9. We find that the cash book for the period 01/04/2016 to 31/03/2017 relevant to A.Y. 2017-18 is enclosed in Page 701 of the paper book filed before us. This cash book is admittedly filed before the ld. CIT(A). We find that a sum of Rs 10,76,70,050/- is introduced as income in the cash book on 22/09/2016 (which is just 2 days after the survey on 20/09/2016) . From the perusal of the cash book, we find that the entry passed by the assessee company in its cash book is as under:- Cash Account Dr 10,76,70,050 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its made by the assessee company stood properly explained by way of available cash balance and hence there is no scope of making any addition towards unexplained cash deposits. The ld. AO is hereby directed to delete the addition made in the sum of Rs 10,20,38,500/-. Accordingly, the Ground No.2 raised by the assessee is allowed. 4. The next issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the addition made u/s.68 of the Act in respect of unsecured loans of Rs.43,27,42,916/- in the facts and circumstances of the instant case. 4.1. We have heard rival submissions and perused the materials available on record. During the year under consideration the assessee had received the following loans from the following parties:- Name of lender PAN Loan received during year Outstanding balance as on end of FY Kundan Tieup Pvt. Ltd. AADCK0926E 8,06,00,000 6,31,00,000 Astute Advisors Pvt. Ltd. AAACK3245N 2,35,00,000 3,46,42,916 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r A.Y.2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 of this lender company. The ld. AO observed that this lender company was owned by M/s. Deepesh Vanijya Pvt. Ltd. and M/s. Jas Deep Tradecom Pvt. Ltd which are also having the same address of the assessee company herein. Accordingly, the ld. AO concluded that Gami family (belonging to assessee group) had already acquired the shareholding of this lender company. The ld. AO observed that this lender company had meager income in its income tax returns filed for A.Y.2017-18 and no interest has been paid by the assessee on this loan. The ld. AO observed that lender company had substantial amount of share capital and share premium in its balance sheet which was also invested in various entities including the assessee company. Finally, the ld.AO concluded that creditworthiness of the lender company had not been proved by the assessee company herein. Hence, to be treated as unexplained cash credit u/s.68 of the Act. It is pertinent to note that the ld. AO had added the sum of Rs.6,31,00,000/- being the outstanding balance at the end of the year with regard to this lender company u/s.68 of the Act as against the amounts of loans received d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der company is established beyond doubt. In the instant case this has duly been satisfied by the assessee. Hence, all the three ingredients of Section 68 of the Act has been proved beyond doubt in the instant case. In any case, this loan was already repaid by the assessee in full in A.Y.2018-19 as stated supra. Hence, we direct the ld. AO to delete the addition made u/s.68 of the Act in respect of this lender company. (ii) Astute Advisors Pvt. Ltd. Loan received during the year - Rs.2,35,00,000/- Loan outstanding at the end of Financial Year - Rs.3,46,42,916/- 4.7. The assessee has furnished the following documents before the ld. AO. (a) Financial statements of this lender company for the Asst Years 2015-16 to 2019-20. (b) Details of shareholders of this lender company for the Asst Years 2015-16 to 2019-20. (c) Ledger account of lender company as appearing in the books of assessee company for the period 1.4.2016 to 31.3.2017 together with the confirmation of the lender by mentioning its PAN details. (d) Bank statements of the lender company for the relevant dates on which loan has been advanced to the assessee company proving the immediate source of credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lender company. In this scenario, the only logical conclusion that could be derived is that the assessee company had duly discharged its onus by furnishing all the requisite documentary evidences proving the three necessary ingredients of Section 68 of the Act and that the ld. AO had not drawn any adverse inference on the same. In view of this, we direct the ld. AO to delete the addition made in the sum of Rs.3,46,42,916/- in respect of loan received from M/s. Astute Advisors Pvt. Ltd. (iii) RG BJ Traders Pvt Ltd 1.Loan received during the year Rs 11,17,00,000/- 2.Loan outstanding at the end of the year Rs 2,92,00,000/- 5. We find that assessee had submitted the following documents before the ld. AO with regard to this lender company. (a) Financial statements of this lender company for the Asst Years 2015-16 to 2019-20. (b) Details of shareholders of this lender company for the Asst Years 2015-16 to 2019-20. (c) Ledger account of lender company as appearing in the books of assessee company for the period 1/4/2016 to 31/3/2017 together with the confirmation of the lender by mentioning his PAN details. (d) Bank statements of the lender company for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Revenue had observed that there was a change in shareholding of the lender company and hence the amount given to the assessee by them is undisclosed income of the assessee. This allegation of the Revenue is absolutely without any basis. In this regard, we hold that merely because there has been change in shareholding of the company, it does not mean automatically that the new shareholders have introduced their undisclosed income for acquiring shares. We find that the ld. AO had stated that no interest is paid on the loans borrowed by the assessee company to the lender company. This was countered by the ld. AR by stating that the loan was borrowed in March 2017 and hence, no interest was paid during the year under consideration. However the assessee had paid interest in immediately succeeding year i.e Financial Year 2017-18 including the interest payable for F.Y.2016-17 i.e the year under consideration. In this regard, the ld. AR submitted that the interest paid by the assessee company in A.Y.2018-19. Further, the assessee has repaid the loans commencing from December 2020 and finally repaid on 8.6.2021, which fact is evident from page 748 of the paper book filed before u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no business activity which would justify the receipt of share premium in its books ; that the shareholders of DTPL are nothing but shell entities as they have no capacity to pay such huge premium to DTPL ; that Moon Rise Distributors Pvt. Ltd. and Buds Dealers Pvt. Ltd. are being controlled by Gami Family from 2017 onwards and hence, two companies which held shares of 92.86% in DTPL had sold its shares to the Gami Family ; that by this process, the assessee company and DTPL became related entities ; that Shri Shanker Kumar Khetan had provided accommodation entries to various companies which are listed in pages 17-19 of the assessment order and had earned commission income thereon and this commission income was agreed to be offered to tax pursuant to the search by Shri Shanker Kumar Kethan in the statement recorded u/s.132(4) of the Act. Based on these observations, the ld. AO concluded that all the entities which received funds through the assistance of Shri Shanker Kumar Khetan are shell entities wherein they have received accommodation entries and given accommodation entries to various companies and ultimately that money had flown to the assessee company, hence, the entire ge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced in M/S DTPL as share premium and share Capital) is far fetched, imaginary and unbelievable considering that the asset (loan/ Advance) has been acquired in 2016-17. It was argued that in the period of 2010-11 M/S SGPIL or any member of Gami Family had no interest whatsoever in the alleged benamidar Company or it's alleged share premium contributors. It was argued that the loan advances were made by DTPL to SGIPL only in 2015 (2.7 crore) 2016 (27.88). It was also stated that member of Gami Family became shareholder of M/s Moonrise Dist Pvt M/s Buds Deals Pvt Ltd only in 2016-17. It was therefore argued that prior to 2015-16, there was no nexus of the involvement of SGIPL or members of Gami Family in the transaction of DTPL, and/ or its shareholder companies. This fact is not disputed, however the IO had argued that the share premium of Rs 33 crore is the sources of the said asset and as Shri Gami was not able to prove the genuineness of the companies providing the fund (share premium), the apparent source of the share premium from shareholders can't be accepted and it is logical presumption that the same has been arranged by him/SGIPL. I.O had relied on the financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcumstances, treating this materially important entity as fictitious is not correct, this proposition can't be accepted. 34. The IO Invocation of 2(9)(D) requires that consideration for advances made to M/s SCPIL have been arranged from non- traceable or fictitious person. In the instant case, the direct source of this Advance to M/s SGPL is M/s DTPL which is existing corporate entity albeit controlled by Gami Family . The M/s DTPL had in its various assets as on the day of making this advances including Loans Advances given to other entities (under old management). Actually earlier composite grouping of Loan Advances and current Investments has been replaced by new advance of Rs 33.58 Cr to M/s. SGIPL. Thus under no circumstance can it be said that the consideration has been received from non traceable and fictitious persons. 35. If we can manage to see the woods instead of trees we can appreciate that the Initiating Officer is probably correct when he says that M/s DTPL its Share Holder entities were created in 2010-11 with the purpose to provide accommodation entities to the willing customers. The whole structure was created in 2010-11 and Cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments in various companies in the year 2011. During the year under consideration, DTPL had received back those loans and advances and investments and that money has been utilized by DTPL to make advances to assessee company. The assessee company enters the scene in respect of the financial transaction only in this year by way of receipt of loans and accordingly during the years 2011-2016, whatever financial transactions that were undertaken by DTPL either by way of receipt of monies or by payment of monies, the assessee company was not at all involved. This fact is quite evident on perusal of order of the Adjudicating Authority dated 21/09/2021 which is reproduced supra. There is absolutely no cash trial found with cogent evidences by the ld. AO or by the ld. CIT(A) to prove that unaccounted cash of assessee company had come back in the form of loan from DTPL during the year under consideration. We find that the ld. AO s main grievance is that the shareholders of DTPL had sold their shareholding to Gami Family thereby making assessee company and DTPL related concerns. We are unable to comprehend ourselves as in what way this fact would raise any suspicion or doubt on the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs is enclosed in pages 936 of the paper book filed before us. 6.5. From the above, the following facts emerge:- (a) DTPL had received share capital and share premium from various entities in A.Y.2011-12. This receipt of share capital and share premium from various entities have been accepted to be genuine both in scrutiny assessment proceedings u/s.143(3) of the Act dated 07/05/2013 which is later followed by Section 263 order passed by the ld. PCIT dated 28/03/2016 dropping the revision proceedings. (b) The monies received by DTPL were invested in various entities by DTPL in A.Y. 2011-12. These monies invested by DTPL in A.Y.2011-12 had been received back by them during the year under consideration. (c) This money has been utilized by DTPL to advance loan to assessee company during the year under consideration (d) All the allegations leveled by the ld. AO which has been further affirmed by the ld. CIT(A) had already been considered and reversed by the adjudicating authority of Prohibition of Benami Property Transactions Act, 1988 dated 21/09/2021. 6.5. In view of the above, we have no hesitation to conclude that all the three necessary ingredients of Section 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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