TMI Blog2023 (3) TMI 1434X X X X Extracts X X X X X X X X Extracts X X X X ..... rox. which is much more than investments in shares and mutual funds at Rs. 39.91 Cr. Therefore, it can be safely presumed that interest free funds have been applied for the purpose of making investments in shares and therefore, interest disallowance of Rs. 14,74,087/- is uncalled for and the same is deleted. Disallowance at the rate of 0.5% of the average investment made under Rule 8D(2)(iii) of the Rules the contention of the assessee taking shelter of the judgment of REI Agro Ltd. [ 2022 (3) TMI 1549 - CALCUTTA HIGH COURT] is that such disallowance should be made only in relation to income which does not form part of total income and this can be done only taking into consideration the investment which has given rise to such income which does not form part of total income. In the instant case we notice that the exempt income is not only from dividend but also from long term capital gain from sale of equity shares. No specific details have been filed by the assessee in support of its contention and prayer is made to restore the issue to ld. AO which will keep the issue live. We, on perusal of the audited balance sheet noticed that the investments constitute investment in e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round raised by the assessee. Unreconciled duty drawback - HELD THAT:- As on perusal of the details filed by the assessee in the form of the paperbook as well as details of duty drawback on examining the complete details of the duty drawback found that the alleged sum was sanctioned by the appropriate authority in the subsequent year and has been offered to tax in the return of income for AY 2019-20. The details of income for AY 2019-20 have been filed before us and we, on perusal of the same find merit in the statement made by the assessee and are inclined to hold that the alleged sum of Rs. 2,03,823/- though was applied for duty drawback during AY 2018-19 but it was finally received by the assessee during AY 2019-20 after being sanctioned by the appropriate authority and the same has been duly offered to tax in the income for AY 2019-20. Therefore, no addition is called for unaccounted duty drawback. Therefore, ground raised by the assessee is allowed. Disallowance of bad debts claimed for alleged non-submission of the proof - HELD THAT:- Since the sales have been duly accounted for and certain portions of the sundry debtors which could not be recovered have been claime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Rajpal Yadav, Vice President And Dr. Manish Borad, Accountant Member For the Assessee : Sh. N.S. Saini, Adv. For the Revenue : Sh. Subhrajyoti Bhattacharjee, CIT(DR) and Smt. Ranu Biswash, D/R. ORDER PER MANISH BORAD, ACCOUNTANT MEMBER : The captioned appeals filed by the assessee pertaining to the Assessment Years (in short AY ) 2012-13, 2017-18 2018-19 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the Act ) by ld. Commissioner of Income Tax (Appeal), NFAC, Delhi [in short ld. CIT(A) ] evenly dated 16.09.2022 arising out of the assessment order framed u/s 143(3) of the Act dated 24.03.2015 for AY 2012-13, 22.12.2019 for AY 2017-18 25.03.2021 for AY 2018-19. 2. The assessee is in appeal before the Tribunal raising the following grounds: ITA No. 641/KOL/2022 for AY 2012-13 : 1. The impugned order passed by the Ld. CIT(A) is bad in law, illegal and arbitrary, the same deserves to be quashed/annulled and set aside. 2. On the facts and the circumstances of the case and in law, the Hon'ble CIT(A) erred in upholding the action of the Ld. AO in disallowing a sum of Rs. 33,86,993/- u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition u/s 68 of the Act totalling Rs. 8,61,00,000/-. 3. For that on the facts and in the circumstances of the case, the appellant having furnished relevant documentary evidences establishing the identity and creditworthiness of the share subscribers and proving the genuineness of transaction the authorities below were unjustified in making addition of Rs. 8,61,00,000/- as income of the appellant chargeable u/s 68 of the Act. 4. For that on the facts and in the circumstances of the case, the CIT(A) was unjustified in upholding the action of the AO in making addition of Rs. 8,61,00,000/- and taxing the same at special rate u/s 115BBE of the Act. 5. That the ld. CIT (A) has also erred in confirming the addition, especially when no cross-examination of Shri Raj Kumar Kothari was allowed to the assessee and, thus, the statement recorded at the back of the assessee has no evidentiary value. 6. That the confirmation of addition without allowing the cross-examination of the assessee is against the principles laid down by the Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com and, thus, the sustaining of addition, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,170/- declared in the e-return filed on 28.09.2012 pertaining to AY 2012-13. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) 142(1) of the Act. Assessment u/s 143(3) of the Act completed on 24.03.2015 after making various additions/disallowances and income assessed at Rs. 10,19,05,350/-. The additions made by ld. AO were challenged by the assessee but he failed to get any relief from ld. CIT(A). Aggrieved, the assessee is now in appeal before this Tribunal raising following three issues: i) Disallowance u/s 14A of the Act at Rs. 33,86,993/- (ground nos. 2 to 5) ii) Disallowance u/s 14A of the Act added to the book profit for the purpose of computing the income u/s 115JB of the Act (ground No. 6) iii) Addition u/s 68 of the Act for unexplained share capital at Rs. 1,62,80,000/- (ground nos. 7 to 9) 5. As regards the first issue for disallowance u/s 14A of the Act at Rs. 33,86,993/- facts in brief are that the assessee earned exempt income in the form of (i) dividend at Rs. 43,40,324/-, (ii) long term capital gain on venture capital fund at Rs. 2,43,893/-, (iii) long term capital gain on shares at Rs. 1,13,56,149/-. 6. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Supreme Court of India in the case of Reliance Industries Ltd. (supra) affirmed the view taken by the Tribunal that if interest free funds available with the assessee are sufficient to meet its investment then it could be presumed that investments were made from the interest free funds available to the assessee. Applying this ratio on the issue in the instant appeal we find that the assessee had interest free funds in the form of share capital and reserve and surplus as on 31.03.2012 at Rs. 73.79 Cr approx. which is much more than investments in shares and mutual funds at Rs. 39.91 Cr. Therefore, it can be safely presumed that interest free funds have been applied for the purpose of making investments in shares and therefore, interest disallowance of Rs. 14,74,087/- is uncalled for and the same is deleted. 9. As regards the disallowance at the rate of 0.5% of the average investment made under Rule 8D(2)(iii) of the Rules the contention of the assessee taking shelter of the judgment of the Hon'ble Jurisdictional High Court in the case of REI Agro Ltd. (supra) is that such disallowance should be made only in relation to income which does not form part of total incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computation of income. Further, the AO while determining the income under Minimum Alternate Tax (MAT) as per the provisions of section 115JB of the Act, has added the disallowance made under the normal computation of Income under section 14A r.w.r. 8D of Income Tax Rule for Rs. 2,11,98,182/- in pursuance to the clause (f) of explanation 1 to section 115JB of the Act which was restricted to Rs. 11,37,500/- by the ld. CIT-A. However, we note that in the recent judgment of Special Bench of Hon ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962. The ratio laid down by the Hon ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the assessee is partly allowed. In the result, the CO. of the assessee is partly allowed. 11. Respectfully following the above decision, we are inclined to hold that so far as the disallowance u/s 14A of the Act which is to be considered for computing total income under the normal provision of Income Tax Act and it cannot be considered for the purpose of computing book profit u/s 115JB of the Act, however, taking note of Clause f to Explanation 1 of Section u/s 115JB of the Act which provides that for purpose of compu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. During the course of assessment proceedings ld. AO in order to verify the genuineness, creditworthiness and identity of the share subscribers issued summons u/s 131 of the Act to which written compliance was made enclosing therewith all the necessary documents but there was no physical appearance of the managing persons of the alleged share subscribers. All the share subscriber companies are registered as non-banking finance companies (in short NBFC ) but since the principal officers of the share subscriber companies failed to appear, ld. AO opined that the assessee has not discharged his onus to explain the alleged share capital and share premium and thus, fail to bring cogent material to substantiate the creditworthiness and made the addition u/s 68 of the Act at Rs. 1,62,80,000/-. When the matter was carried before ld. CIT(A) it was submitted by the assessee that out of the six share applicants two share applicants namely Vivek Tracom Pvt. Ltd. Stardox Vinimay Pvt. Ltd. gave a sum of Rs. 35 lakh 15 lakh respectively in the earlier year and shares are allotted during the year under consideration. Further, it was submitted that all the share subscriber companies have ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds 6 7 cannot be sustained and accordingly dismissed. The order of the AO in this regard is therefore confirmed. 14. Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee referring to the statement of facts as well as brief notes stated that the assessee had filed necessary documents in the form of bank statement, income tax return, audited financial statement, PAN card, proof of registration as nonbanking finance company which are sufficient enough to prove the identity and creditworthiness of the share subscribers and genuineness of the transaction. It is also submitted that all the share subscribers replied to the notices issued by ld. AO and directly filed the details. It is also submitted that out of the six share subscribers two had given part of the share application money in the preceding year itself which has not been disputed by Revenue authorities. Except for not appearance of principal officers of the subscriber companies there is no default at the end of the share subscribers and of the assessee. It is also submitted that as regards the share premium is concerned the issue involved is for AY 2012-13 and the amendment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of ITO, Ward-6(1), Kolkata -Vs- M/s Coxis Finance Investment Pvt. Ltd in I.T.A. No. 649/Kol/2020, Order dated 10.11.2022. 7. Decision of Hon ble Kolkata C Bench of the Tribunal in the case of ITO, Ward-4(4), Kolkata -Vs- M/s KDG Projects Pvt. Ltd in I.T.A. No. 711/Kol/2019, Order dated 02.11.2022. 8. Decision of Hon ble Delhi High Court in the case of CIT Vs Nipun Builders Developers (350 ITR 407 (Del.) 9. Decision of Hon ble Kolkata Bench of the Tribunal in the case of M/s. Cygnus Developers (I) Pvt. Ltd in ITA No. 282/Kol/2012 Order dated 02.03.2016 10. Decision of Hon ble Allahabad High Court in the case of CIT Vs. Raj Kumar Agarwal ITA No 179/2008 order dated 17.11.2009 11. Decision of Hon ble Bombay High Court in the case of CIT-1 Vs Gagandeep Infrastructure (P) Ltd reported in [2017] 247 Taxman 245 (Bom) 12. Decision of Hon ble Bombay High Court in the case of Pr CIT Vs Apeak Infotech Others reported in [2017] 397 ITR 148 (Bom) 13. Decision of Delhi High Court in the case of Commissioner of Income Tax vs. Value Capital Services P. Ltd. reported in (2008) 307 ITR 334 (Delhi) 14. Decision of Hon ble Calcutta High Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has discharged the primary onus casted upon him since all the share subscribers were asked by ld. AO to file the details and in compliance to the summons u/s 131 of the Act all the details including PAN card, certificate of incorporation, NBFC certificate, allotment advice, article of association, income tax return, information letters along with share application forms, bank statement of the share subscribers and audited financial statements were filed. A chart has been filed before us which is in consonance with the financial details of the share subscribers filed in the paper book containing 232 pages for AY 2012-13 and this chart depicts the share capital net worth of the share subscribers, investment made in the share capital of the assessee company, turnover and profit before tax of the share subscribers and the same is reproduced below: Detail of Share Subscriber Detail of Creditwortiness of Share Subscriber Name of the Party PAN No of Shar es Share Capital Net worth Share Capital Subscribed Premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e norms of the Reserve Bank of India. Ministry of Corporate Affairs also keeps regular watch on the companies registered with the Registrar of Companies. Annual returns are to be filed. Income tax returns have also been filed by the share subscribers. So, one cannot dispute the identity of the share subscribers and since genuineness of the transactions is proved with the good financials of the assessee company which seems to be a good investment for the share subscribers and creditworthiness is proved with the funds available with the share subscribers. 19. Therefore, under these given facts and circumstances invoking provisions of Section 68 of the Act was uncalled for. We find support from the recent decision of this Tribunal in the case of ITO vs. M/s. Kemex Engineering (P) Ltd. in ITA No. 75/Kol/2021 order dated 01.02.2023 wherein also the identity, creditworthiness and genuineness of some of the share subscribers were doubted by the Revenue authorities and this Tribunal after examining the facts in detail held in favour of the assessee observing as follows: 7. We have heard the rival contentions and perused the material available on record and have given our thoughtful ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the respective subscribing companies was invested in assessee s equity shares. The investments made by each of the share subscribers were paid by way of account payee cheques and/or RTGS and there was no prior cash deposit in their bank accounts. In view of the aforesaid facts it can be safely inferred that the assessee had discharged its onus of substantiating the creditworthiness of the shareholders. The shareholders had also furnished copies of their share allotment advices. They had also explained the nature of their respective source of funds. All these facts considered cumulatively substantiate the genuineness of the transactions involving subscription of share capital. 4.6. It is noted that in the impugned order much emphasis was placed on the act that the shareholders did not respond to the notices u/s. 131. I however, find that although the share subscribing companies did not appear before the AO yet the material documents requisitioned by the AO in his notice u/s. 131 had already been furnished before the AO by the shareholders. From the perusal of the assessment order, I find that save except making an assertion that the Directors of the share applicant compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. The judgment in case of Gagandeep Infrastructure (P) Ltd. (supra) would be applicable in the facts and circumstances of the present case. 4.8. There is per se no quarrel with the proposition put forth by the AO that m tax proceedings the AO is not required to accept apparent as real. The AO has both duty as well as obligation to bring out the truth and present the real facts. For that purpose the AO is permitted to undertake investigation and enquiries so as to unearth the actual and real facts. The AO has been given power by the Legislature to prove that apparent is not real and thereafter make the assessment with reference to actual state of affairs. There is also no denial that the AO while assessing the income is permitted to take into consideration the human probabilities and if he proves that the conduct of the parties is not in conformity with the actions of prudent person then he may overlook the form of the transaction and find out the substance of the transaction and determine the tax consequence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness of the share sub subscribers and the genuineness of the transactions. I therefore hold that the AO was not justified in making the impugned addition of Rs. 1,82,50,000/- u/s. 68 of the Act which is accordingly deleted. These grounds are therefore allowed. 7.3. Before arriving at our finding, we refer to the following judicial precedents to buttress our observations and conclusions: i) The decision of Hon ble Jurisdictional High Court of Calcutta in the case of CIT v. Dataware Pvt. Ltd. in ITAT No. 263 of 2011 dated 21.09.2011 wherein Hon ble jurisdictional High Court held that After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. ii) Decision of Hon ble Madras High Court in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere non-appearance of directors is no basis for invoking provisions of section 68 of the act for which he placed reliance on the decision of Hon ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) wherein it was held as under: In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute that the assessee has filed all the relevant documents of the share subscriber companies and further, in order to prove the source of source, copies of bank statements, audited balance sheets of all the nine subscriber companies are placed on record. 10. As far as the decision of Coordinate bench of ITAT, Kolkata in the case of Bishakha Sales Pvt. Ltd. (supra) referred by the Assessing Officer in making the addition, in our view, it does not support the addition as the said decision is delivered in the context of proceedings u/s 263 of the Act on the issue of enquiry regarding huge premium received on share application. 11. Further, in respect of ground nos. 3, 4 and 5, reference to the judgment of Hon ble Supreme Court in the case of NRA Iron Steel Pvt. Ltd. (412 ITR 161) is found to be distinguishable on facts in as much as in the said decision, Ld. AO has made extensive enquiries and some of investors were found to be non-existent. Upon going through the facts involved in that judgment, it is noted that, in the decided case the AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent, which is certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cash as against the supply of bidis. On failure of production of those creditors summons were issued under section 131 but none of the creditors appeared and in some cases summons were returned with the endorsement made by the postal authority no such person concerned was found . The Commissioner (Appeals) found that there were sufficient materials to hold that the cash -credits received by the assessee were genuine and these were received as against the supply of bidis. During the same assessment year or subsequent assessment year the necessary challans, vouchers, and other confirmatory letters were also considered by the Commissioner (Appeals). After analysing everything he accepted the explanation and also the evidence of the creditworthiness of the creditors and granted relief. The Tribunal found that the Commissioner (Appeals) had erroneously held that the summons were -issued after assessment was done. Only on that ground it was held that the assessee could not establish by producing evidence that the credit was -received from customers. The order of the Income-tax Officer was restored. On appeal to the High Court: Held, allowing the appeal, that the Tribunal had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,53,560/-. The difference of the two i.e. Rs. 2,03,823/- was added to the income of the assessee for unaccounted duty drawback. We, on perusal of the details filed by the assessee in the form of the paperbook containing 97 pages as well as details of duty drawback as on 31.03.2020 filed vide paperbook dated 30.01.2023 on examining the complete details of the duty drawback found that the alleged sum of Rs. 2,03,823/- was sanctioned by the appropriate authority in the subsequent year and has been offered to tax in the return of income for AY 2019-20. The details of income for AY 2019-20 have been filed before us and we, on perusal of the same find merit in the statement made by the assessee and are inclined to hold that the alleged sum of Rs. 2,03,823/- though was applied for duty drawback during AY 2018-19 but it was finally received by the assessee during AY 2019-20 after being sanctioned by the appropriate authority and the same has been duly offered to tax in the income for AY 2019-20. Therefore, no addition of Rs. 2,03,823/- is called for unaccounted duty drawback. Therefore, ground No. 2 raised by the assessee is allowed. 28. As regards ground nos. 3, 4 5, they rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 33. The facts of the case are that the assessee has taken an unsecured loan from 7 body corporates for an amount of Rs. 8,61,00,000/-, the details are as follows: Sl No Name of the party PAN Opening balance Loan Taken (In Rs. ) Closing Balance (In Rs. ) Interest (In Rs. ) 1 M/s Prativa Suppliers Pvt Ltd. AAFCP2862F NIL 18250000 500000 277644 2 M/s Divya Electronics Pvt Ltd AAACD9721C NIL 2000000 2000000 159781 3 Albright Viniyog and Nirman Pvt. Ltd AAECA0590N NIL 7800000 NIL 147551 4 Rajshree Developer Entrepreneurs Pvt Ltd AABCR2000D NIL 11200000 1000000 289134 5 Zigma Elec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation. 37. The Assessing Officer observed that filing corroborative documentary evidence such as KYC Forms, loan confirmations, copy of bank statements does not make a sham transaction genuine. Thereafter he relied on several judgments of different High Courts wherein the addition of loans and share capital u/s 68 was held as justified. Ld. AO accordingly made the addition u/s 68 of the Act for unexplained unsecured loan of Rs. 8.61 Cr and also disallowed the interest paid on alleged loan at Rs. 28,62,863/-. 38. Aggrieved, the assessee preferred appeal before ld. CIT(A) and reiterated the submissions filed before ld. AO stating that the loans were taken for the immediate business needs from seven parties and major portion of the alleged loan was repaid during the year itself. Notices given by ld. AO u/s 133(6) of the Act to the alleged cash creditors were duly served and they all have responded to ld. AO enclosing all the relevant details to prove the identity and creditworthiness of the lenders and genuineness of the transaction. Further, with regard to the statement of Shri Rajkumar Kothari recorded on 02.03.2016 and heavily relied by ld. AO it is submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Counsel for the assessee firstly referred to the written submissions filed before ld. CIT(A) and the same reads as follows: For these grounds, it is submitted that the assessee took short terms loan of Rs. 8,61,00,000/- for immediate business needs from seven parties during the year as stated in the assessment order out of which loan of Rs. 8,36,00,000/- was repaid during the year itself as appears from para 5.2 of the assessment order. The balance payable as at the end of the year was Rs. 35,00,000/- which too was repaid in the next year. In support of the said loans, the assessee filed loan confirmation letters from all the seven along with their PAN and address, duly signed by the director Sri Rajkumar Kothari or Smt. Sangeeta Kothari. The loan was received by account payee cheques so also the same was repaid by account payee cheques. The assessee paid interest on the loan on which tax was deducted at source, which tax was claimed by the creditors as tax credit in their returns and such tax credit was allowed, (the copy of loan confirmations attached) The Ld AO issued notice u/s 133(6) to all the seven parties. A sample copy of the notice u/s 133(6) is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. For the aforesaid submissions the assessee invites the attention to the judgement of the Hon ble ITAT C Bench Kolkata in the case of M/s. Eastern Trade Centre Vs. ACIT, Circle-34, Kolkata wherein the Hon ble ITAT deleted the addition of loan amount and consequently the interest expense on the same allegation of the loan being bogus merely relying on the alleged statement given by Shri Raj Kumar Kothari before DDIT (Inv), Unit-3(1) on 02.03.2016 which were later retracted. The copy of the said order is enclosed herewith. Further, the Ld. AO has alleged in its assessment order that for knowing the whereabouts as well as service of notice of summon u/s. 131 to be given to loan creditor companies, a departmental inspector was deputed but as per the Inspector s report no such companies was found at the given address. However, it is strange that when notices u/s. 133(6) of the Act could be serviced on the loan creditors how can notice u/s. 131 of the Act could not. Also, all the documents needed to prove the genuineness of the transactions was submitted before the Ld. AO namely the copies of loan confirmations, bank statements audited accounts, ROC documents which showed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the income declared by the loan creditors. From the balance sheet of the shareholders the following important points may be noted: Name Share capital and reserves Any other feature of the company Prativa Suppliers P Ltd. 1,59,86,136/- Profit during the year 4,97,372/- Divya Electronics P Ltd. 13,90,60,593/- Profit during the year 16.52 lakhs Albright Viniyog and Nirman P Ltd. 20,59,621/- profit during the year 3.66 lakhs Rajshree Developer Entrepreneurs Pvt Ltd. 11,51,78,112/- Profit during the yar 38,94,021/- Zigma Electrics P Ltd. 7,62,16,792/- includes bank balance of 54,63,682/- Paritosh Electricals P Ltd. 12,97,09,739/- Profit during the year 64,59,932/- Potential Electricals and Electronics P Ltd. 11,38,23, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, provisions of Section 68 of the Act invoked. Ld. CIT(A) has confirmed the addition made by ld. AO. 43. Before us, the assessee has made two-fold contentions; firstly, stating that the principle of natural justice has not been followed by the lower authorities and no opportunity to cross examine Shri Rajkumar Kothari was given by ld. AO whose statement has been recorded for making addition in the hands of the assessee and also ld. AO ignored the fact that Shri Rajkumar Kothari has retracted its statement dated 02.03.2016 by filing an affidavit before the Investigation Wing. Second-fold of the contention is on merit stating that the assessee company is carrying out regular business activities and the income for the year is declared at Rs. 39,59,66,130/-. For the business needs unsecured loan from body corporates was taken. Tax deducted at source on the interest paid to such body corporates and out of the unsecured loan of 8.61 Cr taken during the year, the assessee had repaid 7.81 Cr during the year itself and the balance sum of Rs. 80 lakh has been paid subsequently. 44. It is submitted before us by ld. Counsel for the assessee that the Assessing Officer has relied on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of principles of natural justice. It is a serious flaw which renders the order a nullity. 47. In the case of Kishinchand Chellaram (AIR 1980 14 SC 2117), the Hon'ble Supreme Court of India on the aspect of cross-examination held as follows: It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him. 48. The Hon ble Calcutta High Court in Eastern Commercial Enterprise, (1994) (Cal) [210 ITR 103] at page-111: Held as under: Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied with the contents of all such evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to the notice of the A.O that they are legal entities/corporate registered with the Registrar of Companies (ROC) and have their respective registered addresses in the public domain. The amounts in question were credited through banking channels. The names, PANs and loan amounts and the interests paid for which TDS has been deducted are as under: Sl. Name PAN Loan as on 31.03.2015 Interest Paid 1 M/s. Bhiksu Barter Pvt Ltd. AABCB1315M 3,00,000 1,726/ 2 M/s. Divya Electronics Pvt Ltd. AAACD9721C 1,35,00.000/- 9,20,959/ 3 M/s. Paritosh Electricals Pvt Ltd. AABCP5013E 41,50,000/- 3,84,123/ 4 M/s. Potential Electricals Electronics Pvt Ltd. AABCP5014D 40,00,000/- 4,65,205/- 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities controlled by him. Further, according to the Ld. AR, Shri Raj Kumar Kothari s confession that he is an entry provider was the basis of branding the lender companies as shell companies, however it has been brought to our notice that Shri Kothari had retracted the same within 10 days wherein he has sworn an affidavit before the First Class Magistrate of Kolkatta and for proving that, the Ld. AR drew our attention to the page 45 to 48 of the paper-book from where we note that he has in his sworn affidavit, has alleged that he was whisked away by the officers of the Department along with policemen on 02.03.2016 and they kept him in their Office till late night; and by exerting threat and coercion has extracted some statements/confession/admission. Elaborating further he says that officers threatened to conduct search and survey in his companies and kept on reminding him that they will ruin him and his family. In the back-drop of the aforesaid threat and coercion, he made the statement in accordance to their wishes, and which was not the truth of the contents recorded. And we note that within 10 days (after giving the statement to Investigation Wing), he has retracted the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have accepted the transactions shown by them with the assessee company, then the A.O of the assessee company cannot impute creditworthiness of the lender company and referred to the decision of the Hon ble Calcutta High Court in CIT vs. M/s Dataware Private Limited in ITAT No. 263 of 2011 Date: 21st September, 2011 GA No. 2856 of 2011 held as under: In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act. the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tracom Pvt Ltd. 15,82,29,903 3,46,69,711 80,00,000/ 27,08,014/- 9 Rajshree Developer Enterprises Pvt Ltd. 10,58,86,318 1,38,12,003 58,00,000/- 1,32,553/ Total 4,51,00,000/- 53,70,163/- 15. Thus from a perusal of the above details, it can be seen that the lender companies have sufficient creditworthiness to give loan to the assessee company and cannot be termed as shell companies by simply basing his (A.O) conclusion on the strength of selected questions and answers given by two persons and that too recorded on third party proceedings and which were admittedly recorded behind the back of the assessee. Moreover, Shri Raj Kumar Kothari has retracted the statement within ten (10) days as discussed supra and has alleged threat and coercion on the part of officers who elicited the statement as they wished, so the statement/truth of the contents of the statement cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Therefore, no addition was warranted. To come to my aforesaid decision, I rely on the ratio of the decision of the Hon ble Supreme Com! in the case of CIT Vs. M/s. Odeon Builders Pvt. Ltd. in Review Petition (C) Diary No. 22394 of 2019 in Civil Appeal Nos.9604 9605 of 2018 dated 21.08.2019 wherein the Hon ble Supreme court has held as under: We have perused the review petition and find that the tax effect in this case is above Rs. 1 crore, that is, Rs. 6,59,27,298 Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs. 1 crore. However, ongoing through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866 - was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d [the interest paid by assessee to lenders] Rs. 53,70,163/- is confirmed. So, the Revenue s appeal stands dismissed. 18. In the result, the appeal of the Revenue is dismissed. 51. We, therefore, respectfully following the decision of this Tribunal referred herein above and other judgments of Hon'ble Courts referred (supra) are of the considered view that the legal issue raised by the assessee deserves to be allowed as the basis of the impugned addition is the statement of Shri Rajkumar Kothari u/s 131 of the Act dated 02.03.2016. No opportunity of cross examination was provided to the assessee by ld. AO and also the said statement was retracted within ten days by Shri Rajkumar Kothari and therefore, making the addition based on such retracted statement and that too without giving any opportunity of cross examination to the assessee in whose case addition has been made on the basis of a statement of a third person deserves to be deleted and, thus, the legal issue raised by the assessee challenging the impugned addition is allowed. 52. Now, we move on to deal with the merits of the case we notice that the unsecured loan was received from 7 body corporates which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,75,83,295 64,59,932 19,29,582 7 Potential Electricals And Electronic Pvt. Ltd. U27203WB199 5PTC073361 60,85,000 10,77,38,116 11,38,23,116 4,71,06,041 30,09,856 8,99,050 53. Further, we notice that out of the alleged loan of Rs. 8.61 Cr major portion of the loan i.e. 7.81 Cr has been repaid during the year itself and the status of the loan repaid and closing balance of the alleged loan is tabulated below: Sl. No. Party Name PAN Address Opening Balance Loan taken Amt. Loan repaid Amt. Closing Balance 1 Partiva Suppliers Pvt Ltd AAFCP2862F 32 Ezra Street, 4th Floor, Kolkata: 700001 - 1,82,50,000 1,32,50,000 50,00,000 2 Divya Electronics Pvt Ltd AAACD9721C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... despite the debit entries being carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT(A). 55. Further, it is submitted by ld. Counsel for the assessee that section 68 of the Income-tax Act, 1961, deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The crucial words in the provision are the assessee offers no explanation . This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee explains the credit by placing evidence regarding the identity of the investor or lender along with their confirmations, bank stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee s transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. A bare reading of Section 68 of the Income Tax Act, 1961, suggests that for a sum so credited to be charged to income-tax, as the income of the assessee of the previous year by the A.O., the following have to be present: i) there has to be an amount credited in the books maintained by the assessee ; ii) such credit has to be a sum of money received during the previous year; and iii) either a) the assessee offers no explanation about the nature and source of such credits found in the books or b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. Thus, it is clear from above that in order to establish the receipt of the sum as unexplained cash credit, as required under Section 68 of the Income-tax Act, 1961, the assessee must satisfy three conditions, viz., (i) identity of the creditor, (ii) genuineness of the transaction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11348). In this regard a copy of the confirmation of loan given by Vivek Tracom Pvt Ltd to the assessee is enclosed at page 113 of the paper book and a copy of the bank statement of Vivek Tracom Pvt. Ltd and Eastern Trade Centre evidencing the loan given to the assessee and its receipt by the assessee is enclosed at page 114-116 the paper book. The company is a regular income tax assessee .A copy of the ITR Acknowledgement and Audited accounts of Vivek Tracom Pvt Ltd is being enclosed at pages 91 to 112 of the paper book. As regards the source of Rs. 20,00,000/- it is submitted that Vivek Tracom Pvt Ltd had received interest on loan from the following companies: a. Samridhhi Investments Co Pvt Ltd Rs. 4,06,110/- b. Chandan Mal Raijada Rs. 90,247/- c. Vineet Enterprises Rs. 19,971/- d. Ujjal Business and Investment Pvt Ltd Rs. 1,80,493/- Apart from the above-mentioned interest received by Vivek Tracom, it had also received an amount of Rs. 10,00,000/- from Amco Electrical Eng Co. on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 20,00,000/- it is submitted that Machinery Agencies (India) had taken a loan of Rs. 20,00,000/- from Ranbhumi Marketing Pvt Ltd. A copy of the confirmation of loan taken by Machinery Agencies (India) is enclosed at page 126 to 129 paper book. The refund of loan of Rs. 20,00,000/- from Machinery Agencies (India) is evident from the bank statement of Ranbhumi Marketing Pvt Ltd as is enclosed at page 131-132 of the paper book. Thus, all the transactions took place through proper banking channels and the documents submitted also duly prove the source of source of the funds. We note that Ld AO and CIT(A) ignored all of the said documents submitted before them and they merely relied upon the statement of Shri Raj Kumar Kothari without considering the fact that it was retracted by him before the 1st Class Magistrate ( a copy enclosed at pages 9 to 12 of thep/b) from which it is evident that the DDIT had acted against the principles of law by threatening and coercing the said Shri Raj Kumar Kothari to give false statements. The DDIT had also acted in violation of law by dictating the statements and making the witness (Shri Raj Kumar Kothari) sign on it forcefully without even let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,00,000 9. R.C Suppliers Pvt Ltd 1,85,026 TOTAL 38,59,987 The Ld Counsel for the assessee submitted before us that with regard to the interest paid on outstanding loans taken in earlier year from the parties mentioned in the table above, the confirmations of loans from these parties and their bank statements showing the same are enclosed at pages 137 to 148 of the paper book. The Income Tax Return Acknowledgements and Audited accounts of the parties are also enclosed at pages 155 to 325 of the paper book. It is also to be noted here that during the earlier years in which the loans were taken, the transactions were not disputed during the course of assessment of those years. Therefore with the submission of the said documents the assessee's onus of proving the identity of the parties and genuineness of its transactions with the parties [which had been disputed by the Ld AO and CIT(A)] stands duly fulfilled. The department having accepted the transaction of loans in the past years cannot dispute the payment of interest in a subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder is an individual, some documents will have to be filed or the shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of registered address or PAN identity, etc., can be furnished. When the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction could be copies of the shareholders register, share application forms, share transfer register, etc. As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinise the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case, are of the considered view since the assessee has successfully discharged its onus of proving the identity of the loan creditors which are body corporates in the instant case duly registered with Ministry of Corporate Affairs, having PAN and regularly filing the returns, further creditworthiness of the transaction is proved with the fact that they have been carried out through banking channel and sufficient funds in the form of share capital and reserve and surplus available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is proved with the fact that the assessee company is carrying out regular business activity and huge turnover is achieved year by year and for business needs the said loan has been taken and the major portion of the unsecured loan has been repaid in the year itself and only a minor sum was paid in the subsequent year and all transactions were carried out through banking channel, interest paid on the loans and tax at source has been deducted and duly reflected by the alleged loan creditors in their income tax return and therefore, we fail to find any justification in the action of ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has made donation of Rs. 1.25 crores on 20.01.2016 by RTGS dated 19.01.2016 through UCO Bank which is evident from page 18 of PB which is received by Shree Charity Trust which was 80G(5)(vi) certificate of the Department dated 15.01.2009 placed at page 17 of PB. The assessee has also made payment of Rs. 10 Lakhs to Pt. Jashraj Music Academy Trust which is found placed at page 22 23 and the approval u/s 80G (5)(vi) of the Act in respect of Pt. Jashraj Music Academy Trust is found placed at page 19 of PB dated 30.03.2012 given by Director of Income Tax (Exemption). Therefore, since the assessee satisfies the condition u/s. 80G of the Act of the donees, the assessee s claim for deduction of CSR expenses/contribution u/s 80G of the Act was allowed after enquiry by the AO. Thus we are of the opinion that the action of the AO allowing the claim u/s. 80G of the Act is a plausible view and is in line with the ratio of the decision of Tribunal cited (supra). Therefore we find that the Ld. PCIT has not been able to make out a case that on this issue raised by him, the AO's order is erroneous as well as prejudicial to the revenue. So the jurisdictional fact as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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