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Income Tax Appellate Tribunal, DELHI BENCH ‘B’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the Revenue is directed against the order of ld. CIT (Appeals)-4, New Delhi dated 27.09.2019 pertaining to the Assessment Year 2016-17.
2. The ground of appeal taken by the Revenue read as under :-
“Whether the CIT (A) has erred on facts and circumstances on deleting the addition of Rs.11,63,35,000/- made by AO u/s 68 of the Income Tax Act, 1961?” not carry out any commercial business and was in the process of setting up its plant for juices, beverages and water. AO noted that in the audited balance sheet, assessee claimed to have received unsecured loans from Shri Virender Kumar Soni, Shri Rajendra Kumar Soni and Shri Vikas Kumar Soni as under :-
Shri Virender Kumar Soni Rs.3,68,50,000/- Shri Rajendra Kumar Soni Rs.4,50,10,000/- Shri Vikas Kumar Soni Rs.3,44,75,000/- Total Rs.11,63,35,000/-
AO further noted that from confirmation of loan account of Rajendra Kumar Soni, it was found that total unsecured loan amount was Rs.3,44,75,000/- include cash loan transaction of Rs.4,10,000/-. In order to verify the genuineness of the loan, creditworthiness and identity of the creditor, AO called information/s 133 (6) from these persons. These notices were sent through speed post to the assessee. The information sought from all these persons u/s 133 (6) was as under :-
Please explain as to how you are related to MIs High Street Food Services (P) Ltd. and as to why you have advance loan to the said company.
Please explain in detail about all types of transactions carried out with M/s High Street Food Services (P) Ltd, during the AY 2016-17.
Explain in detail with supportive documents about the source of the amount for advancing as loan.
4. Furnish copy of bank statement for the FY 2015-16 relevant to AY 16-17 with narration to each and every deposit and withdrawal entry.
No response was received from the creditors. AO issued show- cause notice to the assessee. In response thereof, copy of confirmation of loan account was filed at the dak counter by Shri Vikas Kumar Soni, Shri Virender Kumar Soni and Shri Rajendra Kumar Soni along with copy of ITR, computation of total income and copy of bank statement from which money was transferred to the assessee company. AO noted that from perusal of the bank statement, it is revealed that either on the same day or one day before amount through cheque or transfer has been deposited in the creditors account from where it was transferred to the assessee company in the form of loan. AO noted that in the notice u/s 133 (6), all the creditors were specifically requested to furnish copy of their bank statement with narration to each and every deposit and withdrawal entry.
But all the creditors had simply filed copy of bank statement without any clarification to the source of funds deposits in their bank account. AO further noticed that these parties did not have matched the creditworthiness with the amount of loan advanced by them to the assessee. The gross total income declared by them is as under :- ./2019 Name of the creditor Gross total Exempt income income Shri Virender Kumar Soni Rs.12,29,734/- Rs.82,06,987/- Shri Rajendra Kumar Soni Rs.12,43,352/- Rs.98,32,022/- Shri Vikas Kumar Soni Rs.11,54,108/- Rs.82,75,065/-
Further, AO noted that from the confirmation of loan account submitted, Shri Rajendra Kumar Soni only submitted banking transaction entries, hiding the cash loan entries as mentioned above. He further noted that apart from this, opening balance in confirmation of loan account submitted by the assessee and furnished by Shri Rajendra Kumar Soni did not tally. From the aforesaid anomaly, AO noted that creditworthiness of all the creditors has not been established. Further, in absence of any detail regarding the source of amount credited in the bank account of the creditors either on the same day or day before, the genuineness of the transaction has also not been established. AO proceeded to refer to case laws and added the amount as unexplained credit in the hands of the assessee u/s 68 of the Income-tax Act, 1961 (for short 'the Act'). Thus, addition of Rs.11,63,35,000/- was made.
Upon assessee’s appeal, ld. CIT (A) proceeded to examine the documents and with regard to each of the parties, he gave his findings as under :- “Lender 1- Sh. Rajendra Kumar Soni - Rs. 4,50,10,000/- During the year under consideration, the lender Sh. Rajendra Kumar Soni has granted a loan of Rs. 4,50,10,000/- to the assessee ./2019 company. The lender has reported net income amounting to Rs. 1,10,66,564/- which includes an exempt income of Rs. 98,31,601/-. From the perusal of the exempt income transaction, it is noted that the same is on account of sale of long term capital asset, sale proceed on which are Rs.1,20,42,497/-. Furthermore, the lender statement of affairs also reflect a capital balance 4,75,33,280/- and also reflects that he holds two properties and many investments. Further, the bank statement of the lender is also analysed in light of the finding of the AO from which it is noted that the credit entries appearing in the account of the lender's bank account, just before giving the loan to the assessee company, is mostly credit from sweep in from FD Account. Certain banks provide this facility of Sweep in and Sweep Out wherein, the excess balance in saving bank account is converted into FD and as soon as any fund requirement comes in, the same is sweeped into the saving bank account. Most of the entries just before the grant of loan represent sweep in entries. Furthermore, other credits are mostly from finance companies, wife/HUF of the lender as appearing in the bank statements and ledger accounts. The HUF and wife of the lender are filing their IT Returns. As regards source of cash totaling to Rs.4,10,000/- received and repaid by the appellant company, the appellant has filed a copy of cash book and balance sheet of the lender showing availability of amount lent which is from cash in hand and part salary received from one of the companies he manages.
6.5.1 Thus, from the aforesaid, I am of the view that the assessee has sufficiently established the identity, genuineness and creditworthiness of the lender. The documents furnished on record clearly establish the three limbs of sec. 68 of the Act. Thus, the addition made by the AO is deleted.
6.5.2 However, having said so, it is noted that out of the above, the assessee company has received Rs.4,10,000/- loan amount in cash and also repaid the same in cash, which is against the provisions of Section 269SS and Section 269T of the Act. This is an admitted fact that the appellant company has received and repaid loan of Rs 4,10,000/- in cash. Therefore, the aforesaid transaction is fit for levy of penalty under Section 271D and Section 271E of the Act. The Jt. Commissioner of Income Tax is empowered to initiate and impose penalty proceedings under Section 2710 and Section 271E of the Act. The AO is directed to take necessary action in this regard.
6.6 Lender 2 - Sh. Virender Kumar Soni - Rs. 3,68,50,000
During the year under consideration, one of the directors, Sh. Virender Kumar Soni has granted a loan of Rs.3,68,50,000/- to the assessee company. The lender has reported a net income amounting to Rs. 92,81,962/- which includes an exempt income of Rs.82,06,700/- under the head LTCG. From the perusal of the exempt income transaction, it is noted that the same is on account of sale of long term capital asset, sale proceed on which are Rs. 1,01,90,954/-. Furthermore, the lender's statement of affairs also reflect a capital balance 2,99,47,173/- and also reflects that he holds two properties and many investments. Further, the ./2019 bank statement of the lender is also analysed in light of the finding of the AO. From the same it is noted that the credit entries appearing in the account of the lender bank account, just before giving the loan to the assessee company, is actually credit from sweep in from FD Account. Certain banks provide this facility of Sweep in and Sweep Out wherein, the excess balance in saving bank account is converted into FD and as soon as any fund requirement comes in the same is sweeped into the saving bank account. Most of the entries just before the grant of loan represents sweep in entries. Furthermore, other credits are from wife & HUF of the lender and financial company as appearing in the bank statements and ledger accounts. The wife of the lender and HUF are filing their returns of income. 6.6.1 Thus, from the aforesaid, I am of the view that the assessee has sufficiently established the identity, genuineness and creditworthiness and there is no scope for any doubt left. The documents furnished on record, clearly establish the three limbs of sec. 68 of the Act. Thus, the addition made by the AO is deleted. 6.7 Lender 3 - Sh. Vikas Kumar Soni - Rs. 3,44,75,000/- During the year under consideration, the lender Sh. Vikas Kumar Soni has given a loan of Rs.3,44,75,000/- to the assessee company. The lender has reported a net income amounting to Rs.10,41,153/- which includes an exempt income of Rs.82,73,272/-. From the perusal of the exempt income transaction, it is noted that the same is on account of sale of long term capital asset, sale proceed on which are Rs. 1,01,90,954/-. Furthermore, the lender's statement of affairs also reflect a capital balance 2,51,19,913/- and also reflects that he holds two properties and many investments. Further, the bank statement of the lender is also analysed in light of the finding of the AO. From the same it is noted that the credit entries appearing in the account of the lender bank account, just before giving the loan to the assessee company, is in realty credit from sweep in from FD Account as is in the case of other two lenders as discussed above. Most of the entries just before the grant of loan represents sweep in entries. Furthermore, other credits are mostly from wife/HUF of the lender and a finance company as appearing in the bank statements and ledger accounts. The ITR's of wife and HUF of this lender have been placed on record. 6.7.1 Thus, from the aforesaid, I am of the view that the assessee has sufficiently established the identity, genuineness and creditworthiness and addition based on AO's doubt is not sustainable in the eyes of law. The documents furnished on record establish the three limbs of Sec. 68 of the Act. Thus, the addition made by the AO is deleted.”
Accordingly, ld. CIT (A) deleted the addition. heard both the parties and perused the records.
Ld. DR submitted that ld. CIT (A) have accepted the submission of the assessee without proper verification. These submissions and details were not submitted to AO. Further, he submitted that there is no Board Resolution or copy of loan document under which loans were taken, is available.
Ld. Counsel for the assessee, on the other hand, submitted that AO did not ask the assessee to explain the same and there was no opportunity to the assessee to explain the details which were given to the ld. CIT (A).
He further submitted that loan documents were there but not available at that point of time. Further, he did not explain as to why how loans taken by the assessee are within the parameter of Companies Act. Ld. Counsel of the assessee fairly agreed that the matter may be referred to AO and assessee shall prove the veracity of the documents which were submitted and explained before the ld. CIT (A).
Ld. DR for the Revenue supported the plea that the matter may be remitted to the file of AO.
Accordingly, in the interest of justice and as agreed by both the parties, we remit the issue to the file of AO. AO should decide the issue afresh in the light of the submissions and documents submitted before the
In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open court on this 18th day of January, 2023.