THE DCIT1(1), INDORE vs. M/S. AVILABLE FINANCE LTD., INDORE

PER BENCH

The above captioned appeals filed at the instances of the

Revenue & assessee(s) and Cross Objection filed by the assessee

pertaining to Assessment Year 2010-11, 2009-10 and 2014-15 are

directed against the orders of Ld. Commissioner of Income Tax

(Appeals)-I (in short ‘Ld.CIT(A)’], Indore dated 18.3.2019, 20.2.18 &

16.7.2019 which are arising out of the order u/s 143(3) r.w.s. 147

of the Income Tax Act 1961(In short the ‘Act’) dated 29.12.2017,

21.09.2016 and 14.12.2016 framed by ACIT-1(1)/DCIT-1(1), Indore.

M/s Agrawal Transport Corporation Pvt. Ltd, ITA No.651/Ind/2019 Assessment Year 2010-11

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Cross Objection No.35/Ind/2019

In Appeal No.651/Ind/2019 Assessment Year 2010-11 3. The Assessee has raised following grounds of appeal

1.The Learned CITCA) erred in holding that the reopening proceedings were properly and validly initiated in this case. That on the facts and in the circumstances of the case and in law, the reassessment proceedings initiated in this case are wrong, void ab-inito, without jurisdiction and bad in law and it is prayed that the same very kindly be now quashed. 2.That on the facts and in the circumstances of the case the Learned CITCA) erred in not appreciating and not accepting the contention of the assessee that the impugned reopening proceedings initiated in this case were bad in law in view of the first proviso to section 147 as there was no failure on the part of the assessee to disclose the material facts. 3.That on the facts and in the circumstances of the case the Learned CITCA) erred in not appreciating and not accepting the contention of the assessee that the impugned reopening proceedings initiated merely on the basis of information received from the Investigation Wing in this case was on borrowed satisfaction, which is wrong and bad in law. 4.The Learned CITCA) erred in not accepting the contention of the assessee that the impugned reassessment proceedings were wrong on the facts and in the circumstances of the case and in law in the absence of any tangible material and live link of escapement of income, merely on surmises and conjectures and also tantamounted to change of opinion. 5.That on the facts and in the circumstances of the case the Learned CITCA) erred in not appreciating and not accepting the contention of the assessee that the impugned reopening proceedings initiated on the basis of information received by the AO consequent to a search conducted on a third person were bad in law in view of the non-obstante clause in section 153C. 6.The assessee craves leave to add, alter, modify, substitute and/or withdraw all or any of the grounds of appeal at any stage of the appellate proceedings.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 M/s Admanum Finance Ltd ITA No.331/Ind/2018 Assessment Year 2009-10

The assessee has raised following grounds of appeal 4. 1.That the Learned CIT(A) erred in upholding the action of the AO of initiating the reopening proceedings u/s 147 and u/s 148. That on the facts and in the circumstances of the case and in law the proceedings are wrong bad in law and the consequential assessment order is prayed to' be quashed. 2.That the Learned CIT(A) erred in confirming the addition of Rs. 36,00,000/made by the AO u/s 68 on account of loan taken from M/s Aereo Dealcomm Pvt. Ltd. That on the facts and in the circumstances of the case the addition is wrong and uncalled for and is prayed to' be deleted now. 2.1 That the Learned CIT(A) in erred Confirming the disallowance of interest paid to' M/s Aereo Dealcomm Pvt. Ltd. of Rs. 32,93,424/- made by the AO. That on the facts and in the circumstances of the case, the disallowance of interest is wrO.ng and uncalled for and is prayed to' be deleted now. 3.That the Learned CIT(A) erred in maintaining the addition of Rs. 1,08,75,000/- made by the AO u/s 68 on account of loan taken from M/s Chamak Trexim Pvt. Ltd. That on the facts and in the circumstances of the case, the said addition is wrong and uncalled for and is prayed to' be deleted now. 3.1 That the Learned CIT(A) erred in upholding the action of the AO of disallowing the interest of Rs. 28,65,473/- paid to' M/s Chamak Trexim Pvt. Ltd. That on the facts and in the circumstances of the case, the disallowance of interest is wrong and uncalled for and is prayed to' be deleted now. 4.That the Learned CIT(A) erred in upholding the action of the AO of making disallowance of Rs. 6,75,000/- and Rs. 6,00,000/- on acco.unt of interest paid to' two. 100an creditors. That on the facts and in the circumstances of the case, the 100an transactions of these creditors having been accepted as proper. the disallowance of interest was uncalled for and not in accordance with law. The same is prayed to' be now allowed. 5.That the appellant craves leave to' add, to' alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or 5

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 before final hearing, if necessity so arises. M/s Available Finance Ltd, ITA No.895/Ind/2019 Assessment Year 2014-15 5. The Revenue has raised following grounds of appeal 1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) is justified in restricting the addition made u/s 14A of the Act from 38,90,444/- to Rs.7,481/-. 2.Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition on account of unsecured loan amounting to Rs.69,00,000/- and interest thereon of Rs.51,93,162/-. The appellant craves leave to add or deduct from or otherwise amend the above grounds of appeal. 6. As most of the issues raised in these appeals are common

they were heard together and are being disposed off by this

consolidated order for the sake of convenience and brevity.

case of M/s Agrawal Transport Corporation Pvt. Ltd (In short

‘ATCPL’) ITA No.651/Ind/2019 for Assessment Year 2010-11 and

Ground No.2 & 3 of assessee’s appeal in the case of M/s Admanum

Finance Ltd (In short ‘ADFL’) Ltd ITA No.331/Ind/2018 for

Assessment Year 2009-10 and Ground No.2 of Revenue’s appeal

M/s Available Finance Ltd (In short ‘AFL’), ITA No.895/Ind/2019

for Assessment Year 2014-15 common issues relating to alleged

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 unexplained unsecured loans u/s 68 of the Act taken from M/s

Aereo Dealcom Pvt. Ltd (In short ‘ADPL’) and M/s Chamak Trexim

Pvt. Ltd (In Short ‘CTPL’) as well as disallowance of interest paid

thereon. Following chart shows the disputed amount of unsecured

loan and interest thereon which are challenged before us by the

Revenue in case of M/s ATCPL & M/s AFL ‘and the assessee M/s

ADFL.

S.No. Name A.Y Appeal No. Issue Amount CITA) 1 Agrawal 2010- No.651/Ind/ Aereo Deal Com 2,68,00,000 Allowed Transport 11 2019 (Dep.) Pvt. Ltd – Loan Corp. Pvt. Aereo Deal Com Ltd Pvt. Ltd – 3,66,288 Allowed Interest Chamak Traxim 3,42,00,000 Allowed Pvt. Ltd- Loan Chamak Traxim 4,76,137 Allowed Pvt.Ltd-Interest

2 Admanum 2009- No.331/Ind/ Aereo Deal Com 36,00,000 Confirmed Finance Ltd 10 2018 Pvt. Ltd – Loan (Assessee) Aereo Deal Com Pvt. Ltd – 32,93,424 Confirmed Interest Chamak Traxim 1,08,75,000 Confirmed Pvt. Ltd- Loan Chamak Traxim 28,65,473 Confirmed Pvt. Ltd- Interest

3 Available 2014- No.895/Ind/2019 Aereo Deal Com Finance Ltd 15 (Department) Pvt. Ltd – Loan 13,00,000 Allowed Aereo Deal Com Pvt. Ltd – Interest 16,62,641 Allowed Chamak Traxim Pvt. Ltd- Loan 56,00,000 Allowed Chamak Traxim Pvt. Ltd- 35,30,521 Allowed Interest

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 8. Since the issue is common relating to loan taken and interest

paid to M/s. ADCPL and CTPL, as agreed by both the parties we will

be adjudicating the issue on the basis of facts of M/s. Agrawal

Transport Corporation Pvt. Ltd and our decision shall apply

mutandis mutandis on the grounds raised in the similar cases in

the case of M/s Admanum Finance Ltd and M/s Available Finance

Ltd. The issue in brief is that firstly whether the Ld. A.O is justified

in making the addition u/s 68 of the Act for unexplained cash

credit for the loans taken from M/s ADPL and M/s CTPL and also

disallowing the interest paid thereon. Secondly whether the

assessee succeeded in proving the identity, genuineness and

creditworthiness of the cash creditors M/s ADPL and M/s CTPL

with necessary documentary evidence.

assessee in the case of M/s. ATCPL are that the assessee is a

private limited company engaged in the business of transportation

and stevedoring. Return of income for Assessment Year 2010-11

was filed on 27.10.2010 u/s 139(1) of the Act followed by carrying

out of assessment proceedings u/s 143(3) of the Act which were

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 completed on 20.3.2013 assessing the income at Rs. 4,15,63,641/-.

Thereafter the case of the assessee was reopened u/s 147 of the Act

by way of issuing notice u/s 148 of the Act. Assessee again filed its

return of income on 1.3.2017. During the course of reassessment

proceedings assessee was asked to prove the identity, genuineness

and creditworthiness of the cash creditors namely M/s ADPL and

M/s CTPL with regard to the unsecured loan of Rs.2,68,00,000/-

and Rs.3,42,00,000/- taken respectively. The submissions made by

the assessee were not found acceptable and the Ld. A.O was of the

view that since the assessee could not establish the genuineness of

transactions and creditworthiness of the lender the alleged amount

of unsecured loan of Rs.2,68,00,000/- from M/s. ADPL and

unsecured loan of Rs.3,42,00,000/- from M/s. CTPL are liable to

the added to the income of the assessee u/s 68 of the Act. Ld. A.O

also disallowed the interest on these loan at Rs.3,66,288/- and

Rs.4,76,137/- paid to M/s. ADPL and M/s CTPL respectively.

challenging the validity of the reassessment proceedings and also

challenging the additions and disallowance made by the Ld. A.O.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Ld. CIT(A) has given a detailed finding of fact after examining

documentary evidences filed by the assessee relating to the cash

creditors and the source of the amount given as loan to the

assessee and also after examining the fact that both the cash

creditors were regularly assessed to tax and were subjected to

assessment proceedings u/s 143(3) of the Act on several occasions

and nowhere the cash creditors namely M/s ADPL and M/s. CTPL

were held to be bogus/shell/accommodation entry provider. Ld.

CIT(A) also appreciated the fact that both the cash creditors are

registered as Non Banking Finance Companies (In short NBFC) and

have sufficient base of share capital and free reserve and surplus

and are almost regularly offering positive income in the Income Tax

Returns. Ld. CIT(A) accordingly decided the legal ground

challenging the reassessment proceedings against the assessee and

the remaining grounds on merits were allowed in favour of the

assessee and the additions u/s 68 of the Act as well as the

disallowance of interest was deleted. Now the Revenue is in appeal

before the Tribunal.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 11. Ld. Departmental Representative vehemently argued

supporting order of Ld. A.O in the case of three assessee’s namely,

M/s. Aereo Deal Com Pvt. Ltd, M/s Admanum Finance Ltd and M/s

Available Finance Ltd and also supported the finding of Ld. CIT(A)

in the case of M/s Admanum Finance Ltd. It was also submitted

that the nexus of these additions are arising out of the search and

seizure operations carried out u/s 132 of the Act in the case of

Mittal Group of Indore on 4.9.2015 during which office premises of

Mr. Deepak Kalani was also covered. During the search share

certificates of M/s. Aereo Deal Com Pvt. Ltd (In short ‘ADCPL’)

were found both the companies are not having regular source of

income and they are indulged in providing accommodation entries.

Both the cash creditors namely M/s. ADCPL and M/s CTPL were

claimed to be shell companies as the turnover was very little in

comparison to the capital employed. Ld. Departmental

Representative also submitted that the genuineness of the

transactions and creditworthiness of the loan providers is not

proved and hence the additions for unexplained cash credit and

disallowance of interest may be maintained. Reliance was placed

on various judgments referred by Ld. CIT(A) in his detailed order in 11

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 the case of M/s Admanum Finance Ltd.

finding of Ld. CIT(A) in the case of M/s ATCL which were arrived at

after considering the finding of Ld. CIT(A) against the assessee in

the case of M/s Admanum Finance Ltd. Ld. Counsel for the

assessee further submitted that identity of the lender company is

not disputed as they appeared before Ld. DCIT and statements

recorded on 1.12.2016 and 8.12.2016. Both the lender companies

has sound financial as they are earning sufficient income and

paying good taxes and not borrowing from other companies for

giving unsecured loans. It was also submitted that the assessment

proceedings u/s 143(3) of the Act have been carried out for various

years in the case of both the lender companies on account of

reopening of the cases for the same reasons as that of the assessee

but on the completion of the assessment proceedings no adverse

view was taken in the case of lender companies and even the issue

of finding of original share certificates during search proceedings

have been discussed in the assessment order. The share capital of

both the lender companies stands assessed by the Ld. A.O u/s

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 143(3) of the Act. Ld. Counsel for the assessee also submitted that

the Director of the lender companies appeared before the

department, statements recorded, books of accounts produced,

detailed explanation filed for the alleged transactions and

movement of funds and source of source duly explained. On the

basis of these evidences creditworthiness of the lender companies

were accepted.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 ADPL and M/s CTPL stood deleted by the Hon’ble Tribunal vide order dated 27.6.2016. It was also mentioned that when the loan taken from M/s CTPL and M/s ADPL was repaid by M/s Agrawal Coal Corporation Ltd on the very same day those amounts were transferred to the assessee i.e. M/s. Agrawal Transport Corporation Ltd. Thus the source of source is proved on record. Ld. Counsel for the assessee further submitted that the assessments in the case of M/s. Chamak Traxim Pvt. Ltd for Assessment Years 2009-10 to 2012-13 have been completed after the search on Mr. Deepak Kalani and after considering the same report of DDIT (Investigation), Indore which is the sole basis of making addition in the cases of Respondent assessee taking basis of identical allegations regarding dubious nature of transactions due to finding of original share certificates. After verification no adverse view was taken by A.O of M/s. Chamak Traxim Pvt. Ltd. Similarly in case of M/s. Aereo Deal Com Pvt. Ltd assessment for Assessment Years 2009-10 and 2010-11 were also completed subsequent to the search on Mr. Deepak Kalani, however no adverse view was taken in respect of issue under consideration.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 of the transaction but also substantiate that the adverse inference drawn by the revenue authorities from the said search proceedings were baseless and wrong and for this simple reason the additions made in the case of the Respondent are rightly deleted by Ld. CIT(A). As regards the decisions referred to by Ld. CIT(A) in his finding against the assessee in the case of M/s ADFL, Ld. Counsel for the assessee claimed that they are not applicable in their cases and also referred to the written submission placed on record wherein the facts of the assessee’s case have been distinguished from the facts in the case of following decisions referred to by Ld. CIT(A) in case of M/s ADFL namely;

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 surplus and both the lender companies were regularly assessed to tax and are showing substantial income. Genuineness of transaction is proved since the loan transactions have taken place with other group companies with same lenders and have been held to be genuine by Hon’ble Tribunal in the case of Agarwal Coal Corporation Pvt. Ltd (supra) ITA No.202 & 294/Ind/2012 & Others dated 27.6.2016 and also the source of source have been proved as the loan which was repaid back to the lender companies by the assessee’s sister group concern M/s Agarwal Coal Corporation Pvt. Ltd has been utilised in providing loans to the assessee and other companies. At the end Ld. Counsel for the assessee submitted that the case of the assessee is squarely covered by the decision of Co- ordinate Bench of Indore in other sister concern group M/s Agrawal Coal Corporation Pvt. Ltd (supra) for Assessment Year 2003-04 and 2008-09 and in case of M/s Admanum Finance Limited relating to Assessment Years 2008-09, 2010-11 and 2011-12 passed on 27.6.2016 vide ITA No. ITA No.202 & 294/Ind/2012 & Others.

6.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 dispute before us.

2 Admanum 2009- No.331/Ind/ Aereo Deal Com 36,00,000 Confirmed Finance Ltd 10 2018 Pvt. Ltd – Loan (Assessee) Aereo Deal Com Pvt. Ltd – 32,93,424 Confirmed Interest Chamak Traxim 1,08,75,000 Confirmed Pvt. Ltd- Loan Chamak Traxim 28,65,473 Confirmed Pvt. Ltd- Interest

3 Available 2014- No.895/Ind/2019 Aereo Deal Com Finance Ltd 15 (Department) Pvt. Ltd – Loan 13,00,000 Allowed Aereo Deal Com Pvt. Ltd – Interest 16,62,641 Allowed Chamak Traxim Pvt. Ltd- Loan 56,00,000 Allowed Chamak Traxim Pvt. Ltd- 35,30,521 Allowed Interest

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 18. From perusal of the finding of Ld. CIT(A) in the case of M/s Agrawal Transport Corporation Pvt. Ltd for Assessment Year 2010- 11 we find that the issue of genuineness and creditworthiness of loans taken from M/s Aereo Deal Com Pvt. Ltd and M/s Chamak Traxim Pvt. Ltd has been dealt in detail considering all necessary material facts and after discussing the finding of predecessor of Ld. CIT(A) deciding against the assessee namely M/s. Admanum Finance Ltd for similar type of transactions for the loan taken from M/s ADCPL and M/s CTPL during Assessment Year 2009-10. After detailed discussion about the identity, genuineness and creditworthiness of the cash creditors, source of the loan given to the assessee, linkage of the transaction with the search conducted u/s 132 of the Act in the case of Mr. Deepak Kalani on 4.9.2015 along with Mittal Group of Indore and considering the fate of assessment proceedings carried out in the case of lender companies (post search on 4.9.2015 and post report by DDIT (Investigation) which paved the way of making the addition by the Ld. A.O) has held the loan transaction as genuine and also accepted the creditworthiness of the lender companies observing as follows:-

“4. Ground No.1: This ground of appeal has been raised against the initiation of the reassessment proceedings u/ s 147 of the Income Tax Act, 1961. The appellant has challenged the initiation of the reassessment proceedings primarily raising the contention that, since the same were initiated on the basis of the information/ report received from the investigation wing, Indore after the search was carried out on one Shri Deepak Kalani on

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 04.09.2015 and therefore the reopening is on borrowed satisfaction and not on an independent satisfaction of the AO. The appellant has also stated that the correctness of the information received from the Investigation Wing was not verified and was accepted in mechanical manner and the reasons recorded by the AO are not in accordance with the law in as much as the same are not reasons to believe but are only reason to suspect.

The appellant has also stated that the report / information received from Investigation Wing by the AO on the basis of which the present proceedings were initiated was never provided to the appellant. The appellant has also stated that the statement of Shri Deepak Kalani was recorded by the then AO i.e. DCIT 1(1), during the assessment .proceedings of other group concerns of the appellant in December 2016 and the reasons recorded in the present case by the then AO in January, 2017 has not taken in to consideration this factual aspect that Shri Deepak Kalani had presented himself and his statement was recorded. The appellant has also contended that since in this case regular assessment under section 143(3) of the Income Tax Act, 1961 was already framed and there was no failure on the part of the appellant to disclose truly and fully all the material facts necessary for the purpose of assessment, the first proviso to section 147 of the Income Tax Act, 1961 will come to the rescue and reopening proceedings were wrong for this reason also. The appellant has also challenged the present proceedings initiated under section 148 stating that since the same were initiated as a consequence of search proceedings in the case of Shri Deepak Kalani. Therefore, the same should have been 19

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 initiated in the case of the appellant u/s 153C instead of section 147 of the Income Tax Act, 1961.

4.1 1 have gone through the submissions of the appellant on this legal ground and after taking in to account facts and circumstances of the case, I am of considered view that the same are devoid of merits. A search was conducted in the Mittal Group of cases in Indore on 04.09.2015 by the Investigation Wing, Indore in which Mr. Deepak Kalani was also covered. On the basis of certain documents seized from the possession of Mr. Deepak Kalani, the investigation wing passed on certain information to the then AO, on the basis of which the AO initiated the proceedings after recording proper reasons and after issuing a valid and proper notice under section 148 of the Income Tax Act, 1961. 1n response to the same the appellant also filed the return of income. The reasons so recorded, were duly supplied by the AO to the appellant, against which the appellant had also raised the objections. The AO, then disposed off the objections so raised by the appellant, by passing a speaking order subsequently, the appellant participated in the reassessment proceedings and the same were completed after taking in to account the submissions filed by the appellant- Therefore, no infirmity is found. so far as the initiation and the procedural requirements are concerned in this matter.

4.2 It is also observed that there is no concept of borrowed satisfaction in the law and the AO was justified in' reopening the case on the basis of information received by him from the Investigation Wing. It is a settled law that the information received from the Investigation Wing can be made basis of

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 reopening of the case under section 147 of the Income Tax Act, 1961 as the escapement can only be ascertained after the verification, for which the reopening is a starting points- At the stage of initiation of the proceedings, the AO is not supposed to have formed a firm belief regarding the nature and extent of the income which could have escaped assessment. The AO was well within law to have initiated the reassessment proceedings after an expiry of four years from the end of the relevant assessment years on the basis of certain information coming to his possession later on after obtaining approval from competent authority. Further, there is no restriction in the Income Tax Act that the case cannot be reopened u/s 14B on the basis of information collected during the search in the case of third person. The appellant's contention that the AO ought to have resorted to proceedings u/s 153C is misplaced and cannot be accepted.

4.3 In view of the above it is held that the reopening proceedings were properly and validly initiated and the objections raised by the appellant have not been found acceptable as such rejected. Therefore, this ground of appeal is dismissed.

Ground Nos. 2 & 3: The second ground of appeal has 5. been raised against the addition of Rs.6,10,OO,OOO/- made u/s 6B of the Income Tax Act, 1961 on account of loan received from two parties namely M/s Chamak Trexim Pvt. Ltd front whom loan of Rs.3,42,00,OOO/- was received and M/s Aereo Dealcomm Pvt. Ltd. from whom loan of Rs.2,68,OO,OOO/- was received by the appellant during the year under consideration. The third ground of appeal is against the

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 consequential disallowance of interest of Rs.8,42,425/· incurred in respect of the above loans.

5.1 The AO has discussed these issues at para nos. 4 to 7.4 of his order. As noted from the assessment order, the appellant through questionnaire issued u/s 142(1) was required to file copy of bank statement, ITR acknowledgement and tax audit report of the fresh loan depositors alongwith copy of account and was required to prove the identity, creditworthiness and to furnish the details of mode of transactions. The appellant was also required to explain as why the loan taken from M/s Chamak Trexim Pvt. Ltd. and MI s Aereo Dealcomm Pvt. Ltd. be not added back u/ s 68 of the Income Tax Act, 1961.

5.2 The detailed written submissions have been found filed by the appellant in support of it's contentions. The AO also called for information u/s 133(6) of the Income Tax Act, 1961 and has observed in Para 5 of the assessment order that the lenders have furnished the required information which were placed on record. The AO has also discussed in detail at para nos. 6 to 6.4 about the company M/s Aereo Dealcomm Ltd. and at para nos. 7 to 7.4 about the company M/s Chamak Trexim Pvt. Ltd. and broadly the observations of the AO in respect of both the companies in para 6 to para 6.4 and in para 7 to 7.4 are identical.

5.3 It is found that the AO has recorded that the assessee has furnished the copy of ITR of both the companies from where it was found that M/s Aereo Dealcomm had shown income of Rs 8,86,387/- and M/s Chamak had shown income of Rs 17,40,714/-. It is also noted in the assessment order that the 22

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 appellant submitted the confirmation, relevant bank statements, audited financial statements and assessment orders passed u/s 147 of the Income Tax Act, 1961 dated 16/11/2017 in the case of M/s Aereo Dealcomm Pvt. Ltd. and order dated 19/12/2016 in the case of M/s Chamak Trexim Pvt. Ltd.

5.4 It is further stated in the assessment order that both the companies have provided loan entries not only to the appellant but also to other group companies of Agrawal Group. Referring to the investigation carried out by the Investigation Wing and drawing support from his detailed discussion made by the AO while rejecting the objection raised by the appellant to the reopening of the assessment u/s 147 of the Income Tax Act, 1961 and observing that Agrawal Group of companies are assessed at Indore however the lender companies have their registered office at Kolkatta and the fact that the companies have provided loans to appellant's group companies. The AO has also observed that both these companies are controlled and managed by the appellant group to bring its unaccounted funds to the books of accounts. The AO, on the basis of these observations, concluded that the appellant could not establish genuineness of transactions and creditworthiness of the lenders and added the impugned loan amounts u/s 68 of the Income Tax Act, 1961 and also disallowed the interest thereon.

5.5 I have gone through the assessment order as well as the written submissions filed by the appellant carefully and after taking into account the arguments of the appellant and reasons brought out by the AO in the assessment order, the relevant grounds of appeal are adjudicated as under:-

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 5.6 It is seen that a search was conducted in the case of Mittal Group of Indore in which Mr. Deepak Kalani was also covered from whom certain documents particularly original share certificates of his two companies namely M/s Aereo Dea1comm Pvt. Ltd.and M/s Chamak Trexim Pvt Ltd were seized. The investigation wing, Indore passed on this information to the then AO i.e DCIT 1(1) Indore on the basis of which this case was reopened. It was observed by the Investigation wing that the appellant and its group concerns have taken loans from these two companies i.e M/s Aereo Dealcomm Pvt. Ltd. and M/s Chamak Trexim Pvt Ltd., but creditworthy and the genuineness of transactions of these companies were not established.

5.7 Before discussing the observations of the AO made in the assessment order while making the impugned additions, It would be imperative to discuss the various factual aspects of both the companies from whom the appellant has taken loans during the relevant year and which have been added by the AO under section 68 of the Income Tax Act, 1961 and interest paid there on has also been disallowed.

5.8 It is seen from the assessment order passed in the present case that the AO has only doubted the creditworthiness of the lender and the genuineness of the transactions and has not disputed the identity of the loan creditors. The AO carried out independent enquiries from both the lender companies, which were also duly complied with by them by filing all the details required from them by the AO, as per the facts noted in the assessment order. There are no adverse remarks in respect of the compliances made by both these companies.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 5.9 It is also evident that the identity of both these companies is established on records and is undisputed since the director of both the companies Mr. Deepak Kalani appeared before the then A 0 i.e. DCIT 1(1) on various occasions and his statements have also been found recorded on 01/12/2016 and 08/12/2016. The copies of the same have been filed by the appellant at page nos. 154 to 164 of the paper book PB-B·I. Both the companies are also assessed by their respective jurisdictional AOs, wherein assessments have also been carried out, the assessment proceedings were attended and assessment orders were passed. The copies of various have also been placed on record. All these undisputed facts cumulatively establish the identity of both these companies which has also not been disputed by the A.O.

5.10 Therefore, the issue under consideration has to be decided in respect of the other two conditions stipulated under section 68 of the Income Tax Act, 1961 viz creditworthiness, of the loan creditors and the genuineness of the transactions, which have been doubted, by the AO in the assessment order. Both these issues are discussed here under:

6.1 I. M/S CHAMAK TREXIM PRIVATE LIMITED:

The appellant has filed the financials of this company from FY 2008- 09 till FY 2016-17 at page numbers 1 to 48 of PB-B-I and also enclosed a chart of comparative financial figures of this company at page no.1 It is seen that the share capital of this

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 company is constant from F.Y.2008-09 till 2016-17 and it's own net worth was Rs.694.55 lacs in FY 2008-09 which increased to Rs.869.581acs in F.Y. 2016-17 (page 1 of PB-B-1).

6.2 Further the company has earned considerable revenues in all the years and its profit before tax is also substantial which is above Rs. 10 Lacs in each of these years. It has earned profit of Rs. 11.66 Lacs and 17.41 Lacs in AY 2009-10 and AY 2010-11 and profits of Rs. 46.10 Lacs , Rs. 62.71 Lacs, Rs. 47.65 Lacs Rs.32.81 Lacs, Rs. 22.30 Lacs and Rs. 21.49 Lacs in AY 2012-13 till AY 2017-18 on which it has paid considerable taxes. There has been a loss of Rs.7.45 lacs only in the A.Y. 2011-12.

6.3 It is also evident that there are no borrowings or loans taken by the credit or in any of these years. All the above facts cumulatively establish the creditworthiness of this company.

6.4 It is also seen from the balance sheet of Chamak for F.Y. 2009-10 (at page no. 10 of PB-Bl) that the impugned loans advanced to the appellant are reflecting under Schedule-E of Loans and Advances.

6.5 Further, the assessments of this company for various years have been completed by its AO. In the case of Chamak Trexim Private Limited in the order passed for A.Y.2010-11 on 29/12/2016 u/s 148 of the Income Tax Act, 1961has been enclosed by the appellant at page nos. 51 to 55 of its paper' book. The AO of this company i.e. the ITO Ward 6(1), Kolkata has made the following observations citing the reasons for the reopening of the case of Chamak for the AY 2010-11:

"Information has been received from DDIT {Inv-I, Indore vide letter No: DDIT {Inv-I)-I/lnd/Mittal Group/2015-16/2926

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 dated 17.03.2016 along with enclosure from wherein it was written that a search & seizure operation u/s 132 was conducted on Mittal Group Indore on 04.09.2015. Original share certificates of M/s Chamak Trexim. Private Limited were in the course of search also seized which surprisingly found intact in the bound book even though at different point of times there have been different shareholders. Sri Deepak Kalani present Director of Mittal Group and also director of M/s Chamak Trexim Private Limited failed to provide any detail and further the financial transaction of the company are found to be dubious in nature. Analysis of financial data, M/s prima-facie of Chamak Trexim private Limited establishes that the concern is being utilized for providing accommodation entries to various parties of Indore.

On the F. Y. 2009-10 corresponding to A. Y. 2010-11 M/s Chamak Trexim private Limited has made huge advances to some beneficiaries, whose source is doubtful to the tune of Rs 6,50,37,499/-

On the information being received from DDIT (Inv)-I,Indore the case was put up for grant of administrative approval"

6.6 It seems that the same information which was passed on by the DDIT [Inv]-I, Indore to the AO of the appellant in the present appeal, was also supplied to the AO of Chamak as evident from the above abstract from the assessment order of Chamak. The case of Chamak for this year was reopened by it's AO exactly on the identical information received by him from DDIT (Inv)-I , Indore and on the same reason on which the present case of the appellant was reopened. The AO of Chamak completed the assessment proceedings and in the 27

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 later part of the assessment order after noting tile compliances made by Chamak during the assessment proceedings, it is further observed by its AO as under:

“In the course of hearing query regarding seizure and retention of original copies of share certificates by DDIT (INV)-I, Indore related to assessee company made. Shri Vishnu Kr. Singhania said that company was incorporated on 17.03.1994. During AY 2004-05 company received capital and allotment accordingly made. However, some of the share certificates lost by shareholders and approached company for issue of duplicate copies of share. Number of duplicate share was to be issued. For same purpose Sri Deepak Kalani one of the directors of M/s Chamak Traxim Private Limited who was also associated as directors in company located in indore took the bundle of share certificate from Kolkata to Indore and kept in his office A/ R filed letter on Supporting document explanation.

In the matter regarding deposits in bank account A/ R said that opening and closing balance of capital were Rs. 69455633/ - and Rs70658347/- respectively. Capital was applied in investment and providing loan and advances. Opening and closing balances of asset reported under the head loan and advances were Rs 6,33,83,839/- & Rs 6,64,98,528/- respectively. Amount of loans and advances is given to parties changed from time to time. In some cases loans where recovered from one party and given to others. Since monetary transactions were carried through banking channels, reflection in statement of deposits and withdrawal in bank account was obvious, further, total sum credited in bank account also appears greater than gross revenue. These statements related to realization of part of loan and offering same to others as loan against interest. In support of claim statement of loans and r:onfinnation accounts with PAN furnished. 28

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 On verification of accounts and document it was seen that Sri Deepak Kalani being the director of company located in Indore and Kolkata had to look after official works of both companies. Sri Deepak Kalani sometime carry the documents or other paper works from one office to other and completed pending work.

Information related was whether shares certificates where meant for issue or was it related of M/s Chamak Trexim Private Limited. Information as provided not related to involvement of amount escaped from assessment. Issue of duplicate copy of share certificate related to office proceeding, updation of official records and effort to enable the shareholder to have sufficient documentary evidence for investment had made. On verification of ITD/ AST value of paid up capital reported for AY 2010-11 was brought forward from AY 2-007-08 and no change in quantum of capital found till 31.03.2016.

Assessee company accepted the fact that share certificate is seized was related its company and furnished list oJ investors to whom share were allotted.

Hence, on the circumstances as stated above no adverse view taken. J

6.7 From the above findings in the assessment order of Chamak, it is seen that the case was reopened in identical reasons, the issue of seizure of original share certificates and also the issue of advancing the funds by it, which were suspected to be dubious in nature, was examined by its AO and was found proper and no adverse view was taken. It is also evident that the allegation on Chamak that the company is being used for providing the accommodation entries to various parties of Indore was made in the report sent by the DDlT-lnv(1), Indore , which was not found to be correct by the AO of Chamak. The issue of finding of original share certificates has been discussed at length in the assessment order of Chamak It has also

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 been mentioned by the AO of Chamak that he has verified the share capital which was brought forwarded from AY 2007-08 and no change in the quantum of capital was noticed till 31.03.2016. The bank account of Chamak was also analyzed with respect to the loans and advances made by it. The AO of Chamak has given a categorical finding that certain loans were received back from one party and were advanced to others. The copies of the assessment order were also filed by the appellant before the AO which fact has also been acknowledged by the AO at para no.7 of his assessment order. However, no adverse comments have been made by the AO in his assessment order regarding the assessment of Chamak in the relevant assessment year.

6.8 It is seen that the case of Chamak for AY 2011-12 was also reopened by its Jurisdictional AO at Kolkatta on identical grounds referring to the same information received from DDIT Inv. Wing, Indore as above, making similar observations. The relevant abstract of the order dated 29.12.2016 passed by same ITO ward 6(1) Kolkatta, copy enclosed by the appellant at page no. 56 to 60 of its paper book is abstracted as under:

"Information has been received from DDIT (Inv) - I, Indore vide letter No: DDIT (Inv-I)-I/lnd/Mittal Group/2015-16/2926 dated 17.03.2016 along with enclosure from wherein it was written that a search & seizure operation u/ s 132 was conducted on Mittal Group Indore on 04.09.2015. Original share certificates of MI s Chamak Trexim Private Limited were also seized which surprisingly found intact in the bound book even though at different point of times there have been different shareholders. Sri Deepak Kalani present Director of Mitral Group and also director of M/s Chamak

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Trexim Private Limited failed to provide any details and further the financial transaction of the company are found to be dubious in nature. Analysis of financial data, prima-facie of M/s Chamak Trexim Private Limited establishes that the concern is being utilized for providing accommodation entries to various parties of Indore.

On F.Y 2010-11 corresponding to A Y.· 2011-12 M/s Chamak Trexim Private Limited has mode huge advances to some beneficiaries, whose source is doubtful to the tune of Rs. 6,15,82,961/-. '

Accordingly after received information DDIT(Inv)-I, Indore the case was put up for administrative approval. Administrative approval received. Notice u/s 148 accordingly, generated in system on 22.03.2016 and issued to assessee company by post as well as through email”.

6.9 Thus the case of Chamak for AY 2011-12 was also reopened by the AO exactly on the identical information received by him from DDIT. (Inv)- I, Indore and on the same reason on which the present case of the appellant was reopened. The AO of Chamak completed the assessment proceedings and in the later part of the order after noting the compliances made by Chamak during the assessment proceedings it is further observed as under:

"In the course of hearing query regarding seizure and retention of original copies of share certificates by DDIT {INV}- I, Indore related to assessee company made. Sri Vishnu Kr. Singhania said that company was incorporated on 17.03.1994. During AY 2004-05 company received capital and allotment accordingly mode. However, some of the shares certificates lost by

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 shareholders and approached assessee company for issue of duplicate copies of share. Number of duplicate share was to be issued. For same purpose Sri Deepak Kalani one of the directors of M/s Chamak Trexim Private Limited who was also associated as directors in other company located in Indore took the bundle of share certificates from Kolkata to Indore and kept in his office AI R filed letter on supporting document explanation.

Regarding volume of transactions seen in statement of bank account AIR said that major sources of income of assessee company was interest against loan. During the year company recovered loans and advances from one party and given to other against interest Asset reported under the head loans and advances changed from one hand to other hand. Since transaction were carried out through banking channel, reflection in statement of bank account is obvious and credit also appears more than gross income.

On verification of accounts and document it was seen that Sri Deepak Kalani was associated with two companies located in lndore and Kolkata as director and sometime carry the documents or other works from other office.

Information related was whether shares certificates where meant for issue or was it related to M/s Chamak Trexim Private Limited. Information as provided not related to involvement of amount escaped from assessment. Issue of duplicate copy of share certificate related to office proceeding and updation of official records. On verification of ITD/AST value of paid up capital reported for AY 2011-12 was brought forward from AY 2007-08 and no change in quantum of capital 32

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 found till 31.03.2016.

Assessee company accepted the fact that share certificate as seized was related its company and furnished list of shareholders to whom it was to be issued.

Hence, on the circumstances as slated above no adverse view taken"

6.10 Therefore the cases of Chamak for A.Y.2010-11 and A.Y. 2011-12 were also reopened on the basis of same information of the Investigation Wing of Indore and same allegations were made raising doubts on the loan transactions with the appellant and other group companies and were completed after verifying the various facts as narrated by its AO· in the assessment order.

6.11 It is further observed that the assessments of Chamak for AY 2011- 12 and AY 2012-13 were also reopened under section 147 of the Income Tax Act, 1961 on the basis of the information received from ACIT(Central-1)Indore, wherein it was alleged that Chamak Trexim Pvt. Ltd. has made advances to certain concerns of Agarwal Group, sources of which were not explained. These assessments of Chamak for both the years have also been completed on 05.12.2018 by the ACIT(OSD), Ward 6(2), Kolkaua, and the observations made in the assessment order of Chamak of AY 2012-2013 (Copy enclosed at page no. 71 to 74 of Paper Book PB-B1), are abstracted as under:

"The assessee company filed its return of income for the assessment year 2012-13 on 29.09.2012 declaring total income of Rs 38,65,530/-. The return was duly processed

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 u/s 143(1) of the 1.T Act, 1961 on returned income. Subsequently, the case was re-opened on the basis of information received from ACIT (Central)- I, Indore wherein it was alleged that during the financial year 2010-11, the assessee company made advances to Maa Charitable Trust and Available Finance Ltd. sources of which was not explained.

Based on above allegations, statutory notices u/s 148, 143(2) and 142(1) of the IT Act, 1961 were issued to the assessee company. In response to the notices as issued above, the assessee company made compliances from time to time.

Considering the replies of the assessee and on the basis of documents and papers furnished during the assessment pmceedin9s, total income of the assessee is computed as under:

Returned income of the assessee : Rs 38,65,530/-

Addition made : Rs. NIL

Total assessed Income :Rs 38,65,530/-

6.12 Thus the above assessment of Chamak was also reopened on the basis of information of the Central Circle Indore regarding transactions of Chamak with certain concerns of Agrawal Group, which after verification, was assessed at the returned income, without any adverse remarks It is also worth noting that he income of Chamak for this year was assessed at Rs. 38,65,530/- which reaffirms its creditworthiness.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 6.13 It is also seen that the assessment of Chamak for AY 2004-05 was also completed under section 143(3) (copy of order at page no. 49-50 of the Paper Book PB-BI). Further in the said order, the issuance of the fresh capital issued during AY 2004- 05 was examined by the AO of Chamak and was found in order. As per the assessment order of Chamak for the AY 2004-05 dated 31.05.2006 passed under section 143(3) by ITO Ward '9(3), Kolkatta,it is observed that the AO of Chamak has specifically dealt the issue of fresh share capital in that year and accepted the returned income of Chamak It was observed in the assessment order as abstracted under:

"During the year, Assessee Co. increased Share Capital lo the tune of Rs. 64,60,000/- and by way of Share premium receipt to the tune of Rs. 5,81,40,000/- notice u/s 133 (6) were issued to 18 parties/concerns and replies of the above were examine in some seven case summons u/s 131 were also issued to verify their books of AI cs., bank statements which were also test checked, Confirmations from Loan debtors were also obtained

The assessee Co. invested to the tune of Rs. 5,99,00,000/- to different concerns. A/ R Sri Sarda produces computerised books of A/cs., Bills, Vouchers, Bank statements etc. for necessary evidence of investment mode. On going through the administrative and other expenses, It was seen that during the year, salary was debited amounting Rs. 1,57,236/- as against Rs 1,19,700/- of the last year. AIR Sri Sarda was asked for such sudden hike of salary. Sri Sarda, A/ R could not explain the same satisfactorily. His reply in this ground was only that during year, volume of Accounts job was heavier

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 than that of the last year. But this explanation did not fit with the circumstances of the administrative expenses because during the year assessee co. debited and additional amount of Rs 18,000/- against accounting charges were there was no such claim against accounting charges at the last year. Further, the salary amount paid to employees were not. properly vouched. In the view of the above, I disallow Rs 37,536/- (claim this year Rs. 1,57,236/- claimed last year Rs 1,19,700/-) and added to the assessee's total income.

6.14 Thus in this assessment order, the issue of share capital raised by Chamak in AY 2001-05 was specifically examined by issuing summons and not ice s under section 133(6) of the income Tax Act, 1961 and the capital raised along with share premium stands accepted and assessed. From the records and submission of the appellant, it is further observed that the Chamak has not raised any fresh capital after 2007-08, as also stated by the A.O of Chamak in the Assessment order of A.Y.2010-11 and A.Y.2011-12.

II. M/S AEREO DEALCOMM PVT. LTD.: 7.

7.1 The appellant has filed the financials of this company from F.Y.2008- 09 till FY 2015-16 at page numbers 76 to 141 of PB- B-I and also enclosed a chart of comparative financial figures of this company at page No. 76. It is seen that the share capital of this company is constant from F.Y.2008-09 till 2016-17. Its own net worth is also in the range of Rs.638.34 lacs to Rs.731.061acs in these years.

7.2 Further this company has also earned considerable revenues in all the years and its profit before tax is also 36

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 substantial which is above Rs. 5 Lacs in each year. It has earned profit of Rs. 8.86 Lacs in AY 2010-11 and profits of Rs. 07.85 Lacs, Rs. 23.79 Lacs, Rs. 27.13 Lacs Rs.09.67 Lacs, Rs. 35.98 Lacs and Rs. 25.53 Lacs in AY 2012-13 to AY 2017-18 on which it has paid considerable taxes. It has incurred loss of Rs.11.17 lacs only in the A.Y. 2011-12.

7.3 It is also evident that there are no borrowings or loans were taken by the loan creditor in any of these years. All the above facts establish the creditworthiness of this company.

7.4 It is seen that in the case of M/ s Aereo Dealcom Private Limited also, the appellant has filed copies of its assessment orders for AY 2002-03, 2009-10 and AY 2010-11 at page no. 142 to 149 of the PB-B1.

7.5 In the A.Y.2003-04 the assessment order was passed under section 147/143(3 dated 28.06.2007 by ITO ward 1(1) Kolkatta. The financials of this company were properly analyzed and particularly the issue of share capital raised by it during this year was also categorically examined by the AO. It will be worthwhile to refer to the particular observations made in the assessment order in this regard which is abstracted as under:

"From the enclosed Balance Sheet! Profit & Loss Account and other enclosures, if appeared that this is the first return submitted by the assessee Company and the source of income of the assessee was from miscellaneous sources. It also appeared from the, said documents that assessee Company had infused Fresh Share capital for Rs 47,750,000/-. Again, assessee Company had received total Share Premium of 4,29,75,000/ - on account of share allotment. Thus total 'Share 37

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Capital' was raised to the tune of Rs 4,77,50,000/-. Assessee Company was asked to provide list of new Share-holders from whom such fresh 'Share Capital' was raised. The A/ R had submitted the list of Share-holders to whom Shares were allotted during the relevant previous year. Notices u/s 133(6) of the IT Act were issued to some of those new Share-holders on test- check basis but the purpose of verification of the claim made by the assessee Company in this connection. Replies were received from those Share-holders and those were considered in the light of their-capabilities to invest such huge sum to pay Share prices including premium. Copies of Bank Accounts of those Share-holders have also been verified to cross-check the transactions they had entered with the assessee Company. In this connection Inspector was entrusted with independent inquiries. From the report submitted by the inspector, nothing objectionable was found; no interference is thus made on this ground."

7.6 Thus in this case also the issue of share capital raised by Aereo Dealcomm Pvt. Ltd. in A.Y.2003-04 was specifically examined by issuing summons and notices under section 133(6) of the Income Tax Act, 1961 and carrying out enquiries through the inspectors and the capital raised along with share premium stand accepted and assessed.

7.7 The assessments of Aereo for A.Y.2009-10 and A.Y.2010-11 were also completed after scrutiny u/s 147 R.W.S 143(3) of the Income Tax Act, 1961 by its jurisdictional AO assessing the income at Rs. 18,42,160/- and Rs. 8,86,387/- respectively, which fact also reaffirms the creditworthiness of this company,

7.8 It is further seen that Mr. Deepak Kalani, director of both the 38

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 companies appeared before the than AO, during the assessment proceedings of other group concerns of t he appellant and have filed the balance sheets and other financials of these companies. His statement was recorded by the then AO i.e. DCIT 1(1) on 01.12.2016, wherein he produced all the records from FY 2008-09 onwards before the AO including the books of accounts i.e. Bank Book, Cash Book and Ledgers from AY 2009-10 to AY 2014-15 (answer to question no.6 of the said statement – page 157 of PB- B1). He also furnished explanation of each Debit and Credit entry in cash book / bank book of these two companies (Question answer No. 8 of the said statement _ Page 157 of PB-B1) and also the trail of transactions with respect to movement of funds within the Agarwal Group of companies since FY 2008-09 (answer to Question No. 11 of the said statement Page. 158 of PB-Bl). Another statement of Shri Deepak Kalani was recorded on 08/12/2016 by the AO wherein he submitted the Auditor's report of both the companies from FY 2008-09 (AY 2009-10) to FY 2013-14 (AY 2014-15)(answer to Question o. 02 of the said statement Page. 159 of PB- B1). Thus the complete financial details of both these companies were made available on record.

7.9 In view of above factual aspects of both the loan creditors, considering their financials from FY 2007-08 till FY 2016-17, their revenue generations as well as profitability, the fact that there are no borrowings/ loans taken by both these companies, funds have been advanced to the appellant out of their own capital and reserves and also in view of the fact that the assessments of both the companies have been completed by their respective AOs, there remains no other criteria to judge the creditworthiness. It has to be held reasonably that 39

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 the same stand properly established and there remains no. reason to doubt the veracities of the credit worthiness of these companies.

7.10 A perusal of the assessment order of the appellant shows that though it is mentioned by the AO that the creditworthiness of the lender is not established, however no cogent basis of forming such an adverse opinion has been recorded in the assessment order as to why the creditworthiness is not established. Neither any defect is found in the financials of these loan creditors nor it is pointed out that what else was creditworthiness. required to establish the Therefore, considering the financials of both the companies reflecting their substantial own net worth and also considering the profits declared by both the companies and also the fact that both these companies have no borrowings as well as in the light of the facts that assessments- have been carried out of these two companies, particularly for the . assessment years, when they last. raised their share capital, in my opinion the creditworthiness of both the companies stands substantiated properly and there appears no cogent reason to doubt the same. It is held that both the companies were credit worthy of making the advances to the appellant company.

Now coming to the next issue of genuineness of the transactions, it is seen from the assessment order that the same has been doubted primarily for the reason that the registered office of both the companies is at Kolkatta whereas the appellant group of companies are based at Indore and further the observation that providing loans only to the 40

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 appellant group companies raises a doubt that both the lender companies are controlled and managed by the appellant group. Further the AD has also drawn support from his order rejecting the objections of the appellant filed against the reopening of the case. These issues are discussed hereunder:

8.1 So far as the issue that the lender companies are registered at Kolkatta and have provided loans to Indore based appellant group, the appellant has explained this issue through point no. 9.1 (ii) at page no. 23- 24 of its written submission that both the lender companies i.e. Charnak and Aereo arc owned and managed by Mr. Deepak Kalani who is prominent financial consultant having establishment at Indore and Kolkatta. Mr. Deepak Kalani is a close friend of Mr. Vinod Agarwal (the promoter of the Agarwal Group of companies) and is associated professionally with the Agrawal Group since long as a financial consultant. It is also su bmitted by the appellant that Mr. Deepak Kalani is also a man of means as he has promoted several companies and is also a partner in P Kalani &, Associates which is a leading financial consultancy firm.

8.2 It is further explained by the appellant that Mr. Kalani and Mr. Agarwal both basically hail from Kolkata. My. Kalani is born and brought up in Kolkata and Mr. Agarwal along with his father was also settled in Kolkata earlier, before they came to Indore.

8.3 It is further stated that the appellant also brought these facts before the AO that the lender companies i.e. Chamak and Aereo have shifted their offices from Kolkatta to Indore, and' now stand registered at 116-117 Milinda Manor, 2 RNT Marg , 41

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Indore. This is the office premises of Shri Deepak Kalani from where his all business operations are being carried out. The notices sent to Chamak and Aereo under section 133(6) of the Income Tax Act, 1961 by the AO in the present proceedings were also served on this address which were also duly complied by both these lender companies.

8.4 It is seen that this issue was also raised by the then AO i.e. DCIT1(1) while recording the statement of Mr. Deepak Kalani on 01.12.2016 in connection with the assessment proceedings of M/s Available Finance Limited, Admanum Finance Limited and Agarwal Fuel Corporation Limited in reply to Question No.10 (Page 157 and 158 of PB-B1) explaining the reasons as to why the major investments of these two companies are in Agarwal Group of companies, Mr. Kalani replied that he is professionally associated with Agarwal Group since 1990 and the creditworthiness of Agrawal Group is proven and therefore in the interest of safety of his investments, his companies advanced loans and made investments in the Agarwal Group of Companies.

8.5 The appellant has also explained that interest is being regularly and properly paid in respect of the funds borrowed from the lender companies at the prevalent market rates and the loans are also repaid from time to time and in these circumstances any lender would look forward to lend to the Agrawal Group, as safe investment. The fact that Agrawal group being amongst the leading business house with substantial revenues and also a prominent tax payer group of Indore also provides further comfort and security to its lenders and the lenders are more than willing to invest in the group. Further considering the

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 business volumes and potential, the Agrawal Group also requires funds within the group. Considering . these facts, the appellant contended that, the fact that the major exposure of both the lender companies is only with Agrawal Group of concerns stand justified and should not have been viewed adversely.

8.6 Considering all the above, i.e. the explanation of Mr. Deepak Kalani and also of the appellant, in my opinion merely on the fact that the lender companies have advanced amounts only to the appellant group when considered in the light of the explanation given by Mr. Deepak Kalani in this behalf, does not raises any doubt on the genuineness of the transactions. Mr. Deepak Kalani and Mr. Vinod Agrawal are both very well known to each other, which fact is uncontroverted, further considering the financial standing of the appellant group and for securing their investments, the lender companies have mainly invested in the various companies of Agrawal Group, which contention has also not been disapproved It is the sole prerogative of any business man to see how he conducts his business and the AO cannot step into the shoes of the business man. Therefore, this contention of the AO is devoid of merits.

8.7 With regard to the next contention raised in the assessment order that providing loans only to the appellant group companies raises a doubt that both the lender companies are controlled and managed by the Agrawal group, the appellant has submitted that this allegation is ill founded and without any basis, which contention of the appellant also find support from the fact that the AO himself has merely raised doubts and did not has any cogent material which could support his this

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 contention. The appellant emphasized the fact that the appe11ant company or its associates have neither any ownership interest nor any say in the management of these lender companies and further stated that these companies are independently running their business, making advances and investments earning substantial taxable income and paying the good amount of taxes.

8.8 It is categorically stated by the appellant that the appellant group has no control over these entities and all the operations of these companies are being managed by Shri Deepak Kalani, who is a Chartered Accountant by profession and is engaged in the business of lending money, loan syndication, financial restructuring and allied activities since last many years and that these entities are distinct and have made investments with the appellant group on the basis of the good will and creditworthiness of Mr. Vinod Agarwal.

8.9 The above contentions of the appellant deserve to be accepted. In my opinion, as already discussed above, Mr. Deepak Kalani has properly explained the reasons for providing loan to the appellant group only. Further there is nothing on record to support the contention of the AO that both the lender companies are controlled and managed by the Agrawal Group. The AO has also raised doubts only in this regard without any basis- The management and control of both the companies rest with Mr. Deepak Kalani, which fact is uncontroverted and is also supported by the fact that certain documents relating to both these companies were

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 found from the office of Shri Deepak Kalani during the search. Further he is a director of both the companies and is otherwise an independent person having his own standing. He also appeared before the department time to time, filed various submissions and explanations and placed on record various documents and information of both these companies as required by the officers. It is seen that apart from mere allegations, there is nothing on records to hold that management/ control of these two companies are with the Agarwal Group.

8.10 Finally coming to the issue of rejection of the objections filed by the appel1ant, by the AO it is seen that the AO has rejected the objections primarily on the basis of ‘reasons’ recorded by the then AO for reopening of the case and the contentions raised in the 'reasons’ are only reiterated in the order of rejection. On perusal of the ‘reasons’ it is seen that the same are recorded on the basis of information received from the Investigation Wing pursuant to the search conducted in the case of Shri Deepak Kalani on 04/09/2015, wherein the major concern of the Investigation Wing seems to be the finding of original share certificates of both these companies in the possession of Shri Deepak Kalani and other reason being the financial structure -of both the lender companies. The conclusion drawn in the 'reasons' are that the presence of the intact Original Share Certificates and with the appointment of Shri Deepak Kalani as a director and due to change in the business profile of the lender companies it is concluded that both these companies are used for providing accommodation entries. Both these issues are discussed in detail here under.-

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 8.11 In respect of original share certificates found at the time of search, the appellant submitted that the original share certificates of M/s Aereo Dealcomm Pvt. Ltd. and Mls Chamak Trexim Pvt. Ltd. were found intact in the bound book during search proceedings at 116-117, Milinda Manor, 2, RNT Marg, Indore which were seized as BS 2, BS 3 and BS 4 and further, it was observed that the shares certificates were not issued to any share holders. The appellant further submitted that the issue was explained by Shri Deepak Kalani through a written submission dated 07/12/2016 filed by him on 08.12.2016 before the then AO at the time of recording his statement, (copy enclosed in case of Chamak at page no. 182-292 of PB-B-I and in case of Aereo at page no, 293-389 of PB-B-I) and also through his statement recorded on 01.12.2016 in reply to Question no. 3.

8.12 I have perused the statement of Deepak Kalani and it will be worth referring to the relevant portion of the statement of Mr. Deepak Kalani recorded on 0l/12/2016, wherein while replying to the question no. 3, he stated as under :

"As regards question number 22, it is submitted that the share shareholders of the two companies namely Chamak Trexim Pvt.. Ltd. and Aereo Dealcom Pvt.Ltd had lodged request for reissue of share certificates as their shores were either mutilated or lost. In response to the same while preparing duplicate share certificates entire details were mentioned right from the beginning which is not correct practice As such these certificate s were not detached from the shore certificate book and were held back and were not issued. Moreover for reissuing duplicate share certificate only name of the present shareholder is mentioned on the face of the

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 share certificate and details of the earlier shareholder need not be endorsed on the back of share certificate. Accordingly duplicate share certificates were prepared after incorporating name of the present share holder on the face of share certificates and were finally issued to the respective shareholders. These issuance of share certificates to any shareholder does not involve any financial transaction with the company. It pertains the financial transaction between the shareholders only which in no case affects the income of the companies whose shares are being issued/reissued. The communication to this effect will be submitted shortly”.

8.13 Thus Mr. Kalani explained ID detail the reasons for original share certificates of Chamak and Aereo to be lying at the corporate office of the companies at Indore. He has stated that the share holders of Chamak and Aereo requested for reissuance of the share certificates which were mutilated or lost and while preparing duplicate share certificates certain inadvertent technical mistakes were committed by the staff. The nature of such technical errors has also been explained by Mr. Kalani in the above answer. Therefore, these certificates were held back and were not issued. Later on proper duplicate share certificates were prepared and were finally issued to the respective share holders. He had also filed the documents to substantiate his contention including request letter filed by existing shareholders, copy of resolution passed by the Board of Directors for issue of duplicate certificate along with copy of Pan card and copy of Indemnity bond of shareholder companies etc at the time of recording of his statement on 08.12.2016 which have been enclosed along with submission dated 07.12.2016 at page no. 187 to 225 of PB-B1 in case of Chamak and at page no. 298

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 to 334 of PB-B-1 in case of Aereo.

8.14 A perusal of these documents/correspondence corroborate the contention of Mr. Deepak Kalani and also show that duplicate share certificates were already issued to the share holders prior to the search on Mr. Deepak Kalani. The above submissions and the corroborative documents filed by Mr. Deepak Kalani have not been controverted by the then AO while recording the reasons for reopening of the case. Therefore, the contention of Mr. Deepak Kalani that the original share certificates seized were the ones which were held back due to technical errors, which were found and seized during the search comprising of the incorrect share certificates deserves to be accepted. The appellant has also reiterated these facts in its written submissions and further submitted that this fact in itself does not cast any doubt on the creditworthiness of these companies and also on the genuineness of the transactions with the appellant company.

8.15 In my opinion, the appellant as well as Mr. Deepak Kalani have properly explained the reasons for keeping original share certificates before the AO and have also filed the copies of correspondence with the shareholders and other related documents to substantiate the same. It is also seen that Mr. Deepak Kalani through his statements recorded on 01/12/2016 and also through written submissions dated 07/12/2016 filed by him before the then AO i.e. DCIT 1(1) Indore has properly explained this issue. It is also seen that the same AO i.e. DCIT 1 (l) Indore who recorded 'reasons' for reopening this case on 10/01/2017 did not consider the explanation and submissions given by Mr. Deepak Kalani in December, '2016, i.e. just few days before the date of

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 recording tile 'reasons' on this issue and went on to record the reasons in a mechanical manner. If at all the AO recording the 'reasons' was not satisfied with the explanation given by Mr. Deepak Kalani in respect of the seizure of original share certificates, for any reason, it was incumbent upon him to have stated his points of dissatisfaction and the reasons thereof, in the 'reasons' recorded by him immediately after receiving the explanation of Mr. Deepak Kalani. In these circumstances the explanation given by Shri Deepak Kalani on this Issue stands uncontroverted and therefore deserves to be accepted. Even otherwise Shri Deepak Kalani has properly explained and substantiated the reasons of finding original share certificates and there is nothing on record to disbelieve the same. Therefore there is no sound basis or reasons for doubt mg the transactions of both these companies with the appellant group merely due to finding of original share certificates in search operation.

8.16 Having discussed the issue of finding of the original certificates of the lender companies. with the director of the lender companies, which has been properly answered and explained by the director Shri Deepak Kalani and having negated the contentions and doubts of the investigation wing as well as the AOs, even if it is again viewed in light of the explanations given by the directors of the lenders there seems no reason, apparent or otherwise, to raise any doubt, as the original share certificates found were not of any use for them and were found from own premises of the lenders. Thus the doubts raised by the investigation wing in this respect have been found misconceived and cannot be used for doubting the genuineness of the transactions of the appellant with the 49

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 lender companies.

8.17 In view of above discussion and documentary evidences, the doubts raised by the investigation wing and relied upon by the AOs for reopening of the case and also for making the additions by doubting the genuineness of the transactions, do not hold ground and are not based upon any cogent material. On the contrary the appellant has successfully demonstrated that its transactions with both the lender companies were genuine and deserve to be accepted. The appellant's case is well supported by the following reasons:

- Mr. Deepak Kalani and Mr. Vinod Agarwal are very well known to each other and are also professionally related since 1990; both have their roots and belongings in Kolkatta.

- Mr. Deepak Kalani has properly explained the reasons of making investments with Agarwal Group of concerns considering the reputation, creditability and capabilities of the group and considering security aspects of his investments.

- The transactions by Chamak and Aereo both being the registered NBFCs have been made in the normal course of their finance business and also by the Agarwal group of companies in the normal course of their business which required the funds for its working capital needs.

- The transactions are through normal banking channels, on which proper interest has also been paid and TDS was also made. All the transactions are categorically confirmed by both the parties.

- Mr. Deepak Ka1ani director of both the lender companies 50

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 appeared before the authorities from time to time, recorded his statement furnished detailed written submissions and properly addressed all the concerns and doubts with respect to the genuineness of the transactions.

~ Direct enquiries have also been found conducted by the AO in this case by calling information u/s 133(6) from both the loan creditors (copies are at page 102 to 105 of PB-A), which were also complied with, as mentioned in the assessment order, It is seen that there is no adverse inference recorded in the assessment order with regard to such compliances made by the loan creditors.

~ Most importantly, in this case not only the source but also source of source is very well and properly explained and substantiated on records both by the appellant as well as by- the lender companies. As discussed above and also as evident from the financials of both the companies filed on records, right from the financials of 2007-08, the share capital of both the lender companies has remained unaltered during atleast last ten years which establishes the fact that no fresh funds have been introduced in both these companies. It is also on record that the share capital of both these companies stand assessed through orders passed under section 143(3) of the Income Tax Act, 1961 of the respective years in which the share capital was last increased. In these circumstances, in my considered opinion, the ultimate sources of making investments in the appellant company by way of advancing loans stands properly substantiated and explained.

- Similarly the immediate source i.e. source of source of making advances by both the corn parries to the appellant is 51

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 also properly explained and substantiated on records by filing the bank statement and flow of funds of various years of both these companies. No adverse comments have been found made by the AO raising any doubt on these very crucial facts which go to the root of genuineness of the transaction at any stage It is seen that both these lender companies have advanced loans to other group concerns of the appellant in earlier years, which funds were repaid back to the lenders during the year under consideration, out of which the lender companies have again advanced loans to the appellant, this fact is categorically established through the bank statements as well as the ledger accounts and fund flow trail of the funds with the lender companies.

- The appellant has also submitted that the funds advanced in earlier years to the group companies were added under section 68 of the Income Tax Act, 1961 in the respective group company in their regular assessment proceedings made under section 143(3) of the Income Tax Act, 1961, which additions were deleted not only by the first, appellate authority but also by the Hon'ble ITAT. A categorical finding was rendered in respect of both the lender companies with regard to their creditworthiness and also genuineness of their transactions with the appellant group by the CIT[A)-ll and also by the Hon'ble ITAT, Indore Bench. This issue is discussed at length in the later part of this order. In these peculiar facts, when these very funds were received back by the lender companies and were advanced to the appellant, the same cannot by any stretch of imagination be roped into the clutches of genuineness and creditworthiness under section 68 of the Income Tax Act, 1961. 52

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 8.18 It is' important to note here that the lender companies through the director Mr. Deepak Kalani have provided all the necessary details and also recorded their presence before the officers time and again. There is no defect found and pointed out in the trail of any transactions on records. The transactions have been confirmed by the parties and have been found entered in the commercial manner, interest has been paid on loans and TDS has also been deducted. Shri Deepak Kalani and the lender companies have placed on records their balance sheets and assessment details which substantiate the contentions of the appellants as discussed above. On the contrary, there is no evidence in the hands of the investigation wing or the Assessing Officer which suggests otherwise. Only on finding of the original share certificates from the lender’s own office, on which this entire case has been made-up cannot be doubted and concluded that the transactions of concerns of the lenders with the appellant are not genuine. Thus in my considered view, the test of genuineness of the transactions has also been successfully met in this case.

8.19 In view of detailed discussion above, the creditworthiness of the lender parties as well as the genuineness of their transactions with the appellant are properly explained and substantiated and there is nothing on record to doubt the same. Accordingly it is held that the additions made by the AO doubting the creditworthiness of parties as well as the genuineness of transactions are wrong on the facts of the case and deserve to be deleted.

8.20 It is also seen that additions u/s 68 of the Income Tax Act, 1961 were made in respect of certain other group cases of

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 the appellant for AY 2008-09 i.e. M/s Admanum Finance Ltd., M/s Agrawal Coal Corporation Ltd. etc. These additions were made on account of loans received by these assessees from Chamak and Aereo u/s 68 in the regular order passed u/s 143(3) of the Income Tax Act, 1961. The appellant has filed a copy of the assessment order dated 30.12.2010 at page nos. 784 to 819 of PB - B - II in the case of Admanum Finance Ltd. and has also filed a copy of the order of CIT(A) - II Indore dated 07.03.2012 passed against the said assessment order at page 700 to 783 of PB - B - II and also a copy of Hon'ble ITAT lndore Bench dated 27.06.2016 at page 496 to 699 of PB - B - II. It is seen that the AO in AY 2008-09 conducted enquiries through his inspector and also by issuing notice u/ s 133(6) and also through DDIT Investigation Kolkatta by issuing commission to him. The result of all the enquiries was that both the companies were found existing at their respective addresses where the director or the staff present accepted the loan transactions with Admanum Finance Ltd and also filed the confirmations, balance sheet, bank statement etc. Still additions u/s 68 were made by the then A0 doubting the creditworthiness of Chamak and Aereo and also genuineness of the transactions. However, in the subsequent proceedings both, the first appellate authorities as well as the second appellate authority rendered a categorical finding that the as creditworthiness of both the companies as well genuineness of the transactions were established and. delete addition made by the AO u/s 68 of the Income Tax Act, 1961. For me S25 of ready reference, the relevant findings of the CIT(A) -II Indore where this issue has been dealt (page 765 to 775 of PB - B – Il) are reproduced hereunder: -

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 "4.Facts on record, very detailed and elaborate findings recorded by AO in the assessment order on both factual and legal aspects and in particular the result oJ enquiries emerged from ITIs deputed by AO for local enquiry at Kolkata and equally detailed and elaborate submissions filed by the appellant and voluminous documents included in compilation in support of grounds of appeal raised are very carefully taken into consideration.

4.1The first and foremost ground of appeal is directed- against addition of Rs. 6,08,94,415/- crores for Loans taken from 9 Kolkata based companies as per chart included in par a 2.3 of assessment order treated as unexplained The A.O. (Addl.CIT, Range-5) apart from issuing notices u/s 133(6) on 29.11.2010 directly had deputed two Inspectors attached to his Range in making local enquiries at Calcutta in the month of December, 2010; first time for the period 6.12.2010 to 10.12.2010 and then again for the period 20.12.2010 to 25.12.2010. The AO also took assistance of the Investigation Wing of the department based at Calcutta by issuing commission u/s 131(1)(d) on 03.12.2010 to make verification about the existence of these 9 Calcutta based companies from whom the appellant borrowed substantial funds during the year under consideration. The AO has taken note of the enquiry report submitted by DDIT (Inv. Wing) and on page 7- 8 of the assessment order it will be worthwhile to reproduce the report submitted by DDIT (Inv. Wing)- 55

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 13, Kolkatta to appreciate the fact surrounding the transactions i.e. identity of such creditors and further genuineness and creditworthiness of such transactions .

4.1.1 The Inspectors in their enquiry report have noted that two companies M/s Aereo Deal Comm. Pvt. Ltd. and Chamak Trexim Pvt. Ltd. were in existence on the given addresses and some other companies were also operating on the same addresses but they have expressed doubt about their creditworthiness...... “M/s Aereo Deal Comm. Put Ltd & M s Chamak Trexim Put: Ltd are functioning at the given address. The copies of the returns are also enclosed. Shri Ravin Umarethiya is the Accountant to both these Companies and in his Statement he has admitted that these Companies have not applied for any shares in M/ s Admanum Finance. Ltd., In.dor e but: have provided unsecured loans/ advances to it

.............

4.1.7 In the aforesaid factual back ground it has to be now decided whether the appellant has been able to discharge the onus cast u/s 68 and whether the addition made u/s 68 was justified on the facts of this case. It should be appreciated that degree of onus to explain the cash credit transaction cannot be uniform and rigid in all the situations. Degree of onus regarding genuineness of transaction in respect of receipt of share capital at huge premium in unlisted companies otherwise through public issue 56

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 cannot be viewed but with suspicion and the appellant may be required to justify such receipt of money on huge premium as such transaction would defy normal financial prudence and logic. But the same degree of onus cannot be cast on the appellant to explain the loan transaction which have been repaid in a span of 1 ½ years or so when the appellant is able to discharge his: onus to establish the identity of the creditors, receipt of money through banking channel and existence and apparent financial worth of creditors as reflected from the audited accounts and IT. returns. It may be also observed that onus to establish all the three ingredients would vary from case to case identity is first ingredients, which can be established by giving complete address, physical existence of the person and I. T. particulars i.e. PAN and details of filing of return etc. In a given case, where the transaction of say a smaller amount of Rs. 50000/- or 1 lakh is involved the credit worthiness of person involving nominal income in the same range may be acceptable, but can become suspicious and doubtful if the amount advanced runs in millions and crores without there being other verifiable details and evidences of sources of such funds advanced.

.........

4.3 Now the issue of loan taken from Aereo Dealcom at Pvt. Ltd. Rs. 1.88 crores taken up for consideration. The appellant had taken a loan ofRs.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 1.88 crores from. the said company at Rs.8,38,156/- and an amount of Rs. 1,60,590/- was repaid during the year. The AR present pointing out the ledger account of the said party in paper book D at page 392-393 submitted that the loan received from these company stand fully repaid in Nov 2010. The Inspectors in their report as noted on page 3 of assessment order has confirmed about: existence of such company at the given address. The Inspectors have confirmed, as noted on page 7 of the assessment order that the accountant of this company, in the statement recorded by the Inspectors, has confirmed having advanced unsecured loans to the Appellant. Before DDIT (Inv) Kolkatta also against issue of summons u/s 131 compliance were made by filing of copies of audited annual accounts, photo copy of Bank Statement and confirmation letters. Thus it cannot be said that Inspectors and DDIT(Inv) have expressed any doubt about the existence of such company. The doubt expressed by Inspectors and DDIT (Inv.) both of them are apparently subjective and in case of DDITs report is merely based upon non appearance by the Directors of the said company. In response to the AO's notices u/s 133(6) the said lender company replied vide letter dated 07.12.2010 at page 581 stating that it has advanced loans to the appellant and also filed copy of its ledger for the impugned year, copies of ITR acknowledgement along with computation for AYs 2006-07 to 2008· 09 as was

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 required by the AO. The company is holding PAN AACCA5934G and is active registered private limited companies vide registration no. UG1109WB1994PTC066871 with the Ministry of Corporate Affairs Government of India. The copy of audited accounts of the said company, along with copy of bank statement, confirmation, ITR acknowledgement etc are included in compilation by the appellant from page 303 to 328. The main source of the said company is from gross interest income of Rs. 47,83 Lacs. The net profit of the company is reflected in the head as 'Schedule 7 to Balance Sheet under 'Loans and Advances' details of which are at page 323. Thus it could not be said that the financial position of the company was dubious and nominal returned income was disclosed. The appellant has included a copy of NBFC registration issued by the RBI and an intimation u/s 143(1) for the AY 2009-10 where in a refund of Rs. 14.67 Lacs has been issued to this company and also assessment order passed u/s 143(3} for Asstt. Year 2003-04 of this company at page 383 & 384 wherein the source of share holders fund being share capital and share premium account was examined and found to be verifiable and detailed findings in this behalf have been recorded in the said assessment order. It. will be appropriate to reproduce the same here under for ready reference.

"It also appeared front the said documents that 59

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 assessee company had infused fresh share capital for Rs.47,75,000/ -. Again assessee company had received total share premium of RsA,29,75,000/- on account of share allotment. Thus total 'Share Capital' was raised to the tune of Rs 4,77,50,000/- Assessee company was asked to provide list of new 'Share holders' from whom such fresh share capital was raised. The AR had submitted the list of Share holders to whom shares were allotted during the relevant previous year. Notices u/s 133(6) of the IT Act were issued to some of those new Share-holders on test-check basis for the purpose of verification of the claim made by the assessee Company in this connection. Replies were received from those Share holders and those were considered in the light of their capabilities to invest such huge sum to pay Share prices including premium. Copies of Bank accounts of those Share holders have also been verified to cross-check the transactions they had assessee Company. In this entered with the connection Inspector was entrusted with independent inquiries. From the report submitted by the Inspector, nothing objectionable was found; no interference is thus made on this ground."

4.3.4 In view of above factual and legal position wherein even the sources of the funds of the creditor company have been found and verified by the concerned AO and the transactions duly getting reflected in the audited final accounts of the creditor company, the AO's action in doubting such loan 60

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 transaction is absolutely without any merit and substance and accordingly the AO's action in treating such loan of Rs. 1.88 crores and interest of Rs. 8,38,156/- thereon as unexplained is held to be unjustified.

4.4 Proceedings next to the loan of Rs.90 lacs from Chamak Texim Put. Ltd. which is also a registered NBFC as per the certificate issued by the Reserve Bank of India, it is noted that. the appellant has no opening balance with this party and it received during the year under consideration Rs. 90.00 Lacs as loan. Interest of Rs.9,25,680/- was paid / provided and an amount of Rs. 3,29,640/- was paid to the said party. As per the repayment chart in the paper at 394-395 of paper book the loan stand duly repaid in Dec 2010. The position in respect of enquiry report submitted by Inspectors and compliances made before DDIT' is exactly. the same as noted in the case of Aereo Dealcomm Pvt. Ltd. above. The company is holding PAN AABCC1003H, and is active registered private limited companies vide registration no. U51109WB1994PTC06Z349 with the Ministry of Corporate Affairs Government of India. As per relevant .final accounts and other documents of this company are concerned, the same are filed in the compilation from page 329 to 358. In this company also the main source of income is interest and gross amount is reflected at Rs.85.30 lacs and net profits in excess of Rs.14 lacs and loan in the name of appellant company is duly reflected in Schedule E of Loan and Advances 61

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 at page 350 in the balance sheet of the said company. The concerned AO in the case of this company if assessment order passed u/s 143(3) for Asstt. Year 2004-05 on 31~01.2oo6 (included at page 385 & 386) has verified the source of owners fund being share capital, share premium received which were invested by way of loans and advances. In the intimation issued u/s 143(3) for AY 2009-10, the returned income has been stated at Rs: 11.66 Lacs and a refund of Rs. 11.27 lacs has been issued to this company. The said company has also complied in response to the notice issued u/s 133(6) by the AO vide reply dated 07.12.2010 at page 588. Thus in view of detailed findings arrived above in "the case of Aereo Dealcomm Put: Ltd., above, the said loan of Rs. 90 Lacs from this company is also held to be explained."

8.21 Thus it is seen that the creditworthiness of both Chamak and Aereo and also the genuineness of the transactions stand already examined and substantiated earlier in other group cases of the appellant, wherein direct enquiries were got conducted not only by deputing the Inspectors of the department but also through the local Investigation Wing. The CIT(A) - II Indore after examining the issue at length found the creditworthiness of both the parties and also the genuineness of the transactions proved and deleted the addition u/s 68 of the Income Tax Act, 1961 made in respect of loans received from these two companies by the group companies of the appellant, which order was also affirmed by the hon'ble Jurisdictional ITAT in the case of Agrawa1 Coal Corporation Pvt. Ltd in ITA 294/IND/2012. It would be relevant to abstract the observations 62

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 of the Hon'ble 1TAT made in this regard.

"We have heard the rival contentions of both the parties. We have gone through the assessment order and also the order of the CIT(A). We have also perused the case laws cited by the Ld. Departmental Representative as well as the Ld. Authorized Representative for the assessee.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Kolkata, who vide report dated 10.12.2010 confirmed' existence most of the lenders. of Thereafter, Commission was issued to DDIT, Inv., Kolkata under section 131 of the Act, who independently conducted investigation and sent his report dated 20.12.2010 and most of the parties appeared and filed documentary evidences as required by DDIT(Inv}, Kolkata, thereby confirming the transaction with the assessee. The Income-tax Inspectors were again deputed to personally visit and make enquiries at Kolkata and collected certain information directly from the banks and filed another report dated 23.12.2010. The assessee has also submitted the confirmation letters alongwith PAN, Company's Master details with the Registrar of Companies, copy of income tax returns, auditors report of the creditor companies, Bank statements reflecting receipt and payment of the said loan amount and Form No_16A issued on tax withheld on interest paid. The assessee has placed on record requisite documents, which proved the identity, source of credit including existence and creditworthiness and genuineness of the loan. The AO has made the extensive enquiry.

23, The assessee has taken loan from Aereo Dealcomm private Limited. The assessee has submitted documentary evidence like confirmation, bank statement, income tax return, audited accounts, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. 64

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 The existence of the Company was inspected by the Inspector on 10.12.2010 and the AO has not disputed about the existence. During the course of investigation, statement of accountant was recorded by the Inspector, wherein he has confirmed the loan transaction in assessment year 2002-03. The source of fund of Creditor Company was examined. The AO has also examined the opening balance, which stands accepted, since no addition was made in the assessment year 2007-08. The Company has also shown the interest income o] Rs.47.83 lacs and profit of Rs.11.20 Lac s in assessment year 2008-09 reflecting a healthy financial position.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 assessee has also filed copy of the assessment order for assessment year 2002-03 of the said lender company, wherein the shareholder funds being shareholder capital and share premium account was examined and found to be verifiable. AO found that the said lender company had share capital of Rs. 47, 75,000/- and it has received share premium of Rs. 4,29,75,000/on account of share allotment. The AO of the lender company has also verified the shareholder on test check basis and shareholders' bank accounts were also verified. Therefore, we are of the view that the assessee has proved the identity, creditworthiness of this lender company and also the genuineness of the transaction with the said company with sufficient evidence.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 lacs and profit of Rs: 14 lacs in assessment year 2008-09 and the entire loan was repaid in February" 2010 .

......................................................

On going through the above case laws and applying them on the facts of the assessee's case, we find that the same are squarely applicable to the assessee's case. We find that in the instant case the assessee had, during the course of assessment proceedings, filed all the relevant details/ documents/ information, required by the assessing officer, as were necessary to substantiate the identity and creditworthiness of the creditor companies and also the genuineness of transaction.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 assessment order, the assessing officer has simply reproduced the reports furnished, submissions of the assessee and discussion on case laws, without dealing with the same and specifying their applicability vis-a-vis the facts of various creditors.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Therefore, we have to decide the matter as per the facts available on record.

8.22 It is also found that the above findings rendered in the case of Agrawal Coal Corporation Pvt. Ltd. by the Hon'bJc ITAT has been applied in the case of M/s Admanum Finance Ltd AY 2008-09 in appeal no. ITA 389/IND/2012 which has also been decided by the same order of the Hon’ble ITAT wherein in Para no. 105 it is held as under :-

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 106. This issue has already been considered by us hi1e deciding ground nos. 2 to 4 in ITA No. 294/1nd/2012 for the assessment year 2008-09 in the case of M/s Agrawal Coal Corporation Pvt. Ltd. wherein we have dealt with this issue in detail The addition ma.de by the AO u/s 68 in respect of credits received by the assessee from the twelve Kolkata based companies was deleted by the Ld. CIT(A) ho1ding that their identity and creditworthiness and: the genuineness of the transactions was established. We have upheld the decision of the Ld CIT(A] 'and dismissed the said ground of Revenue in that appeal Following the same reasoning we hold that the ITAT has right1y deleted the addition of Rs. 6,08,94,415/- made by the AO in this ease also. Accordingly., this ground of appeal of the departmental appeal is dismissed. "

8.23 Thus the additions made under section 68 of the Income Tax Ac 1961 in respect of the transactions of the group concerns of the appellant with Chamak and Aereo in the regular assessment proceedings of AY 2008- 09 and AY 2009-10 were deleted by CIT(A) - II Indore which order was affirmed by Honble ITAT. At this juncture it will be worthwhile to revisit the following observations of the Honble !TAT while affirming the order of the CIT(A) and also while holding that the identity and creditworthiness of the lender companies and also the genuineness of the transactions has been proved by the assessee with sufficient evidence.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 (i) In Para 22 of its order the Hon’ble ITAT has discussed the nature and extent of enquiries conducted by the then AO in the group cases of the appellant and concluded that, the AO had made extensive enquiry,

(ii) In Para 23 of the order, the Hon'ble ITAT has discussed the issue of loans taken from Aerco Dcalcornm Pvt . Ltd. and found that the existence of the company was inspected by the inspector on 10.12.2010 which is not disputed by the AO, A categorical finding has been rendered that the company has shown interest income of Rs. 47.83 Lacs and profit of Rs.11.2 Lacs in AY 2008-09 reflecting a healthy financial position.

(iiii) In para 24 of the order it is further observed that the opening balance of Rs.98,73,663/- in. 2007-08 has been accepted by the department and no addition was made in that year.

[iv] In same Para 24 it is stated by the Honourable ITAT that the loan received from Aereo was repaid in February 2010. It is also observed that the inspect and the DDIT have confirmed the existence of such company.

(v) It is further observed that the AO of Aereo has examined the source of its fund in AY 2002-03 and the AO also examined the share holders on test check basis and share holder's bank accounts were also verified.

vi ) In Para 24 of its order the Hon'ble ITAT concluded "Therefore, we are of the view that the assessee has proved the identity, creditworthiness of this lender company and also the genuineness of the transactions with the said company with

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 sufficient evidence."

(vii) Similarly in respect of Chamak Trexim Pvt. Ltd. in Para 25 of the order, the Hon'ble ITAT has observed that the existence of this company was inspected by the inspector on 10.12.2010, the statement of the accountant was recorded where he confirm the loan transactions of the assessee.

[viii] In the same Para 25 it is stated that in AY 2004-05 source of funds of this creditor company was examined and verified by the AO in its assessment proceedings u/s 143(3). The opening balance of loan from the said company was accepted. Further it is stated that the company has shown the interest income of Rs. 85.30 Lacs and profit of Rs. 14 Lacs in AY 2008- 09 and the entire loan was repaid in February 2010.

8.24 Thus the Hon'ble ITAT finally concluded at para no.37 that the entire additions made u/s 68 is without any basis and 1S legally unsustainable and in Para 38 further held that the loan taken by the assessee was explained, is proper and does not require any interference and the addition was rightly deleted by the CIT(A) who has also rightly deleted the disallowance of interest on the adhoc loans.

8.25 The appellant has also pointed out that its group companies repaid the same loan which was added u/s 68 in the case of it s group companies, to the lender companies during the year under consideration out of which fresh loans were advanced to the appellant, which has again been added in its hands and which is the subject matter of the present appeal. it is also noticed that the Hon'ble ITAT in the cases of group companies, as abstracted above, has rendered a finding of 72

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 fact that the loans by the group companies were repaid in February 2010, the fact which is also corroborating with the . facts of the present case before me, wherein the present appellant has taken loans from Chamak and Aereo in February 2010 as also evident from the confirmation of account filed respectively at page no. 108 and 138 of PB-A. Thus the impugned loan transactions which are the subject matter of addition u/s 68 in the present appeal are emanating from the earlier loan transactions in group cases of the appellant which were added u/s 68 in the respective cases and stand deleted by the CIT(A) – II Indore as well as by the Hon'ble ITAT in those cases.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 my predecessor are not even factually correct to some extent and I do not agree with the same for the following reasons.

9.1 It has been held at Para 2.2 by my predecessor that the loan providers were not having any business activity and were having meager that they are paper / shell companies engaged in giving accommodation entries to the beneficiaries in the garb of loan. I wish to differ from such observations as both the companies i.e. Chamak and Aereo are having substantial business activities in all these years which is evident from their financials filed at page no. 02 to 48 PB- B-1 in the case and at page no. 77 to 141 PB-B-I in the case of Aereo. The appellant has also filed a table depicting the gross revenues earned by these companies in some recent years which is enclosed at page no. 01 and page No. 67 of PB-B-I. This aspect has already been discussed earlier and it is seen that both these companies have earned considerable income in various years. Therefore, the conclusion that they are having meager income is factually incorrect and consequentially the conclusion that these are paper/shell companies has also not been found correct.

9.2 In para 4.2.3 it has been stated by my predecessor that the appellant failed to prove the genuineness of the transactions. I wish to differ from this observation also. As explained by the appellant, Mr. Deepak Kalani who manages and controls both Aereo and Chamak is a prominent financial consultant having establishment at Indore and Kolkatta and is a very close friend of Shri Vinod Agrawal, the promoter of Agrawal Group of concern and is associated even professionally with the Agrawal Group

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 since long as a financial consultant. These facts have not been controverted either by the AO or by my predecessor. The fact that both these lender companies have not raised any fresh share capital during last 8 to 10 years and have no borrowings in the form of unsecured loans or otherwise in their balance sheets has not been appreciated and considered by them.

9.3 The fact that Mr. Deepak Kalani explained the reasons of advancing loan/making investments with concerns of Agrawal Group considering his long professional relationship with the group and also considering the reputation and credibility of the group, he' found the same to be most safe and lucrative commercial proposition, in the statement recorded by the DCIT 1 (1) Indore, it seems has not been noticed by my predecessor.

9.4 It is concluded that the source of transactions was properly substantiated by filing the bank statements of both the companies and' also by explaining and substantiating the source, and source thereof. The contention of the appellant that the source of loans was receipt of money from other Agrawal Group concerns as repayment of loans and payment of interest is duly supported by the bank statements as well as other documents such as ledger accounts etc in the books of other group concerns confirming such repayment of loans. These important facts have been not been considered by my predecessor.

9.5 Another very crucial fact that additions made u/s 68 in respect of transactions of Agrawal Group concerns with Chamak and Aereo in regular assessment proceedings for AY 2008-09 were deleted not only by the first appellate authority 75

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 but also by the Hon'ble Jurisdictional ITAT rendering categorical finding of admitting the identity and creditworthiness of these two companies and also accepting the genuineness of the transactions has also not been considered in the order passed by my predecessor.

9.6 It is seen that the above facts were duly stated before my predecessor as evident from the written submissions of the respective assessees incorporated in his order, but have not been considered by him. Therefore, it would not be proper to hold that the appellant failed to prove the genuineness of the transactions.

9.7 It is also noticed that the observation of my predecessor that once the AO doubted the creditworthiness of the creditors and genuineness of the transactions, the onus shifts back to the appellant company to offer an explanation to the satisfaction of the AO as contemplated u/s 68 of the Income Tax Act, 1961, which could have been discharged by producing the loan providers before the AO so that truth behind the smokescreen could have been untraveled by the AO by interrogating them, is misplaced since the loan provider companies i.e. Chamak and Aereo were duly produced before the DCIT 1(1) through their director Shri Deepak Kalani on several occasion in December 2016 and his detailed statements were recorded and he also substantiating the transactions by filing the bank also by explaining the source of source. The statements so then AO are enclosed at page no. 154-164 of PB-B-I, which filed before my predecessor as evident from the submission of the appellant in those cases as reproduced in the order of my predecessor. It seems that the vital facts that the loan

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 creditors were produced by the appellant group before the then AO, statements were recorded and submissions were made have completely skipped attention of my predecessor. It is very rightly pointed out by him that once the onus shifted back to the assessee to offer an explanation to the satisfaction of the AO, it could have been discharged by producing the loan providers. Since this is what has exactly happened in the group cases that the loan creditors were produced before the AO in those cases and thus the onus which shifted back to the assessee was properly discharged in those cases.

9.8 Further, I also agree with my predecessor that in such cases the onus u/s 68 of the Income Tax Act, 1961 is very heavy and that mere submission of the name and addresses, income tax returns, balance sheets and bank statements are not sufficient as the AO is to be satisfied cumulatively as to their identity, creditworthiness and the genuineness of the transactions entered into. However, it is found that the appellant had properly and effectively discharged the onus and has cumulatively satisfied by establishing the identity, creditworthiness of the parties and also the genuineness of the transactions. The loan creditor's were produced and detailed statements were recorded by the then AO in the group cases, books of accounts and bank statements of the loan creditors were produced arid verified by the AO, assessment orders of the loan parties were also placer: on records, the loan parties have substantial business transactions and have offered considerable income in their returns. All these facts have been completely ignored by the then AO in those cases and have also not been considered by my predecessor appropriately.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 9.9 The appellant has rightly submitted that neither the AO nor the CIT(A) has pointed out any short coming or deficiency in the documents filed and facts presented to cumulatively satisfy the three prerequisite of section 68 nor they have stated as to what more was required to be done or as to what was not done for discharging the onus casted upon the assessee.

9.10 It is further noticed that the observation by my predecessor, that "the alleged loan parties were not found to be in existence and thus the onus shifts back to the appellant to produce the loan parties before the AO and if the appellant falters, the addition can be made u/s 68 of the Act is factually incorrect as this is not at all the case where the loan parties were not found to be in existence.

9.11 The appellant has also submitted that the CIT(A) has referred to the amendment made to section 68 by the Finance Act, 2012 w.e.f. 01.04.2013 and stated that the appellant is not only required to justify the source of loan but is also required to explain the source of the source of raising the loan which has held to be c1arificatory in nature. In this respect the appellant further submitted that it has duly explained the source of source of raising the loan by filing not only the bank statements of the loan creditors but also substantiating the source of source by filing the details of such source of source. It was categorically substantiated that the immediate source of credit entries in the hands of the appellant was the funds received by the loan creditors from other group concerns of the appellant itself. The other group concerns of the' appellant repaid the loans back to the loan creditor which was advanced

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 to the appellant. Thus the appellant contended that there cannot be any better source of source as in the case of the appellant.

9.12 The appellant further submitted that the person in whose name the appellant i.e. Chamak and Aereo also offered an explanation about the nature and source of such sum credited in explanation, their bank statements and the details and accounts of the persons from whom the transactions with the appellant were sourced. The director was produced and his statements were recorded. Therefore, the condition of the newly inserted proviso were also satisfied. Therefore, the contentions of the appellant have been sound footings.

9.13 I further endorse the view and observation of my predecessor that as held by various courts every transactions involving application of section 68 of the Income Tax Act, 1961 and whether the onus of the assessee has been discharged or not has to be appreciated on totality of evidence available on record and surrounding facts and circumstances of the case and I find that the onus in this case has been properly discharged on overall facts as discussed above.

9.14 Further, I also subscribe to the observation of my predecessor that the creditworthiness or genuineness of transactions depends upon whether the parties are related or known to each other, manner or mode by which he approached each other, creditworthiness of recipients, object and purpose etc. I find that the appellant has brought on record that Mr. Deepak Kalani director of the lender company 79

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 is very well known to Shri Vinod Agrawal of appellant Group. Mr. Kalani is associated professionally with the group since long as a finance consultant and considerable amount of professional fees is paid by various AgrawaI group companies for his services. Similarly the creditworthiness of the recipients i.e. the Agrawal Group Cannot be doubted. The transactions are purely out of business exigencies wherein proper interest has been paid regularly. These submissions of the Appellant have not been controverted.

9.15 Regarding observation of my predecessor that the applicants are not having creditworthiness to invest the amounts, the facts on record do not support this observation. It seems that the fact that the individual net worth of both the companies is in the range of 7 to 8 crores each as evident from their financials already placed on record as paper book B and also from the summary table enclosed at page no. 1&76 - PB-B-l have skipped the attention of my predecessor.

9.16 It is found that the major factor which weighed the decision of my predecessor treating the transactions as not genuine is the observation that these companies are hardly earning any income. However I find that this observation is not correct on facts as evident from the financials of these companies and also from the income tax returns and assessment orders passed u/s 143 (3) of the Income Tax Act, 1961. These companies are having substantial income in the form of interest receipts and have earned considerable net profits.

9.17 Further, I agree with the observation of my predecessor that creditworthiness is not proved by showing issue and 80

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 receipt of cheque or by furnishing a copy of statement of bank account and when circumstances require that there should be some more evidence of positive nature to ensure that the subscribers have made genuine investment. I find that the appellant has well discharged this onus through the balance sheets and other financial details of both the companies reflecting substantial revenues and profits in almost all the years and also through the fact that both the companies have not borrowed any amount for making investments with the appellant group.

9.18 It is found that besides showing that the transactions were through normal banking channels, the appellant, in order to establish the creditworthiness of the loan creditor and the genuineness of the transactions, went far ahead and placed on record many more evidences to substantiate the same, which are already discussed and explained in this order such as investments purely out of own capital and reserves of the lender companies, their assessment orders, source of credits, source of source creditors, production of director of the loan creditor along with books of accounts and other documents etc.

9.19 The appellant has also filed in a tabular form the distinguishing facts of its case with those of the case laws relied upon by my predecessor. It is e case laws relied upon by the CIT(A), the adverse view has the appellate authorities for the reason that either the loan the share applicants were not found or the summons and notices s 133(6) were returned back unserved and the assessees in those cases could not produce the loan creditors during the assessment

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 proceedings. In some of the cases there is a finding that cash was deposited in the bank accounts of the lenders immediately before issuing cheques to the assesses in those appeals. I, however, wish to differ from the view adopted by my predecessor as the facts in all those case laws which have been relied by my predecessor are substantially different.

9.20 In the present appeal, it is not a case where the loan creditors were not found nor it is a case where notices / summons were returned unserved. On the contrary, in the group cases of the appellant, the director of the loan creditors companies i.e. Shri Deepak Kalani presented himself on various occasion and his statements were recorded. In the present appeal the AO has issued notice u/s 133 (6) of the Income Tax Act, 1961 to both the lender companies in response to which proper compliance was made by both the companies, the finding about the same has also been found recorded m the assessment order. In fact, the identity of the loan creditors is not at all disputed by the AO in the present case. It is also seen from the bank statements of the lender companies that there are no cash deposits in their bank accounts. Rather, the source of deposits in these bank accounts have been properly explained by these lender companies which has come from the other group concerns of the appellant, who repaid the loans taken by them in earlier years.

9.21 In the case of ACIT V/s Narmada Extrusion Ltd. (2012) 19 ITJ 202- ITAT Indore, relied upon .by my predecessor, the jurisdictional ITAT confirmed the addition made on account of unsecured loans received from Lunkad Group of companies u/s 68 by categorically stating that based on' the documents

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 impounded during survey from Lunkad Group various cash entries were appearing in the name of Narmada Extrusion Ltd. against which Lunkad Group has issued cheques in favour of Narmada Extrusion Ltd. Further the assessee failed to produce the director and the Lunkad Group also failed in discharging its onus to explain the source of huge share application money as it did not had any sound business and it declared meager amount of income. The facts of this case are also clearly distinguishable and rather support the case of the appellant. No such documents reflecting any cash receipts by Mr. Deepak Kalani or the lender companies were found in the search and it is neither a case where the directors refrained from appearing before the AO nor it is case where there is receipts of huge share application money by the lenders before issuing cheques to the appellant. In fact the share capital received by the lender companies is duly assessed u/s 143(3) of the Income Tax Act, 1961 and no fresh share capital was raised in last 7-8 years. Thus the facts of the present case are very clearly distinguishable from the facts of the various decisions relied upon by my predecessor and therefore, the propositions laid down in those cases do not apply on the facts of the present case before me. On the contrary, the propositions laid down in the various judicial pronouncements support the case of the appellant.

9.22 In view of detailed discussion held as above, I wish to differ from the view taken by my predecessor in respect of two appeals of the group concerns of the appellant on identical issue.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 the onus of establishing the identity, creditworthiness of the loan creditors and genuineness of the transactions. The identity is undisputed. The lenders are validly registered corporate entities. The copies of certificate of registration, memorandum etc are on records. These lenders hold valid and active PAN, Both the lenders are registered Non Banking Finance Companies (NBFC) registered with the Reserve Bank of regulatory norms, as notified by the RBI. The Directors of both the lender companies are known and renowned citizen. Both the lender companies were found functioning at the offices and the departmental representatives have confirmed their existence time and again. The directors of these companies regularly participated in the enquiries conducted from time to time and appeared before the investigation wing as well as before the Assessing Officers in the case of the appellant company as hen required. In both the lender companies, the assessments proceedings are completed by their respective jurisdictional assessing officers for various years, including the year under consideration, without any adverse observation which reaffirms their identity, creditworthiness and also genuineness of the transactions.

10.1 Regarding creditworthiness, it is seen that both the lender companies possessed substantial own funds, out of which the advances have been extended to the appellant. From the balance sheets of the lenders, it is verifiable that both the companies are debt free companies i.e. these companies have no borrowings. From the audited financial statements and return of income filed, it is verifiable that both the lenders companies are doing well, earning substantial revenues and taxable income and paying good 84

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 taxes on their incomes. The director of both the companies is well known and is worthy and financially resourceful person. Both these lender companies furnished their bank account statements, wherein the transactions with the appellant were properly reflecting along with their regular business transactions. The lenders have explained the source of funds which have been advanced to the appellant. It is well evident from audited financials that both the lender companies have not raised any share capital or borrow1ngs in past 10-12 years.

10.2 Regarding the issue of genuineness of the transactions, it is also established as the same are in the normal course of their finance business. These companies are non banking finance companies and have made lending to the appellant for its working capital requirements in purely a commercial manner. The appellant has paid interest on the loans raised and have deducted TDS as per law. The loans taken and repayments have been found through normal banking channel. All the transactions are properly reflecting in the audited balance sheet of the appellant and the lender parties. The transactions have been found properly confirmed by both the parties. The directors of both the lender companies are identified; they appeared before the authorities and explained their transactions as well as· understanding with the appellant companies. They have also replied to all the queries raised by the authorities from time to time. There is no denial of this fact by assessing authority. The source of the funds with the lenders are properly established and explained before the authorities and are on records. There is no doubt or ambiguity regarding the source of funds advanced to the 85

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 appellant.

10.3 In view of above discussion and keeping in view entirety of facts and circumstances, the identity and creditworthiness of the loan creditors having properly been established and substantiated and so also the genuineness of the transactions, it is held that the AO was not justified in making of impugned additions u/s 68 of the Income Tax Act, 1961. Therefore, the additions are directed to be deleted. Accordingly, the ground nos. 2 & 3 are allowed. 19. On going through the above finding of Ld. CIT(A) we find that

he has thoroughly analysed and examined various documents,

financial statements, Income Tax Returns, Assessment Order of

lender companies and also distinguished the fact of the case in

hand with those of the facts of the judgments referred and relied by

his predecessors of Ld. CIT(A) in the case of M/s. Admanum

Finance Ltd has given his finding that both the lender companies

i.e. Aereo Deal Com Pvt. Ltd and M/s Chamak Traxim Pvt. Ltd are

genuine companies carrying out regular business of finance in their

capacity as Non Banking Finance Companies registered with

Reserve Bank of India and having sufficient liquidity to give loan to

various borrowers. Ld. CIT(A) has also mentioned the fact that Mr.

Deepak Kalani who controls the financials of M/s ADPL and M/s

CTPL is having long time friendship with the Directors of Agrawal

Group of Companies and in the past also he has given loan to other 86

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 group concerns of Agrawal Group on interest.

68 of the Act from the very same lender companies namely M/s

Aereo Deal Com Pvt. Ltd and M/s Chamak Traxim Pvt. Ltd which

were received by another group concern of the assessee namely M/s

Agrawal Coal Corporation Pvt. Ltd and Admanum Finance Ltd came

for adjudication before the Tribunal wherein the appeal was filed by

the revenue challenging the finding of Ld. CIT(A) deciding in favour

of the assessee. The Co-ordinate Bench has dealt this issue in

Appeal No. 202&294/Ind/2012 & others in the case of Agrawal

Coal Corporation Pvt. Ltd (supra) and has confirmed the finding of

Ld. CIT(A) thereby confirming the identity of the lenders ,

genuineness of transactions and accepting the creditworthiness of

the lender companies namely M/s ADPL & M/s CTPL and holding

that the Ld. A.O was not justified in making the addition u/s 68 of

the Act. The relevant extract of the finding of Hon’ble Tribunal in

its order dated 27.6.2016 is mentioned below:-

“4.3 Now the issue of loan taken from AEREO DEALCOMN PVT LTD. at Rs. 3.26 crores is taken up for consideration. The

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 appellant had an opening balance appearing in the name of said company at Rs.98,73,663/- and an amount of Rs.42,93,663/- was repaid during the year under consideration the interest paid being Rs.33,04,583/-.

4.3.1 The AR present pointing out the repayment chart in paper book D at page 837 submitted that the loan received from these company stand fully repaid in Feb 2010. The Inspectors in their report as noted on page 3 of assessment order has confirmed about existence of such company at the given address. The Inspectors have confirmed, as noted on page 7 of the assessment order that the accountant of this company, in the statement recorded by the Inspectors, has confirmed having advanced unsecured loans to the Appellant and also in response to the AO's notices u/s 133(6) the said lender company replied vide letter dated 09.12.2010 at page839 stating that it has advanced loans to the appellant and also filed copy of its ledger for the impugned year, copies of ITR acknowledgement along with computation for AYs 2006-07 to 2008-09 as was required by the AO. Before DDIT (Inv.), Kolkata also against issue of summons u/s 131 compliances were made by filing of copies of audited annual accounts, photo copy of Bank statement and confirmation letters. Thus, it cannot be said that Inspectors and DDIT(Inv.) have expressed any doubt about the existence of such company. The doubt expressed by Inspectors and DDIT (Inv.) both of them are apparently subjective and in case of DDIT's report is merely based upon non appearance by the Directors of the said company. The copy of audited accounts of the said company, along with copy of bank statement, confirmation, ITR acknowledgement etc. are included in compilation by the appellant from page 160 to 200. 88

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 The main source of the said company is from gross interest income of Rs.47.83 lacs. The net profit of the company is reflected at a healthy figure of Rs.11.29 lacs. The loan in the name of the appellant company including outstanding loan from earlier year is reflected in the head as Schedule-7 to Balance sheet under 'Loans and Advances’. Thus, it could not be said that the financial position of the company was dubious and nominal returned income was disclosed.

4.3.2 The appellant in another compilation (Paper Book 'D') has included a copy of NBFC registration issued by the RBI at page 836 and an intimation u/s 143(1) for the AY 2009-10 at page 835 wherein a refund of Rs 14.67 lacs has been issued to this company and also assessment order for Asstt. Year 2002~ 03 of this company at page 833 and 834 wherein the source of shareholders fund being share capital and share premium account was examined and found to be verifiable and detailed findings in this behalf have been recorded in the said assessment order. It will be appropriate to reproduce the same here under for ready reference:

" It also appeared from the said documents that the assessee company had infused fresh share capital for Rs.47,75,OOO/-. Again assessee company had received total share premium of Rs.4,29,75,OOO/- on account of share allotment. Thus total 'Share Capital' was raised to the tune of Rs. 4,77,5O,OOO/-. Assessee company was asked to provide list of new 'Share holders' from whom such fresh share capital was raised. The AR had submitted the list of Shareholders to whom shares were allotted during the relevant previous year. Notices u/s 133(6) of the I'T Act were issued to some of those new Share-holders on

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 test-check basis for the purpose of verification of the claim made by the assessee Company in this connection. Replies were received from those Shareholders and those were considered in the light of their capabilities to invest such huge sum to pay Share prices including premium. Copies of Bank accounts of those Shareholders have also been verified to cross-check the transactions they had entered with the assessee Company. In this connection Inspector was entrusted with independent inquiries. From the report submitted by the Inspector, nothing objectionable was found; no interference is thus made on this ground."

4.3.3 It will be appropriate to refer to the decision of Hon'ble KolkataHigh Court as relied and referred by appellant in the written submissions decided in the case of CIT Vs. Data Ware Pvt. Ltd. on 21st September, 2009, wherein Hon'ble Calcutta High Court categorically held -

"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 of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established."

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 4.3.4 In view of above factual and legal position wherein even the sources of the funds of the creditor company have been found and verified by the concerned AO and the transactions duly getting reflected in the audited final accounts of the creditor company, the AO's action in doubting such loan transaction is absolutely without any merit and substance and accordingly the AO's action in treating such loan of Rs. 3.26 crores as unexplained is held to be unjustified.

4.4 Proceedings next to the loan of Rs.25 lacs from CHAMAK TREXIM PVT. LTD. which is also a registered NBFC with RBI it is noted that the appellant has opening balance of more than Rs.3.91 crores from the same company during the year under consideration. A larger amount of Rs.78.86 lacs was repaid and substantial interest of Rs.59.19 lacs was paid after deducting the TDS. As per the repayment chart on page 851 of paper book D the loan stand fully repaid in Feb 2010. The position in respect of enquiry report submitted by Inspectors and compliances made before DDIT is exactly the same as noted in the case of Aereo Dealcomm Pvt. Ltd., above. As per relevant final accounts and other documents of this company are concerned, the same are filed in the compilation from page 201 to 245. In this company also the main source of income is interest and gross amount is reflected at Rs.85.30 lacs and net profit is in excess of Rs.14 lacs and loan in the name of appellant company is duly reflected including opening balance of repayment is at Rs. 3.84 crores.

4.4.1 The AO of this company for Asstt. Year 2004-05 in assessment order passed u/s 143(3) on 31.01.2006 has verified the source of owners fund being share capital, share

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 premium received which were invested by way of loans and advances. In the intimation issued u/s 143(1) for AY 2009-10 at page 849 of paper book D, the returned income has been stated at Rs 11.66 lacs and a refund of Rs. 11.27 lacs has been issued to this company. Thus in view of detailed findings arrived in the case of Aereo Dealcomm Pvt. Ltd. above, the said loan of Rs.25 lacs from this company is also held to be explained. 20. We have heard the rival contentions of both the parties. We have gone through the assessment order and also the order of the CIT(A). We have also perused the case laws cited by the Ld. Departmental Representative as well as the Ld. Authorized Representative for the assessee. 21. We find that during the year under consideration the assessee has received unsecured loan aggregating to Rs. 6,69,00,000/- from 12 Kolkata based companies, the details of which are as under :- S.No. Name Opening Loan Taken Interest TDS on Amount Balance Balance paid interest Repaid 1. Aereo Dealcomm. Pvt Ltd. 98,73,663 3,26,00,000 33,04,583 6,80,745 42,93,663 4,08,03,838 2. Chamak Trexim Pvt Ltd. 3,91,86,415 25,00,000 59,19,345 12,19,384 78,86,415 384,99,961 3. Reward Consultants Pvt. 16,39,608 12,00,000 3,76,804 77,622 1,39,608 29,99,182 Ltd. 4. Pushpak Trading & - 50,00,000 2,41,803 49,881 - 51,91,922 Consultancy Pvt. Ltd 5. Savera Distribution Pvt. Ltd. - 50,00,000 3,10,656 63,995 - 52,46,661 6. Paradise Garments P. Ltd. - 25,00,000 31,762 6,543 - 25,25,219 7. Khatu Vanijya Pvt Ltd. - 50,00,000 34,631 7,134 - 50,27,497 8. PanchnanVanijya Pvt. Ltd. - 35,00,000 25,615 5,277 - 35,20,338 9. Kamal Nayan Commercial - 15,00,000 7,992 1,646 - 15,06,345 Pvt. Ltd. 10. Ranchhod Agencies Pvt. - 14,00,000 7,746 1,595 - 14,06,151 Ltd. 11. Prathmesh Vanijay Pvt Ltd. - 20,00,000 21,721 4,474 - 20,17,247 12. Lambodar Barter Pvt Ltd. - 47,00,000 37,909 7,809 - 47,30,100 TOTAL 6,69,00,000 1,03,20,567

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 make enquiries. The Commission was also issued to DDIT, Kolkata u/s 131 of the Act and Income tax inspectors were again deputed to personally visit and make enquiries at Kolkata and lastly the assessee was directed to furnish documentary evidences in support of the unsecured loan. The AO has issued notices directly u/s 133(6) to lenders calling for documentary evidence in support of the amounts advanced. The lender companies, in return, filed the various documents in the form of confirmations, income tax returns, bank statements etc. Income Tax Inspectors were deputed by the AO to make enquiries at Kolkata, who vide report dated 10.12.2010 confirmed existence of most of the lenders. Thereafter, Commission was issued to DDIT, AO., Kolkata under section 131 of the Act, who independently conducted investigation and sent his report dated 20.12.2010 and most of the parties appeared and filed documentary evidences as required by DDIT(AO), Kolkata, thereby confirming the transaction with the assessee. The Income-tax Inspectors were again deputed to personally visit and make enquiries at Kolkata and collected certain information directly from the banks and filed another report dated 23.12.2010. The assessee has also submitted the confirmation letters alongwith PAN, Company’s Master details with the Registrar of Companies, copy of income tax returns, auditor’s report of the creditor companies, Bank statements reflecting receipt and payment of the said loan amount and Form No.16A issued on tax withheld on interest paid. The assessee has placed on record requisite documents, which proved the identity, source of credit including existence and creditworthiness and genuineness of the loan. The AO has made the extensive enquiry. 23. The assessee has taken loan from Aereo Dealcomm. Private Limited. The assessee has submitted documentary evidence like confirmation, bank statement, income tax return, audited accounts, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. The existence of the Company was inspected by the Inspector 93

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 on 10.12.2010 and the Rs. has not disputed about the existence. During the course of investigation, statement of accountant was recorded by the Inspector, wherein he has confirmed the loan transaction in assessment year 2002-03. The source of fund of Creditor Company was examined. The Rs. has also examined the opening balance, which stands accepted, since no addition was made in the assessment year 2007-08. The Company has also shown the interest income of Rs.47.83 lacs and profit of Rs. 11.20 lacs in assessment year 2008-09 reflecting a healthy financial position. 24. During the course of hearing, the ld. Authorized Representative for the assessee submitted that in assessment year 2007-08, the opening balance of the company was AO. 98,73,663/- which has been accepted by the department as no addition was made in that year and this year interest was paid of AO. 33,04,583/-. We find that the loan receipt from this company were repaid in February, 2010. The inspector has confirmed that the accountant of this company of whom statement was also recorded by the Inspector, has confirmed having advanced unsecured loan to the assessee. The DDIT has also issued summons u/s 131 and in response to that the Company has filed the copy of the audited annual account, photocopy of the bank statement and confirmation. Therefore, the Inspector and DDIT have confirmed the existence of such company. The assessee has also filed copy of the assessment order for assessment year 2002-03 of the said lender company, wherein the shareholder funds being shareholder capital and share premium account was examined and found to be verifiable. AO found that the said lender company had share capital of Rs.47,75,000/- and it has received share premium of AO. 4,29,75,000/- on account of share allotment. The AO of the lender company has also verified the shareholder on test check basis and shareholders’ bank accounts were also verified. Therefore, we are of the view that the assessee has proved the identity, creditworthiness of this lender company and also the genuineness of the transaction with the said company with sufficient evidence. 94

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 25. In the case of Chamak Trexim Private Limited, the assessee has filed documentary evidence like confirmation, bank statement, income tax return, audited report, TDS certificate, Master data of the Company with Registrar of Companies, Memorandum of Association. The existence of the Company was inspected by the Inspector on 10.12.2010. The statement of the accountant of this company was recorded wherein, he confirmed the loan transaction of the assessee. In assessment year 2004-05, source of funds of this creditor company was examined and verified by the Rs. in its assessment proceedings u/s 143(3). The opening balance from the said company was accepted. The company has shown the interest income of Rs. 85.30 lacs and profit of Rs. 14 lacs in assessment year 2008-09 and the entire loan was repaid in February, 2010. 26. Out of twelve companies, the six lender companies, viz., Khatu Vanijya Private Limited, Panchanan Vanijya Private Limited, Kamalnayan Commercial Private Limited, Ranchhod Agencies Private Limited, Prathmesh Vanijya Private Limited and Lambodhar Barter Private Limited merged with M/s. Middleton Good Private Limited in April, 2009. In respect of these six companies, the assessee has filed documentary evidence like confirmations, bank statements, income tax returns, audited reports, TDS certificates, Master data of the Company with Registrar of Companies, Memorandum of Association, the copy of merger order passed by the Hon’ble Calcutta High Court, which have been also placed on record. The existence of these companies have been accepted by the Inspector in his report dated 10.12.2010. The AO has also not disputed the existence of this company. The Inspector recorded statement of brother of the Director, wherein he confirmed the loan transaction with the assessee. The inspector also reported that loan transactions are genuine. The fact that the companies were merged pursuant to the order of the AO’ble High Court after all regulatory compliances, establishes the identity and existence of the erstwhile creditors.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 Similarly, in all the other cases, namely, Reward Consultants Private Limited, Pushpak Trading & Consultancy (P) Limited, Savera Distribution Private Limited and Paradise Garments Private Limited, the assessee has filed documentary evidence like confirmations, bank statements, income tax returns, audited reports, TDS certificates, Master data of the Company with Registrar of Companies, Memorandum of Association. In the case of Reward Consultants Private Limited, on inquiry made by the Inspector, it was informed that the present occupant has purchased the office from one Shri O.P. Agrawal who was the key person of M/s. Reward Consultants Pvt. Limited. This lender company had turnover of AO. 1.66 crores, gross interest of AO. 32.54 lacs and net profit of AO. 9.43 lacs in assessment year 2008-09. Opening balance from the said company stands accepted, since no addition was made in the AO 2007-08. The entire loan was repaid in September, 2010. The said creditor company also responded to the notices issued u/s 133(6) by the AO. Similarly, in Pushpak Trading & Consultancy (P) Limited, it had shareholder’s funds of AO. 13.47 crores as on 31.3.2008.The entire loan was repaid in March, 2009. The said company is a registered NBFC. The said creditor company also responded to the notices issued u/s 133(6) by the AO and also in response to the notice issued u/s 131 by the DDIT (AO) Kolkata. Similarly, in the case of Savera Distribution Private Limited, it had shareholders funds of AO. 13.66 crores. Further, the company had shown the turnover of AO. 2.34 crores and interest income was AO. 18.72 lacs. The said creditor company also responded to the notices issued u/s 133(6) by the AO. Similarly, in the case of Paradise Garments Private Limited, it had shown the turnover of AO. 1.14 crores, interest income at AO. 59.29 lacs and its taxable income was AO. 18.50 lacs in assessment year 2008-09. The company had shareholders fund of AO. 7.62 crores as on 31.03.2008. The entire loan was repaid in February 2011. On enquiry, the Inspector was informed by the current occupant of the premises that the company was in existence at the given address a year back and was now shifted to some 96

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 other place. Thus the existence of the creditor cannot be disputed. The said creditor company also responded to the notices issued u/s 133(6) by the AO. Therefore, we are of the view that in respect of all the twelve companies, the assessee was able to prove not only the identity and creditworthiness but also the source of the funds. Moreover, the assessee has also submitted all the evidences, which were required by the AO. Section 68 of the Income-tax Act, 1961, which is reproduced as under :- “68. 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.” 27. In terms of the aforesaid provisions of section 68 of the Act the primary onus to explain the nature and source of the amount so found to be credited is on the assessee. The expression ‘nature’ encompasses bringing on record, evidence about nature of the receipt, be it loan, advance, share application money, etc. The expression `source’ envisages establishing the identity and creditworthiness of the source/ person from whom the amount is received. However, once reasonable explanation is furnished by the assessee, the onus, shifts to the Revenue. 28. We find that in the case of Orissa Corporation (P) Limited, 159 ITR 78, in the context of requirement of the assessee to discharge primary onus under section 68 of the Act, observed that the assessee having given the names and addresses of the creditor who were income-tax assessees, the mere fact that such creditors did not respond pursuant to notice under section 131 of the Act could not be used against the assessee. The Hon'ble Supreme Court observed 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 income-tax assessees. Their index numbers 97

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 were 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 creditworthy 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 anything further. In the premises, if the Tribunal came to the conclusion that the assessee has 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 is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.” 29. Similarly, in the case of HON'BLE vs. Metachem Industries, 245 HON'BLE 160 (MP), Jurisdictional High Court has observed as under :- “3. We have heard the learned counsels for the parties. Section 68 of the Act says 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 HON'BLE, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, according to section 68, the first burden is on the assessee to satisfactorily explain the credit entry in the books of account of the previous year. If the explanation given by the assessee is satisfactory, then that entry will not be charged with the income of the previous year of the assessee. In case the explanation offered by the assessee is not satisfactory or the source offered by the assessee-firm is not satisfactory, then in that case the amount should be taken to be the income of the assessee. In the present case, the Assessing Officer did not feel satisfied with the 98

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 explanation given by the assessee and, accordingly, assessed all the three credit entries to the account of the assessee as the income.” The Hon'ble’ble Court further held that once satisfactory explanation is adduced by the assessee, then, addition cannot be made and the amount may be taxed in the hands of the person who has deposited the amount. The relevant observations of the Court are as under: “5. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is income-tax payer or not or from where he has brought this money is not the responsibility of the firm. The moment the firm gives satisfactory explanation and produces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be income of the firm for the purposes of income-tax. It is open for the Assessing Officer to take appropriate action under section 69 of the Act against the person who has not been able to explain the investment. In the present case, there is the concurrent finding of both the Commissioner (Appeals) as well as of the Tribunal that the firm has satisfactorily explained the aforesaid entries.” 30. We find that in the case of S. K. Bothra & Sons, HUF v. ITO: 347 ITR 347, the assessee took loan from two persons. During the course of assessment proceedings, the assessing officer issued notice under section 131 of the Act to such parties which were duly responded. The assessing officer, however, added these loan amounts as unexplained credit simply based on the report of the Inspector and held the same as not genuine. The appeal preferred by the assessee was dismissed by the CIT(A) as well as by the Tribunal.

On further appeal before the High Court, while setting aside the matter to the assessing officer, the Court observed as under: 99

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 “……………..

In such circumstances, we find substance in the contention of Mr. Khaitan that the order of assessment cannot be supported as the materials collected by the Assessing Officer through the Inspector which were relied upon were neither disclosed to the appellant nor was the appellant asked to explain the report submitted by the Inspector.

It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.

In the case before us, the assessee by producing the loan- confirmation certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements.

We find substance in the contention of Mr. Khaitan that on the basis of the report submitted by such Inspector, the Assessing Officer could not straightway arrive at the conclusion that the transactions were not genuine without giving further opportunity to the appellant to explain the alleged information disclosed by the Inspector to the Assessing Officer.

……….” 100

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 31. We also find that in the case of CIT v. KishoriLal Construction Ltd.: 191 Taxman 194, Hon'ble Delhi High Court has observed as under: “ After considering the arguments of both the sides, we find ourselves in favour of the submission made by learned counsel for the respondent. As mentioned above, the assessee had produced the following which would clearly demonstrate it has discharged its initial burden:-

(a) The identity of M/s. Yadav and Company, by filing their confirmation and their assessment particulars.

(b) Genuineness of the transaction by pointing out that the assessee had sold shares to M/s. Yadav and Company in the immediately preceding year (which has been accepted by the Department) and that the payment received during the relevant previous year was against the debt due from M/s. Yadav and Company.

(c) Creditworthiness of the creditor by pointing out that the amount was received by way of cheques drawn on the bank account of M/s. Yadav and Company maintained with Union Bank of India, MotiBagh Branch, New Delhi, which, despite denial by the Yadavs, was, as per bank records, found to be opened and operated by Sh. O.P. Yadav/Mohinder Singh Yadav. The initial burden thus discharged, it was for the revenue to establish that the transaction in question was bogus. This would be so even if there is a denial by the creditors that the credits were not genuine as held by the Supreme Court in CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78. Mere denial by Yadavs that account in question was not operated by them would not automatically lead to the inference that assessee deposited in the said account and, therefore, it became its unaccounted income. The CIT(A) as well as the ITAT have rightly pointed out that the necessary exercise which was to be undertaken by the Assessing Officer was not carried out. It was for the Assessing Officer to probe the matter further. He 101

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 could not simply pass on the buck to the assessee asking him to produce Sh. O.P. Yadav or Sh. Mohinder Singh Yadav. It is the Department which had reopened the assessment on the basis of the statements of the Yadavs. The Department was relying upon the said statements. When the premises of M/s. Yadav and Company were searched by the Department in 2002 and the statements of aforesaid two persons were recorded, it is clear that Yadav and Company was very much in existence. More interestingly, M/s. Yadav and Company even assessed to Income-tax. In the case of assessee, the assessment was completed in December, 2003. In such a scenario, it would not have been difficult for the Assessing Officer to find the whereabouts of Yadavs particularly having regard to the statement of the assessee that it had no dealing with M/s. Yadav and Company after assessment year 2000-01 and was thus unaware of its present whereabouts. Live link between the bank account of M/s. Yadav and Company and the assessee has not been established.” 32. We find that in the case of CIT v. Data Ware (P) Limited: ITA No. 263 of 2011, the Hon’ble Kolkata High Court held that once the assessee furnished PAN of the creditor, the assessing officer must enquire from the assessing officer of the creditor. The Court observed as under: “Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but instead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. 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 102

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 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 of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax(Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. The appeal is thus devoid of any substance and is summarily dismissed.” 33. On going through the above case laws and applying them on the facts of the assessee’s case, we find that the same are squarely applicable to the assessee’s case. We find that in the instant case the assessee had, during the course of assessment proceedings, filed all the relevant details/ documents/ information, required by the assessing officer, as were necessary to substantiate the identity and credit-worthiness of the creditor companies and also the genuineness of transaction. 34. The AO has not been able to rebut, in any manner, voluminous documentary evidences placed on record. In fact, disregarding the documents placed on record, the assessing officer, proceeded to make addition under section 68 of the Act, simply by cherry picking certain parts of the reports of the Inspectors of Income Tax/ Investigation Wing, without appreciating that the reports considered along with ex-parte material/ documents collected/ received from creditors, established, beyond any doubt, the ingredients of section 68 of the Act.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 35. Most pertinently, the AO has not specifically dealt with any of the voluminous material/ documents available on record. In the assessment order, the assessing officer has simply reproduced the reports furnished, submissions of the assessee and discussion on case laws, without dealing with the same and specifying their applicability vis-a-vis the facts of various creditors. 36. We find that in assessment year 2005-06 in the case of Agrawal Coal Corporation 19 Taxman.com 209 (ITAT Indore), of the same assessee, relied upon by the Ld. Departmental Representative, the creditors were not traceable, which is not the fact in the present cases. On the contrary, in the present case all the creditors not only responded to the notices issued u/s 133(6), but most of them were also found existing by the Inspectors and most of them also presented before the DDIT (Investigation) Kolkata. Therefore, the facts are clearly distinguishable. Moreover, in the case of CIT vs. Navodaya Castles Pvt. Ltd., also the party was not present and the summons issued u/s 131 returned unserved. In that case, the assessee was asked to produce the shareholders to substantiate the claim of genuineness but the assessee was unable to produce them. But, in the instant case, we have gone through the case records and we found that the AO has made the various enquiries himself. Moreover, he has also deputed the Inspector and in most of the cases, the Inspectors confirmed the existence of the creditors. Thereafter, if the AO had any doubt, he should have issued show cause notice to the assessee to produce the creditors before him. The AO did not require the assessee to produce the creditors. Therefore, we have to decide the matter as per the facts available on record. 37. The entire addition under section 68 of the Act is, thus, without any basis and is legally unsustainable. 38. The view of the ld. CIT(A) that the loan taken by the assessee from twelve companies aggregating to Rs. 6,69,00,000/- was explained, is proper and does not require any interference and the addition was rightly 104

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 deleted by the ld. CIT(A) and has also rightly deleted the disallowance of interest of Rs. 1,03,20,567/- on the above loans. Ground Nos. 2 to 4 of the Revenue are dismissed. “

case of another Group concern of assessee(s) namely Agarwal Coal

Corporation Pvt. Ltd wherein also unsecured loan taken from M/s

ADPL and M/s CTPL were in dispute. We find that Hon’ble

Tribunal after considering all the relevant facts and material; on

record decided in favour of the assessee thereby confirming the

finding of Ld. CIT(A) holding that the assessee has duly proved the

identity of the cash creditors, genuineness of the transaction and

proved creditworthiness of the lender companies which thus do not

call for any addition u/s 68 of the Act and the interest paid on such

loans should be allowed.

companies namely M/s ADPL & M/s CTPL have been carried out

for multiple assessment years u/s 143(3)/147 of the Act but no

adverse inference or action has been taken by the revenue

authorities and thus accepting that the business carried out by

these companies are genuine and are not bogus companies

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 indulged in providing accommodation entries. Detail of such

assessments carried out in the case of two lender companies are

summarised in the following chart:-

Assessment details of M/s Chamak Texim Pvt. Ltd

S. AY Date of Passed u/s Income Page Remarks order assessed No. No PB-B-I 1 2004-05 31.05.06 143(3) 40,050 49-59 Last share capital and premium received is assessed and accepted 2 2009-10 30.12.16 148/147 11,67,510 61-65 Regular reopening on other issues 3 2010-11 29.12.16 148/147 17,40,714 51-55 Cases 4 2011-12 29.12.16 148/147 Nil 56-60 reopened on information of 5 2011-12 05.12.18 143(3)/147 -7,44,953 66-70 DDIT(Inv), 6 2012-13 16.12.18 143(3)/147 38,65,530 71-75 Indore on the basis of search on Mr. Deepak Kalani

Assessment details of M/s Aereo Dealcomm Pvt. Ltd

S. AY Date of Passed u/s Income Page Remarks order assessed No. No PB-B-I 1 2003-04 28.06.07 147/143(3) 32,240 142- Last share 143 capital assessed was accepted 2 2009-10 30.12.16 147/143(3) 18,42,160 144- Cases 148 concluded after searching 3 2010-11 16.11.17 147 8,86,387 149 of DDIT(Inv), Indore and no 106

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 adverse opinion was formed 23. It is also noteworthy that the loans taken by M/s Agrawal Coal

Corporation Pvt. Ltd from two lender companies namely M/s

ADCPL & M/s CTPL which were held to be genuine by the Co-

ordinate Bench were repaid back and on the very same day of

receiving the loan which repaid by M/s Agrawal Coal Corporation

Pvt. Ltd the lender companies have used the same fund for

advancing loan to M/s Agrawal Transport Corporation Pvt. Ltd. We

have verified this fact and found that on 23.02.2010 sum of

Rs.2,68,40,000/- was repaid by M/s Agrawal Coal Corporation Pvt.

Ltd to M/s Aereo Deal Com Pvt. Ltd. This sum was received in UCO

Bank account in case of M/s Aereo Deal Com Pvt. Ltd and on the

very same day, through Cheque No. 111017 sum of

Rs.2,68,00,000/- was given as loan to M/s. Agrawal Transport

Corporation Pvt. Ltd. Similarly in the case of M/s Chamak Traxim

Pvt. Ltd loan of Rs.3,42,55,000/-was repaid by M/s Agrawal Coal

Corporation Pvt. Ltd on 23.02.2010 which was also credited in UCO

Bank account held by M/s CTPL and on the very same day

through cheque No.679523 loan of Rs.3,42,00,000/- was given to

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 M/s Agrawal Transport Corporation Pvt. Ltd. So the source of

source of alleged loans taken from two lender companies is proved

beyond doubt. It further strengthens the finding of Ld. CIT(A) that

both the lender Non Banking Finance are genuine having regular

business of finance and have sufficient funds for providing loans to

various borrowers for earning interest and once the identity,

genuineness and creditworthiness of the company for the

transaction carried out by group companies is proved beyond doubt

and duly accepted by the Tribunal there hardly remain any scope to

question it again in the case of other concerns where such type of

unsecured loans are received from the same lender companies.

Thus the decision of the Co-ordinate Bench in the case of M/s

Agrawal Coal Corporation Pvt. Ltd (supra) is squarely applicable on

the facts of the instant case and thus we hold that the loan received

from M/s Aereo Dealcomm Pvt. Ltd and M/s Chamak Trexim Pvt.

Ltd by M/s Agrawal Transport Corporation Pvt. Ltd, Admanum

Finance Ltd and Available Finance Ltd are genuine and duly

explained by the assessee(s) and the interest paid thereon as

provided in the chart in the preceding paras is genuine business

expenditure and the assessee(s) have duly explained the 108

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 transaction of loan taken and also proved the identity, genuineness

and creditworthiness of the loan creditors. We thus are of the view

that respective Assessing Officers of the three assessee(s) in appeal

before us erred in treating the loans taken from M/s Aereo

Dealcomm Pvt. Ltd and M/s. Chamak Trexim Pvt. Ltd has

unexplained cash credit u/s 68 of the Act and further erred in

disallowing the interest paid on said loans. We thus, confirm the

finding of Ld. CIT(A) in the case of M/s. Agrawal Transport

Corporation Pvt. Ltd deleting the addition u/s 68 of the Act at Rs.

6,10,00,000/- and also deleting the disallowance of interest at Rs.

8,39,425/-. We also confirm the finding of Ld. CIT(A) in the case of

M/s Available Finance Ltd deleting the addition for unexplained

cash credit u/s 68 of the Act at Rs. 69,00,000/- and deleting the

disallowance of interest paid on such unsecured loans at

Rs.51,93,162/-. We also set aside the finding of Ld. CIT(A) in the

case of M/s Admanum Finance Ltd and delete the addition of

unexplained cash credit u/s 68 of the Act for the unsecured loan

taken from the above referred two lender companies totalling to Rs.

1,44,75,000/- and we also direct the revenue authorities to allow

the claim of interest expenditure of Rs.61,58,897/-. We thus 109

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 dismiss Ground No. 1 & 2 of Revenue’s Appeal in the case of M/s

Agrawal Transport Corporation Pvt. Ltd for Assessment Year 2010-

11 allow Ground No. 2 & 3 of the assessee’s appeal in case of M/s

Admanum Finance Ltd for Assessment Year 2009-10 and dismiss

Ground No.2 of Revenue’s appeal in the case of M/s Available

Finance Ltd for Assessment Year 2014-15.

M/s Agrawal Transport Corporation Pvt. Ltd for Assessment Year

2010-11, at the outset Ld. Counsel for the assessee requested for

not pressing the ground raised in the Cross Objection

No35/Ind/2019. Thus all the grounds raised in the Cross Objection

by the assessee in case of M/s Agrawal Transport Corporation Pvt.

Ltd for Assessment Year 2010-11 are dismissed as not pressed.

Finance Ltd for Assessment Year 2009-10 (ITA No.331/Ind/2018)

challenging the initiation of reopening of assessment proceedings,

Ld. Counsel for the assessee requested for not pressing Ground

No.1 and thus Ground No.1 is dismissed as not pressed.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 26. Now we will take up Ground No.4 of the assessee’s appeal in

the case of M/s Admanum Finance Ltd vide ITA No.331/Ind/2018

for Assessment Year 2009-10 wherein the assessee has challenged

the finding of Ld. CIT(A) confirming the disallowance of interest at

Rs.6,75,000/- and Rs.6,00,000/- paid on the unsecured loans

taken from M/s Jayant Securities & Finance Ltd and Lunkward

Media Entertainment Ltd respectively.

reassessment proceedings carried out u/s 147 r.w.s. 143(3) of the

Act Ld. A.O observed that the assessee had paid interest on

unsecured loans of Rs. 6,75,000/- and Rs.6,00,000/- taken from

M/s Jayant Securities & Finance Ltd and Lunkward Media

Entertainment Ltd respectively. Though no fresh loan was taken

during the Year and the interest was paid on the opening balance of

the loans taken in the previous year, Ld. A.O giving the finding that

since both the loan provider companies are

accommodation/paper/bogus company the interest paid during the

year needs to be disallowed. Aggrieved with this disallowance

assessee went in appeal before Ld. CIT(A) but failed to succeed as

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 the action of Ld. A.O. was confirmed.

issue is squarely covered in favour of the assessee by the decision of

Hon’ble Tribunal in another group concern of the assessee M/s

Agrawal Coal Corporation Pvt. Ltd for the very same assessment

year i.e. 2009-10 vide ITA No.356/Ind/2014 and C.O.

No.41/1/2014 dated 1.12.2015. Ld. Counsel also submitted that

loans on which the alleged interest was paid was not taken during

the year and it is a brought forward balance. During the preceding

years when the actual loan was taken the same were accepted as

explained by the revenue authorities in the regular assessment

proceedings. Further the loan from M/s Jayant Securities &

Finance Ltd was repaid in the immediately subsequent year. The

loan balance of M/s Lunkward Media Entertainment Ltd along

with the impugned interest was offered to tax in the subsequent

year by the assessee itself on account of certain dispute with the

lender and thus the addition made during the year under appeal

resulted into double addition. 112

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 30. Per contra Ld. Departmental Representative vehemently

argued supporting the orders of both the lower authorities.

placed before us and also gone through the decision of Hon’ble Co-

ordinate Bench of Indore in the case of M/s Agrawal Corporation

Pvt. Ltd (supra) relied by Ld. Counsel for the assessee. Through

Ground No.4 the assessee namely M/s Admanum Finance Ltd is

aggrieved with the finding of Ld. CIT(A) confirming the disallowance

of interest of Rs. 6,75,000/- and Rs.6,00,000/- paid to M/s Jayant

Securities & Finance Ltd and M/s. Lunkward Media Entertainment

Ltd respectively. The undisputed fact before us is that the interest

has been paid on the opening balance of the loans which were

taken in the preceding years. No fresh loan has been received from

the above named loan providers during the year under

consideration. It was also brought to our notice that no addition

has been made u/s 68 of the Act in the case of the assessee for the

loans taken in preceding years from these companies. We observe

that the Co-ordinate Bench, Indore in the case of another group

concern of assessee namely Agrawal Transport Corporation Pvt. Ltd

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 (supra) dealt the very same issue for Assessment Year 2009-10

relating to disallowance of interest paid on loans taken in earlier

year and the Tribunal confirmed the finding of Ld. CIT(A) thus

deciding in favour of the assessee after relying on the decision of

the Hon’ble Tribunal in the case of same assessee Agrawal

Transport Corporation Pvt. Ltd (supra) for AssessmentYear 2008-09

accepting the proposition that “since no addition has been made

u/s 68 in the assessee’s own case, interest cannot be disallowed”.

decision of Hon’ble Tribunal, we are of the view that the same is

squarely applicable since no loan has been taken during the year

and the loan on which interest has been paid during the year has

not been subjected to addition u/s 68 of the Act and therefore the

disallowance of interest of Rs. 6,75,000/- and Rs. 6,00,000/- paid

to M/s Jayant Securities & Finance Ltd and M/s. Lunkward Media

Entertainment Ltd respectively is uncalled for. We thus set aside

the finding of Ld. CIT(A) and allow Ground No.4 of the assessee’s

appeal for Assessment Year 2009-10 in the case of M/s Admanum

Finance Ltd.

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 33. Now we will deal with Ground No.1 of the revenue’s appeal in

the case of M/s Available Finance Ltd ITA No.895/Ind/2019 for

Assessment Year 2014-15. In this Ground No.1 revenue has

challenged the finding of Ld. CIT(A) restricting the addition u/s 14A

of the Act at Rs. 7481 as against Rs.38,19,444/- made by Ld. A.O.

Brief facts relating to this issue are that during the year assessee

earned dividend income of Rs. 2,70,120/- from the investment in

equity shares. The total investment stood at Rs.1601.46 lakhs as

on 31.3.2014 as against Rs. 1101.46 lakhs as on 31.3.2013. The

auditor of the company worked out the disallowance at Rs.7481/-

u/s 14A of the Act. The assessee had paid interest of Rs.

88,41,366/-. However during the year assessee had a positive

interest income and total interest received was higher than the

interest paid. However, Ld. A.O only considered the interest paid at

Rs.88,41,366/- and the average value of investment at

Rs.11,01,46,222/- and computed the disallowance u/s 14A of the

Act applying the method provided under Rule 8D of I.T. Rules r.w.s.

Section 14A of the Act and computed disallowance at

Rs.38,90,444/-. Against this disallowance u/s 14A assessee

preferred appeal before Ld. CIT(A). The assessee got substantial 115

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 relief as Ld. CIT(A) sustained the disallowance u/s 14A of the Act

only to the extent of Rs.7481/- which the Auditor of the company

has worked out. Now the revenue is in appeal before the Tribunal.

A.O. Ld. Counsel for the assessee supported the finding of Ld.

CIT(A) and also submitted that Ld. CIT(A) has rightly held that

disallowance of interest was not called for since at the end of the

year it earned net interest income and secondly the assessee had

sufficient own capital and from reserves to cover up the

investments made. The assessee placed reliance on following

decisions;

(i) Hon’ble High Court of Bombay in the case of CIT v/s M/s Reliance Utilities & Power Ltd (2009) 313 ITR 0340 (Mum)

(ii) Hon’ble High Court of Bombay in the case of CIT v/s HDFC Bank Ltd 366 ITR 505 (2014) (Mum)

(iii) Hon’ble High Court of Bombay in the case of HDFC Bank V/s DCIT (2016) 383 ITR 0529

(iv) Hon’ble Supreme Court in the case of CIT V/s M/s Reliance Industries Limited (2019) 104 CCH 0005 (SC) 116

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 (v) Hon’ble Bench of ITAT Indore in the case of Admanum Finance Limited for A.Y 2008-09 in ITA No.389/2012 dated 27.06.2016.

(vi) ACIT Circle 1 Indore V/s Arihant Capital Market Limited in ITA No. 370/Ind/2017 dated 31.05.2018.

placed before us and gone through the decision relied by the Ld.

Counsel for the assessee. Revenue is aggrieved with the finding of

Ld. CIT(A) sustaining the disallowance of Rs. 7481/- as against

Rs.38,90,444/- computed by the Ld. A.O applying the method

under Rule 8D of I.T. rules. We observe that the disallowance

computed by the Ld. A.O comprises of two figures firstly the

disallowance of interest expense at Rs.33,39,713/- and the

remaining part of Rs.5,50,731/- is arrived at by applying 0.5% on

the average value of investment at Rs. 11,01,46,222/-.

that during the year assessee has earned interest income which is

higher than the interest paid during the year. We find that the Co-

ordinate Bench in the case of same assessee for Assessment Year

2008-09 ITA No/389/Ind/2012 dated 27.6.2016 has held that the 117

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 disallowance of interest is uncalled for if the interest expenditure

during the year is less than the interest income earned during the

year. Even otherwise the judgment of Hon’ble Bombay High Court

in the case of CIT V/s Reliance Utilities & Power Ltd (supra) is also

squarely applicable in the case of assessee as the assessee has

sufficient share capital and free reserves at Rs. 1584.75 lakhs and

Rs. 1682 lakhs as on 31.3.2013 and 31.3.2014 respectively to cover

up the investments of Rs. 1101.46 lakhs. This itself proves that

borrowed funds have not been utilised for making these

investments and nothing contrary has been brought to our notice

by the revenue authorities. Therefore we confirm the finding of Ld.

CIT(A) to the extent of that no interest disallowance was called for

u/s 14A of the Act in the case of the assessee and thus the interest

disallowance of Rs. 33,39,713/- has been rightly deleted.

computed by the Ld. A.O applying 0.5% on the average investment

of Rs.11,01,46,222/-. Ld. CIT(A) while adjudicating this issue has

observed that only Rs.5 crores of fresh investment was made by the

assessee in debenture of group companies on which interest has

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 earned and out of the remaining investment only Rs.14,96,222/- is

only made in the shares of the listed companies and all the

remaining investments are old investment in equity shares of

unlisted companies. We however are of the view that the word

average investment referred in Rule 8D of I.T rules certainly does

not include the investments made for earning taxable interest

income but for sure includes the investment fetching tax free

interest and those made in equity shares, which can be listed or

unlisted. The contention of the assessee and finding of Ld. CIT(A)

that investment in unlisted companies should not consider for

computing the disallowance under third limb of rule 8D is devoid of

any merit. There is no bar under the law for the unlisted

companies to declare dividend. In other words dividend income can

be generated from both the listed as well as unlisted companies. So

for calculating the disallowance under third limb of Rule 8D of I.T.

Rules we first need to subtract the investment in debentures of Rs.

5 crores from the total average investments of Rs. 11.01 crores. The

resultant average investment will be Rs. 6.01 crores and 0.5% of

this average investment works out to Rs.3,00,731/-. However the

disallowance so calculated at Rs. 3,00,731/- should not exceed the 119

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 dividend income earned by the assessee during the year at Rs.

2,70,120/-. Our this view of not making disallowance u/s 14A of

the Act exceeding the total exempt income earned during the year is

on the basis of the judgment of Hon’ble Delhi High Court in the

case of Cheminvest Ltd V/s CIT (2015) 378 ITR 33 (supra) wherein

the Hon’ble High Court has confirmed the finding of Tribunal that

in the absence of any exempt income disallowance u/s 14A of the

Act is not warranted. Further Revenue’s Special Leave Petition filed

after this judgment of Hon’ble High Court of Delhi before Hon’ble

Supreme Court also stands dismissed vide SLP No.2755 of 2019. In

view of the above judgment we sustain the disallowance u/s 14A of

the Act at Rs. 2,71,120/-. Thus Ground No.1 of assessee’s appeal

in case of Admanum Finance Ltd is partly allowed.

general in nature which needs no adjudication.

of M/s Agrawal Transport Corporation Pvt. Ltd is dismissed,

Assessee’s C.O. No.35/Ind/2019 in case of M/s Agrawal Transport

Corporation Pvt. Ltd is dismissed as not pressed, Assessee’s appeal 120

Agrawal Transport Corporation (P) Ltd & Ors ITA Nos. 651, C.O.No.35/Ind/2019, 331/Ind/2018 & 895/Ind/2019 No.331/Ind/2018 inthe case of Admanum Finance Ltd is allowed

and the Revenue’s Appeal No.895/Ind/2019 in the case of M/s

Available Finance is partly allowed as per the terms indicated

above.

The order pronounced in the open Court on 14.10.2020.

Sd/- Sd/- ( KUL BHARAT) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER �दनांक /Dated : 14th October, 2020

/Dev

Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore