ACME CHEM LIMITED,KOLKATA vs. NFAC, DELHI/ D.C.I.T., CIRCLE-11(1), KOLKATA, KOLKATA

1. The captioned appeals filed by the assessee pertaining to the Assessment Years (in short “AY”) 2012-13, 2017-18 & 2018-19 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income Tax (Appeal), NFAC, Delhi [in short “ld. CIT(A)”] evenly dated 16.09.2022 arising out of the assessment order framed u/s 143(3) of the Act dated 24.03.2015 for AY 2012-13, 22.12.2019 for AY 2017-18 & 25.03.2021 for AY 2018-19.

For that on the facts and in the circumstances of the case, the appellant having furnished relevant documentary evidences establishing the identity and creditworthiness of the share subscribers and proving the genuineness of transaction the authorities below were unjustified in making addition of Rs.8,61,00,000/- as income of the appellant chargeable u/s 68 of the Act.

That the ld. CIT (A) has also erred in confirming the addition, especially when no cross-examination of Shri Raj Kumar Kothari was allowed to the assessee and, thus, the statement recorded at the back of the assessee has no evidentiary value.

For that on the facts and circumstances of the case, the appellant has satisfied the conditions laid down in Section 36(2) had rightly claimed deduction of bad debts of Rs.27,90,726 and in that view of the matter the impugned disallowance being unsustainable on facts and in law deserves to be deleted.”

On the other hand, ld. D/R vehemently argued supporting the orders of both the lower authorities.

Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee referring to the statement of facts as well as brief notes stated that the assessee had filed necessary documents in the form of bank statement, income tax return, audited financial statement, PAN card, proof of registration as non- banking finance company which are sufficient enough to prove the identity and creditworthiness of the share subscribers and I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. genuineness of the transaction. It is also submitted that all the share subscribers replied to the notices issued by ld. AO and directly filed the details. It is also submitted that out of the six share subscribers two had given part of the share application money in the preceding year itself which has not been disputed by Revenue authorities. Except for not appearance of principal officers of the subscriber companies there is no default at the end of the share subscribers and of the assessee. It is also submitted that as regards the share premium is concerned the issue involved is for AY 2012-13 and the amendment in Section 68 of the Act inserting the proviso has come into effect from AY 2013-14. Reliance placed on plethora of decisions referred in the brief note which mainly includes the judgment of Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure (P) Ltd reported in [2017] 247 Taxman 245 (Bom), decision of this Tribunal in the case of M/s. Cygnus Developers (I) Pvt. Ltd. (supra), judgment of Hon'ble Bombay High Court in the case of Pr. CIT vs. Apeak Infotech & Others reported in [2017] 397 ITR 148 (Bom). It was also submitted that all the share subscribers have sufficient creditworthiness in the form of share capital and share premium to explain the investment and most of the share subscribers have huge turnover and are paying taxes. Further, reliance was placed on the decision of this Tribunal in the case of M/s. Eastern Trade Centre vs. ACIT in order dated 06/09/2019 wherein also the addition u/s 68 of the Act were made on account of unsecured loans received from some of the alleged share subscribers and the Revenue authorities also relied on the I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. statement of Shri Rajkumar Kothari recorded on 02.03.2016 and this Tribunal held in favour of the assessee.

We have heard rival contentions and perused the records placed before us. The assessee is aggrieved to the addition made u/s 68 of the Act at Rs. 1,62,80,000/- received from the following persons against the issue of equity shares at face value of Rs. 10/- and share premium of Rs. 990/- for each share:-

Therefore, under these given facts and circumstances invoking provisions of Section 68 of the Act was uncalled for. We find support from the recent decision of this Tribunal in the case of ITO vs. M/s. Kemex Engineering (P) Ltd. in order dated 01.02.2023 wherein also the identity, creditworthiness and genuineness of some of the share subscribers were doubted by the Revenue authorities and this Tribunal after examining the facts in detail held in favour of the assessee observing as follows: “7. We have heard the rival contentions and perused the material available on record and have given our thoughtful consideration to the Page 19 of 67 .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. elaborate observations and findings given by the Ld. CIT(A) while giving relief to the assessee. At the outset, we note that notices u/s. 133(6) of the Act were issued by the Ld. AO to all the five subscribers, who had replied giving all the details and documents required by the Ld. AO along with confirming the transaction of they making investment in the share capital of the assessee. We also take note of the fact that the share subscribers had furnished copies of their ITR acknowledgments which showed that each of them were regular income tax assessees, testifying their identity. 7.1. From the perusal of the paper book and the documents placed therein, it is seen that all the share applicants are (i) income tax assessees, (ii) they are filing their income tax returns, (iii) share application form and allotment letter is available on record, (iv) share application money was made by account payee cheques, (v) details of the bank accounts belonging to share applicants and their bank statements, (vi) in none of the transactions there are any deposit of cash before issuing cheques to the assessee, (vii) all the share applicants are having substantial creditworthiness represented by their capital and reserves. 7.2. We also take note of the elaborate and well reasoned findings and decisions arrived at by the Ld. CIT(A) by taking into consideration all the details and documents placed on record. The relevant findings and decisions from the following paras are extracted as under: “4.5. To sum up the foregoing, it is observed that all the notices u/s. 133(6) were served at the respective addresses of ach of the five shareholders by registered post. The share subscribers had furnished copies of income-tax Acknowledgments which showed that each of them were regular income-tax assessees who were assessed in their own rights with reference to their audited financial results. These facts established the identity of the share applicants. It is further noted that each of the share subscriber had furnished copies of the audited accounts for the FY 2011-12. Examination of these accounts revealed that each share subscribing company was having substantial own funds in the form of capital & reserves which were several times more than the share subscription amount paid to the appellant. In find that only a fraction of the net owned funds of the respective subscribing companies was invested in assessee’s equity shares. The investments made by each of the share subscribers were paid by way of account payee cheques and/or RTGS and there was no prior cash deposit in their bank accounts. In view of the aforesaid facts it can be safely inferred that the assessee had discharged its Page 20 of 67 .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. onus of substantiating the creditworthiness of the shareholders. The shareholders had also furnished copies of their share allotment advices. They had also explained the nature of their respective source of funds. All these facts considered cumulatively substantiate the genuineness of the transactions involving subscription of share capital. 4.6. It is noted that in the impugned order much emphasis was placed on the act that the shareholders did not respond to the notices u/s.

I however, find that although the share subscribing companies did not appear before the AO yet the material documents requisitioned by the AO in his notice u/s. 131 had already been furnished before the AO by the shareholders. From the perusal of the assessment order, I find that save & except making an assertion that the Directors of the share applicant companies failed to appear beore him, the AO did not bring on record any substantive material to disprove the documentary evidences which the appellant as well as the share subscribers had placed on AO’s record in support of the share subscription transactions. The material available on record shows that the AO had also made independent enquiries from the shareholders u/d. 133(6) of the Act. The facts and circumstances furnished by the shareholders in response thereto, supported the AR’s contention that the identity of all the five share subscribing companies stood established. Referring to the copies of the bank statements, the AR established that payment of subscription amounts were recorded in the bank statements of the respective companies. The entries in the bank statement proved that the share subscription amount was transferred through banking channel. Besides the entries in the bank statements also substantiated that before payment of share subscription mounts, no cash was deposited in the bank accounts of the subscribing companies. The AR further pointed out that appellant had furnished explanations before the AO with regard to immediate sources from which share subscription amounts were paid. On these facts therefore, I find that in terms of section 106 of the Evidence Act, the creditworthiness of the share subscribers and the genuineness of the transactions could not have been doubted by the AO merely on the ground that Directors of the share subscribers did not appear before the AO for verification. Gainful reference in this regard may be made to following observations made the Hon’ble Bombay High Court in the case of CIT Vs. Orchid Industries Limited (397 ITR 136). “6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons disclosed that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. The judgment in case of Gagandeep Infrastructure (P) Ltd. (supra) would be applicable in the facts and circumstances of the present case.” 4.8. There is per se no quarrel with the proposition put forth by the AO that m tax proceedings the AO is not required to accept apparent as real. The AO has both duty as well as obligation to bring out the truth and present the real facts. For that purpose the AO is permitted to undertake investigation and enquiries so as to unearth the actual and real facts. The AO has been given power by the Legislature to prove that apparent is not real and thereafter make the assessment with reference to actual state of affairs. There is also no denial that the AO while assessing the income is permitted to take into consideration the human probabilities and if he proves that the conduct of the parties is not in conformity with the actions of prudent person then he may overlook the form of the transaction and find out the substance of the transaction and determine the tax consequences based on the real facts. In the impugned order the AO has doubted the genuineness of the entire transaction on the ground that it was against the human probability that the companies would invest in shares of the appellant company. The AO has also alleged that the unaccounted monies belonging to the assessee and ploughed back in the form of share capital by adopting the modus operandi where the unaccounted cash was rotated in four-five layers and thereafter the money was brought into the assessee’s bank account in the form of share capital. I however find that before these conclusions were recorded the AO himself did not bring on record sufficient tangible and cogent material to support his conclusion that the amount credited in the assessee’s books in the form of share capital and premium actually represented assessee’s undisclosed income. 4.15. Applying the judicial principles laid down in the above decisions to the appellant’s case. I find that the AO had made addition u/s. 68 .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. without proper application of mine and incorrect appreciation of the relevant provisions of the Act. In the above judicial decisions, it has been held that before an addition u/s. 68 is made, it is necessary for the AO to bring on record irrefutable material or evidence which would prove that there was no valid issuance of the shares and for that reason the assessee had failed to prove identity & creditworthiness of the shareholders and also failed to substantiate genuineness. If these touchstones are applied to the appellant’s case then I find that the copies income tax acknowledgments and service of notices at their addresses established the identity of all the share subscribers. In the balance sheets of the respective share subscribers, the investments in assessee’s share were recorded and each subscriber in its balance sheet had disclosed sufficiently large investible funds. The assessee had also filed copies of the bank statements of the respective share subscribing companies which established that the share subscription amounts were received through banking channel. The sources of making payment were also furnished and the entries in bank statements indicated that there was no deposit of cash prior to clearance of the cheques in assessee’s favour. All these facts and documents considered cumulatively establish that the assessee had discharged the onus of proving creditworthiness of the share sub subscribers and the genuineness of the transactions. I therefore hold that the AO was not justified in making the impugned addition of Rs.,1,82,50,000/- u/s. 68 of the Act which is accordingly deleted. These grounds are therefore allowed.” 7.3. Before arriving at our finding, we refer to the following judicial precedents to buttress our observations and conclusions: i) The decision of Hon’ble Jurisdictional High Court of Calcutta in the case of CIT v. Dataware Pvt. Ltd. in ITAT No. 263 of 2011 dated 21.09.2011 wherein Hon’ble jurisdictional High Court held that “After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence.” .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. ii) Decision of Hon’ble Madras High Court in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR 100 (Mad) wherein it was held as under: “In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.'' iii) Judgment of Hon’ble Jurisdictional High Court in the case of Exoimp Resources (India) Ltd. vs. CIT (supra), wherein it was held as follows: “It is incumbent upon the Assessing Authority to examine the explanation of the creditor and arrive at a conclusion as to whether the explanation was satisfactory. The conclusion arrived by the Assessing Authority is to be communicated to the assessee if such explanation is not considered satisfactory. If thereupon the assessee submits any comments or furnishes further information, in that event, the Assessing Authority has to examine the same and arrive at his own conclusion. The inbuilt safeguard provided in section 68 cannot be ignored by the Assessing Authority at his sweet will. The Assessing Authority can add the share capital as undisclosed income if no explanation is offered by the assessee. But since the details/explanations were offered, it was incumbent on the Assessing Authority to examine the same and arrive at a cogent conclusion. Assessing Officer having failed to discharge such obligation the addition is not sustainable in law.., case of CIT vs. Lovely Exports Ltd. (2008) 216 CTR 195 (SC) that where share application money.” 7.4. In the course of assessment proceeding, Ld. AO directed the assessee to produce the director of the assessee and also the directors of the subscriber companies along with relevant documentary evidence and details which was not complied with in full. Ld. Counsel submitted that mere non-appearance of directors is .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. no basis for invoking provisions of section 68 of the act for which he placed reliance on the decision of Hon’ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) wherein it was held as under: “In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions sought for. Decision of the High Court affirmed.”

We notice that all the details were very much placed before the Assessing Officer but while framing the assessment, no efforts have been made by the Assessing Officer to examine the correctness of various proof, filed by the assessee by carrying out any investigation. Merely for non-appearance of the directors, the ld. Assessing Officer disregarded all these documents which have been placed before various statutory authorities including Registrar Of Companies, Income Tax Department and Schedule Banks. The assessee by way of filing all these documents necessary to prove identity, creditworthiness and genuineness of the alleged transaction, has discharged the initial burden casted upon it under the provisions of section 68 of the Act. Unless and until, the assessing authority finds any lacuna or adversity or defect in the said documents, the burden to prove remains on the Revenue authorities. In the instant case, ld. Assessing Officer failed to discharge the burden and summarily disregarded the documents filed by the assessee by merely referring to some decisions and not going into the facts of the case except referring to the price per share. .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited.

In the result, the appeal filed by the assessee in for AY 2012-13 is partly allowed. Now, we take up ITA No. 660/KOL/2022 for AY 2018-19: 26. The first issue for our consideration in ground no. 2 is regarding the addition of Rs. 2,03,823/- made by ld. AO on account of unreconciled duty drawback.

We have heard rival contentions and perused the records placed before us. We notice that during the course of assessment proceedings carried out by NFAC, Delhi it was pointed out that the assessee has declared income from duty drawback at Rs. 4,59,081/- but as per Exim data received from CBEC the assessee has received duty drawback of Rs. 6,53,560/-. The difference of the two i.e. Rs. 2,03,823/- was added to the income of the assessee for unaccounted duty drawback. We, on perusal of the details filed by the assessee in the form of the paperbook containing 97 pages .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. as well as details of duty drawback as on 31.03.2020 filed vide paperbook dated 30.01.2023 on examining the complete details of the duty drawback found that the alleged sum of Rs. 2,03,823/- was sanctioned by the appropriate authority in the subsequent year and has been offered to tax in the return of income for AY 2019-20. The details of income for AY 2019-20 have been filed before us and we, on perusal of the same find merit in the statement made by the assessee and are inclined to hold that the alleged sum of Rs. 2,03,823/- though was applied for duty drawback during AY 2018-19 but it was finally received by the assessee during AY 2019-20 after being sanctioned by the appropriate authority and the same has been duly offered to tax in the income for AY 2019-20. Therefore, no addition of Rs. 2,03,823/- is called for for unaccounted duty drawback. Therefore, ground no. 2 raised by the assessee is allowed.

As regards ground nos. 3, 4 & 5, they relate to disallowance of bad debts claimed of Rs. 27,90,726/- for alleged non- submission of the proof. We have heard rival contentions and perused the records placed before us. We have also gone through the details of disallowance of bad debts along with the statements filed in paperbook from page 76 to 97 and observe that the major amount of bad debts is on account of final account reconciliation and certain deductions/rebate given to the buyers of the assessee which mainly include MRF Ltd., CEAT Ltd. Birla Tyres Ltd. and various small amounts below Rs. 50,000/- amounting to Rs. 2,15,883/-. The print out of the ledger account of all these companies have been filed and it is a clear case of the normal bad debts claim made by the assessee on account of less realisation of Page 30 of 67 I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. the sales declared in the year under appeal or in the preceding year. Since the sales have been duly accounted for and certain portions of the sundry debtors which could not be recovered have been claimed to be bad debts and this claim of the assessee is allowable in view of the ratio laid down by the Hon'ble Apex Court in the case of TRF Limited (190 Taxman 391) which has been subsequently followed in various other decisions namely: CIT Vs Krone Communication Limited (9 taxmann.com 145) (Mad HC) CIT Vs Modi Xerox Limited (10 taxmann.com 73) (All HC) CIT Vs Morgan Securities Limited (162 Taxman 124) (Del HC) CIT Vs D.C.M. Limited (167 Taxmann 160) (Del HC) CIT Vs Autometers Limited (292 ITR 345) (Del HC) Suresh Gaggal Vs ITO (180 Taxman 90) (HP HC) DCIT Vs Oman International Bank SAOG (100 ITD 285) (Mum SB) 29. Thus, respectfully following the ratio laid down in the decisions referred herein above, we are inclined to hold that the assessee has made a justified claim of bad debts u/s 36(1)(vii) of the Act and the same deserves to be allowed. Thus, ground nos. 2, 3 & 4 raised by the assessee are allowed.

Other grounds of appeal

The facts of the case are that the assessee has taken an unsecured loan from 7 body corporates for an amount of Rs.8,61,00,000/-, the details are as follows:

The Assessing Officer further observed that from the database of the department, it is found that most of the companies are mere jama-karchi/shell companies controlled by Sri Raj Kumar Kothari a well-known entry operator. Sri Kothari vide his statement dated 02.03.2016 admitted on oath that all those companies are managed and controlled by him and that he was providing accommodation entries to the beneficiaries in the guise of share capital, share premium, unsecured advances/deposits, bogus billing, etc. The Assessing Officer accordingly issued a show cause notice on 18.12.2019 asking the assessee to explain why an unsecured loan of Rs. 8,61,00,000/- from the said companies should not be treated as unexplained cash credit and the interest paid thereon should not be disallowed and added to the income.

In response to the same the assessee submitted on 20.12.2019 that the amount was borrowed by the company for its business and out of the total sum borrowed during the year of Rs. 8.61 crore an amount of Rs. 7.81 crore was repaid during the year itself and balance sum of Rs. 80,00,000/- was repaid subsequently. It was also explained that TDS was deducted from the interest and deposited to the credit of the Central Government. The assessee also filed copies of loan confirmation.

The Assessing Officer observed that filing corroborative documentary evidence such as KYC Forms, loan confirmations, copy of bank statements does not make a sham transaction genuine. Thereafter he relied on several judgments of different High Courts wherein the addition of loans and share capital u/s 68 was held as justified. Ld. AO accordingly made the addition u/s .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. 68 of the Act for unexplained unsecured loan of Rs. 8.61 Cr and also disallowed the interest paid on alleged loan at Rs. 28,62,863/- .

Aggrieved, the assessee preferred appeal before ld. CIT(A) and reiterated the submissions filed before ld. AO stating that the loans were taken for the immediate business needs from seven parties and major portion of the alleged loan was repaid during the year itself. Notices given by ld. AO u/s 133(6) of the Act to the alleged cash creditors were duly served and they all have responded to ld. AO enclosing all the relevant details to prove the identity and creditworthiness of the lenders and genuineness of the transaction. Further, with regard to the statement of Shri Rajkumar Kothari recorded on 02.03.2016 and heavily relied by ld. AO it is submitted that the stands retracted by Shri Rajkumar Kothari filing an affidavit and therefore, placing reliance on a retracted statement is not valid and further, no opportunity of cross examination was given to the assessee by ld. AO before making addition based on such statement. Reference was also made to the financials of the cash creditors stating that they were having sufficient funds to explain the alleged loans. Reliance placed on various judgments. However, ld. CIT(A) was not satisfied with these submissions and held against the assessee and the crux of the finding of ld. CIT(A) given in para 5.7 of the impugned order reads as under: “5.7 Thus, clued into the above judgements, the ratio decidendi espoused in them and the facts of the case on record, the appellant’s contention that the AO did not conduct any independent enquiry and the assessee had successfully discharged its initial onus is hollow and without logic. Huge sums of money have been received as credits Page 34 of 67 .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. from parties which are very well known and close to the assessee. Yet it could not demonstrate any attenuating circumstances whereby it fails to produce these parties before the authorities or give them their current addresses. In fact, by not producing the parties the appellant has thwarted the natural investigations that the assessing officer could have embarked upon. The parties who were depositors are in the private knowledge of the assessee and therefore, the evidence with respect to their presence, identity (in flesh and bone) ought to have been put forward by the appellant. By mere filing of certain paper evidences, the assessee did not discharge its primary onus especially when the assessing officer has a doubt that the whole paper evidences were a managed, contrived and planned one as part of a pernicious design. The natural presumption as per Indian Evidence Act thus goes against the assessee. The catena of case laws relied on by the appellant also are factually distinguishable and hence are not relevant to the case at hand. As the appellant has failed to discharge its onus with respect to the identity, creditworthiness, genuineness of the transaction, no faults can be attributed to the addition of the impugned sum under section 68 of the IT Act 1961. Thus, the grounds 4-6 cannot be sustained and accordingly dismissed.”

Aggrieved, the assessee is now in appeal before this Tribunal. Ld. Counsel for the assessee firstly referred to the written submissions filed before ld. CIT(A) and the same reads as follows:

Further, reliance was placed on the decisions of Hon'ble Jurisdictional High Court in the case of PCIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Calcutta), CIT vs. Odeon Builders Pvt. Ltd. reported in [2019] 418 ITR 315 (SC), Andaman Timber Page 38 of 67 I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. Industries vs. CCE reported in [2016] 38 GSTR 117 (SC), PCIT vs. Oriental Power Cables Ltd. reported in [2022] 143 taxmann.com 371 (SC), Kishinchand Chellaram reported in AIR 1980 14 SC 2117, Eastern Commercial Enterprise reported in (1994) (Cal) [210 ITR 103], CIT vs. Smt. Sunita Dhadda reported in [2018] 406 ITR 220(Raj), PCIT vs. Ambe Tradecorp (P.) Ltd reported in [2022] 145 taxmann.com 27 (Guj), ACIT vs. M/s. Overtop Marketing Pvt. Ltd. in order dated 15.03.2021.

On the other hand, ld. D/R vehemently argued supporting the detailed finding of both the lower authorities and stated that the alleged cash creditors are accommodation entry provider companies and do not have sufficient creditworthiness to give the loan of such a huge magnitude to the assessee company and also the genuineness of the transaction is not proved as to how the assessee came in contact with these companies for lending huge amount.

We have heard rival contentions and perused the records placed before us. The issue in dispute before us relates to addition u/s 68 of the Act made by ld. AO for unexplained unsecured loan of Rs. 8.61 Cr taken from 7 body corporates and also disallowing the interest paid on such loans. We observe that ld. AO on the strength of the statement of one Shri Rajkumar Kothari taken u/s 131 of the Act on 02.03.2016 who allegedly accepted to be engaged in providing accommodation entry to various beneficiaries on commission through various body corporates, managed and controlled by him. Ld. AO has also referred to the financial data of the alleged body corporates and came to a conclusion that they are .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. accommodation entry providers and the alleged unsecured loan is not explained and thus, provisions of Section 68 of the Act invoked. Ld. CIT(A) has confirmed the addition made by ld. AO.

Before us, the assessee has made two-fold contentions; firstly, stating that the principle of natural justice has not been followed by the lower authorities and no opportunity to cross examine Shri Rajkumar Kothari was given by ld. AO whose statement has been recorded for making addition in the hands of the assessee and also ld. AO ignored the fact that Shri Rajkumar Kothari has retracted its statement dated 02.03.2016 by filing an affidavit before the Investigation Wing. Second-fold of the contention is on merit stating that the assessee company is carrying out regular business activities and the income for the year is declared at Rs. 39,59,66,130/-. For the business needs unsecured loan from body corporates was taken. Tax deducted at source on the interest paid to such body corporates and out of the unsecured loan of 8.61 Cr taken during the year, the assessee had repaid 7.81 Cr during the year itself and the balance sum of Rs. 80 lakh has been paid subsequently.

It is submitted before us by ld. Counsel for the assessee that the Assessing Officer has relied on the judgments by quoting from the head note of the judgments reported in various Tax Journal. It is submitted that each judgment is delivered on its peculiar facts. In the assessment order, the Assessing Officer has not explained how the facts on those judgments are identical to the facts in the case of the appellant. Therefore, the reliance on those judgments by the Assessing Officer is misplaced and the .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. addition made u/s 68 of the Act and on account of the disallowance of interest payments cannot be sustained in law.

Further, we notice that the Assessing Officer has relied on the statement of one Sri Raj Kumar Kothari dated 02.03.2016 wherein he deposed before the department that he was providing accommodation entry to the beneficiaries in the guise of share capital, share premium, unsecured advances/deposits, bogus billing, etc. It is submitted by ld. Counsel for the assessee that the assessee was not supplied a copy of the statement. The Hon'ble Supreme Court in the case of CIT vs. Odeon Builders Private Limited [2019] 418 ITR 315 (SC) has held that Addition or disallowance cannot be made solely on third-party information without independently subjecting it to further verification by the Assessing Officer. We note that the compliance of provisions of Sec. 142(3) is a mandatory statutory requirement in completing the assessment proceedings failing which may vitiate the entire assessment itself since this sub-sec. uses the word "shall". The AO has relied on the statement of Sri Raj Kumar Kothari dated 02.03.2016. Neither statement of Sri Raj Kumar Kothari dated 02.03.2016 was provided to the assessee nor it was allowed to cross-examine the deponent. The Hon’ble Supreme Court in the case of Andaman Timber Industries vs. commissioner of Central Excise reported in [2016] 38 GSTR 117 (SC) has held that the adjudicating authority's denial of the assessee’s claim to cross- examine the witnesses though the statements of those witnesses were made the basis of the order, was a serious flaw which nullified the order since it was a violation of the principles of natural justice. .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited.

Also, in the case of Principal Commissioner of Income Tax (Central) vs Oriental Power Cables Ltd reported in [2022] 143 taxmann.com 371 (SC) has held that failure to give the assessee the right to cross-examine witnesses whose statements are relied on, results in a breach of principles of natural justice. It is a serious flaw which renders the order a nullity.

In the case of Kishinchand Chellaram (AIR 1980 14 SC 2117), the Hon'ble Supreme Court of India on the aspect of cross- examination held as follows: “It is true that the proceedings under the Income Tax law are not governed by the strict rules of evidence and therefore it might be said that even without calling the Manager of the Bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax Authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statements made by him.”

The Hon’ble Calcutta High Court in Eastern Commercial Enterprise, (1994) (Cal) [210 ITR 103] at page-111: Held as under: “Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied with the contents of all such evidence, both oral and documentary so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness hostile to him.”

A similar view was also taken by the Hon’ble High Court of Rajasthan in the case of CIT vs. Smt. Sunita Dhadda reported in [2018] 406 ITR 220(Raj) wherein the Hon’ble Court has considered the judgment of the Hon'ble Supreme Court in the case of M/s I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. Andaman timber Industries vs. CCE (supra) and confirmed the view taken by the Tribunal holding that “if the assessee is not provided any opportunity to cross-examine the person who stated to have received 'on-money' is a violation of principles of natural justice which, thus called for the deletion of addition so made by the Ld. Assessing Officer.”

Further, we observe that similar type of addition was made in the case of another assessee namely M/s. Overtop Marketing Pvt. Ltd. for AY 2015-16 based on the statement of Shri Rajkumar Kothari and this Tribunal in its order dated 15.03.2021 in after observing that the assessee was not provided opportunity of cross examination Shri Rajkumar Kothari regarding his original statement given on 02.03.2016 accepting to be an accommodation entry provider (though the same was retracted subsequently by filing an affidavit) held in favour of the assessee observing as follows: “9. We have heard both the parties and perused the records. It is noted that the assessee has set up a manufacturing plant at NH-6, Mouza Chandrapur, PS Bagman, Howrah-711303 for manufacturing of Fly Ash Blocks and bricks. And the assessee company has availed for loan from nine (9) entities to the tune of Rs.4.51 crores and it is noted that all the loans taken are interest bearing; and the interest have been paid by the assessee regularly after duly deducting TDS on the said payment of interest every year.

It is noted that pursuant to the notice issued by the A.O u/s 133(6) of the Act, the nine (9) lender companies have directly replied to the AO by filing the following documents of them: (a) copy of income-tax acknowledgment, (b) copy of audited accounts for FY 2014-15, (c) copy of long-term investment, (d) copy of bank statement ascertaining transaction.

It is noted that the lender companies have duly furnished their PAN and the registered addresses and also brought to the notice of Page 43 of 67 .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. the A.O that they are legal entities/corporate registered with the Registrar of Companies (ROC) and have their respective registered addresses in the public domain. The amounts in question were credited through banking channels. The names, PANs and loan amounts and the interests paid for which TDS has been deducted are as under: Loan as on Sl. Name PAN Interest Paid 31.03.2015 1 M/s. Bhiksu Barter Pvt AABCB1315M 3,00,000 1,726/ Ltd. 2 M/s. Divya AAACD9721C 1,35,00.000/- 9,20,959/ Electronics Pvt Ltd. 3 M/s. Paritosh AABCP5013E 41,50,000/- 3,84,123/ Electricals Pvt Ltd. M/s. Potential 4 Electricals & AABCP5014D 40,00,000/- 4,65,205/- Electronics Pvt Ltd. 5 M/s. Ranbhumi AAECR5842G 20,00,000 1,44,247/- Marketing Pvt Ltd. 6 M/s. Shresth AADCS7759J NIL 5,33,425/- Builders Pvt Ltd. 7 Vivek Barter Pvt Ltd. AAACV8952B 73,50,000/- 6,79,911/- 8 Vivek Tracom Pvt. AAACV8670J 80,00,000/- 27,08,014/- Ltd. 9 Raj shree Developer AABCR2000D 58,00,000/ 1,32,553/- Enterprises Pvt Ltd. Total 4,51,00,000/- 53,70,163/- 12. Despite the assessee filing all these documents from which it can be noted that the lender companies are regular income-tax assessee’s, still the A.O had branded them as shell/paper companies on the strength of the statement of Shri Raj Kumar Kothari and Shri Bijay Kumar Dokania whose statements were recorded u/s 131 of the Act on 02.03.2016 and 28.05.2014 by the Investigation Wing u/s 131 of the Act in third party proceedings and of course behind the back of assessee. The Ld. AR of the assessee brought to our notice that from a perusal of the statement of Shri Vijay Kumar Dokania it can be noted that the A.O has reproduced only selected questions and answers i.e. questions and answers no.4,6 & 12 and from the answers given it would be clear that his companies are engaged in giving bogus shares/LTCG and also he earns from Tax Consultancy and so, in the statement he [Shri Vijay Kumar Dokania] didnot say anything about his companies involvement in giving accommodation entry in the form of loans. It was pointed out by the Ld. AR that he has stated that his main source of income was from commission for providing accommodation entries by forming jama-kharchi companies and selling them in lieu of commission and he has elaborated his .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. modus operandi by stating that he gives entry in the form of LTCG (long-term capital gain). Thus according to Ld. AR the statement of Shri Vijay Kumar Dokania cannot be used against the assessee company in respect of loan given by the entities controlled by him. Further, according to the Ld. AR, Shri Raj Kumar Kothari’s confession that he is an entry provider was the basis of branding the lender companies as shell companies, however it has been brought to our notice that Shri Kothari had retracted the same within 10 days wherein he has sworn an affidavit before the First Class Magistrate of Kolkatta and for proving that, the Ld. AR drew our attention to the page 45 to 48 of the paper-book from where we note that he has in his sworn affidavit, has alleged that he was whisked away by the officers of the Department along with policemen on 02.03.2016 and they kept him in their Office till late night; and by exerting threat and coercion has extracted some statements/confession/admission. Elaborating further he says that officers threatened to conduct search and survey in his companies and kept on reminding him that they will ruin him and his family. In the back-drop of the aforesaid threat and coercion, he made the statement in accordance to their wishes, and which was not the truth of the contents recorded. And we note that within 10 days (after giving the statement to Investigation Wing), he has retracted the statement by swearing the affidavit which is placed at page 45 to 48. Therefore, according to the Ld. AR, the statement of Shri Raj Kumar Kothari which was the only basis of which the A.O branded the lender companies as shell/paper companies could not have been used against the assessee and in any case does not have any evidentiary value, since retracted and could not have been acted upon against the assessee. Moreover, according to Ld.AR both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania has not been summoned by the A.O and their statements were not recorded directly by the A.O before drawing adverse inference against the lender companies. According to the Ld. AR, neither the A.O gave the full statement of both these persons nor gave an opportunity to the assessee to cross-examine them (Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania). So, according to Ld. AR, in any case their statement cannot be the basis for drawing adverse inference against the assessee as for that Ld. AR relied on the decision of the Hon’ble Supreme Court in Andaman Timber v. CCE (2015) 62 taxmann.com 3 (SC).

So, the A.O in this case, erred in relying on the statement of two persons who were not allowed to be cross-examined as held by the Hon’ble Apex Court in Andaman Timber (supra) and Odeon Builders Pvt. Ltd. (supra). So from any angle, one looks, the statement of these two persons cannot be used against the assessee. And when we remove these two statements with the legal infirmities discussed supra, there is no material at all against the assessee and the AO having failed to find any infirmity with the documents filed by the assessee/lenders to prove the loan transactions as discussed supra, .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. no adverse view was legally tenable. And having gone through the impugned order and the Paper Book filed before us, we fully concur with the finding of facts as rendered by Ld CIT(A) in respect of identity, creditworthiness and genuineness of the lenders/loan transaction and for the sake of brevity and to avoid repetition it is not again repeated. We agree with the judicial precedence relied upon by the Ld CIT(A) in support of his decision. And we don’t find any legal or factual infirmity in the impugned order of the Ld CIT(A), so we decline to interfere. So the impugned action of Ld. CIT(A) to delete the section 68 addition of Rs.4.51 crores and [the interest paid by assessee to lenders] Rs.53,70,163/- is confirmed. So, the Revenue’s appeal stands dismissed.

In the result, the appeal of the Revenue is dismissed.”

We, therefore, respectfully following the decision of this Tribunal referred herein above and other judgments of Hon'ble Courts referred (supra) are of the considered view that the legal issue raised by the assessee deserves to be allowed as the basis of the impugned addition is the statement of Shri Rajkumar Kothari u/s 131 of the Act dated 02.03.2016. No opportunity of cross examination was provided to the assessee by ld. AO and also the said statement was retracted within ten days by Shri Rajkumar Kothari and therefore, making the addition based on such retracted statement and that too without giving any opportunity of cross examination to the assessee in whose case addition has been made on the basis of a statement of a third person deserves to be deleted and, thus, the legal issue raised by the assessee challenging the impugned addition is allowed.

Now, we move on to deal with the merits of the case we notice that the unsecured loan was received from 7 body corporates which are regularly assessed to tax, registered on the portal of Ministry of Corporate Affairs, regularly filing income tax return and I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. annual returns, carrying out business activity and possess sufficient paid up capital and reserve and surplus to explain the alleged loan and also all the 7 body corporates have replied to ld. AO to the notices duly served upon them and duly enclosed all the relevant documents including bank statement to explain the genuineness of the alleged transaction and identity and creditworthiness of the loan creditors. The following table of the financial data of the loan creditors for AY 2017-18 is reproduced below:

Further, we notice that out of the alleged loan of Rs. 8.61 Cr major portion of the loan i.e. 7.81 Cr has been repaid during the year itself and the status of the loan repaid and closing balance of the alleged loan is tabulated below:

Further, it is submitted by ld. Counsel for the assessee that section 68 of the Income-tax Act, 1961, deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The crucial words in the provision are “the assessee offers no explanation". This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee explains the .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. credit by placing evidence regarding the identity of the investor or lender along with their confirmations, bank statements, audited financial statements the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to ld. AO to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee’s transaction. For this purpose, ld. Counsel for the assessee draws support from the judgement of the Jurisdictional Calcutta High Court in the case of Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) where it is held as follows: “Section 68 of the Income-tax Act, of 1961, deals with cash credits. It states that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to Income-tax as the income of the assessee of that previous year. The crucial words in the provision are “the assessee offers no explanation". This would mean that the assessee offers no proper, reasonable and acceptable explanation as regards the amount credited in the books maintained by the assessee. No doubt the Act places the burden of proof on the taxpayer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. confirmations, the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation concerning the cash credit, the Assessing Officer should consider it objectively before he decides to accept or reject it. Where the assessee furnishes full details regarding the creditors, it is up to the Department to pursue the matter further to locate those creditors and examine their creditworthiness. While drawing the inference, it cannot be assumed in the absence of any material that there have been some illegalities in the assessee’s transaction. Held, dismissing the appeal, that the allegations against the assessee were in respect of thirteen transactions. The Assessing Officer issued a show-cause notice only in respect of one of the lenders. The assessee responded to the show-cause notice and submitted the reply. The documents annexed to the reply were classified under three categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The Assessing Officer had brushed aside these documents and in a very casual manner had stated that merely filing the permanent account number details, and balance sheet did not absolve the assessee from his responsibility of proving the nature of the transaction. There was no discussion by the Assessing Officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee had discharged his initial burden and the burden shifted onto the Assessing Officer to enquire further into the matter which he failed to do. In more than one place the Assessing Officer used the expression "money laundering". Such usage was uncalled for as the allegation of money laundering is a very serious allegation and the effect of a case of money laundering under the relevant Act is markedly different. The order passed by the Assessing Officer was utterly perverse and had been rightly set aside by the Commissioner (Appeals). The Tribunal had rightly deleted the additions under section 68.”

Further, we notice that out of the alleged 7 body corporates, the issue regarding unexplained cash credit of 4 of such body corporates namely i) Divya Electronics Pvt. Ltd., ii) Paritosh I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. Electricals Pvt. Ltd., iii) Potential Electricals and Electronic Pvt. Ltd. & iv) Rajshree Developer Entrepreneurs Pvt. Ltd. were the subject matter before this Tribunal in case of M/s. Overtop Marketing Pvt. Ltd. (supra) and the decision of this Tribunal stands extracted (supra) wherein the facts are almost identical and on merits of the case this Tribunal has given relief to the assessee accepting the identity and creditworthiness of the alleged loan creditors and genuineness of the alleged transaction.

Further, we notice that in another decision of this Tribunal in the case of M/s. Eastern Trade Centre vs ACIT in for AY 2014-15 dated 06.09.2019 similar issue of unexplained cash credit from some of the alleged cash creditors was adjudicated and there also the basis was the statement of Shri Rajkumar Kothari and this Tribunal dealt with the merits of the case and held in favour of the assessee observing as follows: “7. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that first of all, it is appropriate to go through the provision of Section 68 of the Income Tax Act,1961 which is reproduced as under: "68. Cash Credits: 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." A bare reading of Section 68 of the Income Tax Act, 1961, suggests that for a sum so credited to be charged to income-tax, as the income of the assessee of the previous year by the A.O., the following have to be present: .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. i) there has to be an amount credited in the books maintained by the assessee ; ii) such credit has to be a sum of money received during the previous year; and iii) either a) the assessee offers no explanation about the nature and source of such credits found in the books or b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. Thus, it is clear from above that in order to establish the receipt of the sum as unexplained cash credit, as required under Section 68 of the Income-tax Act, 1961, the assessee must satisfy three conditions, viz., (i) identity of the creditor, (ii) genuineness of the transaction, and (iii) creditworthiness of the creditor. All these three conditions laid down as above are being discussed in the ensuing para of this order.

Genuineness and Creditworthiness of the Transaction: We note that regarding the genuineness of the transaction, it was stated by the ld Counsel that all the said loans received during the year were duly routed through the regular banking channels of all the companies and also of the assessee company. To substantiate the genuineness of the transactions and the identity and creditworthiness of the parties, following documents were submitted by the assessee: .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. i) ITR Acknowledgment, Relevant Bank statements of the loan creditors evidencing that loans given to the assessee were through normal banking channels. ii) Audited Accounts of the loan creditors and parties from whom the creditors received fund (being source of source of funds) iii) Copies of loan confirmations received from loan creditors These documents clearly prove the genuineness of the transactions and the identity and creditworthiness of the parties. Further, we discuss the genuineness of the transactions, identity and creditworthiness of these three parties one by one: (1). Vivek Tracom Pvt Ltd We note that the assessee had taken loan amounting to Rs. 20,00,000/- from M/s Vivek Tracom Pvt Ltd during the relevant year through proper banking channel (being cheque No. 0111348). In this regard a copy of the confirmation of loan given by Vivek Tracom Pvt Ltd to the assessee is enclosed at page113 of the paper book and and a copy of the bank statement of Vivek Tracom Pvt. Ltd and Eastern Trade Centre evidencing the loan given to the assessee and its receipt by the assessee is enclosed at page 114-116 the paper book. The company is a regular income tax assessee.A copy of the ITR Acknowledgement and Audited accounts of Vivek Tracom Pvt Ltd is being enclosed at pages 91 to 112 of the paper book. As regards the source of Rs. 20,00,000/- it is submitted that Vivek Tracom Pvt Ltd had received interest on loan from the following companies: a. Samridhhi Investments Co Pvt Ltd Rs. 4,06,110/- b. Chandan Mal Raijada Rs.90,247/- c. Vineet Enterprises Rs. 19,971/- d. Ujjal Business and Investment Pvt Ltd Rs. 1,80,493/- Apart from the above-mentioned interest received by Vivek Tracom, it had also received an amount of Rs. 10,00,000/- from Amco Electrical Eng Co. on account of refund of loan given to them earlier. In support of the aforesaid, confirmation of accounts of all the said parties are enclosed at pages 117 to 122 of the paper book. Thus, with the submission of these documents showing the source of source of funds and the fact that all the transactions took place through proper .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. banking channels, the genuineness, creditworthiness and identity of the transaction stands duly proven.

Paritosh Elcctricals Pvt Ltd We note that the assessee had taken a loan of Rs.10,00,000/- from Paritosh Electricals Pvt Ltd during the relevant year through proper banking channel (being cheque No. 0038128). In this regard a copy of the confirmation of loan given by Paritosh Elcctricals Pvt Ltd to the assessee is enclosed at page 123 of the paper book and a copy of the bank statement of Paritosh Electrical Pvt Ltd evidencing the loan given to the assessee is enclosed at page 124-125 of the p/b. The company is a regular income tax assessee. A copy of the ITR Acknowledgement and Audited accounts of Paritosh Electricals Pvt Ltd is enclosed at pages 49 to 69 of the paper book. As regards the source of Rs. 10,00,000/- it was submitted that Paritosh Electricals Pvt Ltd had received Rs. 20,00,000/- from Machinery Agencies (India) on account of refund of loan as shall be evident from the bank statement of Paritosh Electricals Pvt Ltd. A copy of confirmation of loan taken by Machinery Agencies (India) from Paritosh Electricals Pvt Ltd along with bank statement of Machinery Agencies showing the same is enclosed at page 123 to 125 of the paper book. Thus, the source of source of the fund also stands proven.

M/s Divya Electronics Pvt Ltd 6,50,000 2. M/s Mahcshwari Merchants Pvt ltd 2,50,000 3. M/s Rajshree Developers 2,50,000 EntcrprencursPvt Ltd 4. M/s Vivek Barter Pvt Ltd 1,00,000 5. M/s StardoxVinimayPvt Ltd 4,99,569 .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited.

M/s RainaVyaparPvt Ltd 1,86,344 7. M/s TanjoreVanijayPvt Ltd 6,85,042 8. A. K. Construction Pvt Ltd 3,00,000 9. R.C Suppliers Pvt Ltd 1,85,026 TOTAL 38,59,987 The Ld Counsel for the assessee submitted before us that with regard to the interest paid on outstanding loans taken in earlier year from the parties mentioned in the table above, the confirmations of loans from these parties and their bank statements showing the same are enclosed at pages 137 to 148 of the paper book. The Income Tax Return Acknowledgements and Audited accounts of the parties are also enclosed at pages 155 to 325 of the paper book. It is also to be noted here that during the earlier years in which the loans were taken, the transactions were not disputed during the course of assessment of those years. Therefore with the submission of the said documents the assessee's onus of proving the identity of the parties and genuineness of its transactions with the parties [which had been disputed by the Ld AO and CIT(A)] stands duly fulfilled. The department having accepted the transaction of loans in the past years cannot dispute the payment of interest in a subsequent year without doing anything to disturb the status of the assessment in the past years. The loans were not received during the year and therefore the A.O. could not have examined their genuineness during the year. Furthermore, the A.O. has nothing to examine their genuineness even otherwise and has simply relied on the retracted statement of Shri Rajkumar Kothari to draw his conclusion. Therefore addition made by Assessing Officer in respect of interest paid is hereby deleted.

We note that the onus of proof is not a static one. Though in section 68 of the Income-tax Act, 1961, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Therefore, once the assessee had discharged the primary onus, which was cast upon the assessee, it was incumbent upon the Assessing Officer to prove on the basis of cogent evidence that the transaction was not genuine. There was no such evidence in assessee's case under consideration. The conclusions of the Assessing Officer and the Commissioner (Appeals) with regard to the genuineness of the transactions were merely based on surmises and assumptions. Thus after taking into consideration the totality of the facts discussed as above and in view of the case laws discussed above, it is well established that the assessee by producing necessary documents viz., ITR Acknowledgements, audited accounts, bank statement copy, PAN Number and confirmations etc has sufficiently established the identity, creditworthiness and genuineness of the loan creditors and interest paid. Therefore, we delete the addition of Rs.88,59,987/- (Rs.50,00,000 + Rs. 38,59,987).

In the result, the appeal of the assessee is allowed.”

We, therefore, under the given facts and circumstances of the case, are of the considered view since the assessee has successfully discharged its onus of proving the identity of the loan creditors which are body corporates in the instant case duly registered with Ministry of Corporate Affairs, having PAN and regularly filing the returns, further creditworthiness of the transaction is proved with the fact that they have been carried out .: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. through banking channel and sufficient funds in the form of share capital and reserve and surplus available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is proved with the fact that the assessee company is carrying out regular business activity and huge turnover is achieved year by year and for business needs the said loan has been taken and the major portion of the unsecured loan has been repaid in the year itself and only a minor sum was paid in the subsequent year and all transactions were carried out through banking channel, interest paid on the loans and tax at source has been deducted and duly reflected by the alleged loan creditors in their income tax return and therefore, we fail to find any justification in the action of ld. AO invoking the provisions of Section 68 of the Act. We, thus, set aside the finding of ld. CIT(A) and delete the addition made u/s 68 of the Act at Rs. 8.61 Cr and further hold that invoking the provisions of Section 115BBE of the Act was not justified and further, since provisions of Section 68 of the Act are held to be wrongly invoked and the alleged transaction is held to be genuine, the interest expenditure incurred on alleged loans is also allowable to the assessee. Thus, ground nos. 2, 3, 4, 5, 6 & 7 of the assessee’s appeal are allowed.

Now, we take ground no. 8 for AY 2017-18 wherein deduction u/s 80G of the Act at Rs. 17.50 lakh was not provided. We notice that the assessee incurred CSR expenses of Rs. 35 lakh and the same was disallowed while computing the total income. The assessee gave donation of Rs. 20 lakh to Kisan Vikas Trust and Rs. 15 lakh to Howrah Maheswari Seva Trust, both are registered u/s 12A of the Act and also approved u/s 80G of the Act. On such Page 64 of 67 I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. donation of Rs. 35 lakh the assessee claimed deduction of Rs. 17.50 lakh u/s 80G of the Act. Ld. AO disallowed the said claim merely observing that no deduction is allowable for CSR expenses.

We fail to find any merit in this action of ld. AO which has been subsequently confirmed by ld. CIT(A) for the reason that CSR expenses incurred by the assessee already stands disallowed in the computation of income. Now, Section 80G of the Act comes into play if any of the donations is eligible for deduction u/s 80G of the Act. It is not in dispute before us that the organizations to which the alleged donation has been given are registered u/s 12A of the Act holds the approval of Section 80G of the Act. This Tribunal in the case of M/s. JMS Mining Pvt. Ltd. vs PCIT in order dated 22.07.2021 has allowed the deduction u/s 80G of the Act on CSR expenses. The relevant finding of this Tribunal is reproduced below: “23. As discussed supra, we concur with the contention of the assessee that since Parliament intended certain restrictions to only CSR expenditure in respect of two donations included by an assessee as CSR expenditure i.e. [Swachh Bharat Kosh and Clean Ganga Fund] has impliedly not made any prohibition/restriction in respect of claim of CSR expenses in other cases if it is otherwise eligible under Section 80G of the Act. In this context we find that the assessee has made donation of Rs. 1.25 crores on 20.01.2016 by RTGS dated 19.01.2016 through UCO Bank which is evident from page 18 of PB which is received by Shree Charity Trust which was 80G(5)(vi) certificate of the Department dated 15.01.2009 placed at page 17 of PB. The assessee has also made payment of Rs. 10 Lakhs to Pt. Jashraj Music Academy Trust which is found placed at page 22 & 23 and the approval u/s 80G (5)(vi) of the Act in respect of Pt. Jashraj Music Academy Trust is found placed at page 19 of PB dated 30.03.2012 given by Director of Income Tax (Exemption). Therefore, since the assessee satisfies the condition u/s. 80G of the Act of the donees, the assessee’s claim for deduction of CSR I.T.A. Nos.: 641, 650 & 660/KOL/2022 Assessment Years: 2012-13, 2017-18 & 2018-19 Acme Chem Limited. expenses/contribution u/s 80G of the Act was allowed after enquiry by the AO. Thus we are of the opinion that the action of the AO allowing the claim u/s. 80G of the Act is a plausible view and is in line with the ratio of the decision of Tribunal cited (supra). Therefore we find that the Ld. PCIT has not been able to make out a case that on this issue raised by him, the AO's order is erroneous as well as prejudicial to the revenue. So the jurisdictional fact as well as law is absent for invoking revisional jurisdiction. Therefore, the usurpation of jurisdiction by Ld. PCIT u/s 263 of the Act is bad in law and therefore need to be quashed and we order accordingly.

In the result, the appeal of the assessee is allowed.”

We, therefore, respectfully following the decision referred herein above, are inclined to hold that the assessee is eligible for deduction u/s 80G of the Act at Rs. 17.50 lakh and thus, set aside the finding of ld. CIT(A) and allow ground nos. 8 & 9 raised by the assessee for AY 2017-18.

Ground nos. 1 & 10 are general in nature which need no adjudication.

Thus, the appeal filed by the assessee in for AY 2017-18 is allowed.

In the result, the appeals filed by the assessee in ITA No. 641/KOL/2022 for AY 2012-13 is partly allowed and ITA Nos. 650 & 660/KOL/2022 for AY 2017-18 & AY 2018-19 are allowed. Kolkata, the 31st March, 2023 Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 31.03.2023 Bidhan (P.S.)