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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: SHRI SANJAY GARG & SHRI GIRISH AGRAWAL
Present for: Appellant by : Shri Sunil Surana, CA Respondent by : Shri Vijay Kumar, Addl. CIT Date of Hearing : 07.02.2023 Date of Pronouncement : 29.03.2023 O R D E R
PER SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This captioned appeal filed by the assessee is against the order of Ld. CIT(A)-7, Kolkata vide dated 04.09.2019 against the order of Ld. ACIT, Circle-26, Kolkata passed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 17.03.2016.
Assessee is in appeal in respect of addition made by the ld. AO of Rs.62,95,869/- by treating the unsecured loans from four different parties as unexplained cash credit u/s. 68 of the Act.
Brief facts of the case are that assessee is a partnership firm engaged in the business of manufacturing and supplying readymade shirts, retail chain stores. Assessee filed its return on 28.09.2013 reporting total income of Rs.73,69,852/- which was revised on Forcas Apparels, AY : 2013-14 04.01.2014 at a total income of Rs.94,87,250/-. In the course of assessment proceeding, Ld. AO noted that assessee has received unsecured loans from the parties details of which is tabulated below:
3.1. In respect of the above four parties, assessee submitted that transaction with them are through proper banking channel. They are regular in compliance in relation to their income tax and ROC matters and loan confirmation from the said parties were placed on record. The details and documents placed on record contained in the paper book are extracted below from the index which is reproduced as under:
3.2. Ld. AO in the course of assessment had issued notice u/s. 133(6) of the Act and also commission u/s. 131 to DDIT (Inv.), Kolkata. Ld. AO noted that the enquiries conducted through ITI revealed that following companies as well as their directors and the individual do not exist at their respective address. Ld. AO thus concluded that assessee did
Forcas Apparels, AY : 2013-14 not discharge its onus to establish the identity and creditworthiness of the parties and the genuineness of the transactions and thus, treated these unsecured loans as unexplained cash made u/s. 68 of the Act and added it to the total income. Aggrieved, assessee went in appeal before the Ld. CIT(A), who dismissed the appeal. Aggrieved, assessee is in appeal before the Tribunal.
Before us, Ld. Counsel reiterated the submissions made before the authorities below and demonstrated that all the necessary documentary evidences were placed on record which are contained in the paper book. He strongly submitted that the onus casted u/s. 68 of the Act has been effectively discharged by the assessee in respect of the unsecured loans taken from the four parties for which the addition has been made. He also stated that all the loans have been repaid subsequently for which also confirmation is placed on record. Ld. Counsel also asserted that it is not a case of share capital where the source or source is required to be proved by the assessee. He placed reliance on 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.
So long it is not established that the return submitted by the creditor has been rejected by its Assessing officer, the Assessing
Forcas Apparels, AY : 2013-14 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.” 4.1. Per contra, ld. Sr. DR submitted that notices issued u/s. 133(6) as well as commission issued u/s. 131 returned unserved in two cases. Further, the identity of the parties could not be established. Ld. Sr. DR also submitted that the loans claims to have been repaid after the completion of assessment and first appellate proceeding. Reliance was placed on the orders of the lower authorities.
We have heard the rival contentions and perused the material available on record. We take note of the documentary evidence placed on record by the assessee which forms part of the paper book, details of which are extracted above. At the outset, we note that assessee had furnished all the details and documents required by the Ld. AO along with confirmation of the transaction of, they granting loan to the assessee. We also take note of the fact that the lender companies and the individual had furnished copies of their ITR acknowledgments which showed that each of them were regular income tax assessee, testifying their identity. 8.1. From the perusal of the paper book and the documents placed therein, it is seen that all the lenders are (i) income tax assessee filing their income tax returns, (ii) loans were given by account payee cheques, (iii) details of the bank accounts belonging to lenders and their bank statements, (iv) in none of the transactions there are any deposit of cash before issuing cheques to the assessee, (v) all the lender are having substantial creditworthiness represented by their net worth as reported in their financial statements, (vi) all of them
Forcas Apparels, AY : 2013-14 confirmed the transactions with the assessee including that of repayment of loans given by them by issuing confirmation letters.
8.2. We also take note of the fact that in case of loan from Smt. Premlata Singhania and Gamini Distributors Pvt. Ltd., the loans were repaid by the assessee within a period of less than one month. Necessary confirmation letters and statement of Bank account in this respect are placed on record.
8.3. We notice that all the details were very much placed before the Assessing Officer. We, therefore considering the facts and circumstances of the case and deriving force from the judicial precedent referred in the case of CIT Vs. Dataware Pvt. Ltd. (supra) by the Hon’ble jurisdictional High Court of Calcutta are of considered view that since the assessee has sufficiently explained the identity and creditworthiness of the lender companies and the genuineness of the transaction of unsecured loans obtained by the assessee firm, we set aside the order of ld. CIT(A) and delete the addition made in respect of unsecured loans. We accordingly allow the grounds raised by the assessee in this respect.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 29th March, 2023.