FILATEX INDIA LIMITED,NEW DELHI vs. ACIT CENTRAL CIRCLE - 4, NEW DELHI
Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
PER MANISH AGARWAL, AM :
The captioned appeals are filed by the Assessee and by the Revenue and the Cross-Objections (C.Os) are filed by the assessee in case of captioned assessee’s for various Assessment years. Since the issues involved in all the cross appeals filed by both the parties and objection raised by the assessee in all the C.Os are common therefore, all these cross appeals and C.Os are taken together and decided through a common order.
ITA No.4635/Del/2024 & CO No.-11/Del/2025 (AY 2013-14)
M/s Filatax India Ltd
We first take the appeal filed by the Revenue in the case of Filatex India Ltd. in ITA No.4635/Del/2024 and the corresponding C.O. No. 11/Del/2025 filed by the assessee for AY 2013-14. 3. Brief facts of the case are that the assessee is a company engaged in the business of manufacturing Polyester Chips, Polyester/Nylon/Polypropylene Multi & Mono Filament Yarn and Narrow Fabrics. The return of income was originally filed electronically on 08.09.2013, declaring the net loss of INR 49,70,14,441/-. The ITA Nos.4635, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 return of income was processed u/s 143(1) of the Act. A search and seizure action was carried out by the Department u/s 132 of the Act in the case of Filatex India Ltd. group on 01.09.2021. Consequent upon the search and after obtaining the necessary approval from the Competent Authority, the cases from various AYs were re-opened and notices u/s 148 of the Act were issued which inter-alia includes AY 2013-14 for which the notice u/s 148 of the Act was issued on 20.03.2023. In response to said notice, return of income was filed on 30.03.2023, declaring same income i.e. INR 49,70,14,441/- as was declared in the return of income filed u/s 139(1) of the Act. The AO observed that a search was simultaneously carried out in the case of Shri Ankit Bhageria who was alleged as the entry operator and involved in providing accommodation entries to various beneficiaries through Shell companies operated by him and the assessee is one of the beneficiaries. His statements were also recorded during the course of search and based on his statements, the AO concluded that the assessee group, Filatex India Group has taken bogus share capital including share premium and bogus unsecured loans from various Shell companies managed and operated by Shri Ankit Bhageria and Shri Vimal Bhageria (father of Shri Ankit Bhageria). After considering the financial capacity of the lender companies, the modus operandi and statement of various persons recorded during the course of search and also by referring certain WhatsApp chat, email and other material found as a result of search, the AO concluded that during the year, out of ITA Nos.4635, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 total loans received of INR 24.25 crores from four entities tabulated as below, the credits of Rs. 5.90 crores were doubtful:- S.No. Name of the Entity from which credits have been taken Total credits received during the year (In Rs.) 1. M/s. ANM Fincap Private Limited 12,35,00,000 2. M/s. RMP Holdings Private Limited 9,65,00,000 3. M/s. Bhageria Finance Investment Private Limited 50,00,000 4. M/s. RKG Finvest Limited 1,75,00,000
Total
24,25,00,000
Accordingly, the information so gathered was confronted to the assessee and the AO asked the assessee to explain and furnish the reply with respect to the loans of INR 5.90 crores with supporting documentary evidences taken from above four entities and further asked as to why not commission @ 0.25% be added as unexplained expenditure paid to obtain such accommodation entries. The AO also issued summons u/s 133(6) of the Act to these four companies from whom the loans were obtained during the year which were duly complied with.
After considering the submissions filed by the assessee and the compliance made by various companies, AO held that the assessee has failed to furnish the documentary evidences / explanation with respect to loans of INR 5.90 crores and made the addition of said amount of INR 5.90 crores as unexplained credits u/s 68 of the Act and further invoked the provision u/s 115BB of the Act. The interest paid of INR 1,00,53,494/- on the loans taken from four companies was disallowed by invoking the provisions of section u/s 37(1) of the Act and added
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
back to the total income of the assessee. The AO further made an addition of INR 7,87,500/- by holding the same as unexplained expenditure u/s 69C of the Act by alleging that the same was paid as commission @ 0.25% to obtain the bogus accommodation entries of INR
24.25 crores and further on the repayment of the loans of INR 7.25
crores though the addition of alleged unexplained credits was made for INR. 5.90 crores only.
Aggrieved by the said order, the assessee preferred the appeal before Ld. CIT(A) who vide impugned order dated 22.08.2024 in Appeal No. CIT(A), Delhi/23/10125/2012-13 passed u/s 250 of the Act has partly allowed the appeal of the assessee wherein the additions made towards unsecured loans by treating them as bogus, disallowance of interest and further addition u/s 69C of the Act towards alleged payment of commission to obtain accommodation entries were deleted by observing that the assessee has proved the identity and the creditworthiness of the parties and therefore, no addition could be made.
Against such order, the Revenue is in appeal before the Tribunal on the strength of following grounds of appeal:- 1. “The Ld. CIT(A) has erred in deleting the addition of Rs. 5,90,00,000/- made by Assessing Office u/s 68 of the Income-tax Act, 1961. 2. The Ld. CIT(A) has failed to appreciate that the creditors are only shell companies, created for abatement of, and legitimize, illicit means and evade taxes, and its legal identity is only a façade to hide its illegal operations.
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
3. The Ld. CIT(A) has failed to appreciate that submissions of audited accounts and bank statements of alleged entry operator are necessary pre-requisite to give such entities a semblance of a genuine business.
Filing of such documents does not mitigate lack of genuineness in its actual operations.
Ld. CIT(A) has failed to appreciate that accommodation entry operators have sufficient funds only in the form of investments in other non-genuine companies. There is hardly substantial balance in the bank account or genuine investment.
The Ld. CIT(A) failed to appreciate that there is no information of conduct of any audit/investigation by SEBI/RBI, while the search conducted by Investigation Wing brought out substantial evidence about actual financial conduct of these entry operators, masquerading in the guise of NBPC.
Whether the Ld. CIT(A) is correct in holding that the term "in evidence" used in section 132(4) of the Act cannot be treated as "as evidence" when statement u/s 132(4) made while confronting with incriminating material gathered during the search operations.
Ld. CIT(A) has erred in holding that the Assessing Officer should have conducted further enquiry to find about the source of fund of the entry operator, without appreciating that Ld. CIT(A) could have conducted such enquiry himself or directed the Assessing Officer to conduct requisite enquiry so as to ascertain the true nature and source of the cash credit.
Ld. CIT (A) has erred in not appreciating that whatsapp chats undertaken between the entry operator and promoter of the company clearly shows that cash are being exchanged and such chats are backed up by statements u/s 132(4) of respective parties.
Ld. CIT(A) has failed to appreciate that the evidence collected clearly reveals the cash trails and in reply to notice u/s 133(6) of the Act the entry operators are not expected to accept that the loan transactions are not genuine.
The Ld. CIT(A) erred in deleting the addition of Rs. 1,00,53,494/- without appreciating the fact that interest paid on account of bogus unsecured loan is also bogus in nature, therefore, the interest paid by the assessee to the tune of Rs. 1,00,53,494/- is not genuine expense.
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
11. The Ld. CIT(A) erred in deleting the addition of Rs. 7,87,500/- without appreciating the fact that the accommodation entries to the tune of Rs.
5,90,00,000/- were taken during the year under consideration and commission must have paid to accommodate such entries.
The appellant craves to add or amend any/all the grounds of appeal before or during the hearing of the appeal.”
The assessee also filed C.O. wherein the following objections are taken by the assessee:- 1. “On the facts and in the circumstances of the case and in law, the learned CIT(A) should have quashed the assessment order as illegal, not tenable, void and without juri iction.
On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the addition by appreciating that the material relied upon by Assessing Officer is totally unrelated and irrelevant to the respondent and thus conditions laid down in forth proviso to section 153A r.w.s 153C and 149(1) are not satisfied.
On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not considering the fact that the assessment order passed by Assessing Officer had provided the new material directly in assessment order without confronting the same to the respondent company during assessment proceedings. On the basis of the principle of opportunity of being heard also, the addition was liable to be deleted.
On the facts and in the circumstances of the case and in law, the learned CIT(A) ought to have deleted the addition simply on the ground that the Whatsapp messages relied upon by Assessing Officer is totally unrelated and irrelevant to the respondent.
The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same.”
Since all the grounds taken by the Revenue are related to the deletion of additions of INR 5.90 crores made u/s 68 of the Act and further disallowance of INR 1,00,53,494/- of interest payment u/s 37(1)
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
of the Act and also addition of INR 7,87,500/- being alleged commission paid on such bogus loans u/s 69C of the Act and these grounds are inter-related, therefore, the same are taken together for consideration.
In support of the grounds of appeal taken by the Revenue, Ld. Sr. DR vehemently supported the orders of the AO and submits that the AO during the course of assessment proceedings has made detailed discussion about the modus operandi of the entry operators and it was found that the assessee group was obtaining accommodation entries in the shape of share capital including share premium and unsecured loans from the Shell companies managed and operated by Shri Ankit Bhageria and Shri Vimal Bhageria. He further submits that the AO has made detailed analysis of the financial statements of these companies and concluded with these companies has very low assets based and mostly having heavy share capital and premium only without any proper and regular business activities. As per ld Sr. DR the AO further relied upon the statements of Shri Ankit Bhageria and his employees who confirmed that the companies belonged to Shri Bhageria were used as conduit to provide accommodation entries to assessee group. Ld. Sr. DR further submits that the AO has referred certain WhatsApp chats and messages which clearly indicate that these loans are not genuine and therefore, requested for the restoration of the additions made by the AO in this regard.
Before us, Ld.AR supported the order of Ld.CIT(A) and submits that during the course of search, no incriminating material whatsoever
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
was found pertaining to the transactions carried out by the assessee for the year under appeal, based on which, it could be said that the assessee has obtained accommodation entries. Solely on suspicion, the AO has concluded that the loans taken were not genuine. The assessee discharged the onus lies upon it by filing all the relevant details as required to establish the genuineness of the loans u/s 68 of the Act. He further submits that the notice u/s 133(6) were issued to the lender companies and the same were duly complied with by them and no discrepancies whatsoever was pointed out in the details filed by these companies and the AO made general observations with respect to the capacity of the lender companies. He further submits that the loans taken were partly repaid in the year itself and partly were repaid in the subsequent AYs. Which facts are fortified from the assessment order itself and therefore, no addition could be made by holding these credits as unexplained. Ld. AR also stated that the additions have been made solely based on the statement recorded of the third party which were taken under exceptional circumstances and were retracted by the respective persons through affidavits filed before the AO, therefore, such statement deserves no credence. Ld. AR further submits that none of the loans were taken in cash, and it is not the case of the revenue that the cash was deposited in the bank accounts of the lender companies immediately before the loans were given to the assessee. Ld.
Also stated that the assessee has also established the source of source in the hands of the companies by submitting the assessment
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
particulars and other documents of the entities from whom the funds were received by the lender companies.
With respect to the payment of interest, ld.AR submits that out of total loan of INR 24.25 crores, the AO alleged the loan of INR 5.90 crores as bogus however, interest paid on the gross amount of loan was disallowed which is contrary to the findings of the AO himself. He further submits that the loans were genuine, and the interest was paid at the rate of prevalent in the market after making TDS in accordance with law and therefore, no disallowance should be made u/s 37 of the Act as the interest payment is most genuine and in connection with the genuine loans taken by the assessee. The ld.AR thus, requested to confirm the order of Ld.CIT(A) in deleting the disallowance made by the AO.
With regard to the deletion of commission, Ld.AR submits that once the loans were treated as genuine, no addition on account of alleged commission could be made. He further submits that the AO has taken dual approach as on the one hand, out of total loans amount of INR 24.25 crores received during the year from four entities alleged as non-existent/non capable of granting such loan, however, only INR 5.90 crores of the loans were treated as bogus accommodation entries but the commission was calculated @ 0.25% on the total of loans received and repaid during the year itself. It is thus prayed by Ld. AR that additions were rightly deleted by Ld. CIT(A) and requested for confirmation of the orders of Ld. CIT(A). He also filed a written
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
submission and reliance is placed on various judicial pronouncements.
The written submission as filed by the ld. AR of the assessee is reproduced as under:-
“The assessee has raised the following arguments before the AO and CIT(A) in response to the allegations made:
Regarding the addition being made on suspicion Though such evidences found during the course of search does give rise to suspicion but such suspicion alone cannot be the basis to reject all the documentary evidences filed by appellant in support of loans taken by it. It is also the presumption of law that the nature of the evidence or information gathered during the search should be of such nature that it instead of only raising doubt, the evidence establishes some wrong doing. No material pertaining to appellant is found.
There is no scope of extrapolation and addition should be based on material pertains to appellant.
Additions made based on presumptions that all loans are bogus without concrete evidence relating to any specific loan transactions, leading to an incorrect conclusion.
Decisions relied:
Hon'ble Supreme court in the case of Daulatram Rawatmull, (1964) 53 ITR 574. [no matter how strong suspicion is, it cannot take place of the evidence]
Society [The seized incriminating material have to pertain to the AY in question and have correlation, document-wise, with the AY]
Hon'ble Delhi High Court in the case of Principal CIT versus Smt. Anita Rani reported in 392 ITR 501 (Delhi) [No scope of extrapolation in assessment]
Hon'ble Delhi High court in the case of PCIT Vs Pilot Industries Ltd [2023] 146
taxmann.com 233 [no incriminating material for AY under consideration]
The Hon'ble Delhi High Court in the case of PCIT, Central-2, Delhi vs Meeta
Gutgutia (2017) 82 taxmann.com 287 (Delhi). [no incriminating material for AY under consideration]
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
2. The assessee has completely discharged the Onus u/s 68
The assessee has submitted the following documents before the Ld. AO as well as the CIT(A) to discharge the onus u/s 68:
Particulars
ITAT PB Page No.
ANM
Fincap
Private
Limited
RMP
Holdings
Private
Limited
Bhageria
Finance
Investment
Pvt. ltd.
RKG
Finvest
Limited
1
Copy of confirmation of Accounts
66.65
96
122
152
2. Copy of Bank statements of Lender
67-71
97-99
123
153-154
3
Audited Financials of Lender
72-87
100-114
124-144
155-180
4
Copy of ITR
Acknowledgement of Lenders
88
115
145
181
5
133(6) responses filed by Lenders
89095
116-121
146-151
The bank statements of the lenders as well as the PAN and Bank A/c details of the persons from whom the lenders have taken the Loan (Page 14-16 of CIT
Oder, Para 7.24) are duly submitted so as to prove the source as well as the source of source of funds received.
Further, notices u/s 133(6) have been complied with and no specific discrepancy in such details are pointed out by Assessing Officer.
Identity:
Confirmations, PAN details, and income returns of all alleged entities, conclusively establishing the identity of the depositors.
Creditworthiness:
The annual accounts of companies show their creditworthiness. Assessee provided source of source though not required u/s 68. The loan was taken through banking channels only.
Genuineness:
Appellant was advanced through banking channels. All lenders accepted the transaction with assessee complying with notice u/s 133(6).
Assessment order of AY 2016-17 and 2018-19 of Satsai passed after the date of search in which it was not considered as shell entity.
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
Decisions relied:
Hon'ble Supreme Court of India in case of Commissioner of Income-tax v. Lovely
Exports (P.) Ltd. [2008] 216 CTR 195 (SC) held:
".. 2. Can the amount of share money be regarded as undisclosed income under section 68 of IT Act, 1961?. We find no merit in this Special Leave Petition for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment."
Hon'ble Supreme Court of India in the case of CIT v. Kamdhenu Steel & Alloys
Ltd., SLP (CC) no. 15640 of 2012 (SLP Dismissed against Decision of Delhi HC):
"... assessee discharged the burden in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter, in case such evidence is to be discarded or it is proved that the assessee has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under Section 68 and 69 of the Act..."
Hon'ble Delhi High Court in the case of CIT(A) -9 Erstwhile CIT versus
Vrindavan Farms (P) Ltd, ITA 71/2015, ITA 72/2015, ITA 84/2015. (No addition can be made when details of share applicants are furnished to the Assessing Officer complying condition of section 68)
Regarding Self Contradictory Findings of the Assessing Officer
Addition made by AO is not tenable as Ld. AO himself has accepted that out of 1235 Lakhs received from ANM Fincap Rs. 1035 Lakhs is not bogus and out of 965 Lakhs received from RMP Holdings 800 Lakhs is not bogus. (Page 46, Para
57 and 58 of CIT(A)). Then finding of Ld. AO that the lenders are bogus is itself self-contradictory
Regarding the loans belong repaid in the subsequent Years
The unsecured Loans has been repaid in subsequent Assessment Years which has been accepted by the AO and to substantiate the same, Ledger Accounts of the above Parties was submitted before CIT(A) and the same is Attached herewith in General Paperbook-2 page number 4-17. Decisions relied up
Commissioner of In taxmann.com 329 (D
Commissioner of In 42 taxmann.com 25
Commissioner of taxmann.com 323 (G
CIT v. Karaj Singh [
In these judgmen repayment are ent transactions.
ITA Nos.4635, 5000, 20
2061, 1455, 20
& C.O.Nos.11, 32, 33, 34/Del/2025 & 8
pon:
ncome-tax vs. Shiv Dhooti Pearls & Invest
Delhi)/[2016] 237 Taxman 104 (Delhi) [21-1
come-tax, Rajkot-I vs. Ayachi Chandrashek
51 (Gujarat)/[2014] 221 Taxman 146 (Gujara
Income-tax, Surat-1 vs. Shri Mahavir C
Gujarat) [13-06-2018];
[2011] 15 taxmann.com 70/203 Taxman 21
nts, the Hon'ble High Courts have held titled to great weight while evaluating the 60, 4999, 4648, 3988,
062 & 1456/Del/2024
89, 90 & 91/Del/2024
tment Ltd. [2015] 64
2-2015]
khar Narsangji [2014]
at)[02-12-2013]
Crimpers [2018] 95
18 (Punj. & Har.) that the factum of e bona fides of loan
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
Assistant Commissioner of Income-tax, Circle-8(2) vs. Evermore Stock Brokers (P.)
Ltd. [2024] 158 taxmann.com 211 (Delhi - Trib.)/[2023] 108 ITR(T) 13 (Delhi -
Trib.)[19-09-2023]
Director of Income-tax vs. Modern Charitable Foundation [2012] 20 taxmann.com
693 (Delhi) [18-05-2011]
Regarding addition being made solely on the basis of Statements The addition made by the AO is made only on the basis of statements recorded during the course of the search and no corroborative evidence has been brought on record by the AO. Further, these statements are also not reliable due to the following reasons:
Purushottam Bhageria
(MD of Filatex India
Limited)
-He was diagnosed for arteries blockage on 28th August 2021 and coronary angioplasty was scheduled on 2nd September 2021. -He was forced to reschedule the appointment and give the statement, the angioplasty was finally conducted on 18th September 2021. - He was pressurized to sign the statement
(Page 222-223 in his Affidavit of general Paper book 1)
- He stated that there is no relation between unsecured loan and cash transactions in his
Affidavit. (Page 225 of General PB 1)
- Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant
-Such statements are substantively clarified by duly notarized affidavit.
Ankit Bhageria
- Ankit's role was limited before passing away of his father, Vimal Bhageria in the month of April, 2021 (Q. 12). Therefore, loan taken in the year under consideration would not have any impact of his statement.
- Statement was recorded in English. Ankit
Bhageria could not understand the questions
On 7th August 2021, doctor suggested him to go for Angiography to diagnose for any heart disease
- he was pressurized and threatened to accept the allegation made by the AO to sign the statement
- He could not comment on the questions as his
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
father was looking after the operations of the companies until the death of his father in April
2021. Therefore, his statement itself is not reliable as it could not be presumed of his awareness about any transaction (Q. 12 of his statement).
(Page 143-144 in his Affidavit of General PB 1)
- In response to Question No. 25 (Page 9 of General PB 1) of the statement of Ankit u/s.
132(4), he stated that source of unsecured loan was amount borrowed from various Body
Corporate and individuals.
Question No. 69 (Page 26 of General PB 1), Shri
Ankit Bhageria had categorically denied of getting any direction from Purrshottam Bhageria regarding alleged cash transactions.
Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant
- Such statements are substantively clarified by duly notarized affidavit
Jitender
Kumar
(Employee of Filatex)
He was pressurized to sign the statement.
- The statement does not show what he stated.
It is the version of the Officer.
(in his Affidavit Page 146 of General PB 3)
Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant
Such statements are substantively clarified by duly notarized affidavit
Prabhakaran Pillai
(Employee of Filatex)
- He was a diabetic and Heart Patient.
- he was put under pressure and the search was continued for 3 days
- The statement does not show what he stated.
It is the version of the Officer. (in his Affidavit
Page 139 of General PB 3)
- Such statement is general in nature and admission is not with reference to any specific transaction of loan by the appellant
-Such statements are substantively clarified by duly notarized affidavit
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
As explained above, though the statements are not reliable, still even otherwise the additions cannot be made merely on the basis of statement without any corroborative evidences.
Sec. 132(4) specifies word "used in evidence" not "Used as evidence" The usage of the word "used in evidence" signifies that if there are any other corroborative evidence or documentary evidence, in that case the statement can be used as one of the evidences
Decisions relied:
CIT Vs. Harjeev Aggarwal 70 taxmann.com 95 (Del-HC) [A statement under section 132(4) can be relied if it is corroborated by incriminating evidence]
Sambhav Buildwell (P) Ltd vs. ACIT vide ITA No. 1938/Del/2022 (Del-
ITAT)[Unsecured loan cannot be termed bogus only on the basis of statement without corroborative material]
Decision of Delhi High Court in the case of PCIT V. Pavitra Realcon Pvt. Ltd. (ITA
579/2018)
Ajay Gupta Vs. DCIT 81 Taxmann.com 462 (Del-ITAT) [Incriminating material must have been found to correlate the undisclosed income with such statement.]
The AO could not find any corroborative evidence to prove that the contents of the Whatsapp Messages were true and linked with the unsecured loan taken by the assessee.
Further, no cash trail was established by the AO to prove that unsecured loans were taken in exchange of Cash Payments.
During the course of recording of statement of Shri Purshottam Bhageria, no independent witnesses remained present during the recording of the statement of Shri Purshottam Bhageria. The 2 witnesses required by Rule 112 were the drivers of the car in which the Search party came at the place of search. They were neither independent nor literate enough to understand the language in which the statements were recorded.
The statement of various employees as referred to in assessment order cannot be applied to facts of the appellant's case as such statements are general in nature and admission is not with reference to any specific transaction of loan by the appellant.
The A.O. has not doubted the utilization of such loans by appellant and such loan has been repaid in the same year or subsequent Assessment Years.
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
Ld. CIT(A) on Page 62-Para 130 of the CIT(A) order has considered the submission of the assessee and summarily held that appellant has proved identity, creditworthiness, Capacity and Genuineness, AO has not doubted the utilization and repayment of such loans, TDS has been deducted on interest payments, 133(6) summons have been complied by the parties and details asked by Ld. AO were filed.
Further, in the same Para point (vi) it was held by Ld. CIT(A) that WhatsApp chats relied upon by Ld. AO does gives rise to suspicion but the same nowhere proves that cash has been exchanged against any specific loan taken by appellant.
This ground is in relation to the consequent Interest disallowance made by AO as the unsecured Loans were held bogus by Ld. AO.
Since, the Loans were held genuine by CIT(A) and TDS has been deducted on the interest expenses claimed, the disallowance of the same made by AO was deleted by CIT(A).
Ld. AO also made addition of alleged commission expense incurred by assessee for obtaining accommodation entries @0.25% on total credits as well as repayments i.e 0.25% of Rs. 3150 Lakhs (2425L +725L) which comes to Rs.
7,87,500/-.
Since, the Loans were held genuine by CIT(A), the alleged unexplained expenditure for taking accommodation entries was also deleted by Ld. CIT(A).”
Heard both the parties and perused the material available on record. From the perusal of the order of Ld.CIT(A), it is found that Ld.CIT(A) after considering the submissions of the assessee and the observations made by the AO in the assessment order and further by following the judicial pronouncements relied upon and after referring the WhatsApp chat etc. deleted the additions made by the AO towards the unsecured loan and interest paid thereon and alleged payment of commission. The relevant conclusion drawn by the ld. CIT(A) in para 130 of the order is as under:
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
130. “In view of above discussion, and considering relevant facts on record, it is observed as under:
(i)
The appellant has proved identity of the creditor which is not disputed by Assessing Officer in assessment order.
(ii)
The appellant has also proved creditworthiness of the creditor by submitting its audited annual account along with relevant bank statement of depositors. The Assessing Officer has not proved that any cash has been deposited prior to giving cheque to appellant even though appellant was not required to prove sources of source, the bank statement submitted by appellant clearly reflects such sources which is not doubted by A.O. nor any inquiry has been made by A.O. for concluding that loan received by appellant is accommodative loan from shell companies. As discussed herein above, when appellant was asked to further explain sources of source, the appellant has provided such details, availability of funds with depositors who have transferred funds to ANM, RMP, Bhageria Finance and RKG who have in turn transferred funds to appellant and their sources are mainly from sale of shares, fixed assets, redemption of mutual fund or unsecured loan taken from group entities or third parties. The appellant had also submitted relevant return of income of depositors of ANM, RMP, Bhageria Finance and RKG to prove that they have disclosed income arising from such transactions in return of income. The Assessing Officer has observed that relevant documents submitted by appellant prove creditworthiness of depositors.
(iii)
The appellant has taken loan from ANM, RMP, Bhageria Finance and RKG who are having sufficient funds as on 31st March, 2012 and 2013
and same is duly disclosed in audited annual accounts of such company.
Thus, the capacity of depositor is proved by the appellant.
(iv)
The A.O. has not doubted the utilisation of such loans by appellant and such loan has been repaid in subsequent Assessment Years after making payment of interest and deducting TDS on such interest payment.
(v)
During the course of assessment proceedings, notice u/s 133(6) was issued ANM, RMP, Bhageria Finance and RKG and in response to such notice they have filed relevant details. If the Assessing Officer had any doubt about sources of funds either in balance sheet or sources of funds in their bank statement, he could have made further inquiries either under Section 133(6) or 131 of the Act.
(vi)
While making the addition Assessing Officer has relied upon various
WhatsApp chats but such chats nowhere prove that those cash has been ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
exchanged against any specific loan taken by appellant. Though such evidences found during the course of search does give rise to suspicion but such suspicion alone cannot be the basis to reject all the documentary evidences filed by appellant in support of loans taken by it.
(vii) Though according to Assessing Officer, Shri. Ankit Bhageria is an entry provider or he is operating shell companies, but what is required to be seen is whether in the case of Assessee the documents found during the course of search at their premises or from the premises of Shri. Ankit
Bhageria or otherwise show that Assessee was beneficiary of any accommodation entry or not. In the present case, the A.O. sans any specific link about loan taken from ANM, RMP, Bhageria Finance and RKG with any cash trail and on the contrary ANM, RMP, Bhageria
Finance and RKG in reply to notice u/s 133(6) has accepted that genuine loan was given to appellant. The A.O. has failed to prove any direct nexus linking the Assessee with accommodation entries from SFPL or Ankit Bhageria group entities.”
In the present case, the sole dispute is with respect to the unsecured loans taken by the assessee from four companies which were alleged as bogus accommodation entities. The assessee received total amount of loans of INR 24.25 crores from four companies however, the AO though had observed that these four companies are Shell companies which are managed and controlled by Shri Ankit Bhageria (alleged as entry operator) however, only loans of INR 5.90 crores were considered as accommodation entries and accepted the balance amount of loans of INR 18.35 crores received from the same lender companies as genuine loans. It is surprising that when the creditworthiness of lender companies is doubted and allegation has been made with respect to the lender companies as Shell companies as to what prevent the AO to hold that the entire loans taken were accommodation entries. Moreso, while making the additions for alleged payment of commission for obtaining such entries, the AO not only taken the entire loan
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
amount received at INR 24.25 crores but also taken into consideration the repayment made at Rs. 7.25 crores during the year. This at first hand raised doubts about the conclusion drawn by the AO in holding the said companies as Shell Companies and the loan received by assessee as accommodation entries. It is also relevant to state that during the year itself, repayment of INR 7.25 crores was made which has been ignored and also the fact that the loans were finally repaid in subsequent years was also ignored while holding these loans as accommodation entries.
Before AO, the assessee submitted detailed reply to the show cause notice issued and further filed all the plausible documentary evidences to support that the loans taken were genuine. At this juncture, we first refer to the provision of section 68 of the Act. Cash credits. 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 :
Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,—
(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
Provided further that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—
(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:
Provided also that nothing contained in the first proviso or second proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.”
That a bare reading of Section 68 suggests that there has to be credit of amounts in the books maintained by an assessee; such credit has to be of a sum during the previous year; and the assessee offer no explanation about the nature and source of such credit found in the books; or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression "the assessee offer no explanation" means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. It is true that the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The opinion of the Assessing Officer is required to be formed objectively with reference
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
to the material available on record. Application of mind is the sine qua non for forming the opinion.
Coming to the facts of the present case in the line of the above proposition of law, from the perusal of details filed by the assessee during the course of assessment proceedings as available in Paper Book at page 65 to 181, it is seen that in the case of four lender companies, the assessee filed the following documentary evidences:- (i) Confirmed Copy of account statement; (ii) Bank statement of the lender companies; (iii) Audited financial statement of the lender companies; (iv) Copy of ITR acknowledgement of the lender companies; and (v) Copy of compliance letter filed by the lender companies in response to notice u/s 133(6) of the Act issued by the AO
It is further seen that the assessee not only prove the source in the hands of the loan creditors but further prove the source of source of the funds advanced to the assessee company which is evident from the table given in page 15 & 16 of the order of Ld. CIT(A) in para 7.24 which is reproduced as under:-
ITA Nos.4635, 5000, 20
2061, 1455, 20
& C.O.Nos.11, 32, 33, 34/Del/2025 & 8
60, 4999, 4648, 3988,
062 & 1456/Del/2024
89, 90 & 91/Del/2024
20. It is also relevan
Finance Act, 2022 whe to provide that the nat of loan or borrowing, o assessee shall be treate explained in the hands additional onus to pro creditor, would not entity, i.e., it is a Ventu registered with SEBI.
ITA Nos.4635, 5000, 20
2061, 1455, 20
& C.O.Nos.11, 32, 33, 34/Del/2025 & 8
nt to state that an amendment erein second proviso to section 68
ture and source of any sum, whet or any other liability credited in t ed as explained only if the source s of the creditor or loan provider ove satisfactorily the source in th apply if the creditor is a ure Capital Fund, Venture Ca
This amendment has taken effec
60, 4999, 4648, 3988,
062 & 1456/Del/2024
89, 90 & 91/Del/2024
t is made vide
8 is added so as ther in the form the books of an of funds is also r. However, this he hands of the well-regulated apital Company ct from 1stApril,
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
2023 and accordingly applies in relation to the assessment year 2023-
24 and subsequent assessment years. The year before us is AY 2013-14
thus this amendment is not applicable, yet the assessee has been able to establish the same as per the table reproduced herein above.
As observed above, the requirement of explaining ‘Source’ of ‘Source’ in respect of loans is applicable from A.Y. 2023-24 and subsequent years. Reliance in this regard is placed on coordinate bench of Delhi ITAT decision dated 31.05.2022 in the case of M/s Mall Hotels Ltd. Vs. CIT (ITA No. 2688/DEL/2014). The coordinate Delhi Bench of ITAT in the case of ACIT v Smt. Prem Anand (ITA No. 3514/Del/2014) vide its decision dated 13.04.2017 has held that amendment made in section 68 of the Act w.e.f. 01.04.2013 empowers the A.O. to examine source of source in case of share application money / share capital / share premium from 01.04.2013 and this amendment does not give power to the A.O. to examine source of source of non-share capital cases.
It is clear that the assessee has furnished source of source and if the AO has any doubts with respect to the source of source in the hands of the loan creditor, it could have made further enquiries from all such parties even after receiving their replies in response to the notices issued u/s 133(6) of the Act.
The Hon’ble Supreme Court in the case of Orissa Corporation reported in [1986] 159 ITR 78 (SC) has held that when the assessee
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw an adverse inference against the assessee.
It is further seen that no incriminating material was brought on record pertaining to the year under appeal from which it could be held that the loans taken by the assessee are not genuine. In this regard, we place reliance on the judgment of Hon’ble Supreme Court in the case of CIT-III, No.11080/2017 arising out of SLP (C) No.25257/2015 wherein the Hon’ble Apex Court has held as under:- “The seized incriminating material have to pertain to the AY in question and have co-relation, document-wise, with the AY. This requirement u/s 153C is essential and becomes a juri ictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S.153A.”
Hon’ble Supreme Court in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxman.com 399 (SC) has also held that “no addition could be made dehorse the incriminating material”. Ld.CIT(A) has also referred to certain judgements in this regard which are discussed in para 16 to 21 of the appellate order which are not controverted by the ITA Nos.4635, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 Revenue therefore, the ratio laid down in these judgements is also applicable to the facts of the present case.
It is further seen that Ld.CIT(A) has made detailed discussion on the statement of various persons recorded during the course of search and post-search proceedings which were relied by the AO for holding the loans as bogus. The observations of Ld .CIT(A) as contained in para 23 to 43 in this regard speaks about the non-application of such statements and relied upon various judgments for not providing opportunity to cross examine those third parties to the assessee has not been controverted by the Revenue before us therefore, we find no infirmity in these observations of Ld.CIT(A).
Regarding surrounding circumstances, it is observed that while making addition u/s 68 of the Act, the AO has doubted the financial capacity of loan creditors but such addition cannot be made on preponderance of probability and there has to be some evidence and substance in contention. The Assessing Officer has not brought anything on record to establish that the sources in the hands of loan creditors is non-genuine. Merely because they have shown meager income or no sufficient sources as presumed by Assessing Officer, loan taken by appellant from them cannot be held to be accommodation entries. It is well-settled position of law that no matter how strong suspicion is, it cannot take place of the evidence. Therefore, in the absence of any evidence showing that in fact, appellant has given cash in lieu of unsecured loan taken, merely on the basis of suspicion, no ITA Nos.4635, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 addition can be made for which reliance is placed on decision of Hon'ble Supreme court in the case of Daulatram Rawatmull, (1964) 53 ITR 574. 28. The Hon’ble Allahabad High Court in the case of Principal Commissioner of Income-tax v. Anshika Consultants (P.) Ltd. reported in [2024] 162 taxmann.com 792 (Allahabad) held as under:- INCOME TAX: Where assessee had received unsecured interest bearing loans from three corporate entities and had furnished necessary acknowledgement of return, balance sheet, profit and loss account, etc., to prove identity, creditworthiness and genuineness of transaction of unsecured loan taken by it, addition under section 68 was not warranted.
Similarly in the case of Deputy Commissioner of Income-tax v. Paswara Papers Ltd. reported in [2024] 159 taxmann.com 604 (Allahabad), the Hon’ble Court has held as under: INCOME TAX : Where assessee received loan from various creditors who sold their old jewellery and gave loan to assessee out of sale consideration, since assessee had disclosed name of jewellers to whom jewellery was sold and also established mode of payment through banking channel, and moreover existence of deposits made to assessee by creditors was not in dispute, impugned addition under section 68 with respect to loan could not be sustained.
The Co-ordinate Bench of ITAT, Delhi in the case of ITO Vs. Alpha Contech Pvt. Ltd. in ITA No.3351/Del/2016 vide order dt. 28.07.2023 under identical circumstances while deleting the additions made by AO by alleging the loan creditors as bogus, has held as under: 7. On careful consideration of above rival submission, first of all, we note that the Assessing Officer made addition u/s. 68 of the Act, by observing that despite several opportunity the assessee failed to prove creditworthiness of lender and genuineness of transaction and thus could not discharge onus as per requirement of sec 68 of the Act. The assessee carried the matter before ld. CIT(A) and filed additional evidence under rule 46A of the Rules on which remand report was ITA Nos.4635, 5000, 2060, 4999, 4648, 3988, 2061, 1455, 2062 & 1456/Del/2024 & C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024 called wherein the Assessing Officer did not made any adverse comment on the additional documentary evidence of assessee and also admitted that the lender company received amount of Rs. 7,30,62,000/- as share premium reserve during immediately preceding assessment year and amount of loan of Rs. 3.60 crore advanced to the assessee during present assessment year was from the said reserve amount. The remand report of the Assessing Officer supported the case of assessee which was based on the strength of additional evidence filed by the assessee without raising any doubt or discrepancy therein.
We also find and appropriate to reproduce the relevant operative part of first appellate order as follows:- The appellant company has received Rs.3,60,00,000/- from M/s Fennie Commercial Pvt. Ltd. as unsecured loan / share application money during the year. The same was added by the AO on the ground that appellant has failed to file confirmation as well as other supporting documents of the lender party before AO to prove identity, genuineness and creditworthiness of the party. During the course of appellate proceedings, appellant filed an application under Rule 46A and filed following documents to prove identity, genuineness and creditworthiness of the party:
i. Copy of Acknowledgement of IT. Paper Book page no. 48. ii. Copy of Audited Financial Statements along with all the annexures. Paper Book page no. 49-60. iii. Copy of Confirmed ledger account. Paper Book page no. 61. iv.
Copy of Bank Statements reflecting the amount given to the assessee company. Paper Book page no. 62-63. v.
Copy of confirmation. Paper Book page no. 64. These documents were forwarded to the A for carrying out necessary enquiry with reference to the lender party. The Assessing Officer after conducting enquiries with reference to the lender party has submitted remand report vide his letter dated 2.03.2016 which was forwarded by the Addl. CIT, Range 2 vide his letter dated 08.03.2016. The relevant part of the remand report is submitted as under:
"4. As per directions received, the submissions made by the assessee before your good self as well as additional evidence submitted by it for admission at the appellate stage have been ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
carefully perused. Besides, the additional evidence furnished by the assessee has also been independently verified from this Office by way of issue of letter us 133(6) of the Income Tax Act,
1961, to the third party concerned, i.e., to Ms Fennie Commercial
Private Limited, 96-AV9, Neelkanth Apartments, Kishan Ganj,
Vasant Kunj, New Delhi - 110070. 5. The said party has furnished its detailed reply to the letter issued us 133(6) vide its letter dated 08.01.2016, which is placed on record. The said party has given the details of the share application money of Rs.3.60 crores advanced by it to the appellant company and also produced the ledger account of the assessee company in its books for the relevant period, apart from the copy of the ITR-V in its case, copy of the Audit Report,
Balance sheet, P & L Account and annexures. It is also seen from the annexures to the Audit Report that under the head "Loans &
Advances (totaling Rs. 7,41,00,000/-), the name of the appellant company is appearing the List of Share application money given details wherein the sum of Rs.3.60 crores has been shown against the name of the appellant company, amongst other entities to whom share application money had been advanced by this company. As regards the source of investment made by this company, it has been submitted that the same has been made out of its own sources. Further, the perusal of the Balance Sheet of this company shows that it has Share Premium Reserve of Rs.7,30,62,000/-, which is the same as in the immediately preceding previous year, out of which funds have been invested in the appellant company and others.
6. However, it is also seen from the P & L Account filed in this case that this company has no apparent business activity during the relevant period, i.e. during the FY 2010-11, and it has declared a nominal sum of Rs.35,600/- as Consultancy / Commission income. This company has also furnished a copy of the intimation us 143(1) in its case, issued by CPC, Bangalore, in response to the specific query regarding furnishing copy of assessment order passed in its case for AY 2011-12. 7. As regards the present position of the said money advanced by MIs Fennie Commercial Pvt. Ltd. to the appellant company, it has been stated that they have not received any shares from M/s
Alfa Contech Private Limited till date and the said Sum is lying as Loans & Advances in their books. However, this company has not furnished copy of its latest IT filed as well as copy of Audit
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
Report, Balance Sheet and P & L Account despite being specifically called for in the letter issued us 133(6) to it.
8. It is also submitted here that as per the Balance Sheet of the appellant company for the AY 2011-12, it has shown a sum of Rs.3.60 crores as "Loans from Body Corporate", as per Schedule
3 annexed to the Balance Sheet and not as Share Application
Money. Also, as per details filed by the appellant vide its letter dated 03.02.2014 during the course of the assessment proceedings in its case for AY 2011-12, it has furnished the name of Ms
Fennie
Commercial
Private
Limited,
PAN
AAACF9549A, from whom it had allegedly received unsecured loan of Rs.3.60 crores whereas the said party is showing this Loan & Advance as "Share Application Money".
It is seen from the remand report that Assessing Officer has carried out enquiry with the lender party us 133(6) of the I.T. Act. The said party furnished the detailed reply vide its letter dated 08.01.2016. It has been reported by the AO that Ms Fennie Commercial Pvt. Ltd. has confirmed that it has given share application money of Rs.3.60 crore which has been accounted for by the appellant as unsecured loan in its balance sheet.
The AO has also examined the ledger account of the appellant company from the lender party's books of accounts. The lender party has also filed copy of its return of income, audit report, balance sheet, profit & loss account and annexures. It has been observed by the AO from the annexures of the audit report that lender has shown loans and advances totalling Rs.7,41,00,000/- in its balance sheet. The appellant's name is also appearing in the loan and advances and has been shown as share application money of Rs.3.60 crore in the name of appellant. AO has also verified the balance sheet of the lender company and it is seen that said company has shown share premium reserve in its balance sheet in A.Y.
2010-11 out of which the amount has been given to the appellant. All these facts establish the identity, creditworthiness and genuineness of the transactions. It is seen that the said party has confirmed the transactions with the appellant and source of the money is also explained. M/s Fennie Commercial Pvt. Ltd. is assessed to tax with Ward
9(1). New Delhi and filing its return of income.
The appellant company has filed copies of their bank statement, balance sheets and profit & loss a/c of the lender company before me to prove the identity, creditworthiness and genuineness of the transaction. These facts have been verified by the AO in the remand proceedings and has submitted report in this regard. It is seen that name of the appellant
ITA Nos.4635, 5000, 2060, 4999, 4648, 3988,
2061, 1455, 2062 & 1456/Del/2024
& C.O.Nos.11, 32, 33, 34/Del/2025 & 89, 90 & 91/Del/2024
company is appearing in the balance sheet of the lender company. In view of the documents filed by the above named lender company before me as well as AO, it is established that the identity, source, creditworthiness of the lender company and genuineness of the transactions has been established.
I find that the AO has not been able to bring on record any evidence to negate the genuineness of the transaction done by the appellant.
Therefore, the addition cannot be sustained only on suspicion and surmises. Considering the fact that the identity, genuineness and creditworthiness of the lender company duly established, the addition made by the A cannot be upheld and hence the AO is directed to delete the addition of Rs.3,60,00,000/- made on account of unexplained income us 68 of the I.T. Act. In support of my above decision, reliance is placed on following judicial pronouncements:
a. CIT Vs. Fair finvest Itd. [ 2014 ] 44 taxmann.com 356 (Delhi) HIGH
COURT OF DELHI "Section 68 of the Income-tax Act, 1961 - Cash credit - Assessment year 2002-03 - Where assessee had filed documents including certified copies issued by