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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI CHANDRA MOHAN GARG
Date of Hearing : 30.09.2022 Date of Pronouncement : 14.10.2022 ORDER
This appeal filed by the assessee is directed against the order dated 16.07.2019 of the CIT(A)-34, New Delhi, relating to Assessment Year 2012-13.
Briefly stated facts of the case are that the assessee is a company and e-filed it’s return of income on 29.09.2012 declaring loss of Rs.1,24,94,251/-. The case of the assessee company was selected for scrutiny and notice under section 143(2) dated 27.09.2013 was issued and duly
2 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. served upon the assessee. In response to the said notice, the Authorised Representative of the assessee company appeared before the A.O. and filed requisite details which are noted by the A.O. in the assessment order. During the course of assessment proceedings, the A.O. noted that the assessee company has received unsecured loans from Associates of the companies i.e., Rs.19,55,000/- received Shamken Spinners Ltd., on various dates through A/c payee cheques and Rs.13,12,859/- received from Shamken Multifab Ltd., on various dates through A/c payee cheques and Rs.10,000/- from Mr. Sanjay Chaturvedi on 05.12.2011 vide A/c payee cheque No.048463, totalling to Rs.32,77,859/-. The A.O. called the assessee to prove the genuineness of the lendor of unsecured loans. Since the assessee failed to furnish any documentary evidences like ITR, Bank A/c, confirmation etc., the A.O. made addition of Rs.32,77,859/- on account of unsecured loans under section 68 of the I.T. Act, 1961 besides making addition on account of other expenses to the tune of Rs.5,29,973/-, addition on account of depreciation of Rs.3,12,13,605/-
3 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. under section 32 of the I.T. Act, 1961 and determined the total income of the assessee at Rs.2,25,35,040/- under section 143(3) of the I.T. Act, 1961 as against the returned loss of Rs.1,24,94,251/-. The A.O. also initiated penalty proceedings under section 271(1)(c) of the I.T. Act separately for furnishing inaccurate particulars of income.
2.1. Aggrieved by the order of the A.O, the assessee carried the matter in appeal before the Ld. CIT(A) who vide order dated 16.07.2019 partly allowed the appeal of the assessee
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal and has raised the following grounds :
“1. That on the facts and in the circumstances of the case, learned Commissioner of Income Tax (Appeals), has grossly erred in upholding the addition made by the learned AO of Rs. 13,12,859/- u/s 68 of the Act in respect of the payment made by M/s ShamkenMultifab Ltd. on behalf of the 4 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. assessee without appreciating that such company is an associate company of the assessee and is listed on stock exchanges and payment made by such company on behalf of the assessee has duly been reflected in the audited financials of M/s Shamken Multifab Ltd.
2. That while upholding the addition, learned Commissioner of Income Tax (Appeals), has grossly erred failing to appreciate that payment made by M/s ShamkenMultifab Ltd on behalf of the assessee were in respect of genuineness business expenses, and incurring of such expenses has not been disputed.
3. That on the facts and in the circumstances of the case, learned Commissioner of Income Tax (Appeals), has grossly erred in upholding the addition made by the learned AO of Rs.19,55,000/- u/s 68 of the Act in respect of the sum received the assessee from M/s Shamken Spinners Ltd. without
5 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. appreciating that such company is an associate company of the assessee and is also listed on stock exchanges and sum advanced to the assessee has duly been reflected in the audited financials of M/s Shamken Spinners Ltd.
4. That the learned Commissioner of Income Tax (Appeals) has grossly erred in failing to appreciate that both the creditors are public limited companies and are listed on stock exchanges and since the payments had been made through banking channels, as such, addition made u/s 68 of the Act is unsustainable in law.
5. That the learned Commissioner of Income Tax (Appeals) has grossly erred in failing to appreciate that appellant has furnished complete particulars of both the creditors, and before making the addition, no enquiry what so ever was made from such creditors, and hence, the addition made is unsustainable in law.”
6 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab.
During the course of hearing, the Learned Counsel for the Assessee submitted that the authorities below made addition under section 68 of the I.T. Act, 1961 on account of unsecured loans received by the assessee company from it’s Associate companies viz., M/s. Shamken Multifab Ltd., of Rs.13,12,859/- and M/s. Shamken Spinners Ltd., of Rs.19,55,000/- from which are listed companies in the Stock Exchange and having sufficient funds to advance funds in the assessee company and Rs.10,000/- from Shri Sanjay Chaturvedi by A/c payee cheque No.048463. He submitted that since the companies are listed in the stock exchange and are available in public domain and also available in the Department PAN data, which is sufficient for the assessee company to prove the creditworthiness and genuineness of the transaction in the matter as the amounts so received by the assessee company are also through A/c payee cheques and banking channel. He submitted that the assessee company has filed the acknowledgment of return of income as on 31.03.2012 for the A.Y. 2012-13, PAN Card, in respect of M/s. Shamken
7 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. Multifab Ltd., and in respect of M/s. Shamken Spinners Ltd., the assessee company had filed bank statement, acknowledgment of return of income as on 31.03.2012 for the impugned A.Y. 2012-13 and PAN Card before the authorities below. He thus, submitted that the initial onus upon the assessee to prove the creditworthiness and genuineness of the transaction in the matter has been discharged by the assessee and the assessee company has met the ingredients of Section 68 of the I.T. Act, 1961 by proving the creditworthiness and genuineness of the transaction in the matter. Therefore, the Learned Counsel for the Assessee submitted that the impugned addition made by the authorities below, be deleted.
The Ld. D.R. on the other hand relied on the orders of the authorities below and submitted that since the assessee failed to establish the genuineness and creditworthiness of the lenders, the impugned additions were made by the A.O, however, the Ld. CIT(A) confirmed the additions made on account of unsecured loans from M/s. Shamken Multifab Ltd., of Rs.13,12,859/- and M/s.
8 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. Shamken Spinners Ltd., of Rs.19,55,000/- and deleted the addition of Rs.10,000/- made by the A.O. which was received by the assessee company from Shri Sanjay Chaturvedi. He, therefore, prayed that the orders of the authorities below be confirmed.
I have heard the submissions of Learned Representatives of both the parties and perused the material on record. In the instant appeal, the assessee company challenged the additions made on account of unsecured loans under section 68 of the I.T. Act, 1961 which are purportedly received by the assessee company from M/s. Shamken Multifab Ltd., of Rs.13,12,859/- and M/s. Shamken Spinners Ltd., of Rs.19,55,000/-. I find that the assessee company has received the funds from listed companies on Stock Exchange which are very much available in public domain. From the careful perusal of the paper book containing pages 1 to 144, I have noticed that the assessee company has filed sufficient documentary evidences before the authorities below such as acknowledgment of return of income, balance sheet as on 9 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. 31.03.2012 for the impugned A.Y. 2012-13, bank statements, PAN etc., in respect of both the companies and, thus, the assessee company has discharged it’s initial onus upon it by proving the creditworthiness and genuineness of the transaction in the matter and meet the requirements of Section 68 of the I.T. Act, 1961. It is a settled position of law, when the assessee discharged it’s initial onus lay on it by proving the creditworthiness and genuineness of the lenders, no addition is warranted under section 68 of the I.T. Act, 1961. In support of this view, I rely upon the following decisions.
6.1. The Hon’ble jurisdictional High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under :
“The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee,
10 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. the departmental appeal was dismissed by the Hon’ble High Court.
6.2. The Hon’ble jurisdictional High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., &Ors. 361 ITR 220 (Del.) in which it was held as under :
“Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee 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 it 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 s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable.”
6.3. The Hon’ble jurisdictional High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd.,
11 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. ITA.No.169 of 2017 dated 14th March, 2017, in which it was held as under :
“The CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon’ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon’ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any 12 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. scrutiny of the document, the departmental appeal was accordingly dismissed.
6.4. The Hon’ble jurisdictional High Court in the case of CIT vs. (i) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under :
“In any matter, 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 assesses 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. Just because the creditors/share applicants could not be found at the address given, it would not 13 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of Rs.71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs.35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of 14 ITA.No.7861/Del./2019 Dwarkadish Spinners Limited, Patiala, Punjab. the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified.”
6.6. From the above findings, it is clear that when the assessee has proved the initial onus lay upon it by proving the creditworthiness and genuineness of the transaction in the matter, addition cannot be made under section 68 of the I.T. Act, 1961. Since the Revenue could not bring out any adverse or cogent material to dispute the creditworthiness of