S Y MINERALS PRIVATE LIMITED,NIZAMABAD vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, NIZAMABAD

The assessee has also filed stay application seeking stay from recovery of outstanding demand of Rs. 82,12,914/- for the Assessment Year 2014-15.

The assessee has raised 9 grounds in its appeal however the crux of the issue is that the Ld. CIT (A) has erred in confirming the order of the Ld. AO who had made addition of Rs. 2,10,00,000/- invoking the provisions of section 68 of the Act.

The brief facts of the case are that the assessee is a private limited company engaged in the business of mining contract filed its return of income electronically for the relevant assessment year 2014-15 on 30/11/2014. Thereafter, the case was taken up for scrutiny under CASS and the assessment order was passed on 29/12/2016 u/s. 143(3) of the Act wherein the Ld. AO made addition invoking the provisions of section 68 of the Act with respect to the unsecured loan obtained from M/s. Swiss Brain Store Systems (India) Pvt Ltd., for Rs. 2 Crs and Rs. 10 lakhs loan received from Sri Tati Raju.

During the course of scrutiny assessment proceedings, it was observed by the Ld. AO that the assessee had obtained unsecured loans from the above stated parties. On query, the assessee submitted confirmation letter from M/s. Swiss Brain Store Systems (India) Pvt Ltd. Thereafter, the ld. AO called for information U/s. 133(6) of the Act from M/s. Swiss Brain Store Systems (India) Pvt Ltd. However, the letter was returned undelivered. It was further revealed that M/s. Swiss Brain Store Systems (India) Pvt Ltd., did not file its return of income for the relevant AY 2014-15. With regard to the loan obtained from Sri Tati Raju, the assessee had not furnished any explanation. For the aforesaid reasons, the Ld. AO opined that the assessee had not proved the identity, creditworthiness and genuineness of the creditors and accordingly invoked the provisions of section 68 of the Act and added the same to the income of the assessee as unexplained cash credit. When the matter cropped up before the Ld. CIT (A), the Ld. CIT (A) obtained remand report from the Ld. AO wherein certain discrepancies with respect to the address of M/s. Swiss Brain Store Systems (India) Pvt Ltd., was noticed. Further, it was revealed that M/s. Swiss Brain Store Systems (India) Pvt Ltd., had not filed return before the Registrar of Companies. No further explanation was made with respect to the loan obtained from Sri Tati Raju. Therefore the Ld.CIT(A) confirmed the order of the Ld.A.O.

At the outset, the ld. AR submitted before us that the assessee had furnished the names, addresses and particulars of the creditors before the Ld. Revenue Authorities. The ld. AR further submitted that the amount of loan was received through banking channels. Hence, it was argued that the identity of the creditors was established. He further submitted that when the assessee realised that M/s. Swiss Brain Store Systems (India) Pvt Ltd., had ran out of business and not reachable, the loan obtained from them was immediately offered as its income in the FY 2017-18 in order to avoid litigation from the revenue and accordingly tax was duly paid. It was therefore argued that making addition in the hands of the assessee in the relevant AY is factually not appropriate and it would also amount to double taxation. With respect to the other creditor Sri Tati Raju it was submitted that he had expired and therefore the amount of Rs. 5 lakh was repaid to his wife Smt. Krishnaveni Tati and an amount of Rs. 5 lakh was paid to M/s. Madhuri Lorry Services towards medical expenses incurred for Sri Tati Raju. Hence, it was pleaded, that the addition made for Rs. 2.10 Crs in the hands of the assessee may be deleted. The Ld. DR on the other hand vehemently argued in support of the orders of the Ld. Revenue Authorities.

We have heard the rival submissions and carefully perused the materials on record. From the facts of the case it is apparent that the identity of the creditors is established as the transactions are routed through banking channels and the particulars of the creditors were also furnished. Moreover, M/s. Swiss Brain Store Systems (India) Pvt Ltd., is a private limited company registered under the Companies Act. However, it also appears that an air of suspicion exists with respect to the genuineness and creditworthiness of the creditors though it is not conclusively proved. In such circumstances, in order to avoid litigation, the assessee had offered the same as its income in the FY 2017-18 for the amount of Rs. 2 Crs being the loan received from M/s. Swiss Brain Store Systems (India) Pvt Ltd. It is also obvious that if the addition of Rs. 2 Crs is made during the relevant AY then it would amount to double taxation. In this situation, we are of the considered view that addition of Rs. 2 Crs in the hands of the assessee with respect to loan received from M/s. Swiss Brain Store Systems (India) Pvt Ltd., is not warranted because the genuineness and creditworthiness is only doubtful and the assessee had offered the same as its income in the FY 2017-18. Therefore, we hereby direct the Ld. AO to delete the addition made for Rs. 2 Crs invoking the provisions of section 68 of the Act subject to verification that the assessee had offered the amount of Rs. 2 Crs as its income in the FY 2017-18 and duly pay the tax. With respect to the loan received from Sri Tati Raju, we find it appropriate to remit the matter back to the file of the AO in order to verify whether the claim of the assessee that it had repaid the loan as stated herein above is correct and if found so, delete the addition made for Rs. 10 lakh invoking the provisions of section 68 of the Act and if found otherwise pass appropriate order in accordance with law and merit.

Since we have disposed off the appeal stay petition filed by the assessee do not survive.

In the result, appeal of the assessee is allowed for statistical purposes as indicated hereinabove and the stay petition filed by the assessee is dismissed.