ASSISTANT COMMISSIONER OF INCOME TAX 4 (1), INDORE vs. M/S VASTU DEVELOPERS,, INDORE

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE

BEFORE S/SHRI C.M. GARG, JUDICIAL MEMBER AND MANISH BORAD, ACCOUNTANT MEMBER

ITA No.479/Ind/2017 Assessment Year : 2013-14

The Asst. Commissioner of Vs. M/s. Vastu Developers, 475, Income Tax 4(1), Main Building, Jawahar Marg, Indore Indore PAN/GIR No.AAHFV 3957 E (Appellant) .. ( Respondent)

Assessee by : Shri P.K.Singh, SR DR Revenue by : Shri Prakash Jain & Ms Shreya Jain, CAs

Date of Hearing : 27 /7/ 2021 Date of Pronouncement : 29/ 09/2021

O R D E R Per Bench This is an appeal filed by the assessee against the order of the

CIT(A)-III, Indore dated 25.4.2017 for the assessment year 2013-14.

“ 1. Whether on the facts and in the circumstances of the case the ld CIT(A) is justified in allowing the assessee’s claim by deleting the addition made u/s.68 in respect of alleged unsecured loans taken by the assessee amounting to Rs.1,50,00,000/-. 2. Whether on the facts and in the circumstances of the case, the ld CIT(A) is justified in allowing the assessee’s claim of having made interest payments on the same unsecured loans amounting to Rs.14,08,759/-.”

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noticed that the assessee has received loan of Rs.1,05,00,000/- from

Achiever Cmmotrade Pvt Ltd., and Rs.45,00,000/- from Excellent Infrabuild

Pvt Ltd in the year under consideration. The assessee has also shown loan

of Rs.1,00,00,000/- from M/s. Cube Infrastructure Pvt Ltd., as opening loan.

The Assessing Officer issued notice u/s.133(6) of the Act to the above

parties at the address given, however the notices were returned back

unserved. Thereafter, the AO issued commission u/s.131(1)(d) of the Act

to DDIT (Inv)-II, Kolkata, who also reported that none of the above

companies were found at the given address. The address given by two loan

providers is being used by another bogus company namely Beautiful

Tradelink Pvt Ltd. Hence, these companies are paper company and used by

entry operator Shri Narendra Kumar Jain. Although the assessee has filed

PAN number, income tax return and assessment order, the AO observed

that from the above, the identity, creditworthiness and genuineness of the

transactions cannot be established. Hence, the AO treated the loan as

unexplained cash credit and added the same to the income of the assessee

u/s.68 of the Act in respect of loan of Rs.1,50,000/-. However, in respect of

loan of Rs.1,00,00,000/- from Cube Infrastructure Pvt Ltd., as opening

balance, he treated the same as unexplained in the relevant assessment

year. The AO found that the assessee has paid interest of Rs.2,55,539/- to

Excellent Infrabuild Pvt Ltd., Rs.4,88,096/- to Achiever Commotrade Pvt

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Ltd., and Rs.6,65,124/- to Cube Infrastructure Pvt Ltd., totaling to

Rs.14,08,759/-. As the loans were treated as unexplained, therefore, the

interest paid of Rs.14,08,759/- on the unsecured loan was also treated as

unexplained and added the same u/s.68 of the Act.

proceedings, notices u/s.133(6) were sent to all the three creditors at the

addresses provided by the assessee and the replied have been received.

The assessee has furnished confirmation, bank statement, copy of return

and copy of the ledger account. On the basis of above documents,

especially the income tax returns of three creditors, the AO doubted the

creditworthiness of the creditors to advance the loan to the assessee as the

amount shown in the income tax returns are negligible in comparison to the

loan advanced to the assessee. The ld CIT(A) thereafter emphasized the

key financial position of the creditor companies, as under:

Name of the Loan given Income as per Share capital Share capital company I.T.return & reserve & reserve available with surplus as per surplus as per AO audited audited balance sheet balance sheet as on 31.3.13 as on 31.3.12 Cube 1,00,00,000 13,77,610 10,62,70,276 10,48,81,724 Infrastructure (loan given in P.Y) Achiever 1,05,00,000 12,97,330 11,50,08,187 11,41,11,730 Commotrade Ptd Ltd.

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Excellent 45,00,000 16,55,268 5,00,43,444 5,08,99,654 Infrabuild Pvt Ltd.

CIT(A) observed that the identity, creditworthiness and genuineness of

transactions are not doubted. He also noted that from the significant

income returns, and reserves and surplus, it is ample clear that all creditors

have sufficient funds to advance the loan. Hence, he deleted the addition

of Rs.1,50,00,000/- made by the AO. Aggrieved by the deletion of addition,

the revenue is in appeal before the Tribunal.

when the Assessing Officer issued commission u/s.131(1)(d) to the DDIT

2(2), Kolkata for conducting enquiry, it was reported that none of the

companies who have advanced the loan are not found in the given address.

It was submitted that one company Cube Infrastructure Pvt Ltd., is in

identified paper company of Shri Narendra Kumar Jain who is an

accommodation entry of Kolkata and all three companies have been

controlled and operated by Narendra Kumar Jain, entry operator. As the

above three companies are not found in the address given, the loan

transaction are bogus and the AO has rightly added the same to the income

of the assessee and ld CIT (A) is not justified in deleting the addition. He

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submitted that the ld CIT(A) is also not correct in deleting the addition

made in respect of interest amount of Rs.14,08,759/-.

ld CIT(A). Ld A.R. submitted that when the creditors have sufficient

reserves and surplus as per the audited balance sheet, doubting

creditworthiness of the loan creditors is unjustified.

materials placed on the record of the Tribunal. We have also perused the

impugned order of the ld CIT(A), wherein, he has discussed the issue at

length while deleting the addition. The relevant portion of his findings is as

under:

“4.1 I have gone through the assessment order and the appellant's contention. The party wise details of the additions made by the A.O. are as under:- Name of the Party Amt of Loan received Interest during the vear Paid Achiever Commotrade (P) 1,05,00,000 4,88,096 Ltd Excellent Infrabuild (P) Ltd 45,00,000 2,83,932 Cube Infrastructure (P) Ltd Nil 6,65,124 Total 1,50,00,000 j 14,08,759

4.2 The Assessing Officer issued notice u/s 133(6) to the above mentioned parties at the addresses as given on MCA-21 site. After the notices were returned back unserved the AO issued commission u/s 131 (l)(d) to DDIT (Inv.)-II, Kolkata who also reported that none of the above companies were found at the given addresses. The Assessing Officer relied on the report of the DDIT that one of the company's which had given the loan in the previous year is a company of Shri Narendra Kumar Jain who is an accommodation provider. Further, the address of the other two creditors Achiever Commotrade (P) Ltd and Excellent Infrabuild (P) Ltd. 282, Rabindra Sarani, 4th floor, Room No. 404, Kolkata is being used by another

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bogus company Beautiful Tradelrnk Pvt. Ltd.. another company of the same entry provider, 5hri Narendra Kumar Jain. The appellant has submitted that in response to the show cause notice it file copy of balance sheet, loan rmation letter, IT return acknowledgment, 26AS statement of the creditor companies.

4.3 In the remand report the Assessing Officer has first emphasized that appellant's application for admission of additional evidence filed under rule 46A should be rejected as sufficient opportunities were allowed during the assessment proceedings. After perusing the facts of the case I am of the view that the appellant, did not have sufficient time during the assessment proceedings. The enquiries were made by the Assessing Officer at the addresses obtained from the MCA-21 site and the appellant was not left with sufficient time to provide the correct addresses. 4.4 During the remand proceedings notices u/s 133(6) were sent to all the three creditors at the addresses provided by the appellant and the replies have been received. The confirmation of account, bank statement, copy of return and copy of the ledger account of the appellant have been submitted. 4.5 The Assessing Officer has emphasized that the three credit: companies had filed returns of income which are negligible in comparison ..o the quantum of the loan and has therefore submitted that these companies do not have sufficient creditworthiness to lend such huge amounts. The key financials of the creditor companies are as under:- Name of the Loan given Income as Share capital Share capital company per income & reserve & reserve tax return surplus as surplus as available per audited per audited with AO balance balance sheet as on sheet as on 31.3.13 31.3.12 Cube 1,00,00,000 13,77,610 10,62,70,276 10,48,81,724 Infrastructure (loan given in the P.Y) Achiever 1,05,00,000 12,97,330 11,50,08,187 11,41,11,730 Commotrade Pvt Ltd. Excellent 45,00,000 16,55,268 5,00,43,444 5,08,99,654 Infrabuild Pvt Ltd.

4.6 In the absence of any other corroborative evidence brought on record by the Assessing Officer, the creditworthiness of the three creditor companies has to be accepted in view of the above financial details. The

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three companies have disclosed significant income in the returns of income and have sufficient share capital and reserves and surplus. Further, it is seen that Shri Narendra Kumar Jain who has been identified as an entry provider in Kolkata is not a Director of the three companies.

4.7 The various judicial rulings cited by the appellant also support its case. 4.8 In view of the above, it is held that the addition of Rs. 1,50,00,000/- treated as unexplained credit u/s 68 on account of unsecured loan of Rs. 0,000/- from M/s Excellent Infrabuild Pvt. Ltd. and Rs. 1,05,00,000/- from M/s Achiever Commo Trade (P) Ltd. is not sustainable. Ground Nos. and 2.4 are allowed.

(i) M/s Excellent Infrabuild Pvt. Ltd : Rs. 2,55,539 (ii) M/s Acheiver Commodtrade P. Ltd., : Rs. 4,88,096/ (iii) M/s Cube Infrastructure Pvt. Ltd `: Rs. 6,65,124/-

5.1 The addition of Rs. 1,50,00,000/- on account of loan unsecured loan of Rs. 45,00,000/- from M/s Excellent Infrabuild Pvt. Ltd. and Rs. 1,05,00,000/- from M/s Achiever Commo Trade (P) Ltd. has been deleted as discussed above and therefore, the addition on account of interest paid to these creditors is also deleted. Further, as discussed above, there is no justification in treating the opening balance of loan of Rs. 1,00,00,000/- from M/s. Cube Infrastructure Pvt Ltd., as unexplained and, therefore, the addition on the interest paid during the year also does not survive.”

ld CIT(A). From the financial status as enumerated by ld CIT(A) in the

impugned order, we find that all three creditors have sufficient reserves and

surplus as reflected in their audited balance sheet, hence, there is no

question to doubt their creditworthiness to advance the loan to the

assessee. It is also noted by ld CIT(A) has accepted that Shri Narendra

Kumar Jain is an entry provider in Kolkata but he is not a director of above

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three companies. Based on the fact that Shri Narendra Kumar Jain is an

entry provider, it cannot be assumed that he has managed to rout the

money from the creditors to the assessee. In the circumstances, in the

absence of any specific defect being pointed out in the order of the CIT(A),

we find no good reason to interfere with the order of the CIT(A), which is

hereby confirmed and the grounds of appeal of the revenue are dismissed.

Order pronounced u/s.34(4) of I.T.Rules, 1963 on 29 / 09/2021.

Sd/- Sd/- ( MANISH BORAD) (CHABNDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore ; Dated 29/ 09/2021 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : The Asst. Commissioner of Income Tax 4(1), Main Building, Indore

By order

Sr.Pvt.secretary ITAT, Cuttack

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