RANI SATI SURAJGARHIA INFRASTRUCTURE LTD.,NOIDA vs. DCIT, CENTRAL CIRCLE-1, NOIDA

Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A)-4, Kanpur and raised several grounds of appeal. It was ITR copies, Balance Sheet and Profit & Loss Account of the lenders to establish three vital ingredients of cash credits, i.e. identity, creditworthiness and genuineness of the transaction. After considering the detailed submissions, ld. CIT (A) observed that the AO has issued notice u/s 133(6) of the Act seeking information from the creditors, however it remains uncomplied with. He submitted that the bank statements were not filed by the creditors, viz., Kamdhenu and Shri Amit Mittal, before the AO. He observed that the lenders have not complied with the notices issued u/s 133(6) of the Act and further he observed that the bank statement of the lender, Kamdhenu, was submitted in appeal proceedings but same cannot be accepted as evidence as no applciation under Rule 46A of the Income-tax Rules, 1962 (for short ‘the Rules’) was submitted by the assessee. Considering the totality of the facts and circumstances of the case, he dismissed the appeal filed by the assessee by relying on various decisions to come to the conclusion that assessee has miserably failed to submit vital ingredients specified u/s 68 of the Act.

Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “1 That on the facts and circumstances of the case and in law the order passed by the learned Commissioner of Income Tax (A) in confirming the addition of Rs.1,07,82,932/- is arbitrary, against law and facts on record.

At the time of hearing, ld. AR of the assessee brought to our notice page 2 of the assessment order wherein the assessment was selected for limited scrutiny and submitted that the AO has asked the assessee to submit information relating to unsecured loan from Kamdhenu and Shri Amit Mittal. In this regard, he brought to our notice page 17 of the paper book which is the confirmation letter submitted by Shri Amit Mittal and he submitted that various transactions were carried on during the year through banking channel only and also there were high value transactions recorded during the year. He submitted that it is a running account maintained by the assessee with the Director for the purpose of business only during the year, transactions recorded were amounting to Rs.4,33,75,000/-. He submitted that AO has proceeded to make addition of outstanding amount of Rs.4,90,000/- only, therefore, Shri Amit Mittal is only a Director of the company and there is no requirement to file identity and creditworthiness of the same. With regard to genuineness, he submitted that confirmation of accounts submitted by the assessee clearly shows that it is a business transaction carried on for the purpose of business and prayed that the addition made by the AO may be deleted.

With regard to loan outstanding of Kamdhenu, he brought to our notice page 5 of the paper book and submitted that assessee has submitted before the AO that assessee has taken an unsecured loan of Rs.1 crore and explained the transaction that Kamdhenu has commercial property at Noida having market value at Rs.10 crores approx. and it was also submitted that Kamdhenu has given unsecured loan out of its surplus funds available in the bank. He also brought to our notice confirmation submitted by them. Further he brought to our notice page 29 of the paper book which is confirmation submitted by Kamdhenu of the abovesaid transactions which matches with the confirmation letter submitted by the assessee. Further he brought to our notice bank statement of Kamdhenu and submitted that they have given unsecured loan to the assessee and source of the same also brought on record that they have closed the term deposit prematurely for the purpose of transfer of the abovesaid fund to the assessee. He submitted that the abovesaid informations were duly submitted before the ld. CIT (A) and he brought to our notice the relevant letter submitted before ld. CIT (A) along with bank statement explaining the abovesaid transactions. He prayed that both these transactions are only business transactions.

On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.

Considered the rival submissions and material available on record. We observed that during assessment proceedings, AO has asked information from the assessee relating to unsecured loan received from Kamdhenu and Shri Amit Mittal. We observed that assessee has not submitted the relevant information before the AO, however assessee has filed all the relevant information before the ld. CIT (A). It is also fact on record that assessee has no doubt filed the information before the ld. CIT (A), however not followed the due procedure to file the same as additional evidences under Rule 46 of the Rules. In our considered view, the abovesaid fact was also confirmed by the ld. CIT (A) in his own order. However, he failed to give one more opportunity to the assessee to rectify the procedural defects in filing the additional evidences before him. Since ld. CIT (A) has failed to give one more opportunity to the assessee, in our considered view, the detailed evidences filed by the assessee before us clearly indicate that assessee has submitted confirmation letters from both the parties which are placed on record. With regard to the transactions of the Director of the company, assessee has filed the confirmations detailing various transactions carried on with the assessee as a running account in its books of account. It clearly indicates that assessee has given funds to the Director to carry on business activities involving Rs.4,38,65,000/- and the Director has lent the money to the assessee company and also assessee has repaid the same during the year and the final outstanding balance at the end was of Rs.4,90,000/- and the same was added by the AO as unsecured loan. Since Shri Amit Mittal is a Director of the company, there is no requirement for the assessee company to submit identity and creditworthiness of the Director and with regard to genuineness of the transaction, we observed that it is a running account maintained by the assessee to meet out the short term requirement for the purpose of business. Therefore, the genuineness has already been proved in this regard.

Coming to the unsecured loan received from Kamdhenu, we observed that assessee has submitted confirmation letter and also bank statement indicating the transfer of funds through banking channel, it also explained the source of source for the same. We observed that Kamdhenu has closed term deposit prematurely to transfer the abovesaid funds to the assessee. It clearly shows that it has surplus funds available with them which were transferred to the assessee as unsecured loan and these documents clearly show that vital ingredients of section 68 of the Act are already proved by the assessee by bringing on abovesaid documents which were in fact filed before the ld. CIT (A) who has not appreciated the same. Therefore, we are inclined to delete both the additions made by the AO and accordingly, grounds raised