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Facts
The assessee filed a return of income, and the AO completed the assessment by making additions for unexplained cash credit (unsecured loans) under Section 68 and interest expenditure on these loans under Section 69C, based on information from an investigation wing.
Held
The Tribunal held that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the lender companies and the transactions. Therefore, the addition for unexplained loans and the disallowance of interest expenditure were deleted.
Key Issues
Whether the assessee discharged the onus to prove the genuineness of unsecured loans and related interest expenditure, and if the AO's reliance on investigation wing information without cross-examination was sufficient.
Sections Cited
143(3), 147, 148, 68, 69C, 133(6)
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL
Assessment Year: 2008-09 Assistant Commissioner of vs Narayan Dalpatram Income-tax - 4(3)(1), Thakkar Mumbai Abhay Bldg, 5th Floor, NS 9th RDM JVPD Scheme, Juhu Vile Parle (W), Mumbai - 400032 [PAN: AAIPT0713F] Appellant Respondent Present for: Assessee : Shri Parag Shah, CA Revenue : Shri Leyaqat Ali Aafaqui, Sr. DR Date of Hearing : 05.08.2025 Date of Pronouncement : 29.10.2025 O R D E R
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the Revenue is against the order of CIT(A) – 9, Mumbai, vide order no. CIT(A)-9/Cir.4/529/2015-16, dated 17.03.2016 passed against the assessment order by Deputy Commissioner of Income-tax-4(3)(1), u/s.143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 29.01.2016 for AY 2008-09.
2. Grounds taken by the Revenue are reproduced as under: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition made towards unexplained unsecured loan of Rs.65,00,000/- u/s.68 of the I.T. Act.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition made towards interest claimed to be paid on unexplained unsecured loan of Rs.87,547/-u/s.69C of the I.T. Act.”
Brief facts of the case are that assessee filed his return of income on 31.07.2008 reporting total income at Rs. 76,20,820/-. Assessing Officer completed the assessment u/s.143(3) r.w.s.147 by assessing the total income at Rs. 1,42,08,370/- after making an addition of Rs.65 lakhs as unexplained cash credit u/s. 68 and of Rs. 87,547/- as unexplained expenditure on account of interest on unsecured loans by applying provisions of section 69C. These additions were based on information from the Directorate General of Income Tax Investigation, Mumbai indicating that the loans taken by the assessee from Olive Overseas Pvt. Ltd. (erstwhile Real Gold Trading Company Pvt. Ltd.) of Rs.30 lakhs and from Triangular Infocom Ltd. (erstwhile Lexis Infotech Ltd.) of Rs.35 lakhs were accommodation entries orchestrated by Shri Praveen Kumar Jain's group.
2.1. Ld. CIT(A) in the first appellate order deleted the additions so made by holding that assessee had discharged the onus u/s. 68 by proving the identity and creditworthiness of the lender companies and genuineness of the transactions. Revenue is in appeal before the Tribunal on the relief so granted by the ld. CIT(A) by putting its contention that ld. CIT(A) overlooked the evidence of non-genuine transactions.
We have heard both the parties and perused the material placed on record containing written submissions by both the parties and a paper book filed by the assessee having 143 pages. We have also perused the orders of the authorities below to take note of the facts and Narayan Dalpatram Thakkar AY 2008-09 observations for arriving at their respective findings. Fact of the matter is that ld. AO has primarily placed reliance on the search conducted by the DDIT(Inv)-III, Mumbai in the case of Shri Praveen Kumar Jain group which led to reopening of the case of the assessee by resorting to provisions of section 148 r.w.s.
Addition has been made u/s. 68 towards loan taken by the assessee from the parties of Rs. 65 lakhs on the basis of this information. Details of unsecured loans taken by the assessee which has been alleged to be accommodation entries from companies being entities operated by Shri Praveen Kumar Jain group is tabulated below: S. No. Name of the Lender Amount (Rs.) 1 Olive Overseas P. Ltd. (Realgold Trading Co. P. Ltd.) 30,00,000/- 2 Traingular Infocom Pvt. Ltd. (Lexus Infotech 30,00,000/- Limited) 3 Traingular Infocom Pvt. Ltd. (Lexus Infotech 5,00,000/- Limited)
3.1. Case of the assessee is that he had obtained unsecured loans from the two companies through proper banking channel and paid interest regularly thereon. Further, the said loan has been repaid in the subsequent financial years through proper banking channel for which ledger accounts reflecting the repayment were placed on record. Both the lender companies are assessed to income tax regularly, who had filed their income tax returns, copies of which are placed on record. The loan transactions have been duly reflected in the books of accounts of the assessee as well as of the lender companies without any qualification by the auditors. Assessee has furnished following documents in respect of the two lender companies to establish the requirements as contained in section 68:-
Narayan Dalpatram Thakkar AY 2008-09 i. loan confirmation. ii. bank statement of the two lender companies reflecting payment made through account payee cheques. iii. copy of acknowledgement of return of income along with financial statements duly audited by the auditor. iv. proof of repayment of loans. v. copies of ledger accounts in the respective books of accounts maintained by the assessee as well as by the lender companies. vi. affidavit confirming genuineness of the transaction by directors of both the lender companies.
3.2. Also, ld. AO issued notice u/s. 133(6) to the lender companies. Ld. AO records in the assessment order that he had received reply from Triangular Infocom Limited along with necessary and relevant documentary evidences confirming the transaction undertaken by it with the assessee. In respect of the other company, namely, Olive Overseas Limited, ld. AO mentions that no reply was received from the said party. However, contention of the assessee is that no notice u/s. 133(6) was served to the said party for which a confirmation of non- receipt of notice u/s. 133(6) was placed on record as received from the said lender company. Despite this, the said lender company complied with requirements contemplated by the ld. AO by furnishing all the relevant documentary evidences through the assessee.
We note that ld. AO has been unable to refute the cogent evidences placed on record by the assessee and those furnished by the lender companies. Various facts and figures and details furnished by the assessee in complying with the requirements of section 68 is tabulated below:
Sl.No. Details of Loan Bank Cheque/ Date Amount Remarks, if any Details DD (Rs.) 1 Olive Overseas P. CANARA 820668 07.01. 30,00,000 NO CASH DEPOSIT Ltd. (Realgold BANK 2008 IN BANK A/C. Trading Co. P. BEFORE OR AFTER Ltd.) ISSUING OF CHEQUE - 2 TRIANGULAR CANARA 824566 09.01. 30,00,000 NO CASH DEPOSIT INFOCOM PVT. BANK 2008 IN BANK A/C. LTD. BEFORE OR AFTER ISSUING OF CHEQUE 3 TRIANGULAR CANARA 824569 09.01. 5,00,000. NO CASH DEPOSIT INFOCOM PVT. BANK 2008 IN BANK A/C. LTD. BEFORE OR AFTER ISSUING OF CHEQUE
Sl.No Details of Loan Bank Cheque Date Amount Remarks, if Details /DD any 1 Olive Overseas INDIAN 701486 01.09. 20,00,000 NO CASH P. Ltd. (Realgold OVESEAS 2010 DEPOSIT IN Trading Co. P. Ltd.) BANK BANK A/C. BEFORE & AFTER REPAYMENT OF LOAN 2 Olive Overseas P. INDIAN 575259 30. 10,00,000 NO CASH Ltd.(Realgold Trading OVESEA 09. DEPOSIT IN Co. SBANK 2009 BANK A/C P. Ltd.) BEFORE & AFTER REPAYMENT OF LOAN 3 TRIANGULAR INDIAN 586386 02- 35,00,000 NO CASH INFOCOM PVT. OVESEA 11- DEPOSIT IN LTD. SBANK 2009 BANK A/C. BEFORE & AFTER REPAYMENT OF LOAN Genuity of lenders: SI. Name Of Parties PAN details CINNO Whether No (Company Incorporation No.) existing Company with ROC/Latest Annual Return Filed 1 Olive Overseas AACCR4512K U51909MH2003PTC139464 ACTIVE P. Ltd. (Realgold Trading Co. P. Ltd.
2 Triangular Infcom AAACL4646G U74999MH1998PLC116845 LAST Ltd. (Lexus Infotech BALANCESHEET Ltd.) FILED ON 31/03/2014 SI. Details of Share Contributo Nature and amount of Fund Amount Remarks No. applicant/ Loan r's Capital in the Balance Sheet of the Loan/Capital if any Creditors as on creditors contributed 31.03.200 by this Party 7 of the to Appellant previous Year- (preceding FY prior to the FY in Which contributio n made) 1 Olive Overseas Own Fund- Rs.2,25,24,642 Rs.30,00,000 Own P. Ltd. (Realgold i. Share Capital/ Fund of Trading Co, P. Ltd. applications- Rs.1,96,37,000 Party ii. Reserve and Surplus- being Rs.29,85,502 Rs.2,25, iii Loan Fund-Rs.63,41,790 24,642 iv. Deferred Tax Liability - is higher Rs.6,025 than the v. Fixed Assets -Rs.77,391. amount vi. Investments- received Rs.7,22,69,660 vii Net Current Assets - Rs. (4,34,74,595) viii. Misc Expenses - Rs. 97,860 2 Triangular Infocom Own Fund- Rs.3,02,86,014 Rs.30,00,000 Own Ltd. (Lexus i.Share Capital/applications- Fund Infotech Ltd.) Rs.2,48,22,000 of Party ii. Reserve and Surplus- being Rs.55,63,264 Rs.3,02, iii. Loan Fund - 86,03 Rs.3,35,69,089 4 is iv. Deferred Tax Liability - higher Rs.88,767 than the v.Fixed Assets -Rs.2,39,747. amount vi. Investments- received Rs.8,82,51,550 vii. Net Current Assets:- (2,45,47,427) yiii. Misc Expenditure - 99,250 4.1. From the above details, it is evidently noted that assessee has discharged his onus to prove the identity and creditworthiness of the loan transactions as well as their genuineness. All the documentary evidences are placed on record for which nothing cogent is brought to disprove them or point out any deficiency or inconsistency to dislodge the claim of the assessee. It is seen that ld. AO has merely relied on the statements by alleged Shri Praveen Kumar Jain as recorded by Investigation Wing. It is also noted that ld. AO could not establish and demonstrate with cogent documentary evidence of any relationship between the assessee and the Praveen Kumar Jain group as well as the lender companies by evidencing any nexus of the transaction of the assessee with the Praveen Kumar Jain group. From the statements recorded of Shri Praveen Kumar Jain on which ld. AO has placed his sole reliance, there is nothing brought on record to suggest and establish that assessee's name was taken and recorded in the statement for the alleged transactions being undertaken by the assessee for the purpose of accommodation. Assessee has claimed for providing copies of material relied upon by the ld. AO and for a cross examination in respect of the statement relied upon by the ld. AO. However, no such opportunity was made available to the assessee, nor any such material was provided. Claim of the assessee is that statement made by Shri Praveen Kumar Jain and relied upon by the ld. AO is a general statement with regard to providing entry through his concerns and nowhere in his statement made any specific allegation that he had provided any entry to the assessee in the form of unsecured loans. It is also worth noting that ld. AO has not made any further enquiry to probe into the matter and has rested on the findings of the investigation wing and the statement recorded of Shri Praveen Kumar Jain in the course 4.1. Reliance placed by the ld. Sr. DR. on the judgement of Hon’ble Supreme Court in the case of NRA Iron and Steel Pvt. Ltd. 412 ITR 161 (SC) is found to be distinguishable on the facts in as much as in the said decision, ld. AO had made extensive enquiries and some of the investors were found to be non-existent. On going through the facts involved in that judgement, it is noted that in the decided case, the AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent, which is certainly not the case before us. In the decided case, certain investor companies also failed to produce their bank statements proving the source for making investments in assessee Company. In the facts of the present case, however, not only have the lender companies furnished their bank statements and audited financial statements to establish the source of funds but have also furnished their respective sources of funds in response to notices issued by the ld. AO.
Keeping the entire discussion made above in juxtaposition, with the documentary evidences placed on record, we find that assessee has discharged his onus to prove the identity and creditworthiness of the lender companies and the genuineness of transactions. We do not find any reason to interfere with the findings arrived at by ld. CIT(A) in deleting the addition made by ld. AO u/s.68 amounting to Rs. 65 lakhs from the two lender companies. Accordingly, ground no.1 raised by the Revenue is dismissed.
Narayan Dalpatram Thakkar AY 2008-09 6. Ground no. 2 relates to addition made on account of interest expenditure on the said two loans. Since the said two loans have been held to be genuine, the consequential effect is that the claim of interest on the said loan is an allowable expenditure and therefore, the disallowance made is deleted. We find no reason to interfere with the findings arrived at by ld. CIT(A) on this aspect by deleting the disallowance so made by ld. AO. Accordingly, ground no.2 raised by the Revenue is dismissed.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 29.10.2025.