GREVEK INVESTMENT &FINANCE PVT LTD,MUMBAI vs. ITO (TDS)-1(2)(3), MUMBAI

The grounds of appeal are as under:-

Relevant facts of the case as culled from the impugned order are that the assessee filed its return declaring loss of Rs.51,10,762/-.Scrutiny assessment u/s 143(3) was completed at total income NIL.An information was received from Investigation wing of the Department that during the year under consideration the assessee company had made certain transactions with bogus entities. Subsequently, the case of the assessee was reopened u/s 148 of the Act. An inquiry was conducted on one M/s Cheiro Trading Pvt Ltd by Investigation wing, Surat which that this company made various banking transactions during the relevant financial year. However, it was non-filer for the year and was also was struck off by ROC Ahmedabad. In this regard a Summons u/s 131 of IT Act was issued by Investigation Wing, Surat on 31.12.2019 calling for explanation regarding source of credit and destination of withdrawals. No compliance was received against the above summons. Investigation revealed that the transactions in the bank account of the company no business rationale. Purpose of debits and credit was merely layering of funds. Various companies/concerns had transferred funds into its account and the samew as further transferred out of the country in the name of bogus import bills. One such concern which transferred was M/s Dhunki Traders(„DT‟).

Aggrieved, the assessee filed appeal before the first appellate authority during which it filed a written submission and the ledger account of DT as appearing in its books of account as also the bank statement for the relevant period maintained with State Bank of India explaining the source of making the advance of Rs 26 Lakh to DT. The P a g e | 5 amount of Rs.26 lakh was sourced out of funds received from Krosslink Infrastructure Limited. It was submitted that the addition was unsustainable as the assessee had demonstrated source of making the advance of Rs 26 Lakh with documentary evidences before the AO and the amount in question whose source stood explained as above was never claimed as an expenditure by debiting the same to the P&L or otherwise, but was carried forward only as an advance/debtor by it in the books of accounts till date. Apart from loose and generalistic observation, there was no specific finding neither any concrete evidence had been recorded by the AO or the Investigation Agency against it so as to arrive at an adverse conclusion for making an addition u/s 69C of the Act. Attention was drawn to the decision of the Supreme Court in the matter of Kishnchand Chellaram v. CIT 125 ITR 713 (SC),Bimal Kumar Damani v. CIT-261 ITR 635 (Kol),Krishna Textiles 310 ITR 227 (Guj.),Vaman International Pvt. Ltd. 442 ITR 520 (Bom), Nikunj Eximp Enterprises (P) Ltd. 372 ITR 619 (Bom) in this regard.

1 It was further submitted that nowhere the company‟s name to be the beneficiary of accommodation entries had appeared. There was no money trail demonstrating that the assessee was a beneficiary of the accommodation entries allegedly provided. The decisions as cited above establish the requirement of independent investigation and evidence to P a g e | 6 fasten the rigors of Section 69C, even if it is an expenditure. The twin conditions as stipulated by section 69C of the Act were not satisfied in our case, as the source of the amount advanced of Rs.26 Lakh stood fully explained. The AO had not made any further independent enquiries apart from relying on the report of the Investigation Wing. This would not be sufficient since while making an addition u/s 69C of the Act, the burden was on the revenue to prove that an assessee had made an unexplained expenditure.

The ld.CIT(A) noted that during the appellate proceedings, the assessee had provided a copy of bank account of the assessee with State Bank of India and on perusal, it was seen that on 14.01.2013, the assessee received Rs.19,00,00,000/- and the outstanding balance was Rs.19,20,05,760/-. Out of that, amount of Rs.2,00,00,000/- was given to Anuza Infrastructure by RTGS on 14.01.2013. Further, amount of Rs.1,50,50,055/- was transferred to Kaynet Commodities by RTGS on 14.01.2013. Further, the amount of Rs.26,00,000/- was paid to M/s. DT on 14.01.2013. Thus, the source of amount transferred to DT was from the regular bank account maintained by the assessee with the above bank. Thus, the creditworthiness of transaction and genuineness of the transaction had been proved by the assessee. It was also a case that the assessee had not debited such amount to the Profit and loss account.

Before us, the ld.DR has made a detailed oral and written submissions. It is contended that the CIT(A)‟s narrow interpretation of “expenditure” under Section 69C is misconceived. The section deals with “unexplained expenditure” and provides that if an assessee has incurred any expenditure and fails to explain its source satisfactorily, the amount of such expenditure shall be deemed income. The statute does not require that the amount be debited in the profit and loss account or claimed as a deduction. The assessee‟s plea that the “source” of Rs.26 lakh was its own bank account fed by another entity, Krosslink Infrastructure Ltd. missed the point. The requirement of Section 69C is that the assessee offer a cogent explanation to the AO‟s satisfaction about the expenditure. Providing the trail of money from one bank account to another is not a satisfactory explanation in light of evidence of bogus layering. Here, the origin of the Rs 26 lakh, ostensibly from Krosslink (a third party), itself raises unanswered questions (e.g. if Krosslink gave funds to the assessee, was that genuine? or another layer in the accommodation chain). More importantly, the assessee had not P a g e | 8 explained the utilization, it claimed it was an “advance” for unspecified purposes which to date remains outstanding. This lack of business purpose or recovery strongly indicated it was not a bona fide advance but a transfer in a circular routing of undisclosed income. The AO noted that the assessee could not provide any satisfactory business rationale or evidences for this advance to such a tainted party. It is telling that even during the appellate proceedings, the assessee did not produce any agreement, invoice, correspondence or subsequent outcome for the alleged advance no evidence of goods purchased or services obtained, nor any effort to recover the sum. The absence of any commercial substratum to the transaction, coupled with the linkage to an established accommodation entry racket, leaves the only plausible conclusion that this was unexplained (and likely unaccounted) expenditure deployed by the assessee. The assessee‟s conduct routing funds into a non-existent business-is an illegality that Section 69C is meant to address by deeming the unexplained payment as income. Reliance was placed on Principal Commissioner of Income-tax vs. Kanak Impex (India) Ltd.[2025] 172 taxmann.com 283 (Bombay),Principal Commissioner of Income-tax vs. Ganesh Developers [2025] 172 taxmann.com 542 (Bombay) [05-03- 2025], CIT v. Shoreline Hotel (P) Ltd. [2018] 98 taxmann.com 234 (Bom).

We have carefully considered all the relevant facts of the case, rival submissions and perused the records. It is noticed that the AO made the addition based on certain Investigation wing report the contents thereof have not been elaborated in the assessment order. The assessee has not been found to be a direct beneficiary of the transactions with alleged accommodation entry providers. No independent enquiry worth the name has been conducted by him to strengthen the investigation report. The impugned transactions have been made through banking channels and it is not disputed in any manner. The only reasons that the party with whom transaction was made did not file return of income. To our mind, this cannot be a conclusive finding to treat an otherwise genuine transaction. Apparently the addition is made purely on surmises and presumptions and cannot be sustained. The citations relied by the ld.DR does not help in any manner as the basis requirements of section 69C of the Act which pertains to Unexplained expenditure not recorded in the books of account are not applicable to the facts of the case. The impugned sum is duly reflected in the bank account and regular books of account. Moreover, nothing has been P a g e | 10 brought on record to prove any money trail. We therefore, find no infirmity in the conclusion drawn by the ld.CIT(A) which is accordingly upheld, dismissing the grounds of appeal of the Revenue.

In the result, the appeal of the Revenue is dismissed. 9.ITA No. 934/MUM/2025(Assessee) On facts & circumstances of the case and in law the CIT(A) has erred in:

01 Lakh) on a core interest payment of Rs.6,85,65,775/- liable for TDS u/s.194A of the Income Tax Act.

Doing so the CIT(A) has further erred in not appreciating the fact that for TDS default of Rs.51.25 Lakh (core tax), the principal amount would be Rs.5,12,57,190/- and not Rs.6,85,65,775/- as worked out by the AO and confirmed by the CIT(A).

The process, the CIT(A) has further failed to appreciate the fact that the assessee has obtained a certificate in Form 26A for a sum of Rs.25,79,91,350/- as against which Rs.20,46,34,025/- was the amount on which no TDS was deducted and the balance of Rs.5,12,57,190/- was the amount on which the TDS was deducted but not deposited. If the amounts (Rs.20.46 Crores + 5.12 Crores) are aggregated, then the sum total is Rs.25.58 Crores as against which the assessee has procured a certificate in Form 26A of Rs.25.79 Crores. Resultantly, the assessee should not be a defaulter for TDS under the provisions of section 201/201A of the Income Tax Act.

At the outset, it is noticed that the appeal is delayed by 16 days. In this regard, the assessee filed an application for condonation of delay alongwith an affidavit of the Director Sri Dev Kumar Singh, submitting inter alia that the delay occurred due to circumstances beyond the control of the assessee as the Chartered Accountant Shri S. K. Mutsaddi, who was looking after the matters was unwell during the relevant period and could not attend to the preparation and filing of the P a g e | 11 appeal papers in time. The assessee is a Finance Company and is presently under financial stress. On account of the said financial stress, only a skeletal staff was employed in the Company, who also do not attend office on regular basis. As a result, there was no effective follow- up from the its office, which further contributed to the delay. The delay is neither deliberate nor intentional but has occurred due to the reasons stated hereinabove. On due consideration of the stated facts, we condone the delay.

In this case a complaint was received from one Kotilya Consultants Ltd Kolkata that the assessee was granted a loan of Rs 90 cr.on 26.4.2011 @ 11% interest and an amount of Rs 9,24,90,411/- was paid as interest for first year ending 31.3.0212 and TDS OF rs 20,90,283/- was deducted. However, in subsequent years no interest was paid to it and did not issue TDS certificates. In response to query, it was explained that no interest was paid/credited and the loan was still outstanding subsequent o FY 2011-12 and it was not liable to deduct ant TDS.

1 With regard to the interest expenses of Rs 30.34 cr., it was stated that interest of Rs 30,34,70,996/- was paid to IL&FS which was shown in its books of account. It was noted from the audited report that P a g e | 12 the assessee did not deduct TDS on interest of Rs 20.46 cr to IL&FS and deducted but not paid TDS on interest of Rs 6.85 cr. The AO was of the view that the assessee was required to deduct TDS on total amount of Rs 30.34 cr. as the amount was debited to the Profit and loss account. The TDS liability was worked out u/ 201(1) of Rs 2.55 cr. and interest u/s 201(1A) of Rs 2.68 cr.

Before the ld.CIT(A),it was submitted by the assessee that the default as quantified by the AO was u/s. 194A of the Act in respect of interest payments to IL&FS. The AO rejected the assessee‟s plea that the amount of Rs.2,55,89,118/- could not be recovered from it, since IL&FS had already filed returns of income offering the amounts as their income in the return of income filed for AY 2015-16.The AO also rejected its request to summon IL&FS to verify from them such contention. Besides, the AO was not justified in charging interest of Rs.2,68,46,163/- u/s.201(1A) of the Act upto the date of assessment. Since IL&FS had filed its returns of income, the interest liability u/s 201(1A) ought to have been restricted upto the date of filing of return of income by the respective parties.

The ld.CIT(A) observed that on perusal of 3CD report, the AO noted total unsecured loan during the year was Rs.329,73,74,663/.

1 During the appellate proceedings, the assessee submitted that after follow up with IL&FS, it furnished the details of income offered in respect of the payment made to it and the details of filing of P a g e | 14 the return of income for AY2015-16 and provided Form no.26A. The assessee also submitted that as per CBDT Notification of 11 of 2016 dated 02.12.2016, upto A.Y.2016-17, Form no.26A could be filed manually before the AO. Form No.26A was issued by IL&FS on 11.09.2023. The same had been submitted to the AO but he had not given the effect to that.

2 From perusal of the ledger account and form no.26A, it was observed by the ld.CIT(A) that during A.Y.2015-16, total interest of Rs.25,79,91,350/- was paid to IL&FS which for A.Y.2015-16 filed return of income on 28.11.2015. In the return of income for A.Y. 2015-16,IL&FS had shown total income of Rs.416,77,24,430/-, tax payable of Rs.141,66,09,53/-. Against such tax payable, tax of Rs.162,33,96,896/- (Advance tax- Rs. 16,00,00,000/- and TDS-Rs. 146,33,96,8967/-) was paid by IL&FS. The interest payment of Rs. 25,79,91,350/- was included in the taxable income of Rs.414,67,75,941/- under the head „income from business and profession. Form no.26A along with annexure-A had been certified by the Chartered Accountant. Thus, it could be seen that the interest income of Rs.25,79,91,350/- had been offered by IL&FS for the year and the tax had also been paid by IL&FS on such interest. income.

4 However, in respect of payment of Rs.6,85,65,775/-, the assessee had not submitted any further details. It had deducted TDS but the same was deposited to the Government treasury not within the due date. Therefore, interest of Rs. 51,25,718/- levied u/s. 201(1) and Rs. 72,01,299/- levied u/s. 201(1A) was upheld.

Before us, the ld.AR has reiterated the same contentions as made before the appellate authority. A chart of complete TDS working as per the records available with the assessee was also submitted. Since the details as provided in the chart were stated to be crucial and also go to the roots of the matter, it was requested to consider the same as an additional

1 It has been further submitted that above stated additional evidence in the form of chart could be sent back to the AO for necessary verification of the contentions of the assessee and he may be directed to examine the issue in the light of facts and figures stated therein.The ld.DR did not object to the proposition.

We have carefully considered the above contentions of the assessee qua the TDS report and the appellate order. The issue in hand is P a g e | 17 basically a factual matter involving sections 201(1) and 201(1A) of the Act. Since, the assessee did not submit the relevant details before the lower authorities, which we consider essential for adjudication of the issue in hand, we admit the additional evidence in the form of a detailed chart showing TDS liability, payments thereof. Accordingly, the orders of the authorities below is set aside and the impugned issue is restored to the file of the AO for necessary verification and passing de novo order in accordance with law. Needless to state, he would allow reasonable opportunity of hearing to the assessee in this regard. The grounds are therefore, allowed for statistical purposes.

In the result, appeal of the assessee is allowed for statistical purposes.

To sum up, appeal of the Revenue in ITA No.308/Mum/2025 is dismissed while the appeal of the assessee in ITA No. 934/Mum/2025 is allowed for statistical purposes.