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Facts
The revenue appealed against the order of the CIT(A) who deleted additions made by the AO concerning unsecured loans and interest payments. The AO had made additions based on a commission report alleging non-existent or bogus loan creditors, primarily due to non-appearance of creditors. The CIT(A) found that the assessee had submitted sufficient documentary evidence.
Held
The Tribunal held that the assessee had discharged the onus by furnishing all relevant documents and evidence to substantiate the unsecured loans. The Tribunal found that the AO relied solely on the commission report and failed to conduct independent verification, while the CIT(A) had conducted due verification of facts. The non-delivery of notices by the commission due to incorrect addresses was also noted as an error.
Key Issues
Whether the unsecured loans and interest payments were genuine and adequately substantiated by the assessee, or if additions were justified based on the commission report alleging non-existent creditors.
Sections Cited
68, 263, 143(3), 250, 271(1)(c), 131, 115JB, 143(2)
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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI ANIKESH BANERJEE
The instant appeals of the revenue are preferred against the common order of the National Faceless Appeal Centre (NFAC), Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in shot, ‘the Act) for the Assessment Year 2014-15 & 2015-16, date of order 19/09/2024. The impugned order emanated from the order of the Learned Assistant Commissioner of Income- tax, Circle-1, Kalyan (in short, ‘the Ld.AO’), date of order 30/12/2019 for A.Y. 2014- & 6082/Mum/2024 Jamini Industries Private Limited 15 passed u/s 143(3) r.w.s 263 r.ws. 254 of the Act and for A.Y. 2015-16, order passed by Ld.Dy.CIT-4(2)(2), Mumbai passed under section 143(3) of the Act, date of order 28/12/2017.
The revenue has raised the following grounds of appeal: - A.Y. 2014-15
1. On the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred by failing to exercise his co-terminus powers to direct the AO or through independent enquiry ensure the compliance of the specific direction of ld. ITAT of cross examination of the loan creditors by the assessee.
2. On the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in merely presuming that the creditworthinesss of the loan creditors is established from the audited balance sheets and profit and loss accounts that had been furnished. The CIT(A) failed to exercise his co-terminus powers by directing the AO or by making independent enquiry to ascertain the creditworthiness of the loan creditors.
3. The appellant craves leave to add, amend or alter any ground / grounds, which may be necessary.”
A.Y. 2015-16 “1. On the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred by failing to exercise his co-terminus powers to direct the AO or through independent enquiry examine the (10) new loan creditors, even after noting that the AO in his assessment order has not made any inquiries in this regard. 2. The appellant craves leave to add, amend or alter any ground / grounds, which may be necessary.”
The brief facts of the case are that the assessee is a company engaged in the business of manufacturing and trading of textiles. The return was filed for A.Y. 2015-16 declaring loss of Rs.2,69,71,406/-/- under normal provisions of the Act and
The Ld. Commissioner of Income-tax, by invoking the provisions of section 263 of the Act, set aside the original assessment order passed U/s 143(3) of the Act dated 30/12/2016. The assessee did not challenge the order passed under section 263 before the appropriate forum. The assessee challenged the assessment order before the first appellate authority. The Ld. CIT(A) upheld the assessment order. The assessee carried the matter in further appeal before the ITAT, Mumbai Bench, which vide order dated 10/07/2019 in set aside the impugned order to the file of the Ld. AO for de novo verification. Pursuant thereto, the Ld. AO passed an order under sections 263/254/143(3) of the Act, wherein he confirmed the addition of loan under section 68 amounting to Rs. 4,15,00,000/- and further disallowed the interest payment to loan creditors treating the same as unexplained expenditure, amounting to Rs. 34,58,630/-. Both the amounts were added back to the total income of the assessee. The assessee, being aggrieved, preferred an appeal before the Ld. CIT(A). The Ld. CIT(A), after considering the verification carried out and the submissions of the assessee, deleted the additions made by the Ld. AO. Against this relief, the revenue is in appeal before us.
A.Y. 2014-15 5. The Ld.AR submitted a chart and chronology / even of the appeal in for A.Y. 2014-15, which is reproduced as below: -
CHRONOLOGY OF EVENTS Date Event Remarks 29.11.2014 Return of income filed u/s Appellant declared total loss of Rs.57 20,251/- 139(1) Notice u/s 143(2) of the Act The case of the appellant was selected for scrutiny 31.08.2015
Assessment Order u/s 143(3) The AO made addition of Rs. 4,54,62,081/- byway of 30.12.2016 unexplained cash credit u/s 68 of the Act holding the unsecured loans to be bogus. Appellate order by The Ld. CIT(A) deleted the entire addition made u/s 27.06.2017 Ld. CIT(A) u/s 250 68 of the Act 06.12.2017 SCN u/s 263 by The Ld. Pr.CIT proposed to set aside the assessment order PCIT-Thane for the reason that the AO had not duly verified all the loan parties but had made additions based on enquiries made on test check basis
26.03.2019 Order u/s 263 The Ld. Pr.CIT set aside the original assessment of the AO for de novo verification of all lending entities.
10.07.2019 Appellate order passed by The Hon’ble ITAT set aside the order of the CIT(A) dated Hon'ble ITAT, Mumbai in ITA 27.06.2017 and restored the matter back to the file of the No.5516/Mum/2017 AO for fresh adjudication
30.12.2019 Impugned assessment order The AO made addition of Rs.4,15,00,000/- u/s 68 of the Act passed u/s and disallowed interest to the extent of Rs. 34,58,630/-. 143(3)/263/254 of the Act
The Ld. DR vehemently argued and stated that on relying on the report of DDIT(Inv) 1(2), Kolkata, the parties for loan creditors, was not accepted and on verification of facts on the basis of the report, Ld.AO added back the loan amount of Rs.4.15 crore and further, the interest payment on bogus loan was treated as unexplained investment which is also added back amount to Rs.34,58,630/-. She further stated that the loan creditors have submitted the documents in relation to the notice of the investigating authority, but even after issue of notice u/s 131 of the Act, the loan creditors were never appeared before the revenue authorities. So the entire loan was treated as bogus and Ld. DR prayed for sustaining the addition made by the Ld.AO. The Ld.DR relied on the impugned assessment order. The relevant part of the impugned assessment order in page 10 is reproduced as below:- “AO comments:- In this respect, it is stated that in response to the summons u/s 131 of the I T Act, issued (and served through e-mail) by the DDIT (Inv)1(2) Kolkata, only submissions were received from the respective loan creditors. However, none were appeared for the examination before the DDIT(Inv)1(2) Kolkata. It is pertinent to mentioned here that during the original assessment proceedings Commission was issued to the DDIT(Inv)1(2) Kolkata to examine the unsecured loan of 11 loan creditors. As per the Commission repot, out of the 11 companies 9 companies were not found at the given address. Rest two companies i.e. M/s Onkarmal Consultancy Pvt Ltd (Director Mr. Raj Kumar Bajaj) and Cyndrella Tie-up Pvt Ltd. (Dr. Ami Khemka) were just entry providers. Further, as per Inspector report “no such companies were found on the given address”. Hence, identity of loan creditors are remains unproved.
Further, the assessee has submitted bank statements along with confirmations of the loan creditors. In this regard it is stated that mere receipts of loan through banking channel are not enough to prove genuineness of the transactions.
10.1 In view of the above discussion and adverse finding of the DDIT(Inv) in the commission report, the unsecured loan received during the year of Rs.4,15,00,000/-, are treated as income of & 6082/Mum/2024 Jamini Industries Private Limited the assesse u/s 68 of the I T Act, 1961. Penalty proceedins u/s 271(1)(c) of the Act, ‘for furnishing of inaccurate particulars of income”. Addition: Rs.4,15,00,000/-“ 7. The Ld.AR argued and filed two sets of paper books containing pages 1 to 489 which are kept in record. The Ld.AR stated that the assesse has taken loan from 17 parties and the DDIT(Inv) 1(1), Kolkata issued the summons u/s 131 to all the 17 parties; in 7 cases, summons were served by postal department and in case of 10 summons, the same were returned by the postal authorities with the remarks, “insufficient address”/ ”left”/”not known”. Subsequently, copy of the report of the investigation team was not considered by the Ld.AO in proper manner, but in an incomplete way. The Ld.AR invited our attention to APB page 196 where the DDIT(Inv) issued the letter bearing No. DDIT(Inv), U- 1(2)/ Kol/commission report/1920/4481 dated 18/12/2019 specifically mentioned in the last paragraph “in many cases, the parties have replied that registered address has been changed which is also evident from MCA. The submission of the aforesaid concerns are enclosed herein in original for your perusal and necessary action at your end.”
The ld.AR invited our attention to serial No.1 in the list of loan creditors, where, in case of “Aachman Marketing Pvt Ltd”, the address is mentioned in the summons is – “AD 319, Ravindra Pally, Estopur, Kolkata-700 101”. The Ld.AR further drawn our attention to APB page 442 where the “Aachman Marketing Pvt Ltd” informed the DDIT(Inv) by a letter dated 16/12/2019 where the address is mentioned as “7, Ganpat Bagla Road, Kolkata-700 001”. The said loan creditor by this letter confirmed the loan transaction with the party and the correct address is duly mentioned in the letterhead with CIN No. But without considering the same the Ld.AO made the addition on the basis of the report of the Commission.
& 6082/Mum/2024 Jamini Industries Private Limited 9. The Ld.AR respectfully relied on the order of the Ld.CIT(A). The observations of the Ld.CIT(A) in impugned appellate order page 34 to 41 is reproduced as below:- “I have looked at the facts of the case. The moot point for adjudication is whether the AO was justified in treating the unsecured loans aggregating to Rs.4,05,00,000/- that had been raised by the assesse during the year, inter alia from eight (8) bodies corporate, as unexplained income under Section 68 of the Act, in the light of evidence brought on record. I find that the assesse, in the course of assessment proceedings, has brought on record the particulars of loan creditor companies including name, complete address and PAN, the mode of receipt of each loan; the bank statement of the assessee company; loan confirmations; IT Acknowledgement, financial statements, ROC master data proof of address of the loan creditors, etc. The AO is noted to have commissioned enquiry into the loan creditors through the DDIT(Inv), Kolkata who had furnished his report dated 18.12.2019. The relevant extracts of his report, as taken note of, is as follows:-
Sr.No. Name of the loan Parties Address Status of Remarks summon 1 AACHMAN MARKETING AD 319, Summons was Submission PVT LTD RABINDRA returned back by received but PALLY,ESTOPUR, the postal none was KOLKATA- department with appeared for 700101 comments recording address cannot statement be located again summons sent through mail 2 CYNDRELLA TIE UP PVT LTD GANESH Summons was Submission CHANDRA served through received but AVENUE, P HARE postal none was STREET, department appeared for KOLKATA- recording 700013 statement 1ST 3 JAGANNATH FLOOR, Summons was Submission BANW3ARILAL TEXTILES SADASUKH served through received but PVT LTD KATRA, 201, B M postal none was G ROAD, department appeared for KOLKATA-700 recording 007 statement & 6082/Mum/2024 Jamini Industries Private Limited 1ST FLOOR, ALOK 4 MEGHNA SARE EMPORIUM Summons was Submission PVT LTD HOUSE, 63, returned back by received but BENTICK STREET, the postal none was LAL BAZAR department with appeared for KOLKATA-700 comments recording 001 address cannot statement be located again summons sent through mail 5 ONKARMAL CONSULTANCY 8, GANESH Summons was Submission PVT LTD CHANDRA served through received but AVENUE, P HARE postal none was STREET, department appeared for KOLKATA-700 recording 013 statement 6 SHREE SHYAM MERCHANTS 11, SIR HARIRAM Summons was Submission PVT LTD GOENKA STREET, served through received but BARABAZAR, postal none was KOLKATA-700 department appeared for 001 recording statement 1ST FLOOR, ALOK 7 STARLIT PHARMCEUTICALS Summons was Submission PVT LTD HOUSE, 63, returned back by received but BENTICK STREET, the postal none was LAL BAZAR, department with appeared for KOLKATA-700 comments recording 001 address cannot statement be located again summons sent through mail 8 RAVIPRAKASH 11, SIR HARIRAM Summons was Submission COMMERCIAL PVT LTD GOENKA STREET, served through received but BARABAZAR, postal none was KOLKATA-700 department appeared for 001 recording statement
The AO has relied on the above report and has accordingly averred that the identity of the loan creditors remained unproved and also that mere receipt of loan through banking channels was not sufficient to prove the genuineness of the loan transactions. The appellant, on the other hand, has submitted that, the fact that notices were served by registered post on five (5) parties & 6082/Mum/2024 Jamini Industries Private Limited and that each of them had also furnished the documents requisitioned by DDIT(Inv), Kolkata in his office, proves their identity. In respect of remaining three (3) loan creditors, whose notices were not served, the appellant showed that, two loan creditors M/s Starlit Pharmaceuticals Pvt. Ltd &M/s Meghna Saree Emporium Pvt. Ltd. were associate non- banking financial companies (NBFC) holding valid registrations with RBI which had advanced loans to the appellant and that the DDIT had erroneously sent the notice on incorrect address, viz., the notice was sent on 63, Bentinck Street, Kolkata which was a non-existent location whereas the correct address, as was discernible from ROC as well as the RBI records, was 6B, Bentinck Street, Kolkata. In respect of loan creditor, M/s Aachman Marketing Pvt. Ltd, it was shown that the AO had erroneously shared their erstwhile address with the DDIT(Inv), Kolkata, in spite of the fact that the appellant had intimated its new address. As a consequence, the notice was sent on their old address instead of their new / current address at which the said lender company operated, at the time of the impugned assessment. The appellant also showed that, each of these three (3) loans creditors had specifically brought this mistake to the notice of the DDIT(Inv), Kolkata as well, while responding to the latter's email inquiry. On the issue of non-appearance, according to appellant, the same was not of any consequence. The appellant has explained that unlike shareholder, the relationship with the lender is not a continuing one and that the lender always functions from a position of strength and dictates the terms of the transaction. The appellant submitted that the loans had been repaid along with interest and therefore since, the transactional relationship was over, the appellant was in no position to ensure their personal attendance, if they chose not to attend. Instead, according to the appellant, each of these eight (8) loans creditors had inter alia furnished documentary evidences in support of the loans advanced to the appellant, viz. their ROC master data, registration certificates, financial statements, ITR Acknowledgements, source of funds out of which loans were advanced, TDS statements, returns filed with the ROC etc. The appellant contended that each of these lenders had sufficient own funds to advance the loans and that all the loans carried commercial rates of interest in as much as the loans were also repaid subsequently. According to the appellant therefore, the identity and creditworthiness of these & 6082/Mum/2024 Jamini Industries Private Limited creditors and the genuineness of these transactions could not be doubted only because these lenders did not appear before the DDIT(Inv), Kolkata. It is hence noted that the main thrust for making the impugned addition was the non- attendance of summons by the directors. The AO as well as the Ld. DDIT(Inv), Kolkata are however noted to have not objectively examined the documents and details furnished by these loan creditors in support of the loans, which was the express directions of the Hon'ble ITAT, Mumbai. I therefore deem it necessary to first examine the documents and evidences furnished by the appellant and loan creditors in support of the loans, which has been discussed hereunder. From the details on record, it is noted that maximum amount of loan i.e. Rs.1,40,00,000/- was obtained by the appellant from M/s Jagannath Banwarilal Textiles Pvt. Ltd. which is noted to be the group flagship company. It is observed that, M/s Jagannath Banwarilal Textiles Pvt. Ltd. and the appellant have been promoted by the Khaitan family who are engaged in the business of manufacture and marketing of sarees and textile products. M/s Jagannath Banwarilal Textiles Pvt. Ltd. is noted to have been in this business since 1996 and that the turnover for the year was Rs.90,94,373/-, profit of Rs. 12,59,539/- and has paid taxes of Rs.3,95,366/- The own funds of M/s Jagannath Banwarilal Textiles Pvt. Ltd. is noted to be Rs.346.78 lacs. The shareholding pattern as well as Directors of M/s Jagannath Banwarilal Textiles Pvt. Ltd. and the appellant are found to be common. These facts show that this particular loan was obtained from group operating entity and therefore there was no reason to doubt the identity or genuineness of the transaction. This shows that, the AO had not objectively examined the facts but simply followed the report of the DDIT and made the impugned addition on the sole premise that the director of lender did not appear. In my considered view, such action of the AO was not justified. Similarly, it is noted that loans aggregating to Rs. 1,50,00,000/- was received from two active Non-Banking Financial Companies ('NBFCs') i.e., M/s Meghna Saree Emporium Pvt Ltd & M/s Starlit Pharmaceuticals Pvt. Ltd. Both these NBFCs are noted to hold valid RBI registrations and it is discernible that these lenders had advanced loan in their usual course of business of money lending. Both these lenders are noted to have sufficient own funds, viz., Rs.650.94 lacs and Rs.618.93 lacs to advance the loans of Rs.150 lacs. These loans are noted to have carried commercial rates of interest of 12% which was paid after deduction of TDS and that these loans & 6082/Mum/2024 Jamini Industries Private Limited were also later on repaid in full. These lenders have also furnished their IT Acknowledgments which shows that they are regular income-tax assessees and their bank statements also evidences the source of funds. Having regard to these contemporaneous facts, these loans are also noted to have been substantiated by the appellant /loan creditor. Likewise, it is noted that loan of Rs. 46,00,000/- was obtained from M/s Onkarmal Consultancy Pvt. Ltd. which had furnished all relevant contemporaneous evidences in support of the loan advanced to the assessee. This lender also is noted to have operating turnover of Rs.255.84 lacs and own funds of Rs. 1044,02 lacs. The lender is noted to be an income-tax assessee and the bank statement evidences the source of funds. Similarly, the remaining aggregate loan of Rs.79,00,000/- is noted to have been obtained from four (4) parties, whose details have been extensively discussed by the appellant at Para 3.5 of the written submissions. Upon examination and verification of the same, it is noted that each of these lenders had furnished all relevant supporting documents viz. loan confirmations, explanation as to source of funds, ITR acknowledgement, audited financial statements and bank statements which evidenced their identity, creditworthiness and also genuineness of the transactions. I thus find that, the appellant has discharged the primary onus cast upon it to substantiate the unsecured loans received by it during the year. The identity of the loan creditor companies is established as all of them have PANs and are found to be have been regularly filing their respective returns of income. The creditworthiness of the loan creditors is established from the audited balance sheets and profit and loss accounts that had been furnished. The genuineness of the transaction is established form the fact that the loans carried commercial rates of interest which was paid after deduction of TDS and that both the acceptance and repayment of loan has been effected through banking channel, as evidenced from the bank statements of the loan creditors and the appellant.” for AY 2015-16 10. The Ld. DR argued that the entire addition made by the Ld. AO was based on the Commission’s report for A.Y. 2014-15. She submitted that the addition was & 6082/Mum/2024 Jamini Industries Private Limited made on account of lack of identity, as the loan creditors did not appear before the revenue authorities. She further contended that the Commission, by issuing a notice under section 131 of the Act dated 07/11/2017, initiated verification proceedings, and on the basis of such verification, it was found that out of the total unsecured loan of Rs.5.72 crores obtained by the assessee from different parties, the transactions had already been treated as bogus in A.Y. 2014-15. Therefore, following the order for A.Y. 2014-15, the entire amount of Rs.5,72,00,000/- was added under section 68 of the Act, and the interest payment of Rs.63,29,161/- on such bogus loans was also disallowed as a bogus expenditure.
The Ld. DR invited our attention to assessment order page 14, para 3.6, which is reproduced as below: - “3.6 Therefore, in view of the assessment order of A.Y. 2014-15 and the commission report received from the Investigation Wing, Kolkata, it is clearly seen that the bogus unsecured loan is a recurring issue in the assessee's case. The same parties which could not be traced by the Investigation Wing, Kolkata were involve in providing the unsecured loan entries to the assessee. Further the reliance is placed on the judgment of Hon'ble Supreme Court in the case of M/s. N.R. Portfolio vs CIT [(2013) (263 ITR 456) (Delhi)] where it was held that if the parties are not traceable, the addition u/s. 68 of the 1.T. Act, 1961 will be upheld. The loans received Rs.5,72,00,000/- are treated as income of the assessee u/s 68 as the explanation given for those entries is not found satisfactory. The interest payments made on them of a sum of Rs.63,29,161/- are hereby disallowed as expenditure on bogus loans has to be disallowed as well. The penalty u/s. 271(1)(c) of the I.T. Act, 1961 is initiated for the concealment of particulars of income.”
The Ld. AR filed two sets of paper books comprising pages 1 to 722, which are placed on record. During the course of arguments, the Ld. AR submitted that & 6082/Mum/2024 Jamini Industries Private Limited the Ld. AO had carried out no independent verification in the impugned assessment year, but merely relied upon the Commission’s report and thereby drew an erroneous assumption regarding the alleged loan creditors. It was pointed out that the Ld. CIT(A), after conducting verification, had concluded that out of 18 loan creditors, only 4 pertained to A.Y. 2014-15 as per the Commission’s report. In contrast, the Ld. AO had incorrectly treated 14 loan creditors as being related to A.Y. 2014-15. The Ld. AR further submitted that, both during the assessment proceedings and in appeal, complete documentary evidence had been furnished for each loan creditor, including: copy of ledger account, loan confirmation, I.T. acknowledgement for F.Y. 2015-16, audited financial statements for F.Y. 2015-16, and relevant bank statements. These documents are compiled in the assessee’s paper book at pages 392 to 727.
The Ld. AR further placed reliance upon the relevant paragraphs of the impugned appellate order pages 44 t0 45, which are reproduced hereunder: –– “From the assessment order, it is noted that, the AO observed that the appellant had obtained fresh loans of Rs.5,72,00,000/- from eighteen (18) loan creditors whose details were tabulated at Para 3.1of the assessment order. The AO is noted to have issued show cause dated 21.12.2017 as to why these loans should not be treated as bogus u/s 68 of the Act, as according to him, these loans were obtained from non-existent or bogus entities. The basis of this show cause was stated to have emanated from a commission report dated 07.11.2017. In response, the appellant is noted to have filed detailed submissions on 28.12.2017, which has been reproduced extensively by the AO at Pages 5 to 8 of the assessment order. It was particularly pointed out by the appellant that, although the show cause mentioned a commission report dated 07.11.2017 but it was not provided to the appellant. In response, the AO is noted to have uploaded the report of the commission on ITBA portal on 28.12.2017, which is noted to be commission report, pertaining to enquiries made regarding the loan creditors for the preceding AY 2014-15. It is noted that there & 6082/Mum/2024 Jamini Industries Private Limited was no commission report in relation to the specific loans and lenders pertaining to the relevant AY 2015-16. Instead, the AO is noted to have simply relied on the commission report of earlier AY 2014-15 and the findings recorded in the assessment order for earlier AY 2014-15 and held that the loans of Rs.5,72,00,000/- obtained during the year was bogus as well and accordingly added the same u/s 68 of the Act. In the appellate proceedings, objecting to this action of the AO, the appellant has urged that, the reliance placed by the AO on the commission report and assessment order for the earlier AY 2014- 15 was erroneous and unjustified. The appellant firstly pointed out that, out of the eighteen (18) loan creditors involved in the relevant AY 2015-16 only four (4) loan creditors were common and found mention in the commission report for AY 2014-15 and therefore the AO's action of disbelieving the genuineness of the new fourteen (14) loan creditors without making any inquiry whatsoever in this regard or pointing out any infirmity in the documentary evidences placed on record was completely unjustified. With regard to the common four (4) loan creditors, the appellant explained that the earlier commission report dated 07.11.2017for AY 2014-15 had already been rejected by the Ld. CIT(A)-9, Mumbai in his order dated 27.06.2017passed for AY 2014-15. It is noted that, the Hon'ble ITAT, Mumbai had set aside the matter for fresh consideration and thereafter a new commission report was called for, which was issued by DDIT (Inv.), Kolkata on 18.12.2019 in which it was stated that notices were served on these four (4) parties and replies were received but the directors did not personally appear. The appellant has therefore contended that, the earlier commission report dated 07.11.2017 for AY 2014-15 was no longer of any relevance in as much as the findings in the original assessment order for AY 2014- 15 had also been set aside and therefore the basis on which the AO made the impugned addition in the relevant AY 2015-16 was no longer in existence. The appellant has further elaborated on the documentary evidences furnished in relation to the loan creditors from whom loans of Rs.5.72.00.000/-was received during the year and has submitted that the identity and creditworthiness of the lenders were substantiated and genuineness of transactions stood proved. The appellant has accordingly claimed that the addition made u/s 68 of the Act ought to be deleted.”
& 6082/Mum/2024 Jamini Industries Private Limited 14. We have heard the rival submissions and perused the material available on record. Assessment Year 2014-15 The addition under section 68 was made on the ground of lack of identity of the loan creditors during verification proceedings conducted by the Commission. The Ld. AO relied solely upon the report of the Commission. On careful examination, we find that the assessee had duly discharged the onus cast upon it by furnishing all relevant documents both before the Commission as well as before the Ld. AO. As regards the non-delivery of notices, it is evident that the Commission had erred in mentioning incorrect or outdated postal addresses of the loan creditors. It is pertinent to note that all the loan creditors are companies duly registered with the MCA, and their correct addresses were readily available on the MCA portal. The Commission itself admitted that the parties had already intimated the correct details, and in its report dated 18/12/2019, the Commission acknowledged this fact and annexed the updated addresses. This factual position also stands conceded by the Ld. CIT(A) in the impugned appellate order. During the course of hearing, the Ld. AR invited our attention to the assessee’s reply dated 26/12/2016 filed before the DCIT, Range-4(2)(2), Mumbai, in response to the show-cause notice, wherein the assessee had submitted the following documents in support of the genuineness of the loan creditors: Covering letters from loan creditors; Photographs of signboards affixed at their office premises; Proof of filing of ITR for A.Y. 2014-15; Original loan confirmation letters; & 6082/Mum/2024 Jamini Industries Private Limited Certified copies of bank statements evidencing payments through account- payee cheques; and Certified audited accounts for F.Y. 2013-14. Without appreciating or considering the above evidences, the Ld. AO proceeded to make the entire addition. In our considered view, the observation of the Ld. AO is unsustainable. We, therefore, uphold the findings of the Ld. CIT(A). Consequently, the grounds raised by the revenue for A.Y. 2014-15 stand dismissed. Assessment Year 2015
16. In this year, the Ld. AO confirmed the addition once again by placing reliance upon the Commission’s report pertaining to A.Y. 2014-15. However, the Ld. CIT(A), after conducting independent verification, recorded a categorical finding that out of 18 loan creditors, only 4 were common with those covered by the Commission’s report for A.Y. 2014-15. The Ld. CIT(A) further verified the records and confirmed the identity, creditworthiness, and genuineness of the loan transactions through the banking channel. It is thus evident that the Ld. AO made the impugned addition merely on the basis of the earlier Commission’s report without carrying out any fresh or independent verification in this assessment year. In our view, the order of the Ld. CIT(A) is reasoned and based on due verification of facts. We find no infirmity therein warranting interference. Accordingly, the grounds raised by the revenue for A.Y. 2015-16 are also dismissed.