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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition made by the Assessing Officer for Rs. 37,23,906/- towards interest paid on an alleged unsecured loan from M/s. V R B Capital Services Pvt Ltd. The AO treated M/s. V R B Capital Services Pvt Ltd. as a bogus entity providing accommodation entries. The assessee claimed no new loan was obtained during the relevant period and produced documentary evidence, including PAN, ITR, annual accounts, and bank statements of the lender, establishing its identity and creditworthiness.
Held
The Tribunal held that the loan transaction had been found to be genuine in a previous appeal for AY 2016-17, which order was confirmed by the Tribunal and had attained finality. Therefore, the disallowance of interest could not be sustained. The Tribunal found no reason to interfere with the CIT(A)'s order.
Key Issues
Whether the addition made by the AO towards interest paid on an alleged unsecured loan is justified when the loan transaction has attained finality as genuine in a previous assessment year.
Sections Cited
69C, 142(1), 68
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Income Tax Appellate Tribunal, MUMBAI BENCHES “G”, MUMBAI
Before: Justice (Retd.) C V Bhadang, Hon’ble & Ms. Padmavathy S, Hon’ble
Per Justice (Retd.) C V Bhadang, President:
By this appeal the Revenue is challenging the order dated 29.11.2024 passed by the Commissioner of Income Tax (Appeals)-48 (‘CIT(A)’ for short) there by deleting the addition of Rs 37,23,906/- made by the Assessing Officer u/s. 69C towards interest paid on alleged unsecured loan obtained by the assessee from M/s. V R B Capital Services Pvt Ltd. The appeal relates to assessment year 2019-20.
The challenge is made on the following grounds:
(i) Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in not confirming the addition made by the AO
ITA 2942/Mum/2025 G M Modular Pvt Ltd. and has ignored the fact that there is physical evidence in the form of excel sheet which is directly related to the assessee therefore the addition made by the AO is justified? (ii) Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in relying on the net worth of the company as VRB capital services Pvt. Ltd. is a proven bogus entity? (iii) Whether on the facts and circumstances of the case and in law the Ld.CIT(A) has erred in relying on the fact that loan and interest has been given through banking channel ignoring the evidence found?
The brief facts necessary for the disposal of the present appeal are that during the relevant year the Assessing Officer had received information from Investigation Wing, Mumbai and “Insight Portal” indicating that the respondent assessee was beneficiary of bogus unsecured loans taken from M/s. Aneri Fincap Ltd. and M/s. V R B Capital Services Pvt Ltd. of Rs.2,73,98,455/-. The Assessing Officer noticed that the assessee had paid interest of Rs.37,23,906/- to M/s. V R B Capital Services Pvt Ltd. According to the Assessing Officer M/s. V R B Capital Services Pvt Ltd. was a bogus entity providing accommodation entries. The Assessing Officer issued notice u/s. 142(1) of the Act on 26.07.2023 and 17.08.2023 asking the respondent as to why the amount of Rs.2,73,98,455/- taken as loan from M/s. V R B Capital Services Pvt Ltd. and interest amounting to Rs.37,23,906/- should not be added as its income.
The assessee filed its reply stating that there was no outstanding loan during the relevant year obtained from M/s. Aneri Fincap Ltd. In so far as M/s. V R B Capital Services Pvt Ltd. is concerned, it was stated that no new loan was obtained from the said entity during the relevant period. The Assessing Officer did not accept the contention of the assessee and made the addition of ITA 2942/Mum/2025 G M Modular Pvt Ltd. Rs.37,23,906/- paid by appellant to M/s. V R B Capital Services Pvt Ltd. u/s. 69C of the Act.
In appeal, the learned CIT(A) has found that the assessee had produced documentary evidence pertaining to loan obtained from M/s. V R B Capital Services Pvt Ltd. The assesse had paid interest during the relevant year after deducting tax at source and it has been paid through proper banking channels. It was further noticed that the addition made by the Assessing Officer towards loan taken by the assessee from M/s. V R B Capital Services Pvt Ltd. amounting to Rs.4,50,00,000/- during F.Y. 2015-16 was challenged by the appellant before the learned CIT(A). The learned CIT(A) by a common order for A.Ys 2014-15 and 2016-17 has deleted the additions made u/s. 68 of the Act as well as the disallowance of interest u/s. 69C of the Act. That order has been confirmed by this Tribunal vide order dated 12.04.2023. It was also found that the assessee had produced the PAN and copy of ITR of M/s. V R B Capital Services Pvt Ltd., establishing its identity. It was further found that the assessee had produced annual accounts and bank statements of the lender which established its credit worthiness. In that view of the matter, the CIT(A) after having found the loan transaction as genuine held that the disallowance towards interest paid cannot be sustained. Feeling aggrieved the Revenue is in appeal.
We have heard parties. Perused record.
The learned DR has placed reliance on the order passed by the Assessing Officer. The learned DR submitted that in view of the possibility of the re- opening of assessment for A.Y. 2017-18 in view of the decision of the Supreme Court in Abhisar Buildwell (454 ITR 212), the issue about the receipt of the loan being an accommodation entry, is still at large and has not attained finality.
ITA 2942/Mum/2025 G M Modular Pvt Ltd.
It is submitted that therefore the Assessing Officer was justified in making the addition.
The learned AR has submitted that once the loan transaction was found to be genuine, which issue has attained finality by virtue of dismissal of appeal by this Tribunal for A.Y. 2016-17, the disallowance of interest cannot be sustained and has rightly been deleted.
We have considered the submissions made.
In this case there is a delay of 87 days in filing the appeal. It is contended that as per earlier scrutiny report, it was recommended not to challenge the order of the CIT(A). Subsequently, the matter was re-submitted and there was a recommendation to file appeal as the issue fell under the exception in para 3.1(h) of Circular No.5/2024 dated 15.03.2024. In pursuance of the subsequent report dated 20.03.2025, the appeal came to be filed resulting into a delay of 87 days.
Upon hearing the parties, we find that sufficient cause is made out for not filing the appeal within time. The delay is therefore condoned.
Coming to the merits, undisputedly, the addition made on account of unsecured loans obtained from M/s. VRB Capital Services Pvt Ltd. has been deleted by the learned CIT(A) in appeal for A.Y. 2016-17, which order has been confirmed by this Tribunal. It is undisputed that the matter has not been carried further and has attained finality. In such circumstances, we are of the considered view that merely on account of possibility of re-opening it cannot be said that as of now the issue has not attained finality as held by the Assessing
ITA 2942/Mum/2025 G M Modular Pvt Ltd.
Officer. We have gone through the reasoning articulated by the CIT(A) in para 6.4 and 6.5 of the order and we see no reason to interfere with the same. The appeal is without any merit and is accordingly, dismissed.
Order pronounced in the open court on 1st September, 2025.