ACIT-CC-7(3), MUMBAI vs. CALCULUS PROPERTIES PRIVATE LIMITED, MUMBAI

All the three appeals have common issues relating to unsecured loans taken by the assessee, interest thereon and repayment thereof relating to ten different parties involved in all the three years. Since the issues involved are common, we take up all the three appeals together for adjudication by passing this consolidated order.

1. Ld. Assessing Officer has made the addition in respect of unsecured loans received by the assessee during the year u/s. 68. He has also made addition in respect of interest u/s. 69C on these loans including those which are appearing as opening balances and has further made addition in respect of repayment of these loans by applying section 69. 2.2. We take up appeal for Assessment Year 2011-12 in ITA No.612/Mum/2025 as the lead case to draw the facts and our observations and findings arrived herein shall apply mutatis mutandis to the other two appeals. Assessee has furnished paper book for each of the appeal to demonstrate and establish the identity and credit worthiness of the lenders and genuineness of the transactions. Assessee has also placed on record certain charts to submit in concise manner, how the treatment has been given by the ld. Assessing Officer for all the ten parties in the three different assessment years in appeal before us. It has also placed on record a compilation of judicial precedence whereby six parties out of the ten parties have been held to be genuine in the decisions of the coordinate bench in different cases. All of these are taken into consideration while adjudicating the three appeals before us. Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

Brief facts of the case are that assessee is engaged in the business of real estate, property and project development and also deals in trading of shares and stocks. Assessee filed its return on 27.11.2014 reporting a total loss of Rs.2,97,997/-. Present appeal is the second round of litigation, since in the first round, coordinate bench had set aside the matter back to the file of ld. Assessing Officer on the appeal filed by the department, with a direction to carry out further necessary investigation/verification as to whether the amount of loan along with interest was repaid by the assessee or not. Ld. Assessing Officer was also directed to bring on record any other evidence to prove that loans were not genuine. The said direction was given by the Coordinate Bench vide its order dated 27.12.2018. The direction so given is reproduced for ready reference. “Therefore, keeping in view the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to carry out further necessary investigations /verification as to whether the amount of loan along with interest, if any, was repaid by the assessee or not and thereafter pass afresh order. The AO is also at liberty to bring on record any other evidence to prove that loans were not genuine. It is needless here to mention that before passing afresh order of assessment, the AO shall provide sufficient opportunity of to the assessee.”

In the year under consideration, assessee had taken unsecured loans of Rs.12.30 Crores out of which ld. Assessing Officer in the second round has made addition of Rs.75 lakhs in respect of two lender parties. Ld. Assessing Officer has also disallowed claim of interest expenditure on the said two loans as well as on two other loans of parties which had opening balance of unsecured loan. The details of the additions so made in the second round of litigation is tabulated below: Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

1. In the set aside proceedings, assessee was asked to submit the details and documents to prove the genuineness of the loans and details of their repayment. Ld. Assessing Officer also issued notices u/s. 133(6) to all the four lenders, two from whom fresh loans were taken, totalling to Rs.75 lakhs and the other two in whose case interest expenditure was added u/s. 69C. Out of the four parties, only one, i.e. Link Point Infrastructure Limited complied with the said notice. Assessee was also asked to produce the four lender parties for verification for which it expressed its inability by stating that parties won't comply with this request as the loans have already been repaid. On this, assessee requested the ld. Assessing Officer to issue summons to the said parties for necessary verification required by him. ld. Assessing Officer took an adverse view on expression of this inability by the assessee. He relied on the findings of the Investigation Wing, Kolkata in the case of Shri Praveen Agarwal where it was held that the said companies were used for providing accommodation entries and thus, completed the assessment by making an addition of Rs.75 lakhs as unexplained cash credits u/s. 68 and of Rs.9,53,322/- as unexplained expense u/s.69C. Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

2. In order to establish the identity and credit worthiness of the lender parties and genuineness of the transactions, assessee submitted all the corroborative documentary evidences which are placed on record. Details of the same is listed below: A. Alishan Estate Pvt. Ltd. i. Copy of assessee bank statements highlighting the bank transaction for loan ii. Copy of acknowledgement of return filed by Alishan Estate Pvt. Ltd. iii. Copy of loan conformation iv. Copy of financial of Alishan Estate Pvt. Ltd.

3. On these set of documents and details furnished by the assessee, ld. Assessing Officer did not make any further enquiries so as to bring on record the evidences to establish that the loans were not genuine which would have met the compliance requirement of the direction of the coordinate bench so given. ld. CIT(A) analysed the documents and details furnished by the assessee for each of the lender parties and arrived at a conclusion that assessee has discharged its onus Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

5. In the case of the other lender M/s Alishan Estates Pvt ltd, the returned income for AY 2011-12 is Rs 4,41,908/-. It has reserves and surplus of Rs 36,34,78,814/-/-. The amount of Rs 30,00,000/- has advanced to the appellant company by RTGS on 28/4/2010. Interest of Rs 1,56,575/- has been has been paid by the appellant company on 6/1/2011. TDS of Rs 15658/- has been deducted. The appellant company has paid repaid an amount of Rs 30,00,000/- on 6/1/2011. i.e. in the same financial year. I am of the view that the appellant has provided the documents in support of genuineness of the loan.”

Keeping the direction of the Coordinate Bench in the context, it is noted that ld. Assessing Officer has based his findings on the investigation wing in the case of Shri Praveen Agarwal. No new evidence has been brought on record by the ld. Assessing Officer to prove that the loans are not genuine. No attempt has been made to establish the trail of funds from the assessee to the lender to indicate that the funds of the assessee are routed back in the form of unsecured loans. The only factor which ld. Assessing Officer has stressed upon is that assessee has not complied with the notices issued u/s. 133(6) and has not produced the lender companies for examination and thus, resorted to an adverse view.

1. Admittedly, it is a fact on record that the loans taken by the assessee have been repaid which has been established with corroborative documentary evidences. The stand taken by the assessee Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

2. In respect of addition made u/s. 69C towards interest expense on these loans, since the loans from the two lenders namely, Abhilasha Export Pvt. Ltd. and Alishan Estates Pvt. Ltd. have been upheld to be genuine and the addition so made has been deleted, the interest on the same is also an allowable expenditure and the addition so made u/s. 69C is not justified.

3. In respect of interest to the other two parties, it is noted that the loans were not taken in the year under consideration, but are opening balance from the earlier years. No addition has been made u/s.68 in respect of these loans from Suryamukhi Projects Pvt. Ltd. and Linkpoint Infrastructure Pvt. Ltd. Further, assessee has placed on record relevant documents to establish the genuineness of these parties. Thus, the interest expenditure on the outstanding loan brought forward as an Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

4. In the result, appeal by the Revenue for Assessment Year 2011- 12 is dismissed.

In appeal for Assessment Year 2012-13 in ITA No. 613/Mum/2025, the details of additions made is tabulated below: Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

1. Additions made by the ld. Assessing Officer are on three counts. First, unexplained cash credit u/s.68 of Rs. 1,45,00,000/-; second, unexplained investment u/s.69 of Rs. 73,00,000/-; and third, unexplained expenditure u/s. 69C of Rs.18,26,044/-. It is worth noting that not only the addition has been made for loan taken by the assessee Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

2. From the above table, it is noted that exhaustive details were furnished on record and the same forms part of the paper book placed before us. The index of the paper book containing the aforesaid details is reproduced for ready reference: Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15 Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

3. Ld. Assessing Officer did not point out any deficiency or defect in the details so furnished by the assessee. However, assessee was asked to produce the parties in person for verification which assessee could not. This led to an adverse view taken by the ld. Assessing Officer for making the addition. However, ld. CIT(A) analysed and examined the Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

From the factual analysis as stated above and the corroborative documentary evidence placed on record, it is evident that assessee has discharged its onus casted u/s. 68 of the Act to establish identity of the lender companies and their creditworthiness as well as genuineness of the transactions. The onus was on the Assessing Officer to prove that the loans are not genuine for which nothing cogent has been brought on record except for findings of the investigation wing in the case of Shri Praveen Agrawal group. There is nothing on record to establish trail of funds from the assessee to the lender company so as to indicate that assessee's funds have been routed back to it in the form of unsecured loans. It is also evident that the lender companies are going concerns having sufficient reserves and surplus to advance loan to the assessee which has been undertaken through proper banking channel. Due interest has been paid by the assessee which has been subjected to TDS. More importantly, the entire loan taken by the assessee has been repaid along with interest for which relevant documentary evidences are placed on record.

1. In respect of addition of Rs.18,26,044/- u/s. 69C, it is noted that the same represents interest on the unsecured loans taken from 9 parties by the assessee. According to the ld. Assessing Officer, since these loans were treated as non-genuine, the interest payment thereon was added as unexplained expenditure u/s.69C.

2. Ld. CIT(A) has given his fact-based findings on the submissions made by the assessee. From the perusal of the same, it is noted that out of the 9 parties, loan from four parties namely Skylight Distributors Pvt. Ltd., Jagaddhatri Deelcom Pvt. Ltd., Suryamukhi Projects Pvt. Ltd. and Link Point Infrastructure Pvt. Ltd. were taken in the earlier years. No Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

3. In respect of the other four parties wherein the additions were made u/s. 68 for loans taken during the year, the same have been held to be genuine and the addition so made u/s.68 has been deleted. These four parties are Samparg Advisory Services Pvt. Ltd., Parmeshwar Merchandise Pvt. Ltd., Shridhan Jewelry Pvt. Ltd. and Neel Kamal Deelcom Pvt. Ltd. Since unsecured loans from these parties has been treated as genuine, the interest payment on the same are also held to be genuine and allowable. Addition so made by ld. Assessing Officer u/s.69C is not justified and is deleted. The findings arrived at by ld. CIT(A) are thus, upheld.

4. In respect of unsecured loan from Abhilasha Exports, the said loan has been treated as genuine while adjudicating appeal for Assessment Year 2011-12 in the above paragraphs. The addition made by ld. Assessing Officer u/s.68 in that Assessment Year has been deleted. Accordingly, interest on the said loan added by the ld. Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

5. Considering the overall facts and circumstances as discussed above, the entire addition of Rs.18,26,044/- u/s.69C towards interest expense on unsecured loans is deleted. The findings arrived at by ld. CIT(A) are thus, upheld.

Furthermore, there is an addition of Rs.73 lakhs u/s.69 on account of repayment of loans which has been treated unexplained investment by the ld. Assessing Officer. Assessee has made repayment of loan to the two parties namely, Skylight Distributions Pvt. Ltd. which had the opening balance of loan and part of it was paid during the year amounting to Rs.53 lakhs. The second party is Abhilash Exports Pvt. Ltd., to which Rs.20 lakhs was repaid, out of Rs.45 lakhs taken in the preceding years, i.e. Assessment Year 2011-12. According to the assessee, these amounts represents repayment of unsecured loan and not investment as contemplated u/s. 69 of the Act. These loan repayments are through proper banking channel and duly accounted for in the books of accounts. In the case of repayment to Abhilash Exports Pvt. Ltd., the unsecured loan taken during the year Assessment Year 2011-12 has already been upheld to be genuine and the additions so made in this respect has been deleted. The repayment of the said loan cannot be treated as unexplained investment as done by ld. Assessing Officer by applying section 69. In respect of the repayment of Rs.53 lakhs to Skylight Distributions Pvt. Ltd., assessee has placed on record the relevant documents based on which it is noted that assessee had taken loan of Rs.15 lakhs and Rs.1 crore in Assessment Year 2010- Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

1. Provisions of section 69 are applicable only if any investment is found to be made outside the books of accounts. In the present case, the repayments of unsecured loan have been made through the bank account of the assessee and are duly recorded in the books. Accordingly, the addition so made by the ld. Assessing Officer, treating these repayments of loan as unexplained investment u/s.69 are deleted. The findings arrived at by ld. CIT(A) are upheld.

2. Considering the above discussion and factual matrix and the details and documents placed on record and adequately examined and verified by ld. CIT(A) to give his fact-based findings, the additions made by ld. Assessing Officer in Assessment Year 2012-13 are deleted and the findings so arrived at by ld. CIT(A) are upheld.

In the result, appeal of the Revenue for Assessment Year 2012-13 is dismissed.

In the appeal for Assessment Year 2014-15, in ITA No.616/Mum/2025, the details of additions made by ld. Assessing Officer on account of repayment of loans for which provisions of section 69 are applied and disallowance of interest paid on these loans which were repaid, by applying provisions of section 69C are tabulated below: Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

1. From the above tabulated details, it is noted that assessee repaid the loans taken by it in the preceding years from six parties. The additions made in respect of these parties in the preceding years i.e., 2011-12 and 2012-13, specially in the case of Sampark Advisory Services Pvt. Ltd. Parmeshwar Merchandise Pvt. Ltd. and Neelkamal Dealcomm Pvt. Ltd. have been upheld to be genuine and the additions made by ld. Assessing Officer u/s.68 in Assessment Year 2012-13 has Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

2. In respect of repayment of loan to Skylight Distributions Pvt. Ltd., we have already given our observations and findings, while dealing with the same party in Assessment Year 2012-13, when part repayment was made. In the year under consideration, assessee has repaid amount of Rs.62 lakhs for which addition has been made u/s.69. Our observations and findings given in respect of this party in Assessment Year 2012-13 applies mutatis mutandis in this year. Furthermore, in respect of the other two parties, namely, Jagadhatri Dealcomm Pvt. Ltd. and Suryamukhi Projects Pvt. Ltd., it is noted that the loans were taken by the assessee in the earlier years, which have not been added u/s.68 by the Revenue. In the year under consideration, assessee has only repaid the unsecured loans from the two parties taken in the earlier years. Corroborating all the documentary evidences placed on record, it is not a case of unexplained investments falling within the meaning u/s.69, all these loans and their subsequent repayments are have been duly recorded in the books of accounts in their respective years and therefore, the primary condition for applying section 69 is not satisfied.

3. The details of documentary evidences in respect of each of the six parties furnished by the assessee before the authorities below are placed in the paper book. The index of the paper book is reproduced for ready reference: Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15 Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

We have perused the findings and observations of ld. CIT(A), while dealing with the additions so made, who has elaborately analysed and examined the documents and explanations given by the assessee. The additions so made by ld. Assessing Officer u/s.69 on account of repayment of unsecured loans have been deleted by the ld. CIT(A) and we do not find any reason to interfere with the findings so arrived at. Accordingly, the additions so made ld. Assessing Officer u/s.69 are deleted and the finding of ld. CIT(A) thereon is upheld.

In respect of addition of Rs.11,43,658/- made u/s.69C on account of interest expense on the unsecured loans taken by the assessee from these six parties, since the loans have been treated as genuine in terms of above observations and finding, the addition so made by ld. Assessing Officer is uncalled for. Ld. CIT(A) has taken note of the factual matrix on this account. He has noted that these interest payments are through proper banking channel and have been subjected to TDS. These have been adequately disclosed and accounted for in the books of accounts. Furthermore, the entire loans along with interest have been repaid and therefore, the additions made by the ld. Assessing Officer were deleted.

1. Considering the overall factual matrix and the documentary evidences placed on record, corroborated by explanations furnished which has been adequately analysed by ld. CIT(A), we do not find any reason to interfere with the findings of ld. CIT(A), to uphold the deletion so made.

In the result, appeal of the Revenue for Assessment Year 2014-15 is dismissed. Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

Assessee has also placed on record a legal paper book whereby, assessee has demonstrated that out of the 10 parties, six lender parties have been dealt by the Coordinate Benches of ITAT in several other appeals, whereby these six lender parties have been held to be genuine, for which the additions made u/s.68 or 69 were deleted. The details of the judicial precedents, wherein the six parties have been dealt with by the Coordinate Bench is tabulated below: Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

1. From the perusal of the aforesaid decisions, we draw force for upholding the findings arrived at by the ld. CIT(A) in all the three appeals.

2. We also draw our force from the decision of the Hon’ble juri ictional High Court of Bombay in the case of PCIT v. Paradise Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Pan) wherein it was held that once the assessee has produced documentary evidence to establish the existence of the subscriber companies (lender companies in the present case), the burden would shift on the revenue to establish their case. We also draw our force from the decision of Hon’ble Industries Pvt. Ltd. 397 ITR 136 (Bom) wherein it was held that mere non-compliance of summon under section 131 would not disprove the transaction and other documents filed on record cannot be brushed aside by the Ld. Assessing Officer. Calculus Properties Pvt Ltd., AYs 2011-12, 2012-13 & 2014-15

3. Also, it is relevant to quote the decision of Hon’ble juri ictional High Court of Bombay in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR 100 (Bom) wherein it was held as under: “In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.''

In the result, all the three appeals by the Revenue are dismissed.