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Facts
The Revenue appealed against the CIT(A)'s order deleting additions made for unsecured loans, commission expenses, and interest expenses. The Assessing Officer (AO) had treated the unsecured loans as unexplained cash credit and accommodation entries.
Held
The Tribunal upheld the CIT(A)'s decision, finding that the assessee had discharged the initial onus by providing loan confirmations, PAN of lenders, their income tax returns, bank statements, and balance sheets. The AO failed to conduct independent inquiries to disprove the genuineness of the transactions.
Key Issues
Whether the deletion of additions related to unsecured loans, commission, and interest expenses was justified, considering the assessee's evidence and the AO's investigation.
Sections Cited
68, 69C, 143(3), 133(6)
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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI RAJ KUMAR CHAUHAN
ORDER PER OM PRAKASH KANT, AM
This appeal by the Revenue is directed against order dated 09.07.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds:
1. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made of Rs.
Satyendra Kumar Triloknath Satyendra Kumar Triloknath 2 Goyal 1,75,00,000/ 1,75,00,000/- as unexplained cash credit u/s.68 of the I.T.Act, as unexplained cash credit u/s.68 of the I.T.Act, 1961 by the AO in respect of unsecured loans taken by the 1961 by the AO in respect of unsecured loans taken by the 1961 by the AO in respect of unsecured loans taken by the assessee from Bhanwarlal Jain who is an accommodation assessee from Bhanwarlal Jain who is an accommodation assessee from Bhanwarlal Jain who is an accommodation entry provider. entry provider.
2. On the fact 2. On the facts and circumstances of the case and in law, the s and circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made of Rs.5,25,000/ Ld.CIT(A) erred in deleting the addition made of Rs.5,25,000/ Ld.CIT(A) erred in deleting the addition made of Rs.5,25,000/- as unexplained expenditure u/s.69C of the I.T.Act, 1961 by AO as unexplained expenditure u/s.69C of the I.T.Act, 1961 by AO as unexplained expenditure u/s.69C of the I.T.Act, 1961 by AO in respect of commission paid on the said loans. in respect of commission paid on the said loans.
3. On the facts and circumstances 3. On the facts and circumstances of the case and in law, the of the case and in law, the Ld.CIT(A) erred in deleting the addition made of Rs.48,48,355/ Ld.CIT(A) erred in deleting the addition made of Rs.48,48,355/ Ld.CIT(A) erred in deleting the addition made of Rs.48,48,355/- (Rs. 38,86,191/ (Rs. 38,86,191/- + Rs. 9,62,164/-) by the AO on account of ) by the AO on account of interest expenses on interest expenses on the said loans.
Briefly stated, facts of the case are that the assessee is an Briefly stated, facts of the case are that the assessee is an Briefly stated, facts of the case are that the assessee is an individual and proprietor of M/s Peerless Construction, engaged in individual and proprietor of M/s Peerless Construction, engaged in individual and proprietor of M/s Peerless Construction, engaged in business of constructing buildings. The assessee filed his return of business of constructing buildings. The assessee filed his return of business of constructing buildings. The assessee filed his return of income on 28.09.2013 declaring total income of Rs.67,11,530/-. income on 28.09.2013 declaring total income of Rs.67,11,53 income on 28.09.2013 declaring total income of Rs.67,11,53 The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny The return of income filed by the assessee was selected for scrutiny and statutory notices under the and statutory notices under the Income-tax Act, 1961 (in short ‘the tax Act, 1961 (in short ‘the Act’) were issued and complied with. The assessment u/s 143(3) of were issued and complied with. The assessment u/s 143(3) of were issued and complied with. The assessment u/s 143(3) of the Act was completed on 26.02.2016 determining was completed on 26.02.2016 determining total income at was completed on 26.02.2016 determining Rs.2,96,94,882/- by way of making three additions, firstly by way of making three additions, firstly, addition by way of making three additions, firstly for unsecured loan of Rs.1,75,00,000/ for unsecured loan of Rs.1,75,00,000/- held as unexplained cash held as unexplained cash credit u/s 68 of the Act, secondly, the loans were held as credit u/s 68 of the Act, secondly, the loans were held as credit u/s 68 of the Act, secondly, the loans were held as accommodation accommodation accommodation entry entry entry and and and therefore, therefore, therefore, commission commission commission paid pa pa of Rs.5,25,000/- for obtaining such accommodation entry was held as for obtaining such accommodation entry was held as for obtaining such accommodation entry was held as unexplained expenditure u/s 69C of the Act, thirdly, the interest of unexplained expenditure u/s 69C of the Act, thirdly, the interest unexplained expenditure u/s 69C of the Act, thirdly, the interest Rs.48,48,355/- in respect of current year loan in respect of current year loan held held as unexplained
Satyendra Kumar Triloknath Satyendra Kumar Triloknath 3 Goyal as well as brought forward loans which were held as well as brought forward loans which were held as unexplained as unexplained, was treated as unexplained expenditure u/s 69C of the Act. was treated as unexplained expenditure u/s 69C of the Act. was treated as unexplained expenditure u/s 69C of the Act.
On further appeal, the Ld. CIT(A) deleted the addition On further appeal, the Ld. CIT(A) deleted the addition On further appeal, the Ld. CIT(A) deleted the additions relying on the decision of the Co on the decision of the Co-ordinate Bench of the Tribunal in the case ordinate Bench of the Tribunal in the case of the assessee for assessment year 2012 of the assessee for assessment year 2012-13. Aggrieved, the Revenue is in appeal before us, by way of raising grounds as Revenue is in appeal before us, by way of raising grounds as Revenue is in appeal before us, by way of raising grounds as reproduced above.
We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused We have heard rival submissions of the parties and perused the relevant materials on record the relevant materials on record. In the case of the assessee . In the case of the assessee allegation are that assessee had rec allegation are that assessee had received accommodation entry of eived accommodation entry of the unsecured loans from the entities controlled and operated by the unsecured loans from the entities controlled and operated by the unsecured loans from the entities controlled and operated by Shri Bhawarlal Jain, i.e. an , i.e. an accommodation entry provider. During accommodation entry provider. During the course of assessment proceedings, the the course of assessment proceedings, the Assessing Officer Assessing Officer issued notice u/s 133(6) of the Act notice u/s 133(6) of the Act to all such parties from whom, the to all such parties from whom, the assessee received loans. In response, those parties confirmed loan assessee received loans. In response, those parties confirmed loan assessee received loans. In response, those parties confirmed loan given to the assessee and also filed copy of their bank statements. to the assessee and also filed copy of their bank statements. to the assessee and also filed copy of their bank statements. The assessee also filed his bank statement and further explained The assessee also filed his bank statement and further explained The assessee also filed his bank statement and further explained that loans were repai that loans were repaid through account payee cheques and tax was d through account payee cheques and tax was deducted on the interest payment regularly. The Ld. CIT(A) observed deducted on the interest payment regularly. The Ld. CIT(A) deducted on the interest payment regularly. The Ld. CIT(A) that in the additions s were made in earlier year by the Assessing by the Assessing Officer on similar allegation of the receipt of unsecured loan by way Officer on similar allegation of the receipt of unsecured loan by way Officer on similar allegation of the receipt of unsecured loan by way of accommodation entry from the Bhawarlal Jain but the Co odation entry from the Bhawarlal Jain but the Co odation entry from the Bhawarlal Jain but the Co- ordinate Bench of the Tribunal ordinate Bench of the Tribunal after verification of after verification of documents of Satyendra Kumar Triloknath Satyendra Kumar Triloknath 4 Goyal identity, confirmation, bank statements etc identity, confirmation, bank statements etc held that assessee held that assessee discharged his onus onus of burden u/s 68 of the Act. u/s 68 of the Act. The relevant finding of the Co-ordinate Bench of the Tribunal in Bench of the Tribunal in ITA No. ordinate Bench of the Tribunal in ITA No. 5562/Mum/2017 for assessment year 2012 5562/Mum/2017 for assessment year 2012-13 is reproduced as 13 is reproduced as under:
“7. We have heard the rival submissions and perused the 7. We have heard the rival submissions and perused the 7. We have heard the rival submissions and perused the relevant material on record. The reasons for our decisions relevant material on record. The reasons for our decisions relevant material on record. The reasons for our decisions are given below. are given below. In the case of In the case of Bikram Singh (supra), relied on by the Ld. (supra), relied on by the Ld. DR, it is held that "where the AO made addition to DR, it is held that "where the AO made addition to DR, it is held that "where the AO made addition to assessee's income assessee's income u/s 68 in respect of loan taken from n taken from various parties, since the assessee failed to prove that various parties, since the assessee failed to prove that various parties, since the assessee failed to prove that any of those creditors had financial strength to lend such any of those creditors had financial strength to lend such any of those creditors had financial strength to lend such huge sums of money to assessee, that too without any huge sums of money to assessee, that too without any huge sums of money to assessee, that too without any collateral security, without interest and without a loan collateral security, without interest and without a loan collateral security, without interest and without a loan agreement, impugn agreement, impugned addition deserves to be confirmed". ed addition deserves to be confirmed". In the case of In the case of NRA Iron & Steel Pvt. Ltd. (supra), relied on (supra), relied on by the Ld. DR, the AO had issued summons to the by the Ld. DR, the AO had issued summons to the by the Ld. DR, the AO had issued summons to the representatives of the investor companies. Despite th representatives of the investor companies. Despite th representatives of the investor companies. Despite the summons having been served, nobody appeared on summons having been served, nobody appeared on summons having been served, nobody appeared on behalf of any of the investor companies. The Department behalf of any of the investor companies. The Department behalf of any of the investor companies. The Department only received submissions through dak, which created a only received submissions through dak, which created a only received submissions through dak, which created a doubt about the identity of the investor companies. doubt about the identity of the investor companies. doubt about the identity of the investor companies. Thereafter, the AO independently got field e Thereafter, the AO independently got field enquiries nquiries conducted conducted conducted with with with respect respect respect to to to the the the identity identity identity and and and creditworthiness of the investor companies and to creditworthiness of the investor companies and to creditworthiness of the investor companies and to examine the genuineness of the transaction. Enquiries examine the genuineness of the transaction. Enquiries examine the genuineness of the transaction. Enquiries were made at Mumbai, Kolkata and Guwahati, where were made at Mumbai, Kolkata and Guwahati, where were made at Mumbai, Kolkata and Guwahati, where these Companies were stated to be situated. On the these Companies were stated to be situated. On the these Companies were stated to be situated. On the basis of the detailed enquiries conducted, the AO held basis of the detailed enquiries conducted, the AO held basis of the detailed enquiries conducted, the AO held Assessment Year: 2012 Assessment Year: 2012-13 that the assessee had failed 13 that the assessee had failed to prove the existence of the identity of the investor to prove the existence of the identity of the investor to prove the existence of the identity of the investor companies and genuineness of the transaction. companies and genuineness of the transaction. As mentioned earlier, in the instant case the As mentioned earlier, in the instant case the entire focus entire focus of the AO was on the modus operandi adopted by of the AO was on the modus operandi adopted by of the AO was on the modus operandi adopted by Satyendra Kumar Triloknath Satyendra Kumar Triloknath 5 Goyal Bhanwarlal Jain Group of cases to provide bogus Bhanwarlal Jain Group of cases to provide bogus Bhanwarlal Jain Group of cases to provide bogus accommodation entries of loan. The main reason of the accommodation entries of loan. The main reason of the accommodation entries of loan. The main reason of the AO for making addition AO for making addition u/s 68 was on the b was on the basis of information provided by the Investigation Wing of the information provided by the Investigation Wing of the information provided by the Investigation Wing of the Department. No independent enquiry has been conducted Department. No independent enquiry has been conducted Department. No independent enquiry has been conducted by the AO as was done in by the AO as was done in NRA Iron & Steel Pvt. Ltd. NRA Iron & Steel Pvt. Ltd. (supra). In the case of In the case of Bikram Singh (supra), the assessee (supra), the assessee was unable to establish the identity, creditworthiness was unable to establish the identity, creditworthiness was unable to establish the identity, creditworthiness and genuineness of the said persons and transactions. and genuineness of the said persons and transactions. and genuineness of the said persons and transactions. As recorded by the Ld. CIT (A), during the course of As recorded by the Ld. CIT (A), during the course of As recorded by the Ld. CIT (A), during the course of assessment pro assessment proceedings, the assessee filed before the ceedings, the assessee filed before the AO (i) loan confirmations from lenders, (ii) PAN of the AO (i) loan confirmations from lenders, (ii) PAN of the AO (i) loan confirmations from lenders, (ii) PAN of the lenders, (iii) copy of the return of income of lenders, who lenders, (iii) copy of the return of income of lenders, who lenders, (iii) copy of the return of income of lenders, who advanced the loan, (iv) copy of bank account of lenders advanced the loan, (iv) copy of bank account of lenders advanced the loan, (iv) copy of bank account of lenders (v) copy of bank account of the assessee and (v) copy of bank account of the assessee and (vi) copy of (vi) copy of balance sheet and P & L account of the lenders. balance sheet and P & L account of the lenders. Therefore, the instant case is distinguishable from the Therefore, the instant case is distinguishable from the Therefore, the instant case is distinguishable from the above case laws relied on by the Ld. DR. above case laws relied on by the Ld. DR. 7.1 It is well settled that in order to discharge the onus 7.1 It is well settled that in order to discharge the onus 7.1 It is well settled that in order to discharge the onus u/s 68, the assessee must prove the following: , the assessee must prove the following: (i) the identity of the creditor, (i) the identity of the creditor, (ii) the capacity of the creditor to advance money; and (ii) the capacity of the creditor to advance money; and (ii) the capacity of the creditor to advance money; and Assessment Year: 2012 Assessment Year: 2012-13 (iii) the genuineness of the transaction. (iii) the genuineness of the transaction. After the assessee has adduced ev After the assessee has adduced evidence to establish idence to establish prima facie the aforesaid, the onus shifts to the prima facie the aforesaid, the onus shifts to the prima facie the aforesaid, the onus shifts to the department. In the instant case, though the onus shifted department. In the instant case, though the onus shifted department. In the instant case, though the onus shifted to the department, the AO has failed to make necessary to the department, the AO has failed to make necessary to the department, the AO has failed to make necessary enquiry to reject the contentions of the assessee. enquiry to reject the contentions of the assessee. In view of the above f In view of the above factual matrix and position of law, actual matrix and position of law, we uphold the order of the Ld. CIT (A). we uphold the order of the Ld. CIT (A).
8. In the result, appeal filed by the revenue is dismissed.
8. In the result, appeal filed by the revenue is dismissed.
In the result, appeal filed by the revenue is dismissed.”
Satyendra Kumar Triloknath Satyendra Kumar Triloknath 6 Goyal 4.1 We find that the Co We find that the Co-ordinate Bench(supra) while deciding relied on the following decision of the Co relied on the following decision of the Co-ordinate Bench : ordinate Bench :
1 ITANo. 6099/Mum/2016 DCIT (CC) ITANo. 6099/Mum/2016 DCIT (CC)-l(3)vs. M/s Jainam Investments Jainam Investments
2. ITANo. 1414/Mum/2017 DCIT 25(1) vs. M/s YRV ITANo. 1414/Mum/2017 DCIT 25(1) vs. M/s YRV International International
4. ITANo. 7049/Mum/2016 Asst CIT ITANo. 7049/Mum/2016 Asst CIT-19(1) vs. Shri Dilip Chimanlal Gandhi Dilip Chimanlal Gandhi
ITANo. 7047/Mum/2016 Jitendra M Kitawat (HUF) ITANo. 7047/Mum/2016 Jitendra M Kitawat (HUF) ITANo. 7047/Mum/2016 Jitendra M Kitawat (HUF) vs. ITO 18(1)(5) vs. ITO 18(1)(5) 7.
Smt. Ritu Kamal Singal Smt. Ritu Kamal Singal vs. ITO vs. ITO 21(3114) 4.2 Before documents identical to which had been filed in earlier Before documents identical to which had been filed in earlier Before documents identical to which had been filed in earlier year had been filed. year had been filed. Out of the list of parties from whom loans have Out of the list of parties from whom loans have been taken , the unsecured loan giver unsecured loan giver parties namely parties namely ‘Naukar Diamonds’ and ‘Naukar India Naukar India’ are also appearing in the list of the are also appearing in the list of the parties for assessment year 2012 parties for assessment year 2012-13 which has been allowed in 13 which has been allowed in favour of the assessee by the Co favour of the assessee by the Co-ordinate Bench (supra). Since ordinate Bench (supra). Since identical documents have been filed in respect of parties to justify identical documents have been filed in respect of parties to justify identical documents have been filed in respect of parties to justify the discharging of onus onus u/s 68 of the Act, we uphold the finding of u/s 68 of the Act, we uphold the finding of the Ld. CIT(A) on the issue in dispute in respect of addition of the the Ld. CIT(A) on the issue in dispute in respect of addition of the the Ld. CIT(A) on the issue in dispute in respect of addition of the Satyendra Kumar Triloknath Satyendra Kumar Triloknath 7 Goyal ITA No. 1113/MUM/2025 unsecured loan. Thebground No. 1 of the appeal of Revenue is Thebground No. 1 of the appeal of Revenue is Thebground No. 1 of the appeal of Revenue is dismissed.
4.2 As far as addition of the commission expenses is concerned As far as addition of the commission expenses is concerned As far as addition of the commission expenses is concerned same is in respect of unsecured loans s in respect of unsecured loans considered as unexplained considered as unexplained cash credits, which have already deleted which have already deleted by the ld CIT(A) and we by the ld CIT(A) and we have upheld said deletion while adjudicating ground no. 1 of have upheld said deletion while adjudicating ground no. 1 of have upheld said deletion while adjudicating ground no. 1 of appeal, therefore, consequent addition for the commission in therefore, consequent addition for the commission in therefore, consequent addition for the commission in respect of those entries is also de those entries is also deleted. The ground No. 2 of the leted. The ground No. 2 of the appeal is dismssed.
4.3 In respect of ground No. 3, the Ld. Counsel for the assessee In respect of ground No. 3, the Ld. Counsel for the assessee In respect of ground No. 3, the Ld. Counsel for the assessee has given list of the interest in respect of parties for the current has given list of the interest in respect of parties for the current has given list of the interest in respect of parties for the current year as well as the brought forward and in re year as well as the brought forward and in remark column given mark column given where the loan has been allowed by the ITAT or the Ld. CIT(A) where the loan has been allowed by the ITAT or the Ld. CIT(A) where the loan has been allowed by the ITAT or the Ld. CIT(A) against which no appeal is pending. The relevant detail of the against which no appeal is pending. The relevant detail of the against which no appeal is pending. The relevant detail of the interest payment is reproduced as under: interest payment is reproduced as under:
SR. TDS NAME, ADDRESS AND , ADDRESS AND INTEREST (Incl. TDS) Remarks PAN OF THE LOAN PAN OF THE LOAN NO. CREDITORS 1 Navkar India Rs. Rs. Loan allowed in appeal Loan allowed in appeal AY 12 AY 12-13 by ITAT 218,137 21,819 2 Rajan Diamonds 1,344,000 134,400 Loan allowed by CIT(A) in Loan allowed by CIT(A) in AY 2009 AY 2009-10 and ITAT in AY 12 AY 12-13 3 Mohit Enterprises 120,000 12,000 Loan allowed in Appeal Loan allowed in Appeal AY 12 AY 12-13 by ITAT
Satyendra Kumar Triloknath Satyendra Kumar Triloknath 8 Goyal ITA No. 1113/MUM/2025
4 Mukti Exports 120,000 12,000 Loan allowed in Appeal Loan allowed in Appeal AY 12 AY 12-13 by ITAT 5. Pushpak Gems 360,000 36,000 Loan allowed in Appeal Loan allowed in Appeal AY 12 AY 12-13 by ITAT S Navkar Diamond 380,054 38,005 Loan allowed in Appeal Loan allowed in Appeal AY 12 AY 12-13 by ITAT 7 Mehul Gems Pvt Ltd Mehul Gems Pvt Ltd 120,000 12,000 Loan allowed in Appeal Loan allowed in Appeal AY 12 AY 12-13 by ITAT 8 Daksh Diamonds 324,000 32,400 Loan allowed by CIT (A) Loan allowed by CIT (A) in AY 2009 in AY 2009-10 and ITAT in AY 12 in AY 12-13 9 Jewel Diam 120,000 12,000 Loan allowed by CIT (A) Loan allowed by CIT (A) in AY 2009 in AY 2009-10 and ITAT in AY 12 in AY 12-13 10 Kothari & Co. 120,000 12,000 Loan allowed by CIT (A) Loan allowed by CIT (A) in AY 2009 in AY 2009-10 and ITAT in AY 12 in AY 12-13 11 Minal Gems 360,000 36,000 Loan allowed by CIT (A) Loan allowed by CIT (A) in AY 2009 in AY 2009-10 and ITAT in AY 12 in AY 12-13 12 Rose Impex 300,000 30,000 Loan allowed by CIT (A) Loan allowed by CIT (A) in AY 2009 in AY 2009-10 and ITAT in AY 12 in AY 12-13
Total interest disallowed interest disallowed 3,886,191 388,624 4.3 Since the loans corresponding to the interest paid has already Since the loans corresponding to the interest paid has already Since the loans corresponding to the interest paid has already been allowed either by the Co been allowed either by the Co-ordinate Bench of the ITAT or the Ld. ordinate Bench of the ITAT or the Ld. CIT(A) and no appeal has been preferred against said finding of and no appeal has been preferred against said finding of and no appeal has been preferred against said finding of CIT(A), therefore, the interest paid in respect of those loans also therefore, the interest paid in respect of those loans also therefore, the interest paid in respect of those loans also stands allowed. We uphold the finding of ld CIT(A) on the issue in We uphold the finding of ld CIT(A) on the issue in We uphold the finding of ld CIT(A) on the issue in dispute. The ground No. 3 of the appeal of the Revenue is The ground No. 3 of the appeal of the Revenue is The ground No. 3 of the appeal of the Revenue is accordingly dismissed. accordingly dismissed.
Satyendra Kumar Triloknath Satyendra Kumar Triloknath 9 Goyal ITA No. 1113/MUM/2025
In the result, the appeal of the Revenue i In the result, the appeal of the Revenue is dismissed. s dismissed.
Order pronounced in the open Court on nounced in the open Court on 31/07/2025. /07/2025.