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Facts
The revenue filed an appeal against the CIT(A)'s order deleting an addition of Rs. 2,17,12,598/- made under Section 68 of the Income Tax Act on account of unsecured loans. The AO had made the addition believing the loans were accommodation entries based on a survey and a director's statement, but the assessee provided confirmations and other documents to prove the genuineness, identity, and creditworthiness of the lenders.
Held
The Tribunal held that the Assessing Officer erroneously noted that the director admitted the transactions were bogus. The statement showed the director agreed to submit details later. The assessee had provided sufficient documents to the CIT(A) to establish genuineness, identity, and creditworthiness, and that the loans were repaid. Thus, the CIT(A)'s deletion of the addition was upheld.
Key Issues
Whether the deletion of addition on account of unsecured loans by the CIT(A) was justified, considering the documentary evidence provided by the assessee to establish the genuineness, identity, and creditworthiness of the lenders.
Sections Cited
68, 147, 148, 144, 144B, 131, 133A, 250
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Before: SHRI NARENDER KUMAR CHOUDHRY, JUDICIAL & SMT. RENU JAUHRI
आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal has been filed by the revenue, for which the assessee has filed cross-objection, against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai-51 [hereinafter referred to as “CIT(A)”] dated 16.02.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2013-14.
The revenue has raised the following grounds of appeal:
1. Whether on the facts and circumstances of the case and in law, the Learned CIT (A) was justified in deleting the addition made under section 68 of the Income Tax Act on account of unsecured loans received from Dev Darshan Diamond Pvt Ltd, Sugan Exim Pvt Lt., Nikhil Gems Pvt Ltd, Frontline Diamond Pvt Ltd, and Rajat Diamonds Exim Pvt. Ltd despite the assessee's failure to prove the genuineness, identity, and creditworthiness of the parties even after being provided an opportunity by the Assessing Officer
1. 2. Whether on the facts and circumstances of the case and in law, the Learned CIT (A) was justified in deleting the addition made under section 68 of the Income Tax Act on account of unsecured loans received from Dev Darshan Diamond Pvt Ltd, Sugan Exim Pvt Lt., Nikhil Gems Pvt Ltd, Frontline Diamond Pvt Ltd, and Rajat Diamonds Exim Pvt. Ltd despite admission on oath by the Director of the company in statement recorded u/s 131 of the Income Tax Act during survey action u/s 131 of the Act that these entities are nothing but only paper companies with no genuine business activity.”
3. Following cross-objections are filed by the assessee: “ 1.1 In the facts and circumstances of the case and in law, the re- assessment framed by the Learned Assessing officer u/s 147/148 of the Act is bad in law and void for want of jurisdiction. 1.2 In the facts and circumstances of the case and in law, the Learned Assessing officer erred in framing a re-assessment on the Assessee without appreciating that the necessary pre-conditions for initiating and completing a re-assessment are not fulfilled in the present case. 1.3 In the facts and circumstances of the case and in law, the impugned assessment order framed u/s 144 r.w.s. 147 of the Act is bad in law and void. 1.4 The Assessee craves leave to add, amend, alter, delete or modify all or any of the grounds of cross objections.”
4. Both the grounds in the department‘s appeal relate to the deletion of the addition made u/s 68 of the Act in respect of unsecured loans received from five parties.
Brief facts of the case are that the assessee company filed return declaring income of Rs. 34,54,060/- on 29.09.2013. Based on the information received from the Investigation Wing, Mumbai, a notice u/s 148 was issued on 19.03.2020 by the Ld. AO. A survey u/s 133A of the Act had been conducted in the case of JPV Group, including on the assessee company, on 24.03.2017, wherein it was found that the assessee company had taken accommodation entries totalling Rs. 2,17,12,598/- in the form of unsecured loans from various parties during the year under consideration. Ld. AO proceeded to make an addition on account of unexplained cash credit after noting that the assessee’s director, Shri Hemant Kantilal Shah, in his statement u/s 131 of the Act recorded on 25.02.2017, had accepted that the impugned unsecured loans were not actually business transactions but accommodation entries. However, the assessee furnished confirmations in respect of unsecured loans along with copies of ITRs of the lenders, their bank statements, copies of TDS Certificate, etc. during the course of assessment proceedings. After considering the assessee’s submissions, Ld. AO held that the identity, creditworthiness and genuineness of the following loans were not established: Name of the lender Amount of Loan & Interest A.Y. 2013-14 Sonasta Resorts Pvt. Ltd.
Dev Darshan Diamond P. Ltd. Rs. 19,53,901/- 2. Sugan Exim Pvt. Ltd. Rs. 2,92,931/- 3. Nikhil Gems Pvt. Ltd. Rs. 93,91,818/- 4. Frontline Diamond Pvt. Ltd. Rs. 39,40,132/- 5. Rajat Diamonds Exim Pvt. Ltd. Rs. 61,33,816/- ____________________________________________________ Total Rs. 2,17,12,598/- 6. Accordingly, the assessment was completed at an income of Rs. 2,51,66,658/- vide order u/s 147 r.w.s. 144 r.w.s. 144B of the Act dated 25.09.2021, after making an addition of Rs. 2,17,12,598/- in respect of the above-mentioned cash credits u/s 68 of the Act.
Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). After examining the submissions of the assessee in detail, Ld. CIT(A) held that the assessee has sufficiently discharged its onus by establishing the identity and creditworthiness of the lenders and genuineness of the transactions through relevant supporting documentary evidence, and hence, allowed the relief to the assessee by deleting the entire addition of Rs. 2,17,12,598/- u/s 68 of the Act.
Aggrieved with the order Ld. CIT(A), the revenue is in appeal before the Tribunal. The revenue is aggrieved on the following grounds :
Firstly, the assessee had failed to prove the genuineness, identity and creditworthiness of the parties. Secondly, the director of the assessee company A.Y. 2013
14. Sonasta Resorts Pvt. Ltd. had admitted on oath in the statement recorded u/s 131 that the entities in question were only in paper in company with no genuine business activity.
Before us, Ld. DR has heavily relied on the orders of Ld. AO and argued that the based on the report of the investigation wing, the case was reopened as JPV Group was found to have indulged in bogus accommodation entries, and the assessee company was one of the beneficiaries of such accommodation entries. He accordingly argued that the AO’s order deserves to be upheld.
Ld. AR, on the other hand, relied on the order of Ld. CIT(A) and submitted that the Ld. AO has wrongly proceeded on the premise that the director of the assessee company, Shri Hemant Shah, had accepted in his statement on oath that the impugned transactions were not genuine business transactions but were accommodation entries. In support of his claim, the Ld. AR has filed a copy of the statement of Shri Hemant Shah recorded u/s 131 of the Act on 25.03.2017 by the DDIT Investigation Wing, Mumbai. It was also submitted by Ld. AR that detailed submissions were made before Ld. CIT(A) and relevant documentary evidences were also furnished to establish the identity and creditworthiness of the lenders as well as the genuineness of the impugned transactions, based on which the addition made by Ld. AO was rightly deleted by the Ld. CIT(A).
Besides in its cross-objection, the assessee has also raised legal grounds regarding the validity of the proceedings u/s 148 of the Act.
A.Y. 2013-14 Sonasta Resorts Pvt. Ltd.
We have heard the rival submissions and perused the material placed before us. We find that Ld. AO has erroneously noted that the transactions in question were admitted to be bogus accommodation entries by the director of the company, Shri Hemant Shah, in his statement recorded u/s 131 of the Act on 25.03.2017. On perusal of the statement, it is seen that such an admission has not been made by him. Instead, it was stated by Shri Hemant Shah that the details with regard to unsecured loans would be submitted within five days. Further, during the course of assessment proceedings and has also before Ld. CIT(A), the assessee has duly submitted the relevant documents to establish the identity and creditworthiness of the lenders and also the genuineness of the transactions. The impugned loans were also shown to have been repaid during the year or in the subsequent years through banking channels. The assessee company had also paid interest and deducted TDS in respect of these loans. Taking into account the totality of facts and circumstances, Ld. CIT(A) rightly held that the initial onus has been discharged by the assessee, and hence, no addition was called for u/s 68 of the Act in respect of these loans. In view of the detailed reasons given by the Ld. CIT(A), while giving relief to the assessee, we find no infirmity in the order of Ld. CIT(A), which is therefore upheld. Accordingly, the appeal of the revenue is dismissed.
A.Y. 2013-14 Sonasta Resorts Pvt. Ltd. 13. Since the decision of Ld. CIT(A) has been upheld and the assessee gets relief on merits, the legal grounds raised in the cross-objections are rendered academic in nature, and hence, not being adjudicated upon.