M/S. OM SHANTI HOUSING ,MUMBAI vs. INCOME TAX OFFICER WARD 20(2)(3), MUMBAI

4. On the facts and in the circumstances of the case and in law, the Ld. Jurisdictional Assessing Officer erred in making disallowance and learned CIT (A) erred in confirming the entire disallowance of Rs. 88,44,064/- on account of interest on loan on erroneous presumptions although several documents related to the loan creditors were submitted during the course of Assessment & Appellate Proceedings which are available in the paper book submitted to CIT (A) vide letter dated 18th April, 2022 & 18th December, 2024 being: - a) Copy of ledger accounts of the concerned parties. b) Bank statement highlighting loan taken and repaid c) Details of TDS deducted in respect of Interest expenses. d) MCA Records of the Parties. e) All the loan creditors are assessed to tax.

5. a) On the facts and circumstances of the case and in law, the Learned Ld. Commissioner of Income tax (Appeal), ADDL/JCIT (A) -Agra has erred in ignoring the fact that the learned A.O. erred in erroneously and hurriedly, unjustifiably coming to the adverse conclusion without relying on the decision of the learned CIT (Appeal) dated 20th June 2017 for AY 2013-14 on similar facts and circumstances in the assessee's favor which confirmed lending by all parties excepting only one party from whom further borrowings were made in AY 2014-15. The order passed by the AO has caused great injustice to your appellant and is merely on conjectures and surmises. b) The Disallowance of interest paid of Rs 88,42,064/-/- in respect of borrowings taken from below same parties in AY 2013-14 was already deleted by the learned Commissioner of Income tax (Appeals) & same was confirmed by Hon'ble ITAT vide order dated 10th January 2020.Even the Hon'ble ITAT vide order dated 13th November, 2024 has deleted the addition in respect of below parties for AY 2015-16 c) The Learned assessing officer had erred in not specifically mentioning relevant reasons for addition in the Assessment order previously on conjecture and surmises.

Sr. Name of party Interest amount No. (Rs) claimed and included in closing work in progress 1. M/s. Switstar India Pvt Ltd. 4,71,351/- 2. M/s. Kaushali Impex Pvt Ltd. 3,64,609/- 3. M/s. Namo Diamonds Pvt Ltd. 4,65,350/- 4. Radhey Krishna Gems Pvt Ltd. 40,58,286/- 5. Siddham Gems Pvt Ltd. 27,93,640/- 6. Manbhawan Exim Pvt Ltd. 3,60,922/- 7. Divyanshi Gems Pvt Ltd. 3,27,906/- Interest on Loan (Total) 88,42,064/- 2.2. Ld. AO accordingly, issued notice u/s.133(6), that has returned back by the postal authorities. The assessee however, filed confirmation of the above loans from respective parties along with copy of their ITR’s and relevant page of the banks statement in support of the loan creditors. The Ld.AO however, relied on the Investigation report received dated 11/12/2017 wherein, it was stated that, most of the lender parties were not available at the given address and they did not carry out any real business activity. The Ld. AO passed the assessment order on 23/12/2019 disallowing interest of Rs.88,42,064/- paid to the above parties, thereby reducing the closing work in progress from Rs.19,33,57,331/- to Rs.18,45,15,247/-. Aggrieved by the order of the Ld. AO, assessee preferred appeal before the Ld. CIT(A).

3. Before the Ld.CIT(A) assessee submitted that, coordinate bench of this Tribunal for assessment year 2013-14 and 2015-16 in assesses own case granted relief in respect of same loan creditors. He submitted that, the facts and circumstances of the assessee was identical in those assessment year as is in the year under consideration. The assessee submitted that, all loan transaction were through banking channels and that the interest payment was also made through banking channels. It was submitted that, assessee filed PAN details, incorporation certificate and other relevant documents in respect of the loan creditors to establish their identity. It was also submitted that the credit worthiness of the lenders could be established from the financial statement and the bank statement furnished. 3.1. The Ld.CIT(A) however, did not follow principal of consistency by following procedure’s orders for assessment year 2013-14 and 2015-16 instead the Ld. CIT(A) held that, each year is separate and listing. The Ld. CIT(A) upheld the addition made by the Ld. AO by observing as under: Conclusion: 5.1 After a thorough examination of all the grounds of appeal, the assessment order, the written submissions of the appellant, and the relevant legal provisions and judicial precedents, I conclude that the appellant has failed to discharge the onus of proving the genuineness of the unsecured loans and the interest paid thereon. 5.2 The Assessing Officer's decision to treat the interest expenditure of Rs. 88,42,064/- as unexplained credit under section 68 of the Income Tax Act, 1961 is upheld. The appellant has not been able to satisfactorily prove the identity and creditworthiness of the lenders or the genuineness of the transactions. 5.3 The reliance on earlier years' favorable orders is misplaced as each assessment year is separate and distinct. The Assessing Officer has provided adequate opportunities to the appellant during the assessment proceedings. 5.4 In view of the above findings, all the grounds of appeal are hereby dismissed. The appeal is accordingly dismissed, and the assessment order is upheld.

Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before this Tribunal.

by the revenue against identical order of the Ld.CIT(A) has been considered and after considering relevant facts, the Tribunal deleted additions made by the Ld. AO The relevant findings of the Tribunal are as under-

5. DECISION: I have considered the facts of the case, grounds of appeal and oral and written submissions made before me. After a careful consideration of the same as well as the assessment order. All grounds of appeal are correlated therefore dealt together for sake of convenience I proceed to rule as under. 5.1 From the assessment order I find that AO made addition u/s 68 loan taken from following 8 parties viz. Divyanshi Gems P Ltd Rs. 3,09,00,000/-/-, Manbhawan Exim P Ltd. Rs. 2.00.00.000/- Siddham Gems P. Ltd Rs 37.00,000/- Radhey Krishna Gems. P. Ltd. Rs 1,29,00,000/-, Shri Brahma Shakti Gems P Ltd. Rs. 1,50,00,000/- Shankeshwar Diamonds P Ltd Rs 2.27,00,000/-, Shri Charbhuja Diamonds P. Ltd Rs. 2.10.00.000/- and Shri Jagdamba Shakti Gems P Lld Rs 1.68,00.000 totaling to Rs 14.30.00.000/- The addition has been done by treating the same as unexplained cash credit stating that lenders are not genuine because appellant remain failed to produce the parties before the AO for verification and identity of the lenders and creditworthiness was not provided by the appellant. The AO came to the conclusion that as the declared income by the respective loan creditors was less they were not capable of lending which has been done by ignoring the fact that they had substantial turnover and had a very large base of assets as evident in the respective balance sheet. 5.2 I find from the assessment order of the A. O., in para 4.2 it has been stated that assessee has filed confirmations of the above loan parties along with copy of ITR and relevant page of the bank statement During the assessment proceedings notice u/s 133(6) of 2 parties viz Brahm Shakti Gems Pvt Ltd. and Shree Charbhuja Diamonds Pvt. Ltd. was returned from postal authorities with remark "left" As it came to notice to the appellant, he produced the new address of the all lenders from whom notices return unserved. I find from para 4.5 of the assessment order wherein AO herself accepted that finally all the lenders filed confirmations. The same extract is as under. 4.5 Thereafter in this case compliance has been made by all the lenders of loan by speed post from the new business address. 5.3 I come on the issue of commission issued by the another AO to DDIT (Inv.). Surat The AO received information that ITO- 20(3)(1) Mumbai Issued commission to DDIT, Surat u/s 131(1)(d) to verify the genuineness and creditworthiness of lenders The DDIT(Inv.), Surat submitted report stating that he has issued summons u/s. 131 for appearance but due to close premises summons could not be served, therefore summons were served by affixture but loan creditors not responded. In this case three parties viz. Shree Charbhuja Diamonds Pvt. Ltd, shankeshwar Diamonds Pvt. Ltd and Radhy Krishna Gems Pvt. Ltd. are related to the parties to whom commission was issued in other case. I find that registered office of these lenders have been changed. Before me appellant submitted that changed address of the lenders were provided to the AO during the proceedings. Appellant filed before me proof of change of address in form of Form No. 18/Form No INC-22 which is the notice of situation or change of situation of registered office pursuance to section 146 of the Companies Act 1956/ section 12(2)&4 of the Companies Act, 2013 and Rule 25 and 27 of the companies (incorporation) Rules 2014 On verification of the same it is noticed that in Sr. No 4 it is clearly mentioned "notice is hereby given that (a) the address of the registered office of the company with effect from Particulars of the details are as under Sr. Name of the Change address With effect No. company from 1. Shree Charbhuja H. No. 5/909, 3rd 01/07/2013 Diamonds Pvt. Floor Gansesh Ltd. Ashish Ghiya Sheri, Kamnath Road Mahidharpura Surat Gujrat- 395003

2. Shankeshwar 6/2497, Maze Nine 21/08/2014 Gems P. floor, Office NO. 21/08/2014 Ltd M3 Balaji Sadan Limbu Sheri, Mahidharpura Surat 395003

3. Radhey Krishna 6/1766 Sainath 29/04/2013 Gems Building Gundi Sheri Mahapura Surat, Gujrat 395003 All the lenders are Pvt. Ltd. Co are registered under Companies Act, All the details of company are available on public domain. On the above fact I come to the conclusion that the DDIT (Inv). Surat has not made adequate enquiry nor any adequate report is taken on record by AO Only on the basis of the premises closed on one day or notices returned from the postal authority it cannot be acceptable that parties from whom the loans were taken are not in existence or they are bogus. The DDIT (inv) Surat issued served notice on the old address which have been changed. Therefore compliance of summons issued by him could not be made Finally all the confirmation and details called for was provided during the assessment proceedings as well as before me it is also pertinent to note that in this case no commission was issued to the DDIT(inv) Surat As no commission was issued in this case and appellant provided the change of address of the parties during the assessment proceedings, this contention was also accepted by the AO in his order then AO should have made enquiry for the same but he did not do so.

5.4 Before me as well as the A. O also documents were produced by the parties to prove the genuineness of the transactions which inter alia included the confirmations bank statements of Tenders acknowledgements. ROI, from these parties, their Balance Sheets. Profit and Loss accounts. Statements of advances which included name of the appellant as borrower in two cases and details of interest and principal repaid which were by payees account cheques/RTGS The appellant is filed details from the records of Ministry of Corporate Affairs which also shows that lender companies are alive. Moreover, the appellant has not commenced the construction or done any booking to generate any funds However, the A.O brushed this aside on the grounds that the identity itself was not proved. The A.O further held that the genuineness was not proved because these parties were not credit worthy to advance loans of such magnitude. I find that loans have been given by crossed account payee cheques/RTGS and they are reflected in their audited books of account and filed their returns of income including bank statements from which the funds have been given to the appellant, this fact was also accepted by the AO The appellant has produced the audited accounts and returns of income of all the parties which show that the loans given by them to the assessee are reflected in their audited accounts. These parties have not borrowed any funds and thus they have utilised their own funds for giving loans to the assessee on which they have earned interest. 5.5 1 am unable to appreciate this position of the A.O The A. O himself states that the turnover of these parties is in hundreds of crores. In the same breath he states that these parties are not credit worthy. I find that the A. O has no other corroborative evidence to show that cash had been paid by the appellant to these parties for availing the loans. An accommodation entry of this nature would perforce require the appellant to part with cash in his hands and obtain a cheque in lieu of the same The A. O has not been able to establish the cash trail at all. The appellant has filed the entire documents required to establish the identity of the creditors their creditworthiness, as well as the genuineness of the transaction. The source of the said loans thus stands proven. As has been held in several decisions of superior judicial authorities (MurlidharLahorimat v CIT (280 ITR 512 (guj)] Labhchand Bohra v ITO 219 ITR 571 (Raj)) and CIT v Dwarkadhish Investment Private Limited. 1299 ITR 268 (Del)) the assessee cannot be called upon to prove the source of the source of his loans.

5.7 The AO has relied on a number of judgements, however the facts of these judgements are completely different as in this case the appellant has proved the identity and creditworthiness of the lender and the genuineness of the transactions 5.8 As the loans have been subsequently repaid by the appellant through banking channels. Thus, the appellant is able to prove that not only did he take genuine loans, but the same has also been repaid. If these loans were not genuine, then there would not have been a question of repayment I find that the weight of evidence is in favour of the appellant. as he has been able to satisfy all ingredients of cash credit le identity. creditworthiness and genuineness of transactions. Accordingly, I delete the addition of Rs. 14,30,00,000/- and interest thereon amounting to Rs 1,13,74,600/- totaling to Rs. 15.43,74,600/- made by the A.O 7. After having gone through the facts of the present case and perusal of the documents and after hearing both parties at length we find that the assessee had already placed on record all the documentary evidences in order to show the identity and creditworthiness of the lenders and genuineness of the transactions We have perused the confirmation filed by the parties, copies of acknowledgement of return of income filed by the lenders for the year under consideration, copies of the bank statement of lenders, which establish that the payment towards loans were received during the year under consideration. Therefore, the identity of the lenders was not in dispute. We have also considered all the documents placed on record by the assessee in the shape of statement of accounts and documents to show that the transactions were carried out through banking channels and the confirmations which were filed in the form of ledger accounts which reflect that the assessee had received the amount through RTGS. All those documents prove the genuineness of the transactions. Now as far as creditworthiness of the lenders are concerned, we have perused the audited accounts of the lenders which shows the creditworthiness of the lenders to grant loans and advances Further, we also noticed from the records that Ld. CIT(A) had brightly painted out in its order that the AO made the additions by holding that as the declared income by the respective loan creditors was less, therefore they were not capable of lending. However, the AO ignored the fact that the lenders had substantial turnover and had a very large base of assets as is reflected in the respective balance sheets

by the revenue stands dismissed.

16. In the net result, the appeal filed by the revenue stands dismissed with no order as to cost.

9. We further noted that the Ld. CIT(A) after considering relevant details filed by the assessee, in respect of all five loan creditors has came to the conclusion that the assessee has discharged the onus cast upon it u/s 68 of the I.T. Act, 1961, by filing various details, including confirmation letters from the parties. We, further noted that the Ld. CIT(A) had also recorded categorical findings that the Id. AO has disregarded all evidences filed by the assessee only on the ground that notice issued u/s 133(6) were return unserved, in respect of some parties, without appreciating the fact that on subsequent event all the lender companies had replied to the notices of the Ld. AO issued u/s 133(6) by furnishing documentary evidences, in respect of each of the issues raised therein. Further, the assessee had also furnished bank statement to prove transfer of loans through proper banking channel. The assessee firm had paid interest on said loans after deducting TDS applicable as per law. The assessee firm had also repaid said loans by crossed account pay cheques in the subsequent assessment years and the detail thereof have been filed in form of a chart, which is at pages No. 59 to 63 of the paper book. Therefore, we are of the considered view that when, the assessee has discharged its onus by filing necessary evidences to prove identity, genuineness of transactions and creditworthiness of the parties, the Ld. AO cannot make additions towards unsecured loans only on the basis of non service of 133(6) notices or non cooperation of lenders to said notices issued by the Ld. AO because, the appearance of parties to notices issued by the Ld. AO is not within the control of the assesee. The assessee at best could file necessary evidences to prove transactions between the transactions between the parties are non genuine. Therefore, we are of the considered view that the Ld. AO was erred in making additions towards unsecured loans taken from five parties u/s 68 of the I.T.Act. cannot be attributed to the failure of the assesse to hold that parties as genuine, but at the same time non appearance of parties 1961. The Ld.CIT(A) after considering relevant facts has rightly deleted additions along with interest paid thereon.

10. Coming back to various case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Bombay High Court, in the case of PCIT vs Paradise Inland Shipping Pvt.Ltd. (2018) 400 ITR 439. We find that the Hon'ble Jurisdictional High Court has examined a similar issue in light of provision of section 68 and held that once, assessee has discharge its onus by filing necessary evidences, including name and address of alleged shareholders, then the revenue is free to proceed on loan creditors in accordance with law, but sum so received from loan creditors cannot be regarded as undisclosed income of the assesee. The Om Shan above decision of Hon'ble Bombay High Court has been affirmed by the Hon'ble Supreme Court, thereby concurred with the findings of the Hon'ble High court. Further, the Hon'ble Bombay High Court, in the case of CIT vs Green Infra Ltd. (2017) 392 ITR 7 and CIT vs. Gagandeep Infrastructure Ltd. (2017) 394 ITR 680 had taken similar view and held that once, the assessee discharges its onus by filing necessary evidences including name and address of creditors, then the department can reopen the assessment of creditors and proceed in accordance with law, but sum so received from the creditors cannot be regarded as undisclosed income of the assesee. A similar view has been upheld by the Hon'ble Allahabad High court, in the case of CIT vs Rahul Vineeth Traders 2014 41 taxmann.com 86. The Hon'ble Punjab & Haryana Court, in the case of CIT vs Varinder Rawalley 2014 366 ITR 233 had taken similar view. 11.In this view of the matter and respectfully following the case law discussed hereinabove, including the coordinate bench of ITAT, Mumbai bench decision in assessee's sister concerns case namely M/s Om shanti realtors in we are of the considered view that the Ld. AO was erred in making additions Towards unsecured loan and consequent interest paid thereon u/s 68 of the I.T.Act, 1961. The Ld.CIT(A) after considering relevant facts and also by relied upon various judicial precedents has rightly deleted additions made by the Ld. AO. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and dismissed appeal filed by the revenue.

12.In the result, appeal filed by the revenue is dismissed. 4.2. In respect of the other loan creditors, that was conducted for A.Y. 2015-16, based on the observation of Ld.CIT(A)’s view therein Coordinate Bench of this Tribunal considered and observed as under: 5. We have heard the counsels of both the parties, we have also perused the material placed on record, documents filed before us, judgments cited by both the parties and also the orders passed by the revenue authorities. From the records, we noticed that assessee is a partnership firm engaged in the business of property development and filed the return of income which was processed under Sec. 143(1) of the Act, subsequently the case was selected for scrutiny and after serving statutory notices and providing opportunity of hearing the order of assessment was passed by the AO u/s 143(3) of the Act thereby disallowing the interest of Rs. 1,02,03,318/- being paid to the 7 parties, the details of which are herein below and reduced closing work-in-progress for Rs. 15,59,04,259/-. Sr. Name of party Interest amount (Rs) No. claimed and included in closing work in progress 1. M/s. Divyanshi Gems Pvt 7,37,553/- 2. M/s. Manbhawan Exim Pvt Ltd. 8,11,308/- 3. M/s. Siddham Gems Pvt Ltd 26,50,225/- 4. M/s. Radhe Krishna Gems Pvt 41,53,261/- Ltd.