ITO, WARD- 8(2), NEW DELHI vs. EMDET JAMSHEDPUR PVT. LTD., NEW DELHI

The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-3, New Delhi, dated 22.03.2017.

Following grounds have been raised by the Revenue:

The assessee company is engaged in the business of manufacturing of rubber and auto parts for TATA Motors & Others.

The Assessing Officer held that the ITR for the A.Y. 2012- 13 shows meager or Nil income for all these loan parties and the debits & credits (the transactions) have taken place on the same day and hence came to the conclusion that this is a typical of the trends shown in accommodation entries. The AO held that it is well known in such entities of entry operators, funds are routed through them as share capital with premium so as to create capital, which is not real but lies only in the books. In order to verify the veracity of the transactions and the true capacity of the entities, the AO has asked the assessee to 3 Emdet Jamshedpur Pvt. Ltd. produce the Directors of the said entities from where funds had been received for personal examination. Since, the assessee has failed to produce the Directors of the said entities to ascertain their creditworthiness, the AO held that the basic requirements of provisions of Section 68 of the Income Tax Act, 1961 are not fulfilled and treated the amounts as unexplained credit of the assessee.

The ld. CIT(A) on verification of the assessment record found that the Assessing Officer has directly called for the details from the companies who has given the loans. The lenders have sent the replies to the Assessing Officer which have been kept on the record. It was revealed that the lender companies have given the loans and the interest has been paid by the assessee company at the market rate. The ld. CIT(A) held that the evidence adduced during the appellate proceedings show that the transactions are in the nature of normal commercial transactions as per the practice in the money market.

We have gone through the submissions mentioned at page nos. 3 to 21 of the order of the ld. CIT(A) and also the judgments relied upon by the Assessing Officer at page nos. 9 & 10. We find that the Assessing Officer has sought to produce the Directors of the said entities for examination and recoding of statement on 23.02.2015, 03.03.2015 and 11.03.2015 which the assessee failed to do so. The assessee did not even seek the issue of summons from the Assessing Officer. All the loans have been received from entities at Kolkata and a categorical finding has been given that the transactions have been taken on the 4 Emdet Jamshedpur Pvt. Ltd. same day as per the bank statement. The primary onus casted upon the assessee to prove the identity, genuineness and creditworthiness of the transaction has not been discharged by the assessee on the first page. Mere payment of interest cannot connote discharge of the onus by the assessee. Hence, in the interest of justice, we remand the matter back to the file of the Assessing Officer with direction to the assessee to discharge his onus to the satisfaction of the Assessing Officer in accordance with the provisions of Section 68 of the Income Tax Act, 1961.

In the result, the appeal is allowed for statistical purpose. Order Pronounced in the Open Court on 22/10/2021.