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Facts
Assessee M/s Akshar Developers took an unsecured loan of Rs. 1 crore from M/s Bestway Consultants Pvt. Ltd. The Assessing Officer added this amount under Section 68, treating it as an accommodation entry/bogus transaction based on a statement from an individual, which the Ld. CIT(A) confirmed. The assessee challenged this addition, claiming to have provided all necessary evidence.
Held
The Tribunal found that the assessee provided sufficient evidence for the identity, creditworthiness, and genuineness of the loan, including TDS, interest payments, and subsequent repayment. A remand report further confirmed the loan's genuineness, with the lender's director refuting the previous adverse statement. Citing High Court precedents, the Tribunal held that no addition under Section 68 is justified when the credit is repaid, and thus, the addition was unsustainable.
Key Issues
Whether an addition of Rs. 1 crore as unexplained cash credit under Section 68 of the Income Tax Act, 1961, is justified when the assessee provides evidence of the loan's genuineness, creditworthiness of the lender, and subsequent repayment.
Sections Cited
250, 143(3), 133(6), 131, 133A, 68
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI ANIKESH BANERJEE
Instant appeal of the assessee was filed against the order of the Ld. Commissioner of Income-tax, Appeal, Pune-11*for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’), date of order 27/09/2024 for A.Y. 2018-19. The impugned order was emanated from the order of the Ld. Assistant Commissioner of Income-tax, Central Circle 4, Thane[for brevity the “Ld. AO], orderpassed under section 143(3) of the Act, date of order 29/09/2021.
The assessee has taken the following grounds:- “1.BECAUSE, the CIT(A) has erred in law and on facts in confirming the unsecured loan from Bestway Consultants Pvt. Ltd. amounting to Rs.1,00,00,000/- as accommodation entry ignoring the reply filed by the lender company alongwith ledger extract and bank statement filed by the lender company in response to notice dated 11.08.2023 u/s 133(6) of Act and statement of director of the lender company recorded on 27.02.2024 u/s 131 of the Act accepting the genuineness of the loan transaction, simply on the basis of statement of Shri Praveen Kumar Agarwal recorded u/s. 133A on 10/02/2015.
2. BECAUSE, the CIT(A) has erred in law and on facts in confirming the unsecured loan from Bestway Consultants Pvt. Ltd. amounting to Rs.1,00,00,000/- as unexplained cash credit without appreciating the fact that the Appellant has duly repaid the said unsecured loan in subsequent years.
3. BECAUSE, the CIT(A) erred in law and on facts in ignoring the findings in the remand report of the AO which he himself had called for.”
3. The brief facts of the case are that the assessment was completed under section 143(3) of the Act and addition was made under different heads. Assessee challenged the order before the Ld.CIT(A) and the appeal was partly allowed. The only issue challenged before the Bench related to the loan taken by the assesseefrom M/s Bestway Consultants Pvt Ltd amount to Rs.1 crore which was added back under section 68 of the Act which was treated as accommodation entry& bogus transaction.
The Ld.AR filed a written submission containing pages 1-87 which is kept in the record. The Ld.AR argued that the assessee has taken the loan of Rs.1 crore and interest was paid and the TDS was deducted. Requisite TDS return was also filed before the authority and TDS certificate was issued. But on the basis of the statement of Shri Praveen Kumar Agarwal, duly received from Investigation Wing of the department, the alleged loan was treated as accommodation entry and the addition was confirmed. During the assessment and appeal proceedings, the assessee submitted all the relevant documents as evidence of transaction, identity of the party and creditworthiness. The documents are also annexed in the paper book which are filed before the Bench. The list of the documents is reproduced as below: - Sr.No. Exh Nature of Document Page No. 1 A (1) Return of Income 1 (2) Computation of Income 2-4 (3) Audited Balance Sheet as at 31.03.2018 5 (4) Audited Profit and Loss Account for the year 6-14 ended 31.03.2018 (5) Audit Report for AY 2018-19 15-29 (6) Work in progress calculation 30 2. B Show cause notice dt.15.06.2021 31-32 3. C (1) Confirmation of M/s Bestway Consultants Pvt Ltd 33-35 (2) Bank statement of M/s Bestway Consultants Pvt 36-45 Ltd highlighting the loan transaction and interest received from the Appellant. (3) Bank statement of the Appellant 46-47 (4) ROI of M/s Bestway Consultants Pvt Ltd 48-50 (5) Details of interest paid to the lender 51 (6) TDS certificates issued by the Appellant 52-69 4. D (1) Bank statement of the Appellant highlighting the 70-75 repayment entry (2) Confirmation of repayment by the lender vide 76-79 confirmation dt.01.04.2021 along with its bank statement highlighting the receipt entries.
E Remand Report dt. 18.07.2021 80-87 The Ld. CIT(A) called for a remandreport. Accordingly, the Ld. AO issued a summons under Section 131 to the director of the loan creditor, Shri Sushil S. Basotia. His statement was recorded on 27/02/2024. Subsequently, the remand report, dated 18/07/2024, was submitted before the Ld. CIT(A).A copy of the remand report and the recorded statement is annexed on APB pages 80–87, wherein the director confirmed that the loan transaction was genuine and that the said loan was disbursed to the assessee through banking channels. Regarding the statement of Shri Pravin Kumar Agarwal, the director refuted its contents, asserting that he had no knowledge of Shri Pravin Kumar Agarwal. Furthermore, the Ld. AR submitted that the loan was duly repaid in subsequent financial years. The relevant bank statements and confirmations of loan repayment are annexed in the APB on pages 76–79. The Ld. AR also relied on the decision of the co-ordinate bench of the ITAT, Mumbai-G Bench, in the case of JCIT (OSD)-CC 7(4) vs. M/s Shalimar Housing & Finance Ltd., pronounced on 1/06/2021. In this case, the Bench acknowledged the loan creditors and duly considered the loan repayment.The relevant portion from paragraph 17 of the decision is reproduced below: “17. The grievance of the assessing officer is that these companies do not have substantial income and hence are not capable of giving loans. He has also expressed doubt about the position of reserves and fund position without brining on record any cogent material from any further enquiry made by bench. We find that the funds position of the companies as noted by the ld.CIT(A) is quite capable of granting loans. The adverse inference drawn from the financial statement of lending companies is only a surmise by the assessing officer without making any enquiry. In this regard, we note that honorable jurisdictional High Court in the case of Pr.CIT vs Veedhata Tower Pvt.Ltd, order dated 21.04.2018 has held that when all the necessary details of the fund provider was available with the assessing officer, he was free to make the necessary enquiry and addition under section 68 in the hands of the recipient were unjustified. Furthermore, assessee has also paid interest to the lenders. It has also deducted tax at source. Loan have been duly repaid, some part has been repaid even in the present assessment year. In these circumstances, in our considered opinion assessee has discharged the onus. The assessing officer has not brought on record any cogent material to make the addition as unproved cash credit. Hence, the addition made by the assessing officer is not sustainable.”
The Ld. DR argued and fully relied on the order of the revenue authorities, but unable to bring any contrary judgment against the submission of the Ld.AR.
We heard the rival contention and considered the materials available on the record. We note that when the assessee has discharged its initial onus cast u/s 68 of the Act by submitting evidence, then additions u/s 68 cannot be made. It was submitted that the onus shifts from assessee to the Ld. AO. Here assessee has completely discharged its onus. Further remand proceeding was initiated, and the director of loan creditor was summoned to the notice U/s 131 of the Act. In the statement the said director accepted the transaction of loan paid to assessee. The statement of Shri Pradeep Kumar Agarwal was duly negated by the director of alleged loan creditor. We respectfully follow the order of the coordinate bench in case of M/s Shalimar Housing & Finance Ltd(supra). Further, it is also brought to our notice that the closing balance of Rs.1,00,00,000/- is repaid by assessee in FY 2020-21 and FY2021-22. The same is substantiated by Copy of confirmation and Bank Statement of appellant and loan creditorof subsequent year showing details of transactions for payment of outstanding balance. Ld. AR of assessee has relied upon judgment ofHon’ble Bombay High Court in the PCIT vsBairaga Builders (P.) Ltd 164 taxmann.com 162 (Bom), order of the Hon’ble Gujrat High Court inPCIT vs Ambe Tradecorp (P.) Ltd 145 taxmann.com 27s(Guj)and CIT vs Ayachi Chandrashekhar Narsangji 42 taxmann.com 251 (Guj) wherein it was held that no addition u/s 68 can be made in case where amount credited is repaid back in subsequent year. Accordingly, we find that addition confirmed by the Ld. CIT (A) u/s 68 of the act are devoid of any merit, unsustainable as assessee has discharged its onus ofproving identity, creditworthiness and genuineness of the credits so received. Thus, the order of the Ld. CIT(A) is reversed, and Ld. AO is directed to delete the addition u/s 68 of the act of Rs 1,00,00,000/-.
In the result, appeal bearing