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Facts
The assessee filed a return declaring income of Rs. 49,80,470/-. The case was reopened based on information from the Investigation Wing regarding an accommodation entry of a loan amounting to Rs. 1,00,00,000/- from M/s. Purvi Finvest Ltd. The Assessing Officer added this amount as unexplained credit u/s 68 of the Act.
Held
The Tribunal held that the assessee had discharged its onus by proving the identity of the lender, its creditworthiness, and the genuineness of the transaction, as required by Section 68. The CIT(A) had rightly deleted the addition, and there was no reason to interfere with that decision.
Key Issues
Whether the addition made by the Assessing Officer on account of an unsecured loan under Section 68 was justified, considering the assessee's evidence regarding the lender's identity, creditworthiness, and transaction genuineness.
Sections Cited
68, 250, 147, 144B
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Before: SHRI AMIT SHUKLA & SMT. RENU JAUHRI
Assessee by : Shri Rajnish Vohra & Shri Parth Gupta Revenue by : Shri Mahesh Pamnani Date of Hearing 13.01.2025 Date of Pronouncement 17.01.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :- This appeal is filed by the revenue against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 28.09.2024 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2015-16.
A.Y. 2015-16 Olympia Industries Limited 2. The assessee has raised following grounds of appeal:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made u/s 68 of the Income Tax Act, 1961 towards unsecured loan shown to have been received from M/s. Purvi Finvest Ltd ignoring that in consequence to the evidence gathered during the investigation conducted by the Investigation Wing, Mumbal, the non-genuine nature of the transaction clearly emerged?
2. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made u/s 68 of the Income Tax Act, 1961 towards unsecured loan shown to have been received from M/s. Purvi Finvest Ltd ignoring the ratlo laid down by the Hon'ble Delhi High Court in the case of CIT vs. Nova Promoters & Finlease (P) Ltd [2012] 18 taxmann. com 217(Delhi) wherein it was held that when the assessee happens to be beneficiary of racket carried out by the accommodation entry providers, mere filing of coptes of documents like loan confirmation, Bank statement etc. will not suffice and that the evidence has to be judged in depth by applying the test of human probability?
3. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) has erred in deleting the addition of Rs. 1,00,00,000/- made u/s 68 of the Income Tax Act, 1961 towards unsecured loan shown to have been received from M/s. Purul Finvest Ltd without appreciating that since the sham nature of this transaction entered under the garb of loan from M/s. Purvi Finvest Ltd, a paper entity clearly emerged, it cannot be said that the assessee has substantiated genuineness of the said transaction and financial capacity of the said lender to discharge the onus cast on it in terms of provisions of section 68 of the Income Tax Act, 1961?"
4. The appellant prays that the order of the CIT(A) on the grounds be set aside and that of the Assessing Officer be restored.
5. The appellant craves leave to add, amend or alter all or any of the grounds of appeal.”
3. Brief facts of the case are that the assessee filed return declaring income of Rs. 49,80,470/- on 22.09.2015. Subsequently, in view of information received from the Investigation Wing, Mumbai regarding accommodation entry of loan amounting to Rs. 1,00,00,000/- taken by the assessee from M/s. Purvi Finvest Ltd., the case was reopened. After considering the assessee’s A.Y. 2015-16 Olympia Industries Limited submissions, Ld. AO held that the creditworthiness of the lender and the genuineness of the transaction has not been established. He, therefore, considered the loan of Rs. 1,00,00,000/- as unexplained credit u/s 68 of the Act and added it to the total income vide order u/s 147 r.w.s. 144B on 24.05.2023.
4. Aggrieved with the order of Ld. AO, the assessee preferred an appeal before Ld. CIT(A). Vide order dated 28.09.2024, Ld. CIT(A) deleted the addition after considering the explanation submitted by the assessee, and the decision of the co-ordinate bench in the case of ITO-15(1)(1) v/s M/s. Agripure Trdeware Pvt. Ltd, Mumbai in (Mum Trib.) dated 20.04.2021 on similar facts, after holding that the assessee had successfully established the genuineness of the loan transaction. Aggrieved with the order of Ld. CIT(A), the revenue is in appeal before this Tribunal.
5. Before us, Ld. DR argued that the basis of addition was information received from the Investigation Wing, Mumbai that the assessee had taken bogus accommodation entry from Shri Sharad Darak who operated various shell companies including M/s. Purvi Finvest Pvt. Ltd. Shri Sharad Darak in his statement recorded on oath had admitted that he provided bogus accommodation entries to various entities through his companies. Ld. DR has, accordingly, argued that the assessee has taken the accommodation entry from A.Y. 2015-16 Olympia Industries Limited M/s Purvi Finvest Pvt. Ltd. and, therefore, the addition Rs. 1,00,000/- made u/s 68 by the Ld. AO deserves to be upheld.
6. On the other hand, Ld. AR has furnished copies of submissions made before Ld. CIT(A) whereby financial statements of M/s. Purvi Finvest Pvt. Ltd. had been submitted to prove the creditworthiness of the company. It was also demonstrated that the loan has been repaid subsequently which proves genuineness of the transaction. Further, interest was paid on the loan on which TDS was also duly deducted and deposited in the government account further lending credence to the assessee’s submissions. He further pointed out that the addition has been made on the basis of statement of Shri Sharad Darak but the assessee has not been given copy of his statement nor an opportunity to cross- examine him, despite specific request made before Ld.AO. Ld. AR, further, argued that the Ld. CIT(A) rightly deleted the addition after examining the evidences produced before him with regard to the identity of the lender, its creditworthiness and genuineness of the transaction.
We have heard both the parties and perused material placed before us. It is seen that M/s. Purvi Finvest Pvt. Ltd. is a Non-Banking Finance Company (NBFC) registered with the Reserve Bank of India. It is found to be an existing and active company as per data available on Ministry of Cooperate Affairs portal a downloaded copy of which had been submitted by assessee before Ld. CIT(A)
A.Y. 2015-16 Olympia Industries Limited as noted in his order. From the audited financial statements, it is seen that the lending company has shown total share capital and Reserve & Surplus of Rs. 199,00,00,000/- as on 31.03.2015 demonstrating its creditworthiness. In view of these facts, Ld. CIT(A) came to the conclusion that the creditworthiness of the assessee was sufficiently proved. The loan had been received and repaid along with interest through banking channels. It was, therefore, held by the Ld. CIT(A) that the assessee had sufficiently discharged the onus to prove identity and creditworthiness of the lender as well as the genuineness of the transaction.
In view of above facts and circumstances, we hold that the assessee has duly discharged its onus by proving the three ingredients of section 68 i.e. identity of the lender, its creditworthiness and genuineness of the transaction. Accordingly, we find no reason to interfere with the decision of the Ld. CIT(A) which is, therefore, upheld.