ACIT., CENTRAL CIRCLE-1(4), HYDERABAD vs. KVR CONSULTANCY PRIVATE LIMITED, HYDERABAD

The brief facts of the case are that, the assessee company is engaged in the business of Management Consultancy Services and filed its original return of income for AY 2016-17 on 29.11.2016 declaring an income of Rs.37,250/-. A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the case of M/s. Sumeru Infrastructure Park and its associated persons/concerns on 08.02.2019, during which Sri Bangar Raju Penmetsa, Managing Director of M/s. KVR Consultancy Private Limited, was also covered under Section 132 of the Income Tax Act, 1961. From the information gathered during the post-search proceedings from the bank account statements of the assessee, it is observed that, there were huge credits to the tune of Rs. 5,63,00,000/- appearing on various dates during the financial year 2015-16 in the assessee's bank account from M/s. Opus Holdings Pvt. Ltd. Further, during the course of post-search proceedings, the Director of the company, M/s. KVR Consultancy Pvt. Ltd., was asked to explain the nature of the above transaction, for which Sri Bangar Raju could not explain the nature of the amounts credited in the assessee's bank account. Further, during the investigation proceedings, summons were issued and a statement was recorded on 04.06.2019 from Sri Rajesh Gandhi, Managing Director of M/s. Opus Holdings Pvt. Ltd., and he was asked to explain the transactions between M/s. KVR Consultancy Pvt. Ltd. and M/s. Opus Holdings Pvt. Ltd. In response, Sri Rajesh Gandhi has not furnished any documents or books of account and also failed to explain the transactions.

Consequent to search, the case has been reopened under Section 147 of the Act, and accordingly, notice under Section 148 of the Act dated 10.03.2021 was issued and served on the assessee. In response to the notice, the assessee filed its return of income on 02.11.2021 admitting the income at Rs.37,250/-. During the course of assessment proceedings, the assessee was called upon to explain the transactions between the assessee company and M/s. Opus Holdings Pvt. Ltd. In response to the notice issued under Section 142(1) of the Act, the assessee company furnished a copy of the financials and the return of income filed in response to notice under Section 148 of the Act and stated that, the company has received an amount of Rs.5,48,00,000/- from M/s. Opus Holdings Pvt. Ltd. in the form of loan. The assessee had also furnished relevant details including the confirmation letter from the loan creditors. The A.O., after considering the relevant submissions of the assessee, observed that, if the transaction happens to be a loan transaction, which according to the assessee is forming part of the financials, it should have been reflected in the balance sheet of the assessee in the original return of income. In the original return of income filed by the assessee and the financial statements filed along with the return, the said transaction does not appear. The A.O. had also verified the transactions with reference to the books of account of M/s. Opus Holdings Pvt. Ltd. and observed that, the purported loan given to the assessee company does not appear on the assets side of M/s. Opus Holdings Pvt. Ltd. Therefore, the A.O. rejected the explanation of the assessee and made addition of Rs.5,63,00,000/- towards credit into the bank account of the assessee from M/s. Opus Holdings Pvt. Ltd. as unexplained investment under Section 69 of the Income Tax Act, 1961. 5. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished a detailed written submission on the issue, which has been extracted in para 5 on pages 9 to 15 of the Ld. CIT(A) order. The sum and substance of the argument of the assessee before the Ld. CIT(A) is that, the credits in the bank account of the assessee from M/s. Opus Holdings Pvt. Ltd. is a genuine transaction and the same has been reflected and reported in the books of account of both the parties. The additional evidence filed by the assessee has been forwarded to the A.O. for his comments and remand report and the A.O., vide remand report dated 23.09.2024, submitted his observations with regard to the transaction between the assessee company and the loan creditor and claimed that, the transaction does not appear in the balance sheet of the original return of income filed by the assessee on 29.11.2016. Further, the balance sheet of M/s. Opus Holdings Pvt. Ltd. does not show any corresponding entry on the assets side. The remand report of the A.O. has been forwarded to the assessee for its rejoinder and in response, the assessee has furnished the explanation and claimed that, the transaction between the assessee company and M/s. Opus Holdings Pvt. Ltd. is recorded in the regular books of account and in the balance sheet net of loans and advances and loans received from M/s. Opus Holdings Pvt. Ltd. has been reported, which is the reason for the A.O. to doubt the transaction. The assessee had also furnished an affidavit from the Director of M/s. Opus Holdings Pvt. Ltd. to the effect that the company has paid loan of Rs. 5,48,00,000/- to the assessee company.

The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of various facts, observed that, the assessee company furnished copy of confirmation letter from M/s. Opus Holdings Private Limited, which mentioned that, a loan of Rs. 5,48,00,000/- was given to the assessee company during the financial year 2015-16. Along with the confirmation letter, ledger extract of the assessee company in the books of M/s. Opus Holdings Private Limited was also enclosed. The assessee company has also furnished ledger account of loan account in the books of account of M/s. Opus Holdings Private Limited. From the details furnished by the assessee, it is observed that, the loan given by M/s. Opus Holdings Private Limited to the assessee company has been recorded in the books of account under the head loans and advances' and net balance of the ledger account has been reported in the balance sheet. To this effect, the assessee has also furnished an affidavit from Sri Rajesh Gandhi, Director of M/s. Opus Holdings Private Limited, wherein he has confirmed the loan transactions and entries in the books of account. Although the A.O. has observed that, the assessee has furnished an affidavit, but claimed that, Sri Rajesh Gandhi is not a Director and his affidavit cannot be accepted, however, fact remains that as per the MCA portal, Sri Rajesh Gandhi was appointed as Director on 25.04.2024 and he has filed an affidavit on 23.09.2024. The assessee has also reported the loan transaction by filing Form No. AOC-4 with the Registrar of Companies with a digital signature and the form has been signed on 29.11.2016. From the above, it is very clear that, the loan transaction between the assessee company and M/s. Opus Holdings Pvt. Ltd. are genuine and the assessee company has established the identity of the loan creditor, the genuineness of the transaction and the creditworthiness of the creditor. Thus, the Ld. CIT(A) directed the A.O. to delete the addition made towards loan received from M/s. Opus Holdings Pvt. Ltd. for Rs.5,63,00,000/-.

Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before the Tribunal.

The learned Senior A.R. for the Revenue, Dr. Sachin Kumar, submitted that, the Ld. CIT(A) has erred in deleting the addition made by the A.O. towards loan received from M/s. Opus Holdings Private Limited, even though the assessee company has not discharged the onus by filing relevant details. The learned Senior A.R. for the Revenue further submitted that, there is a discrepancy between the financial statements filed along with the original return of income and the return filed in response to notice issued under Section 148 of the Act. In the original return of income, the assessee company has not disclosed the loan transactions with M/s. Opus Holdings Private Limited. The A.O. had also verified the transactions with reference to the books of account of M/s. Opus Holdings Private Limited and found that, no such transaction has been reported by the loan creditor. Although the A.O. has brought out clear facts to the effect that the transactions between the assessee company and the loan creditor is unexplained, the Ld. CIT(A), by accepting additional evidence filed by the assessee, deleted the addition without providing an opportunity to the A.O. contrary to Rule 46A of Income-tax Rules 1962. Therefore, the Ld. Sr. A.R. submitted that, the order of the Ld. CIT(A) should be set aside and the addition made by the A.O. should be upheld.

The learned counsel for the assessee, Shri P. Murali Mohan Rao, C.A. supporting the order of the Ld. CIT(A), submitted that, the assessee company has filed all the details to prove the identity of the loan creditor, genuineness of the transaction and creditworthiness of the parties. The A.O. never disputed the fact that the assessee has furnished all the details, however, made addition only on the ground that, the loan transaction between the assessee company and M/s. Opus Holdings Pvt. Ltd. was not reported in the ITR filed under Section 139(1) of the Act on 29.11.2016. But, fact remains that the assessee company has explained the said discrepancy to the A.O. and proved that, the loan transaction was also recorded in the books of account and formed part of the financial statements along with the original return of income where the loan transactions has reported net balances under the head “Loans and Advances”, which includes loans advanced by M/s. Opus Holdings Pvt. Ltd. and loans received by them, which is evident from the relevant ledger account furnished by the parties. The assessee company had also explained the discrepancy noticed by the A.O. in light of the affidavit filed by Sri Rajesh Gandhi, Director of M/s. Opus Holdings Pvt. Ltd., and disproved the claim of the A.O. that Sri Rajesh Gandhi was not a Director as on the relevant date. The Ld. CIT(A), after considering the relevant facts and also taking note of various reasons given by the A.O., deleted the addition made by the A.O. towards loan received from M/s. Opus Holdings Pvt. Ltd. The learned counsel for the assessee further submitted that, although the Revenue has taken a ground on violation of Rule 46A of the Income Tax Rules, 1962, but fact remains that the assessee has furnished additional evidence as directed by the Ld. CIT(A) and the same has been forwarded to the A.O. for his comments and remand report. In the remand proceedings, the A.O. had verified the additional evidence filed by the assessee and only after receipt of the remand report from the A.O., the Ld. CIT(A) had considered the issue in light of the evidence submitted by the assessee. Therefore, it cannot be said that there is a violation of Rule 46A of the Income Tax Rules, 1962. Therefore, he submitted that, the order of the Ld. CIT(A) should be upheld.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant evidences submitted by the assessee in support of its contentions and the reasons given by the A.O. to make addition towards unsecured loan from M/s. Opus Holdings Private Limited as unexplained money under Section 69 of the Income Tax Act, 1961. There is no dispute with regard to the fact that the assessee company has received Rs.5,63,00,000/- into the bank account on various dates from M/s. Opus Holdings Private Limited. The A.O. made addition towards loan received from M/s. Opus Holdings Private Limited on the ground that, the assessee company failed to establish the genuineness of the transaction and also failed to prove the creditworthiness of the loan creditors. The A.O. reached to the above conclusion on the basis of the original return of income filed by the assessee on 29.11.2016 and corresponding financial statements filed along with the return of income and subsequent return of income filed in response to notice issued under Section 148 of the Act on 02.11.2021 and corresponding financial statements attached with the said return of income. According to the A.O., the loan transaction between the assessee company and M/s. Opus Holdings Private Limited was not reported in the original return of income filed by the assessee on 29.11.2016. The A.O., based on the ITR filed by the assessee, observed that the assessee company has not reported the loan transaction and the A.O. also verified corresponding loan transaction reported by M/s. Opus Holdings Private Limited, and observed that, under the head loans and advances' in the balance sheet, the loan creditor has reported Rs.1,86,39,036/- whereas it claimed to have advanced a loan of Rs.5,63,00,000/-. Therefore, the A.O. came to the conclusion that, the transactions between the assessee company and M/s. Opus Holdings Private Limited remains unexplained and thus, made addition under Section 69 of the Act.

We have gone through the relevant evidence filed by the assessee in support of its contentions in light of various reasons given by the Ld. CIT(A) to delete the addition made towards loan received from M/s. Opus Holdings Pvt. Ltd. We find that, there is no dispute with regard to the identity of the loan creditor, because the assessee company has furnished relevant confirmation letter from the loan creditor along with the ITR filed for the relevant assessment year. The only dispute is with regard to the genuineness of the transaction and creditworthiness of the parties. The A.O. doubted the genuineness of the transaction on two grounds. The first and foremost reason given by the A.O. is discrepancy in the ITR filed by the assessee company under Section 139(1) of the Act on 29.11.2016 and the subsequent return filed in response to notice issued under Section 148 of the Act on 02.11.2021. Admittedly, in the return of income filed by the assessee company on 29.11.2016, the loan transactions with M/s. Opus Holdings Pvt. Ltd. was not reported in the ITR filed by the assessee, however, the ledger account of the assessee company in the books of M/s. Opus Holdings Pvt. Ltd. disclosed loan transactions between the assessee company and the loan creditor, which is evident from the relevant ITR form considered by the A.O. and scanned in the assessment order. Although the A.O. had noted that, M/s. Opus Holdings Pvt. Ltd. has reported loans and advances on the assets side of the balance sheet for Rs.1,86,39,036/-, but the Ld. CIT(A) has recorded a categorical finding in light of the ledger account of the assessee company in the books of account of M/s. Opus Holdings Pvt. Ltd., that the loan creditor has reported loans and advances towards various loans given by the loan creditor and also loans received by the loan creditor. In the loans and advances ledger account, loan given to M/s. KVR Consultancy Pvt. Ltd., amounting to Rs. 5,48,00,000/- has been reported. While filing the return of income, the net result of debits and credits in the loans and advances account has been reported in the balance sheet, which was at Rs. 1,86,39,036/-. Since the transaction between the assessee company and M/s. Opus Holdings Pvt. Ltd. is forming part of the regular books of account of M/s. Opus Holdings Pvt. Ltd., in our considered view, the observations of the A.O. with regard to non-disclosure of the said transaction and corresponding discrepancy, as claimed by the A.O. is contrary to the facts available on record. Therefore, we cannot accept the reasons given by the A.O. to make addition towards loan received from M/s. Opus Holdings Pvt. Ltd.

Coming back to another observation of the A.O. The A.O. disbelieved the affidavit filed by Sri Rajesh Gandhi, Director of M/s. Opus Holdings Pvt. Ltd., only on the ground that, he was not a Director at the relevant point of time and that the affidavit filed by him lacks credence. The assessee has explained the misunderstanding of the A.O. in analysing the affidavit filed by Sri Rajesh Gandhi in light of various evidences, including relevant details of Directors as per MCA portal. As per the details submitted by the assessee, Sri Rajesh Gandhi was appointed as Director of M/s. Opus Holdings Pvt. Ltd. on 25.04.2024 and he has filed an affidavit on 23.09.2024. From the above details, it is very clear that, although he was not a Director at the relevant point of time, when he has filed an affidavit on 23.09.2024, he was very much on the Board of M/s. Opus Holdings Pvt. Ltd., which is evident from the relevant details appearing in the MCA portal. Therefore, the observation of the A.O. on the basis of affidavit filed by Sri Rajesh Gandhi that his affidavit lacks credence is also contrary to the material available on record. This fact is further strengthened by Form No. AOC-4 filed with the Registrar of Companies, for reporting financial transactions for the period from 01.04.2015 to 31.03.2016 and as per Form No. AOC-4, the loan transaction with M/s. Opus Holdings Private Limited to an amount of Rs.5,48,00,000/- has been reported in Form AOC-4 and the said form is digitally signed on 29.11.2016. Had it been the case of the A.O. that the above loan transaction was not reported in the original return of income filed by the assessee, then the details filed by the assessee would not have shown the loan transactions of the assessee company with M/s. Opus Holdings Private Limited. From the above details, it is very clear that the assessee has discharged the onus by filing relevant details and proved the identity of the loan creditor and established the genuineness of the transaction and creditworthiness of the creditor. The A.O., without appreciating the relevant facts, and only suspicion, made addition towards loan received by the assessee company from M/s. Opus Holdings Private Limited as unexplained money under Section 69 of the Income Tax Act, 1961. 13. Insofar as the argument of the learned Senior A.R. for the Revenue in light of ground No. 4 that the Ld. CIT(A) has deleted the addition made by the A.O. by violating Rule 46A of the Income Tax Rules, 1962, in our considered view, it is not a case of violation of Rule 46A of the Income Tax Rules, 1962, going by the evidence available on record. During the appellate proceedings, the assessee has furnished additional evidence as directed by the Ld. CIT(A) and the Ld. CIT(A) has forwarded the additional evidence filed by the assessee to the A.O. for his remand report. In fact, the A.O. had submitted remand report and also commented on the additional evidence filed by the assessee. The Ld. CIT(A), after considering the relevant evidence and taking into account the remand report filed by the A.O., had decided the issue. Therefore, in our considered view, the grounds taken by the Revenue in light of Rule 46A of the Income Tax Rules, 1962 does not hold good and thus, rejected.

In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to delete the addition made by the A.O. towards loan transaction of the assessee company with M/s. Opus Holdings Private Limited. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss the appeal filed by the Revenue.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the Open Court on 11th March, 2026. श्री विजय पाल राव (VIJAY PAL RAO) उपाध्यक्ष / VICE PRESIDENT (मंजूनाथ जी) (MANJUNATHA G.) लेखा सदस्य/ACCOUNTANT MEMBER Hyderabad, dated 11.03.2026. TYNM/sps आदेशकी प्रतिलिपि अग्रेषित/