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Facts
The assessee had declared a total income of ₹89,968 for AY 2011-12. The AO reopened the case under Section 147 and made an addition of ₹9,35,00,000/- (₹2,25,00,000/- as share capital/premium and ₹7,10,00,000/- as unsecured loans) treating it as unexplained cash credit under Section 68.
Held
The Tribunal held that the Ld. CIT(A) had rightly deleted the addition. The assessee had furnished all necessary evidences regarding subscribers and loan creditors, and the loans were repaid in subsequent years. Relying on various High Court decisions, the Tribunal found no infirmity in the order of the Ld. CIT(A).
Key Issues
Whether the addition made by the AO under Section 68 of the Act for share capital, share premium, and unsecured loans as unexplained cash credit is justified when the assessee has provided evidence of identity, creditworthiness, and repayment.
Sections Cited
68, 147, 148, 143(2), 142(1), 131, 133(6)
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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PARDIP KUMAR CHOUBEY, JM
The appeal of Revenue and CO of the assessee are against the order of the Commissioner of Income-tax (Appeals), Kolkata-21, (hereinafter referred to as the “Ld. CIT(A)”] dated 14.02.2025 for the AY 2011-12.
02. The issue raised in the various grounds is against the deletion of addition of ₹ 9,35,00,000/- comprising Rs. 2,25,00,000/- in respect of share capital / share premium and Rs. 7,10,00,000/- in respect of unsecured loans which were made by the AO as unexplained cash credit u/s 68 of the Act.
The facts in brief are that the assessee filed the return of income on 27.09.2011, declaring total income of ₹89,968/-. The ld. AO on the basis of information available observed that during the year the assessee has raised share capital and unsecured loan from shell companies. Accordingly, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act. In response the assessee filed the return of income on 16.04.2018, declaring total income of ₹25,72,455/-. Thereafter notice u/s 143(2) of the Act and 142(1) of the Act along with questionnaire were issued to the assessee. The ld. AO also issued notices to the subscribers of the share and loan creditors. However, according to the ld. AO same were not replied. The ld. AO noted that though the assessee has filed the evidences in respect of share subscribers and loan creditors comprises, names, addresses, pan numbers, audited accounts, bank statements evidencing the payments received from the subscribers/ loan creditors. However, according to the ld. AO the summon issued u/s 131 of the Act were not complied with by most of the subscribers/ lenders. Finally, the ld. AO after discussing the modus operandi of the shell companies came to the conclusion that the share capital/ unsecured loans were nothing but assessee’s own money brought back in to the business in the form of share capital/ unsecured loans and also that there was no compliance to the summons issued u/s "3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act.
3.1 While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions.
3.2 The appellate authority observed that, "In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information."
3.3 The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt. The accounts were finally settled with the repayment of the loan to the lender companies. 3.4 When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of Durga Prasad More (82) ITR 540 and also in Sumati Dayal (214) ITR 801, to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under Section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. 3.5 While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine.
Learned advocate for the appellant attempted to emphasize that for the purpose of application of Section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied.
As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in CO No. 66/KOL/2025 08. The CO of the assessee is not pressed at the time of hearing, hence dismissed.
In the result, the CO of the assessee and Revenue’s appeal are dismissed.
Order pronounced in the open court on 02.12.2025.