DCIT, CENTRAL CIRCLE - 4(4), KOLKATA, KOLKATA vs. LADHURAM TOSHNIWAL AND SONS ELECTRICALS PRIVATE LIMITED , KOLKATA

4. In the appellate proceedings, the ld. CIT (A) deleted the addition by holding that the assessee has furnished all the details / evidences before the ld. AO and the ld. AO has failed to carry out any further enquiries of these evidences nor pointed out any defects in the evidences. The ld. CIT (A) dealt with the observations of the ld. AO that lending entities did not have minimum financial strength to extend such funds to the assessee and also observations in the assessment proceedings as well as remand proceedings that they have very weak parameters like ‘fixed assets’, ‘Turnover’, ‘Rent Payment’, ‘PBT’, ‘PAT’, ‘total other income’, etc. The ld. CIT (A) held that the financial strength cannot determined based on the aforesaid parameters by relying on the decision of Hon'ble Delhi High Courtin case of CIT vs. Ms. Mayawati 338 ITR 563 dated 03.08.2011. The ld. CIT (A) also noted that the assessee had repaid these loans along with interest in the subsequent assessment years and therefore, the addition cannot be made u/s 68 of the Act by relying on the decision of Hon'ble Calcutta High Court in case of PCIT Vs. Alom Extrusions Limited [ITAT/268/2024] vide order dated 17.12.2024. Ambe Tradecorp (P) Ltd. Vs. PCIT (2022) 145 taxmann.com 27 (Gujarat). The ld. CIT (A) also followed the decision of Hon'ble Supreme Court in case of CIT Vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC). The ld. CIT (A) by relying on the above decision observing and holding as under:-

“6.2.18. In view of the various judicial pronouncements cited by assessee together with various evidential documents submitted by the assessee, it can be inferred that since the assessee had taken loan in case of normal business and repaid the said loan through banking channel in the next FY, the assessee cannot be said to be beneficial owner of themoney without any cogent evidence brought by the AD on record and addition under section fil by the AO cannot be sustained. Additionally, as discussed above, the assessee's burden is confined to prove identity of the creditors, creditworthiness of creditor and genuineness of the transaction with reference to transaction between assessee and creditor and the same cannot be extended to include source of such creditor for the purpose of section 68 of the Act. The burden of the assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the assessee and the creditor. In the present case, the assessee had received unsecured loan of Rs. 1,50,00,000/- from the said three lending entities (supra) through banking channel and also repaid the same during the subsequent years through banking channel and the same is well reflected in the Tax Audit Report. The acceptance of loan has been established vide the confirmation and bank statements filed during the appellate proceedings. Hence, the addition of Rs. 1,50,00,000/- made by the AO u/s 68 of the Act is deleted 6.2.19. As the addition on the unsecured loan has been deleted by the AO, the corresponding addition on interest payments against the such loans of Rs. 4,99,125/- is also Rable to be deleted as the same was paid by the assessee through proper banking channel and the said was reflected in the audited P&L A/c and books of the assessee. Hence, the corresponding addition on such interest payments are also liable to be deleted. Further, the said interest payment was reflected in the audited books of accounts of the assessee and paid through banking channel. The AO had failed to bring any corroborative evidence on record to substantiate the fact that the aforesaid interests were paid from unexplained sources of the assessee and outside books of it. Hence, the disallowance u/s 36(1)(ii) can't be invoked in any manner. Therefore, the addition totaling to Rs. 4,99,125/- is hereby deleted. Consequently, these grounds of appeal raised by the assessee are allowed.

6.2.20. Again, the assessee's contention in this ground No. 3 is perused. As in the discussions made in the above grounds, the afore-mentioned unsecured loan transactions are declared to be genuine, there no question arises in respect of availing entry by the assessee from any entry operator. The investigation wing as well as the AO had neither found any incriminating evince which can prove that the assessee had actually paid Rs.75,000/- to the said lending entities for availing any accommodation entry nor the said lending entitles and their directors or key persons had admitted that they had taken such commission 0.5% against accommodation entry. Hence, the AO's observation that there may be expenses incurred by the assesseo in respect of commission paid to the entry operators is nothing but an Imaginary fictional story. Hence, in view of the above the addition of Rs. 75,000/- as estimated by the AO @0.5% of total loan of Rs.1,50,00,000/- is liable to be deleted. Hence, this ground of the assessee is also allowed.”

5. After hearing the rival contentions and perusing the material on record, we find that in this case, the assessee has received loans from three parties. We note that the assessee filed all the evidences/documents qua the said loans before the AO as well as before the Ld. CIT(A). We also note that the notices issued u/s 133(6) of the Act to all the three lenders were not complied with by two whereas the third one filed incomplete details. We also note that the Ld. CIT(A) has also recorded a detailed finding of fact that these loans were repaid in the subsequent years and therefore, no addition can be made u/s 68 of the Act. In this case we find that the assessee has filed all the evidences before the AO qua these loans and AO has not pointed out any defects in the said evidences except that the lenders were having very less operational income, no fixed assets, not paying any rent etc by ignoring the fact that lenders have sufficient funds in the form of share capital/reserves and surplus. In our opinion the addition made on this basis is wrong and cannot be sustained as has been held by Hon’ble Delhi High Court in the case of CIT Vs. Ms. Mayawati (supra) wherein the exactly same ratio was laid.

6. In the present case the assessee has filed all the evidences before the AO and ld. CIT(A) and established that the repayment of loans made in the subsequent financial year. Therefore, no addition can be made u/s.68 of the Act on the ground that the assessee has failed to meet the ingredients of Section 68 of the Act. The case of assessee is squarely covered by the decisions of the Hon’ble Calcutta High court in number of cases namely PCIT-2, Kolkata Vs. Rahul Premier India Agency Private Limited in ITAT/133/2025, IA No.GA/2/2025 vide order dated 05.08.2025, PCIT Vs. M/s Narayan Tradecom Pvt. ltd. in ITAT/76/2025, IA No. GA/1/2025 dated 10.06.2025, PCIT Vs. Alom Extrusions Ltd. ITAT/268/2024, IA no. GA/1/2024, GA/2/2024 dated 17.12.2024, PCIT Vs. M/s Edmond Finvest Pvt. ltd., in ITAT/28/2024, GA/2/2024 dated 26.02.2024, PCIT Vs. Parwati Lakh Udyong, ITAT/2/2024, IA No.GA/1/2024 dated 19.02.2024. In all the above decisions the Hon'ble court has held that where the assessee has filed all the evidences qua the loan creditors before the ld. AO and loans are also repaid then the same cannot be added us/ 68 of the Act. Similarly, the case of assessee is squarely covered by the decision of the Hon’ble Gujarat High Court in the case of Ambe Tradecorp (P.) Ltd., reported in [2022] 145 taxmann.com 27 (Gujarat), wherein it has been held as under: - "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.

Order pronounced in the open court on 11.11.2025.