DCIT, CENTRAL CIRCLE-4(3), KOLKATA, KOLKATA vs. AVIMA EXPORTS PRIVATE LIMITED , KOLKATA

Avima Exports Pvt. Ltd The same was again disposed of by the Assessing Officer later on. Thereafter, statutory Notice u/s 143(2) dated 10.01.2022 followed by notice u/s 142(1) dated 11.01.2022 accompanied with detail questionnaire was issued and duly served on the assessee. In response to the same, the assessee had filed its submission and on perusal of the same, the Assessing Officer passed the assessment order u/s 147 r.w.s. 143(3) of the Act on 14.03.2022 by determining the total income of the assessee at Rs.6,10,14,650/-. On perusal of the assessment order, it is observed that the Assessing Officer has made additions in three grounds viz. a) unexplained cash credit u/s 68 of the Act in the form of bogus unsecured loan Rs.5,24,50,000/- and b) disallowance of relatable interest expenses of the aforesaid unsecured loan of Rs.35,49,027/- u/s 36(1)(iii) of the Act and c) unexplained expenditure of Rs.2,62,250/- in the form of secret & undisclosed commission expenses paid to entry operators from unaccounted cash u/s 69C of the Act.

1 Copy of Audited Financial Statement of all the Four loan Creditors 2 Copy of Relevant Bank Statement reflecting transaction 3 Copy of Loan Confirmation 4 Source of Funds of the loan creditor company 5 Copy of IT Acknowledgement of the loan creditor company 6 Copy of Audited Financial Statement of the appellant company 7 Computation of Income of the appellant company 8 Copy of ITR Acknowledgement of the appellant company Avima Exports Pvt. Ltd 7.1 It is further pertinent to mention here that the Assessing Officer alleged that that the Assessing Officer had conducted independent enquiries by issuing summons u/s 131 which was duly served upon all the 16 entities and all of them have made independent compliance which is evident from the order of the ld. CIT(A) and submitted the following documents:  Copy of Audited Financial  Statement of all the Four loan Creditors • Copy of Relevant Bank Statement reflecting transactions • Copy of Loan Confirmations • Source of Funds of the loan creditor company • Copy of ITR Acknowledgement of the loan creditor company • Copy of ledger Account • Copy of PAN Card 7.2 We further find that all these sixteen entities had adequate net worth to give short term loans to the assessee company, the details of the same is as under:

Sl. Name of Loan parties Share Capital, Unsecured Reserves & Loan (Rs.) Surplus/ Total Fund 1 Akshat Merchants Pvt 10,05,28,147/- 23,00,000/- 2 Anubandh Financial 40,00,27,569/- 2,00,00,000/- Services Pvt Ltd 3 8,078,587/- 15,00,000/- Babylon Apartments Pvt Ltd 4 Consistent Suppliers Pvt 4,10,90,242/- 90,75,000/- Ltd 5 Cosmos Tradelinks Pvt Ltd 15,90,72,789/- 30,00,000/- Avima Exports Pvt. Ltd 6 Express Commotrade 10,80,51,435/- 6,00,000/- Pvt Ltd 7 Megapix Real Estate Pvt 7,85,69,679/- 11,75,000/- ltd 8 Overall Marketing Pvt 8,07,89,000/- 39,00,000/- Ltd 9 Panther Suppliers Pvt 6,45,23,726/- 40,00,000/- Ltd 10 Quest Heights Pvt Ltd 8,44,94,24,800/- 19,00,000/- 11 Ratnakar Dealers Pvt 6,89,29,163/- 25,00,000/- Ltd 12 Umang Dealmark Pvt 9,28,61,374/- 25,00,000/- Ltd Total Loan Total 5,24,50,000/- 7.3 It is pertinent to mention here that the assessee duly proved the genuineness of the transaction that the advancement of loan and the repayment of the loan has been carried out through proper banking channel and the loan creditors in reply to notice u/s 131 had furnished their respective bank accounts to substantiate the loan along with interest and the same were reflected in audited accounts of the assessee company and also the loan creditors. We find that the ld. CIT(A) in his order has elaborately discussed the entire issue regarding identity, creditworthiness and genuineness of the entities which is needless to discuss again. The ld. CIT(A) after considering the various judicial pronouncements allowed the appeal of the assessee by concluding as under:

6.2.12. Further, on perusal of the submitted ledger copies and confirmations of the loans, it is noticed that the said loans were repaid by the assessee in the same FY i.e., in the FY 2014-15 with payment of due interest after deducting legitimate TDS on the same. Hence, the assessee cannot be alleged to be the beneficiary of the said fund. However, the AO had not considered the same and sticked to the issue that assessee has brought back its unaccounted income in books of account in the form of bogus unsecured loans without furnishing any evidence regarding the same. Further, it can be stated that the assessee had provided the name, PAN, registered addresses of the aforesaid lending entities, hence, the assessee had proved one of the three primary limbs of the section 68 of the Act i.e., identity, of the loan creditors effectively. Moreover, these lending entities had filed their Income Tax returns regularly and they also were assessed to income Tax. The net-worths of the said entities are more than adequate to extend huge loans to anyone. The AO had not considered the positive financial parameters of the lending entities (supra) and only relied upon the adverse strictures of financials according to his own choice. Further, on perusal of the submission of the assessee, it is noticed that the status of the said loan creditors is Active in MCA website and they are regularly filing their returns as per the provisions of Companie Act with ROC. Further, as stated earlier and as evident from the unsecured loan summary provided by the assessee, it is observed that the assessee had also paid interest on loan @ 12% per annum to the lending entities. This is also evident from the Account Confirmation provided by the lender. However, these findings did not get any place in the assessment order by the AO. It may not be out of place to mention here that the lending entities had neither provided any adverse statement nor they had formed any adverse opinion against the loan transaction of the assessee. 6.2.13. It is observed from the submissions of the assessee that the assessee during the course of reassessment proceedings, had furnished audited Tax audit report showing the receipt and payment of the said loan etc. Hence, it is palpable that the AO, by not considering the aforesaid averments presented by the assessee during the assessment proceedings, relied on the statements of one unrelated arbitrary person recorded by the investigation wing and had made addition on the said loans received by assessee from the aforesaid lending entities along with corresponding interest payments without finding any defect in documents and details filed by assessee and merely relying on some retracted statements of the key persons of the assessee. It is also observed that the AO had not made any cross verification with the alleged lending entities. It is also noticed that nowhere in the assessment order it is mentioned that the assessee had routed its unaccounted cash and also no instance of cash deposit or cash trail was found and established during the assessment proceedings. 6.2.14. Reliance is placed on the following judicial pronouncements on the basis that no addition can be made when the identity, creditworthiness and genuineness of the loan creditors have been established by the assessee and the AO has not disputed the documents: a) In the case of “Overtop Marketing (P.) Ltd. Vs. PCIT 15.03.2021’, the Hon’ble ITAT, Kolkata had held the following: “17. So, the A.O in this case, erred in relying on the statement of two persons who were not allowed to be cross-examined as held by the Hon’ble Apex Court in Andaman Timber (supra) and Odeon Builders Pvt. Ltd. (supra). So from any angle, one looks, the statement of these two persons cannot be used against the assessee. And when we remove these two statements with the legal infirmities discussed supra, there is no material at all against the assessee and the AO having failed to find any infirmity with the documents filed by the assessee/lenders to prove the loan transactions as discussed supra, no adverse view was legally twelveable. And having gone through the impugned order and the Paper Book filed before us, we fully concur with the finding of facts as rendered by Ld CIT(A) in respect of identity, creditworthiness and genuineness of the lenders/loan transaction and for the sake of brevity and to avoid repetition it is not again repeated. We agree with the judicial precedence relied upon by the Ld CIT(A) in support of his decision. And we don’t find any legal or factual infirmity in the impugned order of the Ld CIT(A), so we decline to interfere. So the impugned action of Ld. CIT(A) to delete the section 68 addition of Rs.4.51 crores and [the interest paid by assessee to lenders] Rs.53,70,163/- is confirmed. So, the Revenue’s appeal stands dismissed.

The decision of the ITAT was challenged before the Hon’ble High Court by the department. The court had upheld the decision of ITAT by dismissing the appeal of the department vide ‘Overtop Marketing (P.) Ltd. Vs. PCIT [2023]148 taxmann.com 94 (Calcutta)’. b) In the case of ‘Ambe Tradecorp (P) Ltd. Vs. PCIT [2022]145 taxmann.com27 (Gujarat)’, the Hon’ble Gujarat High Court had held the following: “6. The Tribunal rightly recorded in para 29 of the judgment, "Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A." c) In the case of ‘ACIT Vs H.K. Pujara Builders (2019) 178 DTR 97.’, The Hon’ble ITAT, Mumbai had held as follows: “The assessee had been making frequent repayment of loans to said party and had also availed loans from time to time said party and entire loan account together with interest there on [duly subjected to TDS] had been completely squared up on 20.03.2015-entire transaction i.e. , received of loans, repayment of loans and repayment of interest there on had been made through regular banking channel from account payee cheques/there was no case of any cash deposit made either at the time of receipt of loan in account of M/s Grafton Merchants Pvt Ltd, or in account of assessee while making repayment of loan or repayment of interest–Hence, there was no need to suspect entire gamut of transaction .” d) The Hon’ble High Court of Gujarat, in the case of ‘DCIT Vs. Rohini Builders (2002) 256 ITR 360 (Guj)’ had held as under: “That the tribunal having deleted the addition under s. 68 accepting the genuineness of loans which were received and repaid by assessee by account payee cheques, assessee having established the identity of the creditors by giving their complete addresses, GIR numbers/PAN as well as confirmations along with the copies of their assessment orders wherever readily available, no substantial question of law arises; appeal under s. 260A dismissed.” a) In the case of ‘Commissioner of Income-Tax vs. Shiv Dhooti Pearls & Investment Ltd. [2016] 237 Taxman 104 (Delhi)’, the Hon’ble Delhi High Court had held the following: “12. ……What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub- creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and subcreditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee. ………….

“No additions on account of unsecured loans can be made when identity of the party is proved and more so when the amount is received through proven banking channels.” 6.2.15. Hence, it is proved that the AO had made the addition without any corroborative evidence on record against the assessee. The AO had treated the said lenders as bogus and dummy only relying on the statement of one unrelated person of the assessee namely Mr. Banka, Pritam Beria, Mr. Nangalia, Mr. Gopal Banka etc. Hence, the addition on the said unsecured loans were made by the AO merely on presumption and surmises which is not acceptable in law and devoid of natural justice. Reliance may be placed in the following cases: a) In the case of ‘Prashant Pratap Ahir vs ACIT the Hon’ble Punjab & Haryana High Court had held that “addition u/s 68 of the IT Act merely on the basis of presumption or suspicion without any corroborated evidence is unsustainable.” b) Further, the Hon'ble High Court, Calcutta in the ‘CIT-Ill, Kolkata vs. Dataware Private Limited ITAT No. 263 of 2011 Date: 21st September, 2011’ wherein the Court held as follows: "In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities.” c) The Hon’ble Supreme Court of India in ‘Sreelekha Banerjee V. CIT (1963) 49 ITR (SC) 112’ had held that “if the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject the explanation to hold that it was income. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof”. d) In the case of ‘Khandelwal Construction Vs CIT 227 ITR 900 (Gauhati)’, the Hon’ble jurisdictional High Court had held as under: “the amount of cash credits could not be included in the total income of the assessee because the Assessing Officer had not made proper enquiry. Therefore, u/s 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account. This is not the case where assessee has not provided relevant details. In this case the assessee has discharged its onus by filing the documents for which Ld. Assessing Officer has not pointed any discrepancy. There is no material with the Ld. Assessing Officer to prove the funds received by the assessee as non-genuine and no belief can be formed merely on the basis of assumptions, presumptions, surmises and conjectures.” e) The Hon’ble Calcutta High Court in the case of ‘Hindustan Tea Trading Co. Limited v. CIT 263 ITR 289 (Kol)’, had held that “But once sufficient material is produced and explanation is given, the onus is discharged and shifted on the Revenue. Having regard to the materials, it might ask for further materials from the assessee or it might come to a conclusion on the materials so produce as it might in law arrive at. Once the materials are there, it is incumbent on the Assessing Authority to inquire into the same. It cannot over look one or other materials nor can it undertake a halfhearted enquiry”. (f) In the case of ‘Commissioner of Income Tax V. Diamond Products Limited (2009) 177 Taxmann 331 (Delhi)’, the following has been held by Hon’ble High Court of Delhi: “We have heard the learned Counsel for the appellant and have examined the findings returned by the Tribunal as well as those returned by the Commissioner of Income-tax (Appeals) and find ourselves to be in agreement with the conclusions arrived at by the Tribunal. The Assessing Officer is not permitted to examine the source of the source once the assessee has been able to establish that the transaction with his creditors is genuine and that the creditors identities and creditworthiness have been established. In this case, this had been done, therefore, it was not open to the Assessing Officer to make the addition of Rs.23,00,000 after entering upon an examination of the source of the source. Consequently, we feel that no interference is called for on this conclusion in the impugned order passed by the Tribunal. The Tribunal has correctly applied the law on the facts determined by it. No substantial question of law arises on this aspect of the matter”. 6.2.17. It is further observed from the assessee’s submission (confirmation of accounts, ledgers etc.) that the said loans were repaid in the same AY i.e., 2015- 16 with respective interest after deducting due TDS on it. Reliance was placed by the assessee in the following judicial pronouncements in respect of its contention: a) The Hon’ble ITAT, Ahmedabad, in the case of ‘DCIT vs. A.S.Shah, 02/08/2023’, held the following: “The unsecured loan availed was repaid in the next financial year to the creditor namely Smt. Hansaben M. Patel through cheque payments and the bank statement also filed before the Lower Authorities. Therefore, we are of the considered opinion, the provisions of section 68 do not attract in the above transaction and thereby we uphold the order passed by the Ld. CIT(A) deleting the addition made u/s. 68 of the unsecured loans availed from Smt. Hansaben M. Patel. The so-called unsecured loan was given by Account Payee cheques andalso repaid by the assessee in the next financial year through banking channels. The recovery proceedings u/s. 226(3) initiated against Mukesh J. shah was also dropped by the A.O. Therefore, the provisions of section 68 do not attract of the loan transactions between the assessee M/s. Savitaben Mangaldas Trust and Shri Mukesh J. Shah. Therefore, the addition on this account is also liable to be deleted and the grounds raised by the Revenue is devoid of merits.” b) In the case of ‘CIT v. S. Kamaljeet Singh [2005] 147 Taxman

18. (All.)’, the Hon’ble jurisdictional High Court on the issue of discharge of assessee's onus in relation to a cash credit appearing in his books of account, has observed and held as under:- "

4. The Tribunal has recorded a finding that the assessee has discharged the onus which was on him to explain the nature and source of cash credit in question. The assessee discharged the onus by placing (i) confirmation letters of the cash creditors; (ii) their affidavits; (iii) their full addresses and GIR numbers and permanent account numbers. It has found that the assessee's burden stood discharged and so, no addition to his total income on account of cash credit was called for. In view of this finding, we find that the Tribunal was right in reversing the order of the AAC, setting aside the assessment order." c) The Hon’ble High Court, Calcutta in the case of ‘S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward-46(3), Kolkata 347 ITR 347’ wherein the Court held as follows: “15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.

16. In the case before us, the appellant by producing the loan-confirmation- certificates signed by the creditors, disclosing their permanent account numbers and address and further indicating that the loan was taken by account payee cheques, no doubt, prima facie, discharged the initial burden and those materials disclosed by the assessee prompted the Assessing Officer to enquire through the Inspector to verify the statements.” d) In the case of ‘CIT vs. Y.K. Gupta [2014] 46 (HC), the Hon’ble Gujrat High Court’ held the following: "

raised by the assessee are allowed.

7. In the appeal Ground No. 3 (original ground):- In this ground, the assessee had claimed that the AO had also erred in disallowing a sum of Rs.2,62,250/- as Avima Exports Pvt. Ltd commission u/s 69C read with section 115BBE of the Act paid to entry operators for unsecured loan. ……….. 7.2.1. The assessee’s contention in this ground 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.2,62,250/- to the said lending entities for availing any accommodation entry nor the said lending entities 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 assessee in respect of commission paid to the entry operators is nothing but an imaginary story. Hence, in view of the above the addition of Rs.2,62,250/- as estimated by the AO @0.5% of total loan of Rs.5,24,50,000/- is liable to be deleted. Hence, this ground of the assessee is also allowed.”

7.4 Going over the above discussion and considering the facts of the case, we find that the ld. CIT(A) has elaborately discussed everything and thereafter, passed the impugned order in favour of the assessee. We, therefore, do not find any infirmity in the order of the ld. CIT(A) and the same is upheld. Accordingly, the appeal of the revenue is dismissed.

Kolkata, the 11th November, 2025.