DCIT, CENTRAL CIRCLE-1(4), KOLKATA, KOLKATA vs. MURLIDHAR RATANLAL EXPORTS LIMITED, KOLKATA

A.Y. 2013-14 CO No. 42/KOL/2025 04. Since, the assessee has raised legal issue in cross objection filed, challenging the validity of reopening of assessment u/s 147 of the Income-tax Act, 1961 (the Act) on the ground that the conditions envisaged in proviso to Section 147 of the Act were not satisfied by raising ground no.1, which is as under: - “1. That the Ld. CIT(A) was wrong in not allowing the assessee's objections regarding re-opening of assessment proceeding by issuing notice u/s 148 after elapse of four years from the end of the relevant assessment year as the assessee had already disclosed all the material facts during the course of the assessment proceedings completed u/s 143(3) dt. 28.03.2016. Thus, the re-opening is bad in law and hence the consequent assessment made u/s 147 needs to be quashed.”

6. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by directing the ld. AO to delete the additions. However, the legal issue raised in ground no.3 was rejected and dismissed.

09. Since, we have allowed the appeal of the assessee on ground no.1 raised in Cross objection No. 42/KOL/2025 for A.Y. 2013-14 by quashing the reopening of assessment u/s 147 of the Act, the appeal

A.Y. 2014-15 CO No. 43/KOL/2025 010. The issue raised in this Cross Objection No. 43/KOL/2025 is similar to one as decided by us in Cross Objection No. 42/KOL/2025 for A.Y. 2013-14. Accordingly, our decision would, mutatis mutandis, apply to this Cross Objection of assessee in CO. No. 43/KOL/2025 for A.Y. 2014- 15. Hence, the Cross Objection of the assessee in CO No. 43/KOL/2025 is allowed.

011. Since, we have allowed the appeal of the assessee in Cross objection No. 43/KOL/2025 for A.Y. 2014-15 by quashing the reopening of assessment u/s 147 of the Act, the appeal filed by the Revenue challenging the order of ld. CIT (A) deleting the additions on merit becomes infructuous and consequently, dismissed.

A.Y. 2015-16 CO No. 44/KOL/2025 012. The ld. Counsel for the assessee did not press the issue raised in the cross objection and therefore, the Cross Objection filed by the assessee is dismissed as not pressed.

1. That on the facts and circumstances of the case, whether the Ld. CIT(A) is correct in deleting the addition of Rs. 2,85,00,000/- bogus unsecured loan u/s. 68 of the Income Tax Act, 1961 ignoring the fact that the assessee has failed squarely to prove the Identity and creditworthiness of the loan creditors and the genuineness of the impugned transactions.

2. That on the facts and circumstances of the case, whether the Ld. CIT(A) is correct deleting the disallowance of interest against unsecured loans amounting to Rs. 19,76,710/-, whether the assessee itself failed to justify the genuineness of the corresponding unsecured loan on which interest is paid.

3. That on the facts and circumstances of the case, whether the Ld. CIT(A) is correct in deleting the disallowance of Rs. 1,54,718/- being bogus purchase ignoring the fact the assessee failed to prove the genuineness of the impugned purchase transaction from M/s. Ajanta Vinimay Pvt Ltd., M/s Eskay Enclave Pvt. Ltd., M/s Gokul Commotrade Pvt. Ltd. and M/s Ruchika Vinimay Pvt Ltd.

4. That on the facts and circumstances of the case, whether the Ld. CIT(A) is correct deleting the addition of interest on cash loans amounting to Rs. 2,57,72,500/-, the incriminating documents which are suggestive of assessee's availing the cash loan.

5. Whether on the fact and circumstance of the case Ld. CIT(A)is correct admitting fresh submission of the assessee, based on which he held that the alleged loans were factually cash loans as the same were taken through banking channel, in contravention of Rule 46A of the IT Rules, 1962.”

14. The issue raised by the Revenue in ground no.1 is against the deletion of addition of ₹2,85,00,000/- by ld. CIT (A) as made the by the AO u/s 68 of the Act in respect of unsecured loans.

"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.

5. 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 the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied.

7. For the reasons recorded above, no question of law muchless substantial questions arises in this appeal. It stands meritless and accordingly dismissed.

A.Y. 2016-17 CO No. 45/KOL/2025 027. The ld. Counsel for the assessee did not press the issue raised in the cross objection and therefore, the Cross Objection filed by the assessee is dismissed.

“8.14.1 I have carefully considered the facts of the case, the Assessment Order of the AO and the submission of the appellant. The AO has made the addition of Rs. 1,46,55,000/- on account of interest expenses paid in cash on the cash loan received through Finance broker Sanwaria and Kasera Group. As per AO search u/s 132 of the Act was conducted at the premises of the Finance broker i.e. Sanwaria and Kasera on 30.11.2018 and in search several incriminating documents were found and seized, wherein transaction relating to loan transactions with MREL group were recorded. 8.14.2 The AO has mentioned about incriminating documents impounded during the course of survey operation and reproduce the extract of documents found from the computer Hard Disk marked MREL/HD/2 at page no. 41-46 of the assessment order. Thereafter, the AO alleged that on the perusal of transaction details it was seen that the assessee has entered into several cash loan transactions during the relevant year under consideration and several incriminating material were impounded during the course of survey. The AO has thereafter, prepared a summary at page no. 47 of the assessment order based on the extract of documents from computer Hard Disk marked MREL/HD/2. The AO has made calculation of total credit entry, total debit entry and calculation of interest expense. The summary of documents impounded as per the order is reproduce as under:

8.14.3 However, the appellant in its submission has stated that all these loan transactions alleged to have been made in cash are duly recorded in the books of accounts and have made through proper banking channels. The loan ledgers, interest ledgers, details of TDS deductions etc. were duly furnished to the AO in the assessment. Not only that the AO has conducted enquiry u/s 133(6) of the Act for all the loan creditors appearing in its regular books. This proves that AO has not applied his mind while making vague allegation. Further, there is merit in the submission of the Appellant that all these loans appearing at page no. 42- 46 of the assessment order are duly reflected in the item no. 31(a) & 31(b) of the tax audit report, which was duly uploaded on the income tax portal. Furthermore, the appellant has pointed out various other glaring mistakes in the analysis of the data found in the excel sheets of Hard Disk marked as MREL/HD/2. As per appellant, there is many mistakes and repetition in the data prepared by the AO. 8.14.4 I have examined all the details submitted by the appellant with its submissions. These details were duly furnished to the AO in the assessment as well. On the verification of all the details, I am fully convinced that the loans alleged by AO to have been taken in cash are actually taken through proper banking channels and duly reflected in the books of accounts of the assessee. The interest payments on those loans are also accounted for in the books of account and paid through banks. Assessee has also pointed out that against the assessee penalty proceeding for taking cash loan and refunding u/s 271D and u/s 271E of the act was initiated by the Addl. Commissioner, Central Range -1, Kolkata and he has after due verification found that the assessee has not taken or refunded any cash loan. Hence, he dropped the penalty proceeding initiated u/s 271D and 271E vide order dt. 03.08.2022 for the year under consideration. The claim of the appellant was verified and found to be correct. AO himself has verified all the loan taken in the regular books of account of the assessee is evident from the assessment order and made addition of Rs. 1,46,55,000/- separately. This shows AO has alleged these as cash loan is factually wrong. 8.14.5 Further, the appellant has deducted TDS on the payments of these loans and has claimed these interest payment in P/L Accounts. So, there is no any reason found to treat these loans as received in cash and interest of Rs. 1,46,55,000/- have been paid in cash. The AO has made this addition purely on presumptions and surmises and without bringing any adverse material on record. Further, while making this addition, the AO has failed to look into the details furnished by assessee to him in assessment proceeding. Therefore, in view of the above discussion, I held that addition made by the AO on account of interest payment on the cash loan of Rs. 1,46,55,000/- is arbitrary and untenable in the eyes of law. The AO has made this addition without analyzing the relevant fact of the case and purely on the basis of surmises and presumption. Hence, the addition of Rs. 1,46,55,000/- made u/s 69C of the Act is deleted.”

034. The issue raised in ground no.1 is against the deletion of disallowance of ₹1,07,54,192/- by the ld. CIT (A) as made by the ld. AO in respect of bogus purchases.

“4.10 Decision: - 4.10(1) I have carefully considered the facts of the case and the submission of the appellant on this ground. The AO in its assessment order has treated the interest paid of Rs. 44,83,667/- on loan taken from various loan creditors which the AO has held as bogus loan creditors for AY 2013-14 to 2017-18, as bogus interest. 4.10(2) While making the addition the AO has stated in the assessment order that the unsecured loans have been taken in earlier years from the paper/Jamakharchi Companies. Because as per Investigation Wing data base, the Companies were controlled and managed by various entry operators. The AO has stated that, the entry operators have given statement before DDIT(Inv.), that said companies are Jamakharchi companies and were used for giving accommodation entries to various companies/persons. Further the AO has stated that the identities of these companies were also not established as notices u/s 131/133(6) of the IT Act were either returned unserved or not complied with. Further, in the Income Tax Inspector enquiry report, it was found that the above- mentioned companies are not existing at their respective addresses. The AO has analyzed the financial capacity of these seven companies on the basis of their IT returns and audited accounts and has reached to the conclusion that the above said companies does not have financial capacity to give such a big amount of unsecured loans to the assessee. Thus, the AO in Page 10 of its assessment order has finally held that the identity and creditworthiness of these two loan creditor companies as well as genuineness of their transactions in the form of interest of Rs. 44,83,667/- remains unexplained. 4.10(3) However, on perusal of the assessment order of earlier years and other relevant facts of the case, I find various legal flaws and short-coming in the decision of the AO. The AO in the Assessment Order has stated that survey proceedings u/s 133A of the Act was conducted on 04.11.2019 at the premises of the assessee group including the premise of the assessee company and in survey various incriminating documents/materials were found. Assessment proceeding is initiated on the basis of the material found in the survey. But ironically the AO did not refer any impounded document/paper with its identity mark either for initiation of reassessment proceeding or for the purpose of making addition of Rs. 44,83,667/- to the total income. Thus, absence of reference of impounded material relating to the unsecured loan in the assessment order of the AO is giving ample reason to suspect that nothing incriminating relating to loan transactions were found in the survey against the assessee. 4.10(4) Furthermore, the AO has heavily relied on the statement of entry operators and data base of investigation wing, Kolkata in arriving at the conclusion that the above loan creditors were the Jamakharchi/Paper Companies and have been used for giving accommodation entries in the form of Bogus loans to the assessee. However, the AO has forgotten to evaluate evidentiary value of the statement of alleged entry operators and database of Investigation Wing for making addition in this case. First and foremost is that the database of Investigation Wing, Kolkata is neither a public documents nor a document duly certified by a court of law/Rules/Acts/Circular/ Instructions etc. for its use as an evidence in Income Tax matter. So these details or statements cannot be directly used for making addition in a case. Rather, the AO should have taken the help of these data base for conducting further enquiry in these cases. (i) The AO has relied on 3rd party statement without realising the fact that whether those statements of 3 rd parties were taken in course of survey or assessment proceeding in the case of assessee or in the search/survey conducted on different parties in different context. (ii) The AO should have brought in the fact if any, on record that whether the alleged entry operators have accepted in their statement that the above- mentioned loan given to the assessee are fictitious and bogus, and they are just accommodation entries. No such categorical findings have been brought on record by the AO. Not only that the AO has even failed to justify its claim that the assessee has brought in its own unaccounted money into business in the form of unsecured loan by using these paper companies and sham transaction. The AO has not brought on record any evidence regarding circular transaction whether in the form of cash transaction or through banking channel.

4.10(5) Furthermore, the AO has used the statement of those third parties, (the alleged entry operators) at the back of the assessee as he did not provide the copy of those statements to the assessee for cross examination and rebuttal. The Hon’ble Calcutta High Court in the case of CIT v. Eastern Commercial Enterprises (1994) 201 ITR 105 (Cal)has held that,‘an adverse finding cannot be made against an assessee on the basis of such statements without allowing opportunity to assessee to cross examine the person on whose statement reliance is placed against the assessee Not only that, there is merit in the submission of the appellant, when it states that the 3 rd parties, i.e. alleged entry operators were neither the directors nor were any way related to the loan creditors. So, their statement cannot be taken as so relevant in this case and that too without any corroborative material. 4.10(6) Therefore, in view of the above discussion and considering the relevant facts of the case, vis-a-vis relying on the cases cited above, I find no merit in the decision of AO in treating the interest paid on loan of Rs. 44,83,667/- after deduction of TDS as bogus transaction. Hence, the addition of Rs. 44,83,667/- made by the AO on account of interest expenses is deleted.”

Order pronounced in the open court on 28.10.2025.