DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), KOLKATA, AAYAKAR BHAWAN POORVA vs. DAILMER INDUSTRIES PRIVATE LIMITED, KOLKATA

At the outset, we note that there is a delay in filing the appeal of 36 days by the Revenue for which the condonation petition has been filed.

After hearing both the parties and perusing the contents of the condonation application filed by the Revenue, we are of the view that the reasons are for bonafide and genuine. Hence, we condone the delay and adjudicate the appeal.

The facts in brief are that the assessee filed the return of income on 15.02.2022 by declaring total income of ₹3,85,60,090/-, which were processed u/s 143(1) of the Act 31.05.2022. The assessee company is engaged in the business of trading of HDPE/ LLDPE, which is used in manufacturing of cables and conductors. During the year, the Revenue from operation was ₹103,58,43,299/- and other income of ₹1,24,69,622/-. A search action u/s 132(1) of the Act as well as survey u/s 133A of the Act were conducted on the Goel Group of cases on 15.03.2022, of which the assessee was also a part and a related entity. During the course of search on the Goel Group, various incriminating materials were seized which suggested that the group was engaged in common the practice of routing its own unaccounted fund through shell entities in guise of unsecured loans with the help of various entry operators. During the assessment proceedings, the ld. AO noted that the assessee had borrowed during the year two unsecured loans i) of ₹6,50,00,000 from Indian Infotech & software Ltd. and ii) ₹5,00,00,000/- from Manish Co. Pvt. Ltd. The assessee also paid interested on loan during the year to the extent of ₹1,10,18,307/-. The assessee has also opening balance of unsecured loan outstanding as on the beginning of the year. The complete statement of the total loans outstanding on the year end is given by the ld. AO in Para no.5.1 of the assessment order. Thereafter, the ld. AO noted that during the course of search at the residence premises

We have heard the rival submissions and perused the materials available on record, we note that the search u/s 132(1) as well as survey u/s 133A of the Act were conducted on Goel Group of cases on 15.03.2022. The assessee was also part of the said group. During the search, according to the ld. AO various incriminating documents were discovered and seized which revealed that assessee had borrowed two money by way of loans, aggregating to ₹11,50,00,000/- from two parties namely; i) ₹6,50,00,000 from Indian Infotech & software Ltd. and ii) ₹5,00,00,000/- from Manish Co. Pvt. Ltd. The assessee filed complete evidences qua the lender companies before the ld. AO, however, the ld. AO by relying on the statement of Shri Jivendra Mishra, dated 28.09.2014, added these loans as unexplained cash credit to the income of the assessee in the assessment farmed u/s 143(3) dated 08.03.2023. Besides the ld. AO also disallowed the interest paid on these loans of ₹1,10,18,307/- and commission paid for arranging such bogus loans amounting to ₹5,75,000/-. The ld. AO noted that in case of Indian Infotech and Software Ltd. notice u/s 133(6) of the Act was served through speed post however, no response was received whereas in case of another lender Shri Manish

We also note that that the assessee has provided interest on loan of ₹15,55,892/- taken from Indian Infotech and software Ltd. and TDS of ₹1,16,694/- was deducted. We also note that the loan was repaid during the F.Y. 2022-23. The said lender was non-banking finance company registered with RBI and is engaged in the business of financing, investment and training on computer technology and its related activities. We note that the said company has aggregate unsecured loans of ₹186.28 crores given to various parties out of its own funds of ₹241.60 crores. The assessee has filed all the documents like MCA database, copy of ITR Acknowledgment, audited accounts, ledger copies, and copies of extracts bank statements to establish the identity and creditworthiness of the aforesaid loan party and genuineness of the transactions. The ld. CIT (A) even noted that the party has replied to the notice u/s 13(6) of the Act whereas the ld. AO in the assessment order has stated that the party has not replied to the notice issued by the ld. AO. Similarly, in the case of Manish Co. Pvt. Ltd. interest of ₹24,42,740/- was provided and TDS of ₹1,83,207/- was deducted at source. The said loan was repaid in 2022-23. So far as the creditworthiness is concerned the said company has net worth of ₹33 crores and profit before tax of ₹58.89

In our opinion, once the loans were repaid then the provisions of Section 68 of the Act cannot be invoked in respect of the loan transactions as has been held in the case of PCIT vs. Ambe Tradecorp (P.) Ltd. (2022) 145 taxmann.com 27 (Gujarat), in which the Hon'ble High Court has held that once the repayment of loan has been established based on the documentary evidences then the credit entries cannot be looked in isolation after ignoring the debit entries despite the fact that debit entries were carried out in the later years. Even the case of the assessee is squarely covered by the decision of the co-ordinate bench decision in the case of Poddar Realtors Vs. ITO in vide order dated 22.06.2023. Both the decisions have been followed by the ld. CIT (A) while deleting the addition. Under these circumstances, we do not find any infirmity or defect in the order of the ld. CIT (A) which warrant our interreference. Accordingly, we uphold the appellate order by dismissing the appeal of the Revenue.

In the result, the appeal of the Revenue is dismissed.