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Facts
The Revenue appealed against the CIT(A)'s order deleting additions made on account of bogus unsecured loans, disallowance of interest, and commission paid. The additions were based on search and seizure operations on the Goel Group, of which the assessee was a part.
Held
The Tribunal held that the CIT(A) had correctly deleted the additions. The Tribunal noted that the assessee had provided sufficient documentary evidence for the identity, creditworthiness, and genuineness of the loan transactions, and the loans were also repaid. Relying on judicial precedents, the Tribunal stated that once loan repayment is established, credit entries cannot be ignored.
Key Issues
Whether additions made by the AO on account of bogus unsecured loans, disallowance of interest, and commission were justified, especially when the loans were repaid and supported by documentary evidence.
Sections Cited
68, 132(1), 133A, 133(6), 143(3)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the Commissioner of Income Tax, Appeal (hereinafter referred to as the “Ld. CIT (A)”] dated 22.10.2024 for the AY 2021-22.
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
“5.0 Decisions: 5.1 I have carefully considered the facts of the case, submission of the appellant and the assessment order. In the assessment order, there have been detail discussions with respect to search on Laser Power and Infra Pvt Ltd. and Goel group of companies and their directors and key persons, wherein certain incriminating documents were found. In the assessment order, there is detail discussions on statements of various persons also. The Assessing Officer has finally come to conclusion that the assessee company has failed to prove the creditworthiness of the loan creditors, though the Assessing Officer is satisfied with respect to identity of loan creditors. The Assessing Officer has also raised doubt on the genuineness of the transactions 5.2 There was search and seizure operations under section 132(1) of the Act aswell as survey under section 133A of the Act, 1961 on 15.03.2022 and subsequent dates, at the office premises of "Goel Group of cases' at "Unit No. 12/4, Rajdanga Main Road, Kolkata - 700 107 and other places as well as at the residential premises of its Directors namely, Devendra Goel, Devash Goel, Purushottam Dass Goel and Key Persons connected with this group. Vide notice dated 20.12.2022 and 21.12.2022, the Assessing Officer had provided copy of some documents allegedly belonging to the appellant company, which in his opinion was incriminating. However, I have gone through the said documents and the reply filed by the appellant during the assessment hearing stage and I come to conclusion none of the details /documents mentioned in the aforesaid notice represent any escapement of income. 5.3 Reference has been made in page 3 to 7 of the assessment order with respect to one excel file found from the laptop of Navin Kumar Saffar, the Chief Accounts Head of Laser Group. Reference has also been made to the statement recorded under section 131 of the Act on 02.03.2023from Navin Kumar Saffar. At the assessment hearing stage, Show Cause notice was issued to the appellant company with respect to the aforesaid statement of Navin Kumar Saffar. There is allegation that the said loan represent accommodation entry transaction. It was submitted by the appellant company that the said data file contains the list of loan transactions (and not a alleged accommodation entry) of Laser Power and Infra Pvt Ltd and not the appellant company. It was also clarified that Navin Kumar Saffar had clarified that the content of each column of the said excel sheet and also clarified that the transaction mentioned in the excel file are relating to interest calculations, TDS and the commission of the finance broker. In his reply, he had submitted that the commission is being received by the finance broker from the lender. Thus, it was submitted that the transaction represent actual loan transaction and not accommodation entry. With respect to cash commission mentioned in the excel sheet.He had also stated that there is some kick back of such commission income earned by the finance broker. Thus, from his statement, it is clear that commission, if any, was borne by the lender to be paid to the
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.
Order pronounced in the open court on 25.07.2025.