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Facts
The assessee, an NBFC, appealed against orders for AY 2016-17 and 2017-18. For AY 2016-17, reassessment was initiated based on information regarding accommodation entries (bogus unsecured loans) of Rs. 2.25 crore from shell entities, added under Section 68. Similar issues were present for AY 2017-18, including a Rs. 1 crore addition for unexplained cash credit and unexplained interest expenses.
Held
The Tribunal noted the assessee's lack of proper compliance before the Ld. AO and Ld. CIT(A), partly attributed to the COVID-19 pandemic. In the interest of justice, the Tribunal set aside the orders for both years and remitted the matter back to the Ld. AO for reassessment de novo, granting the assessee a fresh opportunity to be heard and make submissions.
Key Issues
Validity of reassessment proceedings; addition of unsecured loans/cash credits as unexplained under Section 68; addition of interest expenses as unexplained; and procedural compliance during assessment/appeal proceedings.
Sections Cited
147, 148, 250, 68, 143(2), 142(1), 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
O R D E R PER RAKESH MISHRA, ACCOUNTANT MEMBER: These appeals filed by the assessee are against the order of the Ld. Commissioner of Income Tax (Appeals), Kolkata -27 [hereinafter referred to as “the Ld. CIT(A)”] dated 10.12.2024. Since the issues in both the appeals are common, they were heard together and are being decided vide this common order for the sake of convenience and brevity.
The grounds of appeal raised by the assessee are reproduced as under: I.
A.Y. 2016-17: “1 That on the facts and in the circumstances of the case, initiation of re-assessment proceedings u/s 147 of the Income Tax Act, 1961 is bad in law.
& 386/Kol/2025 Hifill Tracon Pvt. Ltd. 2.) That on the facts and in the circumstances of the case, the order u/s 250 dated 10.12.2024 passed by Ld. CIT(A)-27, Kolkata is erroneous and bad in law. 3.) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in confirming the addition on account of unsecured loan to the tune of Rs. 2,25,00,000/- as unexplained cash credit u/s 68 of the Act. 4.) That the appellant craves leave to add, alter, adduce or amend any ground on or at the time of hearing of the appeal.”
A.Y. 2017-18: “1.) That on the facts and in the circumstances of the case, initiation of re- assessment proceedings u/s 147 of the Income Tax Act, 1961 is bad in law. 2.) That on the facts and in the circumstances of the case, the order u/s 250 dated 10.12.2024 passed by Ld. CIT(A)-27, Kolkata is erroneous and bad in law. 3.) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in confirming the addition on account of unsecured loan to the tune of Rs. 1,00,00,000/- as unexplained cash credit u/s 68 of the Act. 4.) That on the facts and in the circumstances of the case, Ld. CIT(A) erred in confirming the addition on account of interest expenses to the tune of 16,15,190/- as unexplained expenditure. 5.) That the appellant craves leave to add, alter, adduce or amend any ground on or at the time of hearing of the appeal.”
We shall first take up the appeal for the A.Y. 2016-17. Brief facts of the case are that the assessee is an NBFC and had filed the original return of income on 17.10.2016 declaring total income at Rs.5,54,020/-. The Ld. AO received information from the DDIT(Inv.), Unit-1(3), Kol vide letter No. DDIT(Inv.)/Unit- 1(3)/Kol/Banka/Information/2018-19/6032 dated 12.12.2018 that the assessee company had received accommodation entries of Rs.2,25,00,358/- during the FY 2015-16 from three shell entities. As per the information, the assessee company had received amounts of Rs 20,00,029/- from M/s Eclat Constructions Pvt. Ltd., Rs.50,00,126/- from M/s Nityadhara Housing Pvt. Ltd. and Rs. 1,55,00,203/- from M/s Oversure Plazza Pvt. Ltd. during the year under consideration, all of which had been alleged to be paper/shell companies. On the basis of the above information, a notice u/s 148 of the Act was & 386/Kol/2025 Hifill Tracon Pvt. Ltd. issued to the assessee on 24.03.2021 asking the assessee to file its return of income. The assessee furnished the return of income showing the same total income which was shown in the original return filed. Subsequently statutory notices u/s 143(2) and 142(1) of the Act were issued and in response to the same, the assessee submitted the details. The assessment order u/s 147 of the Act was passed determining the total income of the assessee at Rs. 2,30,54,020/- in which the Ld. AO made additions on only one ground i.e. unexplained cash credits u/s 68 of the Act at Rs.2,25,00,000/- in the form of bogus unsecured loan received from the above three bogus entities. Being aggrieved with the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who vide order dated 10.12.2024 dismissed the appeal. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal.
Rival submissions were heard and the record and the submissions made have been examined.
It was argued by the Ld. AR before us that on account of COVID-19, the assessee could not make proper compliance before the Ld. CIT(A) who dismissed the appeal of the assessee. He submitted that the assessee is an NBFC and carries on the business of granting loans and has sufficient evidence for the relief claimed and can file the same before the Ld. AO. He requested that the matter may be remanded back to the Ld. AO to grant an opportunity of being heard to the assessee and thereafter make the assessment. The Ld. DR did not oppose the request of the assessee.
& 386/Kol/2025 Hifill Tracon Pvt. Ltd.
We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee by observing as under: “6.2.10. In the light of the aforesaid judicial pronouncements as well the provisions of the section 68 of Act and above discussed facts, it can be inferred that whether any sum credited in the accounts of th e assessee through banking channel or not and whether any loan confirmation from such lending entities are present on record or not, whether any interest was paid against such loan or not, the "onus" to prove the identity, Genuineness & creditworthiness of the creditors and genuineness of the transaction is on the assesses but in the instant case this "onus" was not discharged by the assessee in an effective manner. It is to be reiterated that assessee has completely failed to give any explanation and/or to substantiate the creditworthiness & genuineness of the aforesaid lenders. The explanation offered was not found satisfactory as it was verified from Income Tax Returns of the creditors that the amount of funds transferred to the assessee in the form of unsecured loans were grossly disproportionate to their gross total income & known sources of income. Moreover, when such creditors were summoned for personal appearance, none of them appeared for examination and to substantiate the transactions. Further, assessee also has failed to produce the Loan creditor parties, in spite of being duly requested, for examination and/or cross examination of the aforesaid money receipt transactions. Further, assessee has also failed to explain & substantiate the sources of the funds of the lender & no explanation was offered in respect of credit entries in the account of lenders. Moreover, the lenders were also given multiple opportunities to substantiate their creditworthiness & genuineness vide notices issued u/s 133(6) of the Act but they did not appear before the AO and failed to establish their creditworthiness & genuineness of transactions. Hence, the addition of Rs.2,25,00,000/ - is confirmed. Therefore, this ground raised by the assessee is dismissed.
It is evident that the assessee could not discharge the onus to prove the identity, genuineness and creditworthiness of the creditors and the genuineness of the transactions when the creditors were summoned for personal appearance. The assessee also failed to produce the loan creditor parties in spite of being duly requested for examination and/or cross examination of the aforesaid money receipt transactions nor the source of the funds & 386/Kol/2025 Hifill Tracon Pvt. Ltd. nor any explanation was offered in respect of the credit entries in the account of the lenders. The Ld. AR submitted that the non-compliance occurred on account of COVID-19 pandemic and requested to grant another opportunity before the Ld. AO to file the required details.
Since there was no proper compliance before both the Ld. AO as well as the Ld. CIT(A), in the interest of justice and fair play, it was considered that the request of the assessee to set aside the case before the Ld. AO may be allowed so that a proper opportunity of being heard may be provided. Hence, after examining the facts of the case, we deem it appropriate to set aside the order of the Ld. CIT(A) as well as the order of the Ld. AO and remit the matter back to the Ld. AO for making the reassessment de novo. Needless to say, the assessee shall be given a reasonable opportunity of being heard to make any further submission it wants to make in support of the relief claimed and shall not seek unnecessary adjournments. Accordingly, the grounds taken by the assessee in his appeal are allowed for statistical purposes.
In the appeal for A.Y. 2017-18, the Ld. AR submitted that although compliance was made but since the loan parties and the creditors are similar and did not respond to the notice issued, he requested that the matter for this assessment year as well maybe remanded to the Ld. AO for enabling the assessee to make proper submission before him. The Ld. DR did not oppose this request of the assessee as well. Hence, the orders of the Ld. CIT(A) as well as of the Ld. AO for A.Y. 2017-18 are also set aside as the facts are similar that the addition was confirmed on account of non-response to the notices issued by & 386/Kol/2025 Hifill Tracon Pvt. Ltd. the creditors and the matter is remanded back to the Ld. AO for making the reassessment de novo as per the directions issued in para 7 for A.Y. 2016-17 and all the grounds of appeal of the assessee are allowed for statistical purposes.
In the result, both the appeals filed by the assessee are allowed for statistical purposes
Order pronounced in the open court on 7th July, 2025.