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Facts
The assessee's assessment for AY 2013-14 was reopened under Section 147, and the AO made an addition of ₹7,22,90,000/- as unexplained cash credit for an unsecured loan from Ratio Distributors Pvt. Ltd., alleging it to be an accommodation entry. This was based on the lender's nil income/low capital and non-compliance with Section 133(6) notices. The CIT(A) upheld the addition.
Held
The Tribunal found that the assessee had provided comprehensive evidence of the lender's identity, creditworthiness, and genuineness of the transactions, which neither the AO nor CIT(A) had rebutted. Citing a similar favorable decision for the assessee in AY 2017-18 involving the same lender and other judicial precedents, the Tribunal held that an addition cannot be sustained merely due to non-compliance with Section 133(6) notices when other proofs are furnished. The addition was therefore directed to be deleted.
Key Issues
Whether the addition of unsecured loans as unexplained cash credit/accommodation entry under Section 68 was justified when the assessee furnished detailed evidence; and whether non-compliance with Section 133(6) or 131 notices by the lender is sufficient ground for disallowing the loan when other proofs are provided.
Sections Cited
147, 148, 139(1), 144B, 133(6), 143(3), 68, 131
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 13.12.2024 for the AY 2013-14.
The assessee has challenged the reopening of assessment u/s 147 read with section 148 of the Act, beside challenging on merit the confirmation of addition by ld. CIT (A) as made by the ld. AO of ₹7,22,90,000/-. First of all, we are inclined to adjudicate the issue on merit.
The facts in brief are that the assessee filed the return of income within time allowed u/s 139(1) of the Act, declaring total income of
In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by upholding the assessment order after taking into account the contentions and submissions of the assessee by observing that the assessee is a beneficiary of accommodation entry and AO has given a very detailed finding in the assessment order by relying on various decision from page no.8 to 25 of the Paper Book.
The ld. AR vehemently submitted before us that the issue is squarely covered in favour of the assessee in its own case by the decision of the co-ordinate Bench in the A.Y. 2017-18 in vide order dated 01.04.2025, wherein the addition made by the ld. AO and confirmed by the ld. CIT (A) on account of unsecured loan taken from Ratio Distributors Pvt. Ltd. of ₹1,74,00,000/- was deleted by the tribunal while deleting other loans from four parties of ₹1,75,00,000/- thereby deleting the aggregate addition of ₹349,00,000/- made by the ld. AO. The ld. AR submitted that the assessee has taken loan from the same party of ₹7,22,90,000/- which was partially repaid during the year and the remaining balance was repaid in the subsequent assessment years. The ld. AR stated that the assessee has filed in the assessment proceedings, the copies of loan confirmation from lender, copy of audited financial statement, copy of ITR, copy of assessment order framed in the case of the lender u/s 143(3) of the Act, copy of certificate of enlistment, copy of municipal tax receipt, Copy of MCA Master Data, copy of bank statement of Ratio Distributors Pvt. Ltd. and AO has not pointed out any infirmity in the said evidences. The ld. AO has made the addition on the ground that the notice u/s 133(6) of
The ld. DR on the other hand relied heavily on the orders of the authorities below by submitting that the addition was righty made by the AO and confirmed by the ld. CIT (A) by giving a clear-cut finding that the assessee is a beneficiary of accommodation entries in the form of unsecured loan from Ratio Distributors Pvt. Ltd., who received funds from other shell companies and therefore, the appeal of the assessee may kindly be dismissed by upholding the order of ld. CIT (A).
After hearing the rival contentions and perusing the materials available on record, we find that the assessee had taken a sum of ₹7,22,90,000/- during the year from M/s Ratio Distributors Pvt. Ltd. as unsecured loan. The assessee has filed before the ld. AO the copy of confirmation from the loan creditor, copy of audited financial statements, copy of ITR, assessment order u/s 143(3) framed in the case of loan creditor for A.Y. 2013-14 and bank statement etc. We note that neither the ld. AO nor the ld. CIT (A) has commented on the evidences filed by the assessee and merely made the addition on the “06. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has raised unsecured loans from five parties which are mentioned by the AO in the assessment order from whom aggregate amount of ₹3,49,00,000/- was raised during the impugned financial year. We also note that the assessee has taken the said loans on interest which has been paid after deduction of tax at source. Besides the loans were raised through banking channels. The assessee has filed before the ld. AO various documents with respect to the above loan creditors which are available from page no.2 to 172 of the Paper Book. We have also examined the comparative statement in which the details as to capital and reserves, profit declared and turnover of the loan creditors were available and find that the parties have creditworthiness to advance loans to the assessee. Even the notices were issued u/s 133(6) of the Act to these lenders by the ld. AO were duly responded and all the information/details were furnished. The only ground on which the ld. AO made the addition was the report of the investigation wing and the statement of Shri Pankaj Agarwal, however we note that the nowhereShri Pankaj Agarwal has ever mentioned or uttered about the assessee. Therefore, we do not subscribe to the conclusion drawn by the ld. CIT (A) that these loans were taken from shell companies by routing assessee’s own money. The case of the assessee find support from the decision of PCIT vs. Sreeleather (supra), wherein the Hon'ble court has held that the reliance cannot be placed on the statement of person who has never made any allegation against the assessee in his statement and no evidence was brought on record by the ld. AO to connect the entry operator to the assessee that loan transactions done with the assessee. The Hon'ble High Court has also noted that the assessee in that case had filed all the evidences before the ld. AO qua the loan creditors and even the notice issued u/s 133(6) of the Act were duly responded. Similarly, in the case of CIT vs. Dataware (supra), the Hon'ble jurisdictional High Court has held as under:-
(v) Joy Consolidated Pvt. Ltd. Vs. ITO (ITA No. 547/Kol/2020.
Since, the facts of the case of the assessee in the present year are quite similar to the facts in A.Y. 2017-18 beside the case of the assessee being squarely covered by the above decisions, therefore, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 13.05.2025.