UNIQUE FINANCE & SECURITIES PVT. LTD.,KOLKATA vs. ACIT, CIR. 8(2), KOLKATA

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ITA 355/KOL/2024Status: DisposedITAT Kolkata01 April 2025AY 2017-18Bench: SHRI RAJESH KUMAR (Accountant Member), SHRI PRADIP KUMAR CHOUBEY (Judicial Member)6 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the assessee had furnished extensive details and evidences for the loan creditors, proving their identity, creditworthiness, and the genuineness of transactions, including loans taken on interest through banking channels with TDS deducted. The Tribunal noted that the investigation report and statements did not directly link the assessee to any hawala entries. Relying on High Court precedents, the Tribunal concluded that the AO failed to bring any material on record to disprove the assessee's evidence. Therefore, the addition made by the AO was deleted.

What were the facts?

The assessee, Unique Finance & Securities Pvt. Ltd., filed its return of income, which was selected for scrutiny. The Assessing Officer (AO) made an addition of ₹3,49,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, along with interest of ₹34,66,672/-, on account of unsecured loans received from five companies. The AO contended that the loan creditors were shell companies, lacked creditworthiness, and the genuineness of transactions was not proved based on an investigation wing report and statements of hawala operators. The Ld. CIT(A) upheld the AO's order.

What were the issues?

Whether the addition of unsecured loans as unexplained cash credit under Section 68 was justified when the assessee proved the identity, creditworthiness, and genuineness of the transactions. Whether the AO could rely solely on investigation reports and third-party statements without independent corroboration against the assessee.

Which sections of the Income-tax Act were involved?

Section 143(2),Section 142(1),Section 133(6),Section 68,Section 131,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

For Appellant: Shri Sunil Surana, AR
For Respondent: Shri Ranu Biswas, DR
Hearing: 18.03.2025Pronounced: 01.04.2025

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 17.01.2024 for the AY 2017-18.

2.

The issue raised in ground no.1 is against the confirmation of addition of ₹3,49,00,000/-by ld. CIT (A) as made by the ld. AO on account of unsecured loans being unexplained cash credit u/s 68 of the Act.

3.

The facts in brief are that the assessee filed the return of income on 30.10.2017, declaring total income of ₹85,20,810/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). Accordingly, notices u/s 143(2) and 142(1) along with

4.

In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by upholding the order of the ld. Assessing Officer. The ld. CIT (A) while dismissing the appeal of the assessee held that the ld. AO has righty made the addition based on the information received from the investigation wing which contained the statement given on oath by hawala operators, wherein it was disclosed that various entities operated by them engaged in giving accommodation entries and the names of the loan creditors from whom the assessee received the unsecured loans were also appearing in the said list. Thereafter the ld. CIT (A) after relying on the decision of the Hon'ble Calcutta High Court in case of PCIT Vs. Swathi Bajaj (Calcutta) Appeal No. 1A No. GA/2/2022, confirmed the order of the ld. Assessing Officer. The ld. CIT (A) also relied on the various other decisions as discussed in

5.

The ld. DR on the other hand relied heavily on the order of the ld. CIT (A) by submitting that the ld. AO acted on the basis of a concrete investigation report in which the loan creditors were mentioned as hawala accommodation entry providers from whom the assessee had taken unsecured loans and therefore, the addition was righty made. Similarly, the ld. CIT (A) upheld the order by relying on various decisions as stated in the appellate order.

6.

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 nowhere

“After hearing the learned Advocate for the appellant and after going through the materials on record, we are of the view that no substantial question of law is involved in this appeal.Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but in stead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence.So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same asgenuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax(Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering

8.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 01.04.2025.

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