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Facts
The Revenue filed appeals against CIT(A) orders for AY 2015-16 and 2017-18, with delays which were condoned. For AY 2017-18, the AO added ₹18.27 crores under Section 68 for alleged bogus share sales, relying on entry operator statements; the CIT(A) partly allowed, retaining 5% as business profit. For AY 2015-16, the AO added ₹4.49 crores under Section 68 for alleged bogus unsecured loans from a group company, and made consequential disallowances under Section 69C and Section 14A; the CIT(A) deleted these additions.
Held
The Tribunal dismissed the Revenue's appeals. For AY 2017-18, it upheld the CIT(A)'s decision to sustain 5% of share sale proceeds as business profit, deleting the remaining Section 68 addition, citing similar precedents. For AY 2015-16, the Tribunal upheld the CIT(A)'s deletion of the Section 68, Section 69C, and Section 14A additions, finding the assessee, an NBFC, had discharged its onus regarding the genuineness, identity, and creditworthiness of the loans and that investments were made from own funds.
Key Issues
The primary legal issues concerned additions under Section 68 for alleged bogus share sales and unsecured loans, disallowances under Section 69C for related interest and commission, and disallowances under Section 14A for expenses related to exempt income, particularly regarding the evidentiary value of uncorroborated third-party statements and the shifting of onus.
Sections Cited
68, 69C, 14A, 143(3), 133(6), 131, 132(4), 133A, 153A
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM
These are appeals preferred by the Revenue against the orders of the Commissioner of Income-tax (Appeals) (hereinafter referred to as the “Ld. CIT(A)”] dated 19.03.2024 & 27.03.2024 for the AYs 2015-16 & 2017-18 respectively.
2. At the outset, we note that there is delay of 88 days in filing the appeal by the Revenue in for which the condonation petitions have been moved by the Revenue wherein it has been stated that in order to file the appeals, the files have to go through various stages in the hierarchy for obtaining the approvals and hence, the delay has occurred in filing the appeal. Considering the contents of the
The Revenue has raised following grounds of appeal:-
“1. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 4,49,37,500/- under section 68 of the Act on account of bogus unsecured loans despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors?
2. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the disallowance of Rs. 40,44,375/- under section 69C of the Act on account of interest on bogus unsecured loan despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 3 Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the disallowance of Rs. 2,24,687/- under section 69C of the Act on account of commission paid for accommodation entry despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 4. Whether the Ld. CIT(A) has erred in facts and in law by restricting the disallowance of Rs. 18,67,227/- under section 14A of the Act on account of expenses incurred to earn exempt income to Rs. 86,368/- in contravention of CBDT's Circular No. 5/2014 dated 11/02/2014?” 04. Brief facts of the case are that the assessee filed the return of income on 29.09.2015, declaring total loss of ₹10,22,220/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). The statutory notices along with questionnaires were duly issued and served upon the assessee. The assessee filed the revised return of income on 05.09.2018, after taking the effect of the merger with M/s Nextgen Commosales Private limited as per NCLT order, declaring total income of ₹1,33,10,320/-. M/s Nextgen Commosales
The ld. CIT (A) partly allowed the appeal of the assessee after taking into consideration the replies, submissions and evidences produced by the assessee by observing and holding as under:-
“Grounds 1-2 Both these grounds agitate against the action of the AO in making addition of sale proceeds of shares amounting to Rs. 18,27,00,000/- as unexplained cash credit u/s 68 of the Act, and therefore are being adjudicated together. The facts of the case are that the assessee company, M/s Dollar Holdings Pvt Ltd previously known as M/s Simplex Impex Pvt Ltd is a part of the Dollar group. M/s Nextgen Commosales Pvt Ltd (hereinafter referred as “the amalgamating company) merged with the assessee company w.e.f. 01.04.2016 pursuant to the scheme of amalgamation sanctioned by the Hon’ble NCLT vide its Order dated 29.08.2018. As per the notings of the AO, the amalgamating company, during the F.Y: 2016-17 had sold part of its investments against a consideration of Rs. 18,27,00,000/- and transferred the proceeds to the amalgamated company, i.e the assessee company M/s Simplex The details of the shares of the amalgamating company i.e., M/s Nextgen Commosales Pvt Ltd which were sold during the relevant assessment year are tabulated below. The appellant has submitted that the said shares were purchased at the same value during the A.Y: 201112. In support of the same, the appellant has adduced the requisite documentary evidences which includes the assessment order u/s 143(3) for A.Y: 2011- 12 in respect of the amalgamating company i.e., M/s Nextgen Commosales Pvt Ltd. The appellant has submitted that as such there has been no profit/loss on such sales and the shares have been sold at par. This is clearly evident from the details of purchase and sales given below:
Name of the shares sold Purchase & Purchase A.Y. of Sales value sales Qty Value (Rs.) purchase (Rs.) Overall ComputerPvt Ltd 250 25,00,000 2011-12 25,00,000 Possible Dealtrade Pvt Ltd 950 95,00,000 2011-12 95,00,000 Pratham Commodeal Pvt Ltd 6,600 66,00,000 2011-12 66,00,000 Prince Vintrade Pvt Ltd 2,830 2,83,00,000 2011-12 2,83,00,000 Rose Valley Investment Consultants 16,000 1,60,00,000 2011-12 1,60,00,000 Pvt Ltd Uttam Dealtrade Pvt Ltd 4,700 4,70,00,000 2011-12 4,70,00,000 Pushpak Commotrade Pvt Ltd 5,550 5,55,00,000 2011-12 5,55,00,000 Topgrain Financial Advisory Pvt Ltd 12,300 1,23,00,000 2011-12 1,23,00,000 Touchpoint Marketing Pvt Ltd 5,000 50,00,000 2011-12 50,00,000 Grand Total 18,27,00,000 18,27,00,000 The above-mentioned shares held by the amalgamating company were sold to the following companies during the F.Y: 2016-17:
SL No. Name of the Concern to whom Consideration value shares sold 1. Blueberry Tradelink Pvt Ltd 1,41,00,000 2. Kalyani Vincom Pvt Ltd 2,98,00,000 3. StrongwellCommodeal Pvt Ltd 5,33,00,000 4. Risewell Tradelink Pvt Ltd 7,28,00,000 5. Sagarika Dealcom Pvt Ltd 1,27,00,000 Total 18,27,00,000 The appellant has adduced evidences to demonstrate that all the proceeds from such sale of shares were received through banking channels and that in response to notice u/s 133(6) all the buyers have filed the requisite details and documents as required by the AO. The details submitted by them are as under:
Documents of the Purchasers to show their identity, credit worthiness & also the genuineness of the transactions M/s Kalyani Vincom Pvt Ltd Copy of reply submitted by company in response to notice u/s 133(6) of I.T.Act Sl. No Name of alleged entry operator Recorded on 1 Dinesh Kumar Dhandhania 19.11.2014 A similar view has also been taken by the Hon. Tribunal, “ B” Bench in the case of M/s Ashtvinayak Sales Pvt. Ltd.. vs ACIT, Central Circle-2(2), Kolkata for AY: 2019-20 in IT(SS)A No.54/Kol/2022. In the instant appeal being adjudicated, it has already been discussed in detail earlier that the assessee submitted the requisite documents to prove the identity, creditworthiness of the share applicants, the genuineness of transactions, and the AO has not pointed out any specific defects in such evidences filed. Once the appellant has discharged its onus to submit the requisite documents to prove the identity, creditworthiness of the share applicants, the onus shifts upon the AO to verify the same and bring on record details of the enquiry conducted by him as well as the results of such enquiry alongwith counter evidences if he does not agree with the evidences submitted by the appellant. In this scenario, when the appellant has discharged its onus and the purchase of the shares have not been disputed or doubted by the AO during the course of assessment for A.Y: 2011-12 and 2013-14, the action of the AO in considering the entire proceeds to the tune of Rs.18,27,00,000/- from sale of shares as unexplained cash credit u/s 68 therefore is not sustainable and stands deleted. However, following the decision of the Hon. Jurisdictional Kolkata Tribunal in the case of M/s Swarna Kalash Commercial Pvt. Ltd. vs ACIT, Central Circle-2(2), Kolkata for AY: 201920 in I.T.(SS)A. No.53/Kol/2022 when the assessee had held these shares for past several years and subsequently sold them during the F.Y: 2016- 17, there ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax. Therefore, respectfully following the judicial precedents, with a view to plug the leakage of revenue, the AO is directed to make an addition of the net profit element @ 5% of the sale consideration i.e. 5% of Rs.18,27,00,000/- which comes to Rs.91,35,000/- as the appellant`s business profits. The addition made by the AO u/s
After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench in the case of M/s Ashtvinayak Sales Pvt. ltd. Vs. ACIT in ITA(SS)A No. 54/KOL/2022 for A.Y. 2019-20 vide order dated 14.09.2023 as well as the decision in the case of M/s Swarna Kalash Commercial Pvt. ltd. Vs. ACIT in IT(SS)A No. 53/KOL/2022 for A.Y. 2019-20 vide order dated 01.09.2023, wherein similar issue has been decided in favour of the assessee. We note that the coordinate bench while passing he above decision has relied on the decision as referred to and relied by the ld CIT(A) in the case of M/s Swarna Kalash Commercial Pvt. ltd. Vs. ACIT(Supra).We note that the ld. CIT (A) has taken into account each and every aspect including factual matrix and legal position as regards of sale of investments and passed a reasoned and speaking order which has been extracted above. We note that the sale proceeds from the sale of investments were received during the current financial year which were purchased by the amalgamating company in the earlier assessment years and these investments were accepted by the department at the time of purchase of shares. Therefore, we do not find any infirmity in the order of ld. CIT (A). We also note that the decision of the co-ordinate Bench in the case of M/s Swarna Kalash commercial Pvt. ltd. (supra) has been followed by the co-ordinate “9. We have heard the rival contentions and perused the materials as placed before us. The issue for adjudication before us is in respect of confirmation of addition by ld CIT(A) as made by the AO on the ground that the identity and credentials of the purchasers are suspicious. We observe that the assessee has been in the regular business of purchase and sales of investments over the years as corroborated by the materials placed before us. Even the sales proceeds received during the current financial year were in respect of sale of shares /investments partly out of opening balance and partly out of current purchases as is apparent from the following chart placed before us:-
Opening Investment Purchases made during Investments sold during Closing balance of the year the year investments 24,81,12,740 106,69,21,561 99,72,36,896 31,77,97,405 9.1. The assessee has also filed movement of investments over the years which showed that the phenomenon of purchase and sale of shares/investments was regular feature of the assessee’s business. This is also undisputed that the assessee company had raised share capital (including premium) amounting to Rs.119,84,67,000/- in financial year 2010-11, relevant to AY 2011-12 and the capital so raised in AY 2011-12 was invested in shares/securities and accounted for in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol.-1. We also note that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol.-1 and the neither the share capital/share premium nor the investments out of that source were doubted by the AO. 9.2. We also note that similar issue was involved in the case of M/S Swarna Kalash Commercial Pvt Ltd. Vs ACIT ,Central Circle -2(2), Kolkata, a group concern of the Rashmi Group of Companies ,which was also subjected to search u/s 132(1) of the Act in the same search proceedings. We note that the coordinate bench has decided the issue in favour of the assessee in ITA No. I.T.(S.S.)A.No.53/Kol/2022 A.Y.2019-20 vide order dated 01.09.2023 involving the same issue of addition of sale of shares/investments by the AO on the ground that identity and credentials of the purchasers of shares/investments were suspicious. The operative part of the order is extracted as under: “6.1.We have considered the rival contentions and gone through the record. First we deal with the issue relating to the undated detailed order passed by the Assessing Officer even after the prescribed date of limitation for passing the assessment order for the assessment year under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short “DIN”)as mandated vide CBDT Circular No.19 of 2019.
Opening Investment Purchases made Investments sold during Closing Balance of during the year the year Investments 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,635 The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment. We also look at the movement of investment held by the assessee, which is tabulated below:
Opening Purchase Amount Closing Addition made FY AY Sales Amount Amount Balance by A.O. 201415 201516 63,42,00,000 - - 63,42,00,000 - 201516 201617 63,42,00,000 42,44,960 18,344,960 62,01,00,000 1,83,44,960 201617 201718 62,01,00,000 56,27,44,459 468,499,459 71,43,45,000 46,84,99,459 201718 201819 71,43,45,000 1,55,17,29,538 2,062,064,910 20,40,09,628 2,06,20,64,910 201819 201920 20,40,09,628 66,47,64,007 170,560,000 69,82,13,635 17,05,60,000 Total 2,71,94,69,239 We also refer to the details of opening stock, purchases, sales and closing stock during the year, placed on record by the assessee:
Opening Purchases Sales Closing Sl Balance Balance No Name of the Script Amount Amount Amount Amount 1 Bellona Supply Pvt. Ltd. 1,24,57,344 0 1,24,57,344 0 2 P N Jewellers Pvt Ltd 38,45,323 0 38,45,323 0 3 Rozela Tie Up Pvt Ltd 3,64,33,053 0 3,64,33,053 0 4 Rashmi Cement Ltd 0 1,57,32,000 0 1,57,32,000 5 CimmcoVinimay Pvt Ltd 13,32,04,353 53,71,44,701 0 67,03,49,054 6 Festive Vincom Pvt Ltd 28,01,625 0 0 28,01,625 7 GreenHillDealmark Pvt Ltd 26,14,850 0 0 26,14,850 SwabhimanCommosales Pvt 8 Ltd 26,15,900 0 0 26,15,900 9 Topline Business Pvt Ltd 41,00,205 0 0 41,00,205 10 VidyaBuildcon Pvt Ltd 0 2,50,00,000 2,50,00,000 0 11 BadrinathMinning Pvt Ltd 59,36,974 75,250 60,12,224 0 12 Sankul Retailers Private Ltd 0 74,49,572 74,49,572 0 Alok Financial Services Pvt 13 Ltd 0 8,10,000 8,10,000 0 14 Asankul Cosmetics Pvt Ltd 0 6,55,26,090 6,55,26,090 0 15 Daffodil Plaza Pvt Ltd 0 88,198 88,198 0 NAT Communication & 16 Marketing Pvt Ltd 0 1,26,37,632 1,26,37,632 0 17 AlokPattanayak 0 3,00,000 3,00,000 0 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,634 Total 11.4 Based on the analysis of the above details, it is evident that entire sales is made from purchases & opening stock as under:
Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 Sold out of Investment Purchased During the Year 11,18,86,806 Total 17,05,60,000 11.5 It is also important to note that the AO has made enquiries from the buyers of the shares sold by the assessee by issuing summons u/s 131 of the SL No. CORPORATE ASSESSE Page No. FY 2018-19 Bhootnath Commodities Pvt Ltd 1 1-262 ₹ 1,71,59,300 2 Bluestar Mercantile Pvt Ltd 263-265 ₹ 5,00,000 3 CharviDealmark Pvt Ltd 267-356 ₹ 10,00,000 4 Daania Trading Pvt Ltd 357-359 ₹ 30,00,000 5 Elvof Trading Pvt Ltd 361-369 ₹ 1,00,000 6 Express Image Pvt Ltd 370-542 ₹ 1,11,00,000 7 Laxhmidhan Business Pvt Ltd 544-546 ₹ 6,00,000 8 MuditVanijya Pvt Ltd 547-597 ₹ 5,50,000 9 Outright Commodities Pvt Ltd 599-846 ₹ 2,44,90,700 10 Over Arching Impex Pvt Ltd 847-1053 ₹ 81,00,000 11 RadhacharanTradevin Pvt Ltd 1055-1158 ₹ 10,00,000 12 S P Udyog Pvt Ltd 1159-1161 ₹ 25,00,000 13 SamundarTradelink Pvt Ltd 1162-1164 ₹ 34,00,000 Shatabdi Entertainment Pvt Ltd 14 1165-1193 ₹ 14,00,000 15 Spur Trading Pvt Ltd 1195-1204 ₹ 7,50,000 16 SwarnmahalVyapaar Pvt Ltd 1205-1252 ₹ 15,00,000 17 Swetang Retails Pvt Ltd 1253-1356 ₹ 50,00,000 18 Viewpoint Advisory Pvt Ltd 1357-1490 ₹ 85,00,000 19 Yuthika Merchandise Pvt Ltd 1492-1603 ₹ 25,00,000 Total (A) 9,31,50,000 SL No. NON- CORPORATE ASSESSE Page No. FY 2018-19 20 Bengal Trade Agency 1604-1613 ₹ 1,64,00,000 21 Bhagwati Trading 1614-1616 ₹ 57,90,000 22 Om Sai Enterprise 1617-1619 ₹ 24,90,000 23 Simplex Xallolloy 1620-1622 ₹ 78,05,000 24 Others-Non- Corporate ₹ 4,17,35,000 Total ₹ 7,42,20,000 Sir, Subject: Confession of additional Income during the course of search & seizure and survey operation – regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully,” 12.5. A perusal of the above circular also shows that it is in the notice of the statutory controlling body of the Income Tax Authorities that the revenue officials are used to take confessional statements from the person searched under force, pressure or threat and that is why they have made it mandatory that additions solely on the basis on such statements should not be made and that corroborative evidences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made.
All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in
The Revenue has raised following grounds of appeal:-
The facts in brief are that the assessee filed the return of income on 29.09.2015, declaring total income at ₹ 31,62,160/-. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were issued and served on the assessee. The assessee is a Non-Banking Financial Company (NBFC) was engaged in the business of granting loans and advances and making investments in shares and securities. The assessee has taken unsecured loans from various individuals, HUFs and repaid the same as well. The opening and closing balances of loans given were ₹13,55,93,347 and ₹18,03,46,998/- respectively. The ld. AO also noted that during the year the assessee has taken loan from M/s V.K. Mercantile Pvt. Ltd. amounting to ₹9,05,45,000/- out of which ₹2,20,00,000/- was repaid during the year and a net amount of ₹6,85,45,000/- was outstanding
The aggrieved assessee preferred an appeal before ld CIT(A). The ld CIT(A) after taking into account the contentions/arguments/documents submitted by the assessee allowed “All these grounds agitate against the action of the AO in making addition of unsecured loan taken as unexplained cash credit u/s 68 of Rs.4,49,37,500/- received from V.K.Mercantile Pvt.Ltd. On perusal of the assessment order, it is observed that the AO has come to the conclusion based upon the following: 1. Statement of one Neeraj Jain, an alleged entry operator dated 29.12.2014, 2. A cash trail prepared alleging that the assessee has brought its unaccounted money in the guise of unsecured loan. The AO has made the addition of Rs. 4,49,37,500/- by relying on the alleged cash trail. On perusal of the cash trail prepared by the AO it is observed that it has been alleged by the AO that cash was deposited in 4th/5th layers in the name of various parties such as P K Infotech, Jyoti Enterprise, Bharat Traders, Bajrang Realty, Ashika Traders, Narayan Enterprises, Om Enterprises, Vandana Emporium, Bluebell Trading, Astha Traders, Global Enterprises, Mortex Emporium, Kanha Creations, Vasant Agarwal, Ranisati Emporium, Satkar Trading, Prabhat Sultania, Niranjan Trading and Uma Udyog etc. In the submissions filed by the appellant during the course of appeal proceedings, the appellant has stated that the following documents were submitted before the AO to substantiate the identity, creditworthiness and genuineness of the transaction, given as under: a. Copy of Loan confirmation for FY 2014-15 b. Copy of ITR Acknowledgment for AY 2015-16 c. Copy of Audited Financial Statement for FY 2014-15 d. Relevant pages of bank statement reflecting the loan transaction e. Copy of Loan confirmation for FY 2015-16, FY 2016-17 Copy of Ledger of loan transaction for FY 2017-18 The appellant has further submitted that the loan creditor is a group company of the assessee. As per the appellant, the directors of both the assessee and the loan creditor are as follows:
Dollar Holdings Pvt Ltd V K Mercantiles Pvt Ltd Binay Kumar Gupta Ankit Gupta (Son of Vinod Kumar Gupta) Krishan Kumar Gupta Aayush Gupta (Son of Vinod Kumar Gupta) Vinod Kumar Gupta Gaurav Gupta (Son of Binay Kumar Gupta)
(Amt in Rs.) Opening Balance of Loan received during Loan refunded during FY Closing Balance of Loan FY 2014-15 2014-15 Loan 8,51,75,810 9,05,45,000 2,20,00,000 16,67,53,743 Further, the complete details of loan received and repaid to M/s V K Mercantiles Pvt Ltd is as under: (Amt in Rs.)
F.Y. Opening Loan Loan Repaid Interest TDS Closing Balance Received Balance 2013-14 - 8,46,00,000 - 6,39,789 63,979 8,51,75,810 2014-15 8,51,75,810 9,05,45,000 2,20,00,00 1,44,81,037 14,48,104 16,67,53,743 2015-16 16,67,53,743 - 9,55,75,000 1,39,45,972 13,94,597 8,37,30,118 2016-17 8,37,30,118 12,56,30,118 10,57,00,000 56,66,156 5,66,616 2,50,29,658 2017-18 2,50,29,658 4,00,00,000 13,38,29,658 6,64,817 73,869 6,89,44,326 (Cr.) 2018- 6,89,44,326 6,89,44,326 - 10,86,298 1,20,700 - 19 (Cr.) The interest bearing loans received from M/s V. K. Mercantile Pvt Ltd, were ultimately repaid in entirety during the F.Y: 2018-19 and TDS was duly deducted on the same. The appellant has submitted Ledger copies along with relevant pages of bank statement to substantiate its contention. The appellant has also stated the following to prove the three limbs of section 68 i.e., identity, creditworthiness and genuineness, it is pertinent to note the following: Identity The loan creditor is an Income Tax Assessee vide PAN AABCV0257A and is regular in filing ITR. Copy of the ITR Acknowledgement filed for AY 2015-16 and current AY 2023-24 has been enclosed by the appellant. The books of accounts of M/s V K Merchantile Pvt Ltd are regularly audited and its annual return to ROC is also filed on regular basis. The loan creditor is regularly assessed to income tax. The assessment w.r.t. the loan creditor has been completed vide order u/s 143(3) dated 24.10.2016 w.r.t. AY 2014-15.
A.Y. Order u/s Date of Order 2011-12 153A/143(3) 31.03.2016 2012-13 153A/143(3) 31.03.2016 2013-14 153A/143(3) 31.03.2016 2014-15 143(3) 24.10.2016 2017-18 143(3) 30.12.2019 The appellant had received an amount of Rs. 8.46 crores during F.Y: 2013-14 and Rs. 12.56 crores during F.Y: 2016-17, both of which has been accepted by the AO. A special mention needs to be made for the A.Y: 2017-18, wherein assessment was completed by the same AO, but no additions were made in this regard which implies the fact that such unsecured loans to the tune of Rs. 12.56 crores were accepted. This is an inexplicable circumstance where unsecured loans received from the same company is treated as bogus in the case of A.Y: 2015-16 and not as bogus for unsecured loans received during A.Y`s 2014-15 and 2017-18 from the same lender company.
The loan creditor, M/s V K Mercantiles Pvt Ltd has also been assessed for the A.Y: 2014-15. The assessment order was passed on 24.10.2016 u/s 143(3) by the ITO, Ward-9(2), Kol, wherein the investments of the lender were before the AO and no adverse inferences were made regarding such investments to the tune of Rs.14.26 Crores. M/s V K Mercantiles Pvt Ltd has also been assessed for the A.Y: 2017-18, where also no adverse inferences were made. As per the audited accounts of the lender concern, it had own funds to the tune of Rs. 25.01 crore during FY 2014-15 and earned revenue of Rs. 1.66 crore in FY 2014-15. Total loans and advances as per their audited accounts is Rs. 17.78 crore for FY 2014-15. These facts have not been disputed by the AO. 3.The Dollar Group to which the appellant concern belongs, itself was subject to search proceedings on 07.11.2013, i.e during F.Y: 2013-14. During this period the appellant concern received unsecured loans to the tune of Rs.8.46 Crores. The AO has not mentioned anything in his order as to whether any evidences were unearthed during the search relating to such unaccounted cash of the appellant which allegedly has been deposited in bank accounts of third parties mentioned by the AO.
M/s V K Mercantile Pvt Ltd had been a regular lender to the appellant company starting from F.Y: 2013-14 to 2018-19 and huge amounts of loans were regularly taken from such lender and were repaid in full. Since the loans have been repaid in the next few years along with the requisite interest and deduction of TDS, the same cannot be placed under doubt. I find that a similar matter has been dealt with by the Hon. Jurisdictional High Court in a recent judgement in [2022] 143 taxmann.com 435 (Calcutta)
The issue raised in ground no.4 is against the order of ld. CIT (A) rejecting the disallowance of ₹18,67,227/- u/s 14A of the Act on account of expenses incurred to earn exempt income.
The facts are that the appellant was in receipt of dividend income to the tune of Rs. 40,10,280/-. The assessee had investments of Rs. 3,24,23,600/- during the year under consideration and out of the total investments, Investments to the tune of Rs. 2,18,23,600/- have been said to be strategic investments made in the group companies of the assessee. The assessee has submitted that during the year interest of Rs. 1,86,66,104/- was paid and interest of Rs. 2,21,49,774/- was received by the assessee and that all the investments were made using the own funds of the assessee company.
It is also pertinent to mention that the total own funds of the assessee company was much higher than the investments made and the ld. CIT(A) has recorded findings of act to that effect in the appellate order. The ld CIT(A) while allowing the appeal of the assessee has followed the decision of the Apex Court in South Indian bank Ltd. v. CIT (2021) 130 taxmann.com 178 (SC) – Hon’ble Supreme Court held that where interest-free own funds are available with the assessee and which exceeds their investments, interest-free securities, investment can be presumed to be made out of assessee’s own funds and proportionate disallowance of interest was not warranted under section 14A.
Therefore, we do not find any infirmity in the order of ld. CIT(A) who has correctly decided the issue .Accordingly, we are inclined to dismiss
In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open court on 11.02.2025.