M/S ASSAM BENGAL CARRIERS,KOLKATA vs. ACIT,CIR-40(1), KOLKATA

The present appeal has been preferred by the assessee against the order dated 15.03.2022 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The assessee in this appeal has taken the following grounds of appeal:

The L'd CIT(A) NFAC erred in confirming the order of A.O which is bad in law and perverse.

Each ground is without prejudice to each other and independent.

A perusal of the above grounds of appeal reveals that the assessee is aggrieved by the action of the lower authorities in making addition of Rs.4,73,20,190/- of the unsecured loans received by the assessee treating the same as unexplained credit u/s 68 of the Act. The assessee is also aggrieved from the disallowance of interest amount of Rs.1,30,12,424/- paid by the assessee on the loan amount.

At the outset, the ld. counsel for the assessee has invited our attention to the impugned assessment order to submit that the Assessing Officer firstly observed as under:

The ld. counsel for the assessee has submitted that the Assessing Officer started to frame the assessment in respect of unsecured loans obtained by the assessee on the wrongful assumption that the assessee had taken unsecured loan from shell companies whereas, the said assumption of the Assessing Officer was proven totally wrong and ultimately he made the addition only on the basis of that creditworthiness of the lender company was doubtful. The ld. counsel for the assessee has further submitted that the lender company was the group company of the assessee which was a NBFC (Non Banking Financial Company). That the said lender company was duly registered with the Registrar of Companies and that the director of the said company was one of the partners of the assessee firm. The ld. counsel has further drawn our attention to the following chart:

The ld. counsel has further submitted that the lower authorities have completely ignored the company’s turnover and its reserve and surplus and its net worth that the lender company being a NBFC has to file every year specific return with RBI to demonstrate the company’s net worth. That if adequate net worth is not maintained, then there is every chance of NBFC licence being revoked. The ld. counsel has further submitted that merely because the lender company having run into losses for a year or two, did not mean that the company’s operation was not genuine. That the company’s turnover was in crores and the company was a genuine company. The ld. counsel has further drawn our attention to paper book pages 140 to 153 to submit that the assessee was having a running account with the lender company namely M/s ABC Financial Services Pvt. Ltd. and that there was an opening balance of Rs.12,02,68,102.70 as on 01.04.2016. During the year, a loan of Rs.4.73 crores was received, however, the assessee company also repaid the loan amount of Rs.13.72 crores. He, therefore, has submitted that the Assessing Officer totally ignored that the assessee during the year has repaid an amount of Rs.13.72 crores as against the loan during the year of Rs.4.73 crores by way of various running transaction during the year and that the closing balance was at Rs.4.20 crores only as against opening balance of Rs.12.02 crores. The ld. counsel has further invited our attention to the income tax return of M/s ABC Financial Services Pvt. Ltd. placed at paper book pages 190 to 194 to submit that the said lender company for the assessment year 2013-14 had returned a very high total income of Rs.5,53,94,060/- and paid high taxes. The ld. counsel has further submitted that the Assessing Officer not only verified the existence of company by sending inspector there but also the company responded not only to the summons issued u/s 133 of the Act but also director of the said company appeared before the Assessing Officer in response to the summons issued u/s 131 of the Act. That it was also explained that merely because the erstwhile company namely Agarwal Wire Industries Pvt. Ltd. had stopped working and its name was struck off from the ROC Kanpur, that did not mean that the assessee company was not a 4

The ld. DR could not rebut the above submissions of the ld. counsel for the assessee. He only submitted that the lender company did not return any income for the last four years which means that there was no activity going on and that even the inspector did not find sign board of the lender company at the given address. However, the above submissions of the ld. DR have been proved to be without merits. As noted above, not only the lender company responded to the notices issued u/s 133 of the Act but also the director of the said company appeared in response to notice u/s 131 of the Act, even the inspector also met the director cum employee of the lender company at the given address. The assessee has duly proved not only the identity, creditworthiness of the lender company but also the genuineness of the transaction by way of demonstrating about the running account of the assessee with the said company and that the total loan liability of the assessee company during the year being decreased. In view of this, we do not find justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted.

In the result, the appeal of the assessee stands allowed. Kolkata, the 13th September, 2022. Sd/- Sd/- [Girish Agrawal] [Sanjay Garg] Accountant Member Judicial Member Dated:13.09.2022. RS