Loading judgment…
Facts
The assessee, a domestic company engaged in manufacturing and sale of cotton yarn, filed its return showing a loss. The Assessing Officer (AO) made additions on account of unsecured loans treated as unexplained cash credit and disallowance of interest expenditure on these loans.
Held
The Tribunal held that the assessee had sufficiently discharged the onus by providing material evidence for the unsecured loans. The AO's assumption of genuineness and creditworthiness was considered. The Tribunal agreed with the CIT(A) that the additions were rightly deleted.
Key Issues
Whether the unsecured loans and the interest paid thereon were genuine and properly substantiated, warranting deletion of additions made by the AO.
Sections Cited
68, 37(1), 250, 143(3), 144B
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-MS. SUCHITRA R. KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA R. KAMBLE, JUDICIAL MEMBER (Assessment Year: 2018-19) Siddhi Industries Ltd., Assistant Commissioner of Vs. Survey No. 240, Changodar, Income-tax, Ahmedabad, Ashapur, Circle 3(1)(1), Sarkhej S.O., Ahmedabad Ahmedabad Gujarat-382213 [PAN : AAQCS 4546 L] (Appellant) .. (Respondent) Appellant by : Shri Anil Kshatriya, AR & Shri Alay Anil Kshatriya, AR Respondent by: Shri V. Nandakumar, CIT-DR Date of Hearing 13.03.2025 Date of Pronouncement 15.04.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal has been filed by the Revenue against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)" for short) dated 28.06.2024, passed u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as "the Act" for short) for the Assessment Year (AY) 2018-19. 2. The Revenue has taken following grounds of appeal:-
The Ld. CIT(A) has erred in law and on facts in deleting the addition made on account of unsecured loans of Rs. 12,30,00,000/- received from various entities treated as unexplained cash credit u/s. 68 of IT Act (b) The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of interest expenditure on unsecured loans of Rs. ACIT Vs. Siddhi Industries Ltd Asst. Year : 2018-19 - 2– 1,38,30,604/- under section 37(1) of IT Act made by AO treated it as not incurred for the purpose of business u/s. 37(1) of IT Act ?
3. The brief facts of the case are that the assessee is a domestic company incorporated on 03.05.2011 and is engaged in the business of manufacturing and sale of cotton yarn. For the year under consideration, the assessee has filed its return of income on18.09.2018, showing loss of Rs.24,30,85,552/-. The Assessing Officer has completed the assessment u/s 143(3) r.w.s. 144B of the Act on 22.09.2021, determining total loss at Rs.22,92,54,948/-. During the assessment proceedings, the Assessing Officer made the following additions to the total income of the assessee:- i. Rs. 12,30,00,000/- u/s 68 of the Act, due to the failure to substantiate the genuineness of an unsecured loan; ii. Rs. 1,38,30,604/- u/s 37(1) of the Act, on account of interest expenditure that was deemed not to have been incurred for the purpose of business.
4. Aggrieved by the aforesaid additions made by the Assessing Officer, the assessee preferred appeal before the Ld. CIT(A) who deleted both the additions.
5. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.
6. Before us, Ld. DR relied upon the order of the Assessing Officer and, with regard to the addition made by the Assessing Officer u/s 68 of the Act, he submitted that since the assessee could not prove the creditworthiness and identity of the parties and genuineness of the transactions in question ACIT Vs. Siddhi Industries Ltd Asst. Year : 2018-19 - 3– i.e. loans from (i) M/s. Raina Commodities Private Limited amounting to Rs. 9,82,00,000, (ii) Meenaben M Parikh amounting to Rs. 2,48,00,000/- and (iii) M/s Siddhi Trading Co. for Rs. 5,00,000/-, therefore, the entire loan amount of Rs.2,48,00,000/- has been rightly treated by the Assessing Officer as unexplained income of the assessee u/s 68 of the Act.
With regard to the disallowance of the interest on unsecured loans, the Ld. DR submitted that since the assessee has failed to establish the creditworthiness of M/s Raina Commodities Private Limited and Meenaben M. Parikh as stated above, the interest paid by the assessee on the unsecured loans to these parties amounting to Rs. 1,38,30,604/- has been rightly disallowed by the Assessing Officer u/s 37(1) of the Act.
The Ld. AR, on the other hand, submitted that the assessee had obtained the unsecured loans from the closely related entities and it has sufficiently discharged the onus casted on it by submitting material evidences such as name, PAN, confirmation, bank statements of lenders before the Assessing Officer which was not considered by the Assessing Officer. The Ld. AR contended that the said entities have confirmed the transactions with the assessee, which fact was even confirmed by the Ld. CIT(A) in his appellate order at paragraph No.7.1.8 on page No. 74. Ld. AR argued that the case of Pr. CIT Vs. Ami Industries (India) (P.) Ltd., [2020] 424 ITR 219 (Bom), as referred by the Ld. CIT(A) in his appellate order, is fully applicable in assessee’s case and the Ld. CIT(A) has rightly deleted the additions made by the Assessing Officer as the identity and creditworthiness of lenders and genuineness of unsecured loans transactions have been established with evidence. ACIT Vs. Siddhi Industries Ltd Asst. Year : 2018-19 - 4–
We have heard the rival contentions and perused the material available on record. We find that, with regard to:-
(i) M/s. Raina Commodities Private Limited The Assessing Officer himself at unnumbered para-8 (on page-5) of the Impugned assessment order has noted that the amount of Rs.9.82 cr. has been received from the party out of redemption of the fixed deposits in HDFC bank account and he has further observed that the fixed deposits were made continuously and out of redemption of fixed deposits, the amount is being transferred to the account of assessee as unsecured loans. Hence, the Assessing Officer has accepted identity as well as genuineness of the transaction has been proven by the assessee. As may be verified from the record that in the ledger account, there has been an opening balance of Rs.9,41,98,796/- as on 01.04.2017. Thus, on one hand, the Assessing Officer has prima facie accepted the genuineness of transaction and source of amount of Rs.8.37 crores, there is no justification in drawing an adverse inference and making addition of Rs.9.82 crores in the hands of the assessee. Further, out of the referred amount, the assessee has repaid Rs.15 crores including interest payable by way of cheques between 05.02.2021, 06.02.2021 and 10.02.2021 drawn on HDFC Bank and further payments in F.Y.2021-22, including the repayment of further loans obtained in subsequent F.Ys. i.e. 2018-19 & 2019-20. Thus, the accounts in the name of the said entity have been squared up at the end of 31.03.2022. Thus, the entire amount having been repaid in the Financial Year 2020-21 which is not in dispute. Therefore, the impugned addition has been rightly deleted by the Ld. CIT(A). We decline to interfere with the order of the Ld. CIT(A) in this regard. ACIT Vs. Siddhi Industries Ltd Asst. Year : 2018-19 - 5–
(ii) Meenaben M Parikh The other creditor, Smt. Meenaben M. Parikh, is not an outsider entity but she is one of the directors of the assessee-company. With regard to loan of Rs. 1.98 crores she received from other parties, that the creditor has furnished material details, copies of ledger account of those 5 parties from the books of account of Smt. Meenaben Parikh and their bank statements together with confirmed ledger account. The assessee has repaid Rs.10 lakhs on 01.10.2019 by way of cheque drawn on HDFC Bank and further amount of Rs.1.32 crores by way of cheque dated 14.08.2020 drawn on HDFC Bank, Rs.5 crores repaid in F.Y.2021-22 by way of cheques and further Rs.2.50 crores in F.Y.2022-23. Thus, the above amount having been repaid in the immediate next financial years which is not in dispute. Copies of confirmed ledger accounts from the referred party for F.Y.2020-21 to 2022-23 are on record at PBP-487 to 506. Therefore, the impugned addition has also been rightly deleted by the Ld. CIT(A). We decline to interfere with the order of the Ld. CIT(A) in this regard as well.
In the result, the appeal of the Revenue is dismissed.