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Supreme Build Cap Private… vs ACIT | ITAT Delhi 2020 | BharatTax

SUPREME BUILD CAP PRIVATE LIMITED,NEW DELHI vs. ACIT, CENTRAL CIRCLE-05, NEW DELHI

ITA 8476/DEL/2019Status: DisposedITAT Delhi09 July 2020AY 2016-1717 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

PCIT v. Bikram Singh
250 Taxmann 273 · 2017 · HC
79 citing
Pavankumar M Sanghvi v. ITO
90 Taxmann.com 386 · 2018 · HC
49 citing
Seema Jain v. ACIT
96 Taxmann.com 307 · 2018 · HC
25 citing
Sitaram Ramchanddas Patel v. ITO
95 Taxmann.com 290 · 2018 · HC
6 citing

Income Tax Appellate Tribunal, [DELHI BENCH “G”: NEW DELHI]

Before: SHRI SUDHANSHU SRIVASTAVASHRI PRASHANT MAHARISHI

For Appellant: Shri Rohit Tiwari, Adv.;

For Respondent: Shri Saras Kumar, Sr. D. R.;

Hearing: 16/06/2020Pronounced: 09/07/2020

O R D E R PER PRASHANT MAHARISHI, AM:

01 This appeal is filed for Supreme BuildCap Private Limited [Appellant or Assessee] against the order of The Commissioner of Income Tax (Appeals)-24, New Delhi [The Ld CIT (A)], dated 13th August 2019. The ld. CIT (Appeals) passed order in appeal filed against the order of The Asstt. Commissioner of Income Tax, Central Circle-05, New Delhi,[ The Ld AO ] passed on 17.12.2018 under Section 143(3) of the Income Tax Act, 1961 (the Act) for assessment year 2016-17 wherein the returned income of the assessee amounting to Rs. 15,29,040/- was assessed at Rs. 5,44,34,780/-. 02 Assessee has preferred the 2nd ground of appeal

, which is only substantive ground, against the addition made by the ld. Assessing Officer and confirmed by the ld. CIT (Appeals) of Rs. 5 crores under Section 68 of the Act being loan received by the assessee during the year from M/s . Maharasaa Visions Pvt Ltd on 18/09/2015 holding that assessee failed to establish the creditworthiness of the lender and genuineness of the transaction.

03. The brief facts of the case shows that the assessee is a company engaged in the business of real estate development deriving income from business as well as other sources. The assessee filed its return of income on 13.10.2016 declaring income of Rs. 4,32,810/-. Revised return was also filed on 18.02.2017 declaring income of Rs. 15,29,040/-.

04. During the course of assessment proceedings, ld AO made an addition of Rs. 5 crores on account of loan received from M/s. Maharaasa Visions Pvt. Ltd. on 18.09.2015 under Section 68 of the Act. The ld. Assessing Officer dealt with the whole issue as per under:-

Delhi High Court held that addition made u/s 68 on account of unsecured loans was justified where initial onus of proving the creditworthiness of the lenders was not discharged by the asscssee. ii. In the case of PC1T Vs Bikram Singh [20171 85 taxmann.com 104 (Delhi)/(2017[ 250 Taxman 273 (Delhi)/]2017[ 399 ITR 407 (Delhi) the Hon’ble Delhi High Court held that even if a transaction of loan is made through cheque, it cannot be presumed to he genuine in the absence of any agreement, security and interest payment. Mere submission of PAN Card of creditor does not establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, docs not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy. iii. In the case of Seema Jain Vs ACIT |2t)18| 96 taxmann.com 307 (Delhi) the Hon’ble Delhi High Court held that where AO made addition to asscssee's income in respect of loan availed, in view of fact that lender company did not have tangible or intangible fixed assets and, moreover, it had declared a meagre income of few thousand rupees and, thus, it was not in a position to give such a huge loan to assesses, impugned addition was to be confirmed. iv. In the case of PRATHAM TELECOM I N D I A PVT LTD VS DCIT 2018-T1OL- 1983-HC-MUM-IT the Hon’ble Bombay High Court held that mere production of PAN numbers & bank statements is not sufficient enough to discharge the burden on taxpayer to escape the realms of Section 68. v. In the case of Pavankmnarm Sanghvi Vs ITO [2018] 90 taxmann.com 386 (Gujarat) the Hon’ble Gujarat High Court Held that where assessee received loan from two companies, in view of fact that on date assessee was given loan there were credit entries of almost similar amounts and balance after these transactions was a small amount and moreover assessee failed to produce these lenders for verification, impugned amount was rightly brought to tax under section 68. vi. In the case of Sitaram Ramchanddas Patel Vs. ITO (2018) 95 taxmann.com 290 (Gujarat) the Hon’ble Gujarat High Court held that where assessee failed to prove capacity of concerned persons who alleged to have given unsecured loan and/or gift, impugned addition made under sec. 68 was to be confirmed.

06 Thus, assessee, aggrieved has preferred this appeal. 07 The ld AR submitted that a. Assessee has received the above loan from M/s. Maharassa Visions Pvt. Ltd., which is one of the group concerns. b. Assessee has discharged its onus by providing the complete details with respect to the above company such as (1) Confirmation of the company, (2) Its annual accounts, (3) Its Income Tax returns and (4) The bank statement of the depositor, (5) Source of the funds received by the lender from MKT Investments Pvt Ltd (Another Group Company) with the annual accounts and bank statement of that party (MKT Investments P Ltd) who provided funds to the lender (6) source of the source of the funds is appellant itself, Assessee deposited money with MKT Investments Pvt Ltd which was given to the lender and in turn lender deposited with the assessee. Bank account/ statements of all these parties, audited accounts of all these parties and confirmation c. Source of the fund, which is invested in the assessee company, is a loan from Assessee Company to MKT Investments Private Limited and from KT Investments to M/s. Maharaasa Visions Pvt. Ltd, which deposited the sum with the appellant company. The whole cycle of funds is explained. d. The funds were repaid by the assessee company in the next year. He submitted that Rs. 5 crores were received by assessee on 18.09.2015 and it was re-paid by seven cheques in the next financial year. He submitted that all the transactions are through banking channels. He also submitted that the company from which the assessee has obtained loan is a sister concern. e. Source of the fund received he submitted that M/s. Maharaasa Visions Pvt. Ltd. received the sum of Rs.5 crores from another group company M/s MKT Investments Pvt. Ltd. To show this, he submitted the bank account of M/s MKT Investments Pvt. Ltd. where- from M/s. Maharaasa Visions Pvt. Ltd. received the sum. He submitted that the bank account of M/s MKT Investments Pvt. Ltd., which clearly demonstrated flow of transaction from the bank account of M/s MKT Investments Pvt. Ltd. f. Filed two different paper books wherein several documents with respect to the lender, the assessee as well as MKT Investments private limited including their bank statements, annual accounts, the list of directors, and the shareholding of the respective companies. g. These documents were shown to demonstrate that the lender is a group company, the source of money is also the group company, and the amount is through banking channel where the word transaction is traced out, source of funds available with the lender, the funds received by the assessee company. h. There is no allegation that any third party is involved or there is any malafide intention of the assessee. He submitted that there is no allegation at all that it is an accommodation entry. He submits that funds flow is not at all doubted. i. He submitted that Lender Company was for specific purposes of filing a real estate tender; therefore, assessee transferred the funds to the lender through MKT Investments Pvt Ltd, another Group company. Assessee paid Rs 5 Crore to MKT Investments, MKT Investments in turn Paid 5 Crore to lender. As the project did not fructify, the money was returned to the assessee by lender. However as in the group concerns there were accounting entries at the time of receipt of money, same needs to be reversed, in next year assessee returned this money to lender , lender returned , money to MKT Investments and In turn MKT Investments returned money to the appellant. He explained the whole cycle of the fund movement. j. He submitted that as the project for which the company was formed by the group, did not fructify, there are no assets and liabilities of that company. Above Transactions were sole accounting entries in the books of the company as per above transactions explained. There was unsecured loan from the MKT Investments as Liability, Loans, and advances in assets to the appellant in the books of lender. He submitted that when the above flow of fund is seen, there is clear cut source of funds are available, It is not necessary that there should be income always or assets always with lender. In these peculiar circumstances, it is not. He also submitted that directors are also same group is apparent. He submitted that creditworthiness of the lender is qua transactions. Otherwise, a loss making company cannot give any loan to anybody. With respect to genuineness, he submitted that the whole transaction is so transparent that there is nothing ingenuine in it.

In view of this it was the submission that lender company has source of funds available with it in form of unsecured loan from a group company and as it is a group company transaction, there is no doubt about the genuineness of these transaction also. Therefore, he submitted that the addition made by the learned assessing officer and confirmed by the learned CIT – A is to be deleted. 08 The learned departmental representative vehemently supported the order of the learned lower authorities. He submitted that merely because the assessee received money from its group company, the provisions of Section 68 could not be bypassed. Even in the group company cases according to him the assessee is required to prove the identity, creditworthiness of the lender as well as the genuineness of the transaction. He submitted that the lender does not have any income or income earning apparatus to give an unsecured loan to the assessee company. In fact, the assessee has routed its own money through the group companies. He further referred to the order of the learned and CIT – A who confirmed the above addition. In view of this, he supported the orders of the lower authorities. 09 We have carefully considered the rival contention and perused the orders of the lower authorities. In this case, the assessee has received an unsecured loan from one of the group concern M/s Maharassa Visions Pvt Ltd of ₹ 5 crores on 18 September 2015. During the course of assessment proceedings, assessee was asked to substantiate the identity, creditworthiness of the lender as well as genuineness of the transaction. In support of this contention assessee submitted, that it has received the loan from a group concern, which was repaid in subsequent year. To substantiate its claim the assessee submitted the copy of the income tax return of the lender, bank statement, confirmation as well as the financial statements in the form of balance sheets of the lender. The assessee also submitted that in the balance sheet, the assessee’s name is shown as a debt by lender company. There is a creditor by the name of MKT investments private limited, which is also group concern, who has given a loan to the lender and that lender in turn has deposited the money with the assessee company. Subsequently, assessee returned the money to the lender, the lender returned money to the MK investments private limited and MKT investments private limited returned the loan taken from the assessee. Therefore, there is a complete trace of the transaction of the above loan received. To substantiate the above transaction the assessee has submitted a bank statement of the assessee, MKT Investments Pvt Ltd and lender i.e. Maharasaa Vision Pvt Ltd. The assessee by production of the balance sheet has shown that these are transactions from a group company and more precisely subsidiary of the appellant. It is shown by the balance sheet that appellant is owned by Mr Mithlesh Tripathy and his family as shareholders. Appellant company owns 51% share in the lender company as on 31st of March 2016. As on March 2015, in the lender company Mr. Mithlesh Tripathy and Mr Anmol Tripathy owned 50% each. From the above it is apparent that the year in which the loan was received the appellant company was holding 51% share in the lender company. In the balance sheet of the lender, it is apparently shown that there is an unsecured loan received from a related party i.e. MKT Investments Pvt Ltd and unsecured loan granted to a related party i.e. assessee, appellant. Thus, the creditworthiness of the amount given to the assessee by the lender is a source of fund from another group company. Therefore, it is not the case that the lender did not have the source of fund to give loan to the assessee. Further, with respect to the genuineness of the transaction, the loan was obtained from a group company where there is a clear-cut source of fund available; there is no allegation of any unaccounted money or tainted source.

Therefore, the genuineness of unsecured loan cannot be doubted. With respect to the no source of income i.e. the return of income filed by the lender at Rs. Nil, it was explained that the company was formed for a specific purpose and the amount was transferred to it for bidding, which did not happen, and therefore the money was returned. It was explained that appellant company itself transferred the money to MKT investment private limited, which in turn granted the loan to the lender company i.e. Maharasaa Visions Pvt Ltd. as the bidding did not happen; therefore, the money was available with the group concern, which was returned by the lender to the appellant, as there was no use of the group money in the books of lender. Creditworthiness not necessarily mean that company should have given the money out of profits only. It is merle ascertainment of the fact that when the lender deposits the money it has valid and genuine source available with it or not. In this case, the source of money lent is loan from another group company; group company received money from the assessee itself, the transactions is duly reflected in the balance sheets of respective companies. Even the assessing officer himself has stated that source of money lent to the assessee is the assessee itself. If the view of the ld AO is to be believed then, NBFC companies who have limited earning but lent the money out of the money borrowed will never pass the test of section 68 of the act. Thus, merely filing Nil return by lender, if the sources are clearly established with overwhelming evidences of the bank statements of all the concerned parties duly supported by the annual accounts, cannot lead to addition in the hands of the borrower. The various decision referred to by the ld CIT (A) does not help the case of the revenue and most of these decision merely recites the basic principles of taxation u/s 68 of the act. In view of this, we allow Ground no 2 of the appeal of the assessee, which is against the confirmation of the additions of Rs 5 Crores u/s 68 of the act with respect to above unsecured loan. 10 All other grounds of appeal