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Facts
The assessee, a partnership firm engaged in land development, appealed against additions made by the AO for bogus cash credits and disallowance of interest expenses. The CIT(A) granted partial relief. The assessee challenged the assessment's validity and the confirmation of additions on merits.
Held
The Tribunal noted that the AO made additions for squared-up loans and non-squared-up loans. Regarding squared-up loans, the Tribunal remanded the issue to the AO for fresh adjudication, giving the assessee an opportunity to present evidence. For non-squared-up loans, the Tribunal deleted the addition, finding that the assessee had discharged its onus and the AO's adverse inferences were not based on cogent material.
Key Issues
Whether additions for bogus cash credits (squared up and non-squared up loans) and disallowance of interest were justified, and whether the assessment order was legally valid.
Sections Cited
143(3), 139, 142(1), 154, 68, 115BBE, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
– AY 2015-16 21. Thereafter, Ld. AR carried us to the relevant portion of order of first- appeal passed by CIT(A) upholding the addition made by AO, reading as under:
8.8. With respect to the amounts borrowed during the year from M/s Helpful Vinrade Private Limited, M/s Justify Vanijya Private Limited, and M/s Royal Pet Commodeal Private Limited, the Assessing Officer, in paragraph 11.2 of the assessment order, analysed the responses received from the parties pursuant to notices issued under Section 133(6) of the Act. The officer concluded that these companies appeared to be bogus shell or paper entities with negligible and questionable creditworthiness. Furthermore, it was observed that the responses from these companies were all submitted by a single individual at the same post office and at the same time, raising doubts about the genuineness of the unsecured loans claimed by the appellant. Additionally, the Assessing Officer noted discrepancies between the income reported by these companies and the loans purportedly extended to the appellant, further questioning their financial credibility. It was also highlighted that the group of companies outlined in paragraph 11.2 of the assessment order shared similar addresses and the same set of directors, with some having been classified as shell companies according to an intelligence report received by the Assessing Officer. 8.9. While the appellant claims to have furnished copies of ITRs for Assessment Year 2015-16, auditor's reports, balance sheets, profit & loss accounts, bank statements, and account confirmations from these companies, there remains a gap in establishing both the creditworthiness and genuineness of the transactions. Moreover, the appellant did not present any substantive evidence before this authority to rebut the observations or comments made by the Assessing Officer in the assessment order. Accordingly, the addition made by the Assessing Officer regarding the above three concerns stands confirmed.
Ld. AR submitted that the lower-authorities have made two-fold observations and arrived at a conclusion that the three parameters of section 68, namely identity, creditworthiness and genuineness of transactions, were not verifiable. These observations are primarily based on (i) the manner of posting of replies to notices issued by AO u/s 133(6), and (ii) the low Gross Total Income declared by the creditor-companies.
| Neminath Developers | |||||
|---|---|---|---|---|---|
| ITA No. 688/Ind/2025 – AY 2015-16 | |||||
| made direct enquiries from respective creditors through notices u/s 133(6) | |||||
| to which the creditors also replied. The AO has noted these findings, as | |||||
| under: | |||||
| Sl. | Creditor | AO’s findings in Para 11.2 of assessment- order | AO’s findings in Annexure-A to assessment- order | ||
| Documents filed | Adverse observations | ||||
| 1 | Helpful Vinrade Private Limited | The envelope containing reply-letter to notice u/s 133(6) is posted from Bda Bazar, Kolkata, Post Office at 12:42. This charactersitic of enovelope is similar to other creditors namely (i) Silver Commosale Pvt. Ltd., (ii) Positive View Commercial, (iii) Lifewood Vinimay Pvt. Ltd. and (iv) Swarnim Distributors Pvt. Ltd. | Documents filed by assessee: ITR of AY 2015-16 Audit Report Balance-Sheet P&L Statement A/c statement of Federal Bank A/c Confirmation Certificate of loan transaction through cheque Documents filed by creditor in response to notice u/s 133(6): PAN card Details of loans given to assessee in F.Y. 2012-13, 2013-14 & 2014-15 ITR of AY 2013-14, | Reply to notice u/s 133(6) received from Bda Bazar, Kolkata, Post Office, posted on 19.12.2017 at 12:42. Same envelope as others. It proves that postage has been done by single individual. Gross Total Income for AY 2014-15 is only Rs. 18,287/-. All three parameters are not verifiable. |
With regard to the second observation relating to low income of creditor-companies, Ld. AR submitted that income alone cannot be the sole criterion to judge the creditworthiness, particularly when the financial statements and bank records of creditors demonstrating availability of funds have been furnished.
Further, Ld. AR made a very important and significant submission that similar observations were made by AO in respect of other creditors, however, the additions in those cases stand deleted by AO in OGE pursuant to direction by CIT(A). To illustrate, Ld. AR referred demonstrated that the Page 19 of 23 – AY 2015-16 additions made in respect of loans taken from (i) Silver Commosale Pvt. Ltd., (ii) Positive View Commercial, (iii) Lifewood Winimay Pvt. Ltd., (iv) Swarnim Distributors Pvt. Ltd, and (v) Cindrella Commodeal Pvt. Ltd. stand deleted.
Therefore, according to Ld. AR, the adverse view taken in respect of these three creditors is a contradictory approach of department and such approach must be rejected.
Ld. DR for revenue, on the other hand, relied upon the orders of lower authorities.
We have considered rival submissions of both sides and perused the orders of lower authorities as well as the material available on record.
Basically, the issue for our consideration is whether the assessee has discharged the onus cast upon it u/s 68 of the Act in respect of the impugned loan transactions. It is an undisputed fact that the assessee has furnished documentary evidences such as (i) ITRs, (ii) Audit Reports, (iii)
Balance-Sheets, (iv) Profit & Loss Accounts, (v) Bank statements, (vi)
Account confirmations and (vii) details of loan transactions. It is a further fact that the creditors have also responded to the notices issued u/s 133(6) by AO and the creditors have filed some of those documents directly to AO.
It is a settled position of law that once the assessee furnishes primary evidences to establish identity of creditor and creditworthiness of creditors and genuineness of transactions, the onus shifts upon the Revenue to rebut the same with cogent material. In present case, the adverse inference drawn by the AO is primarily based on surrounding circumstances such as Page 20 of 23 – AY 2015-16 common postal dispatch and low returned income, without pointing out any specific defect, discrepancy or falsity in the documentary evidences placed on record. In our considered view, such general observations and suspicion, howsoever strong, cannot take place of proof and are not sufficient to justify the addition made u/s 68 of the Act.
We further find a strong merit in the contention raised by Ld. AR that similar observations were made by AO in respect of other creditors, however, the additions in those cases stand deleted by AO in OGE. The Ld. AR has demonstrated this factual position with the support of illustrations of some creditors as mentioned by us in preceding para. When it is so, the AO is certainly not justified in denying similar relief to assessee.
In view of above discussion and for the reason stated therein, we are of the considered view that the addition of Rs. 1,89,00,000/- relatable to afore-discussed three loan transactions deserves to be deleted. Therefore, we direct AO to delete the same. Accordingly, this ground is allowed.
Ground No. 5:
In this ground, the assessee challenges the disallowance of interest expenditure of Rs. 1,54,36,666/- made by AO.
The disallowance of interest is relatable to the underlying additions of unexplained cash credits of Rs. 6,33,13,140/- and Rs. 5,80,09,541/- made by AO. At first, we note that the AO has already deleted the disallowance of Page 21 of 23 – AY 2015-16 interest expenditure, partly to the extent of Rs. 1,52,17,278/- in OGE dated 29.08.2025. However, since we have granted further relief to assessee by way of remanding/deleting the underlying additions of loans while adjudicating Ground No. 4 & 5, we direct the AO make a systematic verification of interest disallowance and re-compute the same in accordance with the final outcome of the underlying loan additions. To make it clear, the Ld. AO shall delete the interest relatable to such loans which are finally deleted, and sustain the disallowance of interest only to the extent it pertains to loans that are ultimately upheld. Accordingly, this ground is allowed for statistical purpose.
Ground No. 6:
In this ground, the assessee challenges the invocation of higher rate of tax u/s 115BBE by AO to the additions/disallowances. Since we have already remanded/deleted the underlying additions/disallowances to AO while adjudicating Ground No. 3, 4 & 5, this ground becomes infructuous/ academic at present. Accordingly, this ground does not require adjudication at this stage.
Ground No. 7:
This ground is general and no submission is made by either side.
Accordingly, this ground does not require any adjudication from us.
| Neminath Developers | |||
|---|---|---|---|
| ITA No. 688/Ind/2025 – AY 2015-16 | |||
| 34. Resultantly, this appeal is partly allowed in the terms indicated | |||
| above. | |||
| Order pronounced in open court on 10/04/2026 | |||
| Sd/- Sd/- (PARESH M. JOSHI) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 10/04/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYSr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore | |||
| Sd/- Sd/- | |||
| (PARESH M. JOSHI) (B.M. BIYANI) | |||
| JUDICIAL MEMBER ACCOUNTANT MEMBER | |||
| Indore | |||
| िदनांक /Dated : 10/04/2026 | |||
| Patel/Sr. PS | |||
| Copies to: (1) The appellant | |||
| (2) The respondent | |||
| (3) CIT | |||
| (4) CIT(A) | |||
| (5) Departmental Representative | |||
| (6) Guard File | |||
| By order | |||
| E COPYSr. Private Secretary | |||
| Income Tax Appellate Tribunal | |||
| Indore Bench, Indore |
Order pronounced in open court on 10/04/2026