A.C.I.T.,CIRCLE-49(1), KOLKATA vs. M/S VISWAKARMA RESIDENCY, KOLKATA

आदेश /O R D E R Per Sanjay Garg, Judicial Member :- The present appeal has been preferred by the revenue against the order dated 14-11-2019 of the Learned Commissioner of Income-tax(Appeals)-09, Kolkata (hereinafter, referred to as the ‘ Ld.CIT(A)’ contesting the action of the Ld. CIT(A) in deleting the additions made by the Learned Assessing Officer ( in short, the ‘ld. AO’) in respect of loans received by the assessee treating the same as not genuine. 2. The revenue in this respect has taken following grounds of appeal:- 1. That in the facts and circumstances of the case, Ld. CIT(Appeal) , has erred in deleting the addition of Rs. 12,56,40,000/- made by the Assessing Officer u/ s 68 of the Income Tax Act ,1961, being accommodation entries as a part of organised scam, without considering the facts that the assessee failed to offer any satisfactory explanation about the bogus unsecured loan credited in the books of accounts of the assessee .

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 2 2.That in the facts and circumstances of the case, Ld. CIT(Appeal) , has erred in deleting the addition of Rs. 56,36,542/ - in respect of interest payments on the unaccounted loans as a consequential effect on deletion of addition of unsecured loan of Rs. 12,56,40,000/- made by assessing officer u/ s 68 of the Income Tax Act,1961. 3. That in the facts and circumstances of the case, Ld. CIT(Appeal) , has erred in deleting the addition of Rs. 27,034/ - on account of delayed payments of interest on service tax and TDS, without considering the fact that the assessee failed to produce any valid/ tenable explanation in this regard. 4. The appellant craves leave to add, alter or withdraw any ground/ s of appeal before or at the time of hearing. Ground no. 1: 3. Vide ground no. 1, the Revenue has agitated the action of the ld. CIT(A) in deleting the addition of Rs. 12,56,40,000/- made by the Ld. AO in respect of loan received from 11 parties. 4. During the assessment proceedings the Ld. AO noted that the assessee received unsecured loans from 11 parties. He issued notices u/s 133(6) of the Income Tax Act, 1961 ( hereinafter, referred to as the ‘Act’ ) to the said 11 parties calling for information for verification of the said transactions. As per para 4.1 of the assessment order, replies/confirmations were obtained from the said 11 parties and the same were placed on record. 5. The Ld. AO after examining the details held that out of 11 parties, 8 parties were paper companies, whereas three (3) others were not physically existed at the given address. The Ld. AO further observed that in the year 2014, statement of certain persons were recorded in some other cases u/s. 131 of the Act, wherein the concerned parties/persons operating the said 8 companies had admitted that they had provided accommodation entries in lieu of commission in the form of bogus bills and loans. The Ld.AO further observed that reply to the notices issued u/s. 133(6) of the Act were received from other addresses instead of the given addresses of the creditors. In case of remaining 3 parties, the departmental inspectors were deputed for verification of existence of these companies. As per inspector’s report, these three companies did not physically exist at the given address. The Ld. AO also observed that though, notices sent to the parties u/s. 133(6) of the I.T Act, 1961 were received ‘

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 3 unserved’, however, when the matter was confronted to the assessee, the assessee immediately filed balance sheet, P & L account and ITR of the company and also the said companies filed their replies to the notices. 6. The Ld. AO considering the above circumstances, held that the loan received by the assessee from these companies was bogus and treated the said loan as unaccounted income of assessee and added the same into the income of the assessee. 7. Being aggrieved by the said order of the ld. AO, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed submissions and also relied upon various case laws. 8. The ld. CIT(A) considering the explanations and evidence furnished by the assessee in respect of identity, creditworthiness and genuineness of the transactions and after considering the overall facts and circumstances of the case, deleted the additions so made by the Ld. AO, observing as under:- “4. Decision I have carefully gone through the assessment order and submissions made on behalf of the appellant, the evidences and the findings of the AO. Ground no. 1 is general in nature and does not require any adjudication. Ground Nos. 2 to 7 are against the addition of unsecured loans of Rs. 12,56,40,000/- taken during the year and the same are taken together. The fact of the case is that the assessee firm received loan from various individuals and companies during the year. In response to the notice issued by the AO, the assessee filed details containing the name, address and PAN of the lenders and the amount of opening balance, amount received, interest credited, TDS deducted, interest repaid and closing balances. The name, address, PAN of the loan creditors from whom loan was received and amount repaid was also available in Form 3CD uploaded by the assessee.

In course of the assessment proceedings, the AO issued notices u/s. 133(6) to the loan creditors which were served and complied by them confirming the amount of loans advanced by them and filing copies of their returns of income, audited financial statements, bank statements and explaining their sources of funds and natue of receipts. The AO subsequently issued Show Cause Notice to the assessee stating that 9 loan creditors to whom notices were issued were paper companies, 3 loan creditors (companies) did not comply with the notices issued to them and notices issued to six loan creditors did (individuals and HUFs)

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 4 returned unserved. As such the AO required the asessee to prove the identity and creditworthiness of the loan creditors and genuineness of the transactions. The AO also required the assessee to explain why interest on delayed payments of TDS and Service Tax should not be disallowed. In response to the said notice the assessee filed written submission stating filed a copy of reply of the CPIO and Deputy Director, Ministry of Corporate Affairs, Government of India dated 16.05.2018 whereby in response to RTI Query dated 24.04.2018 to the Department of Revenue forwarded to it through the coordination Section vide OM dated 04.05.2018, it has been categorically stated that word” shell company” has not been defined under Companies Act, 2013 and therefore there is no list of shell companies/suspected shell companies. The assessee in order to establish the identities and creditworthiness of the six individual and HUF loan creditors filed copies of their PAN Card, Aadhar Card, Acknowledgement of return of income, Profit and Loss Account, Balance sheet and Bank statements and also explained their relationship with the partners of the firm. Being satisfied with the evidences adduced, the AO accepted the loans received from the said persons. In respect of the 9 loan creditors being companies alleged as paper companies by the AO and other 3 companies who did not file replies to notices issued u/s. 133(6), the assessee in order to discharge the initial onus lying upon if filed copies of their company master data,PAN Card, Acknowledgement of returns of income, audited financial statements, confirmation of accounts, bank statements, statement showing source of funds and nature of receipts. The assessee also filed copies of the assessment orders of the loan creditors showing that loan creditors had been subjected to regular assessment in different years wherein the returns filed by them has been accepted by their assessing officer. The assessee further required the AO to provide the material on the basis of which he alleged the 9 loan creditors and paper companies for rebuttal by the assessee and further requested to provide copies of statement of any parties on whose statement the AO wished to rely upon against the assessee and to produce the parties for cross examination of the assessee. However, the Assessing Officer without providing copy of any material whatsoever to the assessee assessed the loans received during the year from the 12 loan creditor companies as unexplained cash credit on the following grounds. i. Accurate Vintrade Pvt. Ltd/New Town Mercantiles Pvt. Ltd/Purojit Vinimay Pvt. Ltd/Rotomac Vinimay Pvt. Ltd./ Singrodia Holdings Pvt. Ltd •. Statement of Shri Krishna Murari Natia who as per the AO in his statement dated 23-4-2014 admitted that he had provided accommodation entries in lieu of commission in the form of bogus bills and loans. The

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 5 relevant portion of his statement were stated to be attached with assessment order as KMN-1, KMN-2 and KMN-3. • Replies to notices s 133{6) was received from address other than the address at which notice was issued. • As per Inspector report there was no physical existence of the company at both the address. ii. Carmel Merchants Pvt. Ltd./Everest Commerce Pvt. Ltd. • Statement of Shri Ram Kishan Ajitsaria dated 21-05-2014 who proved that he provide accommodation entries through various paper companies. The relevant portion of" his statement were stated to be attached with the assessment order as RKA. The AO also stated that the said company was not physically found at its address. iii. Cosmos Real Estates Pvt. Ltd. • Statement of Shri Anand Singhania dated 15-07-2014 who controlled the above company and who proved that he provided accommodation entries through various paper companies. The relevant portion of his statement were stated to be attached with the assessment order as AS. • Reply to notice u/s 133(6) was received from address other than the address at which notice. • The AO also stated that the said company was not physically found at both the address. iv. Century Ply & Boards Pvt. Ltd. / Navana Trading Company Pvt. Ltd./ Sthavistha Mercantiles Pvt. Ltd. • Reply to notice u/s. 133(6) were manufactured replies as the same were received after issuance of Show Cause Notice to the assessee • As per Inspector report there was no physical existence of the company. Regarding annexures being KMN­1, KMN­2, KMN­3, RK and AS stated to have been annexed to the assessment order, the appellant stated that the assessment order was served through e-filing portal and in course of the appellate proceeding logged into e-filing portal and demonstrated that there were no such annexures at all. Against the reliance on the statements of Shri Krishan Murari Naita, Shri Ram Kishan Murari Naita, Shri Ram Kishan Ajitsaria and Shri Anand Singhania by the AO, the appellant argued that i. The statement of Shri Kishan Murai Naita. Shri Ram Kishan Ajitsaria and Shri Anand Singhania are stated to have been recorded on 23-04- 2014, 21-05-2014 and 23-07-2014. ii. Considering the dates of statements, it is apparent that the said statements were not recorded by the AO but he merely relied on the statements recorded by other AOs. iii. The transactions of the assessee with the said companies took place in FY 2015-16, therefore the statements recorded years before are irrelevant in so far as the case of the assessee is concerned.

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 6 iv. The statements referred to does not and cannot relate to the transaction of the assessee. v. The parties had no capacity to depose on behalf of the company. vi. The statements recorded u/s. 131 per se without any corroborative material has no evidentiary value. vii. Barring statements no other material has been brought on record by the AO Regarding receipt of replies from address other than the address at which notices were served, the appellant submitted that the assessee had provide the addresses as available in its records and subsequently the said companies changed their address. The notices issued by the AO at the old address were served but the creditor filed their replies mentioning the present address which is as per requirement of the law. Regarding physical existence at old address, the appellant submitted that since some of the loan creditors had shifted to new address as such the question of existence at old address does not arise. Regarding physical existence of loan creditors at new address, the appellant firstly stated that all the above Loan creditor's are companies registered under the Companies Act, 1956 and are regularly filing their statutory returns which is evident from the fact that their status on MCA is ACTIVE COMPLIANT. It is stated that the Active Complaint Status is given only to companies who uploads photo of the building where the office of the company is situated, photo of the registered office of the company along with the photo of the director sitting in the office, geographical location of the company stating the longitude and latitude all digitally signed by all by all the directors of the company and digitally certified by practising company secretary/chartered account. Besides, the companies are having PAN and have filed their returns of income. As such the allegation that the said companies were not found at their address is factually incorrect. The assessee secondly submitted that all the notices issued by the AO were duly served further disapproves the allegation made by the AO. Thirdly and finally, it is submitted that regular assessments have been made in case of all the loan creditors in various years and therefore the allegation of physical non-existence are wholly baseless. The assessee further submitted that the additions has been made relying on the material the copies of which were never supplied to the assessee for rebuttal and the parties were not produced for cross examination by the assessee which is serious flaw and rendered the assessment in nullity. Regarding replies of 3 loan creditors receipt after issuance of Show Cause Notice to the assessee, the assessee stated that the Show Cause Notices are issued to adhere to the principles of audi alter partem providing opportunity to the assessee to establish his case before an order is passed. The assessee submitted that admittedly the notices issued were duly served but the creditors did not filed their replies. Upon receiving the Show

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 7 Cause Notices, the assessee contacted the said parties and requested to comply with the notice which they did. Ensuring compliance from loan creditors upon receiving of Show Cause Notice is not against the law and there is no reason to view the same adversely. The assessee further submitted that the loan from Cosmos Real Estates Pvt.Ltd .,. Everest Commerce Pvt. Ltd., Navana Trading Company Pvt. Ltd were received during earlier years and the same accepted in regular assessment for the Assessment Year 2015-16. From the above discussion the following facts emerges:- 1.The assessee submitted that name, address, PAN. Opening Balance, Loan taken during the year, interest. TDS, Loan repaid and closing balance. Subsequently on receipt of the Show Cause Notice the assessee tiled copies of PAN Card, Acknowledgement of returns of income, audited financial statements, bank statements, confirmation of account and statements showing source of funds and nature of receipts in respect of each of the loan creditors along with copies of the assessment orders of the loan creditors. The asses ee also ensured compliances from parties who although received notices but did not comply with the same. As such the assessee duly discharged the initial onus lying upon it to establish the identity and creditworthiness of the loan creditors and genuineness of the transactions and shifted the onus on the revenue. Thereafter, the AO did not bring any adverse material on record and sought any explanation from the assessee. As such I find that the assessee duly discharged the onus lying upon it. In this regard reference is made to the decision in the following cases:- a. S.K. Bothra & Sons, HUF v. Income­tax Officer, Ward­46(3), Kolkata [201]15 taxmann.com 298 (Calcutta) Where assessee had produced loan confirmation certificates signed by creditors, disclosed their permanent account numbers and address. loans taken by assessee could not be held to be not genuine without giving further opportunity to assessee to explain information basis of which such conclusion was arrived at. b. Fort Projects (P.) Ltd. v. Deputy Commissioner of Income­tax [2013] 29 taxmann.com 84 (Kolkata ­ Trib.) Where assessee had successfully proved genuineness and source of loan by furnishing requisite evidences in form of IT return and financial statements of creditor evidencing receipt of loan and also confirmation of said party, said amount could not be treated as assessee's undisclosed income. c. Commissioner of Income­tax v. Sahibganj Electric Cables (P.) Ltd. [19 78] 115 ITR 408 (CAL.) Loans in question were received b) assessee by cheques and repayments were also made by cheques - Assessee had given confirmation letters of respective parties and in said letters income-tax file numbers of alleged

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 8 creditors were given - Cheques for repayment of loan were cleared through assessee's banker – Tribunal held that assessee had discharged onus prima facie that laid on him and as such amount of loans were not his income from un disclosed sources - Whether order of Tribunal was justified - Held. Yes d. In the case of CIT v Apex Therm Packaging (P.) Ltd. [2014] 42 taxmann.com 473 (Gujarat) it was held a under:­ Where assessee duly submitted all details of creditors from whom it had obtained unsecured loans and evidence produced by assessee proved creditworthiness and genuineness of transactions, no addition under section 68 could be made. e. Commissioner of income­tax, Jaipur­II v. Morani Automotives (P) Ltd. [2014] 45 taxmann.com 473 (Rajasthan) Assessing Officer made certain addition on account of unexplained share capital contribution and unsecured loans-Assessee submitted all details, confirmations, returns, affidavits, bank statements, etc. from various persons in respect of share capital contribution as also for loan advanced, which could not be collected during course of assessment proceeding- It was found that contributors were all income tax assesssees and their return of income and copies of confirmation along with PAN numbers had been furnished by assessee and also identity of cash creditors were established- Whether addition was not justified-Held, yes. f. Commissioner of Income­tax, Ahmedabad­IV v. Sachitel Communications (P) Ltd. [2014] 51 taxmann.com 205(Gujarat). Where assessee proved identity of creditor, its capacity and further transaction, was made through bank, any addition as unexplained unsecured loans would be unsustainable. g. Commissioner of Income­tax­II, Indore v. Vaibhav Cotton (P.) Ltd.[2013] 36 taxmann.com 429 (Madhya Pradesh) In this case, Tribunal on its own independent analysis of matter had reached to factual conclusion about genuineness of unsecured loan transaction and in this process Tribunal had taken note of fact that detailed account of concerned parties were filed by assessee and through account payee cheques. source of deposit in bank was not in dispute and identity established and also creditworthiness was established -Whether since finding which had been recorded by Tribunal was essential finding of fact and since revenue had failed to point out any error or perversity in said finding of fact, order of Tribunal was to be upheld-Held, yes h. Commissioner of Income­tax­I v. Kapoor Chand Mangesh Chand[2013] 38 taxmann.com 239 (Allababad) Where there was sufficient funds in lender’s account and loan was taken and repaid through cheques, there was no unexplained cash credit. i. Commissioner of lncome­tax­I v, Patel Ramniklal Hirji [2014[41 taxmann.com 493(Gujarat)

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 9 Where assessee received loan through account payee cheques, and, in support of loan transaction he also brought on record copy of book's account, bank statement and income-tax return of lender, transaction in question was to be regarded as genuine and, thus, loan amount could not be added to assessee's taxable income under section 68. j. Commissioner of Income­tax v. Mark Hospitals (P) Ltd. [2015] 58 taxmann.com 226 (Madras) Assessee had obtained unsecured loans from agriculturists and submitted their names and addresses, but did not provide their PAN cards - Assessing Officer made addition under section 68- It was found that loans were given to assessee through cheques and all creditors had confirmed that they had advanced loans mentioned against their names to assessee and, disputed - Further, all creditors were agriculturists and therefore, they did not have PAN card- Whether, on facts, no addition could be made- Held, yes k. Commissioner of Income­tax­15 v. Haresh D. Mehta [2017] 86 taxman.com 22 (Bombay) Where assessee proved loan transactions from various parties by producing details like copy of PAN card, copy of return of income, balance sheet and copy of bank accounts of creditors. Tribunal was justified in deleting addition made by AO under sec. 68 in respect of said transactions. i. Commissioner of Income­tax v. Tania Investments (P.) Ltd. [2010] 322 ITR 394 (Bombay) Where in books of account produced by creditors corresponding entries of alleged cash credits were found, books of account itself would indicate capacity of part to advance loan, there was no further need on part of assessee to prove capacity of creditors. m . Commissioner of Income­tax­ III v. Jay Enterprise [2012] 22 taxmann.com 163 (Guj.] Assessing Officer made addition of certain amount as unexplained ash credit - It was found that in respect of addition from two of parties concerned. Assessing Officer had received direct confirmations from them - Both parties had filed return of income. bank statement and balance sheet wherein, loans to assessee were reflected - Whether. assessee had discharged its burden under section 68 and cash credits were to be treated explained - Held, yes n. Commissioner of Income­tax, Ajmer v. H. S Builders (P.) Ltd. 120121 26 taxmann.com 86 (Raj.) Confirmations by creditors and production of their balance sheets. accounts. etc.. proven is enough evidence to justify deletion of cash credits. 2. Shri Krishna Murari Naita, Shri Ram Kishan Ajitsaria and Shri Anand Singha referred to in the assessment order by the AO were recorded by

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 10 another assessing officers long before the transactions with the assessee and as such the said statements have no relevance in so far transactions with the assessee are concerned. Unless the statements relied upon contains the name of the assessee, no addition can be made. The above view is supported by the decision of the Hon’ble jurisdictional Calcutta High Court in the case of S. P. Agarwalla alias Sukhdeo Prasad Agarwalla v ITO 119831 140 ITR 1010 (Cal) held that a mere confessional statement by a third party (who is a lender to the assessee) that he was a mere name lender and that all his transactions of loans were bogus without naming the assessee as one who had obtained bogus loans, would not be sufficient to hold that income has escaped assessment. Similarly in the case of CIT v. Priyanka Ship Breaking Co. (P.) Ltd. [2012] 26 taxmann.com. 321/21 Taxman 20 (Delhi)(Mag.), it has been held that where entry operator in his statement u/s 132(4) did not refer to the name of the assessee, the recipient of credit entry, and merely stated that given only loan after taking cash and deducting commission. it was held that, this is too general or vague an answer on the basis of which the assessee-company can be condemned. Even otherwise, no addition can be made solely relying on the statements made by third parties. In the case of Pr. CIT v. Kanubhai Maganlal Patel [2017] 79 taxmann.com 257 (Guj.); CIT v. D. Kanta [2012] 19 taxmann.com 92/205 Taxman 115 (Kar.) (Mag.) : Smt. Renu Agarwal v. Asstt. CIT[2017] 88 taxmann.com 872 (JP ­ Trib.); Jawahurbhai Atmaram Hathiwala v. ITO [2010] 128 TTJ 36(Ahd.) (UO) ; Harish Daulatram Innani v. Dy. CfT 120081 24 SOT 541 (Mum.) it has been held that AO was not justified in making addition u/s 698 by solely relying upon statements or deponents that he, had admitted of having received on money in cash. Reference is also made to the decisions in the case of CIT v, Rahul Vineet Traders [2014] 41taxmann.com 86/221 Taxman 46 (All.) (Mag.); CIT v. Vijay Kumar Jain [2014] 41 taxmann.com 433/221 Taxman 180 (All.) (Mag.); Asstt. CIT v. Shyarn Indus Power Solutions (P.) Ltd. 120181 90 taxmann.com 424 (Delhi ­ Trib.) it has been held that where lenders were regular income-tax assees and their PANs were on record, amount had been advanced through account-payee cheques and further. before issuing cheques lenders had got sufficient balance in their account, moreover, amount had also been repaid through account payee cheques, addition of loan u/s 68 was unjustified rely on the ground that lenders were engaged in providing accommodation entries. Besides, barring relying on the statements, the AO has not brought any positive evidence against the assessee. It has been consistently been held by the courts that mere statements per se without any corroborative nave no evidentiary value. The fact has consistently been recognized by the Hon'ble CBDT vide its letter Nos. F. No. 286/57/2002-IT(lnv) dated

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 11 03.07.2002, CBDT Letter F. No. 286/98/2013-IT(Inv) dated 10.03.2003, CBDT Letter F. No. 286/98/2013-IT(lnv ) dated 09.01.2014, CBDT Letter No. F. No. 286/98/2013-IT(Inv) dated 18.12.2014. Reference in this regard is made to the decision of the Hon'ble Supreme Court in the case of CIT v Mantri Share Brokers Pvt. Ltd. [2018] 96 taxmann.com 280 (SC) dated 03.07.2018 wherein the department filed by the revenue against the decision of the High Court holding that where except statement of director of assessee-company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery or document in any other form to justify said statement. addition m e of said income in hands of assessee under section 69B was to be deleted. Moreover. the AO has not brought any evidence to show that any cash has emanated from the offers the assessee. In the case of Hon'ble Delhi High Court in the case of CIT v Value Capital Services P Ltd reported in (2008) 30 ITR 334 (Del), has held that the additional burden.. the department to show that even if the hare applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so..enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. Similarly it has been held in the case of ITO v. Neelkanth Finbuild Pvt. Ltd. (2015) taxmann.com 132 (Delhi­ Trib.) that where Assessing Officer was not able to bring anything on record that it was assessee-company’s own money which was routed in form of share application money, addition under section 68 was to be deleted. 3. As per Section u/s 12 of the Companies Act, 2013, the companies are statutorily required inter alia to mention the address of their present registered office of the company. As such there is no reason to draw adverse inference from the fact that in case of some of the creditors the addresses mentioned in the replies of the loan creditor were different from the addresses that were mentioned in the notices. 4. All the loan creditors are companies and their status on MCA is active complaint, the notices issued to all the loan creditors were duly served by postal authorities and regular assessment of the loan creditors have been disapproves the claim of the AO that there is no physical existence of the loan creditors. In any case, merely for the reason that the loan creditors were not found at their address no addition can be made in the following cases :- a. Commissioner of Income­tax­IV v. Dwarkadhish Investment (P.) Ltd. [2010] 194 Taxman 43 (Delhi) section 68 of the Income-tax Act, 1961-Cash credits-assessment year 2001-02-Whehter though in section 68 proceedings, initial burden of proof lies on assessee, yet once he proves identity of creditors/share applicants by either furnishing their PAN numbers or income-tax

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 12 assessment numbers and shows genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then onus of proof would shift to revenue and just because creditors/share applicants could not be found at address given, it would not give revenue right to invoke section 68-Held, yes b. CIT v. Kamdhenu Steel & Alloys Ltd [2012] taxmann.com 26 (Delhi):- Whether where assessee had given particulars of registration of investing/applicant companies; confirmation from share applicants; bank account details; and had shown payment through account payee cheques. etc ., it could be said that assessee had discharged its initial onus and just because some of creditors/share applicants could not be found at address given, it would not give revenue a right to invoke section 68 without any additional material to support such a move - Held, yes 5. In respect of the following 3 loan creditors the only allegation is that the said companies filed their replies after issuance of Show Cause otices issued to the assessee. i. Century Ply & Boards Pvt. Ltd. ii. Navana Trading Company Pvt. Ltd. iii. Sthavistha Mercantiles Pvt. Ltd I agree with the contention of the assessee that the Show Cause notices are issued before passing of final assessment order to meet the principles of natural justice i.e. audi alter partem. It is quite practical for the assessee to approach the parties upon whom the notices are served but not complied and request them to make compliance. Merely for the reason that the parties made compliance after issuance of Show Cause Notice to the assessee, 1 find no reason to hold that the replies were 'manufactured' particularly where no deficiencies have been found in the replies of the loan creditors and documents filed by them. 6. No loans have been taken by the assessee from the following parties during the year under consideration and the unsecured loan taken earlier had been accepted in regular assessment for the Assessment Year 2015-16 i. Cosmos Real Estates Pvt. Ltd. ii. Everst Commerce Pvt. Ltd. iii.Navana Trading Company Pvt. Ltd As such there is no reason to disallow the interest in respect of loans received from the said parties since the loan taken from the said parties have already been accepted in regular assessment in earlier year. 7. Regarding allegation of paper company, I find that the loan creditors ae companies and are regularly filing their statutory returns with the ROC and their status of MCA is ACTIVE COMPLAINT. All the loan creditors are having PAN and have filed their returns of income. The notices issued to the loan creditors have been duly served and in compliance thereto the

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 13 loan creditors have confirmed the transactions with the assessee and have filed copies of their return of income, audited financial statements, bank statements and have also explained their sources of fund and nature of receipts. The transactions have taken place through banking channels and have duly been recorded in their regular books of account and reflected in their audited financial statements. The interest income has been credited in their Statement of Profit and Loss and the TDS have been claimed in the return of income. There is no finding that the return of income filed by the loan creditors have been rejected by their assessing officers. Rather there have been regular assessment of the loan creditors for different years whereby the returns filed by the loan creditors have been accepted. Reference in this regard is made to the decision of the Hon’ble jurisdictional Calcutta High Court in the case of CIT v. Dataware Pvt. Ltd (supra) wherein the Hon’ble Court held as under:- "In our opinion. in such circumstances, the Assessing officer of the assessee burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as worthy of credence. So long it is not established that the return submitted by the creditor has been accepted by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities.” 8. I further find force in the that the loan creditors had sufficient net worth to invest as show under:-

Name of Capital Reserves Net Closing % of Net Company Worth balance Profit Accurate 5,505,000 674,387,861 679,892,861 17,262,113 2. Vintrade Pvt. Ltd Carmel 12,553,000 1,410,028 13,963,028 10,259,988 73 Merchants Pvt. Ltd

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 14 Century Ply 62,600,000 91,454,239 154,054,239 22,718,200 14 & Boards Pvt. Ltd Cosmos 28,110,000 179,993,030 208,103,030 634,686 0.3 Real Estates Pvt. Ltd Everest 32,720,000 210,822,936 243,542,936 542,228 0.2 Commerce Pvt. Ltd Growfast 914,980 39,799,628 40,714,608 500,000 1.2 Advisory Pvt. Ltd Navana 11,556,020 46,602,111 58,158,131 1,269,375 2.1 Trading Company Pvt. Ltd Newtown 3,928,500 551,422,419 555,350,919 16,213,899 2.92 Mercantile Pvt.Ltd Purujit 5,310,000 595,252,811 600,562,811 13,115,545 2.18 Vinimay Pvt. Ltd Rotomac 25,786,550 706,668,643 732,455,193 2,077,101 0.28 Vinimay Pvt. Ltd Sthavistha 4,089,050 485,531,649 489,620,699 - 0.00 Mercantiles Pvt.Ltd Singrodia 28,469,620 699,588,717 728,058,337 50,819 0.01 Bros. Holdings Pvt. Ltd

The issue of creditworthiness with respect to the net worth has been accepted by the Hon’ble ITAT in several cases. Reference is made to the decision of Hon’ble Delhi High Court in the case of PCIT v Goodview Trading (P) Ltd. [2017] 77 taxmann.com 204 (Delhi) wherein it is held that where Commissioner (Appeals) based on details of net worth of share applicant companies, noticed that share applicants possessed substantial means to invest in assessee-investment company- no additons could be made under section 68. Similarly recently the jurisdictional Kolkata Bench of Hon’ble ITAT in the case of Income­tax Officer, Ward­10(1),

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 15 Kolkata v. Axisline Investment Consultants (P) Ltd.[2019] 108 taxmann.com 276 (Kolkata­Trib) held as under:- “ Where any sum is found credited in the books of an assessee then there is a duty caste upon the assessee to explain the nature and source of credit found in his books. In the instant case, the credit is in the form of receipt of share capital with premium from share applicants. The nature of receipt towards share capital is seen from the entries passed in the respective balance sheets of the companies as share capital and investments. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of share applicants, genuineness of transactions and creditworthiness of share applicants. For proving the identity of share applicants, the assessee furnished the name, address, PAN of share applicants together with the copies of balance sheets and returns. With regard to the creditworthiness of share applicants, it was noted that those applicant companies were having capital in several crores of rupees and the investment made in the assessee company was only a small part of their capital. These transactions are also duly reflected in the balance sheets of the share applicants, so creditworthiness is proved. Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then AO should have made enquiries from the AO of the share subscribers which has not been done, so no adverse view could have been drawn. Third ingredient is genuineness of the transactions, for which it is found the monies had been directly paid to the assessee-company by account payee cheques out of sufficient bank balances available in their bank accounts on behalf of the share applicants. It will be evident from the paper book that the assessee has even demonstrated the source of money deposited into their bank accounts which in turn has been used by them to subscribe to the assessee-company as share application. Hence, the source of source is proved by the assessee in the instant case though the same is not required to be done by the assessee as per law as it stood/applicable in this assessment year. The share applicants have confirmed the share application in response to the notice u/s. 133(6) and have also confirmed the payments which are duly corroborated with the respective bank statements and all the payments are by account payee cheques.[Para 23] Thus, in this case in hand, the assessee had discharged it onus to prove the identity, creditworthiness and genuineness of the share applicants, thereafter the onus shifted to AO to disprove the documents furnished by assessee cannot be brushed aside by the AO to draw adverse view cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, it is held that an addition cannot be sustained merely based on inferences drawn by circumstances.[Para28] To sum up, section 68 provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 16 shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and acknowledgements were placed on AO’s record. Accordingly, all the three conditions as required under section 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case, no addition was warranted under section 68 of the Act. Therefore, the impugned order of CIT(A) is confirmed and consequently the appeal of revenue is dismissed.[Para 29] 9. The AO has relied upon following case laws but the same are distinguishable on facts as under:- CIT Vs. Nupun Builders & Developers Pvt. Ltd [2013]350 ITR 407 (Delhi) In the above case, the AO issued summons under section 131` to companies from whom share capital was stated to be received. The summons were returned unserved with the remarks ‘ no such company’, which was confirmed by the Inspector sent to the addresses for verification. Whereas in the instant case, admittedly the notices issued u/s. 133(6) of the loan creditor’s which were duly served upon and complied with. CIT, Central­1, Kolkata Vs. Maithan International [2015] 56 taxmann.com 283 (Calcutta) The above case is related to section 263 of the I.T Act, 1961 in which the ld. AO have not done proper enquiries. As such the above case has not application to the instant case. In the case of CIT vs. Tania Investments (P) Ltd (2010) 322 ITR 394 (Bom.), it has been held that tribunal was right in deleting the addition made by the AO towards unexplained cash credits as the Books of Accounts itself indicate the capacity to advance loan, the parties are identified and there is no further need to prove the creditworthiness of the creditors. In the case of Raichand Kothari (HUF) vs. CIT (1997) 139 CTR (Gau) 329; (1997) 223 ITR 250(Gau) relied on CIT vs. Shree Gopal & Co. (1994) 117 CTR (Gau) 357☹1993) 204 ITR 285 (Gau) applied CIT vs. Laul Transport Corporation (2009) 180 Taxman 185(P&H), it has been held that finding recorded by the tribunal accepting the identity and creditworthiness of the creditors to advance money and genuineness of cash credits is a pure finding of fact, and the appellant having not pointed

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 17 out any illegality or perversity in the said finding of fact, no interference is warranted. In the case of Jalan Timbers vs CIT[1997] 223 ITR 11(Gau) it has been held that where, in respect of certain cash credits, the asessee had not only disclosed them in his return of income but also produced confirmatory letters from the creditors, and the creditors had also declared the amounts in their income-tax returns which were accepted by the ITO, addition made a cash credit by ignoring the aforesaid facts would not be justified. In the case of CIT vs. Agarwal through LRs vs Asstt. CIT [2007] 208 CTR [Raj] 159 following the judgment in the case of Labh Chand Bohra vs. ITO[2008] 219 CTR (Raj) 571, it has been held that Identity of the creditors having been established who have confirmed the credits by making statements on oath and the amounts having been advanced by account payee cheques, impugned addition in respect of the entries in the names of said creditors cannot be sustained; assessee is not required to establish the capacity of the lender to advance money. In the case of Late Mangilal Agarwal through LRs vs. Asstt. CIT(2007) 208 CTR (Raj.) 159 applied Aravali Trading Co. vs ITO (2008) 220 CTR(Raj) 622, it has been held that once the existence of the creditors is proved and such persons own the credits which are found in the books of assessee4, the assessee’s onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him and, therefore, addition under section 68 cannot be sustained in the absence of anything to establish that the sources of the creditors deposits flew from the assessee itself. In the case of CIT vs. Shri Ram Enterprises (2208) 304 ITR 375(All.), it has been held that wherein Tribunal having accepted the source and genuineness of the deposits made by various persons as explained by the assessee, findings of the tribunal are pure findings of facts based on appreciation of evidence and material on record and, therefore, assessee has discharged its onus of providing genuineness, nature and source of the deposits, satisfactorily, addition rightly deleted. In the case of CIT v. Rhombus Intrnational Pvt. Ltd ITA No. 223/13: ITA No. 494/Del/2016, CIT v. Gangeshwari Metal p.Ltd (2014) 361 ITR 10, CIT v. Kamdhenu Steel & Alloys Ltd. SLP (CC) No. 15640 of 2012, dt. 17- 09-2012; CIT v. Harishbhai Raojibhai Patel HUF (2013) 219 Taxman 125 (mag). Distin guished CIT v. Empire Buitech (P) Ltd 366 ITR 110; Vam- Hi-Fashion Garments P. Ltd V. Asst CIT(2016) 151 TR(A) 408 (Del ‘ C’- Trib): 2016 Taxpub(DT) 1579(Del ‘ C’ -Trib), it has been held that Assessee discharge primary onus to prove that credit entry was not accommodation entry. In the case of Yash Developers v. DCIT (2018) 159 TR(A) 416 (Mum- Trib): 2017 TaxPub(DT) 4765(Mum-Trib), it has been held that since assessee had proved creditworthiness and genuineness in respect of

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 18 unsecured loans taken from the parties, addition made under section 68 as unexplained cash crfedit was not justified. Assessee company took unsecured loan from 12 companies. AO initiated inquiry and in view of the inquiry report, companies from whom assessee took loan were reported as jamakharchi/paper companies. Hence, AO treated the above said loan amount as unexplained cash credit under sections 68 and added the same to the income of the assessee. Held: Transactions had duly been proved by assessee by furnishing various evidences i.e copy of loan Confirmation copy of bank statement, copy of return of income filed by these parties, copy of audited financial statements of the aforesaid 12 parties. In view of the availability of the Pan, copy of Acknowledgement of returns, identity of the parties was established. Further the assessee has also filed confirmation letters in this regard. Therefore the creditworthiness of these parties was also placed upon it under section 68. Therefore, addition made under section 68 was not justified-Yash Developers v. DCIT (2018) 159 TR(A) 416(Mum-Trib): 2017 TaxPub(DT)4765(Mum-Trib). Considering all the above arguments, evidences and legal precedents, I find that the addition made against the loan of Rs.12,56,40,000/- cannot be sustained and thereupon is liable to be deleted. In such circumstances, the Assessing Officer is directed to delete this addition. In the result, these grounds of appeal of the assessee is allowed.”

Being aggrieved by the above order, the revenue is in appeal before us. 9. The ld. DR has relied upon the findings of the Ld. AO. On the other hand, the Ld. Counsel for the assessee has submitted that the Ld. CIT(A) has duly considered the facts and circumstances of the case. He has invited our attention to page-2 of the assessment order and submitted that the Ld. AO has himself admitted that in response to notices issued u/s. 133(6) by the Ld. AO, reply and information was received from the concerned parties, which was placed on file. He has further submitted that the Ld. AO in the assessment order could not point out any defect/discrepancy in the evidence and information supplied by the assessee and the concerned parties for making the observation that the said transactions were not genuine. He has also submitted that the assessee had old business relation with some of the parties from whom the loans were taken not only in earlier years relevant to the A.Y but also in subsequent years and the assessments were carried out u/s. 143(3) of the Act in these years, wherein loan transactions with the aforesaid parties were accepted by the Ld. AO. He in this respect has relied upon/on the copy of the assessment order dt. 05-12-2019 relevant to the

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 19 A.Y 2017-18 and copy of the assessment order dt.20-03-2017 relevant to the A.Y 2015-16. The ld. Counsel has further submitted that the assessee has old running accounts with the aforesaid parties. He has further submitted that the alleged report of the inspector in respect of the three parties was never confronted to the assessee. The assessee was never asked to produce any other information by the Ld. AO before arriving at the conclusions. The statement recorded of some persons/parties relied on by the Ld. AO was never confronted to the assessee. Even the alleged statements recorded in some other cases were allegedly recorded in the year 2014, whereas, the assessee had taken loan in the FY 2015-16 from the said parties, hence, the alleged statement relied upon by the Ld. AO was prior to the said loan transactions. The Ld. Counsel has further submitted that the alleged persons on whose statement has been relied upon by the Ld. AO were neither operating nor controlling the said concerns at the time of the transactions done by the assessee. The Ld. Counsel in this respect has also relied upon the balance sheets and submitted that the creditors had sufficient net worth to advance loans to the assessee, He has submitted that the Ld. CIT(A) considering the entire facts and circumstances of the case has rightly deleted the addition so made by the ld. AO. 10. Having gone through the impugned order of the ld. CIT(A) and considering the submissions of the ld. Counsel of the assessee, which the ld. DR could not rebut, we do not find any justification to interfere in the order of the ld. CIT(A) on this issue, the same is accordingly upheld. This ground of revenue’s appeal is dismissed. 11. Ground no. 2 is relating to the interest payments made by the assessee on the unsecured loans. 12. The ld. CIT(A) decided this issue in favour of the assessee observing that since the loan transaction has been accepted, the issue of payment of interest is consequential in nature. 13. Both the ld. Representatives have submitted before us that this issue is consequential in nature to the issue raised in ground no. 1 of the revenue’s appeal In view of our findings made above, this issue being consequential in nature, accordingly, decided in favour of the assessee.

ITA No. 255/Kol/2020 A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 20 14. Ground no. 3 15. Vide ground no. 3 the department has agitated the action of the ld. CIT(A) in deleting the addition of Rs. 27,034/- made by the ld. AO on account of delayed payment of interest on service tax and TDS holding the same as penal in nature. We find that the ld. CIT(A) has relied upon the decision of the Hon’ble Apex Court in the case of Lachmandas Mathura vs. CIT reported in 254 ITR 799(SC) and further on the decision of the co-ordinate bench of this Tribunal in the case of DCIT vs. Narayani Ispat Pvt. Ltd in ITA No. 2127/Kol/2014 dated 30-08-2017, wherein it has been held that the delayed payment of interest on service tax was compensatory in nature and the same was an allowable deduction. The Ld. DR could not point out any infirmity in the above observations of the ld. CIT(A). The order of the ld. CIT(A) on this issue is accordingly upheld. This ground of revenue’ s appeal is dismissed. 16. Ground no. 4 is general in nature. In view of our findings given above, we do not find any merits in the appeal of the department and the same is accordingly dismissed. The appeal of the department (ITA No.255/Kol/2020 for the A.Y 2016-17) is dismissed. Order pronounced in open court at the time of hearing on 26.10.2021 Sd/- Sd/- (Dr. M.L.Meena) (Sanjay Garg) Accountant Member Judicial Member Dated - -2021 26/10/2021 **PP/SPS आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant/Department: ACIT, Cir-49(1), Kolkata 2. ��यथ�/Respondent/Assessee: M/s. Viswakarma Residency Uttarpan Complex, DS-IV, 2nd Fl., Manicktala Civick Centre, Block-2 & 3, 2nd Fl., Kolkata-700 054. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. /True Copy/ By order/ आदेश से, Senior Private Secretary/D.D.O