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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
आदेश / ORDER आदेश आदेश आदेश
PER SUSHMA CHOWLA, JM
The appeal filed by assessee is against the order of CIT(A)-7, New Delhi, dated 18.05.2018 relating to Assessment Year 2015-16 against the order passed under section 143(3) of the Income Tax Act, 1961(in short ‘the Act’).
The assessee has raised the following grounds of appeal which read as under:-
आयकर अपील सं. / ITA No- 4858/Del/2018 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in ignoring that impugned assessment order is nullity and void-ab- initio since the same was passed upon non existing entity and therefore Ld. CIT(A) ought to have quashed the assessment order on this ground itself.
2. That in any case and in any view of the matter, the impugned assessment order as well as order passed by Ld. CIT(A) are illegal and void-ab-initio and deserves to be quashed.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in observing that genuineness of loan received by the assessee company is not established and therefore addition made by the Ld. AO should be ‘substantial’, and not ‘protective’ as was done by Ld. AO.
4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in treating the addition as ‘substantial’ that too without granting opportunity of hearing in this regard.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.20,00,000/- on account of loan received from M/s Aarti Securities and Services Ltd. by treating it as alleged unexplained cash credit u/s 68 by recording incorrect facts and findings and without providing the entire adverse material available on record and without providing the opportunity of cross examination and in violation of principles of natural justice.
The ground of appeal no. 1 raised by the assessee is not pressed, hence the same is dismissed as not pressed.
The issue raised in the ground of appeal nos. 2 to 6 is against the addition of Rs. 20,00,000/- under section 68 of the Act.
Briefly in the facts of the case, the assessee had filed return of income declaring loss of Rs. 13,736/-. The case of the assessee was picked up for scrutiny. During the course of assessment proceedings, the AO noted that the assessee had received loans from different parties totaling Rs. 78,00,000/-.
The assessee was asked to provide the details of the same. The AO also issued notices under section 133(6) of the Act and the statements under section 131 of the Act were recorded. The AO further observed, “From the Page | 2
आयकर अपील सं. / ITA No- 4858/Del/2018 statements recorded, it is noticed that assessment of M/s Aarti Securities and Services Pvt. Ltd. for AY 2014-15 has been completed u/s 143(3) dated 29.12.2016 wherein complete share application money including premium has been added back u/s 68 of the IT Act, 1961. Accordingly, in the order to safeguard the interest of revenue, an amount of Rs. 20,00,000/- received by the assessee from M/s Aarti Securities and Services Pvt. Ltd., in the form of loans and advances is added back to the income of the assessee on protective basis u/s 68 of the IT Act, 1961”.
The learned CIT(A) held that even though identity is established the clouded status of the lender raises doubts about the creditworthiness as well as genuineness of the party. It is further held that I am of the considered view that merely submission of the name and address of the share subscriber, income tax returns, Balance sheet/statement of affairs of the share subscriber and bank statement is not sufficient as the AO is to be satisfied as to their identity and creditworthiness as well as to the genuineness of the transaction entered into. The alleged share holders were not found to be genuine and thus, the onus shifts back to the appellant to produce the shareholders before the AO and if the appellant falters, the additions can be made u/s 68 of the Act. Hence the addition was confirmed in the hands of the assessee, against which the assessee is in appeal before us.
The learned AR for the assessee took us through the various documents/evidences which were filed before the authorities below and pointed out that the assessee had established the creditworthiness of the आयकर अपील सं. / ITA No- 4858/Del/2018 person and in such circumstances, no addition is warranted in the hands of the assessee.
The learned DR for the Revenue placed reliance on the orders of the authorities below.
On the perusal of the record and after hearing both the authorized representatives, the issue which arises in the present appeal is against the addition made under section 68 of the Act. The assessee claims that it had received sum of Rs. 20 Lacs from M/s Arti Securities and Services Private Limited as loans and advances. During the course of assessment proceedings, the assessee filed various documents in order to establish the identity, creditworthiness of the said party and in order to establish the genuineness of the transaction. The copy of the income tax return filed for the captioned assessment year by M/s Arti Securities and Services Private Limited is placed at page 3 alongwith computation of income at pages 4 to 6 of the paper book.
The copy of the audited balance-sheet of profit & loss account etc., are placed at pages 11 to 25 of the paper book. In order to prove the existence of the said company, the assessee also filed information from ROC Registrar of companies wherein the said concern had intimated its change in the address of the registered office from Ghaziabad to Noida w.e.f. 7.7.2016. Other documents which were filed including the bank statement from which the debit of Rs. 20 Lacs was made, which is placed at page 32 of the paper book.
Copy of the confirmation is placed at page 34 of the paper book. The AO sought information from the said person directly and the copy of the reply
आयकर अपील सं. / ITA No- 4858/Del/2018 alongwith the confirmation, bank statement and the ITR filed by the said party are placed at pages 59 to 62 of the paper book. The statement of the Director Shri. Arun Sharma was recorded during the course of assessment proceedings which is further placed at pages 63 to 65 of the paper book. Both the authorities have admitted that the assessee established the identity of the creditor but his creditworthiness was not accepted and hence the addition. There is no merit in the aforesaid addition made in the hands of the assessee wherein the assessee had furnished complete details to establish the identity of the creditor and also the creditworthiness of the said creditor. It may be pointed out that herein itself that the said creditor is duly assessed to tax and in such facts and circumstances, there is no merit in not accepting the creditworthiness of the creditor, especially where the statement of the Director was also recorded and it was accepted that the company had advanced sum of Rs. 20 Lacs to the assessee in the financial year 2014-15. Accordingly, the addition made by the AO of Rs. 20 Lacs is deleted. The grounds of appeal raised by the assessee are thus allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 31st day of December, 2019.