DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, LUDHIANA, LUDHIANA vs. OASIS COMMERCIAL PRIVATE LIMITED , CHANDIGARH

Aforesaid cross-appeals for Assessment Year (AY) 2016-17 arises out of an order of learned Commissioner of Income Tax (Appeals)-5, Ludhiana [CIT(A)] dated 18-02-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 28-12-2018.

First, we take up revenue’s appeal wherein the revenue is aggrieved by deletion of addition of Rs.350 Lacs as made by Ld. AO u/s 68 of the Act. Having heard rival submissions and upon perusal of case records, the same is adjudicated as under. Addition of Unsecured Loans u/s 68 3.1 During assessment proceedings, it was observed by Ld. AO that the assessee received fresh unsecured loan of Rs.100 Lacs from M/s Ganpati Detergent Pvt. Ltd. (GNPL) and another loan of Rs.250 Lacs from M/s Sandhu Electronics Pvt. Ltd. (SEPL). Accordingly, the assessee was required to satisfy the ingredients of Sec.68. 3.2 The assessee furnished various documents and established that the impugned loans were, in turn, sourced by the two entities from M/s Apex Fiber India Ltd. (AFIL). However, since both the lender entities had loss, Ld. AO doubted the genuineness of the loan and ultimately, added the same as unexplained cash credit u/s 68. 3.3 The assessee’s submissions during first appeal were subjected to remand proceedings wherein assessee furnished additional evidences. The remand report was confronted to the assessee and the assessee maintained that the credits were genuine. The Ld. CIT(A) concurred that the assessee furnished completed details regarding the transaction to the extent of the source of source. The assessee duly furnished confirmation, PAN details and bank statements in support of unsecured loans. The ultimate lender i.e., AFIL had sufficient capital as well as substantial returned income. The ingredients of Sec.68 were satisfied and accordingly, the impugned addition was deleted against which the revenue is in further appeal before us. 3.4 From the facts, it clearly emerges that the assessee was successful in establishing the identity of the lender, the genuineness of the transactions and creditworthiness of the lender entities. Not only this, the assessee also established the source of source of unsecured loans and established that ultimate lender i.e., AFIL had sufficient capital and substantial returned income which was sufficient enough to lend to other entities. The Ld. AO could not establish that the assessee’s own unaccounted money had flown back into the account in the garb of unsecured loans. Under these circumstances, the adjudication of Ld. CIT(A) could not be faulted with. We order so. The appeal of the revenue stand dismissed. Assessee’s Appeal 4.1 The sole subject matter of assessee’s appeal is disallowance u/s 14A. The assessee earned exempt dividend income of Rs.3.50 Lacs but did not offer any disallowance u/s 14A on the ground that no expenses were incurred to earn the dividend income. Rejecting the same, Ld. AO invoked Rule 8D and computed disallowance of Rs.40.76 Lacs which was nothing but interest disallowance u/r 8D(2)(ii) for Rs.37.12 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.3.65 Lacs.