ACIT, CIR.43, KOLKATA vs. M/.S DULICHAND CHAMPALAL TEXTILE, KOLKATA

This is an appeal filed by the Revenue directed against the order of the Learned Commissioner of Income Tax (Appeals)-13, Kolkata [hereinafter the “CIT(A)”], passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), dated 24.09.2020 for the Assessment Year 2013-14.

There is a delay of 52 days in filing of the appeal. We condone the delay as the assessee was prevented from sufficient cause from filing of the appeal in time. 3. The assessee is a partnership firm and is engaged in the business of trading of cloth and manufacturing of cotton printed sarees. It filed its return of income for the AY 2013-14 on 30.09.2013 declaring total income of ₹81,87,050/-. The case was selected for scrutiny under CASS for examining the issue of unsecured loans, large commission expenses and low net profit. The AO completed assessment u/s 143(3) of the Act on 11.03.2016 determining total income at ₹4,68,01,258/- inter alia making an addition u/s 68 of the Act of ₹3,49,49,302/- of loans being unexplained cash credits received by Assessment Year: 2013-14 M/s. Dulichand Champalal Textile. the assessee and u/s 2(22)(e) of the Act of ₹36,64,906/-. The assessee carried the matter in appeal. The first appellate authority called for a remand report from the AO. The AO in his remand report concluded that all the nineteen loans from different loan creditors were given to the assessee through banking channels and that they were duly confirmed by all the loan creditors. He further stated that from the documents, ITRs, balance sheets and copies of the bank pass books, the source from which the loan was given were filed from which the creditworthiness of the loan creditors may be ascertained. The ld. CIT(A) considered all the documents filed by each of the loan creditors and after discussing at length, from page 23 to 49 of his order, deleted the additions made u/s 68 of the Act. He also deleted the additions made u/s 2(22)(e) of the Act by applying the decision of the jurisdictional High Court in the case of Pradip Kr. Malhotra vs. CIT (2011) 338 ITR 538 (Cal), as the loan in question carried interest @12% per annum.

Aggrieved, the Revenue is in appeal before us.

The ld. D/R relied on the order of the AO and argued that the ld. CIT(A) has not taken a holistic view of the matter and has wrongly deleted the additions made by the AO u/s 68 of the Act. He wanted the Bench to reconsider the evidences filed by the assessee and re-adjudicate the issue. On the issue of addition made u/s 2(22)(e) of the Act, he relied on the order of the AO. 5.1. The ld. Counsel for the assessee relied on the order of the ld. CIT(A).

We have considered rival submissions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows.

The AO in his remand report has not stated anything adverse. He could not find fault with the documents and submissions of the assessee on the issue of addition made u/s 68 of the Act. The assessee has filed all the details required from these loan creditors for proving the identity and creditworthiness of each of the loan creditors and the genuineness of the transactions. The documents filed are copy of loan confirmation letters, copy of the bank pass books evidencing the fact that the transactions are taken place through banking channels, copy of the income tax returns filed by each of the loan Assessment Year: 2013-14 M/s. Dulichand Champalal Textile. creditors which proves that they are all income tax assessee’s, annual accounts including balance sheet of each of the loan creditors. The ld. CIT(A) has discussed each of the documents filed by these loan creditors at para 7.4 of his order from page 23-48. He has given factual findings on each of these cash credits. The ld. D/R could not controvert any of these factual findings. The AO has issued notices u/s 133(6) of the Act to each of the loan creditors and all these notices were complied with. In view of the above discussion, we uphold the factual findings of the ld. CIT(A) and dismiss this ground of the Revenue. 7.1. Coming to the addition made u/s 2(22)(e) of the Act, the fact is that the loan/advance carried an interest of 12% per annum. On these facts, the ld. CIT(A) relied on the decision of the jurisdictional High Court in the case of Pradip Kr. Malhotra (supra) as well as the Delhi High Court in the case of CIT vs. Creative Dyeing & Printing (P.) Ltd. reported in [2009] 318 ITR 476 (Delhi) and deleted the addition. We find no infirmity in the same.

In the result, the appeal of the Revenue is dismissed. Kolkata, the 13th May, 2021. Sd/- Sd/- [Aby T. Varkey] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated: 13.05.2021 Bidhan (P.S.)