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Income Tax Appellate Tribunal, DELHI BENCH “E”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI R.K. PANDA
ORDER
PER H.S. SIDHU : JM
The Revenue has filed this Appeal against the impugned Order dated 30.12.2015 of the Ld. CIT(A)-27, New Delhi relevant to assessment year 2012-13.
The grounds raised in the appeal read as under:-
1. That the Ld. CIT(A) erred in law and on facts in deleting the addition of Rs. 26,85,00,000/- made u/s. 68 of the Act, without properly appreciating the facts and circumstances as the assessee was ultimate beneficiary and has taken loan from dubious company M/s Varrenyam Securities Pvt. Ltd. where source of fund remain unexplained.
2. The Ld. CIT(A) has erred in law and facts in deleting the addition of Rs. 26.85 crores u/s. 68 of the Act, despite the fact that the asessee has failed to prove the identity of the creditor, creditworthiness of the creditor and the genuineness of the transaction which was in turn a accommodation entry from intermediary dubious company M/s Varrenyam Securities Pvt. Ltd.
That the Ld. CIT(A) has erred in law and on facts in deleting addition of Rs. 26.85 crores on substantiate basis in case of M/s Sidhvandan Enterprises Pvt. Ltd. and confirming protective addition in M/s Varrenyam Securities Pvt. Ltd. without realizing the facts that M/s Varrenyam Securities Pvt. Ltd. is a paper company and not doing any business and has no employees.
4. That the Ld. CIT(A) has erred in law and in ignoring the fact that the source of funds which came as unsecured loans in the assessee company were clearly bogus as has been admitted by the entry operator Sh. Himanshu Verma, on oath.
5(a) The order of the CIT(A) is erroneous and not tenable in law and on facts.
(b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal.
3. The brief facts of the case are that assessee is a company duly incorporated under the provision of The Companies Act, 1956. The assessee filed its return on 18.9.2012 and declared an income of Rs. 4,22,650/-. The return of the assessee was processed u/s. 143(1) of the Income Tax Act, 1961 (in short ”Act”). The case of the assesee was selected and statutory notice under section 143(2) of the Act was issued on 10.9.2013 and served upon the assessee. Further a notice under section 142(1) of the Act alongwith a detailed questionnaire was issued on 24.12.2013. The AO assessed the income of the assessee u/s. 143(3) of the Act at Rs. 26,89,22,650/- against the return income and made the addition of Rs. 26,85,00,000/- on account of unexplained credit u/s. 68 of the Act vide order dated 24.03.2015. Against the assessment order dated 24.03.2015, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 30.12.2015 allowed the appeal of the assessee by holding that the AO was not at all justified in including the sum of Rs. 26.85 cores in the total income of the assessee by invoking the provisions of section 68 of the Act and deleted the addition in dispute. Against the impugned order, Revenue is in appeal before the tribunal.
At the time of hearing, Ld. CIT(DR) relied upon the order passed by the Assessing Officer and stated that Section 68 of the Act permits the AO to add the credit appearing in the books of account of the assessee if the latter offers no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. She also submitted that it places no duty upon AO to point to the source from which the money was received by the assessee. She also relied upon the decision of the Hon’ble Hon’ble High Court of Delhi in the case of CIT vs. Navodaya Castles (P) Ltd. (2014) 50 taxmann.com 110 (Delhi) and the Hon’ble Supreme Court of India in the case of Navodaya Castle (P) Ltd. vs. CIT (2015) 56 taxmann.com 18 (SC). In view of above, she requested to allow the appeal of the Revenue.
On the contrary, Ld. Counsel for the assessee relied upon the impugned order passed by the Ld. CIT(A) and stated that Ld. CIT(A) has passed well reasoned order which does not need any interference. In support of his contention, he also filed two paper books i.e. Paper Book-I containing pages 1-54 in which the assessee has attached the documents of M/s Varrenyam Securities Pvt. Ltd. Rs. 26,85,00,000/- i.e. copy of assessment order AY 2012-13 (assessed at Rs. 25,11,04,450/-); copy of audited financial statement; copy of PAN card; copy of bank account statement; certified ledger a/c of Varrenyam in books of assessee; incorporation certificate; ITR Ack. – AY 2012-13 (income declared 1.33 Cr.); submission dated 7.9.2015 to CIT(A) and ITAT order of M/s Varrenyam Securities Pvt. Ltd. and in another Paper Book-II which contained pages 1-108 attaching therewith Paper Book-I filed on 29.3.2019; CIT(A)’s order of Varrenyam Securities Pvt. Ltd AY 2012-13; documents showing Varrenyam filed recovery suit no. CS620958.16 on assessee for recovery of outstanding amount – still pending; ledger account f assessee in books of Varrenyam 1.4.11 to 31.8.16 and Audited Financial Statements of ‘A’ -AY 12-13. Ld. Counsel for the assessee stated that the addition of Rs. 24.78 Crore has been finally made in the hands of M/s Verrenyam Securities Pvt. Ltd. by the AO; Ld. CIT(A) sustained the addition and ITAT has upheld the action of the Ld. CIT(A) by dismissing the appeal of the assessee and no further appeal has been filed against the order of the ITAT. In support of his contention, he also filed the Brief Synopsis, which read as under:-
“Addition of Rs.26,85,OO,OOO/- U/S.68 The assessee recd. 26,85,00,0001- loan from Verrenyam Securities Pvt. Ltd.(Verrenyam) in this year i.e. A.Y.12-13 Verrenyam had taken share capital from companies operated by one Himanshu Verma entry operator.
The said amt. varrenyam loaned on Intt to assessee.
Hence the A.O. added the said amt. u/s.68 of the Act as unexplained cash credit CIT(A) confirmed the findings of the A.O.
The findings of both the lower authorities are erroneous in law as well as on merits Brief Contentions ONE - It is a case of double addition The assessee recd. loan ofRs.26.85 Cr. from Verrenyam in this year The A.O. held that Verrenyam reed. accommodation entries in the shape of share capital / premium of Rs.24.78 Cr. in this year from various entry operating companies (as per the list given on Pg.8 & 9 of the asstt. order), which amt. has been given to assessee on loan(A.O. Pg.15, Para-12)
It is for this reason that the A.O. added Rs.26.85 Cr. the loan reed. from Verrenyam u/s.68 The case ofVerrenyam of A.Y.12-13 was completed u/s.143(3) (1-18)
In the case of Verrenyam, the said amt. Rs.24.78 Cr. taken from 13 companies by Verrenyam has been added u/s.68 (RP - 17-18)
CIT(A) in Verrenyam, sustained the said addition ofRs.24.78 Cr. (55-59, RP-59)
ITAT dismissed the appeal of Verrenyam, hence the addition of Rs.24.78 Cr. remains sustained in the hands of Verrenyam, which position continuous even as on date (54-55)
It is the same 24.78 Cr. which was given by Verrenyam to assessee, which is the part of total addition of Rs.26. 85 Cr. made in the hands of assessee (A.O. Pg.15, Para-12)
Hence, Rs.24.78 Cr. since already stands added in the hands of Verrenyam and the same amt. has been reed. by the assessee, therefore in the hands of the assessee, the source of said amt. stands fully explained w.r.t. provisions of Sec.68 of the I.T. Act Under these facts, to make addition for the same amt. of Rs.24.78 Cr. in the hands of Verrenyam and then again in the hands of assessee will tantamount to double addition of the same amt.
Reg. bal. amt. of Rs.2.07 Cr. (26.85 - 24.78), the A.O. of Varrenyam has not doubted the source in the hands of Varrenyam to the extent of Rs.2.0 Cr. therefore he has not made any addition in the hands of Varrenyam u/s.68 (1-18, RP-18)
Even in the asstt. of assessee, the A.O. has doubted for only those receipts which have been reed. by Varrenyam from 13 companies operated by Himanshu Verma i.e. totaling Rs.24.78 Cr. and not for bal. Rs.2.07 Cr.
Hence, there is actually no cogent reason assigned in the impugned asstt. for making addition to the extent of bal. Rs.2.07 Cr.
Thus, the complete addition ofRs.26.85 Cr. is unjustified TWO - On further merits The assessee did not take share capital 1 premium but loan ofRs.26.85 Cr. (40-43)
It was intt. bearing loan @9% wherein the following intt. has been paid by assessee which has been allowed to assessee as a deduction after deduction of TDS A.Y. Interest paid and allowed TDS deducted and Pg.No. deposited of P /B 2012-13 2,17,42,274/- 21,74,227/- 87 2013-14 83,34,376/- 8,33,438/- 87 2014-15 6,00,075/- 60,008/- 88 2015-16 5,62,870/- 56,287/- 88 The complete loan of Rs.26.85 Cr. was returned back up to A.Y.2013-14, only some intt. ofRs.94,14,283/- was outstanding as on 31.08.16 (86-88)
Varrenyam filed civil suit NO.CS6209581l6 in Tis Hazari Court for recovery of Rs.94,14,283/- outstanding as on 31.08.16 which is still in progress (60-85, RP-66)
The fact that it is a intt. bearing loan, intt. has been allowed, TDS has been deducted, TDS has been deposited, TDS return has been filed, the civil suit has been filed by Varrenyam for the outstanding, proves that the assessee took a genuine loan from Varrenyam and 7 not in the nature of an accommodation entry Further, in this case, the source of the source also stands proved, so far as assessee is concerned.
Also, in the case of a loan and that too in A.Y.12-13, source of the source cannot be asked, which can be asked only w.e.f. A.Y.13-14 and that too in the case of receipt of share capital as provided in proviso to Sec.68 inserted w.e.f. A.Y.13-14 The assessee, thus has discharged his onus fully W.r.t. Sec.68 of the I.T. Act Income of Varrenyam AY 12-13 - Rs.1.33 Cr.
Documents of varrenayam • ITR (45) • PAN (30) • Financial statements (19-29) • Bank statements (31-39) • Ledger Alc (40-43) • Certificate of Incorporation (44) CASE LAWS For - if loan returned, it is an evidence for the loan being genuine DIT VS. MODERN CHARTIABLE FOUNDATION 335 ITR 105 (DEL.) we may also record the submissions of the Ld. Counsel for the respondent that in so far as un - secured loans are concerned, they were paid back in subsequent years, which shows that these were genuine loans taken by the assessee.
CIT VS. KINETIC CAPITAL FINANCE LTD. 202 TAXMAN 548 (DEL.)
Held that - Where assessee has furnished details with respect to deposits and investors had acknowledged fact that money has been returned to them, further, interest has been received by the investors and TDS has been deducted, thus, assessee had discharged its initial onus and was not require to prove genuineness of transaction with the creditor and source of income of creditor.
CIT VS. AYACHI CHANDRASHEKHAR NARSANGI 221 TAXMAN (GUJ.). (MAGZ.) 146 Loans - A.Y. 2006 - 2007 - AO framed Asstt. U/s. 143 (3) wherein he made addition of Rs. 1.45 crores u/s. 68 on ground that loan taken from one 'lA' was not explained satisfactorily - On appeal, CIT (A) was satisfied with respect to genuineness of transaction and creditworthiness of 'lA' and, therefore deleted addition.- It was found that total loan of Rs. 1.60 crores was advanced to assessee, out of which Rs. 15 lakhs was repaid to 'lA' -0 Balance loan amount was repaid by assessee in immediately next financial year - Whether when Deptt. had accepted same, addition made by AO was to be deleted - Held yes.
For - source of the source can be asked only from A.Y.13-14 and that too in case of share capital PCIT Vs. VEDHATA TOWER (P) LTD. (Bombay High court order dtd. 17.04.18, of 2015)
CIT Vs. Gagandeep Infrastructure (P) Ltd. 394 ITR 680 (Born.)
Held that - Sec. 68 is not applicable in case assessee is not able to explain source of the source.
Further, held that the proviso to section 68 has been introduced by the Finance Act, 2012 with effect from 1-4-2013. Thus, it would be effective only from the assessment year 2013-14 onwards.
ACIT VS. PREM ANAND (ITA O. 3514 / D / 2014) (DELHI ITAT ORDER DTD. 13.04.2017)
7.1. It is a settled law that the assessee is not answerable to explain source of source of the fund. In light of the fact that there is no cash deposit in the bank accounts of the three persons for advancing loan and their categorical admission confirming loan during the remand proceedings, we are oj the considered view that the loan aggregating to Rs.38,50,000/- cannot be charged to tax in the Assessee's hands U/S 68 particularly in absence oj any contrary evidence brought on the record by the AO. Hence, we find that Ld. CIT(A) has rightly observed that the assessee is not required to explain source of source of the fund gets buttressed by the amendment made in section 68 with effect from 01.04.2013, which empowers the AO to examine source of source in case of share application money from 01.04.2013.
We have heard both the parties and perused the orders passed by the revenue authorities alongwith written submissions filed by the Ld. Counsel for the assessee and the case laws cited by both the parties. We note that M/ s Varrenyam Securities Private Limited had filed its return of Income for Assessment year 2012-13 declaring a total income of Rs. 1,33,04,450/- and assessment of M/s Varrenyam Securities Private Limited was framed by DCIT, CC-20, New Delhi (the same AO in the case of the assessee) determining its total income at Rs. 25,11,04,450/ - vide his order u/s 143(3) of the I.T. Act, 1961 dated 24.03.2015 (the date on which AO also framed the assessment order for assessee). It is also noted that the assessee in support of the genuineness of the aggregate of the loans taken had filed the Copy of PAN Card of the Lender; Copy of Bank Statement of the Lender showing all above entries; Confirmation of the Lender in writing for giving the loan; ROC Registration, Lender is filling regular various documents with ROC; Lender name is in ROC record; Copy of ITR of the Lender. Record shows that the Lender filling papers with IT Department regularly and Copy of Audited Final Accounts' of the Borrower. It is also noted that M/s Varrenyam Securities Private Limited is a much bigger company than the assessee company and the loan taken by the assessee company was partly repaid by the assessee to the extent of Rs. 18,25,00,000/- through banking had paid interest at 9% per annum amounting to Rs. 1,95,68,047/- (net of TDS deducted at 10%) and the aforesaid interest was claimed by the assessee and allowed by the AO. It is also noted that the impugned addition of Rs. 26.85 crores clearly is a case of Double Taxation as it has been taxed in the hands of M/s Varrenyam Securities Private Limited as well as the assessee. As stated by the Ld. Counsel for the assessee that the addition of Rs. 24.78 Crore has been finally made in the hands of M/s Verrenyam Securities Pvt. Ltd. by the AO; Ld. CIT(A) sustained the addition and ITAT has upheld the action of the Ld. CIT(A) by dismissing the appeal of the assessee and no further appeal has been filed against the order of the ITAT, therefore, it has become final. Keeping in view of the facts and circumstances of the present case, we are of the view that addition of Rs. 26.85 Crores was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, hence, we uphold the action of the Ld. CIT(A) and reject the grounds raised by the Revenue. The judicial decisions relied upon by the representatives of both the sides have been duly considered. In our considered view, we do not find any parity in the facts of the decisions relied upon with the peculiar facts of the case in hand.
In the result, the Revenue’s Appeal stands dismissed Order pronounced on 12/12/2019.