INCOME TAX OFFICER, VIZIANAGARAM vs. VIJAYANAGARAM WHEAT PRODUCTS PRIVATE LIMITED, KONDAKARAKAM

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ITA 312/VIZ/2024Status: DisposedITAT Visakhapatnam06 February 2025AY 2022-239 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the deletion of the addition of Rs. 93,00,000/- by the CIT(A) was justified. The assessee had submitted confirmation letters, Income Tax Returns, and bank statements of the lenders before the AO. The CIT(A), exercising powers under Section 250(4) of the Act and Rule 46A of the IT Rules, examined the documentary evidence and found that the lenders were regular return filers with substantial income and assets, demonstrating their creditworthiness. Specifically, for Govind Rao, the CIT(A) noted total income exceeding Rs. 14 lakhs for AY 2020-21 and AY 2021-22, and significant fixed, investment, and current assets. For Hariprasad Rao, it was noted he received money from Govind Rao for on-lending, whose creditworthiness was established. For Venkata Manikanta, financial statements showed substantial assets, and the bank balance was sufficient to cover the loan. The Tribunal found no material on record from the revenue to negate the genuineness of the transactions or the creditworthiness of the lenders. The onus was on the AO to substantiate that the provided documents did not meet the criteria under Section 68. Therefore, the Tribunal found no infirmity in the CIT(A)'s order and dismissed the revenue's grounds of appeal.

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2022-23, challenging the deletion of an addition of Rs. 93,00,000/-. The assessee, Vijayanagaram Wheat Products (P) Limited, engaged in manufacturing and selling wheat flour, filed its return declaring NIL income under regular provisions and Rs. 1,42,856/- under Section 115JB. During scrutiny, the Assessing Officer (AO) noted substantial payments to entities not registered under GST and high liabilities compared to income. The AO also identified unsecured loans totaling Rs. 1,43,00,000/- from four parties. The AO made an addition of Rs. 93,00,000/- under Section 68 read with Section 115BBE, considering the assessee failed to substantiate the nature and source of these loans, except for one lender.

What were the issues?

1. Whether the deletion of the addition of Rs. 93,00,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, towards unexplained cash credit is erroneous in law and facts? (Question of law and fact, concerning Section 68). Assessee's contentions: - The assessee discharged its primary onus by filing documentary evidence, including bank statements, Income Tax Returns, and confirmations from lenders, proving the genuineness of transactions and creditworthiness of lenders. - The CIT(A) rightly considered these submissions and allowed the appeal. Revenue's contentions: - The CIT(A) erred in deleting the addition as the assessee failed to establish the genuineness and creditworthiness of the lenders. - The AO correctly observed that cash was deposited in the lenders' accounts before being transferred to the assessee. - The assessee failed to establish the nature and source of unsecured loans. - Sizable amounts were deposited in cash in the lenders' accounts before being withdrawn via cheques in favor of the assessee. - The lenders' income tax returns did not show sufficient sources to provide loans of such magnitude. - One of the loan creditors filed an updated return showing income of only Rs. 17,13,960/- after the show-cause notice was issued.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 139(4),Section 143(3),Section 139(8),Section 250(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM

Before: SHRI K. NARASIMHA CHARY, HON’BLE

For Appellant: Shri GVN Hari, AR
Pronounced: 06.02.2025

PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:

1.

This appeal is filed by the revenue against order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre, Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN &Order No. ITBA/NFAC/S/250/2024-25/1065558674(1) dated 11.06.2024 for the A.Y.2022-23 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 18.03.2024 and Cross objection is filed by the assessee in support of the order of the Ld. CIT(A).

3.

Briefly stated the facts of the case are that, assessee is a Company engaged in the business of manufacture and sale of wheat flour and other by-products and filed his return of income under section 139(4) of the Act on 30.12.2022 for the A.Y. 2022-23. Assessee declared NIL income under regular provisions of the Act and Rs.1,42,856/- under section 115JB of the Act. Subsequently, the case was taken up for scrutiny to verify the following:-

Page No. 2

I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited I. Substantial payments shown to entities not registered under GST as per Sr. No. 44 of Form 3CD. II. High liabilities as compared to low-income expenditure / receipts.

4.

On perusal of the Form 3CD filed by the assessee, Ld. Assessing Officer [hereinafter in short “Ld. AO"] noticed that assessee has paid an expense of Rs.46,94,94,896/- to the entities which are not registered under GST. In this connection Ld. AO issued notice under section 142(1) dated 06.02.2024. Assessee filed its response on 13.02.2024 stating that there was a data entry error in Sr. No. 44 of Form 3CD while furnish the Form 3CD on-line. Assessee submitted the physical copy of the Form 3CD dated 30.12.2022 in support of its claim wherein the amount has been mentioned correctly.

5.

Further the Ld.AO observed that the assessee has received loan from following parties: -

Name of the party from whom Amount received S.No. PAN loan is received during the year 1. Andhavarapu Govind Rao ACFPA6733R Rs.49,50,000/- 2. Andhavarapu Hariprasad Rao ACFPA6732Q Rs. 13,50,000/- 3. A Venkata Manikanta ALMPA4554G Rs.30,00,000/- 4. N. Durga Madhaba Chowdhawry ACUPC7137N Rs.50,00,000/- Total Rs.1,43,00,000/-

6.

Thereafter, the Ld. AO issued a show-cause notice on 15.02.2024 requesting the assessee to show cause why the receipt of unsecured loans

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I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited from the above parties during the year under consideration shall not be added to the income of the assessee under section 68 of the Act. In response, assessee submitted confirmation letters, Income Tax Returns and bank statements of the parties before the Ld. AO. Ld. AO on perusal of the submissions made by the assessee considered that the assessee failed to substantiate the amount and nature and source of amounts received as unsecured loans except Shri N. Durga Madhaba Chowdhary, wherein the lender had an opening balance of Rs.2,54,70,956/- in the bank account, and thereafter proceeded to make an addition of Rs. 93,00,000/- with respect to other lenders under section 68 r.w.s. 115BBE of the Act.

7. On being aggrieved by the order of the Ld. AO, assessee filed an appeal before the Ld. CIT(A). Before Ld. CIT(A), assessee filed petition under Rule 46A of I.T. Rules r.w.s. 250(4) of the Act for admission of the various documents as additional evidences in support of additions made by the Ld. AO amounting to Rs. 93,00,000/-. Ld. CIT(A) provided multiple opportunities to the assessee wherein assessee also responded to the opportunities provided by the Ld.CIT(A). On perusal and examining the documents filed by the assessee, Ld. CIT(A) directed the Ld. AO to delete the addition of Rs. 93,00,000/- thereby allowing the appeal of the assessee.

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I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited 8. Being aggrieved by the order of the Ld. CIT(A), revenue is in appeal before us by raising the following grounds of appeal: -

1. The Order of the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi iserroneous in law and to the facts of the case.

2. The Ld.CIT(A) erred in deleting the addition towards unsecured loans as unexplained cash credit u/s.68 of the I.T. Act, 1961 on the ground that the assessee has discharged its primary onus of filing documentary evidences to substantiate the genuineness of the transaction and credit worthiness of the lenders.

3. The Ld.CIT(A) erred in not appreciating the fact that the Assessing Officer had made addition u/s.68 of the I.T. Act, 1961 only after the assessee failed to establish the genuineness and creditworthiness of the lenders.

4. On the facts and circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the fact that sizable amounts were deposited in cash in the account of the depositors only before their withdrawal through cheques in favour of the assessee.

5. The Ld. CIT(A) erred in deleting the addition made u/s.68 without considering the fact that the income tax returns of the creditors clear show that they did not have sufficient source of income to give loan of size to the assessee.

6. The Ld.CIT(A) erred in deleting the addition made u/s.68 without considering the fact that one of the loan creditors had not filed original return and filed updated return u/s. 139(8) of the Income Tax Act by showing an income of Rs.17,13,960/- only after issuance of show cause notice by the Department.

7.

The appellant craves leave to add or delete or amend or substitute any ground ofappeal before and/or at the time of hearing of appeal.

8.

For these and other grounds that may be urged at the time of appeal hearing, it isprayed that the above addition be restored.

9.

The only issue arising out of the above grounds is with respect to the deletion of the addition of Rs. 93,00,000/- by the Ld. CIT(A), wherein it was contested that the assessee has failed to establish the genuineness and Page No. 5

I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited creditworthiness of the lenders. Ld. Departmental Representative [hereinafter in short “Ld. DR”] submitted that Ld. AO has observed that cash was deposited in the bank accounts of the lenders before it was transferred as unsecured loans to the assessee-Company. She further submitted that the Ld.AO has rightly observed that assessee has not been able to substantiate the nature and source of unsecured loans received from various parties and therefore pleaded that the order of the Ld. AO be upheld.

10.

On the contrary, Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has filed the following documents both before Ld. AO and the Ld. CIT(A). a. Copy of bank statements. b. Copy of Income tax returns. c. Copy of declaration and confirmation from the lenders.

11.

He therefore vehemently argued that assessee has proved beyond doubt the genuineness of the transactions and the creditworthiness of the lenders. He therefore submitted that the Ld. CIT(A) after considering the submissions has allowed the appeal of the assessee. He therefore pleaded that the order of the Ld. CIT(A) be upheld.

12.

We have heard rival contentions and perused the material available on record including the orders of the lower authorities. It is an undisputed fact that the assessee has submitted confirmation from the lenders, Income Tax

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I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited Returns, bank statements including PAN details and addresses of the lenders before the Ld. AO. However, Ld. AO stating that the assessee has not submitted the complete bank statements made an addition under section 68 r.w.s. 115BBE of the Act. The same documents were filed before Ld. CIT(A) by way of petition under Rule 46A of I.T. Rules. Ld. CIT(A) by exercising his powers vested on him under section 250(4) of the Act has made the following observations: - Name of the Loan Amounts Observations party Govind Rao Rs.49,50,000/- 1.The lender is regular return filer. The total income is more than Rs. 14 lakhs for AY2020-21 and AY 2021-22.

2.

The balance sheet for FY 2021-22 depicts fixed assets of Rs.2 Crores, investment worth Rs.3.14 Crores and current assets of Rs.4.15 Crore 3. Theseparametersverywelldemonstrated the credit worthiness oflender. Andhavarapu Rs. 13,50,000/- 1.The lender Hariprasad Rao is brother of first lender Hariprasad viz. Govind Rao and Mr.Hariprasad had received Rao money from Mr. Govind Rao for on-lending to appellant. Credit worthiness of Mr.Govind Rao is already observed above.

2. The appellant also filed undertaking of Mr. Govind Rao confirming that he had paid money to Hariprasad Rao. Venkata Rs.30,00,000/- 1. The appellant filed financial statement of Venkata Manikanta Manikanta for FY 2021-22 which depicts fixed assets of Rs.1.16Crore, Investment of Rs. 1.69 Crores and current assets of Rs.31 lakhs 2. Further the bank statement of lender depicts that lender had funds to the tune of Rs.35.12 lakhs out of which he has lent money to appellant.

In view of the above, the appellant has discharged its primary onus of filing documentary evidences to substantiate the genuineness of the transaction and creditworthiness of lenders.”

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I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited 13. We find that the Ld. CIT(A) has examined the documentary evidences to substantiate the genuineness of the transaction and creditworthiness of the lenders by exercising his powers under section 250(4) of the Act. The Ld.CIT(A) also relied on the various cases discussed in Paragraph No. 6.7 of the order. No material has been brought on record by the revenue, even before us to negate the genuineness of the transactions and the creditworthiness of the lenders, as the assessee has provided the copies of bank statement and Return of Income of the lenders, even before the Ld.AO. The onus is on the Ld.AO to substantiate that the documents provided by the assessee does not meet the three criteria specified under section 68 of the Act. Therefore, in the facts and circumstances as aforesaid, we find no infirmity in the order of the Ld. CIT(A) and therefore no interference is required. Accordingly, the ground raised by the revenue is dismissed.

14.

In the result, appeal of the revenue is dismissed.

C.O. No. 7/VIZ/2024

15.

Assessee has raised following grounds in its cross objection: -

“1. The learned Commissioner of Income Tax (Appeals) is justified in deleting the addition of Rs.93,00,000 made by the assessing officer u/s68 of the Act towards unexplained loans. 2. Any other grounds of Cross-Objection that may the raised at the time of hearing.”

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I.T.A.No.312/VIZ/2024 C.O. No. 7/VIZ/2024 Vijayanagaram Wheat Products Private Limited 16. With respect to the cross objection, Ld.AR submitted that Cross objection is fully supportive of the order of the Ld. CIT(A). As the appeal of the revenue is dismissed and decided in favour of the assessee, the grounds raised by the assessee in cross objection are dismissed as infructuous.

17.

To sum-up, appeal of the revenue as well as cross objection filed by the assessee are dismissed.

Order pronounced in the open court on 06th February, 2025.

Sd/- Sd/- (के.नरधिम्हा चारी) (एि बालाकृष्णन) (K. NARASIMHA CHARY) (S. BALAKRISHNAN) न्याधयक िदस्य/JUDICIAL MEMBER लेखा िदस्य/ACCOUNTANT MEMBER Dated: 06.02.2025 Giridhar, Sr.PS आदेशकीप्रनतनलनपअग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Vijayanagaram Wheat Products Private Limited Survey No. 139, Kondakarakam Vizianagaram – 535003 Andhra Pradesh 2. रधजस्व/ The Revenue : Income Tax Officer 1st Floor, Koppu Guranna Building Siddartha Nagar Vizianagaram – 535002 Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file //True Copy// आदेशधिुसधर / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam

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