ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-25(1), NEW DELHI vs. VENUS PORTFOLIOS PRIVATE LIMITED, NEW DELHI
Facts
The Revenue appealed against the order of the CIT(A) which deleted an addition of Rs. 7,20,00,000/- made by the AO under section 68 for unexplained cash credit and a disallowance of Rs. 15,58,474/- under section 14A read with Rule 8D. The assessee had received unsecured loans which the AO treated as unexplained. The CIT(A) deleted the addition after considering remand reports and documentary evidence, finding that the lenders' creditworthiness was established.
Held
The Tribunal noted that the assessee had discharged its onus of establishing the identity, creditworthiness, and genuineness of the lenders. The CIT(A) had passed a speaking order and rightly deleted the addition under section 68. Regarding the disallowance under section 14A, the Tribunal agreed with the CIT(A) that the AO's disallowance of Rs. 15,58,474/- over and above the assessee's suo motu disallowance was incorrect and rightly deleted.
Key Issues
Whether the addition made on account of unexplained cash credit under section 68 was justified, and whether the disallowance under section 14A read with Rule 8D was correctly calculated and applied.
Sections Cited
68, 14A, Rule 8D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE VICE- & SMT. RENU JAUHRI, HON’BLE
PER RENU JAUHRI :
The above captioned appeal is preferred by the Revenue against the order dated 26.06.2024, passed by Ld. CIT(A)/NFAC, Delhi u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as, “Act”) in Appeal No. CIT (A), Delhi- 9/10356/2018-19 for A.Y. 2016-17.
The revenue has raised grounds of appeal which are reproduced as below: “ Whether, on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 1 | P a g e
ITA No. 3826/DEL/2024 ACIT Vs Venus Portfolios Pvt Ltd. 7,20,00,000/- on account of unexplained cash deposit u/s 68 of the Income Tax Act, 1961 whereas the assessee failed to prove the creditworthiness and genuineness of the transactions during assessment proceedings.
Whether, on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 15,58,474/- on account of disallowance u/s 14A. 3. The appellant craves leave to add, alter, amend, append or delete any of the above grounds of appeal.”
Brief facts of the case are that the assessee had filed its original return of income for A.Y. 2016-17 on 15.10.2026 at Nil income declaring current loss of Rs. 1,25,00,249/-. The case was selected for scrutiny. The assessment was completed u/s 143(3) on 26.12.2018 at an income of Rs. 6,10,58,225/- after making the following additions:
(i) On account of unexplained cash credit u/s 68 : Rs. 7,20,00,000/- (ii) Disallowance u/s 14A r.w. Rule 8D :Rs. 1,89,58,918/-
3.1 Aggrieved, the assessee preferred an appeal before Ld. CIT(A), who has allowed relief to the assessee on both the issues, vide his order dated 26.06.2024.
3.2 Aggrieved with the order of Ld. CIT(A), revenue is in appeal before the Tribunal.
Addition of Rs. 7,20,00,000/- u/s 68
Briefly stated the relevant facts are that the assessee had received unsecured loans of Rs. 7,00,00,000/- from M/s Taurus Assets Management 2 | P a g e
ITA No. 3826/DEL/2024 ACIT Vs Venus Portfolios Pvt Ltd. Company Ltd. and Rs. 20,00,000/- from M/s HLA Investments Pvt. Ltd. After considering the details submitted by the assessee, Ld. AO held that the creditworthiness of the lenders had not been established and, therefore, the loan transactions were treated as unexplained credit and added u/s 68 of the Act.
4.1 During the course of appellate proceedings, Ld. CIT(A) sought a remand report from the Ld. AO on the documentary evidences filed before him. After considering the remand report and examining the assessee’s submissions, Ld. CIT(A) deleted the addition with the following observations:
“7.3.2 From the above, it is seen that the Assessing Officer has made two contrary observations. On the one hand it is argued that the appellant has not filed any details for substantiating the loan transactions and on the other hand it is argued that the appellant has not filed any new evidence as additional evidence. It has also been noted that the appellant had filed requisite details during the course of assessment proceedings. In the Remand Report the Assessing officer has not pointed out any discrepancies in the documents furnished during appellate proceedings and has merely recommended against the admission of additional evidence. However, no cogent reason has been provided for the same. Since, the additional evidence has been admitted as discussed in para above the same is being examined in subsequent paragraphs. With respect to Taurus Asset Management Company Ltd. i) The appellant has submitted the ITR-V of Taurus Asset Management Company Ltd and the bank statement for the relevant period. ii) Loan confirmation is also on record. iii) It has further produced audited financials to prove the creditworthiness of the lender. On perusal of Statement of Profit & Loss, it is seen that the lender company has profit after tax of Rs. 12,97,90,272/- and has paid current year tax of Rs. 3,16,98,130/-. In the assessment order, the Assessing Officer has erroneously considered the amount of tax paid by the lender as 3 | P a g e
ITA No. 3826/DEL/2024 ACIT Vs Venus Portfolios Pvt Ltd. per ITR-V to be the returned loss for AY 2016-17 (Para 7 of assessment order). iv) In continuation, vide Para 7.2 of the assessment order, the Assessing Officer contends that It is further surprising to note that the assessee company has received huge unsecured loans from a company based in Mumbai, without any loan agreement and interest. In response, the appellant has produced TDS certificates (Form 16A) to substantiate interest paid and TDS deducted thereon. It is noted that interest due as per ledger in the books of Taurus matches with amount reported in TDS returns filed by appellant company. Therefore, the observations made by the Assessing Officer are devoid of any merit. With respect to HLA Investments Pvt. Ltd.(HLA) i) The appellant has submitted the ITR-V of the lender and bank statement for the relevant period. ii) Ledger account of HLA is on record. iii) It is further noted from the audited financials of the lender that HLA has profit after tax of Rs. 10,05,005/- and Reserves & Surplus of Rs. 2,72,43,741/-. Further, returned income is Rs. 13,74,670/-, which shows creditworthiness to lend the loan. Additionally, it is evident from bank statement and confirmation of accounts that the HLA has advanced a sum of Rs. 20,00,000/- to appellant for purchase of securities on 30.05.2015, which was then refunded to HLA on 14.07.2015 along with interest. iv) The appellant has also produced TDS certificates (Form 16A) to substantiate interest paid and TDS deducted thereon. It is noted that interest due as per ledger in the books of HLA matches with amount reported in TDS returns filed by appellant company. Therefore, the observations of the Assessing Officer are devoid of any merit.”
4.2. We have heard the rival submissions and perused the material available on record. We are of the considered view that the assessee had been able to discharge
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ITA No. 3826/DEL/2024 ACIT Vs Venus Portfolios Pvt Ltd. its onus of establishing the identity of the lenders as well as their creditworthiness and genuineness of the transactions. Ld. CIT(A) has passed a speaking order examining all the facts and evidences and has rightly deleted the addition of Rs. 7,20,00,000/- u/s 68 of the Act. We, therefore, find no reason to interfere with the order of Ld. CIT(A). Accordingly, this ground of Revenue’s appeal is hereby dismissed.
Disallowance u/s 14A r.w. Rule 8D- Rs. 15,58,474/-
Briefly stated, the assessee had computed the amount of disallowance u/s 14A r.w. Rule 8D at Rs. 1,89,16,912/- at the time of filing of return. Further, amount disallowable @ ½ % of average investments was worked out at Rs. 42,005/- and the same was disallowed by the assessee. However, Ld. AO computed the ½% of average investment at Rs. 16,00,479/- and hence disallowed Rs. 15,58,474/- [Rs. 16,00,479/- minus Rs. 42,005/-].
5.1 Before Ld. CIT(A), the assessee furnished the following chart:
“With regard to working of disallowance under Rule 8D, the following is the Disallowance made Disallowance made Difference by the assesseee in by the AO the computation of income 1. Interest 1,89,16,912/- 1,89,16,912/- NIL 2. Other 42,005/- 16,00,479/- 15,84,474/- expenses (1/2 of Avg. value of Investment) 1,89,58,918/- 2,05,17,391/- 15,58,474/-
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ITA No. 3826/DEL/2024 ACIT Vs Venus Portfolios Pvt Ltd. Ld. CIT(A) after considering the facts in the light of settled legal position, held as under:
“8.4 I have perused the assessment order, Remand Report and appellant’s submission and subsequent clarification on this issue. It is clear in this case that the appellant has suo moto made a disallowance of Rs 1,89,16,912 on account of deemed interest expenses incurred as per limb 2(ii) of Rule 8D. This working is same as the computation of disallowance made by the Assessing Officer in the assessment order. The only dispute is in relation to the computation of disallowance as per limb 2(iii) of Rule 8D. Here, the Assessing Officer has worked out the disallowance of Rs 16,00,479 as per Rule 8D(2)(iii). Whereas, the Appellant has restricted to same to Rs 42,005 on two counts: 1. The total other expenses claimed in the profit and loss account apart from the finance cost is Rs 42,005 only. 2. The exempt income earned during the year is Rs 1,99,663 only and the total disallowance u/s 14A r.w.s. 8D cannot exceed the same. The appellant has relied on The case law of Hon’ble Delhi High Court in ITA 163/2018, The Pr.CIT -3 versus Devata Tradelink Limited. 8.5 In light of the appellant’s contention and the case law relied upon of the Hon’ble jurisdictional High Court, I am of the opinion that the case law is squarely applicable to the facts of the appellant’s case. The contention of the appellant is accepted and the disallowance of Rs 15,58,474 made u/s 14A r.w.s 8D is hereby deleted. Accordingly, this Ground of appeal is allowed. ”
5.2 We have heard the rival submissions and perused the material on record. We note that Ld. CIT(A) has rightly deleted the addition of Rs. 15,58,474/- made by Ld. AO over and above the suo moto disallowance of Rs. 1,89,16,912/- made by the assessee after considering the entire factual matrix in the light of settled legal position. Since Ld. CIT(A) has passed a reasoned and speaking order, we find no reason to interfere with the same.
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ITA No. 3826/DEL/2024 ACIT Vs Venus Portfolios Pvt Ltd.
5.3 Accordingly, revenue’s appeal on this ground is also dismissed.
In the result, revenue’s appeal is hereby dismissed.
Order pronounced in the Open Court on 08-01-2026.
Sd/- Sd/- (MAHAVIR SINGH) (RENU JAUHRI) Vice President Accountant Member Dated: 17.02.2026 Pooja Mittal, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi
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