M/S. SOUTH WEST PINNACLE EXPLORATION LIMITED,GURUGRAM vs. ACIT, CIRCLE-24(1), NEW DELHI
Facts
The assessee company appealed against the order of the CIT(A) concerning additions made by the AO. The additions primarily related to unsecured loans received by the assessee, which the AO alleged were not genuine. Additionally, there was an addition for belated payment of employee's contribution to PF and ESIC.
Held
The Tribunal observed that the unsecured loans were received and repaid through banking channels with interest, indicating genuine transactions. The Court cited previous decisions emphasizing that transactions should be evaluated on merit, not suspicion, and that the assessee had discharged its primary onus. The issue of PF/ESI addition was not pressed by the assessee and was dismissed based on a Supreme Court decision.
Key Issues
Whether unsecured loans received by the assessee are genuine and whether the addition for belated payment of employee's contribution to PF and ESIC is sustainable.
Sections Cited
Sec 143(2), Sec 142(1), Sec 131(1)(d), Sec 68, Sec 115BBE, Sec 2(24)(x), Sec 36(1)(va)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES ‘G’: NEW DELHI.
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES ‘G’: NEW DELHI. BEFORE SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.4076/Del/2025 (Assessment Year: 2014-15) M/s. South West Pinnacle Exploration Limited, vs. ACIT, Circle 24 (1), Plot No.6, 4th Floor, Sector 44, New Delhi. Gurugram – 122 003 (Haryana). (PAN : AAKCS3608R) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri I.P. Bansal, Advocate Shri Vivek Bansal, Advocate REVENUE BY : Shri Manish Gupta, Sr. DR Date of Hearing : 25.11.2026 Date of Order : 21.01.2026 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)-24, New Delhi [“Ld. CIT (A)”, for short] dated 17.06.2025 for the Assessment Year 2014-15. 2. At the outset, ld. AR of the assessee submitted that the issues involved in the present appeal are squarely covered by various decisions and he heavily relied upon the decision of the coordinate Bench in the case of Real Innerspring Technologies Pvt. Ltd. vs. ACIT (2025) 174
2 ITA No.4076/Del/2025 taxmann.com 1130 (Delhi-Tribunal), in which one of us is the author of the order. 3. Further ld. AR of the assessee submitted brief facts and his submissions in the present case. He submitted that the assessee is a limited concern and is listed company which carries on the business activity of providing end to end drilling, exploration and allied services. The case of the assessee company was selected for scrutiny under CASS. Notice u/s 143(2) of the Income Tax Act, 1961 (for short ‘the Act’) was issued on 18.09.2015. 4. He further submitted that during the year under consideration, there is no increase in the share capital/share premium and any such transaction. In the ordinary course of business, the assessee had obtained unsecured loans for the purposes of its business and the unsecured loans were obtained on interest from corporate entities and interest has duly been paid on such loans and tax was also deducted and paid on such loans in the regular course. He submitted that during the course of assessment proceedings carried out in pursuance to notice dated 07.06.2016 issued u/s 142(1) of the Act and the AO made addition of a sum of Rs.16,18,775/- being belated payment of employee’s contribution to PF and ESIC.
3 ITA No.4076/Del/2025 5. He submitted that the AO also inter-alia examined the genuineness of following unsecured loans :-
S.No. Name of lender Amount received Closing during the year Balance 1 Gulzar Hire Purchase Pvt. 1,10,00,000 55,00,000 Ltd. 2 Herald Commerce Ltd. 80,00,000 40,00,000 3 Kanupriya Commercial Pvt. 50,00,000 50,00,000 Ltd. 4 Upadan Commodities Pvt. 1,05,00,000 50,23,424 Ltd. TOTAL 3,45,00,000 1,95,23,424
He submitted that the AO issued commission u/s 131(1)(d) of the Act to DDIT (Inv) Kolkata and this fact is mentioned in para 5.2 of the assessment order. According to AO, as per report of the DDIT (Inv.) Kolkata in response to summons issued to the above creditors neither the principal officer appeared on the date and time nor any request for adjournment was made and it was further mentioned that inspector had visited the premises of all these creditors on 15.11.2016 and no such creditor companies were found at the given addresses. 7. He further submitted that in response to confrontation of the report of commission Calcutta, the AO issued notice to the assessee dated 28.11.2016. In response, the assessee filed reply dated 05.12.2016 in which it was submitted that the assertion of the investigation office that
4 ITA No.4076/Del/2025 no party was found at the given addresses is based on wrong conclusion drawn for either of the following reasons :-
He further submitted in the reply dated 05-12-2016 as under:-
He submitted that further a detailed submissions were made of the evidences relating to each of the creditors company according to which it could be determined that the creditors were not only existing but were being regularly assessed to tax and their status was alive on the Income Tax Department as well as on the portal of Ministry of Corporate Affairs. In short, the reference was made to the CIN of the company; status of the creditors as on 05.12.2016 as per MCA database and its portal: www.mca.gov.in which shows the status of the company as being active
5 ITA No.4076/Del/2025 and functioning. The creditor company was regularly holding annual general meetings of its shareholder and date of the latest annual general meeting; filing of annual E-forms along-with certified audited financial statements; the assessment particulars of the creditor company along-with PAN; copy of ITR; details of principal key persons along-with DIN issued by MCA etc. etc. For details, assessee submitted that reference can be made to the detailed reply dated 05.12.2016 which was enclosed in the paper book. However, the AO has not reproduced any detail in this regard though he has mentioned only a para from the reply. 10. He submitted that the AO being not satisfied with the reply issued summons to the director of the assessee company, viz., Mr. Vikas Jain and small portion of the statement has been reproduced in the assessment order. He submitted that on the ground that the director of the assessee company had nothing much to say with regard to report of the inspector of the investigation Kolkata, the assessee is not able to discharge its onus of proving the genuineness of the cash credit and the closing as on 31.03.2014 standing the name of the each of the creditor was added to the income of the assessee u/s 68 of the Act and the details of addition of Rs.1,95,23,424/- made in this regard are as under :-
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Further he submitted that the AO also held that tax rate is being charged on this addition of Rs.1,95,23,424/- @ 30% as provided in section 115BBE of the Act. 12. He submitted that aggrieved by the aforementioned additions, the assessee filed an appeal before the ld. CIT(A) and ld. CIT (A) decided the issue against the assessee vide order dated 17.06.2025. He submitted that Ld. CIT(A) has upheld the addition of Rs.16,18,775/- made by the AO on account of belated payment of employee’s contribution toward PF/ESIC. 13. With regard to addition of Rs.1,95,23,424/-, the details of which have been mentioned in the table above, ld. AR submitted that before Ld. CIT(A), the assessee had filed ample evidences before the AO which the AO has failed to consider and AO has made the addition merely and exclusively on the basis of ITI Report of DDIT(Inv) Kolkata which is totally baseless and false. The summary of evidences submitted to Ld. CIT(A) was mentioned in para 7 of the written submissions submitted
7 ITA No.4076/Del/2025 which is placed at page 12 of the impugned order. He submitted that on submission of these evidences, Ld. CIT(A) sought remand report from AO and the AO submitted remand report dated 22-10-2018 which is reproduced by the ld. CIT (A) in his order. Further Ld. CIT(A) issued a show cause notice dated 04.12.2023 for enhancement of income and required the assessee to explain as to why the enhancement of income should not be made as per following table.
He further submitted that a detailed reply was filed by the assessee on 07.12.2023 which is reproduced in para 4.5 at Pg. 26-27 and the assessee also filed additional evidences and again Ld. CIT(A) called the comments on additional evidences and response was submitted by the Assessing Officer. Again ld. CIT(A) required the AO to undertake fresh enquiry to ascertain the genuineness/existence of lender entities and in response the
8 ITA No.4076/Del/2025 AO submitted letter dated 30.12.2024 and also submitted Inspector’s report which is reproduced at page 6 of the ld. CIT (A)’s order. 15. Further he submitted that all the unsecured loans were repaid with interest after deduction of tax therefrom either during the relevant financial year or in subsequent year and the chart indicating the dates of taking loans and making repayment thereof with interest in respect of each creditor is as follows :-
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Ld. AR of the assessee submitted that against the impugned order, in the grounds of appeal, the assessee has challenged the additions made by the AO and enhancements made by CIT(A) in respect of each of the credit subject to addition and enhancement. Since the common issue is involved and enquiries were also made cumulatively in respect of all the creditors and remand reports were also submitted cumulatively in respect of all the creditors, these separate grounds relating to each of the creditors are discussed cumulatively. However, for the sake of clarity, the grounds raised with respect to each of the creditor agitating the main addition as well as additions on account of interest paid and alleged commission expenses having been incurred are as follows: (a) Ground no. 1; Addition of Rs. 16,18,775/- made u/s 2(24)(x) read with section 36(1)(va).
10 ITA No.4076/Del/2025 (b) Ground nos. 2 to 5; Addition of Rs. 1,10,00,000/- u/s 68 of the act for credit in the name of Gulzar Hire Purchase Pvt Ltd, including charging of higher rate u/s 115BBE of the Act; enhancement made in respect of interest paid and alleged commission. (c) Ground nos. 6 to 9; Addition of Rs. 80,00,000/- u/s 68 of the act for credit in the name of Herald Commerce Limited, including charging of higher rate u/s 115BBE of the Act; enhancement made in respect of interest paid and alleged commission. (d) Ground nos. 10 to 13; Addition of Rs. 50,00,000/- u/s 68 of the act for credit in the name of Kanupriya Commercial Private Limited, including charging of higher rate u/s 115BBE of the Act; enhancement made in respect of interest paid and alleged commission. (e) Ground nos. 14 to 19; Addition of Rs. 1,05,00,000/- u/s 68 of the act for credit in the name of Upadan Commodities Private Limited, including charging of higher rate u/s 115BBE of the Act; enhancement made in respect of interest paid and alleged commission. 17. Thus, he submitted that it can be seen from the facts stated above that the entities, namely, Gulzar Hire Purchase Pvt Ltd; Herald Commerce Limited and M/s Kanupriya Commercial Private Limited were existing at the address by the commission issued by DDIT(Inv) Kolkatta and therefore, these entities could not be treated as non-existing entities. So far as it relates to the entity named as M/s Upadan Commodities’ Private Limited, it was submitted by the assessee before Ld. CIT(A) as per letter dated 18.12.2023 that this entity was liquidated/closed in 2017 after repayment of loan and this letter was written by the assessee to Ld. CIT(A) in response to show cause notice dated 04.12.2023 and evidence
11 ITA No.4076/Del/2025 was submitted from the extract obtained from MCA data On 16-12-2023 which is reproduced below :-
He submitted that all these facts in reply dated 19.05.2024 is reproduced in para 4.10 of the order of ld. CIT(A), however, Ld. CIT(A) while adjudicating the matter has conveniently ignored all the evidences available on record on the ground that proof of mere location of the
12 ITA No.4076/Del/2025 address of the company at Kolkata in FY 2024-25 has no bearing on the irrefutable factual findings made by the AO during the assessment proceedings despite the fact that all the fresh evidences have been admitted as per observations in para 5.3.2 at Pg. 42-43 of the order of ld. CIT(A). He submitted that the financial data and other evidences submitted by the assessee and also existence of parties having been found at the given addresses even in December 2024, it cannot be presumed that the creditor entities were merely paper entities. He submitted that the assessee even produced assessment orders for the concerned AY of the two creditors, namely, Herald Commerce Limited and Kanupriya Commercial Private Limited which are assessed under section 143(3) of the Act and copies of the assessment orders were also furnished. He submitted that the status of all the creditors on MCA Site is active and copy of acknowledgement of return for each of the creditor is also submitted and the copy of bank account for each of the creditor were also submitted. He submitted that each of the loan has been repaid along-with interest much prior to the initiation of assessment proceedings of the assessee and all these facts and evidences could not be ignored lightly to hold that the credits are not genuine and these findings of Ld. CIT(A) are well against the establish principals of law. He further submitted that producing all these evidences the assessee has discharged its primary
13 ITA No.4076/Del/2025 onus and assessee is under no legal obligation to prove the source of source. 19. He further submitted that it is also pertinent to note that the interest bearing loans were obtained by the assessee according to the business needs and these were repaid along-with interest, therefore, the nature of these loans cannot be treated in the nature of the money having been received by the assessee as ‘share application money’ for which the assessee is burdened with a larger onus laid down as per second proviso to section 68 of the Act which requires that the person in whose name such credit is recorded should also offers an explanation about the nature of source of such sum so credited in addition explanation offered by the assessee company. Thus, the onus laid upon assessee u/s 68 of the Act has been fully discharged and no addition was called for in respect of aforementioned credits and this proposition is supported by recent decision of Hon'ble Delhi High Court in the case of Sheela Overseas Private Limited Vs PCIT in ITA 546/2023. He submitted that in this case it has been held that the amendment to section 68 of the Act introduced by Finance Act, 2022 also make it abundantly clear that section 68 of the Act as was in force prior to 01-04-2023 did not require the assessee to explain the source of the source of funds other than share capital money, share capital; share premium or any amount of such nature. Thus, the
14 ITA No.4076/Del/2025 enlargement of the assessee’s onus to explain the source of the source of sums credited as unsecured loans necessitated the amendment to Section 68 of the Act to expressly provide for the same. 20. Ld. AR of the assessee further submitted that in the present case, it has been shown that entire amount of credit was repaid along-with interest even before the start of assessment proceedings and in a case where the assessee had taken unsecured loans and had submitted various supporting documents in respect of such loans being audited balance sheets, bank statements etc. and had also repaid loans along-with interest, it could not be said that loans taken by the assessee from the said company was accommodation entry. Reference in this regard is made to the very recent decision of Hon'ble Delhi ITAT dated 27-03-2025 rendered in the case of Real Innerspring Technologies Pvt. Ltd., vs. ACIT [2025] 174 taxmann.com 1130 (Delhi - Trib.), in which one of the Member is the author of the order. Further he also relied on the following decision :- (i) Mod Creations (P.) Ltd. vs Income-tax Officer ITA No.1158 of 2007; (ii) Hon'ble Delhi High Court in the case of Sheel Overseas Pvt. Ltd. Vs PCIT judgement dated 28.05.2025 in ITA No. 546/2023; (iii) CIT vs. Makhni and Tyagi (P) Ltd. 267 ITR 433 (Del) 25; (iv) ITO Vs M/s. Rakam Money Matters P. Ltd ITA No.2821/Del./2011;
15 ITA No.4076/Del/2025 (v) Umbrella Projects Pvt. Ltd Vs ITO, ITA No. 5955/DEL/2014; (vi) PCIT Vs Laxman Industrial Resources Ltd [2017] 397 ITR 106 (Delhi); (vii) Deputy Commissioner of Income Tax Vs. Rohini Builders [2002]256ITR360(Guj); (viii) Ravindra Madanlal Khandelwal Vs DCIT [2024] 169 taxmann.com 457 (Nagpur -Trib.) (ix) JCIT (OSD) Vs M/s. Shalimar Housing & Finance Ltd. I.T.A. No. 4079/Mum/2019; 21. In view of the above, ld. AR of the assessee pleaded to delete the following additions :- (a) Delete the Addition of Rs. 16,18,775/- (PF/ESI Disallowance) (b) Delete the Addition of Rs. 1,95,23,424/- (Section 68 - Closing Balances) (c) Quash the Enhancement of Rs. 1,49,76,576/- (Section 68 - CIT(A)'s Enhancement) (d) Delete the Enhancement regarding Disallowance of Interest (e) Delete the Enhancement on Account of Alleged Commission (3%). 22. On the other hand, ld. DR of the Revenue objected to the submissions made by the ld. AR of the assessee and heavily relief on the orders of the lower authorities. 23. Considered the rival submissions and material placed on record. We observed that the similar issue was considered by the coordinate Bench in the case of Real Innerspring Technologies (P) Ltd. (supra) in which one of us is the author of the order and held as under :-
16 ITA No.4076/Del/2025 “10. Considered the rival submissions and material placed on record. We observed that the AO has initiated reassessment proceedings on the basis of information received from the Investigation Wing and search proceedings in the case of Shri Verma. It is brought on record that these two companies were found to be controlled by the accommodation entry providers, Shri Verma and Shri Anil Agarwal. Merely because the assessee has taken the unsecured loan from the companies controlled by them, the addition was made rejecting the various supporting documents provided by the assessee relating to transactions. 11. In our considered view, the additions were made only on the basis of alleging that the loan taken by the assessee from the above said two companies are only accommodation entries and assessee’s own money was routed through these companies with the help of accommodation entry providers. On careful note, the accommodation entries are taken which will remain in the books of account and they will ultimately written off over the period of time. These loans were normally not repaid. In the given case, it is brought to our notice that the assessee has received the unsecured loan through the banking channel and repaid thru the banking channel as under :-
Name of the Amount of Date on which Date of interest Date of Lender the Loan loan taken payment repayment of loan M/s. City 50,00,000 09.07.2015 30.12.2017 (Pg 40 06.12.2017 Infraheights Pvt. (Pg 38 of the PB) of the PB) 30.12.2017 Ltd. (Pg 39 & 40 of the PB) M/s. CEA 50,00,000 18.03.2016 27.04.2016 17.03.2017 Consultants Pvt. 28.03.2017 18.03.2017 Ltd. 21.03.2017 (Pg 81 of the PB) (Pg 81 of the PB) (Pg 83 & 84 of the PB)
From the above, it is clear that the assessee has repaid the loan even before the assessment was reopened. When the assessee takes the loan and repaid along with the interest clearly shows that the transactions are genuine. By returning the loan, the assessee has only utilised the loan for the purpose of business and repaid the same. Merely because some operator has managed the affairs and all the transactions cannot be labelled as non-genuine. Every transaction has to be evaluated on its merit rather than on the basis of suspicion. Therefore, in this case, the assessee has submitted all the documents in support of the transaction before the AO and he has merely rejected the same on the basis of information available with him as the same on the basis of suspicion. Therefore, we are inclined to allow the grounds raised by the assessee. 13. In the result, appeal filed by the assessee is allowed.
17 ITA No.4076/Del/2025 24. Respectfully following the same, in this case also, the assessee had received the loan from the banking channel and repaid the same along with interest as the assessee had submitted detailed payment chart reported at para 15 of this order. It clearly shows that the assessee had received the loans and repaid the same in the subsequent years and also submitted the relevant documents justifying the genuineness of the transaction. Therefore, we are inclined to allow the grounds raised by the assessee. 25. The interest and commission is connected to the same addition. Since the main addition is decided in favour of the assessee, the interest and alleged commission also decided in favour of the assessee. 26. With regard to deletion of addition with regard to PF/ESI, during the course of hearing, the assessee did not press the same and also this issue is squarely covered by the decision of Hon’ble Supreme Court in the case of Checkmate Services Pvt. Ltd. vs. CIT 143 taxmann.com 178 against the assessee. Accordingly, the same is dismissed. 27. In the result, appeal filed by the assessee is partly allowed. Order pronounced in the open court on this 21st day of January, 2026. Sd/- sd/- (VIMAL KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21.01.2026 TS
18 ITA No.4076/Del/2025
