M/S. SOUTH WEST PINNACLE EXPLORATION LIMITED,GURUGRAM vs. ACIT, CIRCLE-24(1), NEW DELHI

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.

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

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 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.

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 :-

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

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 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.

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 :-

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).

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

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 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 onus and assessee is under no legal obligation to prove the source of source.

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 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.

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 of 2007; (ii) Hon'ble Delhi High Court in the case of Sheel Overseas Pvt. Ltd. Vs PCIT judgement dated 28.05.2025 in (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; Umbrella Projects Pvt. Ltd Vs ITO, (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.

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%).

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.

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 :-

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 :-

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