ACIT CC 7(3), MUMBAI vs. NOP PROPERTIES PRIVATE LIMITED, MUMBAI

Briefly stated facts of the case are that the assessee is carrying on the business of Property developer. The return of income was filed claiming a loss of Rs. 17,21,698/-. Subsequently, the case was reopened u/s. 148 of the Act and the assessment was completed u/s. 143(3) r.w. section 147 of the Act assessing total income Rs. 7,80,350/- after making certain additions. According to the assessment order ,in this case information was received from Departmental sources that a search and seizure operation u/s 132 of Act, was conducted at the business and residential premises of one Sri Praveen Agarwal and his group companies at Kolkata on 13.09.2012. Sri Agarwal was one of the known entry operators of Kolkata. In his statement recorded in course of search, Sri Agarwal had accepted on oath that he had registered a large number of paper companies with bogus share capital/premium which had subsequently been sold for a commission. He had also accepted that he had given entries of bogus expenses like commission, contractual expense, professional charges etc. Further, information had been P a g e | A.Y. 2012-13 NOP Properties Private Limited, Mumbai received that the assessee being one of the beneficiaries had received payment of Rs. 25,00,000/- from one of the paper companies M/s. Khusboo Complex Pvt. Ltd.(KCPL).It was noted by the AO that the nature of business of the assessee, shown in its Return was that of 'Property Developers. However, no such activity appeared to have been conducted by the assesse during the year. It was also seen from the ledger account of KCPL that the said company had paid an amount of Rs.2,049/- to the assessee company as interest. In the course of assessment proceeding, the assessee furnished return copy and bank statement, audited annual accounts consisting balance sheet and P&L A/c of KCPL. Unsecured loan of Rs.25 lakh borrowed from it was repaid fully along with interest and nothing was payable. According to him, the assessee could not bring on record with proper supporting evidences for authenticity of transactions u/s.68 of the Act demonstrating that the transaction was not sham though as per report of the Investigation Wing of the Department, Kolkata the amount received by the assessee from KCPL was sham transaction. It was observed that identity, creditworthiness or genuineness of the transaction were not established by merely showing that the transaction was through banking channels or by account payee instrument. He placed reliance on the case of Commissioner of Income Tax vs. N R Portfolio Pvt Ltd. In holding that P a g e | A.Y. 2012-13 NOP Properties Private Limited, Mumbai the impugned amount was not genuine but merely an accommodation entry treating the entire sum of Rs. 25,00,000/- found credited in the books of the assessee during the year under consideration, in the guise of share premium/unsecured loan from the investing company, as unexplained cash credit u/s. 68 of the Act and added to the total income, and interest of Rs.2,049/- was also added as unexplained expenditure u/s.69C of the Act and added back.

Aggrieved, the assessee filed appeal before the appellate authority. The ld.CIT(A) observed that the loan, which was taken on 26.03.2012, had been fully repaid by the appellant in FY 2014-15 corresponding to AY 2015-16, that is, well before the information in the case was shared by the DCIT-3(1), Kolkata. Thus, at the time of reopening of the assessment for the impugned unsecured loan from KCPL in March 2019, nothing was outstanding against the appellant. Before him, the assessee relied on the Hon’ble ITAT decision in the case of ACIT vs. APEX Energy Resources Private Limited [I.T.A. No. 60/KOL/2024] involving the same lender, KCPL. The fact of repayment of the loan back to the lender (KCPL) was involved in this case too. Hon’ble ITAT has held as under – “After verifying the facts and evidences, it was held that the loan amount of 4.80 crores was duly paid during the impugned assessment year. There is no P a g e | A.Y. 2012-13 NOP Properties Private Limited, Mumbai balance for the assessee related to this loan amount. The assessee is not the beneficial owner of the loan during the impugned assessment year. The assessee filed evidence during the assessment proceeding, which is acknowledged by the ld. CIT(A) in the impugned appellate order. So, the contravention of Section 68 related to identity, creditworthiness, and genuineness of the transaction through the banking channel is ruled out. Related to the interest, the amount of 90,40,180/- was squarely covered by the order of ITAT, Kolkata Bench in the assessee’s own case (supra). For rest of the interest, that pertained to loans of earlier years and the part of interest of the loan where the loan was repaid during the impugned assessment year, also follow the same principle laid down by the orders mentioned above. We do not find any reason to interfere with the impugned appeal order. The grounds of the revenue are dismissed.” 4.1 It was further noted from the assessment order that the assessee had submitted before the AO, Bank Statement of the lender highlighting loan given to the appellant ,Ledger confirmation of the lender, Computation of income along with ITR acknowledgement of the ITR filed by the lender for AY 2012-13,Audited Financial Statements of the lender for FY 2011-12,Bank statement of lender highlighting repayment made by the appellant. vi. Computation of income along with ITR acknowledgement of the ITR filed by the lender for AY 2015-16. The appellant had also submitted that the loan taken from KCPL was fully repaid along with the interest. The Balance Sheet of the lender, KCPL, also demonstrated the availability of sufficient funds to establish the creditworthiness of the lender. He further observed that the net worth of KCPL as at the end of the year (31.03.2012) was Rs. 96,60,85,930/-, against which a sum of Rs. 25,00,000/- had been given as a loan to the P a g e | A.Y. 2012-13 NOP Properties Private Limited, Mumbai assessee. The addition was made by u/s. 68 of the Act, primarily relying on the information received from the investigation wing and statements. He concluded that the repayment, coupled with the documentary evidence on record, sufficiently established the nature of the transaction, the identity of the lender, and the genuineness thereof. Accordingly, the finding of the Assessing Officer was not borne out by the objective facts available on record and, to that extent, is unsustainable in law and liable to be set aside. The addition made was therefore, deleted and consequently, the addition of interest u/s 69C was also deleted.

The ld.DR has placed reliance on the assessment order and the report of the Investigation wing in support of the contention that the impugned loan was merely an accommodation entry and non genuine.

in nature.

We have carefully considered all relevant aspects of the facts and find no merit in the grounds of the appeal as filed by the Revenue. The ld.CIT(A) has evaluated the evidences put forth before him to prove P a g e | A.Y. 2012-13 NOP Properties Private Limited, Mumbai the identity, credit worthiness and the genuineness of the transaction. We find that the AO has merely relied on the Investigation wing report without making any independence inquiry or investigation into the matter which could show that the whole transaction was premeditated and bogus in nature. It is evident that the transaction has been made through banking channels and necessary confirmations and supporting details were duly produced before him. But he preferred to reject the same without any concrete findings. The impugned loan was already paid even before the transaction was doubted by the Department as rightly stressed by the ld.CIT(A).Considering the entirety of facts and the circumstances of the case, we uphold the appellate order and dismiss the grounds of appeal preferred by the Revenue.

In the result, the appeal of Revenue is dismissed.

Sd/- Sd/- SANDEEP GOSAIN PRABHASH SHANKAR (न्यातयक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)