M/S. NOVA HOME APPLIANCES PVT LTD,MUMBAI vs. INCOME TAX OFFICER 4(3)(1), MUMBAI

Aggrieved, the assessee was in appeal before the first appellate authority who vide order dated 06.11.2024 upheld the addition made by the Ld. AO on the same finding as that of the Ld. AO along with the legal ground raised by the assessee challenging the reopening proceeding which was also dismissed by the Ld. CIT(A).

Aggrieved, the assessee is in appeal before us challenging the order of the Ld. CIT(A).

The Learned Authorised Representative (‘Ld. AR’ for short) for the assessee commenced his arguments on the legal ground challenging the reassessment proceeding to be invalid for the reason that conditions prescribed in the provision were not fulfilled by the Ld. AO. The Ld. AR contended that the reasons recorded by the Ld. AO were not in accordance with law as the same pertained to borrowed satisfaction since in the reasons recorded the Ld. AO has specified that the assessee has obtained loan from M/s. Kalyani Vincom P. Ltd. instead of M/s. LAN Finance Pvt. Ltd. who is the actual creditor in this case. The Ld. AR further contended that the assessee was not furnished with the copy of the sanction obtained by the Ld. AO for reopening the assessee’s case and relied on the decision of the Hon’ble Delhi High Court in the case of Tia Enterprises (P.) Ltd. vs. Income tax Officer (2024) 158 taxmann.com 63 (Delhi) which had invalidated the reassessment proceeding on the ground that the copy of the sanction obtained by the Ld. AO was not provided to the assessee. The Ld. AR also relied on the decision of the Tribunal in the case of Dharmil Anil Bodani vs. ACIT in order dated 25.03.2025 for the proposition that mere information from the investigation wing cannot M/s. Nova Home Appliances Private Limited be reason for reopening since the Ld. AO has to arrive at his own reason to believe that income has escaped assessment. On the merits of the case, the Ld. AR contended that the loan obtained by the assessee from M/s. LAN Finance Pvt. Ltd. is a genuine transaction for the reason that the assessee had subsequently repaid the same to the creditors and had also paid interest towards the said loan after deducting TDS on the interest paid. The Ld. AR further contended that the Ld. AO has not made any addition/disallowance on the interest claimed by the assessee and when the interest has not been disallowed there can be no addition made on the principal amount as well, stating that these are bogus unsecured loans. The Ld. AR relied on the Tribunal’s decision in the case of SP Industries vs. ACIT in order dated 21.08.2024 where on identical facts the Tribunal had deleted the addition towards unsecured loan on the ground that since the loan was repaid in subsequent years the same cannot be held to be non-genuine by relying on the decision of the Hon’ble Gujarat High Court in the case of Commissioner of Income Tax, Rajkot -I vs. Ayachi Chandrashekhar Narsangji (Tax Appeal No. 992 of 2013, decided on December 2, 2013). The Ld. AR also relied on the decision of Hon’ble Gujarat High Court in the case of Pr. CIT vs. Ambe Tradecorp (P.) Ltd. (2022) 145 taxmann.com 27 (Gujarat) wherein it was held that the assessee when repaid the loan in the subsequent year would not amount to a bogus transaction. The Ld. AR prayed that the impugned addition be deleted and the assessment order be held to be invalid.

The Learned Departmental Representative (‘Ld. DR’ for short), on the other hand, controverted the said fact and stated that on the issue of reopening, the reasons recorded specifically mentions that the assessee was beneficiary of transaction undertaken by M/s.

We have heard the rival submissions and perused the materials available on record.

On the second issue pertaining to the sanction copy not provided to the assessee, it is observed that the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. (supra) has categorically laid down the proposition as to how the reassessment proceeding ought to be carried out. It is not the case of the assessee that there was no sanction obtained prior to reopening of the assessment neither was it a case where the assessee had requested for the copy of the sanction obtained and the same was not furnished by the Ld. AO. The decisions relied upon by the Ld. AR are distinguishable on the facts of the case. Hence, the ground challenging the reassessment proceeding is hereby dismissed.

The issue on the merits is now taken into consideration on the basis of the arguments enhanced by both sides. It is observed that the assessee has availed loan from M/s. LAN Finance Pvt. Ltd. amounting to Rs.10,00,000, Rs.,12,00,000/- and Rs.13,00,000/- aggregating to Rs.35,00,000/- in total. The assessee has paid interest amounting to M/s. Nova Home Appliances Private Limited Rs.1,40,671/- after deducting TDS on the same and further the said amount was also repaid within six months from the date of availing the loan. The Ld. AO contends that the DDIT (Investigation), Kolkata had given a list of beneficiaries who have transacted with the alleged three companies and on enquiry it was found that money was routed through one or more companies prior to transferring to the beneficiary companies. The Ld. AO issued notice u/s 133(6) of the Act to the creditor M/s. LAN Finance Pvt. Ltd., which in fact had responded and submitted copy of ledger account pertaining to the assessee in its books of accounts along with bank statement. The Ld. AO’s contention is that the amounts credited in the bank account are in round figures and prior to the transaction with the assessee Rs.1,00,00,000/- each was credited from M/s. Frontier Tradecom Pvt. Ltd., M/s. Rani Sati Dealer Pvt. Ltd., M/s. Cosmos Delcom Pvt. Ltd. on various dates subsequent to which Rs.10,00,000, Rs.,12,00,000/- and Rs.13,00,000/- were transferred to the assessee’s bank account respectively. The Ld. AO held all these to be shell companies which were controlled and managed by the entry operator Shri Pravin Kumar Aggarwal with dummy directors for the group companies. The Ld. AO stated that the assessee has failed to produce the party M/s. LAN Finance Pvt. Ltd. and further in the address of M/s. LAN Finance Pvt. Ltd. there was none and the said premises was closed. The Ld. AO further stated that merely furnishing the PAN number for assessment details does not establish the identity of the person where no business was carried out and held the transaction to be merely routed money transaction through banking channels where their creditworthiness was not established.

From the above factual matrix of the case, it is observed that the assessee, though, has contended that these documents were filed before the lower authorities neither the Ld. AO nor the Ld. CIT(A) has discussed about the same in their finding. The assessee has also not filed complete details of the documents pertaining to the assessee as well as the creditor before the lower authorities. For extending the assessee with one more opportunity M/s. Nova Home Appliances Private Limited to substantiate is claim before the Ld. AO, we deem it fit to restore this issue back to the file of the Ld. AO for reconsidering the issue in hand on the basis of the documents and evidences filed by the assessee to establish the genuineness of the transactions. The Ld. AO has also not established the cash trial in the impugned transaction as to how the assessee was the beneficiary for the loan taken from M/s. LAN Finance Pvt. Ltd. which has been subsequently repaid by the assessee through banking channel. The Ld. AO is directed to decide this issue in accordance with the merits and the decisions relied upon by the assessee which is now a settled proposition of law. The assessee is also directed to cooperate with the proceeding before the Ld. AO without any undue delay from its side.

In the result, the appeal filed by the assessee is hereby partly allowed for statistical purpose.