SEN FERRO ALLOYS (P) LTD.,KOLKATA vs. A.C.I.T., CC - 4(3), KOLKATA
Facts
The assessee, Sen Ferro Alloys (P) Ltd., underwent a search operation on 01/12/2015, leading to an assessment under section 153A read with section 143(3). Subsequently, reopening proceedings under section 148 were initiated for AY 2014-15 based on information that the assessee received bogus unsecured loans amounting to Rs. 3,69,00,688/- from paper/shell companies of the 'Banka Group'. The Assessing Officer (AO) made an addition under section 68 for these loans, which was confirmed by the CIT(A).
Held
The tribunal noted that the loans, which formed the basis of the addition, had been repaid by the assessee during the assessment years 2015-16 and 2016-17, leaving no outstanding loans. Following the precedent set by the Hon'ble Gujarat High Court in Ambe Tradecorp (P) Ltd., the tribunal held that if the assessee is no longer a beneficiary of the loans, no addition under section 68 of the Act can be made. Consequently, the additions made by the AO and confirmed by the CIT(A) were deleted.
Key Issues
Whether an addition under section 68 for unsecured loans can be sustained when the loans have been repaid in subsequent years, and the assessee is no longer a beneficiary of such loans, particularly after a search assessment.
Sections Cited
153A, 143(3), 142(1), 132(4), 131, 133A, 147, 148, 68, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
आदेश / O R D E R
Per George Mathan, AM: These are two appeals filed by the assessee against the order passed by the Id. CIT(A), Kolkata-27, both dated 26.09.2024 for the assessment years 2014-2015 & 2015-2016. 2. It was submitted by the ld.AR that there was in search on the assessee on 01/12/2015. As a consequence of search, the assessment came to be completed u/s.153A r.w.s 143(3) of the Act on 31/12/2017. The Ld. AR drew our attention to the notice issued u/s.142(1) of the Act in the course of said notice is dated for 12/02/2017. Copy of which is shown at page 118 & 120 of the paper book which reads as follows:-
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It was submission the AO had specifically asked the assessee to furnish the details of all loans taken during the financial year 2009-10 to 2015-16 and in the case of unsecured loans to furnish the evidence of source of fund utilization by the debtors including the copies of the bank statements etc. The Ld.AR drew our attention to the page 117 paper book which is the reply filed on 01/12/2017 which reads as follows:-
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It was submission that after considering the replies and evidences produced, the AO had completed the original assessment u/s.153A/143(3) of the Act on 31.12.2017. It was submission that subsequently the AO has initiated the reopening proceedings by recording reasons which was shown at page 95 & 96 of the paper book which reads as follows:-
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12 ITA No.2358&2359/KOL/2024 5. It was submitted that as all the details have been reproduced before the Assessing Officer, the reopening is liable to be quashed. Ld. AR further drew our attention to page 152 of the paper book filed in ITA No.2359/Kol/2024 to submit that all the loans which had been taken had been repaid by the financial year 2016-17. The said evidence reads as follows:-
13 ITA No.2358&2359/KOL/2024 6. It was submission that none of the loans were outstanding. It was submission that in the course of assessment the AO has asked the assessee to prove the loans which have already been closed. It was submission that in view of the Hon’ble Gujarat High Court in the case of Ambe Tradecorp (P.) Ltd., reported in [2022] 145 taxxman.com 27(Gujarat), the assessee is being not a beneficiary of the loans anymore, the addition is not liable to be made in the hands of the assessee. 7. In reply, the Ld.Sr.DR vehemently supported the order of the AO and CIT(A). 8. We have considered the rival submissions. A perusal of the facts in the present case clearly shows that the loans taken by the assessee had at the initial stage itself being examined as is evident from notice issued u/s.142(1) of the Act and the response filed and the assessment order passed originally. Further a perusal of evidences filed, more specifically, in regard to the repayment of the loans shows that all the loans had been repaid during the assessment year 2015-16 and after 2016-17 no loans remained outstanding. The Hon’ble Gujarat High Court in the case of Ambe Tradecorp (P.) Ltd, referred to supra, has held that as the assessee is not being a beneficiary of the loans anymore, no addition u/s.68 of the Act could be made on account of such loan. The relevant observations of the Hon’ble Gujarat High Court are as under :- Section 68 of the Income-tax Act, 1961 - Cash credit (Bogus loan) - Assessment year 2012-13 - Assessee received loans from two parties - Assessing officer treated same to be sham for reason that creditworthiness of loan givers was not established and, accordingly, made addition under section 68 - It was noted that Tribunal recorded findings of facts that assessee had furnished details such as copy of ledger account, bank
14 ITA No.2358&2359/KOL/2024 statements, income-tax returns, balance sheet etc. of loan givers - It was also recorded that notice under section 133(6) was issued to said loan givers which were duly responded by them, therefore, identity of parties could not be disputed - It was also noticed that assessee was not beneficiary as loan was repaid by assessee in subsequent year - Whether, on facts, identity and creditworthiness of parties and genuineness of loan transactions were well established, therefore, impugned addition made under section 68 on account of said loan amount was unjustified - Held, yes [Paras 3.4, 3.5 and 5] [In favour of assessee] 9. Respectfully following the principle laid down by the Hon’ble Gujarat High Court in the case of Ambe Tradecorp (P) Ltd., referred to supra, the addition as made by the AO and as confirmed by the CIT(A) for both the years under consideration stands deleted. 10. In the result, both appeals of the assessee are allowed. Order dictated and pronounced in the open court on 29/01/2026.
Sd/- Sd/- (RAJESH KUMAR) (GEORGE MATHAN) लेखा सदस्य/ ACCOUNTANT MEMBER न्यधनयक सदस्य / JUDICIAL MEMBER कोलकाता Kolkata; ददनाांक Dated 29/01/2026 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant- 2. प्रत्यर्थी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, 5. ITAT, Kolkata गार्ड फाईल / Guard file. 6.
सत्यापपत प्रतत //True Copy// आदेशधिुसधर/ BY ORDER,
(Assistant Registrar) Income Tax Appellate Tribunal, Kolkata
