GEO CALL CONNECT SERVICES SOLUTIONS P.LTD,NEW DELHI vs. ITO, WARD-10(1),, NEW DELHI

The first issue raised in this case is against confirmation of addition of Rs.3,91,000/- made by the Assessing Officer under section 68 of the Income Tax Act. Succinctly, the facts of the case are that the assessee showed receipt of unsecured loan of Rs.3,91,000/- from M/s Revlite Energy Solutions Private Limited. On being called upon to substantiate the genuineness of the transaction, the assessee filed copies of confirmation, bank statement and acknowledgment of return filed by the lender for the year under consideration. Not convinced, the Assessing Officer made addition of Rs.3,91,000/-, which came to be echoed in the first appeal.

I have heard both the sides and perused the relevant material on record. It is seen that the assessee received unsecured loan of Rs.3,91,000/- from a private limited company through banking channel. Not only confirmation and bank statement but the acknowledgement of return filed by such lender for the year under consideration was also filed before the Assessing Officer. The Assessing Officer has doubted the genuineness of transaction by observing ‘that there are frequent inflow and outflow of funds simultaneously which generally happen in cases of accommodation entry providers’. Except for doubting the genuineness of transaction, the Assessing Officer did not bring 2 on record any material to controvert the evidence filed by the assessee in support of the genuineness of transaction. The ld. CIT(A) has doubted the genuineness of transaction on the raison d’etre that prior to issuing cheques to the assessee, this company had shown to have received a sum of Rs.4,00,000/- which was deposited in its bank account. I have gone through the copy of bank account of the lender. It can be seen that the said sum of Rs.4,00,000/- was received by way of cheque from another group company. A copy of bank statement of the other company, namely, Em kay is also available on record, from which it is vivid that a refund of income tax of more than Rs.2,00,000/- was received, which enabled it to issue a cheque of Rs.4,00,000/- in favour of M/s Revlite Energy Solutions Private Limited. It is out of such receipt of Rs.4,00,000/- that the loan was advanced to the assessee company. Under these circumstances, I am of the considered opinion that the assessee has successfully explained the genuineness of the loan transaction. The addition of Rs.3,91,000/- is directed to be deleted.

I have heard the rival submissions and perused the relevant material on record. I find that the addition has been made under section 41(1) of the Act in respect of all the creditors. Section 41(1) can be applied if there is a remission or cessation of a trading liability by the creditors. The assessee has maintained a claim that the amount was payable to the creditors, which was denied by the authorities simply on the ground that the creditors were static. Simply because a particular sum is payable for a period of more than three years, cannot lead to an inference of the attractability of provisions of section 41(1) of the Act. Here is a case in which the assessee is categorical as regards its liability of repaying to the sundry creditors. In my considered opinion, the authorities were not justified in making or sustaining the addition under such circumstances. I, therefore, order to delete the addition.

In the result, appeal is allowed.