DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3, DELHI, DELHI vs. BG TECHNOLOGIES PRIVATE LIMITED, DELHI

Aggrieved, the Revenue is in appeal before us and has raised the following grounds of appeal:- “1 That the ld. CIT(A) has erred on facts and in law in deleting the disallowance of Rs. 2,20,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act’ 1961

The ld. AR also contended that they have provided each and every detail before the Revenue Authorities based on which the remission has been given by the ld. CIT(A).

Considered the rival submissions and material placed on record. We are of the considered view that assessee has placed on record the evidences in the shape of addresses, PAN details and net worth of M/s Bell Indus Fibercom (P) Ltd.. confirmation of account, bank statement of M/s Bell Indus Fibercom (P) Ltd., ledger account of M/s Bell Indus Fibercom (P) Ltd. in the books of assessee company, certificate of incorporation, financial statement, bank statement of assessee company. A tabular chart of M/s Bell Indus Fibercom (P) Ltd. containing name, address, PAN No. income tax jurisdiction of Assessing Officer, particulars of income declared alongwith date of filing of return of income and date of amount received through banking channels is as under:

The Assessing Officer did not doubt the genuineness of the aforesaid documentary evidences which clearly prove that entity is existing and registered with Registrar of Companies as well as assessed to income tax. The fact that the genuineness of the transaction is also evident from the confirmation, ledger account in the books of account of the assessee, bank statements, audited financial statements establishing the genuineness of the transactions. The AO has made addition u/s 68 in respect of the receipt of money treated as business advance by the assessee. The Assessing Officer in the order of assessment has held at page 127 of order as under: “It is amply clear from the above discussion that in this case, the assessee had not discharged its initial onus u/s 68 of the Act, with regard to credit which was claimed as alleged loan from above referred to paper company whereas it is proved beyond doubt from investigation that the alleged loan were actually accommodation entries from paper companies controlled by entry operators and assessee was one of the several beneficiaries. In view of these facts, it is held that such receipts remained unexplained credit in the books of accounts of the assessee in the form of alleged loan is deemed to be income of the assessee u/s 68 of the Act and amount was wrongly disclosed as loan from paper companies engaged in business of providing entries. For aforestated reasons, Rs. 2,20,00,000/- is deemed to be the income of the assessee for the year under consideration u/s 68 of the Act. Further, the assessee has paid commission/charges to receive such accommodation entries from entry providers. Generally for taking accommodation entry commission/charges @ 3 to 5 % has been charged by the entry operator. During the year under consideration the assessee has received a total entry amounting to Rs. 2,20,00,000/- and paid commission/charges @ 3%, the amount paid by the assessee comes to Rs. 6,60,000/-. The same is added to the income of the assessee u/s 68 of the Act as unexplained cash credits.

It is also noted that M/s Bell Indus Fibercom (P) Ltd. is also examined independently as stated in para 26 at pages 12-18 of CIT(A)’s order. We have examined the order of the ld. CIT(A). The learned CIT(A) deleted the addition by observing as under: “21 I have considered the facts of the issue and submissions of the appellant. The issue involved relates to addition made out of business advance of Rs. 2,20,00,000/- from M/s Bell Indus Fibrecom (P) Ltd. 22 The appellant has placed on record following evidences on record in respect of aforesaid business advance: i) Addresses, PAN Nos and networth of M/s Bell Indus Fibercom (P) Ltd.. ii) Confirmation of account, iii) Bank statement of M/s Bell Indus Fibercom (P) Ltd. iv) Ledger account of M/s Bell Indus Fibercom (P) Ltd. in the books of assessee company, v) Certificate of incorporation, vi) Memorandum of association and articles of association of M/s Bell Indus Fibercom (P) Ltd., vi) Acknowledgement of return of income and audited financial statement, vii) Bank statement of assessee company. ……. 27 In the aforesaid circumstances, the initial burden of the appellant as to identity, creditworthiness of the M.s Bell Indus Fibercom (P) Ltd. and genuineness of the transaction stands duly established. Once statement of Sh. Raju Malik, Director of M/s Bell Indus Fibercom (P) Ltd. has been recorded on 23.03.2022 u/s 131 of the Act thus in absence of any further adverse material brought on record by the AO, the addition is not in accordance with law. Sh. Raju Malik, Director M/s Bell Indus Fibercom (P) Ltd. Has not only confirmed the transactions but also provided the source of the said transaction inn as much as the sums were remitted out of their bank accounts and duly recorded in its books of accounts.

After the appellant having discharged his onus of furnishing the details regarding the transaction, it was incumbent upon the Assessing Officer to prove that either the identity is not established or the creditor does not have the creditworthiness or the or the transaction is not a genuine transaction. Apparently in this case, there nothing on record to establish that the transaction was not a genuine transaction or the creditor did not have the creditworthiness to pay to the appellant.

The assessment in this case was made pursuant search and the Assessing Officer as well as the investing officer had all the powers to fully examined the transaction and bring on record the 68 of the Act.

The creditor is a company and filling his returned with the ROC as well as Income-tax. Therefore, its identity is well established. The director of the company was summoned and his statement recorded. From the fact that the Director of the creditor company appeared before the Assessing Officer and deposed before the Assessing Officer establishes that the person behind the company was not a person of no means. It also indicates that the director was in the knowhow of the affairs of the company and was not a dummy director. These facts established beyond doubt the identity of the creditor. Even otherwise, it is not the case of the Assessing Officer that the director of the company is dummy director and the identity of creditor is not established.

From the annual account of the creditor, it has been reproduced above, it is seen that the creditor company had disclosed to total receipt of Rs.3,93,67,517/- and Rs.4,08,44,685/- for the F.Y 2018-19 respectively. The creditor company has disclosed a net profit of Rs. 17,94,872/- and Rs.28,67,622/- for the F.Y 2018-19 and 2019-20 respectively. Shell companies by its nature of activities do not disclose such high receipts and income. From further analysis of the balance sheet, it is seen that the creditor has disclosed reserve and surplus of Rs. 36,79,34,564/- and Rs. 37,02,18,938/- for the F.Y 2018-19 and 2019-20 respectively. On the basis of balance sheet and profit and loss account of the creditor company, it is held that the creditor had creditworthiness to give advance of Rs. 2.20Crores to the appellant.

Further, there was a MoU between the appellant and the creditor regarding advance. The contents of such MOU has not been proved to be wrong or incorrect in any manner.

It is not the case of the Assessing Officer that the appellant has given cash/unaccounted money to the creditor for taking loan. it is also not the case of the assessing Officer that the creditor had any bogus entries in his accounts. The fundamental premise on which the Assessing officer rests his case is that there were credits in the accounts of the creditor from suspicious sources. However, such a suspicion has not been taken to the logical end by examining the transaction in detail. Presumption and suspicion may be the starting point for making investigation but not the end of investigation.

It is therefore held that the creditor had the creditworthiness of giving advance.

The third limb is regarding genuineness of the transaction. Firstly, it is not the case of Assessing Officer that the transaction is not a genuine transaction. Additionally, there was MoU between the parties to the transaction; the transaction was through banking channel; the transaction is reflected in the books of appellant as well as the creditor; the director of the creditor under statement under oath has confirmed the transaction; there is no evidence or argument to establish that the statement of the director was incorrect; there was any round tripping of funds; and there was any cash deposit in any account t and the same cash travelled back to the appellant. Therefore, it is held that the transaction was a genuine transaction of business advance. 36 The Hon’ble Gujarat High Court in the case of DCIT v. Rohini Builders reported in 256 ITR 360 has held that once assessee had discharged the initial onus by proving identity of creditors by filing complete addresses, income tax details and also proved capacity of creditors where transactions is through banking channels and no addition is tenable. The Hon’ble Court has held as under: ….. 37 Also Hon’ble Deli High Court in the case MOD Creations (P) Ltd. v. ITO reported in 354 ITR 182 has held as under: …. 38 The Hon’ble Delhi High Court in the case of CIT v. Diamond Products Ltd. reported in 177 Taxman 131 has held as under: ….

In our considered view, the ld. CIT(A) has rightly deleted the addition made in this regard. We do not see any reason to disturb the findings of ld. CIT(A), accordingly Ground No.1 of the appeal of the Revenue is dismissed.

Ground 2 raised by the Revenue relate to disallowance of Rs. 6,60,000/- u/s 68 of the Act. The ld. CIT(A) deleted the disallowance by observing as under “48 The Ground No. 15 to 15.2 of Grounds of Appeal

Having regard to the above, the ld. CIT(A) in his order has deleted the addition made in this regard and we do not see any reason to disturb the same. Accordingly, ground no.2 of the appeal of the revenue is dismissed.

In the result, appeal filed by the Revenue is dismissed. Order pronounced in the open court on this 20th day of December, 2024.