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Facts
The assessee, M/s AGL Technologies Ltd., received a temporary advance of Rs.1 crore from M/s Index Securities And Research P. Ltd. on 13.02.2010 via banking channels, which was repaid in two installments on 16.02.2010 and 22.02.2010, also via banking channels, within 10 days. The assessment for AY 2010-11 was reopened based on information from the Investigation Wing alleging this was an accommodation entry (bogus loan), and the AO made an addition under Section 68. The CIT(A) upheld the addition, stating the assessee failed to prove the 'source of source' of the creditworthiness of the lender.
Held
The Tribunal observed that the loan was received and repaid within a short period of 10 days through banking channels, a fact unrebutted by the Revenue. It clarified that for AY 2010-11, the assessee was not required to prove 'source of source' for the lender's creditworthiness, as the amendment to Section 68 came into effect later. Therefore, the Tribunal found no grounds for the addition under Section 68 of the Act.
Key Issues
Whether an addition under Section 68 is justified for a loan received and repaid within 10 days through banking channels. Whether the requirement to prove 'source of source' for the lender's creditworthiness applies to AY 2010-11.
Sections Cited
Section 68 of the Income Tax Act, 1961, Section 139 of the Income Tax Act, 1961, Section 143(1) of the Income Tax Act, 1961, Section 148 of the Income Tax Act, 1961, Section 133A of the Income Tax Act, 1961, Finance Act, 2012
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Income Tax Appellate Tribunal, DELHI BENCH “A”, DELHI
(A.Y.2010-11) M/s AGL Technologies Ltd., S-206, First Floor, Panchsheel Park, New Delhi 110017 ...... अपीलाथ�/Appellant PAN: AAECA-1070-B बनाम Vs. Deputy Commissioner of Income Tax, Circle-1(1), Room No. 153A, C.R Building, ..... �ितवादी/Respondent I.P Estate0, New Delhi 110002 अपीलाथ� �ारा/ Appellant by : Shri Anuj Jain, Chartered Accountant �ितवादी�ारा/Respondent by : Shri Kanv Bali, Sr. DR सुनवाई क� ितिथ/ Date of hearing : 13/08/2024 घोषणा क� ितिथ/ Date of pronouncement : : 30/10/2024 आदेश/ORDER
PER VIKAS AWASTHY, JM:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-1, New Delhi (hereinafter referred to as 'the CIT(A)') dated 26.03.2019, for assessment year 2010-11.
The solitary ground raised by the assessee in appeal is against the addition of Rs.1 crore u/s. 68 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act’).
Shri Anuj Jain, appearing on behalf of the assessee submits that the assessee is engaged in the business of trading of computer software & hardware. The return filed by the assessee u/s. 139 of the Act declaring income of Rs.3,58,071/- was processed u/s. 143(1) of the Act. The assessment for AY 2010-11 in the case of assessee was reopened and notice u/s. 148 of the Act was issued to the assessee on 28.03.2017. The Assessing Officer (AO) reopened assessment on the basis of information received from Investigation Wing that the assessee had taken accommodation entry of bogus loan Rs.1 crore from M/s. Index Securities and Research P. Ltd. The ld. Counsel for the assessee at the outset submitted that reopening is bad in law as the assessment has been reopened merely on the basis of information received from the Investigation Wing. The AO has not applied his mind independently, thus, the reasons to believe for reopening of assessment are borrowed. He further submitted that basis of addition of Rs.1 crore is statement of one Vinod Kumar Taneja, the assessee has not been provided with the said statement. No addition can be made merely on the basis of statement recorded at the back of the assessee. In support of his arguments, he placed reliance on the decision in the case of M/s Andaman Timber Industries vs. CIT Central Excise in Appeal No. 4228 of 2006.
On merits of the addition, the ld. Counsel for the assessee submits that the assessee had taken temporary advance of Rs.1 crore from M/s Index Securities And Research P. Ltd., on 13.02.2010. The aforesaid amount was received through banking channel and the same is reflected in bank statement of the assessee. The aforesaid loan was repaid in two installments. The assessee paid first installment of Rs.75 lakhs on 16.02.2010 through RTGS and the second installment of Rs. 25 lakh was paid on 22.02.2010 through RTGS transfer. In order to prove genuineness of the loan transaction, the assessee placed on record confirmation from M/s Index Securities And Research P. Ltd. During reassessment proceedings, the AO asked for the copy of loan agreement, balance sheet, P & L account, ITR and bank statement of the lender company. The assessee explained that the assessee had taken very short period loan i.e. for 15 days from M/s Index Securities And Research P. Ltd., for which no agreement was executed. Now, after eight years it is not possible for the assessee to provide financials, ITR and bank statements of the said company. The AO without appreciating the submissions of the assessee made addition merely on the basis that the assessee has not been able to substantiate genuineness of transaction. The ld. Counsel further stated that once the loan has been repaid within a short duration of 10 days and the loan has been taken and repaid through banking channel, no addition u/s. 68 of the Act ought to have been made. In first appellate proceedings, the CIT(A) held that the assessee failed to prove source of source to prove creditworthiness of lender. The ld. Counsel stated that in the impugned AY the assessee was not required to prove source of source. The provisions of section 68 of the Act were amended by the Finance Act, 2012 w.e.f. 01.04.2023, thus, the amended provisions would not apply to the impugned AY.
Per contra, Shri Kanv Bali representing the department vehemently defended the impugned order and prayed for dismissing appeal of the assessee. The ld. DR submitted that the assessment has been reopened on the basis of information received from the Investigation Wing. A survey u/s. 133A of the Act was conducted at the premises of M/s Index Securities And Research P. Ltd., statement of Vinod Kumar Taneja and Smt. Chanchal Taneja directors of the said company were recorded on oath. Both of them in their respective statement admitted that they were not doing real business and they were not aware of the affairs of the company. They used to sign documents on directions of the promoters of the company Shri Satish Pahwa and Shri Santlal Agarwal. They were directors of the company only for name sake and their role was limited only to complete legal formalities. Based upon the facts and information gathered by Investigation Wing the Department came to conclusion that M/s Index Securities And Research P. Ltd., was engaged in providing accommodation entries to various beneficiaries. Based upon aforesaid facts, the AO recorded satisfaction note u/s. 148 of the Act and thus, proceeding u/s. 148 of the Act were initiated against the assessee. The ld. DR in support of his submissions that reopening of assessment on the basis of information received from the M/s Index Securities And Research P. Ltd., and other agencies is valid placed reliance on following decisions: i. PCIT vs. Paramount Communication (P.) Ltd., (2017-TIOL-253-Sc-IT); ii. PCIT vs. Paramount Communication (P.) Ltd., [2017] 79 taxmann.com 409 (Delhi); iii. Experion Developers P. Ltd. vs. ACIT, 422 ITR 355 (Delhi) & iv. Rajat Export Import India P. Ltd., vs. ITO 341 ITR 135 (Delhi) 6. We have heard the submissions made by rival sides and have examined the orders of authorities below. Though there is no ground raised by the assessee challenging reopening of assessment, yet both sides have made their submissions on this issue.
The assessee in grounds of appeal
has raised solitary ground on merits of the addition. For the sake of completeness, the relevant ground raised by the assessee in appeal is reproduced herein below:-
2. The learned Assessing Officer has erred in addition sum of Rs. 1,00,00,000/- to the income tax of appellant company u/s. 68 of the income tax act, 1961, without considering the facts and circumstances of the case. “
8. It is an admitted fact that the assessee had taken loan of Rs. 1 crore from M/s Index Securities And Research P. Ltd., during the relevant period. The said loan was taken by the assessee for a short period and was repaid within 10 days; the assessee has placed on record a copy of ABN Amro Bank statement (Account no. 1628589) for the relevant period. A perusal of the said statement shows that the assessee has taken a loan amount of Rs.1 crore on 13.02.2010, and has repaid the same in two installments, the first installment of Rs. 75 lakhs was paid by the assessee to M/s Index Securities And Research P. Ltd., on 16.02.2010 and second installment of Rs.25 lakhs was paid on 22.02.2010. This fact has not been rebutted by the Revenue. The assessee in order to further substantiate the loan transaction has furnished a copy of confirmation from M/s Index Securities And Research P. Ltd. A perusal of the confirmation reflects that the loan amount was repaid by the assessee within 10 days time in two installments. A perusal of the assessment order reveals that the AO has primarily made addition on the ground of genuineness of the loan transaction. In our considered view the Assessing Officer failed to take note of the fact that the assessee has repaid the loan amount of Rs.1 crore within 10 days time. The Revenue has not been able to show either that the assessee has introduced his unaccounted money through alleged bogus loan. Anyways, had this been the case, the assessee would not have repaid the amount. It is also not in dispute that the loan amount was received by the assessee through banking channel and the same was repaid through banking transaction. In peculiar facts of the case, we are of considered view that no addition u/s. 68 of the Act is warranted.
9. Further, a perusal of impugned order shows that the CIT(A) has remarked that the assessee could not prove source of source, hence, creditworthiness of the lender could not be ascertained. The provisions of section 68 of the Act were amended by the Finance Act, 2012 w.e.f. 01.04.2013. Prior to amendment the assessee was not required to prove source of source, hence, the said observations of the CIT(A) are superfluous.
10. Since, no ground is raised by the assessee challenging reopening of assessment, we refrain ourselves in commenting on submissions made by both the sides on validity of reopening of assessment.