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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the Deputy Commissioner of Income Tax (LTU), New Delhi (hereinafter referred to as the Ld. AO) against the order of the Ld. Commissioner of Income Tax (Appeals) (LTU), New Delhi (hereinafter referred to as the Ld. CIT(A)) passed on 19/07/2013 for assessment year 2009-10 in case of the assessee wherein the addition under section 68 with respect to five cash creditors were deleted. 2. The Revenue has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the ld CIT(A)-LTU, has erred in deleting the addition in respect of unsecured loans and interest thereon from 5 cash creditors namely, Chandan Estate & Trading Co. (P) Ltd (PAN:AAACC3383K), Sh Hira lal B. Shah (HUF) (PAN:AABHH1623P), Simplex Fabricators Pvt. Ltd (PAN:AADC2064G), Complex Trading Co. ltd (PAN:AABCC4085F) and Vijay & Sons (HUF) (AAAHV3608K) ignoring the fact that genuineness of these loans was not established either during assessment proceedings or during the appellate proceedings.
2. On the facts and in the circumstances of the case and in law, the ld CIT(Appeals) has erred in deleting the disallowance of interest of Rs. 480000/- on loans and advances without appreciating the fact that the advance given free of interest of M/s. Signum Protection (I) (P) Ltd was not utilized for business purpose.”
3. Brief facts of the case shows that assessee company is engaged in the business of manufacturing and supply of heavy equipment. It filed its return of income declaring income of Rs. 26.86 crore on 26/09/2009. During the course of assessment proceedings it was found Page | 1 DCIT(LTU) Vs. Simplex Engineering & Foundry Works Pvt. Ltd, (Assessment Year: 2009-10) that the assessee company has raised unsecured loan from is directors and close relatives of the directors aggregating to Rs. 28250000/- from 11 persons. During the course of assessment proceedings, the assessee submitted that it is not possible for it to get the loan creditors to appear before the Assessing Officer. However, the Ld. Assessing Officer issued notices Under Section 133(6) of the Income Tax Act to verify 11 creditors. Such notices could not be served on these persons. Therefore, the Ld. Assessing Officer stated that assessee has avoided either producing the parties are bringing on record the facts which could otherwise prove the genuineness of the transaction, creditworthiness of those creditors. It was further stated by him that onus to prove the genuineness and creditworthiness of the parties was on the assessee company. As the assessee company has not discharged the onus cast upon it, the addition under section 68 of these cash credit of Rs. 28250000/- has been made under section 68 of the Income Tax Act. Further, the interest claimed on these loans and opening balance amounting to Rs. 1.11 crore is disallowed to the income of the assessee. Consequently, total addition of Rs. 39399310/- was made under section 68 of The Income Tax Act. The assessment order was passed on 21/ 12/ 2011 determining the total taxable income of the assessee at Rs. 310322004/- against the returned income of Rs. 268665950/-.
4. Aggrieved, assessee preferred appeal before the Ld. CIT (A) who deleted the above addition under section 68 of the Act holding that appellant has substantiated the three cardinal points for explaining a cash credit under section 68, namely, identity, genuineness and creditworthiness. No adverse observation whatsoever has been made in respect of documents filed by the assessee. Therefore, he did not find any merit in the action of the Ld. Assessing Officer in making the addition under section 68 in respect of the loan received from the directors and their family members in group concern as all are income tax payees and in respect of which the appellant has further furnished confirmation. He also did not agree with the Ld. Assessing Officer in taking an adverse view when the appellant did not comply with the direction of the Ld. AO and refuse to furnish the bank statements and the copy of the income tax returns of certain creditors on the ground that all of them were taxpayers with whom the appellant was engaged in transactions in earlier years also and hence, in his view, obtaining income tax return and bank statements of these parties was not required. Therefore, the Ld. CIT (A) allowed the appellant to furnish the bank statements and the income tax return besides other supporting documents under Rule 46A of the Income Tax Rules and obtained remand report of the Ld. Assessing Officer. The Ld. Assessing Officer did not raise any adverse comment in the remand report. Therefore, the Ld. CIT(A) deleted the addition of Rs. 27050000/– under section 68 in respect of 14 cash creditors and further the interest Page | 2 DCIT(LTU) Vs. Simplex Engineering & Foundry Works Pvt. Ltd, (Assessment Year: 2009-10) expense disallowed on such unsecured loans was also deleted. Therefore, Ld. Assessing Officer agreed with the order of the Ld. CIT(A) and has appealed before us against the deletion of the addition with respect to the 5 cash creditors namely Chandan Estate and Trading Company Private Ltd amounting to Rs.37 lacs, Shri Hiralal B Sah HUF of Rs. 59 lacs, Simplex Fabricators Pvt. Ltd of Rs. 2 lacs, Complex Trading Co. Ltd of Rs. 5 lacs and Vijay and Sons HUF of Rs. 5 lacs.
5. The ld Departmental Representative vehemently submitted that the assessee has miserably failed to prove the creditworthiness of the lenders and genuineness of the transaction. He vehemently referred to the order of the ld Assessing Officer stating that the assessee has failed to respond to the queries of the Assessing Officer for submitting the bank account etc. and hence, the addition made by the ld Assessing Officer deserves to be upheld. He submitted a written note relying on the several decision of the various courts as under:- i. Suman Gupta versus CIT 2013 – LL – 0122 – 69 – HC ii. Blessing Constructions VS. ITO 32 taxman.com 366 iii. Tobby Consultants Private Limited VS. CIT 324 ITR 338 iv. Sun Raj Engineering Private Limited Vs CIT (ITA 79/2016) (Delhi) v. Naresh Chander Jain Vs. CIT (ITA No. 335 of 2009) (Allahabad)
The Ld. authorised representative submitted a paper book containing 117 pages and referred to the various papers with respect to the creditors for which the addition has been made by the Ld. Assessing Officer. With respect to the Chandan estates and trading Co private limited he referred to the photocopy of the acknowledgement of income tax return of the lender for assessment year 2009-10 along with the computation of income. He further referred to the copy of account of the Central Bank of India in the books of Chandan Estate And Trading Co Private Limited for the year ended on 31/03/2009 and statement of the bank account of the Chandan Estates And Trading Co Private Limited. He further submitted the confirmation of the above party. He also submitted the copy of the profit and loss account and balance sheet of that particular company for the year ended on 31/03/2009. With respect to Sh. Hiralal B Shah HUF, he referred photocopy of the return of income filed by that particular lender along with the copy of account of the lender from the books of the accounts of the assessee as well as the copy of the statement of the bank account of the lender with Axis Bank evidencing the advance of the money to the appellant. With respect to the amount given by the Simplex Fabricators Private Limited he submitted the copy of acknowledgement of the income tax return, and conformation statements along with the annual accounts of the lender Page | 3 DCIT(LTU) Vs. Simplex Engineering & Foundry Works Pvt. Ltd, (Assessment Year: 2009-10) and the bank account of the lender. With respect to the Complex Trading Co Private Limited he submitted the copy of the acknowledgement of income tax return filed by that assessee along with the competition of the total income, annual account of complex trading Co, and bank statement of IDBI bank Ltd of complex trading Co private limited. He further submitted that money has come to the complex trading company from Sangam forging private limited and therefore he further submitted the copy of the account received from Mr Sangam trading Co private limited pertaining to M/s complex trading Co private limited. With respect to Vijay and Sons HUF he submitted the copy of the acknowledgement of the income tax return, copy of account of lender in the books of the appellant duly confirmed by the lender, copy of the conformation from the lender, copy of the bank statement of the ICICI bank of the lender. He further referred to the notice issued under section 133 (6) of the income tax act issued by the ld AO to M/s Vijay and Sons (HUF) and reply submitted by the party to the Ld. Assessing Officer. Therefore, he submitted that the assessee has submitted the complete details with respect to the identity, creditworthiness of the lenders as well as the genuineness of the transactions. He therefore submitted that as assessee has fulfilled all the three ingredients of the amount added by the Ld. Assessing Officer under section 68 of the Income Tax Act and Ld. Assessing Officer could not find fault with all these evidences submitted by the assessee the Ld. CIT (A) has correctly deleted the above addition.
We have carefully considered the rival contention and perused the orders of the lower authorities. In the present case with respect to the five creditors challenged by the revenue the Ld. CIT (A) has deleted the addition after making verification with respect to all the cash creditors of following evidences:- I. return of income filed by cash creditors for assessment year 2009-10 II. account copy from the books of the cash creditor III. account copy from the books of appellant of the cash creditor IV. bank statement of the cash creditor V. conformation of the cash creditor VI. Annual accounts of the cash creditors VII. in case of complex trading Co Ltd where the sum of Rs. 530639/– has been credited in the bank account of that company from other party i.e. M/s Sangam forging private limited then conformation from that party also.
The Ld. departmental representative could not show us any reason that above details submitted by the assessee do not prove the identity of the lenders. With respect to the DCIT(LTU) Vs. Simplex Engineering & Foundry Works Pvt. Ltd, (Assessment Year: 2009-10) creditworthiness of the parties it is apparent that M/s Chandan estates and trading Co private limited has earned the net profit of Rs. 3180375/- for the current year and has paid income tax of Rs. 2.70 Lacs for the year, under section 115JB of the income tax act. As at the beginning of the year amount of Rs. 21.01 Lacs was paid as loan by that company to the assessee and during the year Rs. 37 Lacs were further deposited with the assessee. The amount of credit outstanding with respect to this party is Rs. 59.27 Lacs. The assessee has further paid interest of Rs. 4.23 Lacs at the rate of 12.5% on the above deposit. The depositor company has shareholders fund of Rs. 77.53 lakhs and has the gross revenue of Rs. 32.41 Lacs for the year. The only loans and advances given by the depositor to the assessee is also shown under the head other advances. In view of this there cannot be any doubt about creditworthiness of this party. No information or evidence was brought on record by the revenue to prove the otherwise. With respect to Sh. Hiralal B Shah (HUF) the assessee has submitted the similar details and the copy of the bank statement of that particular creditor. It is filing return of income showing gross total income of Rs. 10.69 Lacs for the year and further has shown the amount of interest received from the assessee company as its income. For the source of the loan account the axis bank statement was also provided which shows the detail of amount paid by the depositor to the company and none of the credit were in cash but all the credits were through banking transaction and the depositor is earning interest only. With respect to the simplex fabricators private limited where the sum of Rs. 2 Lacs have been deposited with the assessee company, the opening balance outstanding was Rs. 23.01 Lacs and further the shareholders funds available with that company was Rs. 39.23 Lacs in the loans and advances given by that particular depositor to the assessee was also reflected in their balance sheet. The company is also the sister concern of the assessee. The complex trading Co has deposited a sum of Rs. 5 Lacs whereas the opening balance with respect to the above party was Rs. 55.49 Lacs and balance as at 31/03/2009 was Rs. 65.88 Lacs. With respect to Vijay and Sons HUF the total amount outstanding at the end of the year is Rs. 25.26 Lacs and during the year the assessee has received only Rs. 5 Lacs from the above party. It is regularly assessed of the income tax and according to the bank statement of the depositor with ICICI bank and depositor has shown the interest income on such deposits. Revenue could not prove otherwise with respect to creditworthiness of these parties.
Coming to the genuineness of the transaction of the depositor, all of them are related parties and in some of them there are common directors. There is no evidence placed before us which shows doubt about the genuineness of the transactions. All the depositors are regularly assessed to income tax and are showing the amount outstanding with the assessee from year Page | 5