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Facts
The assessee, IRIS Motel and Resorts Pvt. Ltd., received unsecured loans totaling ₹1,27,83,960/- from group companies and directors during A.Y. 2013-14. The Assessing Officer added this amount as unexplained cash credit under section 68, doubting the identity, creditworthiness, and genuineness of the transactions, which was upheld by the CIT(A).
Held
The Tribunal found that the assessee had discharged its onus by providing details like ITRs, bank statements, and confirmations for the lenders, who were existing parties. The AO failed to conduct independent examinations using statutory powers (u/s 133(6) or 131) and had accepted similar transactions as genuine in prior years. Thus, the addition u/s 68 and the consequential penalty u/s 271(1)(c) were deleted.
Key Issues
Whether the addition of unsecured loans as unexplained cash credit under section 68 of the Income-tax Act was justified, and whether penalty under section 271(1)(c) was leviable.
Sections Cited
Section 68, Section 143(3), Section 271(1)(c), Section 133(6), Section 131
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in arise out of the order of the Commissioner of Income Tax (Appeals), Faridabad [hereinafter referred to as ‘ld. CIT(A)’, in short] for A.Y. 2014-15 dated 07.12.2017 and 20.03.2020 against the order of assessment passed u/s 143(3) and 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 09.06.2016 and 08.04.2019 by the Assessing Officer, DCIT, Circle-1, Faridabad (hereinafter referred to as ‘ld. AO’).
1441/Del/2020 IRIS Motel and Resorts Pvt. Ltd
Let us take up the quantum appeal of the assessee in .
The only effective issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the addition of ₹1,27,83,960/- as unexplained cash credit u/s 68 of the Act in respect of unsecured loan received by the assessee.
We have heard the rival submissions and perused the material available on record.
The assessee company was running a Motel at 91 km stone, Delhi-Mathura Road, Hodal (Haryana). The books of account of the assessee company are maintained in computerized format. During the assessment proceedings, the assessee produced the regular books of account like cash book and ledger which was examined by the ld AO on test check basis vis-a-vis the financial statement of the assessee. On perusal of the aforesaid fact that the assessee company, the ld AO noticed that during the year under consideration a sum of ₹1,27,83,960/- was raised as unsecured loan from credit companies and directors/ shareholders of the assessee company. The details of the same are as under:-
Party Name Opening balance Received Repaid Closing (from share balance application money pending allotment) From Body Corporate 1. Euphoria Fabrication Pvt. 2,00,000 2,00,000 Ltd. 2.Focus Fabrication Pvt. Ltd. 9,00,000 6,57,000 15,57,000 3. Galaxy Colils Pvt. Ltd. 15,00,000 15,00,000 4. Iris Jafrutech Pvt. Ltd. 6,15,000 36,22,000 42,37,000 5. Iris Real Estate Pvt. Ltd. 1,81,24,844 71,64,960 2,52,89,804 6. Iris Technopark Pvt. Ltd. 7,00,000 7,00,000 Total(B) 2,20,39,844 1,14,43,960 3,34,83,804 From Directors 1. Sh. Anuj Jhamb 10,00,000 8,00,000 18,00,000 2. Sh. Navneet Jhamb 10,75,255 5,40,000 16,15,525 Total(C) 20,75,255 13,40,000 34,15,255 GROSS TOTAL(B+C) 2,41,15,099 1,27,83,960 3,68,99,059
1441/Del/2020 IRIS Motel and Resorts Pvt. Ltd
The ld AO directed the assessee company to file complete details such as name and address, confirmation of accounts, copy of bank account and copy of ITR of creditors from which the identity, creditworthiness of the lenders and genuineness of the transaction could be verified. The assessee furnished all the requisite details that were called for by the ld AO. On verification of those details, the AO observed as under:
“i) During the year under consideration assessee company raised unsecured loans of Rs.1,27,83,960/- from group concerns and from Sh. Navneet Jhamb. He is also a Director in assesseee company as well as director in creditors companies. ii) Sh. Navneet Jhamb advanced Rs.5,40,000/- to assessee company during the concerned year but has not filed his Income Tax Return for concerned year. iii) All the creditors companies (six companies) including three more companies which have outstanding unsecured loans towards assessee company are being operated from same premise i.e. H. No. 10, Gali No. 10, Village Zamrudpur, Greater Kailsah, New Delhi. iv) All these companies except one or two have shown their income in thousands only and the tax is paid as self assessment tax. v) In all these companies 3-4 persons including Mr. Navneet Jhamb are common directors with almost equal shareholdings. vi) All these companies received huge amount in the form of either loan or share capital and given the same to other group concerns without charging any interest thereon. vii) Most of these companies have no fixed assets in their balance sheet except one or two which have either the computer or agricultural land as their fixed assets. viii) In all of these companies except one or two there is no employee and no salary is debited in Profit and loss account. ix) Being real estate companies no expenses regarding construction/ development was debited to Profit and loss account.
Accordingly, the ld AO doubted the genuineness of the transaction and creditworthiness of the lenders. The ld AO also directed the assessee to produce the lenders with their books of account and case was finally adjourned to 18.03.2016, on which date the lenders could not be produced, but a reply was filed by the ld AR reiterating the earlier submissions and made a request to seek
1441/Del/2020 IRIS Motel and Resorts Pvt. Ltd direct confirmation from all the creditors. Ld AO even directed the assessee to produce the accountant before him to explain the transaction in the bank statement. The assessee responded that the accountant had left the company and there is no one who could explain the accounts. The ld AO observed that all the lenders where either group company of the assessee or directors of the assessee and hence there should not be any defect for the for the assessee to furnish the lenders before for examination. The same not being done raises suspicion on the entire set off of transactions and accordingly he concluded that the three ingredients of section 68 of the Act are not fulfilled and proceeded to treat the loan received during the year in the sum of ₹1,27,83,960/- as unexplained cash credit under section 68 of the Act. This action of the ld AO was upheld by the ld CIT(A).
At the outset, we find that in response to the queries raised by the ld AO seeking all the details connected with the lenders, but the assessee filed letter dated 18.01.2016 had furnished the copy of ITR of lenders, copy of bank statement of the lenders and copy of confirmation from the lenders together with their name, addresses. It is also pertinent to note that all the investors, lenders were existing parties from whom assessee had already received money in the earlier years which was accepted as genuine by the ld AO. The entire details of the unsecured loan along with confirmation, income tax returns and bank statement of six companies and two persons are enclosed in pages 25 to 121 of the paper book. In the balance sheet of the lenders, the loans given/ amount invested in the assessee company have been duly reflected. We find that on receipt of all these details from the assessee, ld AO had not provided to make independent examinations by issuance of notice u/s 133(6) of the Act or summons issued u/s 131 of the Act to those lenders/ investors. In fact vide letter dated 22.02.2016 the assessee had even requested the ld AO to seek direct confirmation from the lenders/ investors, as the accountant of the assessee company had already left and there is no one to explain the accounts. No action whatsoever was taken by the ld AO in this regard. Merely because lenders have shown meager income in their income tax return that cannot be a reason to dis believe their
1441/Del/2020 IRIS Motel and Resorts Pvt. Ltd creditworthiness as bank statement and audited financial statements of the lenders/ investors prove the fact otherwise. Hence, we hold that the assessee had duly discharged its onus by furnishing all the requisite details before the ld AO and ld AO remained completely silent on the same without making further examination. It is also pertinent to note that all these investors/ lenders are existing shareholders and existing loan creditors for the assessee company, where the amount received from them were explained as genuine by the ld AO in the earlier years. Hence, there is absolutely no reason to doubt, either their identity, their creditworthiness or genuineness of the transactions during the year under constitution. Hence, the addition made u/s 68 of the Act is here by deleted. Accordingly, the appeal of the in is here by allowed.
Since the quantum appeal is decided in favour of the assessee, other appeals of the assessee in 2020 challenging the levy of penalty u/s 271(1)(c) would have no legs to stand and penalty is here by deleted.
In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 27/05/2024.