SRI VINAMRA DAGA,KOLKATA vs. DCIT, CIRCLE - 6(1), KOLKATA, KOLKATA

The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs. 40,00,000/- which the assessee claimed to have received as unsecured loan and Rs.4,22,531/- being the interest related to the aforesaid amount of loan of Rs.40,00,000/-.

Brief facts of the case are that the assessee filed its return electronically on 20.09.2014 declaring total income of Rs.92,82,290/-. Later the case was selected for scrutiny. The AO noted that the assessee has taken unsecured loan to the tune of Rs.44,22,531/- from M/s. Pasupati Trade Links Pvt. Ltd. In order to find out the veracity of the loan, the AO issued notice u/s. 133(6) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) which the AO notes to have returned un-served. However the AO

We have heard rival submissions and gone through the facts and circumstances of the case. It was brought to our notice by the Ld. AR that the unsecured loan taken by the assessee is only to the tune of Rs. 40,00,000/- and not Rs.44,22,531/- as noted by the AO and thus the addition made of Rs.44,22,531/- as bogus unsecured loan itself is per se erroneous because the unsecured loan was only Rs. 40,00,000/- and the interest on it booked by assessee was Rs.4,22,531/- and, therefore, the AO erred in making an addition of Rs.44,22,531/- as bogus unsecured loan. It was also brought to our notice that the AO has made double addition of the interest element. On one hand he has made the entire addition of Rs.44,22,531/- under the head bogus unsecured loan wherein the loan amount of Rs.40,00,000/- + Rs.4,22,531/- was added and thereafter separately disallowed an amount of Rs.4,22,531/- u/s. 37(1) of the Act. According to Ld. AR, the double deduction itself exposes the prejudice and pre-determined mind of the AO that the loan is an accommodation entry. It was brought to our notice that the assessee has already repaid the loan amount and for that he drew our attention to page 31 of the paper book which is the letter written by the ITO, Ward-5(2), Kolkata who is the AO of M/s. Pasupati Tradelink Pvt. Ltd. (the lender company in this case) wherein the ITO has asked for the confirmation from the assessee in respect to the amount refunded/repaid by him to M/s. Pasupati Tradelink

We note that the assessee an individual is carrying on the business under the following two proprietorship concerns (i) M/s. Vasundhara International and (ii) M/s. Global Impex. The assessee was conducting trading of fans of Orient brand and was the Vinamra Daga, AY 2014-15 distributor of it in the State of Rajasthan. We note that the assessee had taken a loan of Rs. 40 lakhs for M/s. Vasundhara International on 05.04.2013 which fact has been confirmed by the creditor/lender M/s. Pasupati Tradelink Pvt. Ltd. which is evident from perusal of page 11 of the paper book. The source of the lender company giving loan to the assessee has also been explained from the contents of page 12 of the paper book and this fact has been corroborated by the bank statement of the lender/creditor M/s. Pasupati Tradelink Pvt. Ltd. which is placed at page 13 of the paper book and the loan has been given to assessee through bank transaction. We note that the lender company has PAN AAECP8702B and is an income tax assessee and a perusal of page 30 of the paper book reveals that the lender had filed its return of income. From the perusal of pages 31 and 32 reveals that the assessee had refunded the amount of Rs. 40 lakhs to M/s. Pasupati Tradelink Pvt. Ltd. which fact is corroborated from the queries raised by the AO of the lender company as discussed above. Thus, the assessee has been able to discharge the onus casted upon it to prove the identity, creditworthiness and genuineness of the loan creditor. For taking such a view we rely on the order of the Hon’ble Calcutta High Court in S. K. Bothra & Sons HUF Vs. ITO 347 ITR 347 (Cal). Further, we note that the Hon’ble Calcutta High Court in Crystal Network (P) Ltd. Vs. CIT 353 ITR 171 (Cal) has observed that the creditors cannot be disbelieved merely because they did not respond to summons when all other documents to substantiate the loan transaction has been filed before the assessing authority. The Hon’ble Calcutta High Court in CIT Vs. Dataware (P) Ltd. of 2011 dated 21.09.2011 has held that in case if the AO has doubt regarding the creditworthiness of the loan creditor, then the AO in turn had to seek report from the AO of the loan creditor and thereafter only draw adverse inference against the loan creditor. In this case, the loan creditor has even shown the source of the loan disbursed to the assessee (from funds it received from M/s. Godavari Exim Pvt. Ltd. as discussed) and we note that the AO has not made any exercise to discredit the loan creditor in any manner other than making certain general observations of the accommodation entry providers which cannot be the legal basis for disbelieving the loan the assessee received from M/s. Pasupati Tradelink Pvt. Ltd. and which amount the assessee has repaid as is evident from the correspondence between the assessee and the AO of the lender company as discussed above. The assessee has discharged the onus by placing all the Vinamra Daga, AY 2014-15 documents before the AO/Ld. CIT(A) as discussed above. Therefore, the Ld. CIT(A) erred in not giving credence to the aforesaid documents filed before him without any adverse material to substantiate his stand. Hence, we are inclined to delete the addition of Rs. 40 lakhs which the assessee has taken as loan as well as the interest which the assessee has given to the lender of Rs.4,22,531/-. The additional disallowance u/s. 37(1) of the Act of Rs.4,22,531/- is also deleted. Thus, the assessee gets relief of Rs.44,22,531/- and Rs. 4,22,531/- u/s. 37(1) of the Act.

In the result, the appeal of the assessee is allowed.