VEENAPANI INVESTMENTS PRIVATE LIMITED,MUMBAI vs. ITO 13(3)(1), MUMBAI

(A.Y.2013-14) Veenapani Investments Private Limited Subsequently, the Assessing Officer (AO) has received information from DGIT (Inv), Mumbai that the assessee has obtained accommodation entries from Shri Vipul Vidur Bhatt group entities. Therefore the AO has reason to believe that the income has escaped assessment and issued notice u/sec 148 of the Act. In compliance to the notice, the assessee has filed a letter mentioning that the return of income filed on 31-03-2015 may be treated as a due compliance and the assessee was provided reasons for reopening of assessment and the asssessee has filed the objections, which was disposed off by the A.O on 4.10.2017. Further notice u/sec 143(2) and u/sec 142(1) of the Act are issued and, in compliance the Ld. AR of the assessee appeared from time to time and submitted the details. The A.O dealt on facts of search & seizure u/sec132 of the Act of Shri Vipul Vidur Bhatt group entities. The AO found that the group is engaged in providing accommodation entries in the nature of bogus unsecured loans and the asssssee has obtained aggregate unsecured loans of Rs.1,03,95,000/- from four entities (i) Santoshima Trade Links Ltd Rs.4,75,000/- (ii) Lunkad Textiles Pvt Ltd Rs.68,20,000/-(iii)P.Saji Textiles Ltd Rs.6,00,000/- and (iv) Dolex Commercial Pvt Ltd Rs25,00,000/-.The AO has called for the details/information to explain the transactions and produce the loan/ lender parties with supporting sources of funds and bank statements of lenders. Further the (A.Y.2013-14) Veenapani Investments Private Limited notice u/sec 133(6) of the Act was issued on the unsecured loan creditors and the loan creditors have responded to the notices and filed the information with supporting details.

3. Further, the AO has provided an opportunity to the assessee to establish the identity, creditworthiness and genuineness of the loan parties/creditors. The assessee has filed the detailed submissions explaining the transactions duly supported with the bank statements, loan confirmations and ledger accounts. The AO has dealt on the details filed by the loan creditors in lieu of notice issued u/sec133(6) of the Act. Whereas the AO is of the opinion that the genuineness of the transactions could not be established and the assessee has not discharged its obligation of proving the identity, creditworthiness and genuineness of the loan creditors. Whereas the assessee has filed the details vide letter dated 23.11.2017 and reply to the show cause notice issued by the A.O dated 8.12.2017.The assessee has submitted the details i.e confirmation of lenders, bank account statements and financial statements etc to substantiate genuineness, identity and creditworthiness of the loan creditors. The assessee has repaid the unsecured loans obtained from four lenders in the subsequent years and was confirmed by the parties. But the AO was not satisfied with the information and explanations and observed that the (A.Y.2013-14) Veenapani Investments Private Limited assessee has not satisfied the ingredients required u/sec 68 of the Act and made an addition of Rs. 1,03,95,000/- and assessed the total income of Rs.1,04,04,880/- and passed the order u/s 143(3) r.w.s. 147 of the Act dated 29.12.2017.

4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). The CIT(A) has considered grounds of appeal

, findings of scrutiny assessment. The assessee has filed the submissions on the disputed issue of validity of reassessment proceedings and unsecured loans referred at Page

3. Para 6 of the order read as under :

(A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited (A.Y.2013-14) Veenapani Investments Private Limited

5. Whereas, the CIT(A) was not satisfied with the submissions and material information has upheld the validity of assessment and affirmed the action of A.O. and sustained the addition of unsecured loans and dismissed the assesses appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal with the Honble Tribunal.

6. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the addition u/s 68 of the (A.Y.2013-14) Veenapani Investments Private Limited Act irrespective of the fact that the assessee has filed the details in respect of the loans and submitted the confirmation of the loan creditors along with other details. Further, the Ld. AR submitted that the assessee maintains the regular books of accounts and has obtained unsecured loan from genuine creditors and they were repaid in the subsequent assessment years. Whereas, the assessee has furnished before the CIT(A), the confirmation of loans, bank statement of both the assessee and loan creditors, audited financial statements to substantiate the genuineness, identity and creditworthiness of the loan creditors. Further the A.O relied on the statement of Shri Vipul Vidur Bhatt in the search and seizure u/sec132 of the Act conducted on his group entities which retracted subsequently and hence addition of unsecured loans is bad in law. The Ld.AR supported the submissions on the disputed issues with the material evidences in the paper book and judicial decisions and prayed for allowing the appeal. Per Contra, the Ld. DR submitted that the AO has made enquiry and issued notice u/s 133(6) of the Act and there was no proper response from the parties and the Ld.DR supported the order of the CIT(A)

“7. We find that the Assessing Officer while the assessment order has dis-allowed 40% of the total payments made on the basis of the payments made to 13 parties, who were not produced before him during the assessment proceedings. This on the ground that payments are not genuine. We are unable to understand on what basis the dis- allowance is made on the total payments, if at all it should have been restricted only to the amounts paid to the 13 persons who are not produced before the Assessing Officer. Be that as it may, we find that the respondent assessee had done everything to produce necessary evidence, which would indicate that the payments have been made to the parties concerned. The details furnished by the respondent assessee were sufficient for the Assessing Officer to take further steps if he still doubted the genuineness of the payments to examine whether or not the payment was genuine. The Assessing Officer on receipt of further information did not carry out the necessary enquiries on the basis of the PAN numbers, which were available with him to find out the genuineness of the parties. The CIT(A) as well as the Tribunal have correctly held that it is not possible for the assessee to compel the appearance of the parties before the Assessing Officer.

9. The appeal is dismissed. No order as to costs”.

(A.Y.2013-14) Veenapani Investments Private Limited (ii) The Honble Tribunal in the case of Shri Darshan K Vakharia Mumubai Vs. ITO in & 1539/Mum/2023 dated 28.07.2023 for A.Y.2012-13 & 2013- 14 has considered the provisions and facts on the submissions of the asssessee on the unsecured loans and granted relief observing at Page 9 Para 9 of the order read as under:

“9. Heard the parties and perused the material available on record. As per balance sheet, as on 31st March, 2012 the Assessee has shown the amount of Rs. 20,00,000/- and Rs. 50,000/- as liability towards M/s. Santoshima and M/s. Vasudev respectively and also shown to have paid the interest amount of Rs. 2,40,000/- and Rs. 60,000/- respectively to M/s. Santoshima and M/s. Vasudev. It is not in controversy that the Assessee had taken the said loans in the financial year 2010-11 (AY: 2011-12) which continued in the assessment year under consideration as well. During the course of assessment proceedings, the Assessee also submitted the following documents in order to substantiate its claim.

(i) The confirmation of loans. (ii) Acknowledgment of returns of income of loan parties. (iii) Copies of relevant pages of bank statements of loan parties.

(iv) Copies of bank statements of the Assessee, in which interest payments have been debited.

9.1 However, the Assessing Officer doubted and rejected the same while relying upon the statement of Mr. Vipul Vidur Bhatt, without providing copy of the his statement to the Assessee and even without affording any opportunity of cross examination of Mr. Bhat. The Assessee in this case, has not only discharged its primary onus by establishing the identity of the parties etc., providing confirmation of loans, acknowledgment of return of income filed by the parties who (A.Y.2013-14) Veenapani Investments Private Limited have duly shown the amount of loan in their returns of income and banks statement of loan parties and the Assessee showing the transactions held, but also shown to have deducted TDS on the interest payment made to the parties, which also strengthen the genuineness of the claim of the Assessee. Therefore, on the basis of the general statement made by any 3rd party, without demolishing the case/claim of the Assessee, making of an addition is not logical.

9.2 We also observe as noted above that the loan of Rs. 20,50,000/- was taken by the Assessee from the said entities in 2010-11 (AY:2011-12) and during the year consideration, no such amount was found credited in the books of an Assessee maintained, if any and even otherwise the Assessee has claimed the he is not maintaining any books of account. It is a settled law that mere suspicion cannot takes place for the purpose of passing an order, in fact there must be something more than suspicion in support of an assessment. The Hon'ble Apex Court in the case of CIT vs. P. Mohankala (Civil Appeal no. 2540 of 2007 decided on dated 15.05.2007} has clearly laid down the dictum "that there has to be credited amount in the books of account of the Assessee and such credit has to be sum during the previous year and the Assessee offers no explanation. In the instant case, it is a fact that neither the Assessee has received any cash nor paid any cash and there was no real cash credit during the year under consideration, therefore the amount in question as unexplained expenditure could not arise, hence on this count also, the provisions of section 68 is not applicable and therefore addition u/s. 68 of the Act is un-sustainable. Consequently, we are inclined to delete the addition of Rs. 3 Lacs in total. Resultantly the instant appeal is allowed.” (iii) The coordinate bench of Honble Tribunal in the case of ITO Vs. M/s MJD Financial Services Pvt Ltd in dated 10-09-2020 for A.Y.2012-13 has considered the provisions and facts on the submissions of the asssessee and has upheld the order of the CIT(A) dismissing the (A.Y.2013-14) Veenapani Investments Private Limited revenue appeal observing at Page 5 Para 9 &10 of the order read as under:

“8. We have heard the rival submissions of the parties and perused the material on record including the cases relied upon by the parties. The Ld. CIT (A) has deleted the addition made by the AO holding that the AO has not brought any fact on record to established that cash was introduced prior to advancing the loan to the assessee and there is no evidence on record to show that the assessee had paid cash to the loan creditors in lieu of loan received from them. It is an admitted fact that the unsecured loans under consideration have been repaid over a period of time and the appellant has paid interest and deducted TDS thereon as per the provisions of the Act.

Relying on the various decisions of the Courts and the Tribunal, the Ld. CIT (A) has held that the assessee has discharged its onus of proving genuineness of the transaction of furnishing the identity of the creditors and documents to prove the transactions. The Ld. CIT (A) has pointed out that no addition/disallowance can be made solely on the basis of statement made u/s 132 (4) of the Act without bringing any corroborative evidence on record. As pointed out by the Ld. counsel for the assessee, the "I" Bench of the Mumbai Tribunal has decided the identical issue in favour of the assessee in the case of DCIT vs. M/s Manba Finance Ltd. 1449, 1467/Mum/2017 for the AY 2013-14, 2011-12 and 2010-11. In the said case, survey action u/s 133A of the Act was conducted by DGIT (Inv.) Mumbai. During the course of survey, the books of account of the assessee were examined which revealed that the assessee had received unsecured loan and share application money from the concerned companies operated and controlled by Sh. Pravin Kumar Jain to the tune of Rs. 7,75,00,000/-. A survey was also conducted in the case of Mr. Rakesh Doshi, Proprietor Rakesh Doshi Associates. As per the revenue, Shri Doshi was the broker who arranged the loans and share capital money from the concerned company controlled by Pravin Kumar Jain. During the course of survey Mr. Rakesh Doshi in his statement admitted that he was an (A.Y.2013-14) Veenapani Investments Private Limited accommodation entry facilitator and he had arranged accommodation entry from various other companies which were not the part of company controlled Pravin Kumar Jain. The assessee had shown unsecured loans from such parties amounting to Rs. 1,25,00,000/-.

9. During the course of assessment proceedings, the assessee was asked to show cause as to why unsecured loan taken from the party should not be treated as unexplained cash credit u/s 68 of the Act. The assessee contended that it has submitted all the documents to prove the genuineness of the transaction. The assessee further requested that cross examination of Pravin Jain may be allowed. The assessee further submitted that Pravin Kumar Jain has retracted his earlier statement. So far as the loan amounting to Rs. 1,25,00,000/- from the other companies is concerned, the assessee submitted balance sheet of all the company to show that the lending companies has enough reserves and share capital. The assessee further submitted that it has furnished the confirmation from the parties. However, the AO rejecting the contention of the assessee made addition of the said amount to the income of the assessee. In the first appeal, the Ld. CIT (A) deleted the addition on legal ground as well as on merits. The revenue challenged the action of the Ld. CIT (A) before the ITAT. The coordinate Bench of the Tribunal upheld the findings of the Ld. CIT (A) holding as under:-

"33. We have carefully considered the submissions and perused the records. We find that the first issue in this case relates to the addition of unsecured loan taken from corporate entities u/s. 68 of the Act. In this regard, it is noted that it is the claim of the assessee which has been found correct by the ld. CIT(A) that the assessee has duly paid interest on these loans, deducted TDS, filed the TDS return. The Id. CIT(A) has also found that this loans have been duly repaid.

(A.Y.2013-14) Veenapani Investments Private Limited

Not allowing the assessee to cross examine the witnesses by the Adjudicating authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullify in as much as it amounted to violation of principles of Natural Justice because of which the assessee was adversely affected. The order was vacated.

2. Kishinchand Chellaram v. C.Ι.Τ. (1980) 1251TR 0713 (SC)

3. Ponkunnam Traders υ. Addl. Ι.Τ.Ο. & Anr. (1972)83ITR508(Ker)

(i) Confirmation of the party who gave the loan.

(ii) Copy of Return of Income filed by them alongwith PAN No. of the loanees.

(iii) Copy of Balance Sheet, P/L Account alongwith all Schedules, (iv) Copy of Certificate of incorporation, original and the latest one.

(v) Copy of Bank Statement of the loanee from which the loan have been given to the assessee, as well as Repayment made if any by the assessee.

Cash credits.

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.]

(A.Y.2013-14) Veenapani Investments Private Limited We may gainfully refer to the decision of Hon'ble jurisdictional High Court which is also relevant in this case:

During the previous relevant to the subject Assessment Year the assessee had increased its share capital from Rs.2,50,000/to Rs.83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs.6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs.190/per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no.2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs.7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. This addition was deleted by the CIT(A) and the Tribunal. Before the High Court, the department contended that the proviso to Section 68 of the Act which was introduced with effect from 1st April, 2013 would apply in the facts of the present case even for Α.Υ. 2008-09. The basis of the above submission was that the de hors the proviso also the requirements as set out therein would have to be satisfied. HELD by the High Court dismissing the appeal:

(i) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "declaratory". Therefore it is not (A.Y.2013-14) Veenapani Investments Private Limited open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming of the Act laid down by the pre the genuineness of the transaction, identity and the namelty of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied.

(ii) Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court in CIT v/s. Lovely Exports (P)Ltd. 317 ITR 218 in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit.

As noted in the ratio emanating from the decision of Hon'ble Jurisdictional High Court above, even if the source of funds of this corporate entities who have advanced loan to the company are considered suspicious in the context of pre- amended section 68, the addition can be considered in the hands of these companies and cannot be made in the hands of the assessee.

Even otherwise (as the proviso is applicable for A.Y. 2013-14) as rightly noted by the ld. CIT(A), the said proviso provides for an adverse inference if the assessee company providing those sums does not offer any explanation about the nature and source of sums. In this regard, it is noted that the A.O. has not made any enquiry from these corporate entities who have provided the loan, not even notice u/s. 133(6) has been issued. In these circumstances, without making any enquiry, the A.O. cannot presume that the funds obtained by these corporate entities are bogus or they are assessee's own funds being circulated. In this regard, we note that in the identical (A.Y.2013-14) Veenapani Investments Private Limited situation, this tribunal in the case of Asst. CIT vs. Shri Dilip Chimanlal Gandhi (in LT.A. No.7079/Mum/2016 vide order dated 01.08.2018) the ITAT has held as under:

"22. Upon careful consideration we note that in support of the explanation of the unsecured loans, the assessee has submitted following details before the assessing officer:

I. PAN details of creditors II. Constitution and address of the creditors Particulars of income-tax returns filed by the creditors.

These show that the creditors are legitimate business entities, having the ability to advance the impugned loans to the appellant,] IV. Confirmatory letters given by the creditors V. Audited financial accounts (including balance sheets) of the creditors [These show that the loans are duly reflected in the books of account of the creditors.] VI. Relevant bank statements of the creditors [These show that the loan amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions.] 23. The assessing officer has made no enquiry with reference to the above. He did not seek any further explanation or detail from the assessee. He solely relied upon the investigation wing enquiry regarding the Bhanwarilal group. The Id. Commissioner of Income Tax (Appeals) in this regard has correctly made the observation that the assessee having given all the necessary details and has discharged its onus, it was incumbent upon the assessing officer to make furtherenquiry if he was not convinced by the submissions of the assessee. We find that assessing officer has displayed total lack of application of mind by not even issuing a notice to the loan creditors.

In the result, appeal filed by the revenue for assessment year 2012- 2013 is dismissed” (iv). The Honble Tribunal Jaipur Bench in the case of M/s. Noble Tradelink Pvt Ltd Vs. ITO. In & 303/JP/2021 A.Y.2012-13 & A.Y.2013-14 order dated 10.10.2022 has considered the provisions and facts on the submissions of the asssessee on the unsecured loans and granted relief observing at Page 25 Para 7.3 of the order read as under:

(A.Y.2013-14) Veenapani Investments Private Limited “7.3 We have heard both the parties and perused the materials available on record. In this case, the AO made an addition of Rs.54.50 lacs holding it as unaccounted money relating to Shri Vipul Vidur Bhatt for providing accommodation entries and rotating it in its bank account through these companies during the year. In first appeal, the ld. CIT(A) has confirmed the action of the AO. It is not imperative repeat the facts of the case as similar issue had been raised by the assessee in for the assessment year 2012-13 wherein the Ground No. 2 to 2.4 of the assessee has been allowed. Since the similar points are involved in the appeal of the assessee for the assessment year 2013-14, therefore, applying the same analogy, we feel that the ld. CIT(A) is not justified in confirming the action of the AO as to the addition of Rs.54.50 lacs in the case of the assessee company. Hence, the decision taken by us in Ground No. 2 to 2.4 of the assessee for the assessment year 2012-13, allowing the grounds of the assessee are reproduced as under:- ‘ ’4.5 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the AO while making the assessment in the case of the assessee observed that during the year under consideration the assessee company had taken credit entries in the form of unsecured loan from the entities which are 27 ITA NO.302/JP/2021 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR managed by Shri Vipul Vidur Bhatt for providing accommodation entries and rotated unaccounted money of Rs.80 lacs in its bank through these companies. Thus the AO added unaccounted money of Rs. 80 lacs to the total income of the assessee company for the year under consideration and the ld. CIT(A) has confirmed the action of the AO. The Bench noted that if any sum is found credited in the books of account of the assessee then the assessee has to prove the identity and creditworthiness of the party from whom the amount is received and the genuineness of the transaction. From the record, it is noted that identity of the creditor is established from the company master data downloaded from MCA Portal. The genuineness of the (A.Y.2013-14) Veenapani Investments Private Limited transaction is established from the confirmation of accounts, affidavit of Director of loan creditor companies and bank statement from where it can be seen that the transaction had been carried out through banking channel and the loan amount is repaid during the year itself. It is also noted from the records that the creditworthiness of the creditor is established from the balance sheet from where it can be seen that the net worth of of M/s Lukand Textiles Pvt. Ltd. is Rs.2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs.3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs.10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs.45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan given to assessee is out of repayment of loan given to other parties. Thus, assessee has discharged its onus to establish the identity of creditors, genuineness of the transaction and creditworthiness of the creditors. The ld. AR of the assessee further submitted that having discharged its onus, it is the duty of the AO to disprove the evidence filed by the assessee. The AO except referring to the report of Investigation Wing has not brought any material on record to rebut the evidences filed by the assessee. It is not the case of lower authorities that in search of Mr. Vipul Vidur Bhatt any evidence is found that assessee has given any cash for taking the alleged accommodation entry. Had these loans were accommodation entries, the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. The case laws and the report relied upon by the ld. DR are with reference 28 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR to the LTCG claimed exempt u/s 10(38) of the Act which are not relevant to the facts of the assessee’s case where he took loan and also repaid during the same financial year. Hence, these case are of no help to the revenue. As against this, the ratio laid down by the assessee are squarely applicable to the facts of the assessee.

(A.Y.2013-14) Veenapani Investments Private Limited ITO vs Om Shanti Realtors (ITA No. 5615/Mum/2017 dated 01- 03-2019 wherein the Bench observed as under:-

‘’7. After having gone through the facts of the present case and perusal of the documents and after hearing both parties at length we find that the assessee had already placed on record all the documentary evidence in order to show the identity and creditworthiness of the lender and genuineness of the transactions. We have perused the confirmation filed by the parties, copies of acknowledgement of return of income filed by the lenders for the year under consideration, copies of bank statement of lenders, which establish that the payment towards loans were received during the year under consideration. Therefore, the identity of the lender was not in dispute. We have also considered all the documents placed on record by the assessee in the shape of statement of accounts and documents to show that the transactions were carried out through banking channels and the confirmations which were filed in the form of ledger accounts which reflect that the assessee had received the amount through RTGS. All those documents prove the genuineness of the transactions. Now as far as creditworthiness of the lenders are concerned, we have perused the audited accounts of the lenders which shows the creditworthiness of the lenders to grant loans and advances. Further, we also noticed upon the records that ld. CIT(A) had rightly pointed out in its order that the AO made the additions by holding that as the declared income by the respective loan creditors was less, therefore, they were not capable of lending. However, the AO ignored the fact that the lenders had substantial 29 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR turnover and had a very large basis of assets as is reflected in the respective balance sheet.’’

2. Pr. CIT, Udaipur vs Shubh Mines Pvt. Ltd. (DBITA No. 96/15 order dated 03-05-2016 (Raj. H.C.) wherein the Hon’ble Court observed at para 7.

7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the (A.Y.2013-14) Veenapani Investments Private Limited statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record that the share application money of Rs.50,00,000/- was received from Moderate Credit Corporation Ltd., a listed company. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse.

4. Kanhaialal Jangid vs ACIT (2008) 8 DTR 38 (Raj) wherein the Hon’ble Court observed that –‘’ While it is the assessee’s burden to furnish the explanation relating to cash credits, the assessee’s burden does not extend beyond proving the existence of the creditor and further proving that such creditor owns to have advanced the amount credited in the account of assessee. However, the burden does not go beyond to put the assessee under an obligation to further prove as to wherefrom the creditor has got or procured the money to be deposited or advanced to the assessee. The explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purpose of rejecting the explanation furnished by the assessee and making additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the department that the source of such moneys come from the assessee himself or such source could be traced to the assessee itself. In the present case, while the existence of the creditor is not in doubt & he has admitted to have advance the loan to the assessee, the fact that the explanation furnished by the creditor about his source of such advancement has not been accepted by the revenue authority cannot lead to any presumption that the source of such advancement by creditor emanated from the assessee. Therefore, the addition in the income of the assessee as cash credit cannot be sustained.’’

8. The Ld.AR mentioned that the assessee has cooperated in submitting the information in the assessment proceedings, whereas the A.O has ignored the information, evidences and audited financial statements and unilaterally made addition u/sec68 of the Act. The Ld. AR emphasized that the assessee has discharged its burden by submitting the financial statements of the lenders where the payment is made through banking channel and identity, creditworthiness and genuineness of the lender company was proved in the assessment proceedings. Further the Ld.AR demonstrated the details submitted by the asssessee before the Assessing Officer i.e the audited financial statements, confirmations, Bank statements, copy of the income tax returns and the repayment details to substantiate the genuineness and credit worthiness of loan creditors, which are placed at (A.Y.2013-14) Veenapani Investments Private Limited page 4 to 34 of paper book. The Ld.AR demonstrated the copy of bank statements reflecting the repayment of unsecured loans in the paper book which is not disputed by the revenue. Further, the A.O has failed to make further enquiries and relied on the statement recorded, overlooking the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The Ld. AR referred to the copy of details of unsecured loans provided by the lenders and subsequent repayment of loans along with the financial statements, confirmations and bank statements filed by the four unsecured loans creditors directly with the assessing officer in lieu of notice issued u/sec 133(6) of the Act in the assessment proceedings placed at page 35 to 166 of the paper book.. Whereas the A.O has ignored the information, evidences and audited financial statements and unilaterally made addition u/sec68 of the Act only on the basis of statement provided by third party without any iota of evidences discrediting the evidence furnished by the assessee and the statement of Shri Vipul Vidur Bhatt has been retreated which cannot use as reliable evidence. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 of the Act. Further the loan transactions are not believed and alleged as non genuine and treated as unexplained cash credit U/sec68 of the Act and these unsecured loans were repaid through account payee / banking channels in the subsequent (A.Y.2013-14) Veenapani Investments Private Limited years which is not disputed. The Ld.AR submitted that the assessee has substantiated the stand by submitting the details before the A.O. and CIT(A) and discharged the burden. We considering the facts, circumstances and ratio of judicial decisions referred above, set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition of unsecured loans and allow these grounds of appeal in favour of the assessee.

Order pronounced in the open court on 25.07.2024.