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Facts
The assessee, WAA Mall LLP, appealed against the order of the CIT(A) which upheld the assessment order. The Assessing Officer (AO) made additions on account of unsecured loans treated as unexplained cash credit and disallowed interest expenses on these loans. The assessee had obtained loans from three parties: Hardik A Dave, Hetal Hardik Shah, and Kamlesh D. Shah.
Held
The Tribunal held that the AO did not bring any material on record to disprove the genuineness, identity, and creditworthiness of the lenders. The assessee had provided sufficient documentary evidence, including loan confirmation letters, ITR acknowledgements, balance sheets, P&L accounts, and bank statements of the lenders. Therefore, the addition made by the AO and sustained by the CIT(A) was not justified.
Key Issues
Whether the addition of unsecured loans as unexplained cash credit and disallowance of interest thereon were justified when the assessee provided documentary evidence to prove the genuineness of the transactions and creditworthiness of the lenders.
Sections Cited
143(3), 68, 37, 132, 133(6)
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI VIKAS AWASTHY & SHRI AMARJIT SINGH,
आदेश / O R D E R PER AMARJIT SINGH, AM:
This appeal filed by the assessee is directed against the order passed by the CIT(A)-48, Mumbai, which in turn arises from the assessment order passed by the A.O u/s 143(3) of the Income Tax Act, 1961 (the Act), dated 16.04.2021 for A.Y. 2019-20. The assessee has assailed the impugned order on the following grounds before us: “1) The assessment order passed u/s. 143(3) by the ld. Assessing Officer is without jurisdiction, invalid and bad in law and in violation of the principles of natural justice 2) The ld. Assessing Officer erred in facts and in law in making addition of Rs. 30,00,000/- by treating the unsecured loans received from various parties as unexplained cash credit u/s.
ITA No.3729/Mum/2023 A.Y.2019-20 2 WAA MALL LLP v. Dy. CIT 68 of the Act on his own suspicion, surmises and conjectures which is devoid of any adverse material and without appreciating the explanations and evidences placed on record. 3) The ld. Assessing Officer erred in facts and in law in making disallowance of interest expenses on the above loans aggregating to Rs. 3,56,122/- u/s. 37 of the Act on his own surmises and conjectures which is devoid of any adverse material and without appreciating the explanations provided and the evidences placed on record. 4) Your appellant prays that (a) The assessment u/s. 143(3) be held to be bad-in-law and infructuous and order be quashed. (b) Addition of Rs. 30,00,000/- made u/s 68 be deleted; (c) Disallowance of interest expense of Rs. 3,56, 122/- made u/s. 37 be deleted; (d) Any such other relief as may be deemed fit, be granted. 5) The appellant craves leave to add, amend, alter or delete any or all the grounds of appeal.” 2. The facts in brief are that the return of income declaring income at Nil after set off of the brought forward loss of Rs.44,57,473/- was filed on 30.10.2019. A search and seizure action u/s. 132 of the Act was carried out in the case of M/s. Waaree Energies Ltd. and others on 20.11.2018. During the course of the said search action papers/documents related to unsecured loans given/taken by Waa Mall LLP and other group companies were found and seized. During the course of search action statement of Shri Hitesh Chimanlal Doshi was recorded and he offered a part of unsecured loan received by Waa Mall LLP as its income. However, during the search proceedings vide affidavit dated 06.12.2018 he has withdrawn his offer of aforesaid unsecured loan. During the course of assessment proceedings the Assessing Officer (AO) has discussed the unsecured loan obtained by the assessee from 3 parties as under: -
ITA No.3729/Mum/2023 A.Y.2019-20 3 WAA MALL LLP v. Dy. CIT
Sr. No. NAME PAN Address Status of Loan amount the involved as summons per the issued Investigation Wing (in Rs.) 1 Hardik A Dave AMTPD3611K 480/15, Namrath Returned 22,78,137/- Co-op Housing unserved Society, Mumbai, Motilalnagar Shastri Nagar, Goregaon (W), Maharashtra 400104 2 Hetal Hardik BVFPM1810D 32/2 Jawahar Unserved Shah Nagar, Goregaon (W), Mumbai 400104 3. Kamlesh D. AFDPS6605R G/2, AMRUT No reply 10,00,000/- Shah APARTMENT, received DAMUBHAI COLONY, VASNA Road, Paldi, Ahmedabad, Gujarat 380007
During the course of assessment proceedings the Assessing Officer (AO) has received information from Hardik A Dave by issuing notice u/s. 133(6) of the Act and also recorded his statement by issuing summons u/s. 133(6) of the Act. In his statement Shri Hardik A. Dave stated that he has granted loan to the assessee from his professional income of Chartered Accountant practice and past savings. However, the AO has not accepted the genuineness of the loan on the ground that Shri Hardik A Dave was not having reasonable income or savings to provide loan of Rs.10,00,000/- to the assessee. Therefore, the AO stated that he was not having necessary creditworthiness to advance the loan to the assessee. In respect of Hetal Hardik Shah the AO has also obtained various information and copies of the documents by issuing notice u/s. 133(6) of the Act and her statement was also recorded. In the statement she stated that she has granted loan to the assessee and also filed supporting documents, i.e. copy of income tax return showing that she was earning income from other sources and salary income from the past years. However, the AO has not agreed with
ITA No.3729/Mum/2023 A.Y.2019-20 4 WAA MALL LLP v. Dy. CIT the statement of the party and stated that M/s. Hetal Hardik Shah was not having income to give loan of Rs.10 lakhs to the assessee as she did not have creditworthiness to advance the loan, He also stated that the assessee has not submitted the full bank statement. In respect of the third lender, Shri Kamlesh D. Shah, the AO has also obtained information and copies of documents by issuing notice u/s. 133(6) of the Act. The AO was of the view that Shri Kamlesh D. Shah was not having creditworthiness to advance a loan of Rs. 10 lakhs. The AO also stated that the total income for AY 2018-19 of Shri Kamlesh D. Shah was Rs.9,68,020/- only and he had a few unproved liabilities and therefore he was not satisfied with the creditworthiness of the party. Therefore, the amount of loan of Rs.30 lakhs received from Hardik A. Dave, Hetal Hardik Shah and Kamlesh D. Shah were treated as unexplained cash credit and added to the total income of the assessee for the year under consideration u/s. 68 of the Act.
The assessee appealed before the CIT(A). The ld. CIT(A) dismissed the appeal of the assessee.
During the course of appellate proceedings before us, the ld. counsel for the assessee submitted that in respect of loan obtained from Hardik A. Dave, the assessee has submitted bank statement of the lender showing loan given to the assessee, Balance Sheet of the lender showing the capital balance of Rs. 20 lakhs, also explaining the source of loan as repayment of old loan to the assessee. In respect of Hetal Hardik Shah the assessee has also furnished copy of bank statement of the lender reflecting loan given to the assessee and bank statement showing that there was sufficient balance in her bank account and the detail about the past savings and earning of the lender, etc. In respect of Kamlesh D. Shah, copy of the bank statement of the lender was also submitted
ITA No.3729/Mum/2023 A.Y.2019-20 5 WAA MALL LLP v. Dy. CIT showing that there was sufficient fund available in his bank account to provide loan to the assessee. The ld. counsel for the assessee also submitted that all the lenders have accepted in their statement recorded by the AO that they have provided unsecured loan to the assessee. He further submitted that the AO has treated the loan amount as unexplained cash credit on assumption and surmise basis.
On the other hand, the ld. D.R. supported the orders of the lower authorities.
Heard both the sides and perused the material on record. Without reiterating the facts as discussed above in the order, the AO had made disallowance with respect to unexplained cash credit u/s. 68 of the Act of Rs.30 lakhs and interest on unsecured loan of Rs.3,56,122/- on the ground that genuineness of the unsecured loan was not proved. After perusal of the material on record we find that the assessee has obtained loan amount of Rs.10 lakhs each from the three lenders, i.e. Shri Hardik A. Dave, Hetal Hardik Shah and Kamlesh D. Shah as discussed above in this order. Further, on perusal of material on record we find that during the course of assessment proceedings copies of loan confirmation letters duly singed by the lenders confirming the acceptance of repayment of loan were filed. The copy of ITR acknowledgements of the lenders along with the Balance Sheet and P&L Account were also filed. Before the AO copies of the bank statements of the lenders reflecting loan amount given to the assessee were also filed. In the statement recorded u/s. 136(6) of the Act of the lenders have accepted that they have provided unsecured loans to the assessee on interest which was duly offered in the return of income of the respective years. It was also explained that the loans were granted from the professional income, salary income and post savings, etc. We find that
ITA No.3729/Mum/2023 A.Y.2019-20 6 WAA MALL LLP v. Dy. CIT the AO has neither brought any material on record nor made any investigation/ enquiry to disprove the facts and documents furnished by the lenders and the assessee in support of the genuineness of the unsecured loan transactions. During the course of appeal proceedings before us the assessee has also placed reliance on the decisions in the case of CIT v. Orchid Industries (P) Ltd. [2017] 88 taxmann.com 503 (Bom) and CIT v. Paradise Inland Shipping Pvt Ltd., ITA No. 66 of 2016 (Bom) on the proposition the addition u/s. 68 cannot be made when the assessee has placed necessary documents on record to prove the genuineness of the transaction and identity and creditworthiness of the lenders. However, in the case of the assessee the AO has not brought on record any prima facie material to take contrary view without disproving the documents/evidences submitted by the assessee. In the light of the above facts and materials placed on record we find that the AO has not brought any contrary material on record to disprove the genuineness of the unsecured loan of Rs. 30 lakhs obtained by the assessee from the three parties as discussed supra in the order. Therefore, we consider that the decision of the CIT(A) in sustaining the impugned addition is not justified. Accordingly, grounds 2 & 3 of the appeal are allowed. Ground 1 is general in nature, deserved no adjudication. 8. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 14.05.2024
Sd/- Sd/- (VIKAS AWASTHY) (AMARJIT SINGH) Judicial Member Accountant Member Place: Mumbai Date: 14.05.2024 n.p
ITA No.3729/Mum/2023 A.Y.2019-20 7 WAA MALL LLP v. Dy. CIT
आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent. 2. 3. आयकरआयु�(अपील) / The CIT(A)- आयकरआयु�/ CIT 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण DR, ITAT, 5. Mumbai गाड�फाईल / Guard file. 6. स�ािपत�ित //True Copy// आदेशानुसार/ BY ORDER,
उप/सहायकपंजीकार (Dy./Asstt. Registrar) आयकरअपीलीयअिधकरण/ ITAT, Bench, Mumbai.