P AND Y ENTERPRISES PVT LTD,MUMBAI vs. ITO 5 (2) 1, MUMBAI

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ITA 3685/MUM/2023Status: DisposedITAT Mumbai12 April 2024AY 2015-16Bench: SHRI VIKAS AWASTHY (Judicial Member), SHRI PRASHANT MAHARISHI (Accountant Member)12 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that while the reopening of assessment was justified, the AO failed to conduct independent inquiries into the evidence submitted by the assessee during reassessment. The Tribunal found that the assessee had discharged its initial onus to prove the loan transaction.

What were the facts?

The assessee company received a loan of ₹1,00,00,000/- from M/s. Sanwaria Investment Consultants Pvt. Ltd. The Assessing Officer (AO) reopened the assessment based on information from an investigation wing regarding accommodation entries. The assessee provided documentation to prove the identity, creditworthiness, and genuineness of the loan.

What were the issues?

Whether the addition under Section 68 was justified when the assessee provided sufficient evidence to prove the loan transaction, and whether the AO conducted adequate inquiries during reassessment.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3),Section 68,Section 133(6),Section 131,Section 194A,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

For Appellant: Shri Prakash Jhunjhunwala, AR
For Respondent: Shri H M Bhatt, Sr. DR
Hearing: 28.03.2024Pronounced: 12.04.2024
1.

P and Y Enterprises Pvt. Ltd. for A.Y. 2015-16 against the appellant order passed by National Faceless Assessment Centre, Delhi [the Learned Commissioner of Income-tax (Appeals)] dated 15th September, 2023, wherein the appeal filled by the assessee against assessment year passed under Section 143(3) of the Income-tax Act, 1961 (the Act) by the National Faceless Assessment Centre [ld Assessing officer], was dismissed.

2.

The assessee aggrieved with the same has raised following grounds of appeal:-

2. ON facts and circumstance of the case and in law, Learned. CIT(A), on ignoring the direct evidences, erred in confirming the addition under Section.68 of ₹1,00,00,000/-, though the appellant had proved the identity and credit worthiness of the lender and genuineness of short term loan received from M/s. Sanwaria Investment Consultants Pvt. Ltd;

3.

The Learned. CIT(A) erred in confirming the addition of ₹ 1,00,00,000/- under a serious mistaken belief that the appellant had agreed with the addition proposed under Section 68, irrespective of the fact that the appellant had never admitted of any such addition;

4. The Learned. CIT(A), before sustaining the addition under Section 68 of loan received of ₹ 1,00,00,000/-, erred seriously in brushing aside the understated vital facts, being; a) The exhaustive documentary evidences, being Ledger, Confirmation, PAN, CIN, Own bank statement, TDS certificate, I.T return, bank statement and balance sheet of lender and TDS certificate for interest payment to prove the identity, genuineness and credit-worthiness of the lender had not been disproved; b) The bank statements disclosing the repayment of entire loan i. Assessee is a company engaged in the business of ship chartering and trading of steel products. It filed its return of income on 29th September 2019, ii. at total income of ₹Nil. It claimed current year loss of ₹ 4,55,35,869/-. iii. Assessment was completed under Section 143(3) of the Income-tax Act, 1961 (the Act) on 29th December 2017 at the returned income and current year loss was not disturbed. iv. Notice under section 147 and 148 of the Act were issued on 17th March 2020. Assessee filled return on 1st February 2021, at the same income. Thereafter, notice under section 143(2) of the Act was issued on 27th February 2021. Assessee objected to the reopening of assessment, which was disposed off as per order dated 30th March 2021. v. The reason for reopening states that information is received from the office of the Assistant Director of Investigation, Kolkata as per letter dated 20th August vi. Assessee was found to be one of the beneficiaries who have been provided the loan from one party Sarwaria Investments Consultants Pvt. Ltd. of Rs.50,00,000 each on 29th September, 2014, and 4th October, 2014, therefore it was noted that these are the accommodation entries and ₹1,00,00,000/- has escaped the assessment in view of provisions of Sec. 147 of the Act. vii. Assessee was asked to explain the identity, credit worthiness of the lender and genuineness of the lender. viii. During the course of assessment proceedings assessee submitted a. Permanent Account Number, b. address of the lender, c. copy of the account of lender from the books of the assessee, d. confirmation of the lender, i. Source of loan of Rs.50,00,000 on 29th September, 2014 was received from Gujarpur Marcomm Pvt. Ltd. of the same amount and Rs.50,00,000 given on 4th October, 2014, as the source of ₹2 Crore received from Paul Tree Deal makers Pvt. Ltd. j. Bank account of the lender for repayment of loan by the assessee. k. Copy of income tax return filed by the lender on 30th March 2016 wherein total income of Rs.5,02,950/- was disclosed. ix. Thus, the assessee submitted that it has discharged initial onus under Section 68 of the Act by showing identity and credit worthiness of the lender and genuineness of the loan.

4.

The Ld. AO held that lender has shown income of only ₹5,02,950/- in the return income and therefore the credit worthiness of the lender was not established. He held that merely the transaction is routed through banking channel does not make it a genuine transaction. Further, the investigation wing has given a clear cut finding. Therefore, he made an addition of Rs.1,00,00,000/- under Section 68 of the Act by assessment order passed under section 147 read with section 147 of the Act on 21st September, 2021, determining total income of Rs.1,00,00,000/- and directed applicability of section 115 BBE of the act. 05. Assessee aggrieved with the assessment order preferred appeal before the Ld. CIT (A). Assessee challenged reopening of the assessment. The learned CIT(A) rejected the same. On the merits of the addition, he also confirmed the action of the Learned AO. He held that assessee has obtained accommodation entries and therefore, mere paper documentation does not prove

10.

Ground no. 2 - 5 are on the merit of the case of addition of Rs 1 Crore u/s 68 of the Act. Now the issue arises is that material which is enough for reopening of

11.

Assessee has accepted a loan of ₹1,00,00,000/- from Sarwaria Investments Consultants Pvt. Ltd. To prove the identity of the above company, assessee has submitted the PAN No. of the lender as well as the fact that it is assessed with ITO, ward 2(1), Kolkata. With respect to the credit worthiness of the above loan, assessee has submitted the copy of the bank account of the lender with IndusInd bank. In the bank account when the loans were given to the assessee company, lender had received the sum from other entities. On one of the occasions the sources of fund of loan of ₹50,00,000/- on 4th October, 2014 is ₹2,00,00,000/- were received by the lender. Further, source of ₹50,00,000/- given on 29th September 2014, also the source of funds from another company, it is reflected in the bank statement of the lender. Assessee has also filed the income tax return of the lender wherein total income of ₹5,02,950/- is disclosed. On verification of the balance sheet and profit and loss account of the lender it is apparent that as per note no. 9 total revenue of the lender is interest

12.

On receipt of such information, the learned Assessing Officer did not conduct any enquiry but has merely relied upon the information contained in the reasons for the reopening of the assessment. Such information is valid as far as giving gateway to the Revenue for the reopening of the assessment. For making reassessment, the learned Assessing Officer should have made a fresh

13.

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

Order pronounced in the open court on 12.04.2024.

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