DEPUTY COMMISSIONER OF INCOME TAX, AGRA vs. BASANT INFRACON PRIVATE LIMITED, AGRA

The facts as well as issues in captioned appeals of the revenue are substantially the same. First, we take up revenue’s appeal for Assessment Year (AY) 2017-18 which arises out of an order of learned Commissioner of Income Tax (Appeals), Kanpur-4 [CIT(A)] dated 03- 01-2024 in the matter of an assessment framed by Ld. AO u/s 143(3) r.w.s. 153A of the Act on 31-12-2019. The sole grievance of the revenue is deletion of addition of Rs.583.83 Lacs and Rs.60 Lacs as made by Ld. AO invoking the provisions of Sec.68. Having heard vehement arguments of both the sides, the appeal is disposed-off as under. Assessment Proceedings 2.1 During assessment proceedings, pursuant to search action in the case of BNR group on 26-09-2017, notice u/s 153A was issued to the assessee. It transpired that the assessee raised unsecured loan of Rs.583.83 Lacs from an entity by the name M/s L.S. Automobile and Finance Co. Pvt Ltd. (LSAFCL) which was held by Ld. AO to be accommodation entry. The assessee was alleged to the have received another accommodation entry of Rs.60 Lacs through its directors Shri Ajay Kumar Agrawal & Shri Anubhav Agrawal (Rs.30 Lacs from each of the director) in the form of Share Capital routed from its paper concern M/s Maa Bhagwati Enterprises (Prop. Shri Paras Kumar Parashar). The assessee was accordingly required to establish the satisfaction of primary ingredients of Sec.68. 2.2 With respect of LSAFCL, the assessee furnished ledgers extract, Income Tax Return acknowledgement of that entity, bank statement and PAN details. However, the assessee failed to produce the director of lender entity to confirm the transaction. Notice issued u/s 133(6) as well as field enquiries u/s 131(1)(d) did not elicit any positive response. Upon perusal of financial statements of that entity, Ld. AO held that it had meagre share capital with no business. After perusal of bank statements, it was alleged by Ld. AO that LSAFCL was being used for accommodation entries. Finally, the impugned loan was added u/s 68 by relying on various judicial decisions. 2.3 With respect to M/s Maa Bhagwati Enterprises, the assessee submitted that the source of payment to Shri Anubhav Agrawal and Shri Ajay Kumar Agrawal was M/s BN Agritech Ltd. The directors transferred these amounts to the assessee against purchase of shares of M/s GPL Housing Pvt. Ltd. The assessee furnished flow chart supporting the same. However, going by the investigation findings in the case of M/s Maa Bhagwati Enterprises, Ld. AO added the amount of Rs.60 Lacs u/s 68 r.w.s. 115BBE and framed the assessment. Appellate Proceedings 3.1 The assessee assailed each of the findings of Ld. AO by way of elaborate written submissions which are already extracted in the impugned order. The same were subjected to remand proceedings wherein the assessee furnished various documents in support of its claim. The Ld. AO referred to the field enquiries and justified the impugned addition. On the other hand, the assessee relied on plethora of judicial decisions holding the field in assessee’s favour. 3.2 The Ld. CIT(A), considering the provisions of Sec.68, noted that the assessee had filed various documents with respect to LSAFCL to establish the primary ingredients of Sec.68. These documents were - (a) Confirmation duly signed by the Director of lender entity for AY 2017-18 confirming the Loan transaction; (b) Acknowledgement of Income Tax Return of that entity for AY 2017-18; (c) Copy of Bank Statement of lender for AY 2017-18 confirming transfer of impugned amounts to the assessee on various dates; (iv)Audited Balance Sheet for the year ended 31.03.2017 of LSAFCL. 3.3 The Ld. CIT(A), in para 7.21 observed that in compliance to the summons, reply was received from LSAFCL which was signed by its director. The source of income for that entity was financing activity. That entity filed copy of Income Tax Returns for AY 2017-18 and 2018- 19 along with audited financial statements. That entity also filed bank statements and ledger extract supporting the impugned transactions. That entity reflected loans to various parties and merely because it was allegedly not doing any business, the same could not be a ground to make the addition. The observation that LSAFCL facilitated accommodation entries was on mere presumption. The Ld. AO did not dispute the financial worth of LSAFCL which was demonstrated by the assessee and also reflected in the financial statements of that entity. That entity had unsecured loans of Rs.823.70 Lacs out of which further loans were advanced by that entity. The allegation that this entity lacked creditworthiness could not be accepted. The Hon’ble Supreme Court in the case of CIT vs. Daulatram Rawatmal (87 ITR 349) held that onus of proving what was apparent is not real is on the party who claims it to be so. There should be some direct nexus between the conclusion of facts arrived at by the authorities concerned and the primary facts upon which the conclusion is based. Use of extraneous or irrelevant material in arriving at the conclusion would vitiate the conclusion of fact because it is difficult to predicate to what extent the extraneous and irrelevant material had influenced the authority in arriving at the conclusion of fact. The assessee was under no obligation to prove the source in the bank account of the creditor nor the origin of origin after the assessee established the real source of such receipts as loans. Once the assessee explained the credit entry and bring on evidence to show that the entry is related to a third-party and third-party also owes the credit, the burden would shift on AO to disprove the same. This onus was not discharged by Ld. AO in the present case. The immediate source of impugned loan was credits received in the bank account of the lender.Finally, Ld. CIT(A) held that the assessee had proved the identity of the lender, the creditworthiness of the lender and genuineness of the loan transactions. The assessee was under no obligation to prove furthersource of availability of amount with such creditor. The assessee had fully discharged the onus as required to be discharged u/s 68 and accordingly the impugned addition against this entity was deleted. 3.4 On the issue of addition of Rs.60 Lacs, it was observed that this amount was received from two directors against purchase of shares of M/s GPL Housing Pvt. Ltd. This amount was sourced from M/s BN Agritech Pvt. Ltd. and the immediate source was that entity which was not alleged to be paper entity by Ld. AO. Therefore, the source stood sufficiently explained by the assessee. Further, M/s Maa Bhagwati Enterprises approached Interim Board of Settlement (IBS) wherein Hon’ble IBS admitted that this entity was doing trading of oil. Therefore, the credit so received by the assessee stood fully explained and accordingly, the impugned addition of Rs.60 Lacs was also deleted. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 4. We find that Ld. CIT(A) has rendered pertinent factual findings in its order with respect to both the entities. These findings remain uncontroverted before us. We find that with respect to LSAFCL, the assessee had furnished sufficient documentary evidences to satisfy the primary ingredients of Sec.68. In our considered opinion, by furnishing these documents, the primary onus of the assessee stood discharged and it was the onus of Ld. AO to controvert the same. However, except for mere allegation, there is no concrete evidence to support the fact that the assessee’s own unaccounted money had flown back into its accounts in the grab of loans. Pertinently, the loans advanced to the assessee are preceded by credits through banking channels and there is no cash deposit in the bank account of the lender entity. The assessee, as per settled position of law, is not required to prove the source of the source of loan in this year. It is trite law that no addition could be made merely on the basis of suspicion, conjectures or surmises. The case laws as cited by Ld. CIT(A) in the impugned order duly supports the case of the assessee and the same would lead to an inescapable conclusion that the impugned additions would not be sustainable in law. The assessee had duly furnished plethora of documents to establish the identity of the lender, the genuineness of the transaction as well as the creditworthiness of the lender. Therefore, we concur with the adjudication of Ld. CIT(A) so far as the addition against LSAFCL is concerned.