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Facts
The Revenue appealed against the CIT(A)'s order which partly allowed the assessee's appeal, deleting additions made by the AO. The AO had added unsecured loans of Rs. 1,00,00,000/- and Rs. 50,00,000/- as unexplained investments/income.
Held
The Tribunal held that the assessee had successfully demonstrated the identity, capacity, and creditworthiness of the lender. The unsecured loan was repaid through banking channels, and the assessee had provided necessary documentary evidence, discharging the onus under Section 69A of the Act. The addition was not legally sustainable.
Key Issues
Whether the addition made by the AO for unsecured loans was justified, considering the assessee's evidence of identity, creditworthiness, and genuineness of the transaction, and repayment thereof.
Sections Cited
147, 69, 139(1), 143(3), 132, 148, 143(2), 69A, 69C, 68
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Income Tax Appellate Tribunal, DELHI BENCH “E”NEWDELHI
Before: SHRI SUDHIR KUMAR & SHRI MANISH AGARWAL
ORDER
PER SUDHIR KUMAR JM:
The Revenue preferred the appeal, challenging the order dated 31-12-2024 passed by Commissioner Of Income Tax, Appeal, Delhi- 23(in short Ld. CIT(A))passed assessment order dated 30-03-2024 oftheAssessing Officer for A.Y. 2019-20 under the section 147 of the Income Tax Act, 1961(In short “the Act”).
The revenue raised the following grounds in appeal: 1.The Ld. CIT(A) has erred in deleting the addition of Rs.1,00,00,000/- made by the assessing Officer u/s 69 of the Income –tax Act,1961.
2. The ld. CIT(A) has failed to appreciate that submission of audited accounts and bank statements of alleged shell entity are necessary pre-requisite to give such entities asemblance of a genuine business. Filing of such documents does not mitigate lack of genuineness in its actual operations.
3. The ld. CIT(A) has failed to appreciate that accommodation entry operators have sufficient funds only in form of investments in other non-genuine companies. There is hardly substantial balance in the bank account or genuine investment.
4. Ld. CIT(A) has deleted the addition of Rs.1,00,00,000/- without considering the fact that Ld. CIT(A)-27 in appeal order dated 26-12-2014 stated that Sh. HimanshuVerma is an entry operator and the same has been upheld by Hon’ble ITAT, Delhi.
5. The Ld. CIT(A) erred in deleting the addition of Rs.3,00,000/- without appreciating the fact that the accommodation entries to the tune of Rs.1,00,00,000/- were taken during the year under consideration and commission must have paid to accommodate such entries.
6. The appellant craves leave to add or amend any/all the grounds of appeal before or during the hearing of the appeal.
3. The brief facts of the case are that the assessee filed his return of income u/s 139(1) of the Act for A.Y. 2019-20 on 19-08-2019, declaring total income of Rs.40,22,970/-.The case of the assessee has been assessed u/s 143(3) of the Act on 27-10-2016. A search and seizure action u/s 132 of the act was carried out in the case of SMC Group and related entities on 20-07-2022. Notice under section 148 of the Act was issued in the case of the assessee on 15-03-2023 through e-filling Portal and was duly served upon the assessee. In the response of the notice u/s 148 of the Act, the assessee filed its return of income on 31-03-2023 at a total income of Rs.40,22,970/-. Further notice u/s 143(2) of the Act was issued to the assessee on 21-06-2023. According to AO the assessee has taken the unsecured loan of Rs. 1,00,00,000/- and Rs.50,00,000/- from the M/s Nandish Enterprises ad M/s CEA Consultants Pvt. Ltd. respectively.The Assessing Officer completed the assessment after making the addition of Rs.1,50,00,000/- under section 69A of the Act and Rs.4,50,000/- under section 69C of the Act.
Being aggrieved with the order of the AO, the assessee filed the appeal before the Ld. CIT(A), who vide his order dated 31-12-2024 partly allowed the appeal of the assessee. Aggrieved the order of the Ld.CIT(A), the Revenue is in appeal before the tribunal.
Ld. DR submitted that the assessee has failed to prove the genuineness of the loan. He further submitted that the Ld. CIT(A) -27 has observed in order dated 26-12-2024 that Sh. Himanshu Verma is an entry operator .He relied upon the order of the ld. Assessing Officer.
Ld. AR of the assessee submitted that the amount of loan taken by the assessee was duly paid along with interest. In the written submission the ld. AR of the assessee admitted that the assessee took the loan from the M/s Nandish Enterprises Pvt. Ltd. to the tune of Rs.1,00,00,000/- during the financial year 2018-19 relevant A.Y.2019- 20 and repaid on 18-09-2021. The assessee filed the bank statement of the assessee and the bank statement of M/s Nandish Enterprises to show that loan was repaid by the assessee. The confirmation letter also filed by the assessee to prove the genuineness of the loan. The assessee has provided the proper explanation for the source and nature of the credits so addition cannot be made under section 69 of the Act. Reliance is placed on the following decisions: (i) Deputy Commissioner of Income –tax v. Rohini Builders –[2002] 256 ITR 360 (ii) Manibhadra Securities Services P. Ltd. v. ITO Ward-2(1) (4)Ahmedabad -2022(8) TMI 1074 –ITAT Ahmedabad (iii) Commissioner of Income Tax Surat-1 v. Shri Mahavir Crimpers-2018 (6) TMI 1058 Gujarat High Court (iv) The Principal Commissioner of Income Tax-1 Vadodara v. M/s OjasTarmake. Pvt. Ltd. 2023(9) TMI 845 Gujarat High Court (v) Commissioner of Income Tax v. AyachiChandrashekharNarsangji - 2013 (12) TMI 372 Gujarat High Court (vi) ACIT Circle -8(2) New Delhi v. Evermore Stock Brokers Private Ltd. [2023] 108 ITR (Trib)13 (ITAT{Del}) (vii) RR Carwell Pvt. Ltd. V. The DCIT Central Circle -4 New Delhi - 2022(3) TMI 67 ITAT Delhi (viii) TirupatiBalaji Fiber Ltd. v. ACIT, Central Circle -28, New delhi 2023-(7) TMI –ITAT New Delhi (ix)ITO, ward 1(1) New Delhi v. AMB Homes Pvt. Ltd. & (vice versa) - 2024 (12) TMI 503 –ITAT Delhi (x)DCIT, Central Circle-28, New Delhi v. Uppal Housing Pvt. Ltd. 2024 (12) TMI 1326 ITAT Delhi (xi) M/s Jet Speed Realtors v. ACIT Circle -32(1) , Mumbai -2024 (5) TMI 1069 ITAT Mumbai (xii) DCIT, Central Circle -5(4), Mumbai v. RajendraGulabchand Shah- 2024 (11) TMI 430 ITAT Mumbai (xiii) RajuramSavajiPurohit v. Income Tax Officer Ward -20(3) (1) Mumbai -2024(12) TMI 812 ITAT Mumbai (xiv) DCIT Central Circle-1(1) Ahmedabad v. Gopi Synthetics Pvt. Ltd.- 2024 (12) TMI 1211 Ahmedabad
We have the heard the parties and perused the material available on the record. The Ld.CIT(A), allowing the appeal partly held as under:
8. In ground No. 4 appellant challenged the addition made by the AO on account of unsecured loan taken by it from Nandish Enterprises Pvt. Ltd. The fact of the case is that, during the year under consideration appellant has raised unsecured loan from Nandish Enterprises Pvt. Ltd. amounting to Rs.1,00,00,000/-.
The appellant filed detailed written submissions with paper book. The evidences were mainly documenting to establish the Identity, Creditworthiness and Genuineness of transactions in respect of Unsecured loans added u/s. 69A of the Act.
In appellate proceedings, the appellant submitted that in response to notice u/s 142(1) following documents to explain identity, creditworthiness and genuineness of transaction were submitted with AO
Ledger account Confirmation ITR of Nandish Enterprises Financials of Nandish Enterprises Bank Statement of Appellant Computation of Income
The above facts show that the appellant has duly discharged the onus cast on it to prove the identity, creditworthiness and genuineness of transactions in respect of these two parties.
Another fact pointed out by the AD that the lender company does not have creditworthiness to provide the unsecured loan. The returned income of M/s Nandish Enterprises Pvt. Ltd is Rs. 63,340/- but in fact the Profit
before tax of the lender for the AY is Rs. 82,22,712/- Further, creditworthiness of a depositor can't be solely assessed on the basis of its present income but it depends upon the means of finance held by it. In other words, it depends upon the wealth i.e. net worth of the lender. In the present case M/s Nandish Enterprises Pvt. Ltd has net worth of Rs. 49.62 Crores. It is observed that the AO's inference that the lenders company was not creditworthy on the ground that such company had shown low income has no force in as much as the capacity to lend funds by a lender depends upon the availability of funds with the lender and not on the tax paid/annual income of the lender. The appellant has furnished copies balance sheets of the lender company to establish the creditworthiness of the lender company which highlights their net worth to advance loans to the appellant. From the perusal of the respective balance sheets of the lender company, it is clear that such company has substantial finances at their command and as such these company have entities of means also in the present case lender has profit before tax for the year under consideration amounting to Rs. 82,22,712/- and only lent Rs. 1,00,00,000/- against the net worth of Rs. 49.62 Crores. Reliance may be placed on Judgement of Hon'ble ITAT Delhi in the matter of Assistant Commissioner of Income-tax, Central Circle-25, New Delhi vs. Goodview Trading (P.) Ltd 2017] 82 taxmann.com 55 (Delhi Trib.) in which it was held that the assessee during the course of proceedings has discharged its liability by submitting necessary evidence available to establish the bona fide of the transactions. Thereafter, the onus shifted on to the revenue to prove that the claim of the assessee was factually incorrect. Simply by pointing out that the applicant companies did not have sufficient income or that the bank accounts indicated credits and debits in rapid succession leaving little balance does not discharge the burden cast upon the revenue to take an adverse view in the matter. In the present facts of the case, the addition is not legally sustainable.
Another fact of the case is that appellant had repaid the entire borrowed amount to the lender in the subsequent years. For this fact, he submitted bank statements of himself as well as lender company showing repayment of loan amount of Rs. 1,00,00,000.
There are various judicial pronouncements which favour the appellant that if the borrowed money had repaid back in the subsequent years to the lender, then it can be said that the appellant is not the beneficiary. Reliance may be placed on the Deputy Commissioner Of Income-Tax Versus Rohini Builders [2002] 256 ITR 360 wherein it was held that when the assessee has initial onus by providing identity of all creditors by giving their complete addresses GIR numbers. PAN and copy of assessment orders wherever readily available and proved the capacity of creditors that amounts were paid through cheques Repayment of loan and interest thereon was also made by cheques: the Assessing Officer was not justified
15: The case of the appellant is squarely covered by the judgement of Delhi ITAT in the matter of was held that "Addition u/s 68 Boous loans identity genuineness and creditworthiness of the RR Carwell Pvt. Ltd. Versus The DCIT. Central Circled. New Delhi - 2022 (3) TMI 67 wherein it company which advanced unsecured loan to the assessee company, could not be confirmed-HELD THAT:- Shri Ram Yadav was not a director of M/s White Collar Management Services Pvt. Ltd. and therefore his statement in our opinion, has no evidentiary value. The list of the companies named by Shri Ram Yadav, which has been reproduced by the Assessing Officer nowhere shows that he was O director of M/s White Collar Management Services Pvt Ltd. We further find, the assessee during the course of assessment proceedings has filed confirmation from the said party, copy of which is placed at page 192 of the paper book. The assessee has filed copy of ITR, coy of bank statement of the said party reflecting the receipt and payment of loan and balance sheet as on 31.03.2011 and Form-16 for TDS deducted on interest. Not a single document furnished by the assessee has been proved to be false or untrue by the lower authorities. Under these circumstances and in view of the overwhelming evidences filed by the assessee during the course of assessment proceedings, which are not found to be false or untrue, we hold that the Ld. CIT(A) is not justified in sustaining the addition shown by the assessee as loan which has been repaid in the subsequent year and much before the date of search. Accordingly, the order of the Ld. CIT(A) is set-aside and ground of appeal 4, 5 and 6 are allowed."
Reliance is also placed on the judicial pronouncement in case of ACIT Circle-8 (2) New Delhi Vs Evermore Stock Brokers Private Ltd. [2023] 108 ITR (Trib) 13 (ITAT Del)
The intention of law is that unaccounted money should be brought to tax. As per provisions of section 69A of the Act onus is on the person in whose books of account such money has surfaced. If an amount has surfaced in the books of an assessee either in the shape of share application money or a deposit/loan; it is presumed that such money belongs to the person in whose name it has been shown. However, as per provisions of section 69A of the Act, deeming provisions postulates that it is possible that the assessee may circulate its own unaccounted money in the shape of bogus persons and therefore legal onus has been created. What is relevant is the identity, creditworthiness of the depositor and genuineness of the transaction. All these three conditions have been established and onus of the assessee/appellant has been discharged u/s 69A of the Act. The appellant has amply proved and discharged its burden by filing the necessary relevant documentary evidences in support of unsecured loans raised during the year.
The AO in the assessment order has held that the amount of Rs.1,00,00,000/- is held to be appellant's own income from Undisclosed
sources and was added u/s 69A of the Act. In the present case the AO mere relied on the finding of Investigation wing that the lender company is a shell company and ignored the documents submitted by the appellant. Reliance may be placed on the judgment of Hon'ble Apex Court in the case of Pr. Commissioner of Income Tax (Central) 1 v. Adamine Constructions (P.) Ltd. [2018] 99 taxmann.com 44 (Delhi) in which Hon'ble Delhi High held that:
"1. The Assessing Officer in this case had - based upon the search conducted in the premise of a third party, issued reassessment and proceeded to add Rs. 9,30,00,000/- as unexplained investment under Section 68 of the Income-tax Act, 1961 (hereafter referred to as "the Act).
7. Admittedly, the assessee has taken the loan from the M/s Nandish enterprises in the instant case and the assessee has successfully demonstrated the factum of identity, capacity and creditworthiness of the creditor who gave the loan of Rs.1,00,00,000/- to the assessee. The unsecured loan was repaid by the assessee by banking channel. The assessee has also filed the confirmation of accounts to prove that the loan was genuine. Ld. DR submitted that Shri HimanshuVerma is an entry operator, this fact has been upheld by the ITAT Delhi but this has not been considered by the Ld. CIT(A). The addition cannot be sustained only the statement of Shri HimanshuVerma, when the assessee has discharged his burden by proving that the transaction was genuine and through banking channel. So this argument is not tenable. The Ld. CIT(A), has examined the issue in the correct prospective and rightly deleted the additions towards the unsecured loan under section 68 of the Act, made by Assessing Officer. The reasoning and findings 10 of the Ld. CIT(A), while granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any reasons to interfere with the findings of the Ld. CIT(A). The appeal of the Revenue is liable to be dismissed and dismissed accordingly.
In the result the appeal of the Revenue is dismissed.
Order pronounced in the open court on 28/11/2025.