SUNDIP KUMAR GUPTA. ,KOLKATA vs. DCIT, CIR-47,KOLKATA. , KOLKATA

is relating to the confirmation of addition of Rs.80,00,000/- made by the Assessing Officer u/s 68 of the Act treating to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015

Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A). However, the ld. CIT(A) confirmed the addition so made by the Assessing Officer. Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us.

At the outset, the ld. counsel for the assessee has submitted that the reopening of assessment in this case was bad in law. That the Assessing Officer, on the basis of information received from the Investigation Wing, suspected that there was a possibility of routing of unexplained/unaccounted money into the account of the assessee. That the said information received from the Investigation Wing was at the most reason to suspect and that the said information was not enough to form the belief of escapement of income of the assessee. He has submitted that various courts of law have held that addition cannot be made on the basis of mere suspicion of the Assessing Officer and the Assessing Officer must be in possession of credible information to form the belief that the income of the assessee has escaped assessment. The ld. counsel has further submitted that as per the information received from the Investigation Wing that the assessee was alleged to have to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta received funds of Rs.70,00,000/- only, whereas, in the assessment order, the Assessing Officer has noted that the assessee had received an amount of Rs.80,00,000/-. He in this respect has submitted that after receipt of information from the Investigation Wing, the Assessing Officer did not correlate the said information with the accounts/assessment records of the assessee to form belief that the income of the assessee has escaped assessment. That the Assessing Officer has reopened the assessment merely on the basis of information received from the Investigation Wing and therefore, the satisfaction derived by the Assessing Officer of escapement of income was a borrowed satisfaction. The ld. counsel has submitted that even on merits, the assessee had furnished all the relevant documents to prove the identity and creditworthiness of the creditors and genuineness of the transaction. He referring to the assessment order has submitted that the Assessing Officer has not discussed about a single document furnished by the assessee to prove the identity and creditworthiness of the creditors and genuineness of the transaction. He has submitted that the Assessing Officer has made the addition in a mechanical manner by simply relying upon the report of the Investigation Wing without any discussion on merits of the documents and evidences furnished by the assessee and without pointing out any defect or discrepancy in the same. The ld. counsel has further referred to the various documents placed in the paper-book. He in this respect has referred to page 9 of the paper-book to submit that in response to notice issued u/s 142(1) of the Act, the assessee had duly furnished the copy of ITR, Audited Balance Sheet and Profit & Loss account for the year under consideration along with Tax Audit Report of proprietorship concern of assessee namely M/s Deep Steels, and further that the details of unsecured loan in desired format including details of interest paid and TDS deducted thereupon to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta along with loan confirmations from the creditors were furnished and also the details of bank accounts of the proprietorship concern were furnished. The ld. counsel has further referred to page 10 of the paper- book to submit that the necessary documents were filed in the case of major loan creditor i.e. M/s Anmol Commerce Pvt. Ltd. (loan of Rs.50,00,000/-), which included loan confirmations from the said creditor, return filing acknowledgement for A.Y 2010-11, audited annual accounts, bank statement and declaration about source of loan payments. The ld. counsel has further referred to page 14 of the paper- book, which is a reply to the show-cause notice, wherein, it has been stated that apart from asking the assessee to furnish the relevant documents, the Assessing Officer has directly communicated with the creditors to verify the loan transactions. It has also been mentioned in the said reply that the aforesaid loans have been repaid to the creditors in subsequent years along with interest after deduction of tax at source u/s 194A of the Act. The ld. counsel thereafter has relied upon the various documents which were furnished before the Assessing Officer to prove the identity, creditworthiness of the creditors and genuineness of the transaction. The ld. counsel in this respect has also referred to pages 65 to 92 of the paper-book to submit that copy of financial statements, acknowledgement of unsecured loan of creditors was duly furnished before the Assessing Officer. That loan confirmations from the creditors were also furnished. The ld. counsel has further referred to pages 104 to 116, which is the details of repayment of unsecured loans and submitted that all the loans were repaid and squared off during the subsequent assessment years. The ld. counsel has further referred to assessment order dated 28.12.2019 passed u/s 147/143(3) of the Act in the case of M/s Anmol Commerce Pvt. Ltd. for assessment year 2012-13. He referred to the observation made in the said to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta assessment order to submit that the identical information was received from Investigation Wing in the case of M/s Anmol Commerce Pvt. Ltd., M/s EnpieeFinall Services Pvt. Ltd., M/s Fast-N-Perfect Commercial Pvt. Ltd., M/s Mangalam Tradefin Pvt. Ltd. As per the information, M/s Anmol Commerce Pvt. Ltd. had raised a share amounting to Rs.30.07 crores. The assessment was reopened and ultimately after examination of the documents and considering the submissions, no additions were made in the case of M/s Anmol Commerce Pvt. Ltd. by the Assessing Officer. The ld. counsel referring to the said assessment order has submitted that though the said assessment order was relating to the assessment year 2012-13 but the credit entries in the said year were duly examined by the Assessing Officer and the credibility of the M/s Anmol Commerce Pvt. Ltd. was admitted by the Assessing Officer in the said case. The ld. counsel has further referred to the assessment order to submit that the Assessing Officer has mentioned that the said M/s Anmol Commerce Pvt. Ltd. had received a sum of Rs.2,00,000/- from Vanilla Tieup P Ltd. which has also been mentioned as conduit company in the case of the assessee. The Ld. Counsel has submitted that the ‘Return Of Income’ of the said Anmol Commerce Pvt. Ltd. having been accepted after scrutiny assessment u/s147/143(3) of the Act for the subsequent year despite the fact that the reopening has been made on the identical allegations, proves that the allegation of the Assessing Officer that M/s Anmol Commerce Pvt. Ltd. was a shell company, were wrong and false. That the said company was an active compliant company and regular income tax assessee. The ld. counsel has further submitted that even the assessee has duly produced the explanation regarding the source of funds of the creditor. He has further submitted that the assessment year involved in this case is A.Y 2010-11 and that the amendment in section 68 of the Act casting to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta burden upon the assessee to prove the source of source has been brought into effect vide Finance Act 2012 w.e.f. 01.04.2013 and the said Proviso is not applicable for the assessment year under consideration. The ld. counsel has further submitted that the assessee however, has also proved the source of the source of the funds also.

The ld. DR, on the other hand, has relied on the findings of the lower authorities.

We have heard the rival submissions and gone through the record. In this case, firstly, the reopening has been made merely on suspicion and solely on the basis of report of Investigation Wing by the Assessing Officer without correlating the said information with the accounts/assessment records of the assessee. As pointed out, had the Assessing Officer correlated the information with the accounts of the assessee, he would have mentioned in the reasons recorded that the assessee had received a fund of Rs.80,00,000/- instead of Rs.70,00,000/- as mentioned in the reasons recorded. Secondly, the Assessing Officer himself has mentioned in the reasons recorded that the pattern of the transaction indicated that there was a possibility of routing of unlawful money and probably with intention to convert black money into white money. Thus even in the investigation report, there was suspicion only. Hence, the information from the investigation wing, at the most can be said to be a reason to suspect only. The Assessing officer did not corelate the said information with the accounts of the assessee. There was no credible information available with the Assessing Officer to form the belief that the income of the assessee has escaped assessment. It has been held time and again that the reasons to believe regarding the escapement of the income should be based on certain tangible material and it should not be mere pretence of the to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta Assessing Officer. The reasons to believe does not mean reason to suspect. Reopening of the assessment is not permitted for making fishing and roving enquiries. The Assessing Officer, after receipt of alleged information received from the Investigation Wing was supposed to corelate the same with the records and other facts of the case and thereafter should have satisfied himself of escapement of income. Reopening is not permissible on the basis of borrowed satisfaction of the Assessing Officer. Therefore, reopening of the assessment in this case is held as bad in law. Reliance in this respect can be placed on the decision of Hon’ble Supreme Court in the case of ‘ITO vs. Lakhmani Mewal Das’ reported in (1976) 103 ITR 437 (SC), of the Hon’ble Delhi High Court in the case of ‘PCIT Vs. Meenakshi Overseas Ltd.’ reported in 395 ITR 677 (Del.) and in the case of ‘CIT vs. Atul Jain’ reported in [2008] 299 ITR 383 (Delhi), further of the Hon’ble Punjab and Haryana High Court in the case of ‘CIT vs. Paramjit Kaur’ reported in (2009) 311 ITR 38 (P&H).

As noted earlier, the loan was repaid in 2014-15 and, therefore, the allegation of the AO that assessee was a beneficiary of the loan cannot be sustained on these facts and is liable to be deleted. We gainfully refer to the judgment of the Hon'ble Gujarat High Court in the case of PCIT vs. Ambe Tradecorp (P.) Ltd (supra) where it has been held as follows:

We, therefore, under the given facts and circumstances of the case, are of the considered view since the assessee has successfully discharged its onus of proving the identity of the loan creditor, which in the instant case duly registered with Ministry of Corporate Affairs, having PAN and had filed return of income as well. Further creditworthiness of the transaction is proved with the fact that they have been carried through banking channel and sufficient funds were available with the loan creditors to explain the amount of loan given and the genuineness of the transaction is proved with the fact that the assessee company is carrying out regular business activity and the loan was obtained at commercial rate of interest which was also repaid at a later date in subsequent year, interest was paid on the loans and tax at source has been deducted and duly reflected by the loan creditor in their income tax return. Therefore, we fail to find any justification in the action of ld. AO invoking the provisions of Section 68 of the Act. We, thus, set aside the finding of ld. CIT(A) and delete the addition of Rs.25,00,000/- made u/s 68 of the Act.”

The aforesaid decisions referred to by the Tribunal is squarely applicable to the facts and issues involved in this case. In view of our discussion made above, we do not find any justification on the part of the lower authorities in making/confirming the impugned addition and the same is accordingly ordered to be deleted. – The sole issue raised by the assessee 9. through grounds of appeal is relating to the confirmation of addition of Rs.35,00,000/- made by the Assessing Officer u/s 68 of the Act treating the unsecured loans claimed by the assessee as unexplained income of the assessee.

Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A). However, the ld. CIT(A) confirmed the addition so made by the Assessing Officer. Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us.

At the outset, the ld. counsel for the assessee has submitted that the Assessing Officer has made the addition solely relying upon unsubstantiated report of the Investigation Wing. That the Assessing Officer has not discussed about a single document furnished by the assessee to prove the identity and creditworthiness of the creditors and genuineness of the transaction. He in this respect has submitted that after receipt of information from the Investigation Wing, the Assessing Officer did not correlate the said information with the accounts/assessment order of the assessee to form belief that the income of the assessee has escaped assessment. He has submitted that in the reasons recorded, the Assessing Officer has noted that as per the information received from Investigation Wing, the assessee has received the aforesaid amount of Rs.35,00,000/- from three shell companies namely Anmol Commerce (P) Ltd., Avenue Dealcom Pvt. Ltd. & Mangalam Trade Fin Pvt. Ltd., however, as per the assessment order, the assessee during the year had received Rs.35,00,000/- from one company only namely M/s Mangalam Tradefin Pvt. Ltd. He, therefore, has submitted that the Assessing Officer did not correlate the aforesaid information with the accounts/records of the assessee and that the assessment has been reopened on the basis of borrowed satisfaction. to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta He, therefore, has pleaded that the reopening in this case was bad in law. 12.1. The ld. counsel has further referred to the various documents placed in the paper-book. He in this respect has referred to page 9 of the paper-book to submit that in response to notice issued u/s 142(1) of the Act, the assessee had duly furnished the copy of ITR, Audited Balance Sheet and Profit & Loss account of the proprietorship concern i.e. M/s Deep Steels and further the details of unsecured loan in desired format including details of interest paid and TDS deducted thereon along with loan confirmations from the creditors were filed and also the details of bank accounts of the proprietorship concern were also furnished. The ld. counsel has further referred to page 10 of the paper-book to submit that vide letter dated 21.08.2017, the necessary documents/evidences pertaining to the loan creditor i.e. M/s Mangalam Trade Fin Pvt. Ltd., were furnished to th4e Assessing Officer which included loan confirmations from the said creditor, return filing acknowledgement for A.Y 2012-13, audited annual accounts, bank statement and declaration about source of loan payments. The ld. counsel has further referred to page 14 of the paper-book, which is a reply to the show-cause notice, wherein, it has been stated that apart from asking the assessee to furnish the relevant documents, the Assessing Officer has directly communicated with the creditor to verify the loan transaction. It has also been mentioned in the said reply that the aforesaid loans have been repaid to the creditors in subsequent years along with interest after deduction of tax at source u/s 194A of the Act. The ld. counsel thereafter has relied upon the various documents which were furnished before the Assessing Officer to prove the identity, creditworthiness of the transaction. The ld. counsel in this to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta respect has also referred to pages 62 of the paper-book, which is the copy of balance sheet of M/s Mangalam Tradefin Pvt. Ltd. to show that as per the balance sheet, there was a share capital of Rs.26.02 crore and reserves & surplus amounting to Rs.212.286 crore. That the short- term loans and advances were amounting to Rs.24.35 crore only, out of which an amount of Rs.35,00,000/- was given to the assessee. He, therefore, has submitted that the creditworthiness of the said share subscriber was proved beyond doubt. The ld. counsel has further referred to page 69 & 70 that even source of funds of the creditor was also furnished. He has further referred to page 73 of paper book to submit that the aforesaid transaction was duly confirmed by the creditor. The ld. counsel has finally referred to page 77, which is a copy of assessment order dated 30.12.2017 passed u/s 143(3) of the Act in the case of M/s Mangalam Tradefin Pvt. Ltd. for A.Y 2015-16 to submit that in the said assessment order only an addition u/s 14A of the Act of Rs.352031/- has been made. The ld. counsel in this respect has submitted that the said M/s Mangalam Tradefin Pvt. Ltd. has been duly assessed to Income Tax and that from the said assessment order, it is not only proved that no addition on account of any unexplained source of funds has been made in the case of the said creditor but also the observation of the Assessing Officer that the said company was a shell company, was wrong and false.

We have heard the rival submissions and gone through the record. In this case, firstly, the reopening has been made merely on suspicion and solely on the basis of report of Investigation Wing by the Assessing Officer without correlating the said information with the accounts/assessment records of the assessee. The Assessing Officer himself has mentioned in the reasons recorded that the pattern of the to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta transaction indicated that there was a possibility of routing of unlawful money and probability of converting black money into white money. Even the assessing Officer has mentioned the name of three companies from whom the assessee allegedly received funds, whereas there was only a single loan creditor. The reasons recorded and discrepancies pointed out therein in the present case are identical to that has been discussed above in the assessee’s appeal . In view of our discussion made and findings given in para 7 above, the reopening of the assessment is held as bad in law. 13.1 Even on merits, in the assessment order, the Assessing Officer has merely relied on the report of the Investigation Wing. That the Assessing Officer has not discussed a single evidence/document furnished by the assessee and has not pointed out any defect or discrepancy in the evidence furnished by the assessee to prove the identity, creditworthiness and genuineness of the transaction. The ld. counsel for the assessee has duly demonstrated from the record that the creditor had sufficient net worth to give loan to the assessee. Further, the ld. counsel has duly demonstrated that the entire loan was repaid during the subsequent assessment years. As noted, the loan duly carried interest, TDS was duly deducted on the interest expenditure, the interest income has been accounted by lender and the same forms part of the income of the lender. Interestingly, the Assessing Officer has not made any disallowance in respect of interest expenditure incurred by the assessee on the aforesaid loan amount. In our view, neither the Assessing Officer nor the ld. CIT(A) has pointed out any defect or discrepancy in the evidences furnished by the assessee. The addition has been made on the basis of unsubstantiated information received from the Investigation Wing and the said to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta uncorroborated information has been duly rebutted by the assessee by producing the sufficient evidences on the file. Moreover, the loan has been repaid in the subsequent assessment year. Further in view of our discussion made above while adjudicating identical issue in and in the light of the decision o0f the co-ordinate bench of the tribunal in the case of ‘Poddar Realtors vs. ITO’ (Supra), the addition made/confirmed in this case by the lower authorities is not sustainable and hence the same is ordered to be deleted.

ITA No.1172/Kol/2023 – The sole issue raised by the assessee through the grounds of appeal

Being aggrieved by the said order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A). However, the ld. CIT(A) confirmed the addition so made by the Assessing Officer. Being aggrieved by the said order of the CIT(A), the assessee has come in appeal before us.

The fact and issue involved is identical to that has been discussed above in ITA No.1170/Kol/2023. The facts relating to the legal issue relating to the validity of the reopening of the assessment are identical as discussed above in and ITA 1171/Kol/2023. In view of our findings given above, the legal issue is accordingly decided in favour of the assessee. to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta

The issue on merits relating to identity and creditworthiness of the creditor M/s Anmol Commerce Pvt. Ltd has also been discussed at length at it has been observed that the assessee has not only proved the identity and creditworthiness of the creditor but also the genuineness of the transaction. The ld. counsel has further referred to the various documents placed in the paper-book. He in this respect has referred to page 9 of the paper-book to submit that in response to notice issued u/s 142(1) of the Act, the assessee had duly furnished the copy of ITR, Audited Balance Sheet and Profit & Loss account of the proprietorship concern i.e. M/s Deep Steels and further the details of unsecured loan in desired format including details of interest paid and TDS deducted thereon along with loan confirmations from the creditors were filed and also the details of bank accounts of the proprietorship concern were also furnished. The ld. counsel has further referred to page 10 of the paper-book to submit that vide letter dated 21.08.2017, the necessary documents/evidences pertaining to the loan creditor i.e. M/s Anmol Commerce Pvt. Ltd., which included loan confirmations from the said creditor, return filing acknowledgement for A.Y 2014-15, audited annual accounts, bank statement and declaration about source of loan payments. The ld. counsel has further referred to page 14 of the paper- book, which is a reply to the show-cause notice, wherein, it has been stated that apart from asking the assessee to furnish the relevant documents, the Assessing Officer has directly communicated with the creditor to verify the loan transaction. It has also been mentioned in the said reply that the aforesaid loans have been repaid to the creditors in subsequent years along with interest after deduction of tax at source u/s 194A of the Act. The ld. counsel thereafter has relied upon the various documents which were furnished before the Assessing Officer to prove the identity, creditworthiness of the transaction. The ld. counsel to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta in this respect has also referred to pages 71 of the paper-book, which is the copy of balance sheet of M/s Anmol Commerce Pvt. Ltd. to show that as per the balance sheet, there was a share capital of Rs.18.10 crore and reserves & surplus amounting to Rs.283.919 crore. That the short-term loans and advances were amounting to Rs.176.09 crore only, out of which an amount of Rs.1,10,00,000/- was given to the assessee. He, therefore, had submitted that the creditworthiness of the said share subscriber was proved beyond doubt. The ld. counsel has further referred to page 82 & 88 to submit that the aforesaid transaction was duly confirmed by the creditor. The ld. counsel has further referred to page 108, which is a copy of assessment order dated 28.12.2019 passed u/s 147/143(3) of the Act in the case of M/s Anmol Commerce Pvt. Ltd. for A.Y 2012-13. He referred to the observation made in the said assessment order to submit that the identical information was received from Investigation Wing in the case of M/s Anmol Commerce Pvt. Ltd. for assessment year 2012-13 , however, no addition on account of any unexplained source of funds has been made in the case of the said creditor. The ld. counsel in this respect has submitted that the said M/s Anmol Commerce Pvt. Ltd. has been duly assessed to Income Tax and that from the said assessment order, it is proved that the observation of the Assessing Officer that the said company was a shell company, was wrong and false. In view of our discussion made above on identical facts of earlier years and further in the light of the decision of the Co-Ordinate Bench of this Tribunal in the case of ‘Poddar Realtors vs. ITO’ (supra) , the addition made on this issue is not sustainable and the same is accordingly ordered to be deleted. to1173/Kol/2023 Assessment Years: 2010-11, 2012-13, 2014-15 & 2015-16 Sundip Kumar Gupta

The sole issue raised by the assessee through grounds of appeal