SOUBHIK EXPORTS LIMITED. ,KOLKATA vs. DCIT, CIR-8(2), KOLKATA / N E-ASSESSMENT CENTRE, DELHI. , DELHI

The present appeals are directed at the instance of the assessee against the separate orders of the National Faceless Appeal Centre, Delhi (hereinafter the “ld. CIT(A)”) of evenly dt. 12/10/2023, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Years 2012-13 and 2018-19. 2. First, we take up Assessment Year 2012- 13. The assessee has raised the following grounds of appeal:- “1. That the Appellate Order passed by the Ld. CIT (A), Income Tax Department, NFAC, Delhi is illegal, arbitrary and contrary to the facts and weight of evidence on record.

That the Ld. CIT(Appeals) failed to consider and / or deal with any of the case-laws referred to and relied on by the appellant in support of its contention.

That the Ld. First Appellate Authority erred in law in confirming addition of the aforesaid unsecured loans of Rs. 19,69,50,000/- merely on the basis of "third party information" without affording opportunity of 'cross- examination' of such third party by the appellant.”

With regard to the addition u/s 68 of the Act referring to the paper book volume 1 and volume 2, containing 98 pages and 243 pages, the ld. A/R submitted that the assessee is engaged in the regular business and turnover during the year amounted to Rs.382.65 Crores. That the assessee is carrying out consistent business and also possesses fixed assets used in manufacturing business and is doing regular exports. For the business needs, unsecured loans were taken during the year and they have been repaid subsequently. As far as the unsecured loans from Mahalakshmi Vinimay Pvt. Ltd. is concerned, he submitted that this is the group/sister concern of the assessee company and has been 5 I.T.A. No. 1242 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited regularly assessed to tax and recently for the very same Assessment Year, additions made u/s 68 of the Act in the hands of Mahalakshmi Vinimay Pvt. Ltd. were under consideration before this Hon’ble Tribunal and the same were deleted and the revenue further failed to succeed before the Hon’ble Jurisdictional High Court. Similar arguments were made for other two cash creditor by referring to the documents filed in the paper book to prove that the assessee has furnished all relevant documents to explain the nature and source of funds as well as the source of source of the funds which have been taken by the assessee for the business purposes. He also submitted that all the alleged cash creditors have been scrutinised by the revenue authorities and all have sufficient funds in the form of share capital and share premium which have been brought forward from the preceding years and are sufficient enough to explain the investment of alleged sum. The ld. Counsel for the assessee further placed reliance on the following judgments:- (i) CIT vs. Gagandeep Infrastructure (P) Ltd. 80 taxmann.com 272 (Bombay) (ii) Principal CIT vs. Sreeleathers reported in [2022] 448 ITR 332 (Cal) (iii) Mahalakshmi Vinimay (P) Ltd vs. ITO, Ward-4(2), Kolkata in I.T.A No.35/Kol/2020; Assessment year: 2008-09, order dt. May 18, 2023 M/s. Inter Securities Pvt. Ltd. vs. ITO in ITA No. 609/Kol/2018; (iv) Assessment Year 2012-13; order dt. 16/10/2023. 6 I.T.A. No. 1242 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited

We have heard rival contentions and perused the material placed before us. The first issue for our consideration is the addition u/s 68 of the Act made by the Assessing Officer, received from the following three parties:- Name Amount 1. Mahalakshmi Vinimay Pvt. Ltd., Rs.9,58,00,000/- 2. Stoney Vinimay Pvt. Ltd. Rs.9,65,50,000/- 3. Soumyadeep Agro Food Products Pvt. Ltd. Rs.46,00,000/- Total Rs.19,69,50,000/- 10. We observe that the assessee is a limited company and is engaged in the business of exporting goods and merchandise and turnover during the year is Rs.382.65 Crores in the preceding financial year 2010- 11, the turnover stood at Rs. 571.66 Crores. As per the balance sheet as on 31/03/2012, the assessee had long term borrowings amounting to Rs.59.61 Crores which included secured loans amounting to Rs.2.94 Crores and remaining unsecured loans from body corporates at Rs.31.55 7 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited Crores approx. Out of the unsecured loans from body corporates, the ld. Assessing Officer was not satisfied only with regard to the unsecured loans amounting to Rs.19,69,50,000/-. So, the ld. Assessing Officer was satisfied with the remaining unsecured loans and the business activity regularly carried out by the assessee and that the assessee owns fixed assets as on the close of the financial year at Rs.2.78 Crores approx, trade receivables of Rs.13.66 Crores, stock-in-hand of Rs.54.02 Crores. So, admittedly this is a company which is engaged in regular business and also earning consistent profits as reserves and surplus which represents accumulated current profits amounting to Rs.15.97 Crores. Now, in the backdrop of these facts, we need to examine whether the ld. CIT(A) was justified in confirming the addition u/s 68 of the Act. Before us, the ld. Counsel for the assessee has filed various details which are compiled in the paper book no. 1 & 2 and for reference, index of these two paper books providing the details of documents filed before us are extracted below:- “TRUE PHOTOCOPIES OF:

Further documents in proof of identity, creditworthiness and genuinety of loan transactions had with Stoney Vinimay Pvt Ltd being annexures F and G as referred to in List B forming part of Written Submission dated 14.02.2022 filed before Ld CIT (A): 3. (a). Certificate of incorporation & (ii). Master D ata of the Company as downloaded from website of ROC on 28.01.2022 showing 'Active' status of the company till date: 3.(b). Ledger Account of 'Sale of Shares' to companies from whom moneys were received during the year to generate fund for giving loans to the assessee alongwith Bank Statement of the lender company. 3.(c). Confirmations / certificates from 6 companies, namely, Jeenmata Sales Pvt Ltd, Patron Merchants Pvt Ltd, Sita Commo Trade Pvt Ltd, Dhanprayog Tradelind P Ltd, Keshav Vintrade Pvt Ltd and Swati Vintrade Pvt Ltd with Cheque details who paid Rs.5.45 Crores to the lender Co. during the year which, apart from others, constituted 'source' of source of fund advanced to appellant during the year ALONGWITH their respective bank statements showing the relevant transactions.

Further documents in proof of identity, creditworthiness and genuinety of loan transactions had with Soumyadeep Agro Food Products Pvt Ltd [formerly, Bhagwati Tracon Pvt Ltd] being annexure H as referred to in List 9 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited B forming part of Written Submission dated 14.02.2022 filed before Ld CIT (A): 4.(a). Certificate of incorporation & (ii). Master Data of the Company as downloaded from website of ROC on 28.01.2022 showing 'Active' status of the company till date: 4.(b). Ledger Account of 'Sale of Shares' to companies from whom moneys were received during the year to generate fund for giving loans to the assessee alongwith Bank Statement of the lender company.

Acknowledgement in respect of furnishing of Written Submission dated 14.02.2022 electronically.

Annexure I being gist of case laws relied on by the appellant with citations as referred to in Written Submission dated 27.02.2022.

Order dated 26th March, 2010 passed by ITO, Ward 11 (4), Kolkata under Section 143(3) / 147 of I.T. Act in the case of another lender, namely, Stoney Vinimay Pvt Ltd for Asst. Year 2008-09 filed before Ld. CIT(A) alongwith submission dated 09.06.2023.

For Mahalakshmi Vinimay Pvt Limited. (i). Certificate of incorporation, (ii). Master Data of the Company as downloaded from website of ROC on 28.01.2022 showing 'Active' status of the company till date, (iii). Ledger Accounts of'Sale of Shares', 'Buyers of shares' and Borrowers from whom moneys were received during the year to generate fund for giving loans to the assessee and (iv). Confirmations / certificates from 5 companies with Cheque details who paid Rs.4.98 Crores to this Co. during the year which, apart from others, constituted 'source' of source of fund advanced to assesse during the year and (iv). Copies of bank statements of those 5 companies showing the relevant transactions. D 2. For Mahalakshmi Vinimay Pvt Limited, (i). Confirmations / certificates from 3 companies with cheque details who paid Rs. 1.45 Crores to this company during the year which, apart from others, constituted 'source' of source of fund advanced to assessee during the year and (ii). Copies of bank statements of those 3 companies showing the relevant transactions. 3. For Stoney Vinimay Pvt Limited. (i). Confirmations / certificates from 6 companies with cheque details who paid Rs.5.45 Crores to this company during the year which, apart from others, constituted 'source' of source of fund advanced to assessee during the year and (iv). Copies of bank statements of those 6 companies showing the relevant transactions. F [(i). Certificate of incorporation, (ii). Master Data of the Company as downloaded from website of ROC on 28.01.2022 showing 'Active' status of the company till date-These documents are included in Annexure B] 4. For Stoney Vinimay Pvt Limited. (i). Ledger Accounts of 'Sale of Shares' in books of Stoney Vinimay showing how much shares of which companies were sold to whom to generate funds for giving loan to the assesse company and corresponding ledger account in books 11 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited of the assesse alongwith bank statements of Stoney Vinimay showing reflection of those transactions. 5. For Soumyadeep Agro Food Products Pvt Limited, [Formerly, Bhagwati Tracon Pvt Ltd] Ledger Accounts of 'Sale of Shares' in books of Stoney Vinimay showing how much shares of which companies were sold to whom to generate funds for giving loan to the assesse company alongwith bank statements of Soumyadeep Agro Food Products Pvt Ltd showing reflection of those transactions. _ \ [(i). Certificate of incorporation, (ii). Certificate of fresh Incorporation of the company consequent upon change of name of the company from Bhagwati Tracon Pvt Ltd to Soumyadeep Agro Food Products Pvt Ltd and (iii). Master Data of the Company as downloaded from website of ROC on 28.01.2022 showing 'Active' status of the company till date-These documents are included in Annexure C]”

Now, from going through all these details which includes the income tax return, audited balance sheet, income tax assessments, bank statements of the alleged cash creditors the copy of PAN Card, Ledger account and the details of source of source available with the alleged cash creditors at the time of providing unsecured loans to the assessee, we observe that the assessee has discharged its primary owners by providing the nature and source of the alleged sum as referred. Section 68 of the Act, which reads as follows:- “Cash credits. 68 68. 69Where any sum is found credited in the books70 of an assessee maintained for any previous year, and the assessee offers no explanation70 about the nature and source thereof or the explanation offered by him is not, in the opinion of the 71[Assessing] Officer, satisfactory, the sum so credited may70 be charged to income- tax as the income of the assessee of that previous year : 72[73[Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,— 12 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited (a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided furtherthat] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: 74[Provided also] that nothing contained in the first proviso 75[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.] 12. Now, on going through the above provisions, we find that the assessee is first required to explain the nature and source and whatever best the assessee can procure to explain the nature and source of the alleged sum has been done and the burden has thereafter shifted over to the revenue authorities to examine such explanation given by the assessee and if not satisfied then the ld. Assessing Officer, needs to pinpoint the discrepancies and shortcomings in such explanation. On going through the findings of both the lower authorities, we notice that except giving general observations about accommodation entry providers, no specific discrepancies have been noticed in the documents of alleged cash creditor. However, we feel it necessary to go through the financials of each of the cash creditors in light of the ratio laid down by the Hon’ble Apex Court in the land mark case of Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) and Roshan Di Hatti v. CIT [1977] 107 13 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited ITR 938 (SC) laying down the proposition that the onus of proving the source of a sum of money found to have been received by an assessee, is on the assessee. Once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit- worthiness, then the AO must conduct an inquiry, and call for more details before invoking Section 68. If the Assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the Revenue to hold that it is the income of the assessee, and there would be no further burden on the revenue to show that the income is from any particular source. 12.1. First in the list is Mahalakhsmi Vinimay Pvt. Ltd. - apart from the documents referred above which have been furnished we, on perusal of the balance sheet of the alleged cash credits notice that as on 31/03/2011, it had the share capital and reserves and surplus amounting to Rs.96.66 Crore and out of the accumulated balances, loans have been given to the assessee company on various dates during financial year 2011-12 and the transactions are appearing in page 46 to 47 of the paper book, which is a copy of the Ledger account. Also on perusal of the bank statement of this company, we notice that there is regular inflow and outflow of funds and the assessee has been receiving unsecured loans on various dates. There is no major cash deposit in the bank account of cash creditors immediately prior to the issuing of cheques/RTGS to the assessee company. We also notice that Mahalakhsmi Vinimay Pvt. Ltd., which is regularly assessed tax, was also assessed for Assessment Year 2012-13 and an addition u/s 68 of the 14 I.T.A. No. 1242 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited Act, made in its hands and the matter travelled before this Tribunal and vide order dt. 18/05/2023 in ITA No. 35/Kol/2020, the addition was deleted and thereafter when revenue authorities approached the Hon’ble Jurisdictional High Court, the finding of the Tribunal was confirmed by the Hon’ble Court observing that the ld. Tribunal as rightly gone into the facts and has found that the subscribers have furnished all the documents pursuant to the notice issued by the Assessing Officer u/s 133(6) of the Act. Hon’ble Court also held that the audited financial statement, income-tax returns, bank statements were filed to prove the identity and creditworthiness of the creditors and genuineness of the transactions under these given facts and circumstances and ratio of law laid down by Hon’ble Court. We, therefore, find that Mahalakshmi Vinimay Pvt. Ltd., which is a group concern of the assessee, is a genuine company engaged in the regular business and in the course of which it has given unsecured loan to the assessee for which it had sufficient funds available with it and, therefore, the identity and creditworthiness of the cash creditor and genuineness of the transaction is proved and no addition is called for u/s 68 of the Act for the unsecured loan received from the alleged cash creditor, namely, Mahalakshmi Vinimay Pvt. Ltd.

The next creditor is M/s. Stoney Vinimay Pvt. Ltd., from which the assessee has taken unsecured loan of Rs.9,65,50,000/-, we have gone through the financial statements of this company and find that as on 01/04/2011 the accumulated share capital and reserves and surplus 15 & 1243/Kol/2023 Assessment Year: 2012-13 & 2018-19 Soubhik Exports Limited amounted to Rs.9.87 Crores. This company is also claimed to be group concern of the assessee company. It is carrying out regular business transactions and loans have been taken through banking channels. A copy of master data of the company downloaded from the