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Income Tax Appellate Tribunal, DELHI BENCH, F: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI BRAJESH KUMAR SINGH
.- 4920 & 4921/Del/2019 Ni�n Garg 28.02.2019, pertaining to Assessment Years (A.Y.) 2014-15 and 2015-16 arising of respective Assessment Order both passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act), dated 30.12.2016 and 27.12.2017 passed by the Joint Commissioner of Income Tax, Special Range-18, New Delhi and Assistant Commissioner of Income Tax, Circle-54(1), New Delhi, (hereinafter referred to as ‘the AO’) under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Since common issues are involved in both the appeals, they are disposed of by this consolidated order, for the sake of convenience and brevity.
First, we take up ITA No.- 4920/Del/2019 for A.Y. 2014-15
Brief facts of the case are that the assessee was engaged in the business of manufacturing and sale of Tobacco Products under the name and style of M/s Vishnu Tobacco Products during the year. During the year under consideration, assessee had shown income from business & profession, income from house property and income from other sources. Return declaring income of Rs. 2,43,71,930/- was filed on 11.11.2014. The case was selected for scrutiny and .- 4920 & 4921/Del/2019 Ni�n Garg Noice u/s 143(2) of the Act, dated 31.08.2015 was issued and served upon the asessee.
2.1. The AO noted that during the year, the assessee had raised unsecured loan amounting to Rs. 16,10,00,000/- from M/s Green Stone Agro Product & Infra Pvt. Ltd. The AO asked the assessee vide note sheet entry dated 04.11.2016 to submit the supporting documents, in respect of this unsecured loan. Thereafter, several opportunities, as noted in the Assessment Order, were given to the assessee, by the AO, but according to the AO, the assessee did not comply with the notices / opportunities. The said details of the order- sheet proceedings are recorded on page nos. 4 and 5 of the Assessment Order.
2.3 Accordingly, the AO noted that the assessee avoided the furnishing of requisite basic details / particulars about the lender, such as complete address, particulars of its bank account and, bank account statement, verified current address and the present jurisdiction of the lender. The AO also noted that the assessee failed to produce the lender. Thereafter, the AO relied upon various case laws and added a sum of Rs. 16,10,00,000, as unexplained cash .- 4920 & 4921/Del/2019 Ni�n Garg credit u/s 68 of the Act, as the assessee failed to prove the creditworthiness of the lender and the genuineness of the transaction. The AO also disallowed interest amounting to Rs. 1,24,45,753/- paid in respect of the said loan of Rs. 16,10,00,000/- , which the AO had treated as unexplained credit u/s 68 of the Act.
3. Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A).
The Ld. AR submitted before the Ld. CIT(A) that the assessee had taken unsecured loan of Rs. 16,10,00,000/- from M/s Green Stone Agro Products and Infra Pvt Ltd, D-2, New Garden Flat, Near SBI, Navrangpura, Ahmedabad 380009 through a/c payee cheque and paid interest of Rs. 1,24,45,753/- thereon after deducting TDS of Rs. 1244,575/-. It was further submitted that the confirmation of loan, bank statements, financials of the lender, TDS Certificate for interest and other evidences were submitted during the course of assessment proceedings and have again been filed during appellate proceedings. It was further submitted that the appellant had taken an unsecured loan of Rs. 16.10 crores during the year to meet his working capital requirements as considering the nature of business, the appellant is .- 4920 & 4921/Del/2019 Ni�n Garg unable to get bank loan facilities. The Ld. CIT(A) noted that during appellate proceedings, the AR has submitted; Confirmation for loan; Ledger Accounts in respective books of account; TDS certificate in respect of interest on loan; Audited Financials of the Lender Company along-with copy of the ITRs reflecting loan given and interest income thereof; copies of the bank statements reflecting the transactions of loan with the lender company; and evidence of repayment of loan taken.
The AR further stated that the entire loan from Green Stone Agro Products and Infra Pvt Ltd was returned in subsequent A.Y. 2016-17 through banking channel and copies of the confirmation of accounts were filed along-with. Accordingly, the Ld. AR submitted that assessee had thus, proved the identity of the creditor, its creditworthiness and genuineness of the transaction in the matter. The AR further submitted that the assessee had discharged his initial onus laid down u/s 68 of Income Tax Act and PAN submitted was the necessary documentation to satisfy the initial onus placed on him in terms of section 68 of the Act and there is no positive evidence brought on record by the AO to controvert the evidences and .- 4920 & 4921/Del/2019 Ni�n Garg documents furnished by the appellant or the fact that there are certain inadequacies in such documentation. The Ld. CIT(A) on the basis of above documents and the fact that the said loan was repaid in subsequent year and since the payment was received from banking channels, deleted the said addition. The relevant finding of the Ld. CIT(A) is reproduced as under:
“4.2.3.4. The submissions and case laws filed by the appellant have been considered. It is seen that as per the audited financials of the lender for the Said period, the interest income of the lender company was 593,26,669/-. The amount of the loan have been returned in subsequent AY 2016-17 through. banking channel by the appellant. The assessment order has been perused and in view of the facts of the case, this is not matter for making addition of Rs. 16,10,00,000/- u/s 68 of the Income Tax Act. In view of the above discussion, the appeal on Ground no. 1 is allowed.”
5.1 Further, as the loan taken was accepted as genuine in Ground no. 1 above, the deduction of Rs. 1,24,45,753/- as interest on which TDS was deducted by the appellant and duly deposited in the Government exchequer was also allowed by the Ld. CIT(A).
Aggrieved with the said order, the Department is in appeal before us, on the following grounds of appeal:
“1. On the facts and circumstances of the case, the CIT (A) has erred in deleting the addition of Rs 16,10,00,000 made by the AO, on the basis .- 4920 & 4921/Del/2019 Ni�n Garg of unexplained Unsecured Loans taken by the assessee, whose genuineness was not proved by the assessee. 2. On the facts and circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 1,24,45,753 made by the AO on account disallowance of interest expenses.”
The Ld. CIT(DR) submitted that the Ld. CIT(A) allowed the appeal of the assessee without calling for any remand report from the AO and also did not examine the specific source of the amount of Rs. 16,10,00,000/- received as loan by the assessee, as no discussion is there in the appellate order about the source of the said loan more particularly, when the AO in his assessment order had noted that the assessee avoided the furnishing of requisite basic details / particulars about the lender, such as complete address, particulars of its bank account and, bank account statement, verified current address and the present jurisdiction of the lender and the AO also noted that the assessee failed to produce the lender despite opportunities given during the assessment proceedings. The Ld. CIT(DR) further submitted that in view of the facts, the decision of the Ld. CIT(A) may be reversed and the order of the AO be restored.
.- 4920 & 4921/Del/2019 Ni�n Garg 7.1 For the aforesaid reasons, the Ld. CIT(DR) submitted that the Ld. CIT(A) erred in allowing the interest payment on the unsecured loan of Rs. 16.10 crores amounting to Rs. 1,24,45,753/-.
On the other hand, the Ld. AR supported the order of the Ld. CIT(A).
We have heard both the parties and perused the material available on record. On perusal of the above findings, we agree with the submission of the CIT(DR) that the findings of the Ld. CIT(A) are not supported by cogent facts. There is no discussion in the order about the source of the credit entry in the bank account of the lender before this, loan was advanced to the assessee company. Unless, the same is examined and brought on record the credit worthiness of the lender cannot be established and in absence of the same, the genuineness of the transaction also cannot be established. Merely because that the lender has shown interest income of Rs. 5,93,26,669/- and that the loan was returned in subsequent assessment year through banking channels cannot be a ground to treat the unsecured loan of Rs. 16.10 crores as genuine as has been held by the Ld. CIT(A), when the AO in his assessment order had .- 4920 & 4921/Del/2019 Ni�n Garg noted that the assessee avoided the furnishing of requisite basic details / particulars about the lender, such as complete address, particulars of its bank account and, bank account statement, verified current address and the present jurisdiction of the lender and the AO also noted that the assessee failed to produce the lender despite opportunities given during the assessment proceedings. Moreover, no remand report was called by the CIT(A), and we are of the considered view that in the given facts of the case it was incumbent upon the Ld. CIT(A) to call for a remand report, which was not done by the Ld. CIT(A). However, the CIT(A) noted that the assessee had submitted the relevant details, and therefore, the same require verification by the AO. Therefore, in the given facts of the case, the order of the Ld. CIT(A) cannot be sustained and the same is set aside along with the assessment order and the matter is restored to the file of the AO for framing of de-novo assessment on this issue, after giving reasonable opportunity of being heard to the assessee and as per law. The assessee will be also at liberty to furnish all supporting documents in support of his claim. Ground no. 1 of the appeal is allowed for statistical purposes.
.- 4920 & 4921/Del/2019 Ni�n Garg 9.1 Further, in view of the fact that the issue relating to the addition on account of unsecured loans of Rs. 16,00,00,000/- has been set aside by us and restored to the file of the AO for fresh adjudication as above, as a consequence, we also set aside the orders of the AO as well as of the Ld. CIT(A) on the issue of interest payment of Rs. 1,24,45,753/- on the said loan and restore the matter to the file of the AO for fresh adjudication in accordance with law. Accordingly, Ground Nos. 2 of the appeal is also allowed for statistical purposes.
ITA No.-4921/Del/2019 for A.Y.- 2015-16
The AO noted on perusal of the computation of income submitted by the assessee, that the assessee had paid interest to Mr. Sunny Thakkar and Ms. Monal Thakkar amounting to Rs. 63,00,000/- and Rs. 36,00,000/- respectively totaling Rs. 99,00,000/-. According to the AO, these loans were not disclosed by the assessee in his books of accounts and vide letter dated 30.11.2017 the information was sought directly from these parties by the AO under Section 133(6) of the Act. The AO noted that in response to this, the information was received from the parties from where it was observed that the assessee had outstanding loans .- 4920 & 4921/Del/2019 Ni�n Garg amounting to Rs.4,00,00,000/- from Ms. Monal Thakkar and Rs. 7,00,00,000/- from Mr. Sunny Thakkar as on 31.03.2015 and that these loans were given to the assessee during FY 2013-14.
The AO held that creditworthiness and genuineness of the loans amounting to Rs. 7 crores and Rs. 4 cores taken from Mr. Sunny Thakkar and Ms. Monal Thakkar respectively was bogus as it was assessee’s own unexplained money. However, the AO also admitted that these loans have been raised during the F.Y. 2013-14 relevant to A.Y. 2014-15 and, therefore, these loans cannot be added back to the income of the assessee u/s 68 of the Act, for the present assessment year, 2015-16 and noted in the assessment order that necessary action under the provision of the Act will be taken regarding these loans from Mr. Sunny Thakkar and Ms. Monal Thakkar in the case of the assessee for the A.Y. 2014-15.
11.1 The AO in view of these facts disallowed the interest expenses on these loans amounting to Rs. 99,00,000/- and added back to the total income of the assessee.
Aggrieved with the said order, the assessee filed an appeal before Ld. CIT(A).
.- 4920 & 4921/Del/2019 Ni�n Garg 13. The Ld. AR submitted before the Ld. CIT(A) that the case of the appellant was re-opened for AY 2014-15 u/s 147 and notice u/s 148 was issued on 30/03/2018 and in response to which appellant filed return and sought reasons for re-opening u/s 148. According to the AR the reasons for re-opening of the assessment was to prove the creditworthiness in respect of loans taken by appellant from Ms. Monal Thakker and Mr. Sunny Thakker. The Ld. AR further submitted that the appellant thereafter made complete submissions including confirmations, copy of ITRs, bank statements, tax audit reports in support of genuineness and creditworthiness of the lenders before the AO and same was accepted by the AO and accordingly order u/s 143/147 was passed on 29.12.2018 accepting the submissions of the appellant and no addition was made u/s 68 or 69 of the Act, in respect of loan taken from both, Ms. Monal Thakker and Mr. Sunny Thakkar. The AR submitted that the Department has therefore, accepted the said loans as genuine, and therefore, the disallowance of interest of Rs. 99,00,000/- paid on the said loans was not sustainable and the same may be deleted.
.- 4920 & 4921/Del/2019 Ni�n Garg 14. The Ld. CIT(A) after considering the above submissions filed by the assessee held that as the loans have been repaid and the reopening proceedings on account of the said two loans have been dropped, deleted the disallowance of Rs. 99,00,000/-
Aggrieved with the said order, the Department is in appeal before us, on the following grounds of appeal.
“1. On the facts and circumstance of the case, the CIT (A) has erred in deleting the addition of Rs. 99,00,000 made by the AO in respect of disallowance of interest expenses paid to Sunny Takkar and Monal Takkar, inspite the fact that the same is not a genuine business transaction corresponding to that was proved to be a bogus transaction and has been already added back to the total income of the assessee for the AY 2014-15.
2. On the facts and circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 1,61,00,000 made by the AO, in respect of disallowance of interest expenses paid to M/s Green Agro Products & Infra Pvt. Ltd, inspite of the fact that the same is not a genuine business transaction as the Loan transaction corresponding to that was proved to be a bogus transaction and has been already added back to the total income of the assessee for the AY 2014-15.
3. On the facts & Circumstances of the case. the CIT appeal has erred in deleting the addition in respect of disallowance of interest expenses. inspite of the fact that the interest expenses are only shown in the computation of income, but not included in the balance sheet.
The Ld. CIT(DR) relied upon the order of the AO whereas the Ld. AR supported the order of the CIT(A).
.- 4920 & 4921/Del/2019 Ni�n Garg 17. We have heard both the parties and perused the material available on record. It is seen from the records that the case of the Shri Nitin Garg (the assessee) for A.Y. 2014-15 was reopened by the AO on 30.03.2018 on the ground that loan of Rs. 7.00 crores from Mr. Sunny Thakkar & Rs. 4.00 crores from Ms. Monal Thakkar had escaped assessment. However, no addition in respect of the aforesaid unsecured loans of Rs. 7 crores and 4 crores taken from Mr. Sunny Thakkar and Ms. Monal Thakkar, was made by the AO, in the reassessment order passed u/s 143(3)/ 147 of the Act, dated 29.12.2018. The relevant assessment order passed in this case is reproduced as under:
“The case of the assessee was reopened for reassessment u/s 147 of the Income Tax Act for the AY 2014-15. Subsequently, notice u/s 148 of the Income Tax Act, 1961 was issued and served upon the assessee on 30.03.2018. Subsequently, notice U/s 142(1) of the Income Tax Act, 1961 was also issued. In compliance to notices, the assessee submitted the requisite documents and the required details called for. These were examined and case was discussed.
2. The assessee is earning his Income from Business, Capital Gain and Other Sources. The case of the assessee was originally assessed u/s 143(3) of the Act, at an assessed income of Rs 19,78,17,680/-) on 30.12.2016. The assessee has filed his ITR on 11.11.2014 and submitted the same in response to the notice u/s 148 of the Income .- 4920 & 4921/Del/2019 Ni�n Garg Tax Act, 1961 dated 30.03.2018. All the submissions of the assessee have been verified and found to be tenable.
With this remark, Income of the assessee is computed as under:- Income as per the original assessment order Rs. 19,78,17,680/- Add: addition made Nil Net taxable Income rs. 19,78,17,680/-
The Income of the assessee is assessed at Rs. 19,78,17,680/-. Credit of pre-paid taxes /TDS is being allowed while computing the tax liability. Interest as per applicable provisions of section 234A/234B/234C/234D is being charged and mentioned in ITNS-150 issued along with notice of demand & challans.”
17.1 Therefore, as noted above, no addition in respect of loans of Rs. 7 crores and 4 crores was made in the reopened assessment of the assessee. Accordingly, the disallowance of interest amounting to Rs. 99,00,000/- on the said loan of the Rs. 7 crores is not sustainable and is hereby deleted. Ground no. 1 of the appeal is dismissed.
Further, the AO noted that during the year, the assessee had paid interest of Rs. 1,61,00,000/- on unsecured loans of Rs. 16,10,00,010/- taken in the previous Financial Year, relevant to A.Y. 2014-15 from M/s Green Stone Agro Product & Infra Pvt. Ltd. In view of the fact that the AO had treated the said loans as unexplained cash .- 4920 & 4921/Del/2019 Ni�n Garg credits u/s 68 of the Act, in the assessment order passed u/s 143(3) of the Act, dated 30.12.2016 for Assessment Year 2014-15, in the case of the assessee (as discussed in the above appeal) the AO disallowed the interest payment of Rs. 1,61,00,000/-.
Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A).
19.1 The Ld. CIT(A) held that in view of the fact that the addition of Rs. 16.10 crores was deleted by her in appeal no. 176/2018-19 for A.Y. 2014-15 vide order dated 28.02.2019, deleted the disallowance of interest of Rs. 1,61,00,000/-.
19.2. Aggrieved with the said order, the Department is in appeal before us, the following ground of appeal:
“ 2. On the facts and circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 1,61,00,000 made by the AO, in respect of disallowance of interest expenses paid to M/s Green Agro Products & Infra Pvt. Ltd, inspite of the fact that the same is not a genuine business transaction as the Loan transaction corresponding to that was proved to be a bogus transaction and has been already added back to the total income of the assessee for the AY 2014-15. “
19.3 the Ld. DR supported the order of the AO whereas the Ld. AR supported the order of the Ld. CIT(A).
.- 4920 & 4921/Del/2019 Ni�n Garg 19.4 We have heard both the parties and perused the material available on records. In this case, the addition of Rs. 16.10 crores made by the AO in assessment year 2014-15 was deleted by the Ld. CIT(A). However, in view of the fact that the said order of the AO and of the Ld. CIT(A) has been set aside by us and restored to the file of the AO for fresh adjudication in ITA No. -4920/Del/2019 for A.Y. 2014-15 in assessee’s own case, as a consequence, we set aside the order of the AO and the Ld. CIT(A) on this issue, and restore this matter to the file of the AO for fresh adjudication and as per law. Ground no. 2 of the appeal is allowed for statistical purposes.
Ground no. 3 of the appeal is reproduced as under:
” 3. On the facts & Circumstances of the case. the CIT appeal has erred in deleting the addition in respect of disallowance of interest expenses. inspite of the fact that the interest expenses are only shown in the computation of income, but not included in the balance sheet.
20.1 No specific arguments were made in respect of this ground. Moreover, considering the facts of the present case, this ground of Revenue’s appeal is not tenable and hence dismissed.
.- 4920 & 4921/Del/2019 Ni�n Garg 21. To sum up, the appeal no. 4920/Del/2019, for A.Y. 2014-15 is allowed for statistical purposes whereas the appeal no. 4921/Del/2019, for A.Y. 2015-16 is partly allowed.
Order pronounced in the open court on 8th October, 2025.