Loading judgment…
Facts
The assessee filed its return of income and was selected for scrutiny. The Assessing Officer (AO) made additions on account of share application money treated as unexplained cash credits and disallowance for payments without TDS. Further additions were made for cash payment violating Section 40A(3) and an unsecured loan.
Held
The Tribunal partly allowed the appeal. Grounds related to share application money were remanded to the AO for further verification. The disallowance for non-deduction of TDS was partly allowed. The addition for unsecured loans was set aside and remanded to the AO.
Key Issues
Whether share application money and unsecured loans received by the assessee were unexplained cash credits, and whether disallowances for non-deduction of TDS were justified.
Sections Cited
143(3), 68, 40(a)(ia), 40A(3), 194A, 234A, 234B, 234C, 133(6)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), [“CIT(A)”, in short] National Faceless Appeal Centre (NFAC), Delhi dated 24.02.2017 passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for Assessment Year 2013-14.
Brief facts of the case are that the assessee has filed its return of income on 30.09.2013 declaring total income of Rs. 59,14,000/-. Case of the assessee was selected for scrutiny through CASS and notice u/s 143(2) was issued to the assessee on 27.07.2015. Assessee filed replies in compliance to the notices issued from time to time. AO observed that assessee has received share application money totaling to Rs. 58,90,000/- from three persons namely, Smt. Shanti Devi at Rs.50,00,000/-, Sh. Vipin Jain at Rs.8,50,000/-and Ms. Skashi Jain at Rs.40,000/-, however, their credit worthiness was not established, therefore, same were treated as unexplained cash credit u/s 68 of the Act and addition was made. Besides this, disallowance u/s 40(a)(ia) of Rs.20,21,879/- was made on account of payments made without TDS.
2 IT No.3308/Del/2017 M/s Shring Construction Co. Pvt. Ltd. vs. ACIT Further cash payment of Rs.22,500/- was made in violation to section 40A(3) of the Act. Further addition of Rs.75,00,000/- was made towards unsecured loan received during the year from Sh. Sukumal Chand Jain, Managing Director of the company as unexplained. Accordingly, total income of assessee was assessed at Rs. 2,13,48,460/-. Against the said order, an appeal was preferred before Ld. CIT(A) who dismissed the appeal of assessee in terms of impugned order dated 24.02.2017.
Aggrieved by the said order, the assessee is in appeal before the Tribunal by taking the following grounds of appeal:
1. That assessment order passed u/s 143(3) by the Assessing officer is illegal. had in law and without jurisdiction and the CIT(A) has also erred in upholding the same.
2. The addition/disallowances made by the assessing officer are illegal, unjust. highly excessive and are not based on any material on record by the assessing officer. The total income of the assessee appellant has been wrongly and illegally computed by the assessing officer loss at Rs.2,13,48,459.00 as against declared loss of Rs.59,14,080.00.
3. The Assessing Officer has erred in making the addition/ disallowance of Rs.58.90,000.00 on account Share Capital U/s 68 of the Act, to the income of the assessee company without appreciating the fact that the assessee company has discharged its onus after establishing the Identity, Genuineness and Creditworthiness of the Share Applicants. The CIT (A) has erred in upholding the same.
4. That, the CIT (A) has failed to appreciate, that, the Share Applicants are identifiable, creditworthy and genuine, which has been established by the assessee company by placing the evidences in shape of confirmation, PAN No. and Bank Statements.
5. That, the CIT (A) has erred in upheld the addition/disallowance U/s 40(a)(ia) of the Income Tax Act. 1961 made by the assessing officer at Rs.20,21,879.00 on account of non deduction of TDS on payment of interest paid to financial institute M/s Telecommunications Consultants India Limited (A Government of India Enterprises) and Misc. Expenses, which is highly arbitrary, unjust and against the provision of the ACT.
6. That, the CIT (A) has erred in confirming the addition of Rs.22,500.00 on account of donation made in CASH deposit in the bank account of M/s Digember Jain Mahasamiti on the ground, that, the said payment is covered 11/s 40A(3) of the ACT, which is highly arbitrary, unjust and against the provision of the ACT.
7. That, the CIT (A) has erred in upholding the addition made by the assessing officer on account of Unsecured Loans of Rs.75 Laks received from Shri Sukhmal Chand Jain, who is the director of the assessee company, U/s 68 of the Income Tax Act, 1961, which is highly arbitrary, unjustified and against the circumstances of the case.
8. The additions made and the observations made are unjust, unlawful and based on mere surmises and conjunctures. The additions made cannot be justified by any material on record.
3 IT No.3308/Del/2017 M/s Shring Construction Co. Pvt. Ltd. vs. ACIT 9. That the explanation given evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the same do not justify the additions/ allowances made.
10. That the impugned Assessment Order passed by the Assessing Officer and order passed by CIT(A) are against the principles of natural justice and the same has been passed without affording reasonable and adequate opportunity of being heard.
11. That the interest U/s 234A, 234B, 2340 & 234C has been wrongly and illegally charged as the appellant could not have foreseen the disallowances/additions made and could not have included the same in current income for payment of Advance tax. The interest charged under various sections is also wrongly worked out.
12. The appellant craves leave to add, amend, alter and or modify the grounds of appeal
of the said appeal. All of the above grounds of appeal are without prejudice and are mutually exclusive to each other.”
4. Ground of appeal No.1 to 2 are general in nature needs no adjudication.
Ground of appeal No. 3 & 4 are with respect to addition of Rs. 58,90,000/- made on account of share application money held as unexplained credits u/s 68 of the Act.
6. Before us, Ld. AR of the assessee submits that before AO, assessee has submitted copy of confirmation of Smt. Santi Devi of Rs.50,00,000/- and also filed her bank statements. It is submitted that cheque given to assessee was cleared on 29.01.2013 and there was sufficient balance in the account. Therefore, it was prayed by ld. AR that since Smt. Shanti Devi has sufficient net worth, the application money received from her cannot be treated as unexplained. With respect to share application of money of Rs. 8,50,000/- received from Sh. Vipin Jain, it is submitted that assessee filed confirmation along with his bank statement which are available in PB pages 22 to 24. According to which, there was sufficient balance was available with Sh. Vipin Jain when the amount was transferred to assessee. Therefore, he requested for deletion of addition made on this count. With respect to the amount received from Ms. Skashi Jain, it was submitted by the assessee that payment was made through banking channel. It is further submitted that all the share applicants are family members of the Directors of assessee company. It is further submitted that in the account of Sh. Vipin Jain, there was a credit entry of Rs. 500,000/- from Jindal Construction Company which was related
4 IT No.3308/Del/2017 M/s Shring Construction Co. Pvt. Ltd. vs. ACIT to the assessee and bank account of Jindal Construction Company is incorporated in the books of the assessee. The AO has accepted all the entries appearing in the books of M/s Jindal Construction Co., therefore, amount received from Sh. Vipin Jain could not be doubted. He thus, prayed for the deletion of the additions made towards share application money by holding them as unexplained cash credits u/s 68 of the Act.
On the other hand, Ld. Sr. DR supports the order of lower authorities and submits that except confirmations of the applicants, assessee failed to file any other details to establish creditworthiness by filing their ITR and other details, therefore, AO has rightly made the additions which deserve to be upheld.
Heard both the parties and perused the materials available on record. It is seen that assessee has filed confirmations and bank statements of the share applicants and no further details were submitted with respect to their financial position nor their ITR were filed to prove that they were having creditworthiness to subscribe in the share capital of assessee. Looking to these facts and in the larger interest of justice, we set aside the order of lower authorities and remand this issue back to the file of AO for making further verification with respect to the income declared by all the applicants to justify their creditworthiness. The assessee is also directed to file copy of their return of income and other necessary particulars to establish the creditworthiness to subscribe for the shares of assessee. With these directions, Ground of appeal No.3 & 4 are partly allowed.
9. Ground No.5 is with respect to disallowance of Rs.20,21,879/- made u/s 40(a)(ia) of the Act without making TDS on the payments made.
Heard both the parties and perused the materials available on record. Assessee made the payment of interest on mobilization advance and interest on the bank loans without deducting tax at source. These payments includes Rs.2,50,000/- paid to ABN Amro Bank, for which it is claimed that it is a banking company, therefore provisions of section 194A for making TDS on 5 IT No.3308/Del/2017 M/s Shring Construction Co. Pvt. Ltd. vs. ACIT the interest paid to it are not applicable. Further a sum of Rs.96,219/- was paid to SREI Equipment Finance Ltd. on the loan taken against construction equipment, and TDS was not deducted on such payments. With respect to the interest paid to ABN Amro Bank, AO is directed to verify as to whether any exemption is provided to the bank or not as it is a foreign bank and is not covered in the list provided and decided in accordance with law. With respect to the payment of interest to SREI Equipment Finance Ltd., admittedly it is a NBFC thus assessee is liable to make TDS on the payment of interest, failing which provisions of section 40(a)(ia) are rightly invoked by the AO on such payment.
With respect to the amount of Rs.17,12,046/- paid to Telecommunication Consultants India Limited which is a Govt. Company, it was the claim of assessee that since the recipient is a Govt. Company, provisions of TDS were not applicable on the payment made to it. We find that the recipient company is a Govt. undertaking nor the Govt. Department and is not given any exemption from TDS. Therefore, TDS as per law must be deducted on the payments made of this party. Further, Rs.2,13,614/- was paid as interest on late payment of TDS, Short & Excess recovery and other expenses. Since, interest on delayed payment of TDS is not an allowable expenditure, therefore, the sum of Rs.1,80,763/- cannot be allowed as expenditure and the remaining amount of Short & Excess recovery and other expenses are allowed.
In view of above discussion, ground of appeal No. 5 of the assessee is partly allowed.
13. Ground No.6 is not pressed, therefore, the same is dismissed.
14. Ground No.7 is with respect to the addition of Rs.75,00,000/- made on account of unsecured loan received from the Managing Director of the company Sh. Sukumal Chand Jain which was held as unexplained credit u/s 68 of the Act.
6 IT No.3308/Del/2017 M/s Shring Construction Co. Pvt. Ltd. vs. ACIT 15. Before us, Ld. AR of the assessee submits that confirmation of Sh. Sukumal Chand Jain was filed along with his bank statements. The AO for the sole reason that assessee has failed to provide the details of the parties from whom payments were credited in his bank account out of which the funds were given to the assessee, therefore, loans received was treated as unexplained. The AR submits that once confirmation is filed and lender is Managing Director, whose details were available with the AO and if the AO has doubts about the credit worthiness he could have issued summons to the Managing Director for making necessary verification which has not been done, therefore, no addition could be made.
On the other hand, Ld. Sr. DR vehemently supports the orders of lower authorities and submits that assessee has failed to file return of income of Sh. S.C Jain, therefore, his creditworthiness remained unsubstantiated. Moreover, assessee has not able to explain the credits in the bank account of Sh. Jain, therefore, Ld. Sr. DR prayed that lower authorities has rightly made the addition which deserves to be confirmed.
Heard both the parties and perused the materials available on record. In the instant case, loan was received from Sh. S.C. Jain, Managing Director of assessee company through banking channel, therefore, there was no question about the identity and genuineness of the transaction. With respect to his creditworthiness, assessee filed bank statement and confirmation of Sh. S. C. Jain. AO’s main allegation is that his ITR and income particulars were not filed, therefore, his creditworthiness remained unexplained. It is seen that assessee has field all the details of Shri Jain and if the Assessing Officer was having any doubts about the creditworthiness or genuineness of the loan 3(taken from Shri Jain, he could have issued summons u/s 133(6) of the Act to Sh. S.C. Jain which has not been done. Hon’ble Supreme court in the case of Orrisa Corporation reported in 159 ITR 78 (SC) held that if the assessee has provided complete details of the creditors, AO should have made enquiries by issuing summons u/s 133(6) of the Act.
7 IT No.3308/Del/2017 M/s Shring Construction Co. Pvt. Ltd. vs. ACIT 18. Once the assessee provided complete details of lender along with his bank statements and confirmation, burden lied upon the assessee was duly discharged and thereafter it is the duty of the AO to make necessary verification by issuing summons. However, in the instant case, as observed above, this exercise was not done by the AO. In view of these facts, we set aside the order of the lower authorities and remand this issue to the file of the AO for making necessary verification from the lender and decide the issue in accordance with law. Accordingly, ground of appeal No.7 is partly allowed for statistical purposes.
Ground of appeal
No.8, 9 and 10 are general in nature needs no adjudication.
20. Ground of appeal No.11 is with respect to levy of interest U/s 234A, 234B, 234C & 234C which are consequential in nature and AO is defected to charge interest as per law.
In the result, appeal of the assessee is partly allowed. Order pronounced in the open Court on 19.09.2025.