THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2,, VISAKHAPATNAM vs. LINTON PROJECTS PRIVATE LIMITED,, VIZIANAGARAM

PER DUVVURU RL REDDY, Judicial Member :

The captioned appeal is filed by the Revenue against the

order of the Ld. Commissioner of Income Tax (Appeals)-3,

Visakhapatnam [Ld. CIT(A)] in Appeal No. 375/2019-

20/10428/CIT(A)-3/VSP/2020-21, dated 29/03/2021 arising out

of the order passed U/s. 143(3) of the Income Tax Act, 1961 [the

Act] for the AY 2018-19. The assessee has filed the Cross

Objection.

I.T.A. No.119/Viz/2021 (Revenue’s Appeal)

the business of construction of apartments. The assessee-

company has filed its return of income for the AY 2018-19 on

29/09/2018 admitting a loss of Rs. 40,681/-. A search & seizure

operations U/s. 132 of the Act was conducted on 15/09/2017 by

the DDIT(Inv.) Unit-III(1), Visakhapatnam at the premises of M/s.

Linton Projects Pvt Ltd., in connection with the search and

seizure operations in the group case of Shri Alakram

Satyanandam & Group. Consequent to search, the assessee

company was centralized with Central Circle-2, Visakhapatnam

3 vide proceedings of the Pr. CIT-1, vide order in F.No. Tech/127

order/Pr.CIT-1/VSP/2017-18, dated 25/01/2018. Subsequently,

adhering to the CBDT Guidelines, notices U/s. 143(2) and 142(1)

of the Act were issued on 21/8/2019 and 19/11/2019

respectively. During the AY 2018-19 the assessee company

received unsecured loans to the tune of Rs. 93,55,868/- and the

Ld. AO asked the assessee to produce the ledger accounts,

confirmation letters along with evidences to prove the

creditworthiness of the parties. Since the assessee company has

not filed any information a show cause notice was issued on

12/12/2019 by the Ld. AO. In response, the assessee filed its

reply on 20/12/2019 submitting copies of ledger account without

evidences with reference to creditworthiness of the party. On

perusal of the reply submitted by the assessee-company, the Ld.

AO opined that since all the persons who lend money to the

assessee-company have built their capital by receiving bogus

cash gift or bogus unsecured loan which were added back as

unaccounted income in the hands of the individuals and they are

shown in the form of asset in the hands of the assessee-company,

the amount of Rs. 93,55,868/- was added to the assessee’s total

income on substantive basis and protectively in the hands of the

individual loan creditors as unexplained cash credit U/s. 68 r.w.s

4 115 BBE of the Income Tax Act, 1961. Thus, the total income of

the assessee was determined at Rs. 93,55,868/- and tax demand

of Rs. 87,45,160/- was raised by the Ld. AO. Aggrieved by the

order of the Ld. AO, the assessee carried the matter in appeal

before the Ld. CIT(A).

assessee’s Representative and granted relief to the assessee with

respect to disallowance of Rs. 93,55,868/- vide paras 5.2 to 5.6

of his order and partly allowed the appeal of the assessee.

Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal

before the Tribunal by raising the following grounds of appeal:

“(i) On the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the addition made by the AO towards unexplained credits U/s. 68 r.w.s 115BBE of the IT Act when the assessee has failed to establish the creditworthiness of the parties from which it has received unsecured loan as the loan creditors have built their capital by receiving bogus cash gift or bogus unsecured loans.

(ii) The Ld. CIT(A) has erred in deleting the addition made by the AO U/s. 68 r.w.s 115BBE without appreciating the fact that the onus is on the assessee to satisfy all the three conditions as required U/s. 68 of the IT Act, 1961.

(iii) Any other ground of appeal that may arise at the time of hearing.”

5 4. At the outset, the Ld. DR submitted that the initial onus is

upon the assessee to establish three things necessary to obviate the

mischief of Section 68 viz., (i) identity of the investors; (ii) their

creditworthiness/investments; and (iii) genuineness of the transaction. In

establish the the present case, the assessee has failed to

creditworthiness of the parties from whom the assessee has

received unsecured loan as the loan creditors have built their

capital by receiving bogus cash gift or bogus unsecured loans. In

such situation, the Ld. DR mentioned that, the action of the Ld.

AO making the addition by invoking the provisions of the section

68 r.w.s 115BBE of the Act is justifiable. The Ld. DR further

mentioned that the Ld. CIT(A) without appreciating these facts,

granted relief to the assessee by directing the Ld. AO to allow the

disallowance and therefore the Ld. DR pleaded that the order of

the Ld. CIT(A) on this issue may be set aside and that of the

order of the Ld. AO be upheld. Thus, the Ld. DR strongly relied

on the order of the Ld. AO and argued in support of the same.

Ld. DR submitted that the assessee has furnished the evidences

as sought for by the Ld. AO by way of confirmation letters from

the lenders of the unsecured loans twice during the course of

6 assessment proceedings. The Ld. AR further submitted that

before the Ld. CIT(A), the assessee’s Authorized Representative

has submitted the copies of acknowledgements received from the

Ld. AO in proof of having submitted the confirmations. In such

situation, the observation of the Ld. AO stating that the assessee

has not filed the information during the course of assessment

proceedings is devoid of merit. The Ld. AR further submitted that

considering the above facts and submissions made by the

assessee’s Representative, the Ld. CIT(A) discussed the issue at

length and granted relief to the assessee. Therefore, the Ld. AR

pleaded that the order of the Ld. CIT(A) need not be interfered

with as it holds good and the issue was adjudicated in

accordance with the law.

available on record and the orders of the Ld. Revenue

Authorities. It is an undisputed fact that the assessee has

received unsecured loans to the tune of Rs. 93,55,868/- during

the AY 2018-19. The case of the Ld. AO is that the assessee has

not filed any confirmation letters, bank statements of the loan

creditors and creditworthiness of the creditors during the course

of assessment proceedings. Therefore, the Ld. AO made addition

7 in the absence of any evidence furnished by the assessee. On

appeal, the Ld. CIT(A) deleted the addition stating that the

assessee has filed all the confirmation letters, bank statements

and creditworthiness of the creditors. Moreover, in para 5.5 of

the Ld. CIT(A)’s order, the Ld. CIT(A) observed that the assessee

has also furnished the acknowledgments given by the Ld. AO in

proof of having submitted the confirmation letters before the Ld.

CIT(A). Considering all these submissions of the assessee, the Ld.

CIT (A) directed the Ld. AO to allow the disallowance of

unsecured loans of Rs. 93,55,868/-. On perusal of the order of

the Ld. CIT (A), we find that the Ld. CIT(A) has not discussed

anything except stating that the assessee has filed confirmation

letters, bank statements and creditworthiness of the creditors. In

our considered opinion that Ld. CIT(A) ought to have remanded

the evidences submitted before him to the Ld. AO and sought for

a verification / remand report from the Ld. AO. In the absence of

any verification of the confirmation letters, bank statements etc.,

submitted by the assessee, we cannot come to a conclusion that

the Ld. CIT (A) has adjudicated the issue on merits and in

accordance with law. Therefore, keeping in view all the facts

discussed above, we hereby set-aside the order of the Ld. CIT(A)

on this issue and remit the matter back to the file of the Ld. AO

8 to examine the issue afresh after considering the confirmation

letters filed by the assessee before the Ld. CIT(A). We also hereby

direct the assessee to furnish all the details which were placed

before Ld. CIT (A), should also be filed before the Ld. AO and

cooperate promptly with the Ld. AO in deciding the issue afresh.

We reiterate that on furnishing the details by the assessee, the

Ld. AO should verify and examine them in accordance with law

and pass a speaking order. It is ordered accordingly.

purposes.

C.O. No.14/Viz/2023 (By Assessee)

while adjudicating the Revenue’s appeal we have set-aside the

order of the Ld. CIT (A) and allowed the Revenue’s appeal for

statistical purposes as mentioned herein above, and therefore in

our considered opinion the adjudication of the Cross Objection

raised by the assessee becomes infructuous. Hence, the CO

raised by the assessee is dismissed as infructuous.

9 Pronounced in the open Court on 10th August, 2023.

Sd/- Sd/- (एस बालाकृ�णन) (दु�वू� आर.एल रे�डी) (S.BALAKRISHNAN) (DUVVURU RL REDDY) लेखा सद�य/ACCOUNTANT MEMBER �या�यकसद�य/JUDICIAL MEMBER Dated : 10/08/2023 OKK - SPS

आदेश क� ��त�ल�प अ�े�षत/Copy of the order forwarded to:- �नधा�रती/ The Assessee – m/S. Linton Projects Pvt Ltd., D.No. 16-5- 1. 23, Yelugubantivari Veedhi, Vizianagaram, Andhra Pradesh. राज�व/The Revenue – The Deputy Commissioner of Income Tax, 2. Central Circle-2, Pratyakshakar Bhavan, Sector-8, MVP Double Road, Visakhapatnam, Andhra Pradesh. 3. The Principal Commissioner of Income Tax, आयकर आयु�त (अपील)/ The Commissioner of Income Tax (Appeals), 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, �वशाखापटणम/ DR, ITAT, 5. Visakhapatnam .गाड� फ़ाईल / Guard file 6

आदेशानुसार / BY ORDER

Sr. Private Secretary ITAT, Visakhapatnam