DCIT, CIRCLE- 19(1), DELHI vs. PARAMOUNT PROPBUILD PVT. LTD., DELHI

The appellant craves to be allowed to add any fresh ground(s) of appeal and/or deleted or amend any of the ground(s) of appeal."

Heard both the parties and perused the materials available on record. From the perusal of the order, it is seen that in immediately preceding year i.e. in Assessment Year 2016-17, assessment was completed u/s 143(3) and against that order proceedings u/s 263 were initiated vide notice dated 28.03.2021 and in terms of order passed u/s 263 on 31.03.2021, the Ld. PCIT set aside the assessment order and direct the AO to pass the assessment order afresh after considering the existence, creditworthiness and genuineness of the loans taken from these two companies. Against such order, assessee filed the appeal before the Tribunal wherein the Co-ordinate Delhi Bench of ITAT in Appeal No.388/Del/2021 vide order dated 14.02.2022 quashed the order passed u/s 263 by holding that proper examination was done with respect to these companies. Thereafter, the proceedings u/s 148 were initiated and they were dropped by the AO in the order passed u/s 148A(d) dated 26.07.2022. It is thus clear that loans taken from these two entities i.e. M/s Sarvottam Securities Pvt. Ltd. and M/s Upaj Leasing Finance Company Ltd. were held as explained and genuine loans and thus the interest paid to them on the loan amount cannot be treated as bogus or unexplained expenditure. Whle making disallowances, the AO solely relied upon the conclusion drawn in the order passed u/s 263 of the Act wherein the ld. PCIT doubted and observed that loan taken from these companies were not genuine loans which observations are contrary to the facts on record as has ben decided by the Co-ordinate Bench in assessee’s own case.

2 During the appellate proceedings following chronology of facts were submitted by the appellant:

2.1 Appellant's case for the A.Y. 2016-17 was initially assessed by ACIT, Circle -19(2), Delhi u/s 143(3) vide order dated 26.12.2018 and no additions were made either on account of bogus unsecured loans taken during the year or interest paid thereon. Vide said order, additions of only Rs. 2,76,610/- were made on account of disallowance u/s 14A r.w.r. 8D(2)(iii) of the Act. Appellant has strongly contested that no addition was made by AO either on account of bogus loans received from M/s Sarvottam Securities Pvt. Ltd. & M/s Upaj Leasing & Finance Company Ltd. of Rs. 13,90,50,000/- and Rs. 32,95,00,000/- respectively in F.Y. 2015-16 relevant to A.Y. 2016-17 ог interest paid thereon. Appellant has submitted a copy of this order during the appellate proceedings.

3 Appellant has claimed that the said loans from the above two companies were received through banking channels, on which interest was also paid and tax at source (TDS) was deducted. Appellant has also filed statement of account of these lender companies showing the amount received through banking channels and also claimed that their complete address and permanent account number (PAN) details were submitted during the relevant assessment proceedings of the assessment year 2016-17. 6.4 Thereafter, PCIT, Delhi-7 initiated the proceedings u/s 263 for the A.Y. 2016-17 vide its notice dated 28.03.2021, in which specific query was raised regarding the unsecured loans taken from M/s Sarvottam Securities Pvt. Ltd. & M/s Upaj Leasing & Finance Company Ltd. Subsequently, vide order dated 31.03.2021, u/s 263, the orders passed by the AO u/s 143(3) of the Act were set aside and AO was directed to assess the case afresh. In compliance thereto, AO initiated proceedings u/s 147 r.w.s. 143(3) vide notice issued u/s 148 dated 30.06.2021. However, against the said notice appellant company filed a writ petition before Hon'ble Delhi High Court. Hon'ble Delhi High Court quashed the notice issued u/s 148 of the Act vide order dated 16.12.2021. A copy of this order was submitted by the appellant during the appellate proceedings, the relevant part of which is reproduced as under:

5 Meanwhile, aggrieved with the order u/s 263 dated 31.03.2021, appellant filed an appeal before Hon'ble ITAT. Hon'ble ITAT after considering all the facts of the case vide its order in ITA number 388/DEL/2021 dated 14.02.2022, set aside the order u/s 263 of the Act dated 31.03.2021 and restored the order passed by AO dated 26.12.2018. In the said order, Hon'ble ITAT has observed as under:

In our considered opinion, for exercising power u/s 263 of the Act, there should be material on record which would satisfy the ld. PCIT in a prima facie manner that the order is not only prejudicial to the interest of the Revenue but also erroneous in nature. If any of these factors is not satisfied, he cannot assume juri iction to initiate suo moto power of revision.

Facts mentioned elsewhere clearly show that this is not a case oflack of enquiry or assessment being framed in haste. Proper enquiries were made by the Assessing Officer during the course of assessment proceedings and after considering all the facts and evidences, the Assessing Officer took a view which is a plausible view. Therefore, it is not open to the ld. PCIT to direct a re-enquiry as he is of a different view.

6 Thereafter, a notice u/s 148A(b) was also issued on 23.05.2022 in which details regarding the loan of Rs. 32,95,00,00/- and Rs. 13,09,50,000/- from M/s Upaj Leasing & Finance Company Ltd. & M/s Sarvottam Securities Pvt. Ltd. respectively were asked by the AO. Against the said notice, appellant company filed its objections u/s 148A(c) on 06.06.2022 and AO considered the reply of the appellant company and on 26.07.2022, passed an order u/s 148A(d) of the Act to drop the proceedings. The order of AO passed u/s 148A(d) dated 26.07.2022 is reproduced as under:

Accordingly a letter no. ITBA/COM/F/17/2022-23/1043124311(1) u/s 148A(b) in consequence to the Hon'ble SC Order dated 04.05.2022 for the Assessment Year 2016-17 alongwith the relevant documents was issued to assessee on 23.05.2022 for examining the above facts or filing the response within 2 weeks (i.e. by 06.06.2022).

In response to notice. Reply furnished by the assessee on 06.06.2022 is placed on records. In its reply assessee furnished that.

7 Thus, it is clear from the above chronology of events that, as on date there exist no additions of either unsecured loan taken from M/s Upaj Leasing & Finance Company Ltd. & M/s Sarvottam Securities Pvt. Ltd. of Rs. 32,95,00,00/- and Rs. 13,09,50,000/- respectively, or interest paid thereon during the A.Y. 2016-17 by the appellant company. Hence, if the principal amount of loan is not disputed by the AO or not held to be bogus, amount of interest paid on the said loan in the succeeding year i.e. A.Y. 2017-18 cannot be disallowed. In other words, without the treatment of principal amount of loan as bogus, the question of disallowance of interest thereon does not arise. The additions on account of disallowance of the interest paid on these loans are therefore not sustainable on merits, as on date. Hence, ground nos. 2 and 3 are allowed.

Before us, the revenue has failed to controvert the findings of ld. CIT(A) who deleted the disallowance by observing that once the loans are not treated