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Facts
The Revenue and assessee filed cross-appeals against the CIT(A)'s order concerning unexplained cash credits. The assessee had taken unsecured loans from various parties, which the Assessing Officer (AO) treated as unexplained income under Section 68, treating the creditors as shell companies. The CIT(A) deleted one addition but sustained another.
Held
The Tribunal held that the CIT(A) correctly deleted the addition related to Cloister Realtors Pvt. Ltd. as sufficient evidence was provided to establish identity, creditworthiness, and genuineness. However, regarding UV Credit Solutions, since additional evidence regarding the change of name and existence of the creditor was submitted, the issue was remitted back to the AO for verification.
Key Issues
Whether the additions made under Section 68 for unexplained cash credits are justified when the assessee has provided documents to establish the identity, genuineness, and creditworthiness of the creditors, and whether the AO conducted adequate inquiry.
Sections Cited
68, 115BBE, 133(6), 143(2), 142(1), 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘C’: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN & SHRI VIMAL KUMAR
(Assessment Year: 2017-18) Krish Shalimar Project Pvt. Ltd., vs. ACIT, Central Circle 30, 406, 4th Floor, Elegance Tower 8, New Delhi. Jasola District Centre, Delhi – 110 025. (PAN : AAECK2346Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri K. Sampath, Advocate Shri V. Raja Kumar, Advocate REVENUE BY : Shri Amit Kumar Jain, CIT DR Date of Hearing : 02.06.2025 Date of Order : 27.08.2025 O R D E R PER S.RIFAUR RAHMAN,ACCOUNTANT MEMBER :
1. The Revenue and assessee has filed cross appeals against the order of ld. Commissioner of Income Tax (Appeals)-31, New Delhi [“ld. CIT(A)”, for short] dated 22.06.2023 for Assessment Year 2017-18. The Revenue has also filed appeal against the order of ld. CIT (A)-31, New Delhi dated 03.08.2023 for AY 2018-19.
Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. First we take up appeals filed by the Revenue and assessee for the AY 2017-18 raising following grounds of appeal :- “Revenue’s appeal (AY 2017-18)
1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.5,75,00,000/- made u/s 68 of LT. Act r.w.s 115BBE on account of unexplained cash credits in the hand of the assessee ignoring the facts that assessee has not satisfied the essential ingredients u/s 68 of the I.T. Act, 1961.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that the entity from which credits were obtained, has no tangible business and the reserve money in the hands of the entity is mostly comprising of share capital and share premium received from various entities, thereby reflecting that it is a shell company used for the purpose of providing entries.
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in failing to appreciate that notices under section 133(6) were issued to the creditor by the Assessing officer which returned un-responded, reflecting that the entity from which credits were received is merely a paper entity and was non-existent at its address.
4. The order of the Ld. CIT(A) is perverse, erroneous and is not tenable on facts and in law.
The grounds of appeal are without prejudice to each other.” “Assessee’s appeal (AY 2017-18)
1. For that the 1d. CIT (A) was not justified in confirming the addition of Rs.1,00,00,000/- made by the A.O. on account or loan taken from M/s. UV Credit Solution Pvt. Ltd. (now known as Sivion Real Estate India Pvt. Ltd.) by wrongly treating the same as unaccounted cash credit u/s 68.
2. For that the ld. C1T(A) was not justified in upholding the action of the A.O in making the aforesaid addition or Rs.1,00,00.000/- u/s 68 when the assessee had proved the identity, genuineness and creditworthiness of the loan creditor.
3. For that the Ld. CIT(A) failed to appreciate that the name of the loan creditor was changed to Sivion Real Estate India (P) Ltd., as such, the details of the loan creditor company could not be found on MCA website by the A.O.”
3. Brief Facts of the case are, the assessee filed its return of income for the AY 2017-18 on 31.10.2017 declaring loss of Rs.1684/-. The case was selected for complete scrutiny under CASS, accordingly, the notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee along with the questionnaire. The case was specifically selected to verify the large increase in the unsecured loans. The AO observed that the assessee has taken unsecured loan from 8 parties and in order to verify the same, he issued show cause notices u/s 133(6) of the Act. The above notices were returned unserved in the following 5 cases namely, Cloister Realtors, Cnetlingo Marketing, RKK Portfolio, UV Credit Solutions and White Diamond Enterprises. The assessee was also show caused as to why the above transactions not to be treated as unexplained credits and added to the income of the assessee. In response, the assessee submitted the details like documents consist of ITR, confirmations, bank statements, financial statements and relevant assessment orders along with the explanation on the change of address and change of names, the same is reproduced by the AO in his order at para 5.3. After considering the above information, the AO analysed the financial data available in the MCA portal and information submitted by the assessee, he came to the conclusion on the two companies i.e., UV Credit Solutions and Cloister Realtors that they are shell companies with the observation that the major and only source of funds to finance the assessee are the share capital and share premium, they are making consistent loss making entities or not having substantial returns matching to the amount received by them on share premium. He further observed that there are no tangible business activities carried on by these entities and having similar features in a shell entity.
Accordingly, he proceeded to make the addition u/s 68 of the Act by observing that the assessee has not proved the identity, capacity and genuineness of the transaction. He proceeded to make the addition of Rs.6.75 crores received from the above entities.
Aggrieved with the above order, the assessee preferred an appeal before ld. CIT(A) -31, New Delhi. The assessee has raised several grounds and filed a detailed submission, which are reproduced at pages 4 to 18 of the impugned order. For the sake of clarity, the main submissions are reproduced below:
5. After considering the above detailed submissions, ld. CIT(A) partly allowed the appeal by sustaining the addition relating to UV Credit solutions by observing as under:
Ld. CIT(A) deleted the addition relating to Cloister Realtors by observing as under:
7. Aggrieved with the above order, both revenue and assessee are in appeal before us.
At the time of hearing, Ld DR brought to our notice detailed findings of AO from pages 2 to 10 of the assessment order and also brought to our notice the findings of Ld CIT(A) in giving relief to the assessee at page 20 of the impugned order. He submitted that the Ld CIT(A) has given relief to the assessee with the observation that the AO has not made enquiry and has ignored the fact that the AO has not received any confirmation from the parties during the assessment proceedings, all the confirmations were submitted by the assessee only during appellate proceedings. He objected to the relief granted to the assessee.
On the other hand, ld. AR brought to our notice. Page 11 of the assessment order and submitted that all the companies under consideration are active companies. He also brought to our notice. Para 7.2. of Appellate order. He further submitted that the notices were served on the old address and subsequently assessee submitted the new addresses which were not considered or new enquiries were made. Merely, the Assessing Officer mentions only the details of old address and not makes any enquiry but proceeded to make the addition. He also brought to a notice page 61 and 62 of the paper book and submits that the assessee has already submitted bank statements, which proves the genuineness of the transaction and also explained the source of source of the transaction before the authorities. With regard to assessee’s appeal, he submitted that the assessee had submitted the additional evidence which is placed at page 33 of the PB. He submitted that the lender company name was changed and further submitted that the loan not outstanding at the end of the year and prayed that the grounds raised
by the assessee may be allowed.
10. He also relied on case law as under: (i) Hon’ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd. & Ors. In ITA 71/2015 & ors. Order dated12.08.2015; (ii) ITA in the case of Shivnandan Buildwell Pvt. Ltd. vs. DCIT in order dated 16.10.2024.
Considered the rival submissions and material placed on record. We observe that the assessee had submitted all the relevant documents in support of the transactions like Pan, financial statements, confirmation, bank statements proving the source of source. The AO rejected all the documents on the basis that the lenders have not responded to the notice issued u/s 133(6). Further, he observed from the financial statements and MCI data that these companies were declaring negligible income and sources for the funds were share capital and reserves. He is of the view that they don’t have earning capacity to finance such huge loans. He formed the opinion that these are shell companies. Further we noticed that the AO has taken the above views without giving any opportunity to the assessee to cross examine.
We observe that the ld. CIT(A) has accepted that the assessee has submitted all the relevant documents to discharge the onus upon it, however, he taken divergent views on the basis of traceability of the lenders at the address submitted by the assessee or available with the AO. He accepted the changed address details given by the assessee relating to Cloister Realtors Pvt. Ltd and accordingly deleted the addition. After consideration of the facts on record, we observe that the assessee has already submitted the relevant information and ld. CIT (A) has appreciated the various documents which proved the identity, creditworthiness and genuineness of the transaction. The AO has rejected the plea that assessee on the basis that the creditor was not traceable. The ld. CIT (A) found that they are in existence. Being an authority having co-terminus power, he has allowed the above evidence. Therefore, we are inclined not to disturb the findings of the ld. CIT (A). When it comes to UV Credit solution, he rejected the submissions of the assessee with the observation that they were untraceable and did not responded to the notice creating a doubt about the identity/existence. Before us, Ld AR submitted the additional evidences in the form of paper book, the information contained are certificate of incorporation pursuant to change of name, certifying the change of name from UV Credit Solutions to Sivion Real Estate India Private Ltd and also submitted a confirmation for the same from the company. In order to verify the same, we are remitting this issue back to AO for the limited purpose of above verification of the change of name and existence of the creditor at the address. Accordingly, the grounds raised
by the assessee are allowed for statistical purpose.
13. In the result, appeal filed by the revenue is dismissed and appeal filed by the assessee is allowed for statistical purpose.
14. The appeal preferred by the Revenue in AY 2018-19 are exactly similar, accordingly, we are inclined to follow the decision in AY 2017-18 mutatis mutandis. In the result appeal filed by the Revenue for AY 2018-19 is dismissed.
15. To sum up : Revenue’s appeal for AYs 2017-18 and 2018-19 are dismissed and the appeal filed by the assessee for AY 2017-18 is allowed for statistical purposes. Order pronounced in the open court on this 27th day of August, 2025.