ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), MEERUT, MEERUT vs. PASWARA PAPERS LTD, MEERUT

Aggrieved by the assessment order dated 31/12/2018, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 30/08/2024, deleted the addition made by the A.O. As against the order of the Ld. CIT(A) dated 30/08/2024, the Department of Revenue preferred the present Appeal on the grounds mentioned above.

The Ld. Departmental Representative vehemently submitted that the Ld. CIT(A) erred by deleting the addition of Rs. 3,51,65,500/- made by the A.O. on account of unsecured loan and share capital without considering the fact that during the assessment proceeding, the Assessee failed to furnish the documents to prove the creditworthiness of the lender and also failed to produce the Directors

Per contra, the Ld. Assessee's Representative submitted that no cash deposits were made prior to providing unsecured loan by Envee Infrastructure Pvt. Ltd. or three HUFs. The Ld. Assessee's Representative submitted that all the three ingredientsof Section 68 of the Act were duly proved by providing requisite documents thereby the Assessee discharged the onus cast upon it fully. Mere non production of the Director cannot be ground to doubt the transaction

We have heard both the parties and perused the material available on record. The sole ground of the revenue is against deletion of addition of Rs. 3,51,65,500/- made by the A.O. on account of unsecured loan and share capital. The Ld. CIT(A) while deleting the addition held as under:- “Findings and Decision 5. I have gone through the facts of the case and material available on record. It is seen from the records and submission filed by the appellant from time to time that an assessment order has been passed u/s.143(3) of the Act dated 31.12.2018 by the AO wherein the total income of the appellant is determined at Rs. 39168340/- after following additions/adjustments:

1. As regards to the grounds of appeal, ground no. 1, 2 and 7 are general in nature and does not require adjudication.

2. Grounds No. 3, 4 and 5 is related to addition of Rs. 3,51,65,500 u/s 68 for the unsecured loan received from 4 parties. In this regard the appellant has submitted in its reply filed on 27.08.2024 that it had received unsecured loan amounting to INR 2,50,00,000 from EnnVee Infrastructures (India) Pvt. Ltd. The Appellant had submitted all relevant

3. Here it can be said the appellant had no valid right/reason to produce the director more particularly when the appellant had filed all the necessary details to prove the identity & creditworthiness of the creditor and genuineness of transactions. Had the AO not satisfied with that the notice u/s. 133(6) of the Act should have been issued to EnnVee Infrastructure (India) Pvt. Ltd. by the AO to verify the same. However, the AO didn’t do that and instead he disallowed the same without assigning any reason and hence, not sustainable. Further, it is noticed from the audited balance sheet of EnnVee Infrastructure (India) Pvt. Ltd. that the above transaction has duly been recorded in its books of accounts.

4. In view of the above facts and circumstances and also case laws relied upon by the appellant, it is held that the appellant has duly discharged its onus to prove the identity and creditworthiness of the creditor and genuineness of transaction by way of submitting bank statement and confirmation of the creditors, share holding pattern, audit report and ITR etc. of EnnVee Infrastructure (India) Pvt. Ltd. No inquiry whatsoever has been carried out by the AO to prove the above transactions is not genuine except giving some passing remarks which is not sustainable in the eyes of law. Accordingly, the addition made of Rs.2,50,00,000/- u/s. 68 of the Act by way of treating the unsecured loan received from EnnVee Infrastructure (India) Pvt. Ltd. as non-genuine is deleted.

5. Further, it was further alleged that the Appellant had received unsecured loan and share capital from Arvind Kumar HUF, Vinod Kumar HUF and Kapil Kumar HUF amounting INR 30,68,500, INR 10,28,500 and INR 60,68,500 respectively during the impugned A.Y. and had submitted ID proofs, ITRs and bank statement of the applicants to prove the identity, genuineness and creditworthiness of the parties. Further, the appellant has also submitted that the Ld. AO has, in the assessment order passed for the Assessment Year 2015-16, acknowledged and accepted the genuineness of the amounts received from the above-mentioned Hindu Undivided Families (HUFs) which is evidenced by the fact that these amounts were subsequently invested in shares after receiving payments from other companies and firms within the Paswara Group. Furthermore, on 31 March

7. In view of the above facts and circumstances and also case laws relied upon by the appellant it is held that the appellant has discharged its onus to prove the identity and creditworthiness of share holders and also genuineness of transaction by way of submitting the copy of ITR, bank statements, general ledger account of relevant period, share application form alongwith share certificates etc. However, the AO has not made any further inquiry to verify the source of source and simply added the entire amount of share application money of Rs.1,01,65,500/- u/s. 68 which is not sustainable being based on surmises and conjectures.

As could be seen from the records, the Ld. A.O. while making the addition of Rs. 2,50,00,000/-, assigned two reasons i.e. ‘huge cash deposits in the bank of Envee Infrastructure Pvt. Ltd.’ and ‘the Assessee failed to produce the Directors of the said Company’. Ongoingthrough the bank account of the M/s Envee Infrastructure Pvt. ltd. placed at Page 2 & 3 of the paper book, reveals that no cash deposits have been made prior to providing unsecured loan to the Assessee on the other hand, the alleged cash deposits have been 7ITA No. 5026/Del/2024 10. Further, the Ld. A.O. while making addition of Rs. 1,01,65,500/- in respect of loan and share capital received from three HUFs, held that that there were huge cash deposits in the bank of HUFs before providing loan and the reason for making the said addition was that the documents produced by the Assessee are not sufficient to prove the creditworthiness and genuineness of the transaction and the Assessee failed to explain the source of cash deposits in the account of HUFs.

On verification of the bank statement produced in the paper book,we find no cash deposit in the bank account of the HUF for advancing/subscribing the loan/share capital to the Assessee, which could be corroborated from the bank statements produced at Page No. 16-18, 26-28, 36-38 of the paper book. In order to prove three ingredients of Section 68 of the Act, Assessee produced ITR and PAN card of the lenders, the bank statements which reflects all the transactions were made through banking channel and all the HUFs have sufficient funds and net-worth, which can be corroborated from the balance sheet of all the three entities. In our considered view, the Assessee has fully discharged its onus. The A.O. has also not taken any measures u/s 131/133(6) of the Act, however, A.O. found fault with the Assessee for not producing the above parties. Considering the factthat all the HUFs are Directors of the Assessee Company and the Assessee has discharged its onus as required u/s 68 of the Act and as the creditworthiness of the HUFs, we find no reason to 10 Date:- 27 .08.2025 R.N, Sr.P.S*