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

ITA 5026/DEL/2024

AI Insights

The case revolves around an appeal by the Assistant Commissioner of Income Tax against Paswara Papers Ltd., concerning the deletion of additions amounting to Rs. 3,51,65,500 on account of unsecured loans and share capital by the CIT(A). The Revenue contended that the assessee failed to prove the creditworthiness of the lenders and did not produce the directors of the lending companies for examination. The Tribunal examined the documents and evidence presented, including bank statements, ITRs, and audited balance sheets, and concluded that the assessee had discharged its burden of proof under Section 68 of the Income Tax Act. The Tribunal noted that the Assessing Officer had not conducted further inquiries and had not found any discrepancies in the documents provided by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772455 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2016-2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: RAJ KUMAR; SURAJ
• Keywords: Onus to prove; Share purchase agreement
• Section: 143(3); 68; 133(6)

Judgement Text

"1ITA No. 5026/Del/2024 ACIT VS. Paswara Papers IN THE INCOME TAX APPELLATE TRIBUNAL DELHI [DELHI BENCH:“B” New Delhi] BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER I.T.A. No. 5026/DEL/2024 (A.Y 2016-17) Assistant Commissioner of Income Tax,-1 (1) (1), Aayakar Bhawan, Bhainsali Ground, Meerut, Uttar Pradesh Vs Paswara Papers Ltd. Paswara Hosue, Baghpat Road, Meerut, Uttar Pradesh Appellant Respondent PAN:AAACP9539Q Assessee by Shri Raj Kumar, CA and Shri Suraj Gupta, Adv Revenue by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 31/07/2025 Date of Pronouncement 27/08/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Revenue against the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 30/08/2024 for the Assessment Year 2016-17. 2. The grounds of appeal are as under:- “1. That on the facts and circumstances of the case, CIT(A) erred in his order by deleting the additions of Rs. 3,51,65,500/- on account of unsecured loan and share capital without considering the facts that during the assessment proceeding, the assessee has failed to furnish the creditworthiness of the lender and also failed to produce the Director of company for examination in regard to source of loan given to assessee.” Printed from counselvise.com 2ITA No. 5026/Del/2024 ACIT VS. Paswara Papers 3. Brief facts of the case are that, the Assessee filed return of income declaring Rs. 40,02,840/-, subsequently case of the Assessee was selected for scrutiny and notice u/s 143(2) of the Income Tax Act, 1961 ('Act' for short) was issued. An assessment order came to passed u/s 143(3) of the Act on 31/12/2018 by making total addition of Rs. 3,51,65,500/- and the details are as under:- Name Share Unsecured Loan Total Envee Infrastructure P. — 2,50,00,000 2,50,00,000 Ltd. Arvind Kumar HUF 20,34,500 10,34,000 30,68,500. Vinod Kumar HUF 9,98,500 30,000 10,28,500 Kapil Kumar HUF 10,34,500 50,34,000 60,68,500- Total 40,67,500 3,10,98,000 3,51,65,500 4. 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. 5. 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 Printed from counselvise.com 3ITA No. 5026/Del/2024 ACIT VS. Paswara Papers of the Company for examination in order to prove the source of loan given to the Assessee. 6. The Ld. Departmental Representative further submitted that there was huge cash deposited in the case of Envee Infrastructure Pvt. Ltd. before providing unsecured loan to the Assessee and the Assessee failed to produce the Directors of Envee Infrastructure Pvt. Ltd. before the A.O., therefore, A.O. rightly made addition of Rs. 2,50,00,000/-. Further submitted in so far as other three entities namely Arvind Kumar HUF, Vinod Kumar HUF and Kapil Kumar HUF, the creditworthiness and the genuineness of the transactionswere not proved and huge cash deposits in the Bank accounts of the said HUFs were made and the Assessee failed to explain the source of the cash deposit. Thus submitted that the order of the Ld. CIT(A) deserves to be reversed. Therefore sought for allowing the Appeal. 7. 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 Printed from counselvise.com 4ITA No. 5026/Del/2024 ACIT VS. Paswara Papers itself when the A.O. failed to take records u/s 131/133(6) of the Act. The Ld. Assessee's Representative relying on plethora of judicial precedents and also the documents produced in the paper book submitted that the order of the Ld. CIT(A) requires no interference at the hands of the Tribunal, thus, sought for dismissal of the Appeal of the Revenue. 8. 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: Sr No. Description Amount in Rs.40,02,8 40/- 1 Total income as per the I.T. return 3,51,65,50 0/- 2 Add: 39168340 Total Income 5.1. As regards to the grounds of appeal, ground no. 1, 2 and 7 are general in nature and does not require adjudication. 5.2. 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 Printed from counselvise.com 5ITA No. 5026/Del/2024 ACIT VS. Paswara Papers documents i.e., bank statements, shareholding patterns, audit reports and ITR of EnnVee Infrastructures (India) Pvt. Ltd. to substantiate the identity, genuineness and creditworthiness of the lender. The AO has acknowledged the said fact in the assessment order. However, he said that the appellant failed to produce the director of M/s. EnnVee Infrasturctures(India) Pvt. Ltd. 5.3. 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. 5.4. 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. 5.5. 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 Printed from counselvise.com 6ITA No. 5026/Del/2024 ACIT VS. Paswara Papers 2016, a fresh loan was extended by the HUFs to Paswara Papers Limited. 5.6. In its finding the AO has simply mentioned that the creditworthiness and genuineness of transactions are not satisfactory as the assessee has not submitted any strong explanation for the same. Further, the AO has mentioned that there was huge cash deposit in bank account of above HUFs. However, no inquiry in respect of source of the source has ever been carried out by the AO. Most importantly the AO in the assessment order passed for the A.Y. 2015-16 acknowledged and accepted the genuineness of the amount received from the above mentioned HUFs which is evidenced by the fact that big amounts were subsequently invested in shares after received from other companies and firms within the Paswara Group. 5.7. 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. In view of the above discussion, addition made u/s. 68 of Rs.3,51,65,500/- (2,50,00,000 + 1,01,65,500) is deleted and ground of appeal is allowed accordingly. “ 9. 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 Printed from counselvise.com 7ITA No. 5026/Del/2024 ACIT VS. Paswara Papers made after providing unsecured loan to the Assessee. The Assessee has produced letter of confirmation, bank statement of Evnee Infrastructure Pvt. ltd., ITR and audited balance sheet of the said Company and the A.O. has not found any discrepancy in those documents. The loan given to the Assessee is also reflected in the balance sheet of the Envee Infrastructure India Pvt. Ltd. From the above, it is clear that the Assessee has fulfilled all the three ingredients of Section 68 of the Act to prove the identity of the lender, genuineness of the transaction and also creditworthiness of the lender. As per the audited balance sheet, the said Company had sufficient funds and net worth exceeding Rs. 8.7 Crore. Thus, we are of the considered opinion that, the Assessee has fully discharged its onus. 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. Printed from counselvise.com 8ITA No. 5026/Del/2024 ACIT VS. Paswara Papers 11. It is not in dispute that all the HUFs are Directors of the Assessee Company. During the assessment proceedings, the Assessee produced following documentsin support of its claim of all the three entities:- Details PB Share capital - Arvind Kumar HUF - Rs. 20,34,500Unsecured loan - Arvind Kumar HUF - Rs. 10,34,000 . Balance Sheet of HUF - A.Y. 15-16 (showing loans& Advances receivable from assessee) • Sub-Ledger A/c (loan) of Arvind Kr. HUF in books of assessee • Sub-Ledger A/c (others) of Arvind Kr. HUF in books of assessee • Bank statement of Arvind Kumar HUF (showing payments) • ITR of HUF-A.Y. 16-17 • Confirmation of having Shares of assessee • Application form for applying 203450 shares of assessee • Share certificate 13 14 15 16-18 19 20 21 22 -Share capital Vinod Kumar HUF – Rs.9,98,500 Unsecured loan Vinod Kumar HUF - Rs. 30,000 - Balance Sheet of HUF - A.Y. 15-16 (showing loans& Advances receivable from assessee) Sub-Ledger A/c (loan) of Vinod Kr. HUF in books of assessee Sub-Ledger A/c (others) of Vinod Kr. HUF in books of assessee Bank statement of Vinod Kumar HUF (showing payments) ITR of HUF – A.Y. 16-17 Confirmation of having Shares of assessee Application form for applying 99850 shares of assessee Share Certificate 23 24 25 26-28 29 30 31 32 Share capital - Kapil Kumar HUF- Rs.10,34,500 Unsecured loan -Kapil Kumar HUF – Rs. 50,34,000 Balance Sheet of HUF - Α.Υ. 15-16 33 34 35 Printed from counselvise.com 9ITA No. 5026/Del/2024 ACIT VS. Paswara Papers (showing loans& Advances receivable from assessee) Sub-Ledger A/c (loan) of Kapil Kr. HUF in books of assessee Sub-Ledger A/c (others) of Kapil Kr. HUF in books of assessee Bank statement of Kapil Kumar HUF (showing payments) ITR of HUF - A.Y. 16-17 Confirmation of having Shares of assessee Application form for applying 1,03,450 shares of assessee Share Certificate 36-38 39 40 41 42 12. 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 Printed from counselvise.com 10 ITA No. 5026/Del/2024 ACIT VS. Paswara Papers interfere with the findings and the conclusion of the Ld. CIT(A) in deleting the addition as the Department has not brought anything on record to contradict the finding of the Ld. CIT(A). In view of the above discussion, we dismiss the Grounds of Appeal of the Revenue as the same are meritless. 13. In the result, Appeal of the Revenue is dismissed. Order pronounced in the open court on 27th August, 2025 Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 27 .08.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTR ITAT, NEW DELHI Printed from counselvise.com "