DAZZLING CONSTRUCTION PRIVATE LIMITED,DELHI V. ITO, WARD - 7(2), DELHI

ITA 3771/DEL/2023

AI Insights

The case involves Dazzling Construction Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) confirming additions made by the Assessing Officer under sections 68 and 69C of the Income Tax Act, 1961, for the assessment year 2012-13. The additions were based on alleged unexplained credits and commission payments. The Tribunal examined the legality of the reassessment proceedings, the jurisdiction under section 148, and the merits of the additions made. The Tribunal admitted additional grounds raised by the assessee concerning the jurisdiction and the absence of a Document Identification Number (DIN) on the assessment order. After considering the evidence and legal provisions, the Tribunal concluded that the additions were not sustainable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34218 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Other Referred Cases: National Thermal Power Co.Ltd. vs CIT [1998] 229 ITR 383 (SC), CIT vs Sinhgad Technical Education Society (2017) 84 taxmann.com 290 (SC), PCIT vs NRA Iron & Steel Pvt.Ltd. [2019] 412 ITR 161 (SC), Mod. Creations Pvt.Ltd. vs ITO (2013) 354 ITR 282 (Del), Nemi Chand Kothari v CIT (2003) 264 ITR 254 (Gau.), ACIT vs Smt Prem Anand (ITA No.3514/Del/2014) dated 13.04.2017, CIT vs Shiv Dhooti Pearls & Investments Ltd. [2015] 64 taxmann.com 329 (Delhi), CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj), CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj), CIT Vs. Karaj Singh (2011) 15 Taxmann.com 70 (P&H), Panna Devi Chowdhary Vs. CIT, 208 ITR 849 (Bom)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARPAT SINGH
• Assessee Lawyers: PRANAV YADAV; ENTERTAINING
• Keywords: Set aside; Reassessment proceedings; Unexplained cash credit; Accommodation entries; Competent authority; Reason to believe; Borrowed satisfaction
• Section: 148; 143(3); 250; 64; 251; 208; 133(6); 69C; 153C; 264

Judgement Text

"ITA No.3771/Del/2023 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “B” BENCH: NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI YOGESH KUMAR US, JUDICIAL MEMBER ITA No.3771/Del/2023 [Assessment Year : 2012-13] Dazzling Construction Pvt.Ltd., B-4 9/54, DBG Road, Namdhari Chamber Karol Bagh, Delhi-110005. PAN-AACCD6583C vs ITO Ward-7(2) New Delhi-110002 APPELLANT RESPONDENT Appellant by Shri Pranav Yadav, Adv. Respondent by Shri Narpat Singh, Sr. DR Date of Hearing 16.01.2025 Date of Pronouncement 26.03.2025 ORDER PER PRADIP KUMAR KEDIA, AM : The captioned appeal has been filed at the instance of the assessee seeking to assail the First Appellate order dated 05.12.2023 passed by Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“CIT(A)”] under s. 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 28.12.2019 passed under s. 143(3) r.w.s 147 of the Act pertaining to assessment year 2012-13. 2. Grounds of appeal raised by the assessee read as under:- 1. “On the facts and circumstances of the case and in law, the notice issued u/s148 in this case is bad in law, without jurisdiction and barred by limitation and therefore the notice issued and the assessment order passed on the foundation of such notice are liable to be quashed and CIT (A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is non-est as it does not ITA No.3771/Del/2023 Page | 2 have DIN on the body of the assessment order and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the reassessment proceedings initiated are contrary to the provisions of law including the specific provisions of section 147 to section 151 of Income Tax Act, 1961 and CIT(A) erred in not holding so. 4. On the facts and circumstances of the case and in law, the order passed by the assessing officer is bad-in-law and without jurisdiction and CIT (A) erred in not holding so. 5. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of Rs. 3,45,00,000/- made by the assessing officer on account of alleged unexplained credit us 68 of the Act. 6. On the facts and circumstances of the case and in law, the addition of Rs. 3,45,00,000/- confirmed by the CIT(A) is beyond the scope of jurisdiction and provisions of section 147/148 of the Act. 7. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of R 6,90,000/- made by the assessing officer on account of alleged commission paid u/s 69C of the Act. 8. On the facts and circumstances of the case and in law, the addition of Rs. 6,90,000/-confirmed by the CIT(A) is beyond the scope of jurisdiction and provisions of section 147/148 of the Act.” 3. The assessee is also filed additional grounds under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 (“Rules”) whereby the assessee seeks to assail the jurisdiction assumed under s. 148 rather than s. 153C claimed to be applicable having regard to the facts of the case. As per the additional grounds, the assessee has also questioned the propriety of assessment order in the absence of any reference to DIN on the body of the assessment order. 4. In the light of the judgement of Hon’ble Apex Court rendered in the case of National Thermal Power Co.Ltd. vs CIT [1998] 229 ITR 383 (SC) and CIT vs Sinhgad Technical Education Society (2017) 84 taxmann.com 290 (SC), the ITA No.3771/Del/2023 Page | 3 additional grounds raised by the assessee stand admitted owing to the fact that such issues being legal in nature are capable of being raised before the Tribunal for the first time. 5. As per the main grounds, the assessee has challenged the jurisdiction assumed under s. 147 on the ground that pre-requisites for issuance of notice under s. 148 are not fulfilled in the present case. Such allegation has been made on the ground of absence of ‘reason to believe’ in the reasons recorded; the reasons recorded being vague and suffers from vice of non-application of mind; based on borrowed satisfaction without any specific and definite information of reliable character etc. The assessee also seeks to challenge the issuance of notice under s. 148 on the grounds that the ‘satisfaction’ recorded by the Competent Authority and consequent approval thereon under s. 151 of the Act suffers from the vice of being mechanical, muted and non-descript. The assessee claims that the approval granted by the Pr.CIT is in the nature of omnibus approval without any comment and without uttering a word towards any reason which induced him to grant such approval. Several judgements have been quoted and relied upon to buttress the plea of substantial deficiencies in the formation of belief and competent approval thereon. 6. On merits, it is the contention of the assessee that pre-requisites for invocation of s.68 of the Act are sorely lacking in the present case and therefore, the additions made under s. 68 of the Act and consequential, additions under s. 69C towards incidental cost, are wholly untenable in law. 7. We have heard the rival submissions on all points and perused the assessment order and first appellate order, material available on record and also large number of case laws cited. 8. In the instant case, certain information was disseminated by the Investigation Wing based on search operation conducted on Praveen Aggarwal Group of cases on 13.09.2012. As per the information received, Praveen Aggarwal Group was statedly found to be engaged in providing accommodation entries through shell companies managed and controlled by them. As per material seized by the Investigation Wing during search operations, names of ITA No.3771/Del/2023 Page | 4 several persons and companies were figured in the list of beneficiaries. The assessee company was also found to be in the list of beneficiaries. 8.1. Based on such information obtained from Investigation Wing, the case of the assessee was re-opened under s. 147 of the Act by issuance of notice under s. 148(1) of the Act. 8.2. Having invoked the re-assessment proceedings, the AO made enquiries on the receipt of loan of INR 3,45,00,000/- from M/s. Everlike Projects P.Ltd., a company managed and controlled by Praveen Aggarwal Group. As noticed from the assessment order, the assessee submitted documentary evidences of the lender (M/s. Everlike Projects P.Ltd.) such as name, address and income tax particulars of lender, ITR acknowledgement, confirmation of loan, balance sheet of the bank statement. It was submitted that the lender is a company incorporated under the Companies Act and is an income tax assessee. The lender has maintained banking account and transaction had been carrying through banking channels and owing to such facts, the identity of the lender cannot be doubted. Besides, the lender has confirmed the transactions with the assessee together with the bank statement from which the loan amounts have routed to the assessee. Thus, creditworthiness as well as genuineness of the transactions have been established. The assessee also pointed out that the amount of loan has been refunded back to the lender by the assessee through banking channel. It also emerges from the assessment order that the AO has made independent enquiry directly from the creditor under s. 133(6) of the Act and no adverse information came to the surface. The AO proceeded against the assessee by entertaining doubts about the ‘source of source’ i.e. credits in the books of lender immediately prior to the lending made to the assessee. 8.3. In the backdrop, it is the contention of the assessee that as per the Audited Financial Statement, the lender had net worth of more than INR 100 crore on 31.02.2012. The gross receipts/turnover as per the Profit & Loss Account was also more than INR 97 crore and that taxable returned income stood at INR 18,70,970/-. For the purpose of s. 68 of the Act, what is relevant is the source of the credit in the books of the assessee. The lender can have ITA No.3771/Del/2023 Page | 5 many sources for giving loans viz loans taken by them, accumulated funds, accumulated income and so on. Thus, the remarks of the AO that funds were transferred by the creditors to the assessee immediately after it was received by the creditors is no ground for drawing adverse inference and making additions under s. 68 of the Act. If such remarks are accepted, this would mean that the lender has to keep the funds idle in the bank accounts for some period before giving loans to others. Such approach is thus far-fetched. 8.4. The assessee also seeks to controvert the doubts raised by the AO about the ‘source of source’ with reference to proviso to section 68 inserted w.e.f. 01.04.2013 relevant to AY 2013-14. It is the contention of the assessee that the proviso inserted seeks to put onus on the assessee to explain ‘source of source’ only in the case of share capital, share application money, share premium and that too from AY 2013-14 onwards. None other than share capital transactions are not covered by the proviso and therefore requirement of proving ‘source of source’ do not apply to loan transactions per se. This view has been fortified by the judgement of Hon’ble Delhi High Court in the case of Mod. Creations Pvt.Ltd. vs ITO (2013) 354 ITR 282 (Del); judgement of Hon’ble Gauhati High Court in the case of Nemi Chand Kothari v CIT (2003) 264 ITR 254 (Gau.); and the decision of Delhi Bench of the Tribunal in the case of ACIT vs Smt Prem Anand (ITA No.3514/Del/2014) dated 13.04.2017. The assessee contends that the Hon’ble Delhi High Court in the case of CIT vs Shiv Dhooti Pearls & Investments Ltd. [2015] 64 taxmann.com 329 (Delhi) has again re-affirmed that there is no requirement of law which cast burden on the assessee to prove the genuineness and creditworthiness of the sub-creditors. The assessee submits that there is large number of judgements which fortifies such view. Notwithstanding the aforesaid position, in the instant case even the ‘source of source’ has been explained by the creditor by furnishing direct reply to the AO. The Revenue has proceeded against the assessee by entertaining the doubts alone and ignored the vital fact that the loan received was subsequently repaid as pointed out before both the authorities below. The ITA No.3771/Del/2023 Page | 6 assessee thus contends that it does not stand to benefit in any manner by taking the so-called accommodation entries which stood repaid. 8.5. The assessee also contends that addition of INR 6,90,000/- under s. 69C is also without any cogent documentary evidences. The assessee finally contends that the information and material collected to corroborate the information so received from Investigation Wing was never confronted to the assessee while drawing adverse view. The assessee was thus never in a position to understand the contents of the information and underlying material and to rebut the averments made therein and to cross-examine the adverse statement if any. Be that as it may, the repayment of loan itself is a very strong circumstance to exonerate the assessee from the clutches of s. 68 of the Act. 9. On perusal of the para 5 of the first appellate order, we observe that the CIT(A) has acknowledged the factum of production of documentary evidences and subsequent repayment of loan to the creditors in FY 2013-14. The fact of independent enquiry carried out by the AO under s. 133(6) was also noticed by the CIT(A). The CIT(A) however, declined to grant relief to the assessee mainly in the light of judgement rendered by the Hon’ble Apex Court in the case of PCIT vs NRA Iron & Steel Pvt.Ltd. [2019] 412 ITR 161 (SC). 9.1. It is evident from the record that the assessee, on its part, has filed clinching documentary evidences to support the source of loan received. No legal obligation is prescribed upon the assessee in law to prove the creditworthiness of ‘source of source’ of receipts obtained by the assessee in view of firstly, the prospective insertion to proviso to section 68 of the Act from AY 2013-14 foisting such obligation and secondly, such proviso is limited in its scope and attributable to receipt of share application money, share capital, share premium etc. and does not extend to loan transactions. The legal propositions are derived from the judgement rendered in the case of Mod. Creations Pvt.Ltd. (supra); CIT vs Shiv Dhooti Pearls & Investments Ltd.(supra) and CIT vs Gagandeep Infrastructure P.Ltd. 80 taxmann.com 272 (Bom.). ITA No.3771/Del/2023 Page | 7 9.2. It is trite that additions under s. 68 cannot be made merely on the basis of some perception of culpability towards receipt of loan. The money in the instant case has been received from a company whose financial standing has been demonstrated to be fairly good. The defining feature in the instant case is repayment of such loan in the subsequent years which distinguishes the facts of this case vis-a-vis the facts involved in NRI Steel and other judgements quoted by the Revenue authorities. 9.3. The factum of repayment quells the apprehension entertained by the Revenue. The over-riding factum of repayment of loan itself repels any form of disguise on the part of the assessee and dispels the perception of any sordid or extraneous affairs. The clinching evidences towards loan procurement discharge the primary onus which lay upon the assessee under s. 68 of the Act. Besides, the loan itself having been repaid, the assessee does not ultimately stand to gain any spurious benefit from such alleged unexplained cash credit. Such fact justifies the plea of the assessee towards existence of bonafides in the transactions. In the totality of facts, where the trail for obtaining of loan and repayment thereof is proved and the lender has duly filed its return of income encompassing the transaction carried with the assessee, the action of the Revenue cannot be countenanced in law. 9.4. In the wake of peculiar facts subsisting in the present case, the additions towards unexplained credit under s. 68 and estimated addition under s. 69C is wholly unjustified. 9.5. The Hon’ble Gujarat High Court in the cases of CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj) and CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj) have held that when the Department has accepted the factum of repayment, the additions under Section 68 is not sustainable in law. Similar view has been expressed in CIT Vs. Karaj Singh (2011) 15 Taxmann.com 70 (P&H) & Panna Devi Chowdhary Vs. CIT, 208 ITR 849 (Bom). 10. In the light of the view expressed on merits in favour of the assessee, we are not inclined to examine the nuances of challenge to the jurisdiction ITA No.3771/Del/2023 Page | 8 assumed under s. 147 of the Act, approval granted under s. 151 of the Act, invocation of s. 147 instead of s. 153C and absence of DIN on the body of the assessment order. 11. In conclusion, the order of the CIT(A) is set aside and the additions made by the AO are reversed and cancelled. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 26th March, 2025. Sd/- Sd/- (YOGESH KUMAR US) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER ASSISTANT REGISTRAR ITAT, NEW DELHI "