DCIT, MUMBAI V. INFINITY INDUSTRIES PVT LTD, MUMBAI

ITA 5101/MUM/2024

AI Insights

The case revolves around an appeal by the Deputy Commissioner of Income-tax, Mumbai against Infinity Industries Pvt. Ltd., concerning an addition of Rs. 50,00,000 made to the assessee's income under section 68 of the Income-tax Act, 1961, for alleged non-genuine unsecured loans. The loans were purportedly taken from Sanguine Media Ltd., an entity linked to Shri Shirish Chandrakant Shah, known for providing bogus accommodation entries. The CIT(A) had earlier deleted this addition, leading to the Revenue's appeal. The Tribunal examined the documentary evidence, including the lender's financials, loan confirmations, and bank statements, and found no discrepancies that would warrant the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 470905 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Laws Referred To: Income-tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reassessment proceedings; Principle of natural justice; TDS; Accommodation entries; Bogus
• Section: 148; 143(3); 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 5101/MUM/2024 Assessment Year: 2013-14 Deputy Commissioner of Income-tax, Mumbai Vs. Infinity Industries Pvt. Ltd., 109/A, Rizvi Chambers, Hill Road, Near Bandra Police Station, Bandra (West), Mumbai – 400 050 (PAN : AAACI8002P) (Appellant) (Respondent) Present for: Assessee : Shri Prateek Jain, CA Revenue : Shri Krishna Kumar, Sr. DR Date of Hearing : 24.12.2024 Date of Pronouncement : 21.03.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the Revenue is against the order of ld. CIT(A)– 51, Mumbai, vide order no. ITBA/APL/S/250/2024- 25/1067219181(1), dated 01.08.2024, passed against the assessment order by Deputy Commissioner of Income-tax, Central Circle-1(2)(2), Mumbai, u/s. 143(3) r.w.s. 147 of the Income-tax Act (hereinafter referred to as the “Act”), dated 21.12.2018 for Assessment Year 2013- 14. 2. In the grounds raised by the Revenue in this appeal, the moot point is in respect of genuineness of the transaction for which the addition is made of Rs.50,00,000/- u/s.68 towards unsecured loans 2 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 taken by the assessee from Sanguine Media Ltd. which is alleged to be controlled and managed by one Shri Shirish Chandrakant Shah. 3. Brief facts of the case are that assessee filed its return of income on 28.04.2014 reporting total income at Rs.85,29,930/-. The said return was selected for scrutiny and assessment was completed u/s.143(3) vide order dated 28.08.2015 with total income assessed at Rs.96,60,280/-. Subsequently, case of the assessee was reopened upon receipt of information from DDIT (Inv)(HQ-1), Ahmedabad that assessee had received bogus unsecured loans from an entity operated by Shri Shirish Chandrakant Shah. After recording reasons to believe, notice u/s. 148, dated 01.12.2018 was issued. Assessee made the necessary compliances, after which assessment was completed by making an addition of Rs.50 lakhs u/s. 68 with total income assessed at Rs.1,46,60,280/- by passing the impugned assessment order. Assessee went in appeal before the ld. CIT(A), who after elaborately considering the submission made as well as plethora of documentary evidences placed on record which forms part of the paper book before us, deleted the addition so made. Revenue is in appeal before the Tribunal for the relief so granted by ld. CIT(A). 4. We have heard both the parties and perused the material on record and have gone through the paper book containing documents in respect of claim of the assessee. From the index of the paper book which contains 70 pages, relevant items are listed below: Sr.No Particulars Page No. 1. Copy of ITR Acknowledgement of M/s. Sanguine Media Limited 1 3 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 2. Copy of Loan Confirmation from M/s. Sanguine Media Limited 15 3. Copy of Bank Statement of M/s. Sanguine Media Limited reflecting the loan transaction. 16 4. Copy of Financials of M/s. Sanguine Media Limited 17-66 5. Copy of Bank Statement of the appellant reflecting the receipt and repayment of the Loan 67-68 6. Copy of Form 16A showing the TDS deducted on interest paid to M/s. Sanguine Media Limited. 69-70 4.1. In the assessment order, ld. Assessing Officer has extensively relied on findings of the Investigation Wing to observe that assessee had taken unsecured loan of Rs.50 lakhs from M/s. Sanguine Media Ltd., an entity operated by Shri Shirish Chandrakant Shah, who is known to be an entry operator. A search action was carried out in the case of Shri Shirish Chandrakant Shah in October, 2012 wherefrom it was found that he along with his related concerns were engaged in activities of providing bogus accommodation entries. Based on the admission made by the Director of Sanguine Media Ltd., Shri Dhivesh Uttamchand Muniver in his affidavit, dated 03.12.2013 that he is a dummy Director in the said company and was appointed by Shri Shirish Chandrakant Shah, ld. Assessing Officer held that the said unsecured loan taken by the assessee from Sanguine Media Ltd. is non genuine and thus, is in the nature of an accommodation entry. The same was added u/s.68 of the Act. 4 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 4.2. Contention of the assessee is that the sole basis of making this addition is that the lender company is an entity controlled and managed by Shri Shirish Chandrakant Shah and admission by way of an affidavit by the Director of this lender company, he being a dummy Director. In order to establish the identity and creditworthiness of the lender as well as genuineness of the transaction, assessee made the following submission for each of the components, reproduced as under: A. IDENTITY: ii. The appellant company has received the unsecured loans from M/s Senguine Media Ltd registered before the ROC having the CIN No. L74210TN1995PLC032921, and PAN No. AAECS2217C, which is sufficient to show that the party was very much in existence. iii. To establish the identity of the party the appellant had filed ITR Acknowledgement and Loan Confirmations form the party wherein such loan amount has been duly acknowledged by the said party. Copy of same is placed at page no.1 & 15 of the paper book. iv. Therefore, the identity of the said loan creditors cannot be doubted. v. The ld. AO in the impugned order passed have nowhere given his findings/discrepancy in the above referred details submitted by the appellant. B. CREDITWORTHINESS: vi. Now coming to the question of creditworthiness of the lender, the term “creditworthy” in its natural meaning would mean “considered suitable to receive credit, especially because of being reliable in paying money back in the past”. In order to prove the creditworthiness of the party, copy of ITR Acknowledgement of the party and Financials, is placed at page no. 1 & 17-66 of the paper book. vii. On perusal of the said financials of the company, it can be seen that the company had the adequate capacity to raise funds and advance loan to the appellant. This can be verified from the fact that the said company has more than Rs. 124.86 Crs. as shareholders funds out of which it has advanced the appellant a meagre sum of Rs.50 Lakhs. viii. The ld. AO in the impugned order passed has nowhere pointed out any discrepancy in the above mentioned detail submitted during the course of assessment proceedings. C. GENUINENESS: ix. The appellant during the course of assessment proceedings has submitted copy of bank statement of M/s Senguine Media Ltd showing the loan amount of Rs.50,00,000/-, received by the appellant Further, it is pertinent to mention that 5 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 subsequently the said loan was repaid on 18.06.2014. Copy of the said bank statements is placed at page no. 16 & 67-68 of the paper book, which shows that the entire transaction was made though the proper banking channel. Thus, the genuineness of the transaction is proved as the same are through banking channels. x. Moreover, we would like to state that the appellant has paid interest amounting to Rs. 24,52,051/- during the year under consideration on the said loan and TDS has also been deducted on the said amount of interest. The same can be verified from the Form 16A reflecting the TDS deducted on interest paid to M/s. Sanguine Media limited placed at page no 69-70 of paper book. This again beyond doubt proves the genuineness of the transaction. xi. Further, it is submitted that the addition has been made on basis of a search action carried out in case of Shir Shirish C Shah, wherein the director of M/s. Sanguine Media limited, Mr. Dhivesh Muniver had stated that he was a dummy director of the said company. However, it is submitted that no statement of the said director Mr. Dhivesh Muniver has been brought on record wherein it has been specifically mentioned that the appellant is a beneficiary to any accommodation entry provided by the said company. This in turn proves that the ld.AO has made the said addition without verifying the complete facts of the appellant’s case. xii. Moreover, it is submitted that such statement were recorded in isolation and the appellant being a third party, it is not aware of the subsequent fate of the statement given by Mr. Dhivesh Muniver. The appellant is oblivion to the condition in which it was recorded or whether it was subsequently retracted. xiii. In addition to the above, it is also submitted that in the interest of natural justice it is important on the part of the ld.AO to provide an opportunity of cross examination if he intends to completely rely on the statement. However, no such attempt was made by the ld.AO before initiating the case of the appellant and as such the entire reassessment proceedings is void-ab-initio 4.3. For the above, corroborative documentary evidences are placed in the paper book which are already tabulated above. 4.4. Assessee had also paid interest of Rs.2,45,205/- to the lender company during the year which was subjected to TDS. This is duly reflected in Form 16A generated from the Income-tax portal. Assessee also strongly contended that this loan has been repaid by the assessee through proper banking channel on 18.06.2014 duly reflected in the bank statement placed in the paper book. Fact of repayment of the loan taken by the assessee to the lender company is not in dispute. Assessee, 6 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 further claimed that it has not been provided copy of statement of the Director of lender company, Shri Dhivesh Uttamchand Muniver for the purpose of refuting the same and conducting cross examination. The said statement was recorded in isolation and assessee being an unrelated party, ought to have been given an opportunity to cross examine to satisfy the requirements of principles of natural justice. 5. We note that ld. CIT(A) has elaborately dealt with explanations corroborated by documentary evidences, to give his objective findings. Assessee has discharged its onus casted upon it, u/s.68 to establish identity and credit worthiness of the lender as well as genuineness of the transaction. It is also a fact on record that assessee has repaid the loan taken by it along with interest which was subjected to TDS. 5.1. What Id. Assessing Officer has discussed in the entire assessment order is that assessee could not establish genuineness of talking unsecured loan from Sanguine Media Ltd. which was subsequently repaid through proper banking channel. On the repayment aspect of unsecured loan taken by the assessee, it was categorically pointed out that repayment occurred on the date which was much prior to selection of case of assessee for impugned assessment. The loan was repaid by the assessee on 18.06.2014 whereas notice u/s. 148 was issued on 01.12.2018. For the repayment of loans, it was corroborated by bank statement placed on record in the paper book at page 68. 6. From the perusal of the paper book, we note that relevant documentary evidences to establish identity and credit worthiness of the lender company and genuineness of the transaction are placed on record. We also take note of the elaborate and well reasoned findings 7 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 arrived at by ld. CIT(A) after taking into consideration, details and documents furnished by the assessee. We also note that ld. CIT(A) has referred to various judicial precedents, while granting relief to the assessee. 6.1. We also note that ld. Assessing Officer could have taken adverse view only if he could point out the discrepancy or insufficiency in the evidences and details furnished in his office. It is a settled position of law that once the assessee has produced documentary evidences to establish the existence of lender company, the burden would shift on the Revenue to establish its case. Ld. Assessing Officer has not bothered to discuss or point out any defect or deficiency in the documents of the lender company furnished by the assessee. These evidences furnished have been neither controverted by the ld. Assessing Officer during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. Thus, going by the records placed by the assessee for the lender company, it can be safely held that assessee has discharged its initial burden and the burden shifted on the ld. Assessing Officer. It is also noted from the audited financial statements that the lender company had sufficient owned funds available with it to lend the assessee. It is also pertinent to note that the legislature in its wisdom brought amendment in section 68 w.e.f. 01.04.2013 to specify that the assessee needs to prove the source of source only in case of share capital. In case of other receipts, there were no such provisions until Assessment Year 2022-23, after which the amendment has been made prospectively from Assessment Year 2023-24 to also include loan or borrowing. Accordingly, for the year under consideration, there was no requirement to prove the source of source of the party from whom unsecured loan had been received. 8 ITA No. 5101/Mum/2024 Infinity Industries Pvt. Ltd., AY 2013-14 7. Considering the facts on record and detailed discussion made above and the findings arrived at by ld. CIT(A), we find that assessee has duly discharged the onus cast upon it, u/s.68 of the Act, to prove identity and credit worthiness of the lender company and genuineness of the transaction. Accordingly, we do not find any reason to interfere with the findings arrived at by ld. CIT(A), for deleting the addition of Rs. 50,00,000/-, made by ld. Assessing Officer u/s.68 of the Act. Accordingly, grounds raised by the Revenue are dismissed. 8. In the result, appeal of the Revenue is dismissed. Order is pronounced in the open court on 21 March, 2025 Sd/- Sd/- (Amit Shukla) (Girish Agrawal) Judicial Member Accountant Member Dated: 21 March, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "