DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 4(1), KOLKATA, INCOME TAX, KOLKATA V. M. TECH INFORMATICS LIMITED, KOLKATA

ITSSA 94/KOL/2024

AI Insights

The case involves multiple appeals by the revenue against the orders of the CIT(A) which had deleted the additions made by the Assessing Officer regarding unsecured loans taken by M. Tech Informatics Limited from M/s Pragya Commodities Pvt. Ltd. and M/s Vicky Fincom Pvt. Ltd. The revenue contended that these loans were bogus and lacked the necessary verification of the lenders' identity and creditworthiness. The CIT(A) had found that the assessee had adequately proved the genuineness of the loans through various documents and that the Assessing Officer had not provided sufficient evidence to substantiate the claim that these loans were accommodation entries. The Tribunal agreed with the CIT(A)'s decision, emphasizing that the mere existence of a cash trail does not automatically render a loan transaction as bogus, especially when the loans were received through proper banking channels and were supported by relevant documents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 776872 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-09-2025
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: misc
• Appeal Filed On: 10-08-2024
• Other Referred Cases: N.R.Portfolio (P) Ltd. vs. [2014] 42 taxmann.com 399 (Delhi-HC), CIT vs. Lovely Exports (P.) Ltd. [(2008) 216 CTR 195 (SC)]
• Laws Referred To: Income Tax Act 1961
• Court: TRIBUNAL
• Department Lawyers: P.N. BARNWAL
• Assessee Lawyers: SOUMITRA CHOUDHURY
• Keywords: Condonation of delay; Additional evidence; Unexplained cash credit; Unexplained expenditure; Document seized; Documents seized; TDS; Search and seizure; Assessment record; Bogus
• Section: 143(3); 132; 133(6); 69C; 133A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, JUDICIAL MEMBER IT(SS)A No.94-96/KOL/2024 (निर्धारण वर्ा /Assessment Year : 2014-2015 to 2016-2017) AND ITA No.2207/KOL/2024 (निर्धारण वर्ा /Assessment Year : 2019-2020) ACIT, Central Circle-4(1), Kolkata Vs M. Tech Informatics Limited, 188/1B, 5th Floor, Manicktala Main Road, Kolkata-700054 PAN No.: AAGCM 8371 D (अपीलधर्थी /Appellant) .. (प्रत्यर्थी / Respondent) रधजस्व की ओर से /Revenue by : Shri P.N.Barnwal, CIT-DR निर्धाररती की ओर से /Assessee by : Shri Soumitra Choudhury, Advocate & Shri P. Sarkar, Advocate सुनवाई की तारीख / Date of Hearing : 16/09/2025 घोषणा की तारीख/Date of Pronouncement : 19/09/2025 आदेश / O R D E R Per Manjunatha G, AM: These four appeals filed by the revenue are directed against the separate but identical orders passed by the ld. CIT(A), Kolkata-27, all dated 24.06.2024 pertaining to assessment years 2014-2015, 2015-2016, 2016- 2017 & 2019-2020, respectively. 2. Since the facts are identical and issues are common, for the sake of conveniences, these appeals were heard together and are being disposed off by this consolidated order. 3. The revenue has more or less raised common grounds of appeal in all the three appeals for all the three assessment years, therefore, the Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 2 revised grounds of appeal raised by the revenue for the assessment year 2014-2015 are reproduced hereunder for the sake of brevity :- 1. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the unsecured loan amounting to Rs.70,00,000/- received from two entities namely M/s Vicky Fincon Pvt Ltd and M/s Pragya Commodities Pvt Ltd are not bogus in nature in spite of lack of identity and creditworthiness of lenders and genuineness of the loan transaction. 2. That on the facts and in the circumstances of the case and in law, the amount of Rs.70,00,000/-received as unsecured loan from dummy concerns existing only in paper are in the nature of case related to accommodation entry falling within the exceptional clause (h) of the para no.3.1 of further filing of appeal as per CBDT circular No.5/2024 vide F.No. 279/Misc.142/2007/ ITJ(Pt), dated 15.03.2024. 3. That the Department craves leave to add, modify or alter any of the ground(s) of appeal and / or adduce additional evidence at the time during the appeal proceedings. 4. At the outset, we find that there is a delay of 72 days in appeal filed by the revenue for the assessment year 2014-2015 and 12 days each in the appeal of the revenue for AYs. 2015-16 & 2016-17 for which a petition for condonation of delay explaining the reasons for delay in filing the appeals has been filed, for which ld. counsel for the assessee has not raised any objection. Therefore, considering the reasons given by the revenue in its petition filed for condonation of delay, we condone the delay in filing the appeals for A.Ys.2014-2015 to 2016-2017. 5. Brief facts of the case extracted from IT(SS)A No.94/Kol/2024 for the assessment year 2014-2015 are that the assessee filed its return of income u/s.139 of the Act on 22.09.2014 declaring total income at Rs.53,21,680/-. The case of the assessee for A.Y.2014-2015 was selected for scrutiny through CASS and the assessment was completed u/s 143(3) of the Act on 31.08.2016 determining total income of the assessee at Rs.54,88,550/-. Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 3 Subsequently, a search and seizure and survey operation u/s 132 and 133A of the Income Tax Act 1961, was conducted on 10.08.2018 and subsequent dates on the assessee being one of the part of \"Sarju Sharma Group of cases\". During the course of search operation, several documents were seized pertaining to the various concerns of the group. The seized documents have been examined with respect to regular books of accounts maintained by the assessee and the assessee was confronted with the seized documents and given opportunities to explain the contents, especially with regard to the details of loans taken from various companies. In response, the assessee has filed relevant evidence including details of loan taken, repayment of loan, interest paid on such loans and TDS deducted on interest and claimed that these loans are taken in the ordinary course of business. The Assessing Officer after considering the relevant submission of the assessee and also taking note of the findings recorded during survey and search operation with regard to the cash trail on loans taken from M/s Pragya Commodities Pvt. Ltd. and M/s Vicky Fincom Pvt. Ltd., observed that the assessee is not able to prove the genuineness of the loan taken from the said parties and thus, by following the decision of the Hon’ble Delhi High Court in the case of N.R.Portfolio (P) Ltd., reported in [2014] 42 taxmann.com 399 (Delhi-HC) made the addition of Rs.70 lakhs u/s.68 of the Act as unexplained cash credit. 6. Aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has filed relevant details including identity of the loan creditor, genuineness of the Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 4 transaction and also creditworthiness of the parties by filing relevant confirmation letters from the parties and argued that these loans are taken from the above parties in the ordinary course of business and the Assessing Officer without considering the relevant facts has made the additions of Rs.40 lakhs towards loan taken from M/s Pragya Commodities Pvt. Ltd. and Rs.30 lakhs towards loan taken from M/s Vicky Fincom Pvt. Ltd.. Therefore, submitted that the addition should be deleted. The ld. CIT(A) after considering the relevant submissions of the assessee and also by following the judicial precedents held that the assessee has discharged its onus by providing details of the aforesaid loan creditors, relevant ledgers, respective bank statements as well as confirmation letters from the creditors to authenticate the veracity of the loans taken. Moreover, the said loan creditors also declared their source of investment in assessee’s company by filing the confirmation letters and the Assessing Officer has not brought any corroborative evidence on record which can prove the aforesaid loan as bogus and the assessee’s own money routed through the loan creditors in the form of unsecured loans. Further on perusal of the concerned ledger copies, it is found that the total amount as received by the assessee company as unsecured loan from the above creditors of Rs.6,55,00,000/- however, the Assessing Officer had only treated the part of the said loan i.e. Rs.70,00,000/- as bogus, that illustrates the remaining portion of the loan as received from the aforesaid two creditors was not doubted by the Assessing Officer. Therefore, held that the Assessing Officer has erred in making the additions towards loans claimed by the assessee treating the Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 5 same as unexplained cash credit u/s.68 of the Act and, thus, directed the Assessing Officer to delete the additions made u/s.68 of the Act. 7. Aggrieved by the order of the ld. CIT(A), the assessee is now in further appeal before the Tribunal. 8. Ld. CIT-DR submitted that the ld. CIT(A) has erred in holding that the unexplained loan amounting to Rs.70 lakhs received by the assessee from two entities i.e. M/s Pragya Commodities Pvt. Ltd. and M/s Vicky Fincom Pvt. Ltd. are not bogus in nature in spite of lack of identity, creditworthiness of lenders and genuineness of the loan transactions. The ld. CIT-DR further referring to the assessment order submitted that, the Assessing Officer has established the cash trail in respect of the additions made towards loan taken from M/s Pragya Commodities Pvt. Ltd. to the extent of Rs.40 lakhs and also loan of Rs.30 lakhs taken from M/s Vicky Fincom Pvt. Ltd., on the basis of findings recorded during the course of search and survey operation. As per the findings recorded by the Assessing Officer, the money has been circulated through multilayer accounts stating from individual accounts to company’s account and ultimately reached to the assessee’s account. Since the loan to the extent of Rs.70 lakhs was linked to the cash trail, the Assessing Officer has rightly made the additions as unexplained cash credit u/s.68 of the Act. The ld. CIT(A) without considering the relevant facts, simply deleted the addition made by the Assessing Officer. Therefore, he submitted that order of Assessing Officer should be upheld. 9. The ld. counsel for the assessee, on the other hand, supporting the order of the ld. CIT(A) submitted that the assessment year 2014-2015 to Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 6 2016-2017 are unabated as on the date of search and the addition made by the Assessing Officer towards unsecured loan was not supported by any incriminating material found during the course of search. Therefore, the addition made by the Assessing Officer cannot be sustained. Further the loan taken from M/s Pragya Commodities Pvt. Ltd. for the assessment year 2014-2015 to 2016-2017 are running account and the assessee has accepted the loan and repaid the loan in the year under consideration. The assessee had paid the interest and deducted TDS on the said interest payment. The Assessing Officer accepted the major portion of the loan received from above company as genuine, however, made additions of Rs.40 lakhs on the ground that the said loan is out of cash deposits into various bank accounts. Similarly, the Assessing Officer has made additions towards loan taken from M/s Vicky Fincom Pvt. Ltd. on the very same grounds, even though the assessee has filed relevant documents including identity of the loan creditors, genuineness of the transactions and creditworthiness of the parties. The ld.CIT(A) after considering the relevant facts has rightly deleted the additions made by the Assessing Officer and, thus, order passed by the ld. CIT(A) should be upheld. 10. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. The issue with regard to the addition made by the Assessing Officer towards loans taken from various companies treating the same as unexplained cash credit u/s.68 of the Act is common for assessment years 2014-2015 to 2016-2017. Admittedly, the Assessing Officer has made the additions towards loan Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 7 taken from M/s Pragya Commodities Pvt. Ltd. and M/s Vicky Fincom Pvt. Ltd. for the assessment years 2014-2015 to 2016-2017 on the basis of cash trail which was established during the course of search and survey operations. The Assessing Officer made the addition of Rs.70 lakhs for the assessment year 2014-2015, out of which the Assessing Officer made addition of Rs.40 lakhs towards loan taken from M/s Pragya Commodities Pvt. Ltd. and Rs.30 lakhs towards loan taken from M/s Vicky Fincom Pvt. Ltd. The assessee has filed relevant details of loan ledger accounts from the above two parties and upon perusal of the relevant ledger account, we find that the loan taken from M/s Pragya Commodities Pvt. Ltd. for A.Y.2014-2015 to 2016-2017 is the running account which is evident from the opening balance as on the date loan received during the year, loan repaid during the year and closing balance. The assessee has also paid the interest after deducting the TDS applicable as per law. The Assessing Officer accepted major portion of loan received from above companies, however, made addition to the extent of Rs.40 lakhs only on the basis of cash trail. In our considered opinion, once the major portion of the loan has been accepted as genuine, then identity of the loan creditor is not disputed. Although the Assessing Officer disputed the small portion of the loan taken from the above companies as ingenuine, but in our considered view mere linking cash trail to the said loan account cannot disprove the genuineness of the loan taken from above parties, more particularly, when the said loan was received through proper banking channel. Similarly, the Assessing Officer made addition of Rs.30 lakhs towards loan taken from M/s Vicky Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 8 Fincom Pvt. Ltd. on the basis of cash trail. In other words, the Assessing Officer accepted the major portion of the loan from the above parties, but made addition for Rs.30 lakhs only on the basis of cash trail. As we have already held in earlier part of this order that the cash trail alone will not make the loan ingenuine, more particularly, when the assessee has filed relevant details including bank account statements and confirmation letters from the parties. Further the assessee had also filed relevant assessment orders passed in the case of loan creditors for the very same assessment years where the transaction has been accepted as genuine. Since the Assessing Officer has not disputed the identity of the loan creditors in respect of loan received from M/s Pragya Commodities Pvt. Ltd. and M/s Vicky Fincom Pvt. Ltd., in our considered view, mere cash trail in respect of small loan amount cannot make the said transactions ingenuine. The ld.CIT(A) after considering the relevant facts has rightly deleted the addition made by the Assessing Officer towards the loans taken from M/s Pragya Commodities Pvt. Ltd. and M/s Vicky Fincom Pvt. Ltd. 11. Coming back to the loan taken from M/s Narayana Mercantiles Pvt. Ltd., M/s Sharma Hire Purchase Ltd., Original Tradelink Pvt. Ltd. and M/s Fairland Sales Pvt. Ltd. The assessee has taken loan from M/s Narayana Mercantiles Pvt. Ltd. for the assessment year 2016-2017. The assessee company taken total loan of Rs.7,15,00,000/- and out of said loan, the Assessing Officer made addition of Rs.51,17,000/-. From the above, it is undisputed fact that the Assessing Officer never disputed the identity of the loan creditors, genuineness of the transactions and creditworthiness of the Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 9 parties. Once the identity of the creditors, genuineness and creditworthiness of the loan creditor is not in dispute, then merely for the reason of cash trail, the creditworthiness of the loan creditors cannot be doubted. Similarly, the assessee company had taken loan from M/s Sharma Hire Purchase Ltd. for the assessment year 2016-2017. Once again the Assessing Officer has accepted the major portion of the loan and made the addition only on small portion of the loan amount. The assessee has filed the relevant evidences including the assessment order passed in the case of both the creditors and proved the identity of the creditors. In fact, the Assessing Officer never disputed the identity and genuineness of the transaction. In our considered view, once identity of the creditor and genuineness of the transaction has not been disputed by the Assessing Officer, then merely for the reason of cash trail, the addition made by the Assessing Officer cannot be sustained. Since the assessee has furnished relevant details including confirmations letters from the loan creditors, their identity records and their assessment records, in our considered view, the additions made by the Assessing Officer towards loan taken from both the parties treating the same as unexplained cash credit u/s.68 of the Act, cannot be sustained. It is well settled law from the decision of the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports (P.) Ltd., reported in [(2008) 216 CTR 195 (SC)], wherein the Hon’ble Supreme Court has clearly held that once the identity of the loan creditor is established then the department is free to proceed on the loan creditors in accordance with law but the sum received from the loan creditors cannot be regarded as income Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 10 of the assessee. In the present case, the ld.CIT(A) after considering the relevant facts has rightly deleted the addition made by the Assessing Officer towards loans taken from the above parties as explained cash credit. Thus, we are inclined to uphold the findings recorded by the ld. CIT(A) and dismiss the grounds raised by the revenue for the assessment years 2014-2015, 2015-2016 & 2016-2017. 12. Thus, the appeals of the revenue for A.Y. 2014-2015, 2015-2016 & 2016-2017 in IT(SS)A Nos.94-96/Kol/2024 are dismissed. 13. Now, we shall decide the appeal of the revenue in ITA No.2207/Kol/2024 filed for the assessment year 2019-2020. 14. The first issue that came up for consideration from ground No.1 of Revenue’s appeal is deletion of addition made by the AO towards disallowance of rental expenditure and unproved purchases u/s 69C of the Income-tax Act, 1961 (the Act) as unexplained expenditure. 15. The AO made addition of Rs.83,52,702/- towards rental expenses on the ground that there is substantial increase in the rental expenses when compared to previous financial year. Similarly, the AO made additions of Rs.6,29,200/- towards unproved purchases on the ground that the notice issued under section 133(6) of the Act in respect of two parties has been returned unserved. The ld. CIT-DR submitted that although the AO has given valid reasons for making additions towards increase in rental expenses on the ground that the assessee could not filed the relevant evidences, but the ld. CIT(A) by accepting certain additional evidences, deleted additions made by the ld. AO contrary to rule 46A of the income Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 11 tax, Rules 1962 (‘the Rules). The ld. CIT-DR further submitted that in respect of unproved purchases, the notice issued to M/s Saideep Enterprises and M/s SSC Telecom, has been returned unserved. Although the assessee could not establish purchase from the above two parties, but ld. CIT(A) had deleted additions made by the AO. Therefore, he submitted that the order of the ld. CIT (A) should be reversed and then additions made by the AO should be sustained. 16. The ld. Counsel for the assessee, on the other hand, submitted that the assessee has furnished the relevant details of rental expenses and also explained increase in rental expenses when compared to earlier financial year, and also stated that the expenses under various heads have been regrouped for the purpose of presentation of financial statements. The ld. Counsel for the assessee further submitted that the rental income of earlier financial year was included in selling and distribution expenses and the same has been regrouped to rent expenses. Similarly, the assessee has furnished all details of purchase from above two entities including relevant purchase bills and also payment made against the purchases. The ld. Counsel for the assessee submitted that the ld. CIT (A) after considering relevant submissions has rightly deleted additions made by the AO. Therefore, he submitted that the order of the ld. CIT (A) should be upheld and addition made by the Assessing Officer should be deleted. 17. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The ld. CIT (A) has recorded a categorical finding in its appellate order at paragraph 5.2.2 Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 12 that the rental expenditure has been regrouped from selling and distribution expenses to rental expenses for the year ending 31-03-2018 and upon consideration there is no increase in rent as claimed by the ld. AO when compared to earlier year. Further, there is no increase in office rent and warehouse rent as claimed by the ld. AO for the assessment year under consideration when compared to assessment year 2018-2019. The ld. CIT(A) had recorded a categorical finding that the rent paid on office premises and warehouse has been regrouped from selling and distribution expenses to rent account and because of this reason that there is increase in rent amount when compared to previous financial year, whereas in reality, there is no increase in rental expenses when compared to earlier financial year. Similarly, the CIT (A) has recorded a categorical finding in respect of purchases from two parties and held that merely because the parties are not responding to notices u/s 133(6) of the Act, purchases cannot be treated as bogus. Similarly, the CIT (A) has recorded a finding in respect of Purchase from two parties that is M/s. SSC Telecom and M/s Saideep Enterprises that mere non-response from the end of the parties is not a reason for doubting the purchases more particularly when the above purchases are supported by necessary evidences. The revenue failed to bring on record any evidences to counter the findings of facts recorded by the ld. CIT (A) on the issue of additions made by the ld. AO towards rental expenses and unproved purchases. Therefore, we are of the considered view that there is no error in the reasons provided by the CIT (A) in deleting Printed from counselvise.com IT(SS)ANo.94-96/Kol/2024 &ITA No.2207/Kol/2024 13 additions made towards disallowances of rental expenses and unproved purchases. Thus, we dismiss the appeal filed by the Revenue. 18. Thus, the appeal of the revenue in ITA No.2207/Kol/2024 filed for A.Y.2019-2020 is dismissed. 19. In the result, all the appeals of the revenue are dismissed. Order dictated in the open court on 19/09/2025. Sd/- (SONJOY SARMA) Sd/- (MANJUNATHA G) न्यधनयक सदस्य / JUDICIAL MEMBER लेखा सदस्य/ ACCOUNTANT MEMBER कोलकाता Kolkata; ददनाांक Dated 19/09/2025 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनतललपप अग्रेपर्त/Copy of the Order forwarded to : आदेशधिुसधर/ BY ORDER, (Assistant Registrar) Income Tax Appellate Tribunal, Kolkata 1. अपीलार्थी / The Appellant- 2. प्रत्यर्थी / The Respondent- 3. आयकर आयुक्त(अपील) / The CIT(A), 4. आयकर आयुक्त / CIT 5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कोलकाता / DR, ITAT, Kolkata 6. गार्ड फाईल / Guard file. सत्यापपत प्रतत //True Copy// Printed from counselvise.com "