INCOME TAX OFFICER, DELHI V. RMP HOLDINGS PRIVATE LIMITED, DELHI

ITA 5089/DEL/2024

AI Insights

The case revolves around the Income Tax Officer's addition of Rs. 1,65,10,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961, to the income of RMP Holdings Private Limited for the Assessment Year 2017-18. The addition was based on the assessee's failure to substantiate the genuineness of unsecured loans from Rabik Exports Pvt. Ltd., which was found to be non-existent at the given address. The CIT(A) deleted the addition after considering the assessee's submissions and evidence, which included bank statements and loan confirmations. The Tribunal upheld the CIT(A)'s decision, emphasizing that the loans were repaid within the same financial year and were adequately documented.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 112071 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Other Referred Cases: Ganesh Ganpat Alim Vs ITO, PCIT Vs.Ambe Tradecorp (P) Ltd., PCIT Vs Merrygold Gems (P).Ltd, Pr.CIT vs. Skylark Build, DIT vs. Modern Charitable Foundation, ACIT vs. Signature Global India Pvt. Ltd., Addl.CIT vs. Prayag Polytech Pvt. Ltd., ITO vs. Computer Home Information Plus Pvt. Ltd., Pr.CIT vs. Goodview Trading Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: SURESH GUPTA
• Keywords: Unexplained cash credit
• Section: 143(2); 68; 22; 133(6); 2

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT and SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.5089/DEL/2024 (Assessment Year: 2017-18) Income Tax Officer, vs. RMP Holdings Private Limited, Delhi. 138 – C, Block B, Group 4, Dilshad Garden, Delhi – 110 095. (PAN : AAACR5533N) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Suresh Gupta, CA REVENUE BY : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 25.02.2025 Date of Order : 16.04.2025 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax Appeals/National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to ‘Ld. CIT (A)’) dated 23.09.2024 for Assessment Year 2017-18. 2. Brief facts of the case are, the assessee filed its return of income for Assessment Year 2017-18 on 01.11.2017 declaring nil income. The case was selected for complete scrutiny through CASS. Notices u/s 143(2) 2 ITA No.5089/DEL/2024 and 142 (1) of the Income-tax Act, 1961 (for short ‘the Act’) along with questionnaire were issued through ITBA and duly served on the assessee. The Assessing Officer observed that the assessee is engaged in the business of trading of shares and securities, also earned income from interest. The assessee was asked to submit details of parties from whom unsecured loan were taken during the year with their complete details along with Balance Sheet, bank statement, etc. and asked to prove the identity, creditworthiness and genuineness of the transactions. In response, assessee furnished the details of persons from whom assessee has taken unsecured loans vide its submissions dated 16.09.2019 through ITBA. In order to verify the same, AO issued notices u/s 133 (6) of the Act. In response, all the parties replied except Rabik Export Pvt. Ltd.. The same was returned back with remark ‘incomplete address without office’. Since the notice u/s 133(6) returned unserved relating to Rabik Export Pvt. Ltd., an Inspector was deputed to make field enquiries at the registered office address as per ROC. It was reported by the Inspector that no company exists on that address. The letter was also issued to the jurisdictional AO on 12.12.2019 to provide the details of Income-tax return of Rabik Export Pvt. Ltd.. In response, it was submitted that no income-tax return was filed for the AY 2017-18 & 2018-19. Accordingly, a show-cause notice was issued to the assessee asking 3 ITA No.5089/DEL/2024 details of Rabik Export Pvt. Ltd. and informed that the notices u/s 133 (6) were returned undelivered and enquiries were shared with the assessee. In response, assessee has submitted as under :- “This is with reference to your show cause notice dated 12th December, 2019. In this connection, we submit that company have already submitted the Confirmation with our relevant Bank statement of M/s Rabik Exports Private Limited. Your honour will appreciate M/s Rabik Exports Private Limited has net worth of approx Rs. 7.00 crore and established in the year 1998. This temporary loan from M/s Rabik Exports Private Limited was repaid by the assessee company within the year i.e. three months through banking channel. Your honour M/s Rabik Exports Private Limited has duly filed its annual return for the EY 2015-1Qand no return was pending with the Ministry of Company Affairs at the time of taking loan. We therefore request your honour to kindly not make any addition being this loan amount is taken and repaid through banking channel and M/s Rabik Exports Private Limited has worth for this temporary loan.” 3. After considering the reply of the assessee, AO rejected the same by observing that assessee has taken unsecured loan from the company during the year, however, as per the Inspector report, no such company was in existence at the address provided by the assessee and subsequently, a statement of Director of the assessee company was recorded and the same was reproduced in the assessment order at pages 5 & 6 and in the above statement, Director has submitted that assessee has taken unsecured loan through banking channel and returned the same through banking channel and details of the receipt and remittances 4 ITA No.5089/DEL/2024 submitted before the AO. After considering the statement and physical inspection report of the Inspector, the AO proceeded to make the addition u/s 68 of the Act as unexplained cash credit in the hands of the assessee. 4. Aggrieved assessee preferred an appeal before the ld. CIT (A) and before ld. CIT (A), assessee has submitted detailed submissions. After considering the detailed submissions, ld. CIT(A) deleted the addition by observing as under :- “6.2.2 The appellant has further contended that it had submitted loan confirmation along with bank statement to the AO showing that the loan was a temporary loan taken through banking channels and was squared off during the same financial year through banking channels within three months. Further, the appellant contended that merely because the directors of Rabik Exports were not produced before AO, could not be ground to say that the unsecured loan is non-genuine. Regarding not producing directors of Rabik Exports Pvt. Ltd., the AR of the appellant contended that all the business dealings during F.Y. 2016-17 were overseen by the late Shri Vimal Kumar Bhageria who served as the director during F.Y. 2016-17 and he was fully aware of all pertinent information and maintained relationship with the directors of Rabik Exports Ltd. However, Late Vimal Kumar Bhageria had passed away and Shri Ankit Bhageria lacked first hand knowledge of the dealing and transactions that took place during the relevant assessment year. In addition, the appellant submitted various case laws to substantiate his case. 6.2.3 On perusal of the facts of the case, one thing is clear that although Shri Ankit Bhageria was unable to produce the director of M/s Rabik Exports and the company was not found at the address given by the appellant. However, the appellant had furnished copy of confirmation and bank statement showing loan transaction to the AO. Further, it is also noticed that the Loan taken was subsequently repaid fully within the same financial year within three months through banking channels. Hon'ble ITAT, Surat in the 5 ITA No.5089/DEL/2024 case of Ganesh Ganpat Alim Vs ITO (ITA No.40/SRT/2022) relied on the decision of Hon'ble Gujarat High Court in case of PCIT Vs.Ambe Tradecorp (P) Ltd. (2022) 145 Taxmann 27 (Gujarat) and held that addition under section 68 should not be made when repayment of loan is made in the assessment year itself. The relevant para of the order as under: \"Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A. \" Further, Hon'ble Gujarat High Court in a recent judgement in case of PCIT Vs Merrygold Gems (P).Ltd (2024) 164 Taxmann 764 (Gujarat) dated 11.06.2024 held that where amount of loan received by the assessee was returned within the same financial year, addition u/s 68 of the Act cannot be made. In the said case, The Tribunal dismissed the appeal of the revenue observing that the assessee had refunded the entire deposits either within a day or in a week or in a maximum period of five months. Thus no amount was left at the end of the financial year. It was also matter on record that the repayment was not doubted by the Assessing officer. Against the order of Tribunal, department filed appeal before Hon'ble Gujarat High Court. The Hon'ble Gujarat High Court in their decision observed as under: \"In the instant case, what is evident is that the amount of loan received by the assessee was returned within the same financial year and in most of the cases within 30 days. The said repayment was also verified from the ledger account and the bank statement. [Para 9]\" 6.2.4 In the present case, the appellant has taken loan from banking channels and the same has been repaid fully in the same year itself within three months through banking channels. In view of the above judicial pronouncements, such addition cannot be made where the assessee has repaid the amount of loan in the same financial year itself. As the loan was repaid in the same financial year, appellant was not the beneficiary of that loan. 6 ITA No.5089/DEL/2024 6.2.5 Therefore, looking into the facts of the case that the loan taken from banking channels was squared off within the same financial year itself through banking channel itself, I am of the opinion that such addition cannot be made as the appellant was not the beneficiary as per above judicial pronouncements. Accordingly, addition made by AO of Rs. 1,65,10,000/- u/s 68 of the Act is deleted. Ground No.2 of the appeal is allowed.” 5. Aggrieved, Revenue is in appeal before us raising following grounds of appeal :- “Whether on the facts of the case and in law, the Ld. CIT(A), NFAC has erred in deleting the addition of Rs.l,65,00,000/- made u/s 68 of the J.T. Act by the assessing officer without appreciating the facts that the assessee could not establish the identity, genuineness and creditworthiness of the lender, M/s. Rubik Exports Pvt. Ltd.” 6. At the time of hearing, ld. DR of the Revenue brought to our notice findings of the AO and submitted that Rabik Exports Pvt. Ltd. was not traceable considering the fact that 133(6) notices were returned unserved from the addresses provided by the assessee and he submitted that the jurisdictional AO of Rabik Exports Pvt. Ltd. has confirmed that they have not filed any return of income. Further he brought to our notice page 22 of the appellate order and submitted that merely because assessee has repaid the loan within the same assessment year, ld. CIT (A) has overlooked the findings of the AO. Therefore, he heavily relied on the findings of the AO and further submitted that assessee has not proved three parameters of section 68 of the Act. 7 ITA No.5089/DEL/2024 7. On the other hand, ld. AR of the assessee brought to our notice findings of ld. CIT (A) and submitted that the assessee has received the unsecured loan through banking channel and repaid the same within the same assessment year i.e. within three months from the receipt of unsecured loan also through RTGS i.e. through banking channel. He also submitted that assessee has submitted all the relevant documents to prove the identity, creditworthiness and genuineness of the transaction by filing the confirmation from Rabik Exports Pvt. Ltd.. In this regard, he relied on the decision of Hon’ble Bombay High Court in the case of Pr.CIT vs. Skylark Build 2018 (10) TMI 1513 and decision of Hon’ble Delhi High Court in the case of DIT vs. Modern Charitable Foundation (2011) 335 ITR 105 and coordinate Bench decision in the case of ACIT vs. Signature Global India Pvt. Ltd. in ITA No.9264/Del/2019 dated 07.02.2025. 8. Considered the rival submissions and material placed on record. On careful consideration, it is fact on record that assessee has received unsecured loan from Rabik Exports Pvt. Ltd. only through banking channel. In support of that, assessee has submitted confirmation letters and Balance Sheet and further we observed that assessee has returned the same within three months from the receipt of the above unsecured loan. Since the transactions were only routed through banking channels and assessee has submitted relevant documents as required by the AO. It is 8 ITA No.5089/DEL/2024 also fact on record that the AO has verified the existence of the company as per the address available on ROC records and as per the Inspector’s physical report and also jurisdictional AO has confirmed that Rabik Exports Pvt. Ltd. has not filed return of income for Assessment Years 2017-18 & 2018-19, however there is no mention about the return of income filed by them for earlier AYs i.e. 2015-16 & 2016-17. From the record, it is clear that even the Director of the assessee company has confirmed the transaction, receipt of unsecured loan and repayment of the same. Merely because the AO could not trace the company as per the address available on ROC records and non-filing of return of income for the assessment year under consideration, the transactions carried on by the assessee through banking channel cannot be nullified. It is a fact on record that the transactions are taken place through the banking channel and the same was repaid within three months also through banking channel. 9. We observed that on the similar facts on record, coordinate Bench in the case of Signature Global India Pvt. Ltd. (supra) held as under :- “18. With regard to ground no.ii(a), we observed that the Assessing Officer observed that the assessee has taken unsecured loan from 9 parties and assessee has submitted copies of ITR acknowledgement, confirmation of the loan creditors and copy of bank statement of all the loan creditors and with regard to Basera Realtech Private Limited submitted a copy of the Hon’ble High Court order. The Assessing Officer has made the addition after analyzing loan creditors. He came to the conclusion based on the declaration of meager income in the return 9 ITA No.5089/DEL/2024 of income and observed how can they lend huge amount to the assessee as unsecured loans, therefore, he raised doubt of the creditworthiness of these parties. In appellate proceedings, ld. CIT (A) considered the detailed submissions of the assessee and he deleted the addition with the observation that the assessee has submitted all the relevant details/documents in respect of securing unsecured loans from all the nine parties. After considering the details filed on record, he observed that Assessing Officer has not pointed out any discrepancy in the abovesaid documents and not made further enquiries. Further he observed that based on the balance sheet of these lender companies, he observed that the status of own funds/total funds available with these lender companies are much higher than the amount lend by them and he negated the findings of the Assessing Officer on the basis of lending the money merely on the basis of earning of income. He relied on the decision of coordinate Bench in the case of Addl.CIT vs. Prayag Polytech Pvt. Ltd. (supra), ITO vs. Computer Home Information Plus Pvt. Ltd. (supra) and the decision of Hon’ble Delhi High Court in the case of Pr.CIT vs. Goodview Trading Pvt. Ltd. (supra) and came to the conclusion that income alone is not the criteria for making the loan and also negated the findings of the Assessing Officer that the loan was given immediately after it was received by them and cannot be the ground for making addition u/s 68 of the Act. Finally, he deleted the addition by observing that the assessee has taken loans from these companies for short duration and almost all the loans were repaid during the year itself and only some small amount is outstanding as at the year end and that too is mainly on account of interest. He has reproduced the following chart in his order :- S.No. Name of the Party Loan amount added by A.O. (Rs.) Outstanding balance as at the year end (Rs.) 1 Ace Stone Craft Limited 20000000 2 Arise Infotech Private Limited 5900000 1346065 3 Basera Realtech Private Limited 5200000 NIL 4 Multiplex Fincap Limited 163456456 NIL 5 Radhay Portfolio Limited 2950000 4361540 6 SRK Tradelinks Pvt. Limited 15500000 NIL 7 Syala Buildwell Private Limited 2500000 2590369 8 Tia Enterprise Private Limited 4000000 NIL 9 Umang Leasing and Credit Co. Ltd. 11750000 NIL 19. Based on the above finding, ld. CIT (A) came to the conclusion that assessee has proved the conditions imposed u/s 68 of the Act that assessee has found identity, creditworthiness and genuineness of the transactions. Further, he observed that the Assessing Officer has merely 10 ITA No.5089/DEL/2024 rejected the submissions of the assessee on the basis of doubt without bringing any material to discredit the document or information on record. Further he observed that the provisions of section 68 of the Act as existed at that point out time there is no requirement of proving the source of source in the case of loan transactions. Accordingly, he deleted the addition made by the Assessing Officer. 20. At the time of hearing, ld. DR relied on several decisions in his arguments. We heard the same and we are of the opinion that those case laws are distinguishable to the facts in the present case. Therefore, we are not inclined to disturb the findings of the ld. CIT (A). Accordingly, ground no.ii(a) is dismissed.” 10. The facts in the present case are exactly similar to the above and assessee has submitted all the relevant information to prove the identity, creditworthiness and genuineness of the transactions and it is also fact on record that assessee has repaid the unsecured loan within three months and all the transactions were routed through banking channel. Therefore, respectfully following the aforesaid decision, we do not find any reason to disturb the findings of the ld. CIT (A) and accordingly, the grounds taken by the Revenue are dismissed. 11. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in the open court on this 16th day of April, 2025. Sd/- sd/- (MAHAVIR SINGH) (S.RIFAUR RAHMAN) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 16.04.2025 TS 11 ITA No.5089/DEL/2024 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "