Assistant Commissioner of Income Tax, CC-3, Surat V. Dineshnchandra D. Koradia, Surat

ITA 109/SRT/2022

AI Insights

The case involves two appeals by the Revenue against the decisions of the CIT(A) which had deleted the additions made by the Assessing Officer on various grounds related to interest expenses on unsecured loans and interest-free loans. The Tribunal examined the submissions, evidence, and previous rulings on similar issues. It was noted that the loans in question had been considered genuine in earlier assessments, and the interest payments had been substantiated with adequate documentation. The Tribunal also referenced similar cases and precedents where interest expenses had been allowed under comparable circumstances.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302067 (ITAT-SURAT)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-10-2022
• Assessment Year: misc
• Appeal Filed On: 04-10-2022
• Other Referred Cases: Dinesh Chand Korodia vs. ACIT, HVK International Pvt. Ltd. vs. ACIT, PCIT vs. RSA DIGI Prints, PCIT vs. Sanghi Fincap Ltd., Rohini Builders vs. Dy. CIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Peak credit; Rule of consistency; Proportionate interest; Accommodation entries; Notional interest; Tax effect; Onus to prove; Set aside
• Section: 68; 143(3); 133(6); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 108/Srt/2022 (Assessment Year: 2018-19) (Virtual hearing) A.C.I.T., Central Circle-3, Surat. Vs. Shri Hareshbhai Mohanbhai Sakariya, 9/10, Vinod Niwas, Dayanand Society, B/h Navyug College, Rander Road, Surat. PAN No. ALLPS 9142 H Appellant/ assessee Respondent/ revenue ITA No. 109/Srt/2022 (Assessment Year: 2018-19) A.C.I.T., Central Circle-3, Surat. Vs. Shri Dineshchandra Dahyalal Koradia, 9/10, Dayanand Society, B/h Navyug College, Rander Road, Surat. PAN No. ACUPK 3696 A Appellant/ assessee Respondent/ revenue Department represented by Shri Vinod Kumar, Sr.DR Assessee represented by Shri Biren Shah, CA Date of hearing 10/10/2022 Date of pronouncement 29/11/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. These two appeals by the Revenue are directed against the separate orders of learned Commissioner of Income Tax (Appeals)-4, Surat (in short, the ld. CIT(A) both dated 09/02/2022 for the Assessment year (AY) 2018-19. In both these appeals, the revenue has raised common grounds ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 2 of appeal. Facts in both these years are almost similar, therefore, with the consent of parties, both these appeals were clubbed, heard together and are being decided by this consolidated order to avoid the conflicting decision. For appreciation of facts, the appeal being ITA No. 108/Srt/2022 is treated as a “lead case”. In this appeal, the revenue has raised following grounds of appeal: “(i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 91,38,649/- made on account of disallowance of interest expenses on bogus unsecured loans without appreciating the fact that such loans were arranged by the assessee from the entry providers who have accepted the modus operandi of providing of bogus entries before the Income Tax Department? (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 85,86,709/- made on account of disallowance of interest payments to M/s Meenahar Gems Pvt. Ltd. (Rs. 55,62,670/-) to Vijay Exports (Rs. 15,51,699/-) and to Aavishkar Murli Agarawal (Rs. 14,72,340/-) without appreciating that the fact that said parties have not complied with the notice issued under Sec. 133(6) of the Act to prove the identity of the lender and genuineness of the transactions inasmuch as that the assessee has made factually incorrect submissions regarding receipt of response from aforesaid party during the course of assessment proceedings as well as during the course of appellate proceedings? (iii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 85,86,709/- made on account of disallowance of interest payments to Meenhar Gems Pvt. Ltd., M/s Vijay Exports and Aavishkar Murli Agrawal by relying upon the submissions of the assessee that the said party has complied with the notice u/s 133(6) of the I.T. Act issued by the AO during the course of assessment proceedings, without making any verification or providing an opportunity to the AO to verify the underlying facts which is clear violation of principles of natural justice? ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 3 (iv) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 61,32,957/- on account of interest attributable to interest free loans given without appreciating the fact that the assessee has claimed interest expenses u/s 57 of the Act on borrowed funds even though it has utilized the funds for providing interest free loans to the other concerns? (v) It is, therefore, prayed that the order the ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. (vi) The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 2. Brief facts of the case are that the assessee filed its return of income for the A.Y. 2018-19 on 31/07/2018 declaring NIL income. The case of assessee was selected for scrutiny. During the assessment, on perusal of balance sheet, the Assessing Officer noted that the assessee has shown debited interest on unsecured loan of various parties namely Mayur Gems of Rs. 39,32,076/-, Paras Gems of Rs. 40,34,505/- Piyush Gems Pvt. Ltd. of Rs. 42,898/- and P.K. Enterprises of Rs. 11,29,170/- which have poor credentials as they were part of Pravin Jain group, who was involved in providing accommodation entry. Therefore, the assessing officer made disallowance of aggregate of interest payment of Rs. 91,38,649/- (39,32,076 + 40,34,505+ 42989+ 11,38,649). 3. The Assessing Officer further noted that the assessee also paid interest expenses to Avishkar Murali Agarwal of Rs. 14,72,340/-, Meenahar Gems of Rs. 55,62,670/- and Vijay Exports of Rs. 15,51,699/-. The above said ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 4 interest expenses were also paid against unsecured loans. The Assessing Officer issued notice to all these three parties under Section 133(6) of the Income Tax Act, 1961 (in short, the Act). No reply was received from such parties. 4. The Assessing Officer further noted that the assessee shown interest free loan and advance of Rs. 60.00 lacs to Dimar Construction Pvt. Ltd. and Rs. 8,16,13,678/- to H.V. Construction P Ltd, which are group concern of assessee. The assessing officer was of the view that on one hand the assessee has paid interest on unsecured loan and on the other hand advanced interest free loans to its group concerns. On perusal of rate of interest, the assessee claimed from such concerned, the assessee have claimed interest expenses @ 7% from whom the assessee has availed loan. However, the assessee has given interest free loan to Dimar Construction Pvt. Ltd. and H.V. Construction P Ltd. The Assessing Officer asked the assessee to show cause as to why proportionate interest at the average rate of 7% should not be disallowed. 5. The Assessing Officer issued detailed show cause notice for proposing the disallowance of interest expenses as well as disallowance of proportionate interest rate on the interest free loan given to Dimar Construction Pvt. Ltd. and H.V. Construction P Ltd. In response to said show cause notice, the assessee filed its detailed reply. ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 5 6. The contents of reply are recorded in para 5.4 of assessment order. The assessee in reply, submitted that the assessee has taken a genuine loan from Mayur Gems and Paras Gems and used the loan for business purpose. Against the loan of Mayur Gems and Paras Gems, the assessee furnished copy of ledger account, confirmation, PAN number and return of income. Notice sent under Section 133(6) was also replied by such parties. The assesse also stated that HVK International Pvt. Ltd., who is a separate legal entity, though, the assessee is one of the Director therein, the HVK International filed an application before the Settlement Commission and their application has been admitted under Section 245D(4) and reiterated that loan taken by assessee were genuine for the reasons that the funds were provided by HVK International to certain name lenders and not by assessee, accordingly, the interest paid by assessee was genuine. In the application filed before the Settlement Commission, the HVK International accepted that all the parties except P.K. Enterprises have provided through HVK International. The assessee also submitted that similar interest disallowance was made, however, it was allowed by the ld. CIT(A). The assessee placed on record copy of order of ld. CIT(A) for A.Y. 2009-10, 2010-11 and 2012-13. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer held that the assessee could furnish copy of ledger and bank ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 6 statement to prove that the transactions were genuine. The Assessing Officer by referring the report of Investigation Wing, wherein Pravin Jain and his associates allegedly accepted that they were providing accommodation entry, disallowed the entire interest expenses of Rs. 91,38,649/-. 7. The Assessing Officer further noted that the assessee has also shown interest expenses paid to three parties namely Meenahar Gems of Rs. 55,62,670/-, Vijay Exports of Rs. 15,51,699/- and Aavishkar Murli Agrawal of Rs. 14,72,340/- totalling to Rs. 85,86,709/-. The assessee paid interest against unsecured loan. The Assessing officer issued notice under Section 133(6) of the Act to these parties to verify the genuineness of interest expenses. No reply was received from such parties. The Assessing Officer issued show cause notice to the assessee. The assessee filed reply. The contents of reply of assessee is recorded in para 6.2 of assessment order. The assessee in its reply submitted that they are informed by the assessee that the notice of Assessing Officer under Section 133(6) were complied. The assessee stated that they were already filed copy of confirmation, ledger account of these parties. The assessee further stated that in preceding year, similar interest expenses were allowed in assessment under Section 143(3) of the Act. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer noted that ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 7 non-compliance of notice under Section 133(6) shows that the interest expenses are not genuine and not allowable. Hence, the aggregate of interest expenses paid to Meenahar Gems, Vijay Exports and Aavishkar Murli Agrawal of Rs. 85,86,709/- were disallowed. 8. On the interest free advances, the Assessing officer held that the assessee has given interest free loan to their group concern i.e. Rs. 60.00 lacs to Dimar Construction P Ltd. and Rs. 8.16 crores to HVK International Pvt. Ltd. The Assessing Officer on his observation observed that on the one hand, the assessee has claimed interest expenses on unsecured loan from various parties and on the other hand, the assessee has given interest free loan to its group concerned. The Assessing Officer was of the view that the assessee has utilized interest bearing fund to its group concerned. The assessing officer noted that assessee claimed that the loan to Dimar Construction P Ltd. of Rs. 60.00 lacs were given prior to F.Y. 2010-11 out of its own capital and interest free loan and advances. There is no nexus between the interest free loans and borrowings given to the said party. Copy of ledger of said party from 01/04/2010 to 31/03/2018 was produced. With regard to HVK International, the assessee submitted that the said advances were given in F.Y. 2010-11 and F.Y. 2012-13 to 2014-15. The said advances were given out of capital of assessee and interest free loan and borrowings. The assessee is having ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 8 interest free capital of Rs. 39.78 crores which is far more than the amount than the interest free advances. The advances to the parties were given in A.Y. 2010-11. Though, the assessment for A.Y. 2010-11 to 2017-18 were completed under Section 143(3) of the Act but no such interest disallowance was made as there was no nexus between the interest bearing funds with that of advances given to those parties. The Assessing Officer held that when the assessee was having sufficient fund with him why he is providing interest on the loan. The Assessing Officer concluded that it is proved that it is clear nexus between the interest bearing funds with that of interest free advances. The Assessing Officer made proportionate disallowance of interest @ 6% on the loan and advances of Rs. 8.76 crores thereby worked out the disallowance of Rs. 61,32,957/-. 9. Aggrieved by the additions/disallowances, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee in its written submission made similar submissions as made before the Assessing Officer. 10. The ld. CIT(A) after considering the submissions of assessee on the disallowance of interest expenses of Rs. 91,38,649/- which relates to payment of interest to Mayur Gems, Paras Gems and Piyush Gems held that the Assessing Officer disallowed such interest expenses on the ground that the loan taken from these three concerns are bogus. Further, ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 9 the Assessing Officer noted that the assessee has paid interest to P.K. Enterprises which the Assessing Officer considered to be part of 19 parties about whom, the HVK International Pvt Ltd. in its settlement application accepted such loan to be bogus and consequential interest paid to such loan was disallowed under Section 57 of the Act. The assessee before him contended that the loan taken from three parties i.e. Mayur Gems, Paras Gems and Piyush Gems are genuine loan hence consequential interest cannot be disallowed. So far as interest paid to P.K. Enterprises is concerned, the assessee stated that the said party was not a part of 19 parties and that the land was received from P.K. Enterprises was genuine loan received through account payee cheques and the consequential interest cannot be disallowed. It was also stated by assessee that the interest paid on such loan to Mayur Gems, Paras Gems and Piyush Gems were already considered as genuine in earlier years and the interest disallowance was deleted by the ld. CIT(A) in his order for A.Y. 2009-10 to 2013-14, 2014-15 to 2015-16 and 2017-18. The ld. CIT(A) held that loan taken from Mayur Gems, Paras Gems and Piyush Gems has already been considered to be genuine by his predecessor for A.Y. 2009-10 to 2013-14, 2014-15, 2015-16 and 2017-18. There is no change in the facts. Once the transaction of loan is considered as genuine, the interest on such loan cannot be disallowed. The ld. CIT(A) ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 10 further held that P.K. Enterprises was not part of 19 parties and the assessee had explained the genuineness of said loan during the assessment. Thus, the interest cannot be disallowed. On such observation, the ld. CIT(A) deleted all the disallowances of interest expenses to all these four parties. 11. On the disallowance of interest expenses aggregating to Rs. 85,86,709/- paid to Aavishkar Murli Agarwal, Meenahar Gems Pvt. Ltd. and Vijay Exports. The ld. CIT(A) noted that the Assessing Officer disallowed such interest expenses by taking a view that no response to notice under Section 133(6) was made. On the other hand, the assessee stated that all the parties have filed their reply in response to notice under Section 133(6) of the Act and that the assessee has filed copy of screenshot about their reply as reflected on the ITBA Website. The assessee filed confirmation, ledger account, their bank account wherein receipt of interest payment is reflected. The assessee also claimed that in assessment during A.Y. 2009-10 to 2010-11 and 2012-13 and 2017-18, similar interest expenses were allowed in the assessment order under Section 143(3) of the Act. The ld. CIT(A) after considering the submission of assessee held that reply of all such lender party was seen in /from ITBA Website. The assessee has furnished confirmation, copy of bank account, ledger account wherein the interest payment is shown. The ld. ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 11 CIT(A) on his consideration that the Assessing Officer disallowed the interest expenses only on the ground that the notice under Section 133(6) was not complied. The ld. CIT(A) on his observation that notice under Section 133(6) of the Act was duly complied and the assessee has also furnished corroborative and supporting evidence to substantiate his genuineness of interest expenses, deleted the aggregate disallowance of Rs. 85,86,709/-. 12. On the disallowance of non-charging of interest on interest free loan given to related parties, the ld. CIT(A) noted that there is no nexus between the interest bearing loans and loan advances by the assessee. Most of the loan amounts were advanced before A.Y. 2010-11 and the interest bearing loan was taken after that period. Further, the assessee has own capital and are far excess. There is no change in the facts with regard to earlier assessment year, therefore, considering the fact that no such disallowance was made in earlier years. The ld. CIT(A) deleted the interest disallowance of Rs. 61,32,957/-. Aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before this Tribunal. 13. We have heard the submissions of learned Senior Departmental Representative (ld. Sr. DR) for the revenue and the learned Authorised Representative (ld. AR) of the assessee and have gone through the orders of the lower authorities. Ground No. (i) of the appeal relates to deleting ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 12 the disallowance of Rs. 91,38,649/-. The ld. Sr. DR for the revenue supported the order of Assessing Officer. The ld. Sr. DR submits that the ld. CIT(A) decided the issue in favour of assessee on the basis of decision of his predecessor in assessee’s own case wherein similar issue was involved. The ld. Sr. DR submits that the department has not accepted the order of ld. CIT(A) in those year, however, the income tax effect in those years were less than the monetary limit for filing appeal before the Tribunal, therefore, such appeal was not filed. The fact remains the same that the assesse has availed the loan from entry providers. 14. On the other hand, the ld. AR of the assessee submits that at this stage, the ground of appeal raised by revenue is covered by the decision of Tribunal in favour of assessee in assessee’s own case for A.Y. 2017-18 in ITA No. 48/Srt/2021 order dated 25/05/2022. 15. We have considered the rival submissions of both the parties and perused the orders of lower authorities carefully. As recorded above, the Assessing Officer made disallowance of interest expenses by taking a view that the assessee could furnish copy of ledger and bank statement to prove that the transactions were genuine. The Assessing Officer by referring the report of Investigation Wing, wherein Pravin Jain and his associates allegedly accepted that they were providing accommodation entry, disallowed the entire interest expenses of Rs. 91,38,649/-. The ld. CIT(A) ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 13 deleted the addition/disallowance by holding that that the ld. CIT(A) held that loan taken from Mayur Gems, Paras Gems and Piyush Gems has already been considered to be genuine by his predecessor for A.Y. 2009- 10 to 2013-14, 2014-15, 2015-16 and 2017-18. There is no change in the facts. Once the transaction of loan is considered as genuine, the interest on such loan cannot be disallowed. The ld. CIT(A) further held that P.K. Enterprises was not part of 19 parties and the assessee had explained the genuineness of said loan during the assessment. Thus, the interest cannot be disallowed. 16. We find that similar disallowances of interest expenses in respect of same parties was made in AY 2010-11, on appeal the disallowance was deleted by ld CIT(A) and on further appeal before Tribunal the order of ld CIT(A) was upheld in ITA No. 02/Srt/2021 dated 25.05.2022 and similar order was followed in appeal for AY 2017-18. We find that while dismissing the appeal of revenue against the assessee, we followed the order in assessees group case in Dinesh Chand Karodia in ITA No. 01/Srt/2021 dated 25.0.52022, the relevant part of the order is extracted below; “10. We have considered the rival submissions of both the parties and have gone through the orders of authorities below carefully. We have also deliberated on the various case laws relied by ld. AR for the assessee. During the assessment year, the Assessing Officer noted that on verification of return of income submitted by ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 14 assessee, it is seen that assessee has received unsecured loan from various parties having poor credentials. The assessee has received unsecured loan from Diasqua Exports, Madhav Gems, Mayur Gems and Paras Gems respectively. The Assessing Officer further recorded that these firms are bogus proprietary concerned and entry provider like Madhav Gems and Mayur Gems and Paras Gems that they are of loan providing accommodation entries. The assessee in response to show cause notice submitted that he has taken loan from Paras Gems who is not the same as mentioned in the statement of Praveen Jain. The assessee has availed loan from Prakash Nahar who is proprietorship firm is coincidentally not connected with Praveen Gems. In response to notice under section 133(6), Prakash Nahar submitted that bank statements, ledger account and confirmation and annual accounts regarding Madhav Gems, the assessee submitted that he has taken loan from Madhav Gems, from Madjav Gems is not same as mentioned in the statement of Praveen Jain. He stated that Sushil Jain is the proprietor of Mayur Gems. Further notice under section 133(6) was served on Sushil Jain, where he has furnished complete bank account, ledger account, books of account and confirmation. Regarding Madhav Gems, the assessee also stated that as per statement of Shri Praveen Jain that he appointed Pankaj Jain as director of Madhav Gems. The assessee explained that Madhav Gems is not the same as mentioned in the statement of Shri Praveen Jain. The assessee explained that in response to notice under section 133(6) issued to Sushil Jain furnished his bank account, ledger account and confirmation and stated that he does not know Pravin Jain and he has no relation with him. The Assessing Officer disregarded the submission of assessee. The Assessing Officer instead of giving any finding on the documents furnished by various parties in response to notice under section ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 15 133(6) concluded that mere payment by cheque is not sacrosanct nor it can make a genuine transaction. The Assessing Officer worked the peak credit in the case of Paras Gems, Madhav Gems & Mayur Gems and made addition of Rs.4.15 crores. The Assessing Officer further made addition on account of disallowance of interest expense by taking view that various parties from whom the assessee has availed unsecured loan having over credentials. The assessee has availed interest payment of 19 such parties. The Assessing Officer by disallowed the interest payment by treating as it was bogus. On appeal before Ld. CIT(A) the additions of unsecured loan as well as interest disallowances were deleted. 11. We find that Ld. CIT(A) on considering the submission of assessee that addition of unsecured loan is not based of any incriminating material found during the course of search action. We find that Ld. CIT(A) in para 5-2 of his order has recorded that during the search action, cash / jewellery was seized from the residence of assessee, who is director of HVK International Pvt. Ltd. The Assessing Officer made addition on the basis of general statement of third party recorded by DDIT (Inv.) Mumbai. There is no whisper in the assessment order that any incriminating material was found during the search action for giving cash against such loan. The Ld. CIT(A) by referring the decision of Hon'ble jurisdictional High Court in the case of Saumya Construction Pvt. Ltd. (supra) and Anil Bholabhai Patel (supra) and in the case of PCIT vs. Sunrise Finlease (P) Ltd. 89 taxmann.com 1 and PCIT vs. Sanghi Fincap Ltd. The Ld. CIT(A) held that no addition in absence of incriminating material can be made in the unabated assessment. 12. We find that Ld. CIT(A) also examined the case of unsecured loan on merit and recorded that Assessing Officer made addition by adopting peak credit theory and made addition of Rs.4.15 crores ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 16 of three parties being Mayur Gems, Paras Gems & Madhav Gems. The assessee has furnished ledger account of those parties, confirmation along with PAN, full addresses, bank statement and other relevant documentary evidence. The ld CIT(A) held that the Assessing Officer issued notice under section 133(6) and in response thereto parties have admitted such loan to the genuine and also provided necessary evidence. Such evidence was not found to be incorrect. The assessee has clearly discharged his onus of under section 68 that there is no addition can be made merely on the basis of presumption. The Ld. CIT(A) also relied on the decision of Hon'ble jurisdictional High Court in the case of CIT- 1 vs. Dharmadev Finance (P.) Ltd. [2014] 43 taxmann.com 395(Guj); PCIT vs. RSA DIGI Prints (Tax Appeal No.503 of 2017 dated 06.09.2017 and Rohini Builders vs. Dy. CIT (2002) 76 TTJ 521 (Ahd.Trib) 265 ITR 360 (Guj) and deleted the addition on merit. 13. We find that the Assessing Officer has not made any specific comment on various documentary evidence furnished by assessee nor any independent investigation was carried out. Thus in absence of any adverse material collected by the Assessing Officer during the assessment against the assessee and no addition was warranted. 14. The Hon’ble jurisdictional High Court in the case of Rohini Builders (supra) and in Apex Therm Packaging (P) Ltd. (supra) held that when full particulars including confirmation with names, addresses, PAN No. and copy of income-tax return, balance-sheet, profit and loss account and computation of total income of all creditors or lenders were furnished and the loans were given through cheques and reflected in the balance-sheet the Assessing Officer was not justified in making addition. Thus, in view of the aforesaid discussion, we affirm the order of Ld. CIT(A) on the legal ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 17 issue as no incriminating material was found during the course of search action with regard to unsecured loan and interest payment. We also affirm the order of Ld. CIT(A) on merit that in absence of any adverse material against the documentary evidence and discharging the onus to prove the identity, creditworthiness and genuineness of the lender. Thus, we affirm the order of Ld. CIT(A) on deleting the addition of unsecured loan. In the result, ground No.1 to 5 of Revenue’s appeal is dismissed.” 17. Considering the facts that on similar interest disallowance in A.Y. 2017-18 and similar deletion of interest disallowance was upheld by this Bench in A.Y. 2017-18 in ITA No. 48/Srt/2021. Therefore, we do not find any illegality or irregularity in the order passed by the ld. CIT(A) which we affirm the same qua the issue under consideration. 18. Ground No. (ii) and (iii) of the appeal relates to deleting the disallowance of interest expenses paid to Aavishakr Murli Agarwal, Meenahar Gems Pvt. Ltd. and Vijay Exports on unsecured loan. The ld. Sr.DR for the revenue submits that the ld. CIT(A) deleted the addition merely considering the statement of assessee that the replies were sent by the lenders to the Assessing officer. In the assessment, the Assessing Officer categorically mentioned that no reply to notice under Section 133(6) were furnished by the lenders party. 19. On the other hand, the ld. AR of the assessee submits that the allegation of Assessing Officer that lender parties have not made compliance to his ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 18 notice under Section 133(6) is factually incorrect that all the parties have duly complied the said notice. The assessee also filed confirmation of all the parties as well as copy of ledger account and bank statement showing the payment of interest. All such details are now placed on record. The ld. AR of the assessee submits that the similar interest expenses were allowed in earlier years in the assessment order passed under Section 143(3). The ld. CIT(A) granted relief to the assessee by following the orders of earlier years. In alternative submission, the ld. AR submits that no addition under Section 68 can be made merely because the lender of loan could not respond to notice under Section 133(6) of the Act wherein the assessee has duly discharged his onus by filing all necessary evidence to substantiate such interest expenses. To support such submission, the ld. AR of the assessee relied upon the decision of Delhi Bench of Tribunal in Vidya Education Investment (P) Ltd. Vs DCIT (2021) 129 taxmann.com 5 (Delhi Trib). 20. We have considered the rival submissions of both the parties and have gone through the orders of authorities below carefully. We have also deliberated on the case law relied by the ld. AR of the assessee. We find that the Assessing Officer disallowed the interest expenses by taking a view that the lender parties have not responded to the notice under Section 133(6) of the Act. We find that no finding was given by Assessing ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 19 Officer on various documentary evidences furnished by assesse, which consists of confirmation of parties, return of income of lender parties, ledger account of assessee and parties’ books of account, bank statement of parties and financial statement of lenders. The assessee has also filed copies of reply in response to notice under Section 133(6) of the Act. We find that the ld. CIT(A) allowed relief to the assessee by clearly holding that the reply of lender party in response to notice under Section 133(6) is seen on ITBA Website. Similar interest expenses were allowed in earlier assessment years and was never disallowed. We find that the ld. CIT(A) granted relief on appreciation of fact that the assessee made compliance. As we have earlier noted that the Assessing Officer has not given any finding on the various documentary evidences to substantiate the genuineness of interest expenses. Further the Assessing Officer has not controverted the fact that in earlier years, similar interest expenses were allowed. In view of the aforesaid factual discussion, we do not find any merit in the grounds of appeal raised by the Revenue and we delete the same. Accordingly, grounds No. 2 and 3 of the appeal are dismissed. 21. Ground No. (iv) of the appeal relates to deleting the addition of notional interest of Rs. 61,32,957/-. The ld. Sr. DR for the revenue submits that the ld. CIT(A) has not appreciated the observation of Assessing Officer in the assessment order that the assessee could have utilized his own fund ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 20 when he was having sufficient funds available with him. On one hand, the assessee borrowed interest bearing funds and on the other hand, the assessee was providing interest free loans to its group concerned. The Assessing Officer reasonably disallowed and added 6% interest on such loan paid to group concerned. 22. On the other hand, the ld. AR of the assessee supported the order of ld. CIT(A). The ld. AR of the assessee submits that the assessee was having sufficient interest free fund available with him. Most of the loans and advances were made before A.Y. 2010-11 and interest bearing loan was taken thereafter. The ld. AR further submits that this ground of appeal is also covered by the decision of the Tribunal in assessee’s own case for A.Y. 2017-18 in ITA No. 48/Srt/2021 dated 25/05/2022. 23. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the Assessing Officer made addition of notional interest by taking a view that the assessee has given interest free loan to its group concerned i.e. Rs. 60.00 lacs to Dimar Construction Pvt. Ltd. and Rs. 8.16 crores to HVK International Pvt. Ltd. The Assessing Officer on his view has observed that the assessee has borrowed the interest bearing funds and paid interest @ 7% to such lenders. The Assessing officer after giving show cause notice and considering the submission of assessee, made ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 21 proportionate disallowance of interest @ 6% on the aggregate advances of Rs. 8.76 crores and worked out the addition/disallowance of Rs. 61,32,957/-. We find that before the ld. CIT(A), the assessee made similar submission as made before us. The ld. CIT(A) after considering the submission of assessee noted that there is no direct nexus between the interest bearing loan and interest free loan advanced by assessee. Most of the interest free advances were made prior to 2010-11. The interest bearing loan was given by assessee after that period. The ld. CIT(A) also examined the assessee’s own capital, reserve and surplus and find that reserve and surplus of assessee are in far excess than the interest free advances to its group concerned. Before us, the ld. Sr. DR for the revenue has not controverted the fact that the interest free advance was not given prior to 2010-11 and that the interest bearing loan was taken only thereafter. Considering the fact that the assessee is having sufficient interest free fund available with him, therefore, no interest disallowance is warranted. 24. We find that in assessee’s own case for A.Y. 2017-18, in ITA No. 48/Srt/2022, this combination vide order dated 25/05/2022 passed the following order: ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 22 “74. Ground No.[iv] relates to deleting the disallowance of Rs.7,17,520/- on account of difference in interest rate between the interest paid and interest charged on advances. 75. We find that this ground of appeal is similar to the Revenue’s appeal in ITA No.47/SRT/2021 for assessment year 2017- 18, wherein we have already affirmed the deletion of the addition Ld. CIT(A), wherein it was held that there is no direct nexus interest bearing loan with that of loan advance by assessee. Moreover, the interest free capital was far in excess to the loan advance by assessee. Therefore, this ground No.[iv] of Revenue’s appeal is dismissed. In the result, Revenue’s appeal is dismissed.” 25. Considering the facts, the there is no direct nexus between the interest bearing loan and loan advanced by assessee. Most of the interest free advances were made prior to 2010-11. The interest bearing loan was given by assessee after that period. Moreover, the interest free reserve and surplus are in far excess, which is not controverted by the ld Sr DR for the revenue. Therefore, we do not find any illegality or irregularity in the order passed by the ld. CIT(A) which we affirm the same qua the issue under consideration. Hence, this ground of appeal of the revenue is also dismissed. 26. In the result, this appeal of the revenue is dismissed. 27. Now we take ITA No. 109/Srt/2022 for the A.Y. 2018-19 wherein the Revenue has raised following grounds of appeal: ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 23 “(i) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 72,84,269/- made on account of disallowance of interest expenses on bogus unsecured loans without appreciating the fact that such loans were arranged by the assessee from the entry providers who have accepted the modus operandi of providing of bogus entries before the Income Tax Department? (ii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 79,84,048/- made on account of disallowance of interest payments to M/s Aarav Gems without appreciating that the fact that said parties has not complied with the notice issued under Sec. 133(6) of the Act to prove the identity of the lender and genuineness of the transactions inasmuch as that the assessee has made factually incorrect submissions regarding receipt of response from aforesaid party during the course of assessment proceedings as well as during the course of appellate proceedings? (iii) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 7,76,293/- made on account of disallowance of interest payments to M/s Vijay Exports by relying upon the submissions of the assessee that the said party has complied with the notice u/s 133(6) of the I.T. Act issued by the AO during the course of assessment proceedings, without making any verification or providing an opportunity to the AO to verify the underlying facts which is clear violation of principles of natural justice? (iv) Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 6,45,600/- on account of interest attributable to interest free loans given without appreciating the fact that the assessee has claimed interest expenses u/s 57 of the Act on borrowed funds even though it has utilized the funds for providing interest free loans to the other concerns? (v) It is, therefore, prayed that the order the ld. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. (vi) The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 24 28. Ground No. (i) of the appeal relates to deleting the addition of Rs. 72,84,269/- on account of disallowance of interest expenses paid to Mayur Gems, Paras Gems and P.K. Enterprises. We find that this ground of appeal is similar to the ground No. (i) in ITA No. 108/Srt/2022 which we have already discussed in para 9 of this order and already dismissed. Therefore, considering the principle of consistency, this ground of appeal raised by the revenue is dismissed with similar observation. 29. Ground No. (ii) and (iii) of the appeal relates to deleting the disallowance of interest expenses to M/s Aarav Gems and M/s Vijay Exports. We find that the Assessing Officer made additions/disallowances with similar observation as made above with regard to facts which were involved in grounds No. (ii) & (iii) in ITA No. 108/Srt/2022 which we have already discussed in earlier paras of this order and already dismissed. Therefore, considering the principle of consistency, these grounds of appeal raised by the revenue are dismissed with similar direction. 30. Ground No. (iv) of the appeal relates to deleting the addition of Rs. 6,45,600/- on account of interest attributable to interest free loans given to group concerned. We find that this ground of appeal is identical to the ground No. (iv) in ITA No. 108/Srt/2022 which we have already discussed in para 15 of this order and already dismissed. Therefore, considering the ITA No.108 & 109/Srt/2022 ACIT Vs Sh. Hareshbhai Mohanbhai & One Anr. 25 principle of consistency, this ground of appeal raised by the revenue is dismissed with similar observation. 31. In the result, both these appeals of the revenue are dismissed. Order pronounced in the open court on 29 th November, 2022. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated:29/11/2022 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat