Tirupati Balaji Fiber Ltd., Muzaffarnagar V. ACIT, Central Circle- 28, New Delhi

ITA 2356/DEL/2019

AI Insights

The case involves Tirupati Balaji Fiber Ltd appealing against the order of the CIT(A)-29, New Delhi, which upheld the addition of Rs. 85,00,000 as income from undisclosed sources under section 68 of the Income Tax Act. The addition was initially made by the Assessing Officer, suspecting the unsecured loans received by the assessee were actually share application money. The Tribunal examined the documentary evidence provided by the assessee, including bank statements, loan confirmations, and repayment records, and found that the transactions were genuine loans, not share applications. The Tribunal criticized the lower authorities for not properly appreciating the evidence and for making presumptive and arbitrary conclusions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131274 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 09-05-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 17-03-2019
• Other Referred Cases: M/s Key Components P Ltd VS. ITO, W-5(2), New Delhi, ITA No-366/Del/2016, Neeta Agarwal Vs. ITO. W-1(1). Muzaffarnagar, ITA No- 2488/Del/2017, Sampatraj Dharmichand Jain Vs. ITO. SCA No-4646 of 2016 High Court of Gujarat at Ahmedabad, P.R. Construction Vs. ACIT, C-2. Muzaffarnagar, ITA No- 985/Del/2021, Hindon Forge P Ltd Vs. DCIT. C-1. Ghaziabad, ITA No- 3800/Del/2017
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS
• Section: 68; 148; 133(6); 191

Judgement Text

Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”: NEW DELHI BEFORE Shri C.M. Garg, Judicial Member ITA No. 2356/Del/2019 (Assessment Year: 2012-13) Tirupati Balaji Fiber Ltd, 9 th KM Stone, Bhopra Road, Muzaffarnagar, Uttar Pradesh VS. ACIT, Central Circle-28, New Delhi (Appellant) (Respondent) PAN: AAACB3161E Assessee by : Shri Ankit Gupta, Adv Revenue by: Shri Om Prakash, Sr. DR Date of Hearing 10/05/2023 Date of pronouncement 09/06/2023 O R D E R 1. This is an appeal filed by the assessee against the order of the ld CIT(A)-29, New Delhi dated 04.02.2019 for Assessment Year 2012-13. 2. At the very outset the ld Counsel of the assessee submitted that the assessee does not to press Ground Nos. 1 to 8, hence same are dismissed as not pressed. 3. The sole issue in the remaining ground of assessee on merits is concerned of effective ground No. 9 of assessee which reads as under:- “9. That the Assessing Officer has, in view of the facts and circumstances of the case, erred on facts and in law, in making addition/ disallowance of Rs.85,00,000.00 on account of Unsecured Loans treating as share application money an accommodation entry on the basis of information from ADIT (Investigation). The addition/disallowance made is illegal, unjust and without any basis. The CIT (A) erred in upholding the same.” 4. Ld. Counsel of the assessee submitted that the AO as well as the ld CIT(A) has grossly erred in making addition of disallowance of Rs. 85 lakhs on account of unsecured loan treating as share application money and accommodation entry on the basis of information from ADIT (Investigation). 5. The ld Counsel also submitted that the ld CIT(A) has failed to appreciate that the AO has erred in treating the unsecured loan as ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 2 share premium and share application money which is highly presumptive, arbitrary and purely based on the surmises and conjectures, without appreciating the relevant facts and documentary evidences submitted by the assessee. 6. The ld counsel also submitted that the authorities below have failed to appreciate that the alleged unsecured loan has been repaid in the subsequent year through banking channels and the assessee has also paid interest thereon after claiming the applicable TDS there from. The ld counsel submitted that the AO has allowed interest as expenses as claimed in Profit and Loss Account of the assessee as doubted the transaction on unsecured loan without any basis despite the fact that the assessee demonstrated it by way of relevant documentary evidences and books of account along with confirmation etc, the identity, capacity and creditworthiness of the creditors and genuineness of the transaction. Ld counsel vehemently pointed out that the baseless addition made by the AO and upheld by the ld CIT(A) may kindly be deleted. 7. Replying to the above ld Sr. DR strongly supported the orders of the authorities below and submitted that the ld CIT(A) at para 6.5 has categorically noted the facts of the case and thereafter rightly reached to conclusion that the assessee has not substantiated the identity, creditworthiness of the share holders and genuineness of the transaction, therefore, he was right in confirming the addition made u/s 68 of the Act. 8. Placing rejoinder to the above, the ld counsel submitted that neither the AO nor the ld CIT(A) has rightly characterize the transaction undertaken by the assessee as the AO in para 7.4 noted that during the year during year under consideration the assessee converted the unsecured loan into share money and during the year as shown as allotted to the four parties. The ld CIT(A) has right from beginning held the same as share capital/ share premium whereas the ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 3 books of account and financial statement clearly reveals that it was only unsecured loan and never converted into share application money neither during the earlier or subsequent year nor during the relevant financial period i.e. AY 2011-12. Therefore, the entire baseless addition may kindly be deleted. Ld counsel has also placed reliance on the following decisions:- “1. M/s Key Components P Ltd VS. ITO, W-5(2), New Delhi, ITA No-366/Del/2016 2. Neeta Agarwal Vs. ITO. W-1(1). Muzaffarnagar, ITA No- 2488/Del/2017 3. Sampatraj Dharmichand Jain Vs. ITO. SCA No-4646 of 2016 High Court of Gujarat at Ahmedabad 4. P.R. Construction Vs. ACIT, C-2. Muzaffarnagar, ITA No- 985/Del/2021 5. Hindon Forge P Ltd Vs. DCIT. C-1. Ghaziabad, ITA No- 3800/Del/2017” 9. On careful perusal of the above submission and written submissions filed by the assessee on 13.12.2022 along with PB spread over 204 pages, first of all, I note that the ld CIT(A) has upheld the addition of Rs. 85 lakhs treating the same as share capital and share premium. From the copies of the documents submitted by the assessee in his paper book dated 03.11.2022, I note that the assessee has filed copies of documents related to unsecured loan from three entities at pages 92 to 191 of assessee’s paper book. From page 92 to 122 I further note that the assessee has received Rs. 25 lakhs on 29.02.2012 through RTGS from Joyful Tieup Pvt. Ltd., which was brought forward as opening balance as on 01.04.2012 for subsequent assessment years at page 92 also reveals that the assessee has paid interest after making TDS of Rs. 40,000/- @20% on total interest of Rs. 2 lakh. From copy of confirmation directly submitted to the assessee by the creditor Joyful Tie-up Pvt. Ltd vide dated 14.03.2017 it is clear that the creditor submitted all documentary evidence establishing its identity, capacity ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 4 and creditworthiness before the AO in response to notice issued u/s 133(6) of the Act issued by the AO. It is clear that the lender confirmation statement of accounts at the end of the year of Rs. 25 lakhs from copy of bank account of the lenders I further note that the cheque issued on 29.02.2012 there was no cash deposit before issuing the cheque to the assessee and balance was of Rs. 28,10,000/-. At remaining pages from 98 to 122 are copies of return of income, copy of audited books of account, balance sheet etc which were filed before the authorities below. 10. On careful consideration of these documents at pages 92 to 122, I observe that the assessee has successfully demonstrated the factum of identity, capacity and creditworthiness of the creditors who gave loan of Rs. 25 lakhs to the assessee. From page 104 it is clear that the lender/creditor had total share capital of Rs. 9,65,250/- along with reserve and surplus of Rs. 17,21,84,981/- and the loan given to the assessee has also been shows in the balance sheet page no 93 clearly shows that the assessee squared up the account by way of repayment of entire loan amount and interest due thereon was also paid to the lender after deduction of the TDS @20% . Therefore, there is no IOTA of doubt regarding this transaction which was rooted through banking channels the assessee has also paid interest thereon after deducting the TDS with the department. 11. Now I proceed to examined the documents available at 123 to 160 of assessee’s PB regarding creditor M/s. Khetan Tracon Pvt. Ltd amounting to Rs. 50 lakhs from page 123. I note that the assessee received said amount on 07.03.2012 through RTGS and there was some closing balance at the end of the financial year as on 11.03.2012. The copy of ledger of subsequent financial period available at page 124 reveals that the assessee had made payment of interest of Rs. 4 lakhs after deducting TDS of Rs. 80,000/- @10%. Page 125 and other documents available at subsequent pages clearly reveals with a ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 5 creditor company in response to notice u/s 133(6) of the Act submitted reply vide dated 15.03.2017 along with other relevant documentary evidence such PAN, ITR-V, statement of accounts and copy of bank accounts for the relevant period confirming the factum unsecured loan of Rs. 50 lakhs given to the assessee and receipt of interest @8% PA i.e. Rs. 4 lakhs after deduction of TDS thereon. Page 126 clearly reveals that at the time of issuing of cheque there was balance of Rs. 61 lakhs in the bank account of the lender and earlier to that there was no cash deposit to the bank account of the lender from which the assessee received unsecured loan through banking channel. Other documents i.e. copy ITR, auditor’s report and balance sheet filed at page 133 clearly reveals that this company has share capital of Rs. 4,03,47,600/- and reserve and surplus of Rs. 32,42,54,550/- as on 31.03.2012 which shows capacity and creditworthiness of the lender. 12. In view of above, I am inclined to hold that the assessee submitted all possible documentary evidence under his command and the lender also responded to the notice u/s 133(6) of the Act issued by the AO by submitting the confirmation and other relevant documentary evidence showing its identity, capacity and creditworthiness along with genuineness of the transaction therefore, the authorities below were not right in making addition in the hands of the assessee u/s 68 of the Act particularly when the assessee had also paid interest on the unsecured loan after deducting TDS @20% page 124 of paper book reveals that during subsequent assessment year 2012-13 (A.Y. 2013- 14) the assessee had squared up the account by repaying entire loan amount along with due interest after deducting TDS @ 20%. The AO issued notice u/s. 148 of the Act on 04.12.2015 after lapse of substantial time. 13. Now I further proceed to consider the validity of unsecured loan received by the assessee at Rs. 10 lakhs from M/s. Shivarpan Vanijaya Pvt. Ltd. The copies of the documents available at page 161 to 191 ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 6 clearly reveals that the ledger account of the lender and the books of account of the assessee reveals of the assessee has received Rs. 10 lakh through RTGS on 02.03.2012 which was brought forward as opening balance for subsequent FY 2012-13. The copy of ledger for subsequent FY 2012-13 available at page 162 reveals that the assessee had also paid interest @8% amounting to Rs. 80,000/- and TDS @ 20% was also deducted thereon and remaining of Rs. 64000/- was paid to the lender through cheque No. 058147. Other documentary evidences which was filed by the lender along with his confirmation and reply to the AO in his response to the notice u/s 132(6) of the Act clearly reveals that the assessee was consistently filing return of income and the unsecured loan was recorded in the books of account of the lender and the assessee has received amount of Rs. 10 lakhs on 02.03.2012 and prior to that there was balance of Rs. 10,19,960/- and there was no cash deposit to the bank account to the lender. Other documentary evidence particularly balance sheet of lender company available at page 172 of Paper Book reveals that there was share capital of Rs. 3,05,82,600/- and reserve and surplus of Rs. 42,74,69,170/- and the assessee is consistently filing return of income to the department. In such a situation the identity, capacity and creditworthiness of the lender and genuineness of the transaction which was rooted through banking channel cannot be doubted in any manner. From page 162 of assessee paper book I clearly observe that during subsequent AY 2012-13 the assessee squared up the account by repaying entire loan amount of Rs. 10 Lakh along with interest thereon amounting to Rs. 80,000/- after deducting TDS @20% and this fact again fortify the contention of assessee that the unsecured loan transaction was a genuine transaction. 14. It is pertinent to mention that the copies of applications of the lenders clearly reveals that amount of unsecured loan was converted submitted by the lender to the assessee share application money, ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 7 share premium during the FY 2013-14 relevant to AY 2014-15 as the application were vide at the fag end of FY 2012-13 pertaining to AY 2013-14, I have to adjudicate the issue of addition made by the AO and upheld by the ld CIT(A) for AY 2012-13 u/s 68 of the Act. Therefore, no further deliberations are required on the issue of conversion of unsecured loan into share application money during the subsequent assessment year. 15. On the basis of foregoing discussion I have no hesitation to hold that the assessee during the proceeding before the AO as well as before the ld CIT(A) successfully discharges its onus lend on his shoulders as per requirement of section 68 of the Act and submitted all documentary evidences under his command establishing the identity, capacity and creditworthiness of the lenders and genuineness of the transactions rooted through banking channels. It is also pertinent to mention that all the three lenders in response to notice issued u/s 133(6) of the Act responded to the AO and submitted written confirmation along with of relevant documentary evidences as noted above. 16. The ld AO did not controvert the fact and the same has also not been controverted by the ld Sr. DR during argument before me that the assessee has paid interest on the unsecured loan after deducting the TDS and entire loan amount has been repaid to the respective lenders/creditors during subsequent FY 2012-13 relevant to A.Y.2013- 14. At the cost of repetition, I reiterate that the squaring up of loan amount and payment interest thereon was done by the during immediately subsequent FY 2012-13 and the Assessing Officer issued notice u/s. 148 of the Act, on 04.12.2015 after lapse of substantial period therefore this action on the assessee cannot be held as afterthought or fabricated Therefore, identity, creditworthiness of the lenders/creditors and genuineness of the transactions cannot be doubted in any manner. Therefore, we hold that the AO was not correct ITA No. 2356/Del/2019 Tirupati Balaji Fiber Ltd Page | 8 in making addition u/s 68 of the Act and the ld CIT(A) was also not justified in upholding the same. Accordingly, sole grievance of the assessee i.e. ground no. 9 is allowed and the AO is directed to delete the addition. 17. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 09/06/2023. Sd/- (C. M. GARG) JUDICIAL MEMBER Dated: 09/06/2023 A K Keot/NV Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi