Ahuja And Anand Buildwell Private Limited, New Delhi V. DCIT Central Circle-1, Noida

ITA 349/DEL/2020

AI Insights

The case involves Ahuja and Anand Buildwell Private Ltd., which appealed against the order of the Commissioner of Income-Tax (Appeals)-IV, New Delhi, for the assessment year 2017-18. The primary issues in dispute were the addition of Rs.2,55,00,000 as unexplained cash credit under Section 68 of the Income-Tax Act, 1961, and the disallowance of interest paid on these loans. The Assessing Officer had initially treated these loans as non-genuine based on a search and seizure operation conducted on another group entity, leading to similar assessments across the group. However, the Tribunal, referencing a previous decision involving another group entity with identical circumstances and lenders, ruled in favor of the assessee, establishing the genuineness of the loans and the corresponding interest payments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300498 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-04-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 19-01-2020
• Other Referred Cases: Parmesh Construction Co. Ltd. Vs. DCIT \\u2013 ITA No.346/Del/2020 dated 16.02.2023
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Unexplained cash credit
• Section: 131; 68; 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘A’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND DR. BRR KUMAR, ACCOUNTANT MEMBER ITA No. 349/Del/2020 Assessment Year: 2017-18 AHUJA AND ANAND BUILDWELL PRIVATE LTD. Plot Nos. 3 & 4, 2 nd Floor, Savitri Bhawan, A-Block Market, Preet Vihar, Delhi PIN: 1100 92 Vs. DCIT, Circle-1, Noida PAN :AAGCA0327F (Appellant) (Respondent) ORDER PER SAKTIJIT DEY, JUDICIAL MEMBER: This is an appeal by the assessee against order dated 21.11.2019 of learned Commissioner of Income-Tax (Appeals)-IV, New Delhi pertaining to assessment year 2017-18. Assessee by Dr. Rakesh Gupta, Shri Somil Agarwal & Shri Saksham Agarwal, CA Department by Shri P. Parveen Sidharth, CIT-DR Date of hearing 19.04.2023 Date of pronouncement 27.04.2023 2 ITA No.349/Del./2020 2. The dispute in the present appeal is concerning addition made of Rs.2,55,00,000 under Section 68 of the Income-Tax Act,1961 and disallowance of interest paid of Rs.33,69,276. 3. Briefly, the facts relating to this issues are, the assessee is a resident corporate entity engaged in the business of real estate development. A search and seizure operation under Section 132(1) of the Income-Tax Act,1961 was carried out in case of Bhutani Group of Companies on 09.11.2016. The assessee being a group of entity, assessment proceedings were initiated against the assessee. 4. In course of assessment proceedings, the Assessing Officer noticed that assessee had availed unsecured loan of Rs.2,55,00,000 from four different lenders and had paid interest thereon. The details of which are as under: Party Address Amount received Interest debited M/s. Tradelink Trading Pvt. Ltd. (Formerly Ram Rahim Trading Pvt. Ltd.) 304-MJ Shopping Centre, Delhi Rs.1,25,00,000 12,48,006 Trendz Informatics Pvt. Ltd. C103, Khashra No.115, Panchsheel 1,00,00,000 15,74,385 3 ITA No.349/Del./2020 Vihar, Khirki New Delhi-17 Masterpiece Infocom Pvt. Ltd. S-561, Bhagwati Business Centra 122, School Block, Shakaepur 15,00,000 96,334 Bloom Texnet Pvt. Ltd. A85, Ist Floor, Office No.2, ST no. 15, Madhu Vihar, Delhi. 15,00,000 4,50,551 Total 2,55,00,000 33,69,276 5. Having noticed this fact, the Assessing Officer called upon the assessee to furnish evidences to prove the genuineness of the unsecured loans availed. Further, to independently verify the genuineness of such transaction, the Assessing Officer issued notices under Section 133(6) of the Act to the concerned parties. After verifying the details furnished by the assessee and available on record, the Assessing Officer ultimately concluded that the unsecured loans availed are not genuine. While coming to such conclusion, he also relied upon the field report submitted by the Inspector of Income-Tax, who was deputed by the Assessing Officer to inquire about the genuineness of the loan transaction. Thus, ultimately the Assessing Officer held that unsecured loan of Rs.2,55,00,000 in the nature of 4 ITA No.349/Del./2020 unexplained cash credit under Section 68 of the Act and added back to the income of the assessee. 6. Further, having treated the unsecured loan as unexplained cash credit, the Assessing Officer disallowed the interest paid thereon. Though, the assessee contested the aforesaid addition/disallowance before learned Commissioner (Appeals), however, the additions were sustained. 7. Before us, learned counsel appearing for the assessee submitted that while deciding identical issue in case of another group entity, the Tribunal has deleted similar additions made by the Assessing Officer by treating the unsecured loans from the very same entities as non- genuine. He submitted, since, the facts involved in both the cases are identical, Tribunal’s decisions in case of group concerns would squarely apply. In support of such contention, he relied upon a decision of the Tribunal in case of Parmesh Construction Co. Ltd. Vs. DCIT – ITA No.346/Del/2020 dated 16.02.2023. 8. Strongly relying upon the observations of the Assessing Officer and learned Commissioner (Appeals), learned Departmental Representative submitted, the assessee failed to furnish any evidence 5 ITA No.349/Del./2020 to conclusively prove that the unsecured loans availed are genuine. Further, he submitted, the decision of the Tribunal in case of group concern cannot be relied upon as facts are different. 9. We have considered rival submissions and perused material on record. The facts on record reveal that based on search and seizure operation conducted in case of Bhutani Group of Companies, assessment proceedings were initiated in case of various group entities including the assessee. 10. In course of assessment proceedings, it was found that the group entities have availed unsecured loan from various other entities. While concluding assessment in case of group entities, the unsecured loans were treated as unexplained cash credit. 11. From the facts on record, it is observed that the assessee as well as other group entities have availed loan from the same parties. In case of M/s. Parmesh Construction (P) Ltd. Vs. DCIT (supra), the co- ordinate Bench while examining the genuineness of unsecured loans availed from M/s. Tradelink Trading (P) Ltd., Trendz Informatics Pvt. Ltd., Masterpiece Infocom Pvt. Ltd. and Bloom Texnet Pvt.Ltd. in the same assessment year has held as under: 6 ITA No.349/Del./2020 “9. We have heard the parties, perused the material available on record and gave our thoughtful consideration. The issue involved in the present appeal is regarding the addition on account of cash credits & interest claimed thereon. Whether a particular credit appearing in the books of an assessee is genuine or not is a question of fact to be decided on the basis of material brought on record from both the sides. It is seen that the assessee company had claimed to have raised unsecured loan aggregating to Rs. 11,23,00,000/- from eight private limited companies, the details of which have been given by the Assessing Officer in the assessment order. It is seen that to establish the identity and capacity of the lender companies and genuineness of the loans transactions, assessee had filed documentary evidences such as confirmation of accounts from such lender companies confirming the loans given by them to the assessee company. The loans given by such lenders companies to the assessee were given through banking channel as is evident from the copies of bank statements of the lenders companies filed by the assessee. It is also seen that the lender companies are assessed to income tax which is evident from the PAN details and acknowledgment of their income tax returns placed on record. It is also noticed by us that the lenders companies’ audited Financial Statements were also submitted along with Memorandum of Association to show the volume of operations of the lender companies. It is also seen that the unsecured loans raised by the assessee company were not interest free but were bearing interest. It is also noticed by us that loan of Rs. 45,00,000/- raised from M/s Bloom Texent Pvt. Ltd. and Rs.50,00,000/- raised from M/s Direct Trading Co. P. Ltd. were repaid by the assessee. It was also noticed by us that loan raised from M/s Tradelink Trading P. Ltd. was also repaid to the extent of Rs. 28,00,000/-. It is also evident from the reading of the assessment order that the summons issued u/s 131 were issued but there is no finding that such summon were received back un- served which means that the summon issued stood served. It is also seen by us that AO himself has mentioned in para 8.2 of the assessment order that during post search enquiry summons were 7 ITA No.349/Del./2020 issued to the lender companies and in compliance to the summons, part compliance was made. Therefore, it has to be seen and decided as to whether the ingredients section 68 i.e. the identity and capacity of the creditors stood proved and as to whether genuineness of the loan transactions stood established. 10. Thus, it is found that all the eight lender companies were private limited companies incorporated under the provisions of the Companies Act, and whose books of accounts were audited. The loans transactions were made by these lenders companies through their bank accounts out of the funds available at the time of giving such loans. Such lender companies were borne on RoC records and income tax records. Such loan transactions have been confirmed by these lender companies. Therefore, as a matter of fact the identity and capacity and genuineness of the loan transaction were established. 11. The first adverse observation of the Assessing Officer that the lender companies though have advanced huge amounts but no interest income has been shown. We have referred to Page 26 and 29 of the paper book, which is profit and loss account of one of the lender companies M/s Ablaze Tour and Travels Pvt. Ltd. which shows interest income of Rs. 16,87,697/-Therefore, the observation of the Assessing Officer that no interest income has been shown by the lender company is not found correct. Similarly, we have seen the profit & loss account of another lender company M/s Accurate Buildwell P. Ltd. and it is found from Page 37 and page 40 of the paper book that interest income has been shown by such company at Rs. 12,45,948/-. Similarly, we have seen profit & loss account of other lender companies also enclosed in the paper book at Page 47, 50, in case of M/s Bloom Texent P. Ltd. showing interest income of Rs. 30,28,371/-. Similarly, we have seen profit & loss account of other lender companies also enclosed in the paper book and we find that such lender companies have earned interest of substantial amount which are being shown as income in their respective profit & loss account. 8 ITA No.349/Del./2020 12. Similarly, we have gone through the financial statements of the lender companies to which our attention was drawn and it is seen that there are significant revenue from operations and there are significant amount of interest income. As to the said observation that amount was received by the lender company and immediately it was given to the assessee company, we do 10 ITA. 346/Del/2020 Parmesh Construction Co. not find any substance in this alleged adverse features in this approach of an entity as to the optimization of the financial resources. It is quite natural that if the lender company wanted to lend money, it would make necessary arrangements of funds from available sources at its command and would ensure that its funds do not remain idle. Therefore, nothing adverse can be read into this phenomenon. Regarding non-reply of notice u/s 133(6) or nonreply of the summon issued u/s 131, one thing which appears from the plain reading of the assessment order is that notices u/s 131 were served. That being so and if compliance has not been made by such persons, then as per the judicial decision of Hon’ble Allahabad High Court in the case of Nathu Ram Premchandvs. Vs. CIT 49 ITR 561, blame cannot be ascribed to the assessee. The relevant portion of the said judgment of the Allahabad High Court are as under:- “It appears that Banarasidas was examined not in the assessment proceedings giving rise to this reference but in those relating to the assessment of Banarasidas. Section 37(1) of the Act confers on the Income-tax Officer, the Appellate Assistant Commissioner, the Commissioner and the Appellate Tribunal the powers vested in a court under the Code of Civil Procedure when trying a suit in respect of the following matters, viz. : "(a) Enforcing the attendance of any person including any officer of a banking company and examining him on oath." The provisions of Order XVI of the Civil Procedure Code deal with the examination and attendance of witnesses. Rule 1 of Order XVI provides that by making an application any party to a suit may summon in court a witness whose attendance is 9 ITA No.349/Del./2020 required either to give evidence or to produce documents. In the present case the assessee was given dasti summons for the production of Banarasidas but his case was that Banarasidas refused to accept the same. In a situation like this, the provisions of Order XVI, rule 10, are attracted, which read as follows : "10. (1) Where a person to whom a summons has been issued either to attend, to give evidence or to produce a document fails to attend or to produce the document in compliance with such summons, the court shall, if the certificate of the serving officer has not been verified by affidavit, and may, if it has been so verified, examine the serving officer on oath, or cause him to be so examined by another court, touching the service or non-service of the summons. (2) Where the court sees reason to believe that such evidence or production is material, and that such person has, without lawful excuse, failed to attend or to produce the document in compliance with such summons or has intentionally avoided service, it may issue a proclamation requiring him to attend to give evidence or to produce the document at a time and place to be named to give evidence or to produce the document at a time and place to be named therein; and a copy of such proclamation shall be affixed on the outer door or other conspicuous part of the house in which he ordinarily resides. (3) In lieu of or at the time of issuing such proclamation, or at any time afterwards, the court may, in its discretion, issue a warrant, either with or without bail, for the arrest of such person, and may make an order for the attachment of his property to such amount as it thinks fit, not exceeding the amount of the costs of attachment and of any fine which may be imposed under rule 12 : Provided that no Court of Small Causes shall make an order for the attachment of immovable property." 10 ITA No.349/Del./2020 Admittedly, no such steps as are provided for by this statutory provision for the appearance of the witnesses were taken by the Income-tax Officer for the appearance of Banarasidas. We are of the opinion that under these circumstances neither the Income-tax Officer nor the Income-tax Appellate Commissioner nor the Tribunal were justified in fastening the blame at the door of the assessee and disbelieving his version that the amount of Rs. 10,000 entered in his account books was the deposit made by Banarasidas on the ground that the former has failed to produce the latter. The assessee took all the steps that lay in his power to secure the presence of Banarasidas before the Income-tax Officer. In theses circumstances it appears to us that the Tribunal wrongly took into consideration the circumstances that Banarasidas had not been produced. On the material on the record there is noting to refute the allegation of the appellant that this sum of Rs. 10,000 is the deposit of Banarasidas with the assessee firm. The Tribunal had before it no legal material on which it could come to a contrary conclusion.” 13. In so far as Inspector Report, there is nothing in the assessment order which says that such reports were made available to the assessee. This has also been pleaded by the assessee that such reports surfaced for the first time in the assessment order. In view of such facts, no adverse inference can be drawn against the assessee and for the said proposition we place reliance on the decision of Hon’ble Supreme Court decision in the Kishnichand Chellaram. CIT 125 ITR 713. 14. As to the observations of the authorities below that the evidences do not inspire confident regarding the credit capacity of the creditors, it is seen that total net-worth of the lender namely M/s Ablaze Tour and Travels Pvt. Ltd. 11 ITA No.349/Del./2020 was to the tune of Rs. 68.99 Crores, which is far more than the amount advanced by the said company. Similarly, net- worth of another lender company namely M/s ICE Globe Promoters P. Ltd. was Rs. 66.40 Crores and that of yet another lender company namely M/s Master Piece Infocom P. Ltd. was to the tune of Rs. 12.30 Crores. These are evident from the copy of Financial Statements of these companies available at page 25-30, 90-95, 102- 107 of the paper book filed before us to which our attention was drawn. Even in respect of other companies, from the perusal of the financial statements, it is clear that their net- worth was more than the amount advanced by the lender companies to the assessee and there are significant amount of total revenue. This finding of fact is being recorded by us on the basis of Financial Statements of such lender companies filed before us to which our attention was drawn with the help of various pages of the paper book. We also note that there is no such requirement of law that a person / entity can make investment only if such person / entity have fixed assets. Observation of the Assessing Officer that the address given by the lender companies were only postal address and such premises were occupied by Chartered Accountant is also without any basis, material or evidence. Therefore, having totality facts and circumstance of the case, it is found as a matter of fact that the identity and capacity of the lender companies and genuineness of loan stood established in the present case. It is also seen that despite search action having been taken against the appellant company, there is no material or evidence found in search or otherwise which could have remotely suggested that loans in question were not the genuine loans. Fact of the matter also is that these loans were partly repaid and these loans were on interest which also weigh in favour that the loans in questions were genuine loans raised by the appellant. The entire case made by the A.O. and CIT(A) was based on suspicion, surmises and conjectures. It is settled law that suspicion howsoever gave cannot partake the character of evidence. 12 ITA No.349/Del./2020 A.O. and CIT(A) have relied upon case various case laws whereas on the other hand, assessee has also relied upon various case laws which are mentioned in the case law compilation. As noted by us elsewhere also, the question about the genuineness of loans is a question of fact which has been decided based on appreciation of the evidence brought before us by both the parties and therefore, we can say that after taking into account the case laws relied upon by the both the parties to which we have adverted to, we hold that the loans for an aggregate amount of Rs. 11.23 crores are not unexplained income of the Assessee company and therefore, the interest of Rs. 1,17,10,211/- in respect of these loans also could not been disallowed. 15. It is found that the Ld. AO had made the general observations in para 8 and 8.2 of the assessment order that different company of the Group was involved in real estate development and are engaged in tax evasion on the construction and sale of the flats and the company is engaged in taking unaccounted money in cash to suppress the actual receipt of the same consideration of the flats. This observation made in the assessment order first of all is not directed against the assessee company. In any case, such observation is without any basis, material or evidence and is purely bald and unsubstantiated. No addition on this score also could be found by us in the assessment order. No substantiation has been done by AO as to its observation made in para 8 & 8.2 of the assessment order. 16. Therefore, in view of the above made discussion, we allow the Ground No. 1 and 2 of the Assessee by deleting the addition made under section 68 of the Act and also by delete the disallowance of interest payment of Rs. 1,17,10,211/-.” 12. From the aforesaid observations of the co-ordinate Bench, it is observed, the assessee not only was able to establish the identity of the 13 ITA No.349/Del./2020 creditors but genuineness of the transaction and creditworthiness of the creditors were also established. In fact, in case of the other group entity viz. M/s. Parmesh Construction Co. Ltd. (supra), the Tribunal has duly examined in detail the facts relating to identical loan transaction with the very same creditors and accepted the unsecured loan to be genuine. Though, before us, learned Departmental Representative has made an attempt to distinguish the aforesaid decision of the Tribunal citing the reason of factual difference, however, we are not convinced. On a comparative analysis of the assessment orders passed in case of M/s. Parmesh Construction Company (P) Ltd. and the present assessee, we find the assessment order passed in case of assessee is virtually a replica of the assessment order passed in case of M/s. Parmesh Construction Co. (P) Ltd. Therefore, the contention of learned Departmental Representative that factually both the cases stand on different footing is unacceptable. When, in case of another group concern, the Tribunal has accepted the loan transactions with the very same lenders in the very same assessment year to be genuine, there is no reason to take a different view on the issue in the present case, when facts are identical. 14 ITA No.349/Del./2020 13. In view of the aforesaid, we hold that the addition made under Section 68 of the Income-Tax Act,1961 is unsustainable. Accordingly, we delete it. Once, the unsecured loan is accepted as genuine, interest paid thereon cannot be disallowed. Accordingly, we delete the interest disallowance as well. 14. In the result, the appeal is allowed. Order pronounced in the open court on 27 t April, 2023. Sd/- sd/- (DR. BRR KUMAR) ACCOUNTANT MEMBER (SAKTIJIT DEY ) JUDICIAL MEMBER Dated: 27 th April, 2023. Mohan Lal Copy forwarded to: 1. Applicant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi