Aviral Industries Limited, Kanpur V. Income Tax Officer -1(1), Indore

ITA 419/Ind/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8976 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 06-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Principle of natural justice; Question of law; Accommodation entries; Onus to prove; Set aside
• Section: 68; 143(3); 142(1); 143(2); 264; 139(1); 64; 13; 119; 22

Judgement Text

आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING ITA No.419/Ind/2018 Assessment Year: 2014-15 Aviral Industries ltd. Kanpur PAN No.AAJCA9165G : Appellant V/s ITO-1(1) Indore : Respondent Appellant by Shri Pankaj Shah, AR Respondent by Shri P.K. Mitra, CIT-DR Date of Hearing 23.11.2021 Date of Pronouncement 11.02.2022 O R D E R PER MANISH BORAD, A.M.: The above captioned appeal filed at the instance of the Assessee are directed against the order of Ld. Commissioner of Income Tax(Exemption) (in short ‘Ld. CIT]-1 Indore dated 13.02.2018 which is arising out of the order u/s 143(3) of the Aviral Industries ITA No.419/Ind/2018 2 Income Tax Act 1961(In short the ‘Act’) dated 29.12.2016 by ITO- 1(1), Indore. The Assessee has raised following grounds of appeal in: 1. The CIT(A) has erred in law and on the facts in rejecting the ground related to validity of notice under section 143(2) dated 18.09.2015, by holding that the appellant during the course of assessment proceedings has not objects in this regard. So therefore, the appeal on this ground is dismissed. 2. while deciding the issue raised by the appellant, e II CIT to appreciate and missed to note that a)notice dated 18.09.2015 purported to have been issued by the Assessing Officer under section 143(2), as referred to in the assessment order also, was not based on the opinion on requisite issue, as was, required ~C? be mandatorily expressed by him (the Assessing Officer himself; .. b)to the contrary the notice referred to in the assessment order had been issued on the basis of selection of case through Computer Assisted Scrutiny Scheme (CASS); c)in the absence of opinion expressed by the Assessing Officer before issuing the notice [captioned as notice under section 143(2)] it tanamounted to 'non issuance of notice'; and d)such a non-issuance could not have gone to save the proceedings, even if the assessee had participated, therein without raising any objection to that effect 3. the authorities below have erred in law and on facts in making/ sustaining an addition for sums aggregating Rs.8,52,09,9'15/ - as appearing in the accounts of the constituents of the appellant company, invoking section 68 of the Act; 4. the sums in question had been received from six parties (who were the constituents of the appellant) in the course of their business dealing with the appellant and such sums could not have been treated as 'cash credits' simplicitor under section 68 of the Act. 5. otherwise also, looking to the overall particulars of such accounts as hereunder:- (Amount in Rs.) ASSESSMENT YEAR 2014-15 Sr. Name of the Party Credits Debits on Closing Aviral Industries ITA No.419/Ind/2018 3 during the account of year sale of shares 1 Adinath Shares & Commodities 2,29,80,000 84,50,000 1,45,30,000 (P) Ltd. 2. Bansal Suppliers (P) Ltd 5,23,95,000 2,03,35,000 3,20,60,000 3 Jitendra Kumar Agnihotri 5,00,000 5,00,000 4 Smt. Kavita Agarwal 5,00,000 5,00,000 5 Success Vyapar Ltd.' 17,12,000 17,12,000 -6. Vasundhara Capital & 71,22,975 1,62,000 69,60,975 Securities Ltd. TOTAL 8,52,09,975 2,89,47,000 5,62,62,975 The appellant version of non-assessability under section 68 was liable to be accepted. 6. The addition for sums aggregating Rs.8,52,09,975/-had been made, without appreciating the facts of the case and law applicable thereto, in right perspective. 7. In any case the additions so made and sustained by the authorities below is much too high and excessive. 8. the order appealed against is contrary to the facts, law and principles of natural justice. 2. Brief facts of the case ad culled out from the records are that the assessee is a limited company incorporated on 02.04.1997 and is engaged in the business of share trading. Return of income for A.Y. 2014-15 e-filed on 30.11.2014 declaring income of Rs. 1,05,580/-. Case selected for scrutiny through CASS followed by serving of notices u/s 143(2) and 142(1) of the Act. During the assessment proceedings ld. Assessing Officer (in short Ld. AO) firstly observed that the assessee company is mainly dealing in purchase and sale of equity shares of M/s Sulabh Engineers & Services Ltd. and further alleged that the assessee is engaged in providing accommodation entries in the forum of bogus capital gain/capital loss. Thereafter Ld. AO examined the unsecured loans which were taken during the year for the purpose of trading in equity shares. Aviral Industries ITA No.419/Ind/2018 4 The Appellant was required to submit details which would prove that the credits taken by the Appellant were genuine. In other words, the Appellant was required to submit the following with regard to credits standing in his books: • The identity of the creditors • The creditworthiness of the creditors • The genuineness of transaction carried out. 3. In response, the Appellant submitted the following to the learned AO: • Name and complete address of the lenders/creditors, along with PAN numbers. • Audited financials of company lenders/creditors. • Bank statement of individual lenders showing loan amount given to the Appellant. • Confirmation from lenders/creditors, which shows that the credits were taken from the creditors, and the same was taken during the relevant assessment year. The same was in consonance with the audited financials of the Appellant which were submitted along with the income tax return filed for the relevant year. 4. Ld. AO was not satisfied with the submissions and came to conclusion that the assessee failed to explain the cash credit of Rs. 8,52,09,975/- received during the year from following:- i.Adinath share & commodities P. Ltd. Rs.2,29,80,000/- ii. Bansal Suppliers P. Ltd. Rs. 5,23,95,000/- iii. Jitendra Kumar Agnihotri Rs.5,00,000/- iv. Samt. Kavita Agarwal Rs.5,00,000/- v. Success Vyapar Ltd. Rs.17,12,000/- vi. Vasundhara Capital & Securities ltd. Rs.71,22,975/- Total Rs.8,52,09,975/- 5. Accordingly Ld. AO applied the provision of section 68 of the Act are application and accordingly made addition for unexplained Aviral Industries ITA No.419/Ind/2018 5 cash credit of Rs.8,52,09,975/- assessing the income at Rs.8,5315,555/-. 6. Aggrieved assessee preferred an appeal before Ld. CIT(A) challenging the legality of the assessment order alleging that no valid notice issued u/s 143(2) of the Act and also challenged the addition on merits. Ld. CIT(A) dismissed the legal ground raised by the assessee observing that as per the inspector report there was no office of the appellant at Kanpur due to which PAN of the assessee could not be migrated and thereafter assessee’s authorized representative attended the assessment proceedings and therefore Ld. AO is having correct jurisdiction to pass the assessment order. Further as regards merits of the Ld. CIT(A) confirmed the view taken by the Ld. AO stating that most of the alleged cash creditors are merely paper company not having sufficient creditworthiness to give unsecured loan to the assessee. Ld. CIT(A) also referred to various judicial pronouncements which mainly related to the unexplained share application money/share capital and confirmed the finding of Ld. AO thereby dismissing the assessee’s appeals. 7. Aggrieved assessee is now in appeal before this Tribunal. 8. As far as the legal issue raised in ground no. 1 & 2 Ld. counsel for the assessee referred to the written submission filed before Ld. CIT(A). As regards merits Ld. counsel for the assessee submitted that the appellant company had in the course of business received a sum of Rs. 7,63,75,000/- as unsecured loans, during the year details of which are as follows: Aviral Industries ITA No.419/Ind/2018 6 S No. Borrowings made from Amount 1. Bansal Suppliers (P) Ltd5,23,95,000 2. Adinath Shares & Commodities (P) Ltd. 2,29,80,000 3. Jitendra Kumar Agnihotri5,00,000 4. Smt. Kavita Agarwal 5,00,000 Total 7,63,75,000 Table - 1 9. Further, there was an increase in creditors which has been summarized as follows: S No. Creditor Amount 1. Success Vyapar Ltd. 17,12,000 2. Vasundhara Capital & Securities Ltd. 71,22,975 Total 88,34,975 Table - 2 10. The Appellant maintains proper documentation of all transactions, and all of the aforesaid items, amounting to an aggregate sum of Rs. 8,52,09,975 /-, have been duly recorded in its regular books of account. Annexed to this submission is a table showing a complete documentation of all the transactions between the Appellant and its lenders/creditors for the assessment year in question. The table provides complete clarity regarding the flow of funds from the lenders/creditors to the Appellant and vice-versa. 11. Furthermore in the instant case, the addition has been made by the AO by invoking the provisions of section 68 of the Act which Aviral Industries ITA No.419/Ind/2018 7 automatically proves that credit entries in respect of such receipts were duly made by the appellant in its regular books of account. 12. The appellant company had furnished its original return of income under Section 139(1) of the Income-Tax Act, 1961 on 30.11.2014. Being a company, the Appellant is also obligated to file its financials in a prescribed form, hence the facts as regard to the receipt of loan amount and as regard the increase in creditors was clearly discernible from the returns it filed in compliance with requirements of various statutes. 13. Further, during the course of the relevant assessment year, parts of the above credits were reduced on account of repayment by the Appellant. The following table summarizes the re-payment of loan and payment made to creditors: Party Credits during AY 2014-15 Balance at the end of AY 2014-15 Balance at the end of AY 2016-17 Bansal Suppliers 5,23,95,000 3,20,60,000 2,95,60,000 Adinath Shares 2,29,80,000 1,45,30,000 Nil Vasundhara Capital 71,22,975 69,60,975 Nil Success Vyapar 17,12,000 17,12,000 Nil Jeetendra kr Agnihotri 5,00,000 5,00,000 Nil Kavita Agarwal 5,00,000 5,00,000 Nil 85209975 56262975 29560000 Aviral Industries ITA No.419/Ind/2018 8 14. It is evident based on above table that not only were all credits properly documented, but credits in the books of the Appellant were discharged in a timely manner. The fact that the Appellant has in a timely and systematic fashion discharged its liabilities proves the authenticity of the Appellant's claim without an iota of a doubt. 15. Ld. counsel for the assessee also referred to following documents filed in the paper book dated 27.09.2021 containing 139 pages: Sr. No. Particulars Page 1 Audited Financial of M/s Aviral Industries 1 2 Memorandum of Association of M/s Aviral Industries 11 3 Bansal Suppliers Pvt. Ltd. Confirmation of accounts Bank statements Audited financials ITR Memorandum of association and Article of Association 23 24 30 45 46 4. Adinath Shares and Commodities Pvt. Ltd Confirmation of accounts Aviral Industreis Ltd. Ledger account in books of Adinath Shares Bank statements Audited Financials ITR 65 66 68 71 90 5 Success Vyapar Ltd. Confirmation of account Aviral Industries Ltd. ledger account in books of success Vyapar Ltd. Audited Financial ITR 91 92 93 110 6 Vasundhara Capital and Securities ltd. Aviral Industries ITA No.419/Ind/2018 9 Confirmation of accounts Audited of accounts Audited financials ITR 111 113 134 7 Kavita Agrawal Bank statement ITR 135 135 8 Jeetendra Kumar Agnihotri Bank Statements ITR 137 139 16. Further ld. counsel for the assessee referred to various judgments mentioned in the assessee’s submission before the ld. CIT(A) and contended that the assessee has explained all the three limbs of section 68 of the Act so as to prove the identity and creditworthiness of the cash creditors and the genuineness of the transaction which were carried out in the normal course of business of share trading for which funds were required and genuineness is further approved that the alleged cash loans have mostly being repaid during the year of receiving the alleged loans and therefore there cannot be any intention of the assesse to convert its unaccounted income in the form of unsecured loan. 17. Per contra, Ld. DR vehemently argued and heavily relied on the detailed finding of Ld. CIT(A) as well as observation of the Ld. AO. 18. We have heard rival contentions and perused the records placed before us and carefully gone through decision referred by Ld. counsel for the assessee. As far as ground no. 1 & 2 raised by the assessee are concerned challenging the validity of notice u/s 143(2) of the Act, we fail to find any merit in the contention made by the Ld. counsel for the assessee, since the appellant Aviral Industries ITA No.419/Ind/2018 10 acknowledged the receipt of notice u/s 143(2) of the Act and requested to transfer its case to Kanpur and for doing the same the permanent account no. needs to migrated from the present Ld. AO(Indore) to the Ld. AO at Kanpur. On receipt of the request ITO,6(1) Kanpur deputed Inspector to verify the registered office of the company at which the assessee required for transfer but as per Inspector’s report no office of the appellant was found at the given address due to which no objection certificate could not be send and PAN could not be migrated. Thereafter the assessee through its legal representative appeared before Ld. AO from time to time filing written submissions till the conclusion of the assessment proceedings. Under these given fact in our view assessee fails to get any relief on the legal ground as proper and valid notice u/s 143(2) of the Act served to the assessee and assessment proceedings u/s 143(3) of the Act carried out are legal and valid. In the result, ground no.1 & 2 of the assessees raising legal issue stands dismissed. 19. As far as remaining ground no.3 to 7 are concerned which are on merits of the case we find that the issue relates to addition for unexplained cash credit u/s 68 of the Act received from following parties:- i.Adinath share & commodities P. Ltd. Rs.2,29,80,000/- ii. Bansal Suppliers P. Ltd. Rs. 5,23,95,000/- iii. Jitendra Kumar Agnihotri Rs.5,00,000/- iv. Samt. Kavita Agarwal Rs.5,00,000/- v. Success Vyapar Ltd. Rs.17,12,000/- vi. Vasundhara Capital & Securities ltd. Rs.71,22,975/- Total Rs.8,52,09,975/- Aviral Industries ITA No.419/Ind/2018 11 20. To examine the issue raised in the grounds we will first like the provisions of section 68 of the Act which read as follows: Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10. 21. On a plain reading of the provisions of section 68 of the Act, it becomes abundantly clear that the provisions of the section can be put into operation only if either an assessee offers no explanation about the nature and source of any credit entry found credited in the books of the assessee maintained for any previous year or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. Admittedly, section 68 places a burden of proof on the assessee to explain the nature and the source of any credit found in the books but at the same time it has to kept in the mind that the burden casted upon the assessee is only an initial burden. It has consistently been laid down that when an assessee claims that he had borrowed money from a third party the Aviral Industries ITA No.419/Ind/2018 12 initial onus lies on the assessee to establish (a) the identity of the third party; (b) the ability of the third party to advance money; and (c) prima-facie that the loan is genuine one. If the assessee establishes the aforesaid three pre-conditions, the burden gets shifted to the Department and then it would be for the Department to disprove the same. [CIT vs. Baishnab Charan Mohanti (1995) 212 ITR 199 (Ori)]. In the instant case, the nature of impugned credits are that of loans taken from certain parties and increase in creditors as shown in its books of account. As per the settled law, the appellant company was required to establish identity and creditworthiness of the lenders and creditors and the genuineness of the transactions. 22. During the relevant previous year, the appellant company took certain sums of money as loan amounting to Rs 7,63,75,000/- from various companies and individuals as per the details given supra (table-1). Apart from this, there has been an increase in creditors to the tune of Rs. 88,34,975/- as per details given supra (table-2). The appellant company furnished the following documents for establishing the identity of the lenders and creditors: a) PAN numbers issued to the lenders and creditors by the Income-Tax Department b) Copies of Bank Account statements of all the lenders and creditors c) Copies of acknowledgements of Returns of Income filed by the lenders and creditors with their concerning Assessing Officers along with audited financial statement Aviral Industries ITA No.419/Ind/2018 13 d) Copy of Memorandum of Association of the largest lender companies 23.In the light of the above stated documentary evidences, there does not remain any doubt as regard the existence of the lenders and creditors. As regards the creditor and lender companies, it is submitted that under the provisions of the Companies Act, 1956, for bringing into existence, the promoters of a proposed company are required to comply with certain statutory requirements as contained under Part II of the Act. Only upon completion of certain statutory requirements, the Registrar of Companies issues a certificate of incorporation to the company and such certificate of incorporation, granted by the Registrar of Companies, becomes the conclusive evidence of the existence of the company. 24. The allotment of Permanent Account Number by the Income- Tax Department further proves the existence of lender and creditor companies, as also the existence of lender individuals. The Returns of Income furnished by the lender and creditor companies and lender individuals further speak in volume for the very existence of alleged cash creditor. It is an undisputed fact that any entity, whether having physical existence or not, can have its accounts opened with any bank only after satisfying with the bank regarding its physical and/or legal existence by furnishing the necessary documents prescribed by the Reserve Bank of India on this behalf. The same holds true for the individual lenders, Mr. Jeetendra Agnihotri and Ms. Kavita Agarwal. It is submitted that the Appellant has duly submitted the lender’s PAN number and complete postal address, which proves the identity of the lender without doubt. Further the genuineness and veracity of the Aviral Industries ITA No.419/Ind/2018 14 documentary evidences furnished by the appellant company before the AO/CIT(A) have not been doubted at any stage by any of the authorities. In view of the aforementioned documentary evidences appellant has been able to establish the statutory identity of the alleged cash creditor beyond all doubts. 25. In the following judicial pronouncements, it has been held that once the permanent account number of the lender/creditor is provided and the transaction has taken place through banking channel, the identity of the lender/creditor gets established: a) CIT vs. Rock fort Metal & Mineral 198 Taxman 497 (Del.) b) CIT vs. Winstral Petrochemicals Pvt. Ltd. 330 ITR 603 (Del.) c) CIT vs. Oasis Hospitalities Pvt. Ltd. 333 ITR 119 (Del.) d) CIT vs. Gangour Investment Ltd. 335 ITR 359 (Del.) e) CIT vs. Tulip Finance Ltd. 015 DTR 185 (Del.) 26. ld. AO as well as the CIT(A) has leveled a charge against the appellant that the lender/creditor companies are merely paper companies and these companies do not have any physical existence. To rebut such finding of the authorities below. It is submitted by Ld. counsel for the assessee that during the course of the assessment proceedings, the Appellant had submitted the bank account statements of its lenders and creditors, being companies registered under the Companies Act, 1956 in order to proves the existence of the same as before opening any bank account it is compulsorily required to ensure about the existence and identity of its customers. We find force in the contention of Ld. counsel for the assessee the financials of the companies, duly audited by statutory auditors, again proves the physical and statutory existence of the Aviral Industries ITA No.419/Ind/2018 15 lender/creditor companies. Even a cursory reading of the audited financials will divulge particulars such as the directors of the company. The record of every director in an Indian company is easily available by a simple Google search, and details such as his DIN (Director Identification Number) and the companies he is director in are available for any interested party’s perusal. It is a well-known fact that a person cannot become director in a company without a DIN and at the time of applying for DIN, complete particulars like PAN number and Aadhar number also need to be furnished. This proves the identity of the directors of the company without any doubt. It is a fact that a company and the directors of a company have separate legal existence; hence the identity of the former has already been proved separately without a doubt and the identity of the latter can be easily proved if required. So, not just the statutory and physical existence of the lender/creditor companies, but the identity of the directors of the companies is also unquestionable. 27. Furthermore, the Ld. AO has cast aspersions on the authenticity of the lender and creditor companies due to the fact that the companies are not listed on any recognized stock exchange. We observe that this is an irrational parameter which the AO has chosen to verify the identity and existence of the lender/creditor company. Of all the registered companies operating in India, only a small proportion are listed on a recognized stock exchange. The AO has erroneously assumed that an unlisted company is not as authentic as a listed one. This is an absurd assumption and cannot be a ground for doubting the identity and Aviral Industries ITA No.419/Ind/2018 16 existence of a company. Since the appellant has provided complete address in respect of the lenders and creditors, the PAN numbers of all the lenders and creditors, and the audited financials of the lender/creditor companies, all these documents are sufficient to prove the identity and existence of the lenders and creditors. 28. In the instant case, the Appellant company had taken the loan amount from the companies which are duly registered under the Companies Act, 1956. The Appellant had accepted the entire loan amount through account payee cheques/drafts/RTGS or other banking channels. Further, the loan transactions are getting reflected in the bank accounts of both the parties to the transactions. With regard to increase in creditors, the Appellant has already submitted audited financials which prove that the creditor companies have engaged in trade in regular with assessee during the course of business, which has led to increase in the creditors. It is submitted that not a single penny was taken by the appellant company in form of cash towards the loan amount and the entire credits were duly remitted to the bank accounts of the appellant, while increase in creditors is the result of commercial transaction and in such circumstances, there cannot remain any room for casting any doubt on the genuineness of the transactions. 29. In the audited financial statements of such companies, the investment by them in the appellant / group companies, is getting clearly reflected. Such fact also establishes the genuineness of the transaction. With regard to the individual lenders, we have submitted the bank account statements in which the concerned Aviral Industries ITA No.419/Ind/2018 17 transactions have been recorded. This again establishes the genuineness of the transaction. During the course of the assessment proceedings, not even a single evidence was found from which it could have been established that the credits in the books of the appellant are not genuine or the funds in form of loan was infused by the appellant itself. It seems that the entire theory of entry taking is merely guess work, conjectures and surmises of the authorities without having any cogent material. For such proposition, reliance is placed on the decision of the Hon’ble Delhi High Court in the case of Value Capital Services Pvt. Ltd. as reported in 221 CTR 511 (Del.). During the course of the assessment proceedings, the AO may have investigated the case, but nowhere it has been brought on record that any of the lenders or creditors denied the genuineness of the transaction as claimed by the appellant. It is submitted that not even in a single case there was any denial of the transaction by any lender or creditor. During the course of the assessment proceedings, the appellant had produced abundant documentary evidences before the assessing officer for establishing the genuineness of the transaction but the AO could not find any single defect or discrepancy in the documentary evidences so produced by the appellant/ group companies. Such fact clearly proves the genuineness of the transactions beyond all doubts. 30. As regard Creditworthiness of the lenders and creditors we observe that as per the balance-sheet of the alleged companies, the net worth and creditworthiness of the share applicant companies can be adjudged, but in many of the cases, even the genuineness of Aviral Industries ITA No.419/Ind/2018 18 the transactions can also be verified as in the financial statements of such companies making of investment by them in the appellant/group companies is clearly getting reflected. All the lenders and creditors are regularly assessed to income-tax and such lenders and creditors are having their independent sources of income. Such fact is evident from the copies of the income-tax returns of the alleged cash creditors filed in the paper book. All the lenders and creditors companies were having sufficient funds in their respective bank accounts before issuance of cheques towards unsecured loan in favour of the appellant/group companies, as is evident from the copies of the bank statements filed in the paper book. Thus, the Appellant has succeeded in showing the creditworthiness of the lenders and creditors by submitting the audited financials and bank account statements of these parties. 31. To prove the genuineness of Appellant's claims, a further point of merit which has already been listed earlier is that the Appellant has in due course of time discharged his liabilities of repaying most of the alleged loans and following table makes it clear: Party Credits during AY 2014-15 Balance at the end of AY 2014-15 Balance at the end of AY 2016-17 Bansal Suppliers 5,23,95,000 3,20,60,000 2,95,60,000 Adinath Shares 2,29,80,000 1,45,30,000 Nil Vasundhara Capital 71,22,975 69,60,975 Nil Success Vyapar 17,12,000 17,12,000 Nil Aviral Industries ITA No.419/Ind/2018 19 Jeetendra kr Agnihotri 5,00,000 5,00,000 Nil Kavita Agarwal 5,00,000 5,00,000 Nil 85209975 56262975 29560000 32. Above table summarizes the re payment of loan and payment made to creditors. The submission of the assessee has merit that it is open to a business person to run his business as he deems fit. Business decisions are taken keeping in mind the best economic outcomes, and a business person is at liberty to take such decisions as are in the best interest of his establishment. In the instant case, we notice that Ld. AO has made assumptions about the manner in which re payment of loan has been done. The Ld. AO has resorted to fault finding in each transaction that the Appellant has undertaken, resultantly the learned AO has interpreted in a manner which clearly shows a biased mindset. 33. It has been held by various courts of law, that where the identity of loan providers and creditors, their creditworthiness and the genuineness of transaction has been proven, there remains no ground to make addition of credits to the income of the assessee. The Appellant relied on the judgment of the honorable Allahabad High Court in the case of CIT v. Anurag Agarwal [2015] 229 Taxman 532 where the Hon'ble Court ruled in favour of assessee and propounded “that in respect of credit entries, where the assessee established identity of all creditors by providing PANs and Aviral Industries ITA No.419/Ind/2018 20 addresses beyond reasonable doubts, the credits in books are genuine.” 34. Further, the Hon'ble Madras High Court deleted the addition made on account of unsecured loans in the case of CIT v. Mark Hospitals (P.) Ltd. [2015] 232 Taxman 197/58 taxmann.com 226, where it was found that loans were made through proper banking channels and all creditors had confirmed that they had advanced loans, and on these facts, the Hon'ble Court deleted the additions under Section 68. 35. In the case of Commissioner of Income-tax-15 v. Haresh D. Mehta [2017] 86 taxmann.com 22 (Bombay), the Hon'ble Bombay High Court held that where assessee proved loan transactions from various parties by producing details like copy of PAN card, copy of return of income, balance sheet and copy of bank accounts of creditors, Tribunal was justified in deleting addition made by AO under section 68 in respect of said transactions.The specifics of the case are as follows: Cash credits (Burden of proof) - Assessment year 2007-08 - During relevant year, assessee obtained unsecured loans from various parties - Assessing Officer took a view that assessee had not proved capacity or genuineness of parties to undertake such huge loan transactions - He thus added said amount to assessee's income under section 68 - Tribunal found that assessee had produced details like copy of PAN card, copy of return of income, balance sheet and copy of bank accounts before Assessing Officer - Tribunal thus opined that once initial burden was discharged, Assessing Officer had then to find out that despite production of record in relation to those parties, why version of assessee could not be accepted - In view of failure of Assessing Officer to carry out said exercise, Tribunal Aviral Industries ITA No.419/Ind/2018 21 set aside addition made by him - Whether since finding recorded by Tribunal was based on material available on record, same did not require any interference - Held, yes [Paras 15 and 16] [In favour of assessee] 36. In the case of Assistant Commissioner of Income-tax, Central Circle-13, New Delhi v. Vikrant Puri [2017] 82 taxmann.com 48, Coordinate Bench of ITAT Delhi Bench dismissed the revenue’s appeal and confirmed the deletion of addition made u/s 68 of the Act holding that “when the assessee has submitted documents like name, address, PAN number of the creditor, along with confirmation from the creditor, the identity of the creditor had been proven. Moreover, genuineness of the transaction is also fully established by the fact that the transaction is duly confirmed by the creditor and the fact that the amount is received by A/c Payee cheque indicating cheque no, amount, bank account no. as well as name and address of the bank. Further, creditworthiness of the creditor is also fully established by the fact that the amount is received by a/c payee cheque indicating cheque no, amount, bank account no. as well as name and address of the bank”. 37. In the case of Gaurav Triyugi Singh v. Income Tax Officer 24(3)(1), Mumbai HIGH COURT OF BOMBAY [2020] 121 taxmann.com 86 (Bombay) facts were that assessee received unsecured loan of certain amount from an individual. Since loan amount was received by assessee through cheque and there was no dispute as to identity of creditor and genuineness of transaction, additionally, revenue could not prove or bring any material to impeach source of credit, no addition under section 68 could be made on account of this loan amount Held : Whether in order to Aviral Industries ITA No.419/Ind/2018 22 establish receipt of credit in cash, as per requirement of section68, assessee has to explain three conditions, namely, identity of creditor; genuineness of transaction; and credit worthiness of creditor - Held, yes - Assessee individual had taken unsecured loan of certain amount from one ST - Assessing Officer observed that ST had given said loan amount from its bank account and prior to which this amount was credited to her bank account as gift from two persons, namely, RBS and SST who were her relatives - He was of view that sources RBS and SST were suspected - Consequently, he treated loan amount received by assessee from ST as unexplained cash credit and made additions under section68 - It was noted that loan amount was given to assessee through cheque by ST - There was no dispute as to identity of creditor ST - There was also no dispute about genuineness of transaction - That apart, creditor had explained as to how credit was given to assessee as amount was received by it from RBS and ST - Further, revenue could not prove or bring any material to impeach source of credit - Whether, on facts, assessee had discharged its onus as per requirement of section68 and it was not required for assessee to explain sources of source i.e. genuineness of receipt of amount by ST from RBS and SST - Held, yes - Whether, therefore, impugned addition under section 68 made to income of assessee was to be deleted - Held, yes [Paras 13 to 16] [In favour of assessee] 38. In the case of Commissioner of Income Tax v. Deen Dayal Choudhary High Court of Rajasthan [2017] 88 taxmann.com 475 (Rajasthan) Assessing Officer noticed that the assessee had taken unsecured loans from various persons and desired the assessee to Aviral Industries ITA No.419/Ind/2018 23 place on record confirmations with addresses, permanent account number, bank account details of the person giving loans. The confirmations as desired by the Assessing Officer were submitted. After recording of the statements, the Assessing Officer concluded that genuineness and creditworthiness of the cash credit were not proved, though identity was established and accordingly intended to add the said amount by invoking provisions of section 68.Held :Held that since all the cash creditors had not only placed on record the entire material but had also affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts, no question of law could be said to arise out of the Tribunal's order holding that genuineness and creditworthiness of the creditors were well proved. 39. In the case of Commissioner of Income-tax v. Shiv Dhooti Pearls & Investment Ltd High Court of Delhi [2015] 64 taxmann.com 329 (Delhi) Hon'ble court held, “that the assessee has indeed discharged its onus of proving the creditworthiness and genuineness of the lender. There was no requirement in law for the Assessee to prove the genuineness and credit-worthiness of the sub-creditor. Held whether in terms of section 68, assessee is liable to disclose only source(s) from where he has himself received credit and it is not burden of assessee to show source(s) of his creditor nor is it burden of assessee to prove creditworthiness of source(s) of sub-creditors - Held, yes” 40.Similar view favouring the assessee(s) were taken in case of following judgment/decisions:- Aviral Industries ITA No.419/Ind/2018 24 • CIT Vs. Orissa Corporation (P) Ltd. (159 ITR 78) (SC) • CIT Vs. Rohini Builders (256 ITR 360) (Guj.) • Metachem 245 ITR 360 (MPHC) • Nem Chand Kothari 264 ITR 254 (Gau) DHC in ITAC (ITA 1194/2007) • Rajokri Farms Pvt Ltd (ITA 1410/2008) • Real Time Marketing 221 CTR 716 • Diamond Products 177 Taxman 331 Raj HC in 219 CTR 571 & 220 CTR 622; P&HHC in 180 Taxman 185; Guj HC in 177 Taxman 35 41. To summarize we find that the unsecured loans have been taken from companies whose identity is proved beyond doubt. There is no negative finding or taint with regard to any company. The main reason for addition by AO is that the companies are not listed companies. Ld AO did not appreciate that status of listed company is not relevant and even unlisted company has identity and this cannot be a ground to doubt the identity. The lender companies and the Appellant both belong to same city Kanpur and therefore the funds were advanced for short term as per the commercial need of the company. All the companies are ‘active’ companies as per the record of Ministry of Corporate Affairs. Bank Statements of the lenders were submitted which proves that the creditworthiness of the companies and lenders exists. The bank accounts of lenders establish sufficiency of funds for advancing loan to the Appellant. Further from the audited financials also it is evident that the lenders companies had sufficient funds available to advance the loans. Confirmations from all parties were provided to the Appellant by the cash creditors which has been accepted by the Ld. AO apart from bank statements proving identity and Aviral Industries ITA No.419/Ind/2018 25 creditworthiness. That the loans have been substantially repaid during the subsequent years which also establishes the genuineness of the transactions. 42. We, therefore, under the given facts and circumstances of the case and respectfully following the ratio laid down in the above referred judgments, are of the considered view that at firstly the assessee has successfully proved the identity of the alleged cash creditors by way of filing sufficient documentary evidences, secondly creditworthiness of the cash creditors is proved with the audited financial statement, accumulated reserves transactions through banking channels, thirdly genuineness is proved with the fact that in regular course of business assessee took unsecured loans from new and existing cash creditors and after the use of the funds, repayment of loans has mostly taken place during the year and in the immediately succeeding year which brushes aside the finding of both lower authorities that the assessee has converted its unaccounted income through unsecured loan, fourthly, not even a single documents filed by the assessee has been found to be untrue/incorrect by the revenue authorities by placing any contrary material on record to disprove the claim of the appellant and lastly once the burden of proof has been fully discharged by the assessee by proving the identity, genuineness and creditworthiness of the cash creditors, no further efforts were made by the ld. AO calling information from various sources to examine the correctness of the claim made by the assessee in the form of bank statements, PAN no., income tax returns, financial statements confirmation and other relevant material filed by the Aviral Industries ITA No.419/Ind/2018 26 assessee. This shows that the alleged addition have been made by Ld. AO merely on conjectures and surmises. Therefore, the finding of Ld. CIT(A) is set aside and the addition made by the Ld. AO u/s 68 of the Act at Rs. 8,52,09,975/- is deleted. Accordingly grounds no. 3 to 7 raised by the assessee are allowed. Ground no.8 is general in nature which needs no adjudication. 43. In the result, Assessee’s appeal ITANo.419/Ind/2018 for A.Y. 2014-15 is partly allowed. The order pronounced as per Rule 34 of ITAT Rules, 1963 on 11.02.2022. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER दनांक /Dated : 11.02.2022 Patel/Sr. PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore