M/S. SHRI GAMI INFOTECH PVT. LTED., VASHI V. DCIT- 13(3)(2), MUMBAI

ITA 535/MUM/2022

AI Insights

The case involves M/s. Shri Gami Infotech Pvt. Ltd., which appealed against the order of the Deputy Commissioner of Income Tax, Mumbai, concerning the assessment year 2017-18. The primary contention was regarding the addition of Rs 10,20,38,500 as unexplained cash deposits in the bank accounts of the assessee during the demonetization period. The assessee argued that these deposits were sourced from declared incomes under IDS and from on-money received from customers, which were also declared in the tax returns. The Tribunal examined the submissions, including the cash book entries and the income declarations made under IDS and during the survey, and found that the assessee had sufficient cash balances to explain the deposits made during the demonetization period.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302460 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 22-03-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 68; 263; 133A; 234B; 133(6); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘H‘ BENCH MUMBAI BEFORE: SHRI M.BALAGANESH, ACCOUNTANT MEMBER & SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.535/Mum/2022 (Asse ssment Year :2017-18) M/s. Shri Gami Infotech Pvt. Ltd. C/3, S-16, Sector-14 M.G. Complex, Vashi Navi Mumbai- 400 703 Vs. The DY. CIT-15(3)(2) Mumbai Room No.451, 4 th Floor Aayakar Bhavan M.K.Road, Mumbai – 400 020 PAN/GIR No.AAKCS 8242D (Appellant) .. (Respondent) Assessee by Dr. P. Daniel Revenue by Shri Vivek Anand Ojha Date of Hearing 11/11/2022 Date of Pronouncement 31/01/2023 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No. 535/Mum/2022 for A.Y.2017-18 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-48, Mumbai in appeal No.CIT(A)-24, Mumbai/10312/2019-20 dated 09/03/2022 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2019 by the ld. Dy. Commissioner of Income Tax, Circle 15(3)(2), Mumbai (hereinafter referred to as ld. AO). ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 2 2. The Ground Nos.1 and 5 raised by the assessee are general in nature and does not require any specific adjudication. 3. The Ground No.2 raised by the assessee is challenging the addition made in the sum of Rs 10,20,38,500/- in respect of cash deposits made in the bank account. 3.1. We have heard the rival submissions and perused the materials available on record. The assessee is a private limited company engaged in land development and construction. The return of income for the A.Y. 2017-18 was filed by the assessee company on 07/11/2017 declaring total loss of Rs 6,64,33,728/- which was duly processed u/s 143(1) of the Act. A survey u/s 133A of the Act was carried out in the premises of the assessee company on 20/09/2016 wherein the assessee came forward to make some disclosure of income in the sum of Rs 6 crores under Income Declaration Scheme (IDS) on 20/09/2016 and further sum of Rs 12,12,40,800/- was declared by the assessee being on money received at Rs 400 per square feet on 303102 square feet on the project ‘Amar Harmony’ at Taloja. Hence the total disclosure made by the assessee during survey proceedings worked out to Rs 18,12,40,800/- for the year under consideration. 3.2. The ld. AO observed that the assessee company had made cash deposits during the demonetization period as under:- 10.11.16 - 25,00,000 – Abhyudaya Co-op Bank, Vashi Branch 10.11.16 - 25,00,000 – SDC Bank, Vashi Branch 24.11.16 - 3,50,00,000 – SDC Bank, Vashi Branch 25.11.16 - 3,00,00,000 – SDC Bank, Vashi Branch 09.12.16 - 50,00,000 – Abhyudaya Co-op Bank, Vashi Branch 30.12.16 - 2,70,38,500 – Abhyudaya Co-op Bank, Vashi Branch Total 10,20,38,500 ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 3 3.3. When confronted to explain the source of cash deposits, the assessee explained that it had declared a sum of Rs 6 crores as income under Income Declaration Scheme which was utilized for depositing cash in bank accounts. The assessee company further explained that on money received from various customers in the Amar Harmony Project which were offered to tax is also available for explaining the cash deposits made by the assessee during the period 09/11/2016 to 30/12/2016 in the sum of Rs 10,20,38,500/-. The assessee submitted the complete details of cash deposits made by the assessee, month wise cash sales made by the assessee and month wise cash expenses incurred by the assessee in the prescribed format sought by the ld. AO for the financial years 2015-16, 2016-17 and 2017-18. These details were duly submitted by the assessee vide letter dated 25/11/2019 together with all the annexures, which are enclosed in pages 19 to 129 of the paper book filed before us. The assessee vide further letter dated 26/12/2019 also explained before the ld. AO that the cash balance available with it were deposited in the bank accounts and that the same were deposited late due to chaos prevailing in bank pursuant to heavy rush for depositing specified bank notes post demonetization announcement. The assessee explained that the paper work for depositing specified bank notes (SBN) was also not very much clear in the bank branch account maintained by the assessee and as the amount to be deposited in bank account was high, the company was not in a position to take any risk. Since the window to make the cash deposits was open up to 30/12/2016, the bank officials advised the assessee company to wait for some time and not to take any risk in the rush for depositing cash in bank account. 3.4. The ld. AO observed that with regard to the disclosure made in IDS,2016 in the sum of Rs 6 crores , the assessee submitted copy of Form 4 issued by PCIT-15, Mumbai dated 29/11/2017. On perusal of the ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 4 form, the ld. AO observed that the said disclosure was made for A.Ys. 2011-12 to 2015-16 by the assessee . The ld. AO presumed that the said declaration of Rs 6 crores has been already utilized by the assessee company for business purposes and hence is not available as a source for making cash deposits into bank. From 20/09/2016 (i.e the date of survey) till 08/11/2016, the assessee had made cash deposits only to the extent of Rs 75,00,000/- and substantial sums were deposited only during the demonetization period. The ld. AO acknowledged the fact of assessee offering a sum of Rs 12,12,40,800/- in the return filed for the A.Y.2017-18 but observed that the said income was offered under the head ‘any other income’ of nature ‘income declared under IT survey’. The ld. AO observed that though Rs 12,12,40,800/- being on money received from customers by the assessee was offered to tax by the assessee, the details of customers with name, address, PAN, amount received was not filed during the survey proceedings by the assessee. The ld. AO observed that there was substantial gap between the income offered during survey proceedings and subsequent cash deposits made during demonetization period. The ld. AO also observed that disclosure made in IDS, 2016 and during survey proceedings were not brought into the books of accounts of the assessee and hence availability of cash balance with the assessee cannot be believed. With these observations, the ld. AO proceeded to conclude that the cash deposits made during demonetization period remains unexplained cash credit u/s 68 of the Act by way of deeming fiction for want of satisfactory explanation. This was sought to be taxed at the rate prescribed u/s 115BBE of the Act by the ld. AO. 3.5. Before the ld. CIT(A) , the assessee reiterated its submissions apart from stating that the income declared under IDS, 2016 and income declared during survey proceedings in the sum of Rs 12,12,40,800/- had been duly credited by the assessee in the profit and loss account and also ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 5 credited in the regular books of accounts of the assessee. Hence the addition made by the assessee would only result in double addition. The ld. CIT(A) however dismissed the entire contentions of the assessee and merely upheld the action of the ld. AO. 3.6. It is a fact that the assessee is engaged in real estate development business. We find that the assessee completed a housing project by name Amar Harmony in Taloja and offered the income from sale of units. This project was commenced during Financial Year 2010-11. During the construction stage, the assessee had accepted consideration in cash over and above the agreement value for sale of parking slots pertaining to few units of the project. The total amount of cash component collected over a period of time from Financial Years 2010-11 to 2015-16 was Rs 6 crores, which was offered to tax under IDS, 2016 by the assessee. During the course of survey on 20/09/2016, the assessee declared Rs 6 crores under IDS, 2016. We have verified the Form No. 4 issued by the learned Principal Commissioner of Income Tax-15, Mumbai , wherein for the sum offered of Rs 6 crores for various assessment years, the assessee had to pay the tax of Rs 1,80,00,000/- ; surcharge of Rs 45,00,000/- and penalty of Rs 45,00,000/-. These sums were duly paid by the assessee as under:- 30/11/2016 – Rs 67,50,000/- 29/03/2017 – Rs 67,50,000/- 29/09/2017 – Rs 1,35,00,000/- This Certificate in Form No. 4 is dated 29/11/2017. 3.7. The income declared by the assessee under IDS, 2016 is nothing but the on money received by it from its customers in respect of real estate ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 6 projects undertaken by it over and above the agreement price. Hence obviously this income would remain only in the hands of the assessee in the form of cash. There is no evidence brought on record by the revenue that this income was not available in the form of cash balance with the assessee in the instant case. 3.8. Further we find that the assessee also declared a sum of Rs 12,12,40,800/- being on money received at Rs 400 per square feet on 303102 square feet on the project ‘Amar Harmony’ at Taloja. We find that this sum of Rs 12,12,40,800/- was already offered as income in Schedule 19 of the Profit and Loss Account for the year ended 31/03/2017 by the assessee. The assessee had further explained that post demonetization on 08/11/2016, the assessee company had deposited Rs 10,20,38,500/- during the period 09/11/2016 to 31/12/2016. Out of the said amount deposited, a sum of Rs 4,76,70,050/- pertains to amount declared during survey proceedings and the balance of Rs 6 crores pertains to amount declared under IDS, 2016. The balance cash of Rs 7,35,70,750/- (60000000+121240800-107670050) was already advanced to various parties and the same was grouped in the financial statements under Sundry Assets in the Balance Sheet as on 31/03/2017 in Schedule 17 ‘Other Current Assets’. 3.9. We find that the cash book for the period 01/04/2016 to 31/03/2017 relevant to A.Y. 2017-18 is enclosed in Page 701 of the paper book filed before us. This cash book is admittedly filed before the ld. CIT(A). We find that a sum of Rs 10,76,70,050/- is introduced as income in the cash book on 22/09/2016 (which is just 2 days after the survey on 20/09/2016) . From the perusal of the cash book, we find that the entry passed by the assessee company in its cash book is as under:- ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 7 Cash Account Dr 10,76,70,050 Sundry Assets Account Dr 7,35,70,750 To Income declared under IDS 2016 Cr 6,00,00,000 To Income declared under Survey Cr 12,12,40,800 3.10. Hence it could be seen that a sum of Rs 10,76,70,050/- had entered the cash book as a receipt / income on 22/09/2016 itself which is available as a cash source for explaining all the cash deposits made from 22/09/2016 till 31/03/2017 which includes the demonetization period also. Hence the entire cash deposits made during demonetization period becomes squarely explained. 3.11. We find that the ld. AO had observed that assessee in response to Question No. 16 of the Survey Statement had stated that ‘the income offered has been utilized for the business purposes’. Based on this statement, the ld. AO had concluded that the income offered in IDS 2016 and during survey was not available in the form of cash balance with the assessee as it had already been utilized for business purposes. In this regard, the ld. AR drew our attention to the dictionary meaning of the term ‘utilise’ which means ‘to make useful’. Hence the ld. AO erred in understanding the meaning of the term ‘utilise’ as ‘spent’, which is factually incorrect, as is evident from the entry passed in the cash book supra. Hence we hold that the assessee company indeed had sufficient cash balance to make cash deposits in the bank account. Further, we find that the assessee had actually disclosed Rs 18,12,40,800/- (6,00,00,000 + 12,12,40,800) in IDS 2016 and in survey. Out of this, a sum of Rs 12,12,40,800/- represent on money received from various customers in the project Amar Harmony at Taloja at the rate of Rs 400 per square feet for 303102 square feet sold. Hence only a sum of Rs 7,35,70,750/- was utilized by the assessee company for making advances to various parties ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 8 as is evident from the balance sheet of the assessee company and remaining sum of Rs 10,76,70,050/- on 22/09/2016 was very much available in the form of cash balance with the assessee company which explains the total cash deposits made during 22/09/2016 to 31/03/2017 which includes the demonetization period of 09/11/2016 to 31/12/2016 also. 3.12. In view of the aforesaid observations, we have no hesitation to hold that the entire cash deposits made by the assessee company stood properly explained by way of available cash balance and hence there is no scope of making any addition towards unexplained cash deposits. The ld. AO is hereby directed to delete the addition made in the sum of Rs 10,20,38,500/-. Accordingly, the Ground No.2 raised by the assessee is allowed. 4. The next issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in confirming the addition made u/s.68 of the Act in respect of unsecured loans of Rs.43,27,42,916/- in the facts and circumstances of the instant case. 4.1. We have heard rival submissions and perused the materials available on record. During the year under consideration the assessee had received the following loans from the following parties:- Name of lender PAN Loan received during year Outstanding balance as on end of FY Kundan Tieup Pvt. Ltd. AADCK0926E 8,06,00,000 6,31,00,000 Astute Advisors Pvt. Ltd. AAACK3245N 2,35,00,000 3,46,42,916 ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 9 RG BJ Traders Pvt. Ltd. AAACR1842G 11,17,00,000 2,92,00,000 DhanterashTradewing Pvt. Ltd. AADCD6307R 27,88,00,000 30,58,00,000 Total 49,46,00,000 43,27,42,916 4.2. The assessee was directed by the ld. AO to prove the identity of these lenders, genuineness of the transaction, creditworthiness of these lenders in addition to furnishing the details of name, address, PAN and bank statements and confirmation together with their income tax returns acknowledgements. The assessee submitted the following documents before the ld. AO:- a) Confirmation of loans from the lenders b) Copy of bank statements evidencing receipt of loan through regular banking channels c) Copy of income tax returns acknowledgement for A.Y.2017-18 d) Balance Sheet and Profit and Loss Account of the lender companies 4.3. In fact, the ld. AO asked to prove the three ingredients of Section 68 of the Act in respect of six companies from whom unsecured loans were received by the assessee. On examining documents filed by the assessee, the ld. AO accepted that the loans received by the assessee for two parties are genuine and proceeded to treat the loan balance outstanding at the end of the Financial Year in respect of the aforesaid four parties alone as unexplained cash credit u/s.68 of the Act while completing the assessment. Accordingly, the ld. AO added a sum of Rs.43,27,42,916/- being the year end outstanding balance in respect of the aforesaid four lenders as unexplained cash credit u/s.68 of the Act ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 10 while completing the assessment. This action of the ld. AO was upheld by the ld.CIT(A). 4.4. Let us now proceed to examine the satisfaction of ingredients of Section 68 of the Act in respect of each of the lenders as under:- (i) Kundan Tieup Pvt. Ltd:- (a) Loan received during the year - Rs.8,06,00,000/- (b) Loan outstanding at the end of the year - Rs.6,31,00,000/- 4.5. The assessee furnished the audited balance sheet and audited profit and loss account of this lender company as on 31/03/2015, 31/03/2016,31/03/2017, 31/03/2018 and 31/03/2019 before the ld. AO. The assessee also submitted the list of shareholders together with their PAN for A.Y.2015-16, 2016-17, 2017-18, 2018-19 and 2019-20 of this lender company. The ld. AO observed that this lender company was owned by M/s. Deepesh Vanijya Pvt. Ltd. and M/s. Jas Deep Tradecom Pvt. Ltd which are also having the same address of the assessee company herein. Accordingly, the ld. AO concluded that Gami family (belonging to assessee group) had already acquired the shareholding of this lender company. The ld. AO observed that this lender company had meager income in its income tax returns filed for A.Y.2017-18 and no interest has been paid by the assessee on this loan. The ld. AO observed that lender company had substantial amount of share capital and share premium in its balance sheet which was also invested in various entities including the assessee company. Finally, the ld.AO concluded that creditworthiness of the lender company had not been proved by the assessee company herein. Hence, to be treated as unexplained cash credit u/s.68 of the Act. ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 11 It is pertinent to note that the ld. AO had added the sum of Rs.6,31,00,000/- being the outstanding balance at the end of the year with regard to this lender company u/s.68 of the Act as against the amounts of loans received during the year in the sum of Rs.8,06,00,000/-. 4.6. We find that assessee has furnished the ledger account of this lender company as appearing in its books in page 516 of the paper book which ledger account has also been duly confirmed by the said lender company by mentioning its PAN and on perusal of the same, we find that there is an opening balance of Rs.3,75,00,000/- as on 01/04/2016 representing loans received from this lender company by the assessee company. During the year a sum of Rs.8,06,00,000/- has been received as fresh loans by account payee cheques. During the year, the assessee has also repaid a sum of Rs.5,50,00,000/- by account payee cheques to the said lender company on various dates. We find that assessee has also furnished the bank statements of the said lender company for the relevant period for which loans were paid to the assessee company. On perusal of the said bank statements, we find that there is sufficient credit balance available in the bank account of the said lender company to advance loans to the assessee company on each date of lending. We further find that this entire loan received from Kundan Tieup Pvt. Ltd has been repaid by the assessee in A.Y.2018-19 which is evident from the ledger account of the said lender company as appearing in the books of the assessee company for the period 01/04/2017 to 31/03/2018 annexed in page 750 of the paper book filed before us. The main grievance of the Revenue is only that this lender company had shown negligible income in its income tax returns. But the ld. AO himself had tabulated the availability of shareholders funds for various assessment years of this lender company in page 23 of his order. On perusal of the same, we find that the said ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 12 lender company has total shareholder funds (own funds) of Rs.19,50,27,812/- as on 31/03/2016 which proved sufficient creditworthiness available with the said lender company to advance loans to the assessee company. The identity of the lender company and genuineness of the transactions are not disputed by the ld. AO. From the above fact, it could be safely concluded that the creditworthiness of the lender company is also proved beyond doubt in the instant case. If the lender company is having sufficient bank balance on the date of lending to the assessee company and the source of credit is explained thereon, then the creditworthiness of the said lender company is established beyond doubt. In the instant case this has duly been satisfied by the assessee. Hence, all the three ingredients of Section 68 of the Act has been proved beyond doubt in the instant case. In any case, this loan was already repaid by the assessee in full in A.Y.2018-19 as stated supra. Hence, we direct the ld. AO to delete the addition made u/s.68 of the Act in respect of this lender company. (ii) Astute Advisors Pvt. Ltd. Loan received during the year - Rs.2,35,00,000/- Loan outstanding at the end of Financial Year - Rs.3,46,42,916/- 4.7. The assessee has furnished the following documents before the ld. AO. (a) Financial statements of this lender company for the Asst Years 2015-16 to 2019-20. ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 13 (b) Details of shareholders of this lender company for the Asst Years 2015-16 to 2019-20. (c) Ledger account of lender company as appearing in the books of assessee company for the period 1.4.2016 to 31.3.2017 together with the confirmation of the lender by mentioning its PAN details. (d) Bank statements of the lender company for the relevant dates on which loan has been advanced to the assessee company proving the immediate source of credit. (e) ITR acknowledgement for AY 2017-18 together with computation of total income thereon of the lender company 4.8. The ld. AO had observed that the lender company had offered meager income in its income tax returns for AY 2017-18 and in previous years which is not commensurate with the loan advanced to the assessee company. He also observed that no interest has been paid by the assessee company on the said loans. From the perusal of the Balance Sheet of the lender companies, we find that the said company is having sufficient shareholding funds which were invested in various companies including the assessee company. We find that the said company possessed shareholder funds of Rs 4.45 crores and Rs 4.40 crores as on 31.3.2016 and 31.3.2017 respectively. All the evidences filed by the assessee are enclosed in Pages 555 to 565 of the paper book filed before us. It is also seen that this lender company is owned by Bajaj family group and assessee company has no interest in this company. The main grievance of the ld.AO of this lender company is related to the assessee company, which fact was categorically denied by the assessee company. We find that in any case, if it is related concern according to ld. AO, then ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 14 that itself goes to prove that the identity of the said lender company is accepted by the ld. AO. Genuineness of transactions cannot be doubted as the entire transactions have been routed through regular banking channels. From the availability of sufficient shareholders funds, the credit worthiness of lender company is also proved beyond doubt. If there is sufficient bank balance on the date of lending to the assessee company and source of credit is explained thereon, then the creditworthiness of the said lender is established beyond doubt. In the instant case this fact has been duly complied with by the assessee. In any case, we find that the assessee had received only a sum of Rs.2,35,00,000/- during the year and there was an opening balance of loan as on 01/04/2016 to the tune of Rs.1,11,42,916/-. This opening balance by no stretch of imagination be brought to tax by applying the provisions of section 68 of the Act in view of specific wordings of the said section. We find from the perusal of the records, the ld. AO did not resort to make any verification of the evidences filed by the assessee by way of issuing notice u/s 133(6) of the Act to the lender company. In this scenario, the only logical conclusion that could be derived is that the assessee company had duly discharged its onus by furnishing all the requisite documentary evidences proving the three necessary ingredients of Section 68 of the Act and that the ld. AO had not drawn any adverse inference on the same. In view of this, we direct the ld. AO to delete the addition made in the sum of Rs.3,46,42,916/- in respect of loan received from M/s. Astute Advisors Pvt. Ltd. ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 15 (iii) RG BJ Traders Pvt Ltd 1.Loan received during the year – Rs 11,17,00,000/- 2.Loan outstanding at the end of the year – Rs 2,92,00,000/- 5. We find that assessee had submitted the following documents before the ld. AO with regard to this lender company. (a) Financial statements of this lender company for the Asst Years 2015- 16 to 2019-20. (b) Details of shareholders of this lender company for the Asst Years 2015-16 to 2019-20. (c) Ledger account of lender company as appearing in the books of assessee company for the period 1/4/2016 to 31/3/2017 together with the confirmation of the lender by mentioning his PAN details. (d) Bank statements of the lender company for the relevant dates on which loan has been advanced to the assessee company proving the immediate source of credit. (e) ITR acknowledgement for AY 2017-18 together with computation of total income thereon of the lender company. 5.1. We find that the ld. AO observed that the lender company had offered meager income in its income tax returns for AY 2017-18 and in previous years which is not commensurate with the loan advanced to the assessee company. The ld. AO observed that no interest has been paid on these loans by the assessee company. The ld. AO further observed that ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 16 from the perusal of the shareholding of the lender company the shares were owned by Bajaj family group and the same were transferred to M/s. Golden Falcon Pacific Ltd. which is having the same address of the assessee. Accordingly, the ld. AO concluded that Gami family (belonging to assessee group) had already acquired the shareholding of this lender company and the lender company is also related to the assessee company. 5.2. We find that all the evidences filed by the assessee in respect of this lender company are enclosed in Pages 566 to 580 of the paper book filed before us. It is seen that this lender company is owned by Bajaj family group and assessee company has no interest in this company. The allegation leveled by the ld. AO that this lender company is related to assessee company has been categorically denied by the assessee. We find that in any case, if it is related concern according to ld. AO, then that itself goes to prove that the identity of the said lender company is accepted by the ld. AO. Genuineness of transactions cannot be doubted as the entire transactions have been routed through regular banking channels. From the availability of sufficient funds in the bank account of the lender company, as on the date of advancing loan to the assessee company, the credit worthiness of lender company is also proved beyond doubt. If the lender company is having sufficient bank balance on the date of lending to the assessee company and the source of credit is explained thereon, then the creditworthiness of the said lender company is established beyond doubt. We find that the assessee had received a sum of Rs.11.17 Crores during the year and repaid the sum of Rs.8.25 Crores during the year itself thereby leaving the closing balance of the loan as on 31/03/2017 at Rs.2.92 Crores. We find that the Revenue had observed ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 17 that there was a change in shareholding of the lender company and hence the amount given to the assessee by them is undisclosed income of the assessee. This allegation of the Revenue is absolutely without any basis. In this regard, we hold that merely because there has been change in shareholding of the company, it does not mean automatically that the new shareholders have introduced their undisclosed income for acquiring shares. We find that the ld. AO had stated that no interest is paid on the loans borrowed by the assessee company to the lender company. This was countered by the ld. AR by stating that the loan was borrowed in March 2017 and hence, no interest was paid during the year under consideration. However the assessee had paid interest in immediately succeeding year i.e Financial Year 2017-18 including the interest payable for F.Y.2016-17 i.e the year under consideration. In this regard, the ld. AR submitted that the interest paid by the assessee company in A.Y.2018-19. Further, the assessee has repaid the loans commencing from December 2020 and finally repaid on 8.6.2021, which fact is evident from page 748 of the paper book filed before us. 5.3. We find from the perusal of the records, the ld. AO did not resort to make any verification of the evidences filed by the assessee by way of issuing notice u/s 133(6) of the Act to the lender company. In this scenario, the only logical conclusion that could be derived is that the assessee company had duly discharged its onus by furnishing all the requisite documentary evidences proving the three necessary ingredients of Section 68 of the Act and that the ld. AO had not drawn any adverse inference on the same. In view of this, we direct the ld. AO to delete the addition made in the sum of Rs.2,92,00,000/- in respect of loan received from M/s. R J B J Traders Pvt. Ltd. ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 18 M/s. Dhanteras Tradewing Pvt. Ltd., (DTPL) (i) Loan received during the year - Rs.27,88,00,000/- (ii) Loan outstanding at the end of the year - Rs.30,58,00,000/- 6. The assessee furnished the following documents before the ld.AO with regard to this lender company. (a) Financial statements of this lender company for the Asst Years 2015- 16 to 2019-20. (b) Details of shareholders of this lender company for the Asst Years 2015-16 to 2019-20. (c) Ledger account of lender company as appearing in the books of assessee company for the period 1/4/2016 to 31/3/2017 together with the confirmation of the lender by mentioning his PAN details. (d) Bank statements of the lender company for the relevant dates on which loan has been advanced to the assessee company proving the immediate source of credit. (e) ITR acknowledgement for AY 2017-18 together with computation of total income thereon of the lender company. 6.1. The main grievance of the ld. AO is that M/s. DTPL had received huge share premium from various entities and that money has been utilized for advancing interest free loans to the assessee company during the year under consideration ; that almost 92.86% of shares of DTPL were allotted to Moonrise Distributors Pvt. Ltd and Buds Dealers Pvt Ltd, other than this, ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 19 the companies to whom shares were allotted by DTPL, Gami Family had acquired the shares from those entities ; that there was a statement recorded during the course of search of Shri Shanker Kumar Khetan u/s.132(4) of the Act wherein he had admitted that he is engaged in the business of providing accommodation entries of various persons for the purpose of earning commission or brokerage ; that DTPL has no business activity which would justify the receipt of share premium in its books ; that the shareholders of DTPL are nothing but shell entities as they have no capacity to pay such huge premium to DTPL ; that Moon Rise Distributors Pvt. Ltd. and Buds Dealers Pvt. Ltd. are being controlled by Gami Family from 2017 onwards and hence, two companies which held shares of 92.86% in DTPL had sold its shares to the Gami Family ; that by this process, the assessee company and DTPL became related entities ; that Shri Shanker Kumar Khetan had provided accommodation entries to various companies which are listed in pages 17-19 of the assessment order and had earned commission income thereon and this commission income was agreed to be offered to tax pursuant to the search by Shri Shanker Kumar Kethan in the statement recorded u/s.132(4) of the Act. Based on these observations, the ld. AO concluded that all the entities which received funds through the assistance of Shri Shanker Kumar Khetan are shell entities wherein they have received accommodation entries and given accommodation entries to various companies and ultimately that money had flown to the assessee company, hence, the entire genuineness of transactions and creditworthiness of the lenders could not be established by the assessee company. The ld. AO also observed that DTPL is only a conduit company through which assessee company has brought its undisclosed income into its books of accounts by disguising the transaction in the form of unsecured loan. All the aforesaid observations were made by the ld. AO based on the order passed by the office of Initiating Officer under Prohibition of Benami Property Transactions Act, 1988 by DCIT, ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 20 Benami Prohibition Unit-I, Mumbai dated 29/03/2019 vide provisional attachment order u/s.24(4) of Prohibition of Benami Property Transaction Act, 1988. In fact, the ld. AO literally relied on the entire findings recorded in the said order of Benami Property Transaction, 1988 while addressing this issue in the assessment order. Accordingly, the addition u/s.68 of the Act was made by the ld. AO in the sum of Rs.30,58,00,000/- being the year end outstanding of loan at the end of the year in respect of DTPL. 6.2. It is pertinent to note that this order of Benami transactions Act, dated 29/03/2019 had been reversed by The Adjudicating Authority under Prohibition of Benami Property Transaction Act, 1988 vide its order dated 21/09/2021. The order of Adjudicating Authority is enclosed in pages 914 to 931 of the paper book filed before us. The entire allegations leveled by the DCIT Benami Prohibition Unit-I, Mumbai had been duly taken into account by the Adjudicating Authority and concluded that the entire transactions are genuine and that the parties from whom monies were received are duly traceable and they are not fictitious persons. In fact the statement of Shri Shanker Kumar Khetan was also considered by the Adjudicating Authority while reversing the order passed by DCIT Benami Prohibition Unit-I Mumbai. Hence, effectively the reliance placed by the ld. AO on the order passed by the DCIT Benami Prohibition Unit-I Mumbai has been reversed by Adjudicating Authority of Prohibition of Benami Property Transaction Act, 1988. For the sake of ready reference, the relevant operative portion of the order passed by the Adjudicating Authority dated 21/09/2021 is reproduced hereunder:- “32. Ld AR has that IO's presumption that Beneficial Owner had provided/arranged consideration of RS 33 crore to Shanker Khetan or his controlled entities in 2010-11 (to be introduced in M/S DTPL as share premium and share Capital) is far fetched, imaginary and unbelievable considering that the asset (loan/ Advance) has been acquired in 2016-17. It was argued that in the period of 2010-11 M/S SGPIL or any member of ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 21 Gami Family had no interest whatsoever in the alleged benamidar Company or it's alleged share premium contributors. It was argued that the loan & advances were made by DTPL to SGIPL only in 2015 (2.7 crore) & 2016 (27.88). It was also stated that member of Gami Family became shareholder of M/s Moonrise Dist Pvt & M/s Buds Deals Pvt Ltd only in 2016-17. It was therefore argued that prior to 2015-16, there was no nexus of the involvement of SGIPL or members of Gami Family in the transaction of DTPL, and/ or its shareholder companies. This fact is not disputed, however the IO had argued that the share premium of Rs 33 crore is the sources of the said asset and as Shri Gami was not able to prove the genuineness of the companies providing the fund (share premium), the apparent source of the share premium from shareholders can't be accepted and it is logical presumption that the same has been arranged by him/SGIPL. I.O had relied on the financial affairs and capacity of the shareholders companies & their promoters to conclude that the Share Premium has not actual flown from so declared shareholder companies but that it was actually arranged by M/s SGPIL. I.O had also heavily relied on the statement of Shri Shanker Khetan dated 11.12.2018 to establish that some of the companies who have invested in shares of M/s DPTL were part of adventure of providing accommodation entry. On the other hand, learned AR has argued that there is no evidence with the I.O to establish a nexus between the (Gami Family) and the so called source of consideration i.e share premium being introduced in 2011. I agree with Ld AR on this point. The facts collected by IO suggest that share premium introduced by the dummy share holder companies arranged by Khetan in 2011 has been utilized by the then director/promoter of M/s DTPL in advancing loan and advance to other parties and make investments in the companies and not to M/S SGIPL. In the balance sheet of DTPL for years ending 31 March 2014, 31 March 2015 and 31 March 2016 this fact is clearly apparent. Fact is when M/S DTPL came into possession of Gami family, share premium was not available to be deployed in new investment, it was already locked into loan and advances to other entities or investment in shares of other companies. It remains to be established by the IO that Shri Khetan has deployed the fund (presumably unaccounted in cash) from "Gami Family in M/S DTPL in 2016-17 in order to create the impugned asset. The IO's presumption that "Gami Family" has arranged the share premium to be introduced way back in 2010-11 is not supported by any direct or indirect evidence. Hence the most vital condition of 2(9) (A) is not fulfilled. 33. So far as IO's invocation of 2(9) (B) is concerned, it can be not accepted that M/s DTPL is a "fictitious” entity. M/s DTPL is a Pvt Ltd company having filed required returns before ROC as well IT authorities. Its return for AY 11-12 was subjected to assessment U/s 143 (3) and proceeding/ initiated under section 263 of IT Act to treat this order U/s 143 (3) as erroneous and prejudicial to the interest of Revenue had been dropped, hence Order U/s 143 (3) stand as final. Subsequently also the company continued to file return. Moreover, even the IO has stated that ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 22 this company is now within the control of “Gami family”. In this circumstances, treating this materially important entity as "fictitious" is not correct, this proposition can't be accepted. 34. The IO Invocation of 2(9)(D) requires that consideration for advances made to M/s SCPIL have been arranged from “non- traceable" or "fictitious” person. In the instant case, the direct source of this Advance to M/s SGPL is M/s DTPL which is existing corporate entity albeit controlled by "Gami Family". The M/s DTPL had in its various assets as on the day of making this advances including Loans & Advances given to other entities (under old management). Actually earlier composite grouping of “Loan & Advances" and "current Investments” has been replaced by new advance of Rs 33.58 Cr to M/s. SGIPL. Thus under no circumstance can it be said that the consideration has been received from non traceable and fictitious persons. 35. If we can manage to see the "woods" instead of "trees" we can appreciate that the Initiating Officer is probably correct when he says that M/s DTPL & its Share Holder entities were created in 2010-11 with the purpose to provide accommodation entities to the "willing customers. The whole structure was created in 2010-11 and Capital of Rs 33 Cr Approx. was made available for disbursing accommodation entities i.e provision of Loans/Advance as well as share Capital introduction for willing customer who wanted to deploy their unaccounted cash in their Businesses, and in the instant case, it was probable achieved also as the entire share premium was utilized to disburse loan and advances to other parties and making investments in share capital of other companies in 2010-11 itself. Beneficial owner has appeared in 2015-16 onward only and therefor investigation and its findings of the initial stage will not be helpful in understanding the development of 2015-16 onwards. IO has failed to establish any nexus of the source of benami property i.e. loans advanced to SGPIL (which are now attached as flats in Gami and Bank balances) with the "Gami family" or SGPIL. He has failed to observe that the assets as existing with the BD as on 31 March 2015 and 31 March 2016 in the form of loans given or investments made were the actual source of the new advances made of Rs. 33.60 crore. Share premium received in 2010-11 is the source/consideration of the benami property and no investigation has been conducted on this aspect and the IO had utilized only unacceptable surmises and presumption to state that original shareholders/entities introduced in 2010-11 were arranged by Gami family or SGPIL and that they were the source of the Benami property created in 2015 & 2016 i.e advances made to M/s SGPIL 36. In the end, after going through the reference U/s 24(5), the order under section 24(4), submissions of defendants & material on record, I hold that there are not enough material on record to hold that the properties attached under this reference are benami properties which are ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 23 subject matter of alleged benami transaction. The attachment is not in conformity with the requirements of the scheme of the statute. The provisional attachment under section 24(4), therefore, is not confirmed. The consequential relief is granted to the defendants in the form of lifting of the prohibitions and restrictions on the impugned properties.” 6.3. From the aforesaid order of the Adjudicating Authority, it is very clear that M/s. DTPL had received certain share premium from various companies in the year 2011 and that money has been utilized by them in advancing loan and advances to various parties and also by making investments in various companies in the year 2011. During the year under consideration, DTPL had received back those loans and advances and investments and that money has been utilized by DTPL to make advances to assessee company. The assessee company enters the scene in respect of the financial transaction only in this year by way of receipt of loans and accordingly during the years 2011-2016, whatever financial transactions that were undertaken by DTPL either by way of receipt of monies or by payment of monies, the assessee company was not at all involved. This fact is quite evident on perusal of order of the Adjudicating Authority dated 21/09/2021 which is reproduced supra. There is absolutely no cash trial found with cogent evidences by the ld. AO or by the ld. CIT(A) to prove that unaccounted cash of assessee company had come back in the form of loan from DTPL during the year under consideration. We find that the ld. AO’s main grievance is that the shareholders of DTPL had sold their shareholding to Gami Family thereby making assessee company and DTPL related concerns. We are unable to comprehend ourselves as in what way this fact would raise any suspicion or doubt on the impugned loan transactions between DTPL and assessee company. If it is a related concern even according to the ld. AO, then that itself goes to prove that the identity of the said lender company is accepted by the ld. AO. The entire transactions had been routed through regular banking channels and hence, the evidence of the transactions has been stood established beyond ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 24 doubt. The assessee had indeed proved immediate source of credit available with DTPL which fact is also recorded in para 32 of the order of the Adjudicating Authority referred to supra that monies given by DTPL in the year 2011 has been received back by them and that money has been utilized by DTPL to give loans to the assessee company during the year under consideration. Hence, the availability of sufficient funds in the hands of the DTPL stands clearly established in the instant case. Hence, the creditworthiness of the lender company is also established beyond doubt. Hence it could be safely concluded that all the three necessary ingredients of section 68 of the Act had been duly proved by the assessee company in the instant case beyond doubt. 6.4. One more pertinent fact which needs to be mentioned in the instant case is that DTPL for the A.Y.2011-12 i.e the year in which they had received huge share capital and share premium from various alleged fictitious entities, was subject matter of scrutiny assessment proceedings u/s.143(3) of the Act dated 07/05/2013. This scrutiny assessment order is enclosed in pages 934 and 935 of the paper book filed before us. In the said scrutiny assessment, the entire receipt of share capital and share premium by DTPL was accepted as genuine and no addition has been made in their hands. Further, this assessment was sought to be revised by the ld. Principal Commissioner of Income Tax (PCIT) by invoking his revision jurisdiction u/s.263 of the Act on the ground that the ld. AO did not make enquiries with regard to the genuineness of various investments that had flown into the books of DTPL. The show-cause notice issued by the ld. PCIT dated 03/02/2015 u/s.263 of the Act in this regard is enclosed in pages 932 and 933 of the paper book. After going through the replies filed by DTPL, we find that the ld. PCIT had dropped the revision proceedings u/s.263 of the Act vide his order dated 28/03/2016. The order passed u/s.263 of the ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 25 Act dropping the revision proceedings is enclosed in pages 936 of the paper book filed before us. 6.5. From the above, the following facts emerge:- (a) DTPL had received share capital and share premium from various entities in A.Y.2011-12. This receipt of share capital and share premium from various entities have been accepted to be genuine both in scrutiny assessment proceedings u/s.143(3) of the Act dated 07/05/2013 which is later followed by Section 263 order passed by the ld. PCIT dated 28/03/2016 dropping the revision proceedings. (b) The monies received by DTPL were invested in various entities by DTPL in A.Y. 2011-12. These monies invested by DTPL in A.Y.2011-12 had been received back by them during the year under consideration. (c) This money has been utilized by DTPL to advance loan to assessee company during the year under consideration (d) All the allegations leveled by the ld. AO which has been further affirmed by the ld. CIT(A) had already been considered and reversed by the adjudicating authority of Prohibition of Benami Property Transactions Act, 1988 dated 21/09/2021. 6.5. In view of the above, we have no hesitation to conclude that all the three necessary ingredients of Section 68 of the Act had been duly complied with by the assessee company in respect of loan received from DTPL. Hence, we direct the ld. AO to delete the addition made in the sum of Rs.30,58,00,000/-. In any case no addition could be made in respect of opening balance of Rs.2,70,00,000/- u/s.68 of the Act in view of the specific wordings in the provisions itself. ITA No. 535/Mum/2022 M/s. Shri Gami Infotech Pvt. Ltd. 26 7. Accordingly, the ground No.3 raised by the assessee is allowed. 8. The Ground No. 4 raised by the assessee is challenging the levy of interest u/s 234A, 234B and 234C of the Act, which is consequential in nature and does not require any specific adjudication. 9. In the result, the appeal of the assessee is allowed. Order pronounced on 31/01/2023 by way of proper mentioning in the notice board. Sd/- (RAHUL CHAUDHARY) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 31/01/2023 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//