The DCIT,Central Circle-1(4), Ahmedabad V. M/S. Shreem Spa & Resorts Ltd, Ahmedabad

ITSSA 256/AHD/2019

AI Insights

This case involves an appeal by the Department against the order of the Ld. CIT(Appeals), which had allowed the appeal of the assessee, M/s. Shreem Spa & Resorts Ltd., and deleted the addition of \\u20b930,000,000 on account of an unsecured loan. The loan was allegedly from a shell company, New Wave Commercial Private Limited, and the Department contended that the assessee failed to prove the genuineness and creditworthiness of the transaction. However, the assessee provided various documents including the lender's financial statements, bank statements showing repayment, and confirmation letters, which the Ld. CIT(Appeals) found satisfactory. The Tribunal upheld the decision of the Ld. CIT(Appeals), dismissing the Department's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131485 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-02-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 05-05-2019
• Other Referred Cases: CIT vs. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 / 221 Taxman 146(Gujarat)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: TDS; Set aside; Liquidation
• Section: 131; 68; 153A; 251; 43; 73

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “D” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e Dy. CIT, Central Circle-1(4), Ah medabad (Appellant) Vs M/s. Sh reem Spa & Resorts Ltd. 306 , 3 r d Floor, Solitaire Building, Op p. Bombay Gar age, Shahibau g, Ah med abad-3800 04 PAN: AAN CS3 621H (Resp ondent) Asses see b y : None Revenue by : Shri Durg a Dutt, CIT-D. R. Date of hearing : 06-02 -2023 Date of pronouncement : 22-03 -2023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad, in proceeding u/s. 143(3) r.w.s. 153A vide order dated 08/02/2019 passed for the assessment year 2011-12. IT(SS)A No. 256/Ahd/2019 Assessment Year 2011-12 I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 2 2. Department has taken the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in admitting the additional evidences submitted by the assessee as the assessee never brought this fact in knowledge of the Assessing Officer during the assessment proceedings. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition of 3,00,00,000/- on account of unsecured loan u/s.68 of the Act. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in deleting the addition without considering the facts that during the assessment proceedings and remand report, neither the assessee nor the New Wave Commercial Pvt Ltd submitted any satisfactory evidences to prove genuineness or creditworthiness of the said transaction. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. The brief facts of the case are that the assessee had filed its return of income on 28-12-2012 declaring total income of rupees Nil. Later on, search was carried out at the premises of the assessee on 13-06-2013. The assessee was served with notice under section 153A on 20-01-2014 requiring the assessee to file its return of income under section 153A(a) of the Act for the year under consideration. In response to the above, the assessee furnished return of income under section 153A on 30-03-2014 declaring total income of rupees Nil. The assessee completed assessment after making addition in I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 3 respect of unsecured loan of ₹ 3 crores from M/s New Wave Commercial Private Limited. The AO observed that the assessee did not furnish any details regarding the party and the non-availability of details of the said creditor and non-existence of such person at the address of the lender shows that the lender is a shell company and the assessee had managed accommodation entry of ₹ 3 crores in the form of unsecured loan. 4. In appeal before Ld. CIT(Appeals), the assessee submitted certain additional evidences regarding confirmation of unsecured loans, copies of TDS Challans, ledger account of New Wave Commercial Private Limited, copies of bills, Annual Report of the creditor, ledger account of TDS, bank statement etc. Further, the assessee submitted that it had received unsecured loan of ₹ 3 crores from New Wave Commercial Private Limited and enclosed the ledger account from the books of accounts of the assessee. Further, the assessee furnished new address of the creditor and also submitted the PAN number of the creditor. The assessee further submitted that the said loan has been repaid back to the creditor i.e. New Wave Commercial Private Limited by RTGS on 20-04-2010, 23-04-2010, 28-04- 2010 and 03-05-2010. The assessee also furnished copy of bank statement in order to support the contention that the loans taken from the creditor has been repaid back through banking channels. The counsel for the assessee further submitted that the addition was made on the basis of commission report issued by DIT (Investigation), Calcutta dated 25-03-2014 at the request of DCIT, Central Circle-1, Ahmedabad. In this connection, the assessee requested the DCIT, Central Circle-1, Ahmedabad to furnish a copy of the commission report to the assessee vide letter dated 16-05-2017 on the I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 4 basis of which the additions were made. However, the AO did not furnish the copy of the commission report to the assessee so as to allow the assessee to rebut the same. The Ld. CIT(Appeals) took the additional evidence on record and allowed the appeal of the assessee by observing that the lender company New Wave Commercial Private Limited has total share capital and reserves of ₹ 43 crores, which proves the creditworthiness of the lender. Further, the assessee has provided the financial statement, copies of ledger of New Wave Commercial Private Limited, confirmation on the letterhead of New Wave Commercial Private Limited, bank statement, PAN of New Wave Commercial Private Limited, Form 16A and TDS Challaan, acknowledgement of filing of income tax return of the lender and status of the lender New Wave Commercial Private Limited from the MCA portal which shows that the lender is an “active company” on the MCA website. Ld. CIT(Appeals) further observed that the assessee has repaid the loan during the next financial year before the date of search at the assessee’s premises. Accordingly, Ld. CIT(Appeals) allowed the appeal of the assessee in light of the above facts with the following observations: “8.1 Ground No. 1, 2 and 3 are regarding the addition made u/s. 68 of unsecured loan of Rs. 3,00,00,000/-.The assessee has taken total unsecured loan of Rs.3,00,00,000/- during the subject assessment year from New wave Commercial Private Limited. The AO has added the same as the commission u/s 131 issued by Investigation Wing, Kolkata during the post search investigation could not be served on the lender as the premise of the assessee was locked and therefore the identity, creditworthiness and genuineness of the transaction could not be proved. The assessee has provided financial statement, Copy of ledger of New wave Commercial Private Limited, confirmation on the letterhead of New wave Commercial Private Limited, Sank statement, PAN of the New wave Commercial Private Limited, Form No. 16A I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 5 and IDS challan, acknowledgment of filing income tax return, Confirmation of the assessee's letter and its status from the MCA portal. I have carefully perused the remand report and rejoinder filed by the appellant. The lender company viz. Newwave Commercial Private Limited has total share capital and reserves of Rs. 43,01,00,200 which proves the creditworthiness of the lender. Moreover, the assessee has furnished Copy of ledger of New wave Commercial Private Limited, confirmation on the letterhead of New wave Commercial Private Limited, Bank statement, Form No. 16Aand IDS challan and Confirmation of the assessee's letter to prove the genuineness of the transaction. Moreover, the assessee has repaid the loan during the next financial years before search. And if the assessee has repaid the loan and the department has accepted the same without probing into it, the addition of such unsecured loan as unexplained cash credit u/s 68 needs to be deleted as held by Hon'ble Gujarat High Court in case of CIT V/s. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 / 221 Taxman 146(Gujarat). The High Court has held in Para No. 6 as under: "6. It is required to note that as such an amount of Rs. 1,00,00,000 vide cheque No.102110 and an amount of Rs. 60 lakhs vide cheque No. 102111 was given to the assessee and out of the total loan of Rs. 1.60 crores, Rs. 15 lakhs vide cheque no. 196107 was repaid and therefore, an amount of Rs. 1,45,00,000 remained outstanding to be paid to IA. It has also come on record that the said loan amount has been repaid by the assessee to 'IA' in the immediately next year and the Department had accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, there was no reason to interfere with the impugned order passed by the Tribunal." The lender company was also having an "Active" status as per the status available on MCA Portal. From the copy of the company master data, it can be seen that the detail of the Directors/Signatory was updated on 02.01.2018. And therefore, it can be inferred that the company is an active one. On perusal of all the documents filed by the I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 6 assessee, the assessee has proved beyond the doubt about the credit worthiness and genuineness of the transaction and therefore the addition of Rs. 3,00,00,000 is deleted. These grounds of appeal are allowed.” 5. The Department is in appeal before us against the order passed by Ld. CIT(Appeals) allowing the appeal of the assessee and deleting the addition of ₹ 3 crores. The DR submitted that the creditor New Wave Commercial Private Limited is a shell company and Ld. CIT(Appeals) erred in facts and in law in ignoring the enquiry conducted by the Investigation Wing, Kolkata. The DR drew our attention to page 2, paragraph 3 of the assessment order and submitted that on spot enquiry clearly reveals that the lender was not genuine. Accordingly, the DR submitted that in the instant set of facts, the order of Ld. CIT(Appeals) is liable to be set aside. Before us, none appeared on behalf of the assessee. We observe that the assessee has gone into liquidation, but despite several notices and opportunities, the official liquidator is not present before us to present case of the assessee and provide assistance to the Tribunal in respect of the present hearing. Accordingly, we are adjudicating on the issue on the basis of arguments put forward by the learned DR, the observations made Ld. CIT(Appeals) in the appellate order and the material available on record. 5.1 We observe that at page 66 of the paper book, the company status of the lender New Wave Commercial Private Limited on the MCA website has been reproduced, which shows that the lender company is an “active” company. Further, the ledger account of New Wave Commercial Private Limited has also been produced for our perusal at page 67 of the paper book I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 7 which shows that the assessee received a sum of 3 crores from the lender company through banking channels. We further observe that the relevant extracts of the bank statement of the assessee company have also been furnished before us at pages 68 to 70 of the paper book which shows that the loan taken from the lender was repaid back to the lender on various dates as mentioned therein. Further, “confirmation” received from the lender on his letterhead has also been placed on record at pages 71-72 of the paper book. The Income Tax Return filed by the lender for assessment year 2011-12 has also been placed on record at page 73 of the paper for a perusal. We further observe that ld. CIT(A) has specifically observed in this order that the loan received by the assessee was also repaid back to the lender before the date of search. On going through the various documents produced before us and the detailed observations made by Ld. CIT(Appeals) in the appellate order while allowing relief to the assessee, we are of the considered view that in the instant set of facts, Ld. CIT(Appeals) has not erred in facts and in law in allowing relief to the assessee. In the result, on the light of the above observations, the appeal of the assessee is allowed. 5.2 We would also like to separately mention that the company has gone into liquidation, however, despite several opportunities the official liquidator, he has not appeared before us to provide us the necessary assistance in disposal of the instant case. Accordingly, we are imposing a cost of ₹ 5000/- on the official liquidator on account of non-appearance before us, despite several opportunities. . I.T(SS).A No. 256/Ahd/2019 A.Y. 2011-12 Page No. DCIT vs. M/s. Shreem Spa & Resorts Ltd. 8 6. In the result, the appeal of the Department is dismissed. Order pronounced in the open court on 22-03-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/03/2023 TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 20/03/2023 (dictation on dragon) 2) Date on which the typed draft is placed before the Dictating Member & Other Member 20/03/2023 3) Date on which the approved draft comes to the Sr. P.S./P.S. /03/2023 4) Date on which the fair order is placed before the Dictating Member for pronouncement /03/2023 5) Date on which the fair order comes back to the Sr. P.S./P.S. 22/03/2023 6) Date on which the file goes to the Bench Clerk 22/03/2023 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order a.k