M/S. OM SHANTI HOUSING ,MUMBAI V. INCOME TAX OFFICER WARD 20(2)(3), MUMBAI

ITA 672/MUM/2025

AI Insights

The case involves M/s Om Shanti Housing, a partnership firm engaged in property development, which appealed against the order of the CIT(A) sustaining the disallowance of Rs. 88,42,064/- as interest paid to seven parties. The primary contention was the alleged failure to prove the genuineness of the expenditure. The Tribunal examined previous rulings on similar facts and circumstances, particularly for assessment years 2013-14 and 2015-16, where relief had been granted to the assessee. The Tribunal noted that the loans were taken through banking channels, and the interest payments were also made through these channels, substantiated by various documents including PAN details, incorporation certificates, and MCA records of the parties involved.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 30380 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: M/s Om Shanti Realtors vs ITO, PCIT vs Paradise Inland Shipping Pvt Ltd, CIT vs Green Infra Ltd, CIT vs Gagandeep Infrastructure Pvt Ltd, CIT vs Rahul Vineeth Traders, CIT vs Varinder Rawalley
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMENDU KUMAR DASH
• Assessee Lawyers: ANISH SHAH
• Keywords: Opportunity of being heard; Retrospective amendment; Question of law; Unexplained cash credit; Rule of consistency; Principle of natural justice; TDS; Accommodation entries; Bogus
• Section: 143(3); 142(1); 143(1); 68; 131; 22; 133(6); 13; 44AB; 20; 101

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SHRI GIRISH AGRAWAL (ACCOUNTANT MEMBER) I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s Om Shanti Housing 2nd Floor, 20-B, Sugra Building, 16th Tribhuvan Road, Near Dreamlad Cinema, Grant Road, Mumbai 400004. PAN: AABF04424B Vs. Income Tax Officer, Ward 20(2)(3) Room No. 210, 2nd Floor Piramal Chambers, Lalbaug, Parel, Mumbai 400012 (Appellant) (Respondent) Appellant by Shri. Anish Shah Respondent by Shri. Soumendu Kumar Dash- SR. D.R. Date of Hearing 12.03.2025 Date of Pronouncement 28.03.2025 ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 15/01/2025 passed by Ld. CIT(A), Agra for Assessment Year 2017- 18. 1. “On the facts and in the circumstances of the case and in law the Commissioner of Income tax (Appeal),ADDL/JCIT(A)-Agra erred in deciding the appeal by holding as follows: The learned CIT (A) erred in sustaining disallowance of Rs. 88,42,064/- being interest paid to the following 7 parties as your appellant allegedly failed to prove genuineness of expenditure and thereby sustaining reduction of closing work- 2 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing in-progress from Rs.19,33,57,311/- to 18,45,15,247/- by Rs. 88,42,064/- 2. The learned CIT (A) erred in passing order without giving adequate opportunity of being heard even though requested vide letter dated 18th April,2022 & 18th December 2024 which is contrary to provisions of law and natural justice 3. On the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income tax (Appeal) ADDL/ICIT(A)- Agra) erred in confirming: - (a) The disallowance of interest paid of Rs.88,42,064/- which was done by the learned AO without providing to the appellant any material or clarification relied upon by the ITO Ward 20(2)(3), Mumbai in passing the order of assessment dated 23rd December, 2019. (b) The disallowance of entire interest on loan of Rs. 88,42,064/- by merely relying on the inquiry made by ITO Ward 20(2)(3), Mumbai without any independent enquiry made by the AO and without providing any supporting report or other evidences relied upon by him. (c) The addition which was made by the learned AO by coming to the conclusion without calling for any further information if he needed particularly when the papers called for submitted during the course of Assessment Proceedings. 4. On the facts and in the circumstances of the case and in law, the Ld. Jurisdictional Assessing Officer erred in making disallowance and learned CIT (A) erred in confirming the entire disallowance of Rs. 88,44,064/- on account of interest on loan on erroneous presumptions although several documents related to the loan creditors were submitted during the course of Assessment & Appellate Proceedings which are available in the paper book submitted to CIT (A) vide letter dated 18th April, 2022 & 18th December, 2024 being: - a) Copy of ledger accounts of the concerned parties. b) Bank statement highlighting loan taken and repaid c) Details of TDS deducted in respect of Interest expenses. d) MCA Records of the Parties. e) All the loan creditors are assessed to tax. 3 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing 5. a) On the facts and circumstances of the case and in law, the Learned Ld. Commissioner of Income tax (Appeal), ADDL/JCIT (A) -Agra has erred in ignoring the fact that the learned A.O. erred in erroneously and hurriedly, unjustifiably coming to the adverse conclusion without relying on the decision of the learned CIT (Appeal) dated 20th June 2017 for AY 2013-14 on similar facts and circumstances in the assessee's favor which confirmed lending by all parties excepting only one party from whom further borrowings were made in AY 2014-15. The order passed by the AO has caused great injustice to your appellant and is merely on conjectures and surmises. b) The Disallowance of interest paid of Rs 88,42,064/-/- in respect of borrowings taken from below same parties in AY 2013-14 was already deleted by the learned Commissioner of Income tax (Appeals) & same was confirmed by Hon'ble ITAT vide order dated 10th January 2020.Even the Hon'ble ITAT vide order dated 13th November, 2024 has deleted the addition in respect of below parties for AY 2015-16 c) The Learned assessing officer had erred in not specifically mentioning relevant reasons for addition in the Assessment order previously on conjecture and surmises. 6. Your appellant craves leave to add, amend, alter or delete any of the foregoing grounds of appeal. Brief facts of the case are as under: 2.The assessee is a partnership firm engaged in the business of property development. During the year under consideration, it filed its return of income on 16/10/2017, declaring total income at Rs. NIL. As Assesse is covered under tax audit as per Section 44AB of the Act, the return was processed u/s.143(1) of the Act, and the case was selected for scrutiny. Accordingly, statutory notices u/s.143(2) and 142(1) was issued. In response to the statutory notices, assessee filed various details as called for. 2.1. The Ld.AO observed that, the assessee paid interest on borrowed loans to following lenders: 4 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing Sr. No. Name of party Interest amount (Rs) claimed and included in closing work in progress 1. M/s. Switstar India Pvt Ltd. 4,71,351/- 2. M/s. Kaushali Impex Pvt Ltd. 3,64,609/- 3. M/s. Namo Diamonds Pvt Ltd. 4,65,350/- 4. Radhey Krishna Gems Pvt Ltd. 40,58,286/- 5. Siddham Gems Pvt Ltd. 27,93,640/- 6. Manbhawan Exim Pvt Ltd. 3,60,922/- 7. Divyanshi Gems Pvt Ltd. 3,27,906/- Interest on Loan (Total) 88,42,064/- 2.2. Ld. AO accordingly, issued notice u/s.133(6), that has returned back by the postal authorities. The assessee however, filed confirmation of the above loans from respective parties along with copy of their ITR’s and relevant page of the banks statement in support of the loan creditors. The Ld.AO however, relied on the Investigation report received dated 11/12/2017 wherein, it was stated that, most of the lender parties were not available at the given address and they did not carry out any real business activity. The Ld. AO passed the assessment order on 23/12/2019 disallowing interest of Rs.88,42,064/- paid to the above parties, thereby reducing the closing work in progress from Rs.19,33,57,331/- to Rs.18,45,15,247/-. Aggrieved by the order of the Ld. AO, assessee preferred appeal before the Ld. CIT(A). 3. Before the Ld.CIT(A) assessee submitted that, coordinate bench of this Tribunal for assessment year 2013-14 and 2015-16 in assesses own case granted relief in respect of same loan creditors. He submitted that, the facts and circumstances of the assessee was identical in those assessment year as is in the year under 5 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing consideration. The assessee submitted that, all loan transaction were through banking channels and that the interest payment was also made through banking channels. It was submitted that, assessee filed PAN details, incorporation certificate and other relevant documents in respect of the loan creditors to establish their identity. It was also submitted that the credit worthiness of the lenders could be established from the financial statement and the bank statement furnished. 3.1. The Ld.CIT(A) however, did not follow principal of consistency by following procedure’s orders for assessment year 2013-14 and 2015-16 instead the Ld. CIT(A) held that, each year is separate and listing. The Ld. CIT(A) upheld the addition made by the Ld. AO by observing as under: Conclusion: 5.1 After a thorough examination of all the grounds of appeal, the assessment order, the written submissions of the appellant, and the relevant legal provisions and judicial precedents, I conclude that the appellant has failed to discharge the onus of proving the genuineness of the unsecured loans and the interest paid thereon. 5.2 The Assessing Officer's decision to treat the interest expenditure of Rs. 88,42,064/- as unexplained credit under section 68 of the Income Tax Act, 1961 is upheld. The appellant has not been able to satisfactorily prove the identity and creditworthiness of the lenders or the genuineness of the transactions. 5.3 The reliance on earlier years' favorable orders is misplaced as each assessment year is separate and distinct. The Assessing Officer has provided adequate opportunities to the appellant during the assessment proceedings. 5.4 In view of the above findings, all the grounds of appeal are hereby dismissed. The appeal is accordingly dismissed, and the assessment order is upheld. 6 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing Aggrieved by the order of the Ld. CIT(A) the assessee is in appeal before this Tribunal. 4. The Ld. AR submitted that, the assessee has been borrowing money from there parties on year to year, some of which are common with the preceding assessment years and has been subjected to verification in respect of the credit worthiness. The details furnished by the assessee as under: Sr. No. Parties Name Interest Amount Remarks 1. M/s. Swistar India Pvt Ltd. 4,71,351/- The loan was taken in the AY 2007-08. The Principle amount of loan taken earlier was accepted in the past & hence question of disallowance of interest thereon does not arise 2. M/s. Kaushali Impex Pvt Ltd. 3,64,609/- Relief already given for same parties in AY 2013- 14 by learned CIT(A) & Hon'ble ITAT (ITA No 5613/Mum/20 17) vide order dated 10th January 2020 Relief was also given by Hon'ble ITAT in AY 2015- 16 (ITA No 4092/Mum/2024) vide order dated 13th November 2024 Relief was also given by Learned Commissioner of Income tax in AY 2014-15 (Appeal No CIT(A) 32, Mumbai/10863/ 2016- 17) vide order dated 13th December 2024 7 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing 3. M/s. Namo Diamonds Pvt Ltd. 4,65,350/- The loan was taken in the AY 2014-15(2nd April 2013). The Principle amount of loan taken earlier was accepted in the past & hence question of disallowance of interest thereon does not arise. Relief was also given by Hon'ble ITAT in AY 2015- 16 (ITA No 4092/Mum /2024) vide order dated 13th November 2024 4. Radhey Krishna Gems Pvt Ltd. 40,58,286/- Relief already given for same parties in AY 2013- 14 by learned CIT(A) & Hon'ble ITAT (ITA No 5613 /Mum / 2017) vide order dated 10th January 2020 Relief was also given by Hon'ble ITAT in AY 2015- 16 (ITA No 4092/Mum/2024) vide order dated 13th November 2024 Relief was also given by Learned Commissioner of Income tax in AY 2014-15 (Appeal No CIT(A) 32 ,Mumbai/10863/2016- 17) vide order dated 13th December 2024 5. Siddham Gems Pvt Ltd. 27,93,640/- 6. Manbhawan Exim Pvt Ltd. 3,60,922/- 7. Divyanshi Gems Pvt Ltd. 3,27,906/- (Total) 88,42,064/- 4.1. The Ld. AR relied on the decision of the coordinate bench of this Tribunal for assessment year 2015-16, wherein most of the parties are common with the year under consideration. It is submitted that, loan taken from M/s. Swistar India Pvt. Ltd. was 8 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing originally taken during the assessment year 2007-08. It was also submitted that, loan from M/s. Namo Diamonds Pvt. Ltd. was taken during the year 2014-15. The Ld. AR submitted that, remaining loans from the respective loan creditors were taken to the first time during the assessment year 2013-14 which was been subject matter of consideration before this Tribunal vide order dated 10/01/2020 in ITA No.5613/Mum/2017 and ITA No.5614/Mum/2017 Categorical observation by this Tribunal for assessment year 2013-14 are as under: “We have heard both the parties, perused the material available on record and gone through orders of the authorities below along with case laws cited by both the parties. At the outset, we find that the issue is squarely covered in favour of the assessee by the decision of ITAT, Mumbai Bench in assessee's sister concern namely M/s. Om shanti realtors vs ITO in ITA No. 5615/ Mum/2017, wherein the identical grounds raised by the revenue against identical order of the Ld.CIT(A) has been considered and after considering relevant facts, the Tribunal deleted additions made by the Ld. AO The relevant findings of the Tribunal are as under- 5 DECISION: I have considered the facts of the case, grounds of appeal and oral and written submissions made before me. After a careful consideration of the same as well as the assessment order. All grounds of appeal are correlated therefore dealt together for sake of convenience I proceed to rule as under. 5.1 From the assessment order I find that AO made addition u/s 68 loan taken from following 8 parties viz. Divyanshi Gems P Ltd Rs. 3,09,00,000/-/-, Manbhawan Exim P Ltd. Rs. 2.00.00.000/- Siddham Gems P. Ltd Rs 37.00,000/- Radhey Krishna Gems. P. Ltd. Rs 1,29,00,000/-, Shri Brahma Shakti Gems P Ltd. Rs. 1,50,00,000/- Shankeshwar Diamonds P Ltd Rs 2.27,00,000/-, Shri Charbhuja Diamonds P. Ltd Rs. 2.10.00.000/- and Shri Jagdamba Shakti Gems P Lld Rs 1.68,00.000 totaling to Rs 14.30.00.000/- The addition has been done by treating the same as unexplained cash credit stating that lenders are not genuine because appellant remain failed to produce the parties before the AO for verification and identity of the lenders and creditworthiness was not provided 9 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing by the appellant. The AO came to the conclusion that as the declared income by the respective loan creditors was less they were not capable of lending which has been done by ignoring the fact that they had substantial turnover and had a very large base of assets as evident in the respective balance sheet. 5.2 I find from the assessment order of the A. O., in para 4.2 it has been stated that assessee has filed confirmations of the above loan parties along with copy of ITR and relevant page of the bank statement During the assessment proceedings notice u/s 133(6) of 2 parties viz Brahm Shakti Gems Pvt Ltd. and Shree Charbhuja Diamonds Pvt. Ltd. was returned from postal authorities with remark \"left\" As it came to notice to the appellant, he produced the new address of the all lenders from whom notices return unserved. I find from para 4.5 of the assessment order wherein AO herself accepted that finally all the lenders filed confirmations. The same extract is as under. 4.5 Thereafter in this case compliance has been made by all the lenders of loan by speed post from the new business address. 5.3 I come on the issue of commission issued by the another AO to DDIT (Inv.). Surat The AO received information that ITO- 20(3)(1) Mumbai Issued commission to DDIT, Surat u/s 131(1)(d) to verify the genuineness and creditworthiness of lenders The DDIT(Inv.), Surat submitted report stating that he has issued summons u/s. 131 for appearance but due to close premises summons could not be served, therefore summons were served by affixture but loan creditors not responded. In this case three parties viz. Shree Charbhuja Diamonds Pvt. Ltd, shankeshwar Diamonds Pvt. Ltd and Radhy Krishna Gems Pvt. Ltd. are related to the parties to whom commission was issued in other case. I find that registered office of these lenders have been changed. Before me appellant submitted that changed address of the lenders were provided to the AO during the proceedings. Appellant filed before me proof of change of address in form of Form No. 18/Form No INC-22 which is the notice of situation or change of situation of registered office pursuance to section 146 of the Companies Act 1956/ section 12(2)&4 of the Companies Act, 2013 and Rule 25 and 27 of the companies (incorporation) Rules 2014 On verification of the same it is noticed that in Sr. No 4 it is clearly mentioned \"notice is hereby given that (a) the address of the registered office of the company with effect from Particulars of the details are as under 10 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing Sr. No. Name of the company Change address With effect from 1. Shree Charbhuja Diamonds Pvt. Ltd. H. No. 5/909, 3rd Floor Gansesh Ashish Ghiya Sheri, Kamnath Road Mahidharpura Surat Gujrat- 395003 01/07/2013 2. Shankeshwar Gems P. 6/2497, Maze Nine floor, Office NO. 21/08/2014 Ltd M3 Balaji Sadan Limbu Sheri, Mahidharpura Surat 395003 21/08/2014 3. Radhey Krishna Gems 6/1766 Sainath Building Gundi Sheri Mahapura Surat, Gujrat 395003 29/04/2013 All the lenders are Pvt. Ltd. Co are registered under Companies Act, All the details of company are available on public domain. On the above fact I come to the conclusion that the DDIT (Inv). Surat has not made adequate enquiry nor any adequate report is taken on record by AO Only on the basis of the premises closed on one day or notices returned from the postal authority it cannot be acceptable that parties from whom the loans were taken are not in existence or they are bogus. The DDIT (inv) Surat issued served notice on the old address which have been changed. Therefore compliance of summons issued by him could not be made Finally all the confirmation and details called for was provided during the assessment proceedings as well as before me it is also pertinent to note that in this case no commission was issued to the DDIT(inv) Surat As no commission was issued in this case and appellant provided the change of address of the parties during the assessment proceedings, this contention was also accepted by the AO in his order then AO should have made enquiry for the same but he did not do so. 11 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing 5.4 Before me as well as the A. O also documents were produced by the parties to prove the genuineness of the transactions which inter alia included the confirmations bank statements of Tenders acknowledgements. ROI, from these parties, their Balance Sheets. Profit and Loss accounts. Statements of advances which included name of the appellant as borrower in two cases and details of interest and principal repaid which were by payees account cheques/RTGS The appellant is filed details from the records of Ministry of Corporate Affairs which also shows that lender companies are alive. Moreover, the appellant has not commenced the construction or done any booking to generate any funds However, the A.O brushed this aside on the grounds that the identity itself was not proved. The A.O further held that the genuineness was not proved because these parties were not credit worthy to advance loans of such magnitude. I find that loans have been given by crossed account payee cheques/RTGS and they are reflected in their audited books of account and filed their returns of income including bank statements from which the funds have been given to the appellant, this fact was also accepted by the AO The appellant has produced the audited accounts and returns of income of all the parties which show that the loans given by them to the assessee are reflected in their audited accounts. These parties have not borrowed any funds and thus they have utilised their own funds for giving loans to the assessee on which they have earned interest. 5.5 1 am unable to appreciate this position of the A.O The A. O himself states that the turnover of these parties is in hundreds of crores. In the same breath he states that these parties are not credit worthy. I find that the A. O has no other corroborative evidence to show that cash had been paid by the appellant to these parties for availing the loans. An accommodation entry of this nature would perforce require the appellant to part with cash in his hands and obtain a cheque in lieu of the same The A. O has not been able to establish the cash trail at all. The appellant has filed the entire documents required to establish the identity of the creditors their creditworthiness, as well as the genuineness of the transaction. The source of the said loans thus stands proven. As has been held in several decisions of superior judicial authorities (MurlidharLahorimat v CIT (280 ITR 512 (guj)] Labhchand Bohra v ITO 219 ITR 571 (Raj)) and CIT v Dwarkadhish Investment Private Limited. 1299 ITR 268 (Del)) the assessee cannot be called upon to prove the source of the source of his loans. 12 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing 5.7 The AO has relied on a number of judgements, however the facts of these judgements are completely different as in this case the appellant has proved the identity and creditworthiness of the lender and the genuineness of the transactions 5.8 As the loans have been subsequently repaid by the appellant through banking channels. Thus, the appellant is able to prove that not only did he take genuine loans, but the same has also been repaid. If these loans were not genuine, then there would not have been a question of repayment I find that the weight of evidence is in favour of the appellant. as he has been able to satisfy all ingredients of cash credit le identity. creditworthiness and genuineness of transactions. Accordingly, I delete the addition of Rs. 14,30,00,000/- and interest thereon amounting to Rs 1,13,74,600/- totaling to Rs. 15.43,74,600/- made by the A.O 7. After having gone through the facts of the present case and perusal of the documents and after hearing both parties at length we find that the assessee had already placed on record all the documentary evidences in order to show the identity and creditworthiness of the lenders and genuineness of the transactions We have perused the confirmation filed by the parties, copies of acknowledgement of return of income filed by the lenders for the year under consideration, copies of the bank statement of lenders, which establish that the payment towards loans were received during the year under consideration. Therefore, the identity of the lenders was not in dispute. We have also considered all the documents placed on record by the assessee in the shape of statement of accounts and documents to show that the transactions were carried out through banking channels and the confirmations which were filed in the form of ledger accounts which reflect that the assessee had received the amount through RTGS. All those documents prove the genuineness of the transactions. Now as far as creditworthiness of the lenders are concerned, we have perused the audited accounts of the lenders which shows the creditworthiness of the lenders to grant loans and advances Further, we also noticed from the records that Ld. CIT(A) had brightly painted out in its order that the AO made the additions by holding that as the declared income by the respective loan creditors was less, therefore they were not capable of lending. However, the AO ignored the fact that the lenders had substantial turnover and had a very large base of assets as is reflected in the respective balance sheets 13 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing 8. We have also considered the fact that in the present case, the AD herself had accepted that all the lenders had filed their confirmation apart from other documents as mentioned above. The record of Ministry of Corporate Affairs was also placed on record to show that the lender companies are alive. The loans, which were taken by the assessee had also been repaid and those details have also been filed by the assesse In the case of Pr. CIT vs Paradise Inland Shipping Pvt Ltd. (supra) e Hon'ble High Court has categorically held that the initial onus is upon t assessee to place on record all the documentary evidences to establish the identity and creditworthiness of the lenders and genuineness of the transactions and when once the assessee produce all the documentary evidences to establish the existence of the said lenders then the burden shifts on the Revenue to establish the case. Similar view was also taken by the Hon'ble High Court in the case of CIT vs Green infra Ltd (supra) wherein it was held as under: - \"Section 68 of the Income-tax Act, 1961-Cash credit (Share capital)-Assessment yea: 2011-12-Assessee-company offered to sell its shares Identity of subscribers was confirmed by virtue of Assessing Officer issuing notices to them Genuineness of entire transaction was recorded in books of account and reflected in financial statements of assessee company since subscription was done through banking channels as evidenced by bank statements Tribunal examined case of revenue on parameters of section 68 and found on facts that it was not hit by said section Whether since revenue was not able to show that factual finding recorded by Tribunal was perverse, no substantial question of law arose Held, yes (Para 3(c)] [In favour of assessee] 9. In the case of CIT vs Gagandeep Infrastructore Pvt Ltd (supra) the Hon'ble High Court held as under- \"Section 68 of the Income-tax Act. 1961 Cash credit (Share Capital)-Assessment year 2008-09 Whether proviso to section 68 introduced by Finance Act 2012 with effect from 1-4-2013. would not have retrospective effect-Held, yes-Whether where assessee-company had established identity, genuineness and capacity of shareholders who had subscribed to its shares, Assessing Officer was not justified in adding amount of share capital subscription as unexplained credit Held, yes -Whether where revenue urged that assessee had received share application money from bogus shareholders, it was for Income- 14 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing tax Officers to proceed by reopening assessment of such shareholders and assessing them to tax in accordance with law and it did not entitle revenue to add same to assessee's income as unexplained cash credit-Held, yes (Para 31 [In favour of assessee)\" 10. As far as the facts of the present case, assessee has also repaid the loan which was taken to the lenders through banking channel and in such a situation the Hon'ble High Court in the case of Rahul Vineet Traders (supra) has held as under- \"Section 68 of the Income-tax Act, 1961 Cash credits (Loan) Assessment year 2000-01-Assessee-firm had taken loan from 14 firms out of which loan from four firms were not found by Assessing Officer as genuine because those firms were, allegedly, related to one G involved in providing accommodation entries Assessing Officer thus invoked section 68 and made addition to assessee's income on account of unexplained cash credits Commissioner noticed that lenders were regular income tax assessee and their PANs were on record It was also undisputed that amount had been advanced through account payee cheques and further before issuing cheques lenders had got sufficient balance in their account Moreover, amount had also been repaid through account payee cheques In view of above, Commissioner (Appeals) taking a view that loan transactions were genuine, deleted addition made by Assessing Officer Tribunal upheld order of impugned addition hands of assessee was rightly deleted-Held yes [Papa 5) [In favour of assessee\" 11. in the case of Varinder Rawiley (supra) the Hon'ble High Court has held as under- \"Section se of the Income-tax Act, 1961-Cash credit (Sale of goods)- Assessment year 2002-23 Whether where assessee received and returned amount in question by way of account payee cheques and transactions were reflected in bank accounts of assessee as well as creditor who was an income- tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated ass assessee's income when department failed to prove to contrary Held, yes [Paras 9 and 101 [In favour of assessee In the case of Apex Therm Packaging (P) Ltd (supra) the Hon'ble High Court has categorically held that when the assessee had placed on record full particulars which are inclusive of confirmation with name. address and PAN, copy of income tax 15 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing returns, balance sheet, etc in respect of all creditors/lenders then Revenue is not justified in making additions. Similar view has also been taken by the Hon'ble Allahabad High Court in the of Vijay Kumar Jain (supra) and the Hon'ble Rajasthan High Court in the case of Jai Kumar Bakliwal (supra) and also in the case of ITO vs Vijay Dwellers Pvt Ltd. in ITA No.141/Mum/2018\" for A Y 2009-10 dated 30.01.19. ITO vs Lotus Grih Nirman Pvt. Ltd ITA No 3998/Mum/2014 for A Y 2010-11 dated 18 10 2018, ITO vs. Shri Nemichand Lalchand Jain ITA No 159/Mum 2017 for A.Y. 2007-08 dated 17.12.2018, Shri Vasant Ramji Savlo vs. ACIT in ITA No.6123/Mum/2017 for A. Y 2011-12 dated 27.12. 2018, ACIT ve Rajesh M Shah (HUF) ITA No.7105/Mum/2016 for A Y 2012- 13 dated 30.08 2018 and Mis Keynote Fincorp Limited vs DCIT in ITA Nos. 1643 & 1647/Mum/2018 for A. Ys 2012-13 and 2013-14 dated 5.11.2018 12. In the present case, Ld. CIT(A) apart from appreciating that all the documents had been placed on record by the assessee, which is specifically mentioned in para no. 5:4 of its order had also categorically mentioned that the audited accounts and return of income of all the parties, show that the loans given by them to the assessee were reflected in their audited accounts and these parties had not borrowed any funds and thus had utilised their own funds for giving loans to the assessee on which they had earned interest. It is also important to mention here that the A O himself stated that the turnover of these parties was in hundreds of crores and at the same time. AO stated these parties were not credit worthy In this respect, the AO had not placed on record any corroborative evidence to show that cash had been paid by the assessee to these parties for availing the loans and had not been able to establish the cash trail at all On the contrary, the assessee had filed the entire documents required to establish the identity of the creditors and their creditworthiness, as well as the genuineness of the transaction 13. As far as the case law relied upon by the Reverse is concerned, we have considered those cate law, but they are not applicable to the facts and circumstances of the present case as the pan material contained in those cases are different from the pari material contained in the present case 14 We also noticed that Ld CIT(A) had rightly concluded that the loans taken by the assessee were subsequently repaid through 16 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing banking channels Thus, if these loans were not genuine then in that eventuality the same would not have been repaid. Therefore, considering the entirtiy of the facts, the Ld CIT(A) had rightly held that the assessee had satisfied all the ingredients of cash credit ve (dentity, creditworthiness and genuineness of transactions and accordingly deleted the additions. 15. Moreover, no new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld CIT (A) Therefore there are no reasons for us to interfere into of deviate from the findings recorded by the Ld CIT (A) Hence, we are of the considered view that the findings so recorded by the Lid CIT (A) are judicious and are well reasoned Resultantly these ground raised by the revenue stands dismissed. 16. In the net result, the appeal filed by the revenue stands dismissed with no order as to cost. 9. We further noted that the Ld. CIT(A) after considering relevant details filed by the assessee, in respect of all five loan creditors has came to the conclusion that the assessee has discharged the onus cast upon it u/s 68 of the I.T. Act, 1961, by filing various details, including confirmation letters from the parties. We, further noted that the Ld. CIT(A) had also recorded categorical findings that the Id. AO has disregarded all evidences filed by the assessee only on the ground that notice issued u/s 133(6) were return unserved, in respect of some parties, without appreciating the fact that on subsequent event all the lender companies had replied to the notices of the Ld. AO issued u/s 133(6) by furnishing documentary evidences, in respect of each of the issues raised therein. Further, the assessee had also furnished bank statement to prove transfer of loans through proper banking channel. The assessee firm had paid interest on said loans after deducting TDS applicable as per law. The assessee firm had also repaid said loans by crossed account pay cheques in the subsequent assessment years and the detail thereof have been filed in form of a chart, which is at pages No. 59 to 63 of the paper book. Therefore, we are of the considered view that when, the assessee has discharged its onus by filing necessary evidences to prove identity, genuineness of transactions and creditworthiness of the parties, the Ld. AO cannot make additions towards unsecured loans only on the basis of non service of 133(6) notices or non cooperation of lenders to said notices issued by the Ld. AO because, the appearance of parties to notices issued by the Ld. AO is not within the control of the assesee. The assessee at best could file 17 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing necessary evidences to prove transactions between the transactions between the parties are non genuine. Therefore, we are of the considered view that the Ld. AO was erred in making additions towards unsecured loans taken from five parties u/s 68 of the I.T.Act. cannot be attributed to the failure of the assesse to hold that parties as genuine, but at the same time non appearance of parties 1961. The Ld.CIT(A) after considering relevant facts has rightly deleted additions along with interest paid thereon. 10. Coming back to various case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Bombay High Court, in the case of PCIT vs Paradise Inland Shipping Pvt.Ltd. (2018) 400 ITR 439. We find that the Hon'ble Jurisdictional High Court has examined a similar issue in light of provision of section 68 and held that once, assessee has discharge its onus by filing necessary evidences, including name and address of alleged shareholders, then the revenue is free to proceed on loan creditors in accordance with law, but sum so received from loan creditors cannot be regarded as undisclosed income of the assesee. The Om Shan above decision of Hon'ble Bombay High Court has been affirmed by the Hon'ble Supreme Court, thereby concurred with the findings of the Hon'ble High court. Further, the Hon'ble Bombay High Court, in the case of CIT vs Green Infra Ltd. (2017) 392 ITR 7 and CIT vs. Gagandeep Infrastructure Ltd. (2017) 394 ITR 680 had taken similar view and held that once, the assessee discharges its onus by filing necessary evidences including name and address of creditors, then the department can reopen the assessment of creditors and proceed in accordance with law, but sum so received from the creditors cannot be regarded as undisclosed income of the assesee. A similar view has been upheld by the Hon'ble Allahabad High court, in the case of CIT vs Rahul Vineeth Traders 2014 41 taxmann.com 86. The Hon'ble Punjab & Haryana Court, in the case of CIT vs Varinder Rawalley 2014 366 ITR 233 had taken similar view. 11.In this view of the matter and respectfully following the case law discussed hereinabove, including the coordinate bench of ITAT, Mumbai bench decision in assessee's sister concerns case namely M/s Om shanti realtors in ITA No.5615/Mum/2017, we are of the considered view that the Ld. AO was erred in making additions Towards unsecured loan and consequent interest paid thereon u/s 68 of the I.T.Act, 1961. The Ld.CIT(A) after considering relevant facts and also by relied upon various judicial precedents has rightly deleted additions made by the Ld. AO. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and dismissed appeal filed by the revenue. 18 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing 12.In the result, appeal filed by the revenue is dismissed. 4.2. In respect of the other loan creditors, that was conducted for A.Y. 2015-16, based on the observation of Ld.CIT(A)’s view therein Coordinate Bench of this Tribunal considered and observed as under: 5. We have heard the counsels of both the parties, we have also perused the material placed on record, documents filed before us, judgments cited by both the parties and also the orders passed by the revenue authorities. From the records, we noticed that assessee is a partnership firm engaged in the business of property development and filed the return of income which was processed under Sec. 143(1) of the Act, subsequently the case was selected for scrutiny and after serving statutory notices and providing opportunity of hearing the order of assessment was passed by the AO u/s 143(3) of the Act thereby disallowing the interest of Rs. 1,02,03,318/- being paid to the 7 parties, the details of which are herein below and reduced closing work-in-progress for Rs. 15,59,04,259/-. Sr. No. Name of party Interest amount (Rs) claimed and included in closing work in progress 1. M/s. Divyanshi Gems Pvt 7,37,553/- 2. M/s. Manbhawan Exim Pvt Ltd. 8,11,308/- 3. M/s. Siddham Gems Pvt Ltd 26,50,225/- 4. M/s. Radhe Krishna Gems Pvt Ltd. 41,53,261/- 5. M/s. Kaushali Impex Pvt Ltd. 10,53,647/- 6. M/s. Namo Diamonds Pvt Ltd. 6,77,101/- 7. M/s. Varshit Enterprises 1,20,223/- Interest on Loan (Total) 1,02,03,318/- 6. Aggrieved by the said order the assessee preferred appeal before the CIT(A), but the Ld. CIT(A) dismissed the appeal and upheld the addition /disallowance made by the AO. 7. Now after evaluating the records, we found that Ld. CIT(A) sustained disallowances of Rs. 1,02,03,318/-, being interest paid to the 7 parties as the assessee fail to prove genuineness of expenditure thereby sustaining reduction of closing work-in- 19 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing progress. But, Ld. CIT(A) has ignored very important fact that the disallowance of interest paid of Rs. 62,54,440/- and addition of Rs. 8,90,00,000/- u/s 68 of the Act was in respect of borrowing taken from below mentioned 5 parties which are exactly the same which were there in A.Y 2013-14 and in respect of whom the additions have already been deleted by Ld. CIT(A) vide order dated 20.06.2017 and the same was also confirmed by the Coordinate Bench of ITAT vide order dated 10.01.2020, the details of those 5 parties are mentioned below: Name of party Amount of interest disallowed in A.Y. 2015-16 Remarks M/s. Kaushali Impex Pvt Ltd. 10,53,647/- Relief already given for parties in AY 2013-14 by Ld.CIT(A) & Hon’ble ITAT M/s. Radhe Krishna Gems Pvt Ltd. 41,53,261/- M/s. Siddham Gems Pvt Ltd 26,50,225/- M/s. Divyanshi Gems Pvt Ltd. 7,37,553/- M/s. Manbhawan Exim Pvt Ltd. 8,11,308/- Total Interest 94,05,994/- 8. We also noticed that no new loan was taken during the year under consideration from the remaining two parties and that loan pertains to earlier years, wherein interest paid by the assessee was duly allowed as deduction by the AO during the course of earlier assessment proceedings, the details are which mentioned herein below: Name of the partyt Amount of interest disallowed in A.Y. 2015-16 Remarks Namo Diamonds Pvt Ltd. 6,77,101 The loan of Rs. 68,60,000 was taken in the AY 2014-15 (2nd April 2013). The principle amount of loan taken earlier was accepted in the past & hence question of disallowance of 20 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing interest thereon does not arise. Varshit Enterprises 1,20,223 The loan of Rs. 60,00,000 is AY 2010-11 (30th April, 2009). The principle amount of loan taken earlier was accepted in the past & Hence question of disallowance of interest thereon does not arise. Total interest 7,97,324 9.Since the AO has not specifically mentioned the relevant reasons for making additions in the assessment order, therefore, the order of Ld.AO and upheld by the CIT(A) is not sustainable in the eyes of law. during the course of We further noticed that assessment proceedings several documents relating to loan creditors were submitted by the assessee which are available in the paper book submitted before the CIT(A) vide letter dated 06.04.2022 and 21.08.2023, which contains confirmation, return of income, bank statement highlighting loan taken and repaid, audited financial statement, details of TDS deducted in respect of interest expenses and also documents demonstrated that all the loan creditors are assessed to tax. Since Ld. CIT(A) has ignored the most important fact that on similar facts and circumstances the CIT(A) has already decided in favour of assessee vide order dated 20.06.2017 for A.Y 2013-14 and the appeal of the assessee has also been dismissed by the Coordinate Bench of ITAT vide order dated 10.01.2020, which goes to show that the controversy in question is squarely covered in favour of the assessee by the order of the Coordinate Bench of the ITAT with respect to 5 parties out of 7 namely M/s. Kushali Impex Pvt Ltd, M/s. Radhey Krishna Gems Pvt Ltd, M/s. Sidham Gems Pvt Ltd, M/s. Divyanshi Gems Pvt Ltd. M/s. Manbhawan Exim Pvt Ltd as the relief has already been given by the Coordinate Bench of ITAT in respect of the same parties in A.Y 2013-14 and with regard to other two parties namely M/s. Namo Diamonds Pvt Ltd and M/s. Varshit Enterprises Pvt Ltd., no new loan was taken during the year under consideration and loan pertains to earlier years, wherein interest paid was duly allowed by the AO during the course of earlier assessment proceedings, Therefore considering the principles of consistency and judicial discipline, and while relying upon the decision of the Hon'ble Supreme Court in the case of UOI Vs. Kamlakshi Finance 21 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing Corporation Ltd., AIR 1992 SC 711, the relevant portion of the said order is as under: The principles of judicial discipline requires that the order of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not 'acceptable' to the department in itself an objectionable phrase and is subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent appellate court. If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws\". The same was duly considered by Hon'ble High Court (Madras) in case of Agarwal Warehousing & Leasing Ltd ([2002] 124 TAXMAN 440 (MP) 10. we delete the additions made in the present case taking into consideration the order of the ITAT for A.Y 2013-14 in assessee's own case vide order dated 10.01.2020. It is the submission of Ld. AR that in respect of M/s. Swistar India Pvt. Ltd. the loan creditor existed in the books of assessee since assessment year 2007-08. However, the revenue never made any disallowance of interest paid to this loan creditor in any of the preceding assessment years. 4.3. The revenue has not been able to established anything contrary to what has been observed by this Tribunal as well as Ld.CIT(A) in the preceding assessment years. Further, it is noted that the Ld. AO did not conduct any enquiries of verification in respect of the evidence filed by the assessee for the year under consideration. There is nothing placed on record by the revenue other than the investigation report received from the investigation wing. 4.4. Respectively, following the view taken by coordinate bench of this Tribunal in assesses own case for assessment year 2013-14 22 I.T.A. No.672/Mum/2025 Assessment Year: 2017-18 M/s. Om Shanti Housing and 2015-16 and taking into consideration that, the Ld. CIT(A) for assessment year 2013-14 and 2015-16 and to uphold the principle of consistency deleted the addition on identical facts and circumstances, we direct the Ld.AO to delete the addition for the year under consideration. 5. Accordingly, grounds raised by the assessee stands allowed. In the result appeal filed by the assesse stands allowed. Order pronounced in the open court on 28/03/2025 Sd/- Sd/- (GIRISH AGRAWAL) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 28/03/2025 Divya R. Nandgaonkar, Stenographer Copy of the order forwarded to: (1) The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai "