MPG BUSINESS INFORMATION SYSTEM PVT LTD,GURGAON V. DCIT CIRCLE-02, GURGAON

ITA 4792/DEL/2019

AI Insights

The case involves MPG Business Information Systems Pvt Ltd (the assessee) appealing against the order of the CIT(A) which upheld the additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961. The additions pertained to a loan of Rs 2,21,50,000 from Virender Kumar Gupta, which the AO and CIT(A) found to be non-genuine. The Tribunal examined the evidences, including the audited balance sheets and bank statements, and noted discrepancies in the documents provided by Gupta. The Tribunal found that while the identity of the lender was established, the genuineness of the transaction and the creditworthiness of Gupta were not satisfactorily proven. However, the Tribunal agreed with the assessee on the quantum of addition and allowed the set-off of loss against the deemed income under section 68 for the assessment year 2013-14.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126191 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Other Referred Cases: PCIT vs Ambe Tradecorp (P) Ltd, Dev Darshan Designs (P) Ltd vs CIT, Ivan Singh vs ACIT, Vijaya Hospitality and Resorts Ltd vs CIT, Shree Karthik Papers Ltd vs DCIT, Seema Jain vs DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: TARANDEEP SINGH; VIRENDER
• Keywords: Unexplained cash credit; Principle of natural justice; Accommodation entries; Deemed to accrue or arise in india; Revision of order; Bogus; Grounds of appeal; Dismissed; Loan account; Commissioner; Commissioner of Income Tax; AMP; Transactions; Section 251; Deleted; Department; Section 68 of the Act; Directors; Hospital; Explanation; Not pressed
• Section: 147; 143(3); 263; 68; 131; 22; 133(6); 13; 20; 162

Judgement Text

" Page 1 of 25 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘E’ BENCH, NEW DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 4792/DEL/2019 [A.Y. 2013-14] MPG Business Information Vs. The Dy. C.I.T Systems Pvt Ltd, Unit 1113-1114 Circle - 2 JMD Megapolis, Sector – 48, Gurgaon Sohna Road, Gurgaon PAN – AAHCM 2797 C (Applicant) (Respondent) Assessee By : Shri Tarandeep Singh, Adv Department By : Shri Amit Katoch, Sr. DR Date of Hearing : 04.03.2025 Date of Pronouncement : 23.04.2025 ORDER PER NAVEEN CHANDRA, A.M:- This appeal by the assessee is preferred against the order of the ld. CIT(A)-1, Gurgaon dated 29.03.2019 for A.Y 2013-14. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 2 of 25 2. The assessee has raised the following grounds of appeal: “1 That on facts and in law the orders passed by the Commissioner of Income Tax (Appeals) (hereinafter referred to as \"the CIT(A)\") and the Assessing Officer (hereinafter referred to as \"the AO\") are bad in law and void-ab-initio. 2 That, without prejudice, on facts and in law the CIT(A) erred in violating principles of natural justice rendering the impugned order void in law. 2.1 That on facts and in law the AO/CIT(A) have erred in drawing conclusions premised upon material/information not confronted to the appellant. 3. That on facts and in law the CIT(A) erred in arbitrarily and illegally assuming the power to enhance u/s 251. 4 That on facts and in law the CIT(A) has erred in upholding addition u/s 68 of the Act of Rs 2,21,50,000/- being closing balance of loan account due to Mr Virender Kumar Gupta. 5. That on facts and in law the CIT(A) has erred in holding that: (a) Creditworthiness of Mr Virender Kumar Gupta to advance loan of Rs 2,21,50,000/- is not established, (b) Transaction of loan was not genuine. (c) Accommodation entries were given to appellant by Mr Virender Kumar Gupta (d) Cash was paid by appellant to Mr Virender Kumar Gupta who in turn issued cheque's to appellant. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 3 of 25 6. Without Prejudice, on facts and in law the CIT(A) has erred in holding that alleged addition u/s 68 is not chargeable to tax as \"Income From Other Sources\". That the appellant prays for leave to add, alter, amend and/or vary the ground(s) of appeal at or before the time of hearing. 3. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidences brought on record duly considered. 4. Briefly stated, the facts of the case are that the assessee MPG Business Information Systems Private Limited, (hereinafter referred as MPG) is a resident company incorporated on 17.06.2011. The main object of the company was to do business of designing and development of enterprises solutions and business application software either for sale in India or for export outside India. The assessee filed its Return of Income on 25.09.2013 declaring loss of Rs. 3,21,40,274/-. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 4 of 25 5. On perusal of Balance Sheet of Assessee Company as 31.03.2013, duly audited by Santosh Garg & Co, the Assessing Officer noticed that MPG has shown \"Short Term Borrowings\" amounting to Rs. 5,73,80,000/-, which are as under:- Short Term Borrowings As at 31-03-2013 Amount As at 31-03-2012 Amount Secured - - Unsecured Loan from Directors 21,325,000.00 14,715,000.00 Loan from Others 36,055,000.00 16,900,000.00 Total 57,380,000.00 31,615,000.00 6. The assessee was asked to give reconciliation of 26AS with receipts shown in the P&L Accounts as also the confirmation of loan raised during the year and details of squared up loan. Vide letter dated 08.01.2016 the assessee company submitted through his AR, the confirmation of unsecured loan received from various parties as shown in his balance sheet as on 31.03.2013 as follows: Name of Party 1. Ghamandi Dayal Raghbar Dayal, Prop. Surinder Kumar Gupta 2. Shri Balaji, Prop. Nikhil Garg 3. Garg Enterprises, Prop Achala Garg 4. Virender Kumar Gupta, Prop. Varinder Kumar Gupta 5. Gaurav Goyal ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 5 of 25 6. Jugnu Goyal 7. A.V Infratech Pvt. Ltd 7. The Assessing Officer examined the confirmations submitted by the assessee and found that all the confirmations gathered from various parties were having same date i.e. Dated 01-Apr-2013. Also, the format of confirmation received from various parties were found to be having similar pattern. 8. Not satisfied with the confirmations, the Assessing Officer issued summons to verify the genuineness of loan to various parties. Initially, the parties at sr. no. 1,2,3 and 4 submitted ledger account of the assessee company along with bank statement and copy of their ITR through their counsel. Subsequently, the parties at sr. no. 1,2 and 3 also personally appeared before the AO and confirmed the transaction. 9. The party at Sr. no 4 however, Varinder Kumar Gupta (hereinafter referred to as VKG) submitted ledger account of the assessee company along with bank statement and copy of his ITR through their counsel. The said VKG also submitted his audited Balance sheet audited by Pankaj Man Singh & co. The ledger account of MPG in the books of VKG showed the ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 6 of 25 assessee MPG had a credit balance of an amount of Rs 2,21,50,000/- receivable from the assessee MPG. 10. The Assessing Officer, to verify the genuineness of the confirmation above submitted by VKG, further issued notice under 133(6) to Shri Pankaj Sharma, CA of Pankaj Man Singh & co, who is the auditor of VKG for confirmation of balance sheet audited by his firm. To the surprise of the AO, the audited balance sheet of VKG as 31.03.2013, submitted by the Auditor Pankaj Sharma, duly signed by both VKG and Pankaj Sharma, did not reflect any amount receivable from MPG, the assessee. Thereafter, the AO made further enquiries from the AO of VKG regarding the receivables of VKG. It was found from the Balance Sheet of VKG, submitted to the Income Tax Department by VKG himself during his own assessment proceedings, there was no mention of any amount receivables from MPG, the assessee. 11. The Assessing Officer, upon receipt of such information from the AO of VKG, gave another opportunity u/s 131 of the I T Act to VKG for personal deposition to explain the difference in the balance sheet with regard to ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 7 of 25 the loan advanced to MPG, the assessee. Shri VKG neither attended nor replied to the query raised. 12. The AO simultaneously informed the assessee about the above discrepancy and sought an explanation vide letter dated 15.03.2016. The assessee, in its reply, reiterated that the transaction with VKG was done in normal course of business and through banking channel and that the signed confirmation of VKG is already submitted. 13. The Assessing Officer, after all the enquiries, concluded the status of liability of the assessee company as on 31.03.2013 in respect of VKG amounting to Rs. 2,21,50,000/- as under: “i) M/s MPG Business Information Systems Pvt. Ltd. has shown amount of Rs. 2,21,50,000/- as unsecured loan from Sh. Virender Kumar Gupta and to justify this liability the company furnished confirmation from Sh. Virender Kumar Gupta alongwith ledger account, copy of bank statement and copy of ITR of Sh. Virender Kumar Gupta. ii) In response to summon dated 09.02.2016, Sh. Virender Kumar Gupta confirmed the transaction with M/s MPG vide his letter dated 16.02.2016 by furnishing a fabricated copy of his audited balance sheet. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 8 of 25 (iii) The auditor Sh. Pankaj Sharma provided the original audited balance sheet of Sh. Virender Kumar Gupta as at 31.03.2013 on 25.02.2016 to this office u/s 133(6) of Income Tax Act from which it became clear that there was no such amount shown by Sh. Virender Kumar Gupta as receivable from M/s MPG as 31.03.2013. (iv) The Income Tax Officer Ward-4(4) furnished the information by his letter No.10532 dated 29.03.2016 vide which it became clear that the books of accounts and audit report produced by Sh. Virender Kumar Gupta before the Assessing Officer during his course of assessment proceedings there was no such amount shown as receivable from M/s MPG at 31.03.2013. v) Sh. Virender Kumar Gupta also uploaded his audited balance sheet with all annexure to the AST Module of the Income Tax Department vide which it became clear that there was no such amount shown by Sh. Virender Kumar Gupta as receivable from M/s MPG at 31.03.2013. 14. The Assessing Officer finally concluded that it is apparent from the above that VKG was under influence of the relationship with M/s MPG and the transaction was made through the banking channel to hide the unaccounted/undisclosed transactions with MPG. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 9 of 25 15. The Assessing Officer, to verify the assessee statement that its transaction with VKG was in normal course of business, further found that the assessee is in the business of software designing and is IT related company whereas VKG is engaged in the business of Grain Merchant & Commission Agent. The Assessing Officer further examined u/s 131 of the Act, Sh. Surinder Kumar Gupta (brother of Sh. Virender Kumar Gupta) and Sh. Nikhil Garg (nephew of Sh. Virender Kumar Gupta) who confirmed in their statement on 18.03.2016 u/s 131 of Income Tax Act, 1961 that they did not have any business relationship with MPG. The AO therefore, concluded that the transaction cannot be done in normal course of business activity, Accordingly, the Assessing Officer held that the entire claim of liability shown by the assessee company in its books of accounts in respect of VKG amounting to Rs. 2,21,50,000 was not genuine and added back to the income of the assessee u/s 68 of the Act. 16. Aggrieved, the assessee went in appeal before the ld. CIT(A) who confirmed the additions made by the AO. Aggrieved, the assessee is before us. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 10 of 25 17. The ld AR, at the outset submitted that the ground no 1 is general and ground no 2 are not pressed. The same is therefore dismissed as not pressed. 18. The ld AR with respect to the ground 4 regarding addition of Rs 2,21,50,000/-, vehemently presented the following arguments: i) that the loan from VKG, during the AY 2013-14, was only 1,60,50,000/- and the balance Rs 61,00,000/- pertained to AY 2012- 13. ii) that an assessment u/s 143(3)/263 was passed in the case of VKG where loan given by VKG to the assessee in AY 2012-13 is on records of the tax department where disallowance of interest was also made in hands of VKG u/s 36(1)(iii) of the Act. iii) that in the course of assessment proceedings for A.Y 2013-14, the AO of VKG did not find in the balance sheet of Virender Kumar Gupta, the name of the assessee to whom VKG had advanced interest free loan. Thereafter, the AO of VKG made an addition u/s 143(3)/147 of Rs 1,60,50,000/- u/s 69 of the Act holding that in AY ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 11 of 25 2013-14 VKG had advanced loan to MPG, the assessee from his undisclosed sources. iv) that during the re-assessment proceedings of VKG, his AO further records that all transactions (whether advancing of loan or return of loan) between MPG and VKG have been conducted only through banking channels (refer page 28-29 of PB). v) that when the opening balance of loan is on records of tax department and then there can not be a situation where there are no transactions in the ensuing years, particularly when all transactions are through bank account. vi) that VKG may have fudged his accounts for FY 12-13 which have been filed by him with his Income Tax Return which is substantiated by the fact that in appeal vide order dated 29-03-2019 in appeal no. 453/17-18 (copy enclosed), Ld CIT(A) in case of VKG has held at para 8 that \"In these circumstances the contention of the appellant that he has not given any loan to M/s MPG Business Information System Private Limited during the year under consideration is factually incorrect\" ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 12 of 25 19. The ld AR thereafter referred to the legal propositions as under: (i) When entire loan has been repaid back to Mr Gupta on 23-02- 2015 and all transactions (even return of opening balance of Rs 61 lakh) are through bank and the identity of parties could not be disputed, addition u/s 68 is therefore to be deleted. (Refer PCIT vs Ambe Tradecorp (P) Ltd reported in 290 Taxman 471(Guj) (ii) Once addition is made in hands of the creditor which is an income tax payee then too the source of loan stands explained. (Refer Dev Darshan Designs (P) Ltd reported in (2024) 162 taxmann.com 793(Kol) (iii) There is no burden upon the assessee to prove the source of source qua the creditor. However, the AO has power and freedom to make enquiry from creditor or his sub-creditor and prove as a result of such enquiry that money received in form of loan in unexplained money of the ' assessee '. This burden has not been discharged by the AO. (Refer CIT vs Dhooti Pearls & Investment reported in 237 Taxman 104(Del) copy enclosed at pages 131 to 136 of PB-relevant at paras 12 to 14) (iv) Without prejudice, no addition can be made vis a vis opening balance of Rs 61 lakhs as there is no credit to this extend in the books of accounts for the year under consideration. {Refer Ivan Singh vs ACIT reported in 422 ITR 128(Bom). ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 13 of 25 v) Without Prejudice, the ld AR challenged the enhancement made by the CIT(A) (Ground Nos 3 and 6 of Appeal). The ld AR submitted that in the order of assessment, the AO has allowed set- off off current year business loss against addition u/s 68 of Rs 2.21 crores and has finally assessed the total income of the assessee at a loss of Rs 99.90 lakh (refer page 25 of AO order). CIT(A) for reasons recorded in paras 3.17 to 3.22 has held that addition u/s 68 cannot be set off against loss under any other head of income. In this regard the ld AR submitted that CIT(A) has erred in not appreciating that provisions of section 115BBE(2) have been amended by Finance Act 2016 w.e.f 01-04-2017 specifically to deny such a set-off. Prior to this amendment there is no such legal embargo. Amendment to section 115BBE(2) is not retrospective. The ld AR relied on CBDT Circular No. 11 of 2019 dated 19-06-2019 and case of Vijaya Hospitality and Resorts Ltd vs CIT reported in 419 ITR 322(Ker) and Shree Karthik Papers Ltd vd DCIT reported in 273 Taxman 546(Mad) . 20. Per contra, the ld DR relied on the orders of AO and the CIT(A). The ld DR vehemently argued that the said VKG furnished a fabricated balance sheet to show that he had advanced loan to the assessee. The ld DR pointed out that the said VKG never responded to notice u/s 131 for personal deposition even after being accorded several opportunities. The assessee was also intimated that the said VKG had not advanced any loan to the ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 14 of 25 assessee as his balance sheet did not reflect any receivable from the assessee. At this juncture, the Ld DR submitted that the assessee merely reiterated its stand that the transaction has been done through RTGS and the transaction is genuine. The ld DR relied on the decision of the Delhi High Court in the case of Seema Jain (2018) 96 taxmann.com 307 (Del) dated 11.07.2018 for the proposition that merely because transaction was squared of in the next financial year would not establish that the transaction is genuine and not bogus. 21. We have heard the rival submission and carefully perused the materials on record. It is a trite law that for discharging the initial onus cast by section 68 of the Act, the assessee has to establish (1) identity, (2) creditworthiness and (3) genuineness of the transaction and all the conditions are to be fulfilled cumulatively. Once the assessee proves all these three things cumulatively, his primary onus is discharged and the onus is shifted to the AO to prove otherwise. 22. Facts on records show that the assessee has shown in its balance sheet as on 31.03.2013, an unsecured loan of Rs 5,73,80,000/-. Of these loans, the dispute is only with respect to Rs. 2,21,50,000/- received from ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 15 of 25 VKG. The Assessing Officer found from the enquiry and investigation that the said VKG in response to summon dated 09.02.2016, confirmed the transaction with M/s MPG vide his letter dated 16.02.2016 by furnishing a fabricated copy of his audited balance sheet. 23. To prove that the loan are not satisfactorily explained as genuine, the AO made further enquiry with the auditor Sh. Pankaj Sharma, CA u/s 133(6) of Income Tax Act, where he found from the audited balance sheet of VKG as on 31.03.2013, duly signed by both VKG and Pankaj Sharma, CA, that there was no such amount shown by VKG as receivable from M/s MPG as 31.03.2013. 24. To consolidate his findings, the Assessing Officer further made enquiry with the Income Tax Officer Ward-4(4), the AO of VKG, from where it became clear that the books of accounts and audit report produced by VKG before his Assessing Officer during his course of assessment proceedings, did not show any such amount of Rs 2,21,50,000/.- as receivable from M/s MPG as on 31.03.2013. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 16 of 25 25. The AO, upon further enquiry found that VKG also uploaded his audited balance sheet with all annexure to the AST Module of Income Tax Department which showed that there was no such amount of Rs 2,21,50,000/- shown by VKG as receivable from M/s MPG at 31.03.2013. 26. We also note that the AO of VKG made an office note in his order u/s 143(3) dated 08.08.2014 for AY 2012-13 that the case was selected to verify large increase in unsecured loan taken. This order u/s 143(3) was subjected to revision by PCIT u/s 263 on account of interest not charged on loan given. The name of the assessee MPG figured in the list of person to whom interest free loan of Rs 61,00,000/- was advanced by VKG in FY 2011-12. 27. We also note that the AO of VKG noted in his order u/s 143(3) dated 29.01.2016 for AY 2013-14 that he did not find any loan from the accounts of the said VKG being extended to the MPG during the AY 2013-14. The assessment for AY 2013-14 was re-opened u/s 147 on the basis of information from the AO of the MPG that VKG had extended loan of Rs 2,21,50,000/- to the assessee MPG during AY 2013-14. As the same was not reflected in the audited Balance sheet of the VKG, the Department sought to add the said amount in his hand during his assessment proceedings u/s ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 17 of 25 143(3)/147. The said VKG vehemently opposed the said addition in his hand. However, an amount of Rs 1,60,50,000/-, pertaining to the FY 2012- 13, was added to the income of VKG. 28. We also note that the said VKG, not only in the assessment proceedings but also in the appellate proceedings before the CIT(A), vehemently denied having extended the amount of Rs 1,60,50,000/- to MPG in FY 2012-13 and stated that only Rs 61,00,000/- was given to MPG as on 01.04.2012 which was received back in cash. VKG also took a strong defense that the amount of Rs 1,60,50,000/- should not be added in his hand as the Rs 2,21,50,000/- (Rs 1,60,50,000 pertaining to FY 2012-13 + Rs 61,00,000/- pertaining to FY 2011-12) was already added in the hands of MPG. 29. We further find that the assessee has taken a defense that as the amount advanced by VKG has been returned back in subsequent year by 23.02.2015, hence the genuineness of the loan is established and therefore the same cannot be taxed. Further, as the parties advancing loan to MPG have responded to notices, their identities are established. Moreover, the transactions are certified by the bank, hence the genuineness of ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 18 of 25 transaction is established relying on PCIT vs Ambe Tradecorp (P) Ltd reported in 290 Taxman 471(Guj). 30. We find that in the instant case, facts are distinguishable from the facts of the case of Ambe Tradecorp. In the instant case, though the lender (VKG) has confirmed the loan transaction with the assessee MPG by showing a ledger account and audited balance sheet, yet VKG in scrutiny assessment of his own case, taking support of another set of audited balance sheet, strongly contested any loan being extended to the assessee MPG. In the instant case the lender himself has denied any loan advanced to the assessee when his own case was scrutinized u/s 143(3)/147. Thus, as against the facts of Ambe Tradecorp case, though the identity of lender may not be an issue, the genuineness of transaction is definitely not established. In instant case the lender himself has denied extending any loan to the assessee. 31. Furthermore, we are of the considered view that the repayment of loan does not make the original acceptance of loan as genuine. Such an argument is against the language of provision of section 68. The criteria of identity, creditworthiness and genuineness of transaction are to be tested ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 19 of 25 at the time of amount being credited in the books of account of the assessee. All subsequent events are immaterial. We are fortified in our view by the decision of Hon’ble Delhi High Court in the case of Seema Jain (2018) 96 taxmann.com.307(Del) where it held that merely because the transaction was squared off in the next financial year, that would not establish that the transaction is genuine and not bogus and the hon’ble Delhi High Court upheld the addition u/s 68. 32. We also note that the CIT(A) has recorded in his order that he had perused the copy of bank account of the VKG, a part of which was available in the records. The CIT(A) gives a finding of fact that the bank statement of VKG reveals that there are huge amount of cash deposits in the bank account of the VKG. The CIT(A) further concludes that in these circumstances the creditworthiness of the VKG to advance the loan of Rs 2.21 crore is also not established. We are therefore of the considered view that the finding of the CIT(A) be endorsed that the transactions pertaining to loans from the VKG were not genuine and only logical explanation is that these were mere accommodation entries given by the VKG to the MPG which were arranged by paying cash to VKG who deposited the cash in his bank account and issued cheques to the MPG claiming it to be interest free ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 20 of 25 loan. We find no hesitation in rejecting the argument of the assessee that since the transaction has been conducted through banking channel, the loan received should be considered as genuine. 33. In the above narrated circumstances, we are of the considered opinion that, notwithstanding the fact that the transactions with VKG are claimed to be through banking channels, the genuineness of the transactions are not satisfactorily explained and remains dubious. Perusal of the copy of the bank account of Sh. Virender Kumar Gupta, a part of which was available in the records reveals that there were huge amount of cash deposits in the bank account of VKG. In these circumstances, the creditworthiness of VKG to advance interest free loan amounting to Rs. 2.21 crores is also not established. The assessee’s argument that the fact that the said loan was repaid by the MPG in a period of 3 to 4 years, establishes its genuineness, also does not hold water when the transactions are tested on the principle of creditworthiness and genuineness of transaction. It is highly improbable that a person would give huge amount of loan amounting to Rs. 2.21 crores without any agreement, interest payment or security, and in the words of Hon’ble Delhi Court is 'fantastic' ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 21 of 25 and 'incredible' to say the least. VKG not attending the summons, having huge cash deposits in his bank account, vehemently denying extending loan to MPG during his own assessment proceedings, fabricating his own audited balance sheet are vital and telltale evidence which showed that the transaction was far from being genuine. The Assessee had clearly failed to discharge the onus cast upon him qua this creditor. 34. The transactions in the instant case are yet another example of the constant use of the deception of loan entries to bring unaccounted money into banking channels. The Hon’ble Supreme Court and the High Courts have constantly held that such device of loan entries continues to plague the legitimate economy of our country. As seen from the facts narrated above, the transactions herein clearly do not inspire confidence as being genuine and are shrouded in mystery, as to why the creditor VKG, a grain merchant, would lend such huge unsecured, interest free loans - that too without any agreement to an assessee in the business of Information /Software technology. In the absence of the same, as also the fact that there were huge deposit of cash in the bank of VKG, VKG fail the test of creditworthiness and the transactions fail the test of genuineness. Ground No. 5 is accordingly dismissed. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 22 of 25 35. Insofar as the quantum of addition in assessment year 2013-14 is concerned, we find that in the impugned year there was an opening balance of Rs 61,00,000/- as on 31.03.2012, and the assessee had received Rs 1,60,50,000/- during the year. We therefore agree with the argument of the assessee that additions on account of unexplained credit u/s 68 of the Act be limited to Rs 1,60,50,000/-. We direct accordingly. Ground No. 4 of the assessee are partly allowed. 36. With respect to ground No. 3 and 6 regarding assumption of power by CIT(A) to enhance under section 251, we find that the AO has allowed set- off of current year business loss against addition u/s 68 of Rs 2.21 crore and has finally assessed the total income of the assessee at a loss of Rs 99.90 lakh (refer page 25 of AO order). We find that the CIT(A), for reasons recorded in paras 3.17 to 3.22 of his order, has held that addition u/s 68 cannot be set off against loss under any other head of income and denied the set off allowed by the Assessing Officer. In this regard we find substantial force in the submission of the assessee that the provisions of section 115BBE(2) have been amended by Finance Act 2016 w.e.f 01-04- 2017 specifically to deny such a set-off. The CBDT Circular No. 11 of 2019 dated 19-06-2019, further, clearly lays down the intention of legislature ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 23 of 25 that the amendment to section 115BBE(2) is not retrospective and prior to this amendment there is no such legal embargo. The said Circular reads as under: 4. “Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act 2016 to remove any ambiguity of interpretation, the Board is of the view that the since the term ‘or set off of any loss” was specifically inserted only vide the Finance Act 2016 w.e.f 1.4.2017, an assessee is entitled to claim set off of loss against income determined under section 115 BBE of the Act till the assessment year 2016-17”. 37. We are therefore of the considered view that as the denial of set-off of losses against income referred to in section 68, as propounded in section 115BBE(2), only comes in effect from 1.4.2017, the assessee is entitled to set off the loss from the deemed income u/s 68 of the Act. We therefore hold that during the relevant AY 2013–14, there was no bar existed with respect to allowing set-off from loss against deemed income under section 68. We are fortified in our view by the decisions of Vijaya Hospitality and Resorts Ltd vs CIT reported in 419 ITR 322(Ker) and Shree Karthik Papers Ltd vs DCIT reported in 273 Taxman 546(Mad). Ground No. 3 and 6 of the assessee and accordingly allowed. ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 24 of 25 38. In the result, the appeal of the assessee in ITA No. 4792/DEL/2019 is partly allowed. The order is pronounced in the open court on 23.04.2025. Sd/- Sd/- [MADHUMITA ROY] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 23rd April, 2024. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi ITA No. 4792/DEL/2019(AY 2013-14) MPG Business Information Systems Vs DCIT Cir -2, Gurgaon Page 25 of 25 Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order .04.2025 2. Date on which the typed draft Tribunal Order is placed before the Dictation Member .04.2025 3. Date on which the typed draft Tribunal Order is placed before the other Member 4. Date on which the approved draft Tribunal Order comes to the Sr. P.S./P.S. 5. Date on which the fair Tribunal Order is placed before the Dictating Member for pronouncement 6. Date on which the signed order comes back to the Sr. P.S./P.S 7. Date on which the final Tribunal Order is uploaded by the Sr. P.S./P.S. on official website 8. Date on which the file goes to the Bench Clerk alongwith Tribunal Order 9. Date of killing off the disposed of files on the judiSIS portal of ITAT by the Bench Clerks 10. Date on which the file goes to the Supervisor (Judicial) 11. The date on which the file goes for xerox 12. The date on which the file goes for endorsement 13. The date on which the file goes to the Superintendent for checking 14. The date on which the file goes to the Assistant Registrar for signature on the Tribunal order 15. Date on which the file goes to the dispatch section 16. Date of Dispatch of the Order "