MS COMMUNIQUE MARKETING SOLUTIONS PRIVATE LIMITED ,NEW DELHI V. DCIT, NEW DELHI

CO 27/DEL/2025

AI Insights

The case involves an appeal by the Deputy Commissioner of Income Tax against the order of the Learned Commissioner of Income Tax (Appeals) which had partly allowed the appeal of Ms Commmunique Marketing Solutions (P) Ltd. The primary issues in the appeal were the additions made under Section 68 of the Income Tax Act, 1961, concerning unsecured loans, and the disallowance of interest expenditure under Section 37. The Tribunal examined the evidence presented, including the financial statements and bank transactions, and concluded that the assessee had adequately demonstrated the legitimacy of the loans and the corresponding interest payments. The Tribunal also addressed the applicability of Section 115 BBE, noting that the higher tax rate on cash credits did not apply to the transactions in question as they occurred before the relevant notification date.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 783732 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 03-03-2025
• Other Referred Cases: Toby Consultants (P) Ltd. Vs CIT, Mangilal Jain Vs. ITO, Sanraj Engineering Pvt. Lid. Vs CIT, PCIT Vs Bikram Singh, Sitaram Ramchand das Patel Vs. ITO, Seema Jain Vs ACIT, C.V. Ravi Vs. ITO, CIT vs. N Tarika Properties Investments P. Ltd., Jayeshkumar Chhakaddas Shah v/s GordhanjiMafaji Thakor, J. Kumaradasan Nair Vs. IRIC Sohan, P.K. Palanisamy v. N. Arumugham, Mandlal Jaiswal & Co. v. CIT, Shri Cherian Abraham Vs. DCIT, CIT vs Madurai Knitting Co, Namdev Arora, Manoj Aggarwal, Union of India Vs Major Bahadur Singh, Kasimtharuvi Tea Estate Ltd. Vs. State of Kerala
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: S ASHOK GARG; VISHAL KALRA
• Keywords: Additional evidence; Revised return; Corroborative evidences; Rejection of books of accounts; TDS; Bogus
• Section: 143(3); 142(1); 68; 69; 37; 28

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘B’ NEW DELHI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 4762/Del/2024 Assessment Year: 2017-18 Deputy Commissioner of Income Tax, Circle 4(2), New Delhi. Vs. Ms Commmunique Marketing Solutions (P) Ltd., 5407, Arya Samaj Road, Karol Bagh, New Delhi-110005 PAN :AACCC3432F (Appellant) (Respondent) Cross-Objection No.27/Del/2025 (Arising out of ITA No.4762/Del/2024) Assessment Year: 2017-18 Ms Commmunique Marketing Solutions (P) Ltd., 5407, Arya Samaj Road, Karol Bagh, New Delhi-110005 Vs. Deputy Commissioner of Income Tax, Circle 4(2), New Delhi. PAN :AACCC3432F (Appellant) (Respondent) Department by Shri Rajesh Kumar Dhanesta, Sr. DR Assessee by S/Shri Ashok Garg & Vishal Kalra, Advs. Date of hearing 20.08.2025 Date of pronouncement 07.11.2025 Printed from counselvise.com 2 ITA No. 4762/Del.2024 & CO No.27/Del/2025 ORDER PER VIMAL KUMAR, JUDICIAL MEMBER: The appeal filed by the Revenue and Cross-Objection by the assessee are against order dated 27.08.2024 of Learned Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 (hereinafter referred as “the Act”) arising out of Order dated 12.12.2019 of the Learned Assistant Commissioner of Income Tax , Circle 6(1), Delhi (hereinafter referred as “the Ld. AO”) under Sections 143(3) Act for assessment year 2017- 18. 2. Brief facts of the case are that the assessee company filed return of income on 04.11.2017 showing income of Rs. 9,91,34,394/-. The return was processed under Section 143(1) Act. The revised return of the assessee was selected by CASS for Limited Scrutiny for assessment year 2017-18 to verify two issues i.e. (i) Bonus or Commission Paid to Employee and (ii) Unsecured Loans. Notice under Section 143(2) of the Act was issued on 22.09.2019 and duly served upon the assessee. Notices under Section 142(1) of the Act dated 26.09.2019, 15.11.2019 and 22.11.2019 along with detailed questionnaire were issued. The assessee furnished details online through e-proceedings which were duly examined. On completion of proceedings, Ld. AO vide order dated Printed from counselvise.com 3 ITA No. 4762/Del.2024 & CO No.27/Del/2025 12.12.2019 made additions of Rs.5,00,00,000/- under Section 68 of the Act and Rs.51,39,694/- due to disallowance of bogus interest expenditure under Section 37 of the Act. 3. Against order dated 12.12.2019 of Ld. AO, the appellant/assessee preferred appeal before the Ld. CIT(A) which was partly allowed vide order dated 27.08.2024. 4. Being aggrieved, the appellant/revenue preferred present appeal with following grounds: “(1) Whether the Ld. CIT(A) has erred in disallowing the addition u/s 68 of the Act amounting to Rs. 5,00,00,000/- which is an unaccounted credit received through unsecured loans from its own entities. 2. Whether the Ld. CIT(A) has erred in deleting the addition amounting to Rs. 51,39,694/- made by AO on account of bogus interest expenditure on these loans u/s 37 of the Act. 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal”. 5. The respondent/assessee also preferred Cross-Objection as under:- “1. That on the facts and circumstances of the case and in law, the learned CIT(A) grossly erred in not deciding the ground of appeal to the effect that the provisions of amended Section 115 BBE of the Income Tax Act, 1961 are not applicable to the facts of the case because all the Credits in question were prior to the date of relevant Notification dated 18.12.2016 by which the higher rate of tax was made applicable to income represented by cash credits of the nature mentioned in Section 68 of the Act. 2. That on the facts and circumstances of the case and in law, the learned CIT(A) should have held that the provisions of section 115BBE imposing higher rate of tax to cash credits under Section 68 become effective from Printed from counselvise.com 4 ITA No. 4762/Del.2024 & CO No.27/Del/2025 the transactions taking place after 01.04.2016 ( and in any case not earlier than 15.12.2016). 3. That on the facts and circumstances of the case and in law, the learned CIT(A) should have held that an amount of Rs.11,25,000/- out of total interest (Rs.51,39,694/-) disallowed by Assessing Officer was in any case not disallowed as the same pertained to cash credits taken in previous year(s) prior to the previous under consideration.” 6. Learned Authorized Representative for Revenue submitted that Ld. CIT(A) erred in deleting additions despite detailed reasoning of Ld. Assessing Officer. Ld. CIT(A) deleted the Ld. AO order merely repayment basis and without considering the detailed facts under Section 68 of the Ld. AO order. Reliance was placed on the following decisions: (i) Toby Consultants (P) Ltd. Vs CIT Delhi High Court 2009 [2010] 324 ITR 338 (Delhi) (ii) Mangilal Jain Vs. ITO Madras High Court 2009 [2009] 315 ITR 105 (Madras)/[2010] 229 CTR 183 (Madras) (iii) Sanraj Engineering Pvt. Lid. Vs CIT Delhi High Court 2016 2016-TIOL-316-HC-DEL-IT (iv) PCIT Vs Bikram Singh Delhi High Court 2017 [2017] 85 (Delhi)/[2017] 250 Taxman 273 (Delhi)/[2017] 399 ITR 407 (Delhi) (v) Sitaram Ramchand das Patel Vs. ITO Gujarat High Court 2018 [2018] 95 taxman.com 290 (Gujarat) Printed from counselvise.com 5 ITA No. 4762/Del.2024 & CO No.27/Del/2025 (vi) Seema Jain Vs ACIT Delhi High Court 2018 [2018] 96 taxmann.com 307 (Delhi)/[2018] 257 Taxman 380 (Delhi)/[2018] 406 ITR 411 (Delhi) (vii) C.V. Ravi Vs. ITO Supreme Court 2021 2021 [2021] 129 taxmann.com 44 (SC)/[2021 281 Taxman 362 (SC) (viii) CIT vs. N Tarika Properties Investments P. Ltd. Delhi High Court 2013 40 taxmann.com 225 (Delhi) [2013] 6.1 Non-mentioning of the section or indication of a wrong section would vitiate the assessment order. Section 292B which states that no assessment, notice, summons or other proceedings taken by the authorities under the Act shall be invalid by reason of any mistake, defect or omission if such notice or proceedings or assessment is otherwise valid under the Act. This provision embodies the principle that mere non-mentioning or mentioning of a wrong provision of law in a proceedings or order can not be a ground to invalidate it if that is otherwise permissible and valid under law. In following the judgments, this principle has been provided. a. Jayeshkumar Chhakaddas Shah v/s GordhanjiMafaji Thakor, Civil Appeal No. 10521 of 2013 (SC). b. J. Kumaradasan Nair Vs. IRIC Sohan 2009 AIR SCW 1921 (SC); c. P.K. Palanisamy v. N. Arumugham, (2009) 9 SCC 173 (SC) the Hon'ble Apex Court; d. Mandlal Jaiswal & Co. v. CIT [1998] 232 ITR 540; e. Shri Cherian Abraham Vs. DCIT, LT.A. No. 575/Bang/2016; f. ITR 36 - Madras HC - CIT vs Madurai Knitting Co-doj: 13.02.1975; g. Namdev Arora [2016] 72 taxmann.com 124 [Punjab & Haryana]; & Printed from counselvise.com 6 ITA No. 4762/Del.2024 & CO No.27/Del/2025 h. Manoj Aggarwal [2008] 113 ITD 377 (Delhi) (SB), the Hon'ble Special Bench of Delhi ITAT on 25.07.2008 has held that wrong quoting of section is not fatal to the proceedings, and has preferred substance over form: \"26. The argument advanced on behalf of the assessee before us was that the assessee was not maintaining any books of account and the deposits were found only in the assessee's bank statement which cannot be considered as the books of account of the assessee and, therefore, section 68 was not applicable. Our attention was drawn to the confirmation letters placed at pages 159 and 160 of the paper book. We are however unable to accept the argument. Though section 68 of the Act may not be strictly applicable since the assessee was not maintaining any books of account and the bank statement cannot be considered as the assessee's books of account, on the basis of the judgment of the Supreme Court in the case of A. Govindarajulu Mudaliar v. CIT (1958) 34 ITR 807, it is the onus of the assessee to explain the cash received by him and if there is no explanation or acceptable evidence to prove the nature and source of the receipt, the amount may be added as the assessee's income on general principles and it is not necessary to invoke section 68, nor is it necessary for the income- tax authorities to point out the source of the monies received. Even if section 68 is not applicable, the cash deposit in the bank can be asked to be explained by the assessee under section 69 or section 69B of the Act. No doubt the assessee had tried to file additional evidence before the CIT (Appeals) in the form of confirmation letters and income- tax returns but these were not admitted by the CIT (Appeals) and no reasons have been shown before us as to why they should have been admitted. In the absence of any clinching evidence to show the nature and source of the monies deposited into the bank account which belongs to the assessee, the Assessing Officer was justified in adding the amount of Rs. 15 lakhs as the assessee's unexplained income. We confirm the addition and dismiss the ground.\" 6.2 An addition u/s 68 is permissible without rejecting books of account. When it is argued that once audited books of accounts are accepted as such no addition is permissible or in other words addition u/s 68 can not be made without rejecting books of account or that section 68 does not apply to a sum already disclosed as income. It is not correct and not acceptable because section 68 is outside the Chapter-IVD [Sections 28 to 44BD] of the Act. This addition is unlike additions u/s 36, 37 etc which come under the head business and Printed from counselvise.com 7 ITA No. 4762/Del.2024 & CO No.27/Del/2025 profession. Rejection of books of account comes under section 145[3] while section 145[1] provides that it is for computation of income under the heads \"Profits and Gains of Business and Profession\" or \"Income from Other Sources\". Therefore addition u/s 68 is not an addition under the head business or profession and hence section 145[3 i.e. rejection of books of accounts is not necessary. 6.3 Whether addition u/s 68 can be made on a/c of cash deposit in bank account and assessee does not maintain books of account: The Hon'ble ITAT, Delhi Bench 'G' in its decision dated 13.5.2019, delivered in ITA No. 937 and 938 of 2012 in the case of Shri Janak Goel, considered this issue and concluded, vide para No. 19, as under: “The honourable Bombay High Court noted in Sudhir Kumar Sharma (HUF) vs CIT, 46 taxmann.com 340, that when during the course of assessment proceedings, assessing officer noted that the assessee has deposited huge amount of cash in his bank account, the addition of the said amount in the income of the assessee, by invoking the provisions of section 68 of the income tax act is justified. It was further held that onus is on the assessee to explain the nature and source of the said cash deposits. Special leave petition was preferred challenging the above judgment before honourable Supreme court. However, the honourable Supreme Court has dismissed the same in 69 taxmann.com 219 [239 taxmann 264]. In view of this, even if the assessee does not maintain any books of accounts but the amount is deposited in the bank account of the assessee, which remains unexplained the addition could be correctly made u/s 68 of the act. Further looking at the definition of the books or books of accounts it is apparent that passbook is a daybook which is kept in the return form or as a printout Page | 10 of data stored in a floppy. Therefore, after the introduction of the definition of the books or books of account under section 2 (12A) of the act, the passbook can also be considered as books or books of account. There is no distinction who writes it, but it is record of the transactions entered into by the assessee with the bank. The provisions of section 68 of the income tax act also does not make any distinction about who maintains the books of account, the only requirement is that the books should be of an assessee. There is no requirement that the books of account should be maintained by the assessee himself. In view of this, we do not find any infirmity in the order of the learned CIT - A, in confirming an addition of INR 512000/- on account of unexplained bank deposits under section 68 of the income tax act. Accordingly, the additional ground raised by the assessee for assessment year 2004-05 is also dismissed.” Printed from counselvise.com 8 ITA No. 4762/Del.2024 & CO No.27/Del/2025 6.4 So far as the reliance by the appellant on several judgments presuming to be in its favour it is submitted that in those case the direct evidences, as available in this case were not available before the Hon'ble Benches hence, they are not applicable in this case. As the facts are always distinct and separate in each case the principles of one case cannot be applied blindly to another case. In Union of India Vs Major Bahadur Singh [2006] 1SCC 368 [Para 9 & 11] the Hon'ble Supreme Court held that the observations made in a judgment must be read in the context in which they appear to have been stated. Their lordships of the Supreme Court further held that circumstantial flexibility, one additional or different fact, may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision was held to be not proper. Thus, principles enunciated therein are different from the facts of the instant case and hence the appellant's plea that these judgments are applicable to the appellant has no locus standi. In view of the detailed discussions in assessment order, order of Ld. CIT(A), case laws relied by the AO & Ld. CIT(A), above submissions and relevant case-laws, it is requested that the appeals of the assessee may kindly be dismissed. It is also requested to kindly allow further oral submissions, which may also be made during the course of hearing, if required.” 7. Learned Authorized Representative for the respondent assessee, submitted that the assessee paid interest on loan. 8. From examination of record in light of aforesaid rival contentions, it is crystal clear that Ld. CIT(A) in order dated 27.08.2024 in para no. 5 held as under: “5.OBSERVATION AND DECISION: अवलोकन एवं िनणŊय I have perused the detail submissions of the appellant and the assessment order of the AO and the following observation are made. Printed from counselvise.com 9 ITA No. 4762/Del.2024 & CO No.27/Del/2025 The ground nos. 1 to 4 and 6 to 15 are related to the addition of Rs.5,00,00,000/- under section 68 of the Act, on account of loans taken from the impugned three parties namely M/s. Suraj Trading Company Pvt. Ltd., M/s Suraj Buildmart India Pvt. Ltd. and M/s Suraj Dalmill Pvt. Ltd., Hence the same are adjudicated jointly. During the appellate proceeding the appellant submitted that the following documents/ evidences which were filed before the AO during the assessment proceedings to prove the identity, genuineness and creditworthiness in respect of the impugned loans taken from the above mention three parties:- 1. Loan of Rs.1,00,00,000/- taken from M/s Suraj Trading Company Pvt. Ltd. Identity of the Lender: - Details fetched from Company Master Data - Certificate of Incorporation - Copy of acknowledgement of ITR for PAN Details. Credit Worthiness of the Lender Party: -The Bank statement of the said lender company. The financial of the Company. Genuineness of the Transaction: - Ledger account of the lender company - Confirmation of accounts - Bank statement of the assesse company evidencing the loan received and interest paid - Bank statement of the lender company 1. Loan of Rs.2,00,00,000/- taken from M/s Suraj Buildmart Pvt. Ltd. Identity of the Lender: Printed from counselvise.com 10 ITA No. 4762/Del.2024 & CO No.27/Del/2025 Details fetched from Company Master Data Certificate of Incorporation Copy of MOA of the lender company, relevant point no.16. Copy of acknowledgement of ITR for PAN Details. Credit Worthiness of the Lender Party: -The Bank statement of the said lender company. -The financial of the Company. Genuineness of the Transaction: Ledger account of the lender company Confirmation of accounts Bank statement of the assesse company evidencing the loan received and interest paid Bank statement of the lender company 1. Loan of Rs.2,00,00,000/- taken from M/s Suraj Dall Mills Pvt. Ltd. Identity of the Lender: Details fetched from Company Master Data Certificate of Incorporation Copy of acknowledgement of ITR for PAN Details. Credit Worthiness of the Lender Party: -The Bank statement of the said lender company. - The financial of the Company. Genuineness of the Transaction: Ledger account of the lender company Printed from counselvise.com 11 ITA No. 4762/Del.2024 & CO No.27/Del/2025 Confirmation of accounts Bank statement of the assesse company evidencing the loan received and interest paid Bank statement of the lender company. Further it is also observed that the appellant company has paid the interest at rate of 9% P.A. to the lenders after due deduction of the TDS on such payments. It is worthwhile to mention here that the entire loan taken from the impugned three parties have been repaid in the succeeding F.Y. and no adverse action has been taken by the department against such repayment. It is also observed from the above discussion that the three lenders had sufficient net worth to grant the above loan amount to Rs.5, 00, 00,000/- to the appellant Company. During the appeal preceding the appellant filed its written submission relied upon the various judicial precedents in support of its contention to delete the addition made by the AO u/s 68 of the Act. During the assessment proceedings the AO concluded that the applets company's reply is not tenable since the genuineness of the unsecured loan transitions with the three parties namely M/s Suraj Trading Company Pvt. Ltd., M/s Suraj Buildmart Pvt. Ltd. and M/s Suraj Dall Mills Pvt. Ltd. is not proven. Hence the AO added the above mentioned unsecured loan of Rs.5,00,00,000/- received during the Year in question under provision of section 68 of the Act. But from the Hon'ble Madras High Court's judgment in the case of M/s. Lalita Jewellery Mart P. Ltd. vs The DCIT the Court observed that as the legal principle enunciated by the Supreme Court is that so long as the proof of Identity of the investors and the payment received from him is through a doubtless channel like that of a Banking channel, the receipt in the hands of by the assesse towards the investment does not change its colour. The money so invested in the assesse company would still be the money available and belonging to the investors. The consistent principle followed is that the investor's sources and creditworthiness cannot be explained by the assesse. If the department has doubt about the genuineness of the investor's capacity, it is open to the department to Printed from counselvise.com 12 ITA No. 4762/Del.2024 & CO No.27/Del/2025 proceed against thought investors. But in this case without taking such a course of action the AO is proceeding on conjectures that the assesse has bogus income and the same brought in to books in the form of unsecured loan. The very approach of the assessing officer is completely opposed to settled legal principle enunciated and he has arrived at conclusions contrary to the legal principle on this issue. Further the AO is finding fault with the assesse for the alleged failure of its investors in providing beyond doubt they have the capacity to invest at the moment they did in the assesse company. That is clearly a perverse view, as the AO is not expected to perform a near impossibility. The assesse cannot call upon its investors to disclose, all such business transection they carried on in the immediate past. The assesse cannot also call upon its investors to proof their good business hence in investing in the assesse company; as such investors cannot gain any controlling stake. Considering the detail submissions of the appellant and in view of the above discussion it is concluded that the appellant is only required to explain the source of investment and when once that gets established, it is for the department to proceed against the investor in case those investors have not properly explained their own sources for investing in the assesse company. Since the appellants company established their identity, genuineness and creditworthiness as well as the transactions made through banking channel, hence the addition made by the AO u/s 68 of the Act, of an amount of Rs.5,00,00,000/- is unwarranted. As such the grounds no.1 to 4 and 6 to 15 taken by the appellant are allowed. The appellant raised the ground no.5 against the disallowance of interest paid on unsecured loan of Rs.5,00,00,000/- made by the AO during the assessment proceedings. As the addition in respect of unsecured loan of Rs.5,00,00,000/- has deleted above, the interest on said loans cannot be disallowed. Hence the disallowance of interest amounting to Rs.51,39,694/- is deleted and as such the appeal of the appellant on this grounds is allowed. The other grounds are consequential in nature and hence not adjudicated upon. In view of the above, appeal of the appellant is partly allowed.” 9. From perusal of above findings of Ld. CIT(A), it is evident that assessee paid interest @ 9% per annum to the lenders after deducting TDS on the Printed from counselvise.com 13 ITA No. 4762/Del.2024 & CO No.27/Del/2025 payments. Entire loan taken from three parties was repaid in the succeeding financial years and no adverse action was taken by the Department against such repayments. The three lenders had sufficient networth to grant loan of Rs.5,00,00,000/- to the assessee. Therefore, the addition of Rs.5,00,00,000/- under Section 68 of the Act and disallowance of interest amounting to Rs.51,39,694/- under Section 37 of the Act were rightly deleted by the Ld. CIT(A). As such, in absence of any supporting evidence, the grounds of appeal by the Revenue being de void of merit are rejected. 10. Ld. CIT(A) erred in not deciding grounds of appeal no.17 to the effect that section 115 BBE of the Act was not applicable to the facts of case because all the credits were prior to Notification dated 15.12.2016 by which higher rate of tax was made applicable by represented cash credits under Section 68 of the Act. Ratio of judgment decided by the Hon’ble Apex Court in the case of Kasimtharuvi Tea Estate Ltd. Vs. State of Kerala (1966) 60 ITR 262 (S.C). Therefore, the Cross-objection nos. 1 to 3 are accepted. 11. In the result, the appeal of Revenue is dismissed and cross-objection of Assessee is allowed. Order pronounced in the open court on 07th November, 2025. Sd/- Sd/- (S RIFAUR RAHMAN) ACCOUNTANT MEMBER (VIMAL KUMAR) JUDICIAL MEMBER Dated: 07 November, 2025. Mohan Lal Printed from counselvise.com 14 ITA No. 4762/Del.2024 & CO No.27/Del/2025 Copy forwarded to: 1. Applicant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Printed from counselvise.com "