UNIQUE FINANCE & SECURITIES PVT. LTD.,KOLKATA V. ACIT, CIR. 8(2), KOLKATA

ITA 355/KOL/2024

AI Insights

The case involves Unique Finance & Securities Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre, Delhi, confirming the addition of \\u20b93,49,00,000 as unexplained cash credit under section 68 of the Income Tax Act for the assessment year 2017-18. The Assessing Officer (AO) had initially added this amount to the assessee's income, considering the unsecured loans from five companies as unexplained, based on the investigation wing's report labeling these companies as shell entities. The Commissioner of Income Tax (Appeals) upheld this addition. However, the Tribunal, after examining the evidence and the legal precedents cited, concluded that the assessee had adequately demonstrated the legitimacy of the loan transactions, leading to the allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473867 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: PCIT Vs. Swathi Bajaj, PCIT vs Sreeleathers, CIT vs. Dataware Private Limited
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: SUNIL SURANA
• Keywords: Set aside; Question of law; Unexplained cash credit; TDS; Accommodation entries
• Section: 143(3); 142(1); 143(2); 68; 131; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.355/KOL/2024 (Assessment Year: 2017-18) Unique Finance & Securities Pvt. Ltd. Plot No. 35 11/1A/1 East Topsia Road, Gobinda Khatick Road, Kolkata, West Bengal, 700046 Vs. ACIT, Cir. 8(2) Aayakar Bhawan P-7, Chowringhee Square, Kolkata, West Bengal, 700069 (Appellant) (Respondent) PAN No. AABCR2528L Assessee by : Shri Sunil Surana, AR Revenue by : Shri Ranu Biswas, DR Date of hearing: 18.03.2025 Date of pronouncement : 01.04.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 17.01.2024 for the AY 2017-18. 02. The issue raised in ground no.1 is against the confirmation of addition of ₹3,49,00,000/-by ld. CIT (A) as made by the ld. AO on account of unsecured loans being unexplained cash credit u/s 68 of the Act. 03. The facts in brief are that the assessee filed the return of income on 30.10.2017, declaring total income of ₹85,20,810/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). Accordingly, notices u/s 143(2) and 142(1) along with Page | 2 ITA No.355/KOL/2024 Unique Finance & Securities Pvt. Ltd.; A.Y. 2017-18 questionnaire were issued. On the basis of the details/evidences furnished by the assessee, the AO observed that assessee has raised funds from five companies during the impugned assessment year in the form of unsecured loans. Accordingly, the information/ details were called for, which were duly filed by the assessee. The ld. AO in order to independently verify the transactions also issued notice u/s 133(6) of the Act to the said entities, which were duly replied by the loan creditors. Thereafter the ld. AO on the basis of information furnished noted that these companies had nominal fixed assets and meagre income and therefore, no creditworthiness for lending money to the assessee and the said companies were stated to be shell companies by the director of investigation in the database. Finally, the loans were stated to be unexplained cash credit on the ground that the genuineness of the transactions of the creditors were not proved and accordingly added to the income of the assessee. The ld. AO also added the interest paid to the said parties amounting to ₹34,66,672/-. 04. In the appellate proceedings, the ld. CIT (A) dismissed the appeal of the assessee by upholding the order of the ld. Assessing Officer. The ld. CIT (A) while dismissing the appeal of the assessee held that the ld. AO has righty made the addition based on the information received from the investigation wing which contained the statement given on oath by hawala operators, wherein it was disclosed that various entities operated by them engaged in giving accommodation entries and the names of the loan creditors from whom the assessee received the unsecured loans were also appearing in the said list. Thereafter the ld. CIT (A) after relying on the decision of the Hon'ble Calcutta High Court in case of PCIT Vs. Swathi Bajaj (Calcutta) Appeal No. 1A No. GA/2/2022, confirmed the order of the ld. Assessing Officer. The ld. CIT (A) also relied on the various other decisions as discussed in Page | 3 ITA No.355/KOL/2024 Unique Finance & Securities Pvt. Ltd.; A.Y. 2017-18 the appellate order. The ld. AR vehemently submitted before us that the assessee has fully furnished all the details/ evidences as called for by the ld. AO which are given from page no.2 to 172 of the paper book. The ld. AR submitted that the said details/evidences comprised of names, addresses, ITRs, audited profit and loss accounts, balance sheets, loan confirmations, municipal tax receipts, replies to notice u/s 133(6) of the Act along with ledger accounts were furnished and even in one case the assessment order framed u/s 143(3) of the Act was also placed before the ld. Assessing Officer. The ld. AR submitted that the ld. AO had relied on the investigation Wing report that these loans creditors were engaged in providing hawala accommodation entries. however, strongly denied the fact that Shri Pravin Agarwal, whose statement was recorded u/s 131 of the Act by the ld. DDIT (Inv), Kolkata had ever named the assessee to be beneficiary of the hawala entries. The ld. AR therefore prayed that the addition made by the ld. AO based upon the investigation wing and statement of the hawala operators was not sustainable and even the ld. AO has not pointed out any defect or deficiency in the documents filed by the assessee. The ld. AR also referring to the summary statement which is available at page no. 1, which contained the details as to the lenders capital and reserves, profit declared and total turnover and submitted that the creditworthiness of the loans were duly proved. The ld. AR further submitted that these loans were taken on interest, which was duly paid after deduction of tax at source and the TDS was also deposited in the government treasury. The ld. AR in defense of his argument relied on the decision of Calcutta High Court in case PCIT vs Sreeleathers in ITAT/18/2022 (IA No: GA/02/2022) vide order dated 14.07.2022 and CIT vs. Dataware Private Limited vide dated 21st September, 2011 in ITAT no. 263 of 2011, Ga No. 2856 of 2011 Page | 4 ITA No.355/KOL/2024 Unique Finance & Securities Pvt. Ltd.; A.Y. 2017-18 Calcutta High Court. The ld. AR therefore prayed that the order passed by the ld. CIT (A) disregarding all these facts may kindly be set aside and AO may be directed to delete the addition. 05. The ld. DR on the other hand relied heavily on the order of the ld. CIT (A) by submitting that the ld. AO acted on the basis of a concrete investigation report in which the loan creditors were mentioned as hawala accommodation entry providers from whom the assessee had taken unsecured loans and therefore, the addition was righty made. Similarly, the ld. CIT (A) upheld the order by relying on various decisions as stated in the appellate order. 06. After hearing the rival contentions and perusing the materials available on record, we find that the assessee has raised unsecured loans from five parties which are mentioned by the AO in the assessment order from whom aggregate amount of ₹3,49,00,000/- was raised during the impugned financial year. We also note that the assessee has taken the said loans on interest which has been paid after deduction of tax at source. Besides the loans were raised through banking channels. The assessee has filed before the ld. AO various documents with respect to the above loan creditors which are available from page no.2 to 172 of the Paper Book. We have also examined the comparative statement in which the details as to capital and reserves, profit declared and turnover of the loan creditors were available and find that the parties have creditworthiness to advance loans to the assessee. Even the notices were issued u/s 133(6) of the Act to these lenders by the ld. AO were duly responded and all the information/details were furnished. The only ground on which the ld. AO made the addition was the report of the investigation wing and the statement of Shri Pankaj Agarwal, however we note that the nowhere Page | 5 ITA No.355/KOL/2024 Unique Finance & Securities Pvt. Ltd.; A.Y. 2017-18 Shri Pankaj Agarwal has ever mentioned or uttered about the assessee. Therefore, we do not subscribe to the conclusion drawn by the ld. CIT (A) that these loans were taken from shell companies by routing assessee’s own money. The case of the assessee find support from the decision of PCIT vs. Sreeleather (supra), wherein the Hon'ble court has held that the reliance cannot be placed on the statement of person who has never made any allegation against the assessee in his statement and no evidence was brought on record by the ld. AO to connect the entry operator to the assessee that loan transactions done with the assessee. The Hon'ble High Court has also noted that the assessee in that case had filed all the evidences before the ld. AO qua the loan creditors and even the notice issued u/s 133(6) of the Act were duly responded. Similarly, in the case of CIT vs. Dataware (supra), the Hon'ble jurisdictional High Court has held as under:- “After hearing the learned Advocate for the appellant and after going through the materials on record, we are of the view that no substantial question of law is involved in this appeal.Both the Commissioner of Income Tax (Appeal) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before the Assessing Officer, disclosed its PAN number and also other details of the accounts but in spite of that the Assessing Officer did not enquire further from the assessing officer of the creditor but in stead, himself proceeded to consider the profit and loss account of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence.So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same asgenuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax(Appeal) and the Tribunal below followed the well-accepted principle which are required to be followed in considering Page | 6 ITA No.355/KOL/2024 Unique Finance & Securities Pvt. Ltd.; A.Y. 2017-18 the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. The appeal is thus devoid of any substance and is summarily dismissed. In view of dismissal of the appeal, the connected application has become infructuous and the same is disposed of accordingly. Urgent photostat certified copy of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.” 07. Considering these facts of the assessee in the light of the above decisions, we are inclined to hold that the assessee has duly proved the identity and creditworthiness of the loan creditors and the genuineness of the transactions and the AO has not brought any material on record to prove to the contrary. Therefore, we set aside the order of the ld. CIT (A) and direct the AO to delete the addition. 08. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 01.04.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 01.04.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "