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Judgment
PER YOGESH KUMAR, U.S. JM:
The present appeal is filed by the Revenue and the Cross Objection is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 29/08/2024 pertaining to Assessment Year 2016-17.
Brief facts of the case are that, Assessee filed return of Rs. 4,28,62,410/- for the year under consideration. The case of the Assessee was selected for scrutiny under CASS and an assessment under Section 143(3) was completed on 31/05/2018 by acceptingreturned income. Based on the information handed over by DCIT, Circler 13(1), the Assessee case was reopened on the ground that unsecured loans were taken by the Assessee from the lenders who have been showing either loss or normal income for their Income Tax Returns. An assessment order came to be passed on 31/03/2022 by making an addition of Rs. 12,98,00,000/- on account of unsecured loans. Aggrieved by the assessment order dated 31/03/2022, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vice order dated 29/08/2024, allowed the Appeal of the Assessee by deleting the addition. As against the order of the Ld. CIT(A), the Revenue preferred the captioned Appeal in ITA No. 4978/Del/2024 and the Assessee filed Cross Objection No. 50/Del/2025.
The Ld. Departmental Representative canvassing on Grounds of Appeal of the Revenue, submitted that the Ld. CIT(A) has committed error in deleting the addition of Rs. 12,98,00,000/- made on account of unexplained money in the form of unsecured loan under Section 69A of the Act, though the creditworthiness of the lenders of unsecured loans and the genuineness of the transaction were not proved. Further submittedthat the Ld. CIT(A) has also erred in ignoring the fact that the lender entities either have low income or were having booking loss during the assessment year underconsideration. Thus, submitted that the order of the Ld. CIT(A) is erroneous and deserves to be set aside.
Per contra, the Ld. Assessee's Representative submitted that the Ld. CIT(A) while deleting the addition has examined all 9 lenders, the financial transactions were done through banking channel and interest was also paid which was subject to TDS. Further submitted that the Ld. CIT(A) has relied on the ratio laid down by the Jurisdictional High Court in the case of CIT vs. Vrindavan Farms (P) Ltd. [2016] 6 ITR-OL 182 (Del), thus submitted that the order of the Ld. CIT(A) requires no interference at the hands of the Tribunal. Therefore, sought for dismissal of the Appeal of the Revenue.
We have heard both the parties and perused the material available on record. The Ld. CIT(A) deleted the addition made by the A.O. in following manners:
“5.1It appears from the record that the Appellant raised the grounds No. 1 to 5 in respect of legal notice. I find there is no infirmity in the action of the AO in this regard. Hence, the grounds no. 1 to 5 are dismissed.
5.2In grounds no 6 to 10, the appellant challenged the addition of Rs. 12,98,00,000/- as well as applicability of section 69A.
5.3After going through the assessment order, the submissions made by the Appellant in para 19 to 42 of its letter dated 24/08/2024 and the documents placed on record, I observed that the AO made the addition by doubting the creditworthiness of the 9 parties primarily on the ground of low income returned in the ITR. The Appellant made factual submissions with regard to all the 9 parties separately. I have analyzed the details/data with regard to all the 9 parties as under:
In para 5.9 regarding this party, the AO mentioned that no reply to the notice u/s 133(6) issued is received. To counter such comment of the AO, the Appellant provided the proof of filing the reply to notice u/s 133(6) by Tarini Enterprises Ltd. as Exhibit -D.
5.4I have found that in all 9 cases- the financial transactions happened only through banking system, interest was paid which was subjected to TDS, the lenders were corporate entities, ITR acknowledgements for A.Y.- 2016-17 of the lenders were provided confirmation with audited financials of the lenders were provided and the bank statements of the lenders showing financial transactions with the appellant were provided. Moreover, the notices issued u/s 133(6) were responded by all the 9 lenders. It is contradictory on the part of the AO that at one end he made addition of the amounts received by the Appellant in F.Y. 2015-16 and on another end allowed the claim of the Appellant on account of interest paid to the lenders for F.Y.- 2015-16. After analysing the financial data pertaining to all the 9 parties, I am finding myself convinced with their creditworthiness. I am not convinced with the view adopted by the AO for doubting the creditworthiness on account of low income refurned by the lenders. My view is strengthened from the judgement of jurisdictional High Court (Delhi High Court) in CIT vs. Vrindavan Farms Pvt. Ltd. [2016] 6 ITR-OL 502 (Del) wherein the Court dismissed the departmental appeal by recording that it has been rightly commented by the Income-Tax Appellate Tribunal that without doubting the documents, the Assessing Officer completed the assessment only on the presumption that low return of income was sufficient to doubt the creditworthiness. I am not in agreement with the AO who while commenting on M/s Jagriti Marketing Pvt. Ltd. made a special comment that interest expenses booked is Rs.26,70,797/-while interest income received is Rs.3,72,920/- and while commenting on M/s Jagriti Petrochem Pvt. Ltd. made a comment that interest expenses booked is Rs.27,00,000/- while interest income received is Rs.6,79,800/-because this aspect has nothing to do with the creditworthiness of the lenders, more particularly with regard to the assessment proceedings in the case of the Appellant. Further vide para 33 of its letter, the Appellant clarified that the entire amount of Rs.26,43,297/-represented the interest income. Similarly, vide para 34 of its letter, the Appellant clarified that the entire amount of Rs.24,44,729/- represented the interest income. Considering the above, I delete the addition of Rs. 12,98,00,000/- made by the AO in the Assessment Order.”
As could be seen from the order of the Ld. CIT(A), the Ld. CIT(A) has verified the genuineness and the creditworthiness of all 9lenders and found that the financial transactionwere done throughbankingchannel, interest to the loan were duly paid which was subject to TDS.Further observed that, the lenders being corporate entities have provided the confirmation of the loans with audited financials of the lenders, bank statements. It is also relevant to note that the notice before u/s 133(6) of the Act by the A.O. were duly responded by all the 9 lenders. The A.O. on the one hand made addition of amount received by the Assessee in Financial Year 2015-16 and on the other hand allowed the claim of the Assessee on account of interest paid to the lenders for Financial Year 2015-16. The Ld. CIT(A) after analyzing the financial data of all 9 parties convinced with the creditworthiness of the lenders. The Department has not brought any material on record to contradict the findings of the Ld. CIT(A). At no point of time, the A.O. has doubted the documents produced by the Assessee and the additions have been made by the A.O. only on the presumption that low return of income,which is not sufficient to doubt the creditworthiness. In view of the above, the Revenue failed to either contradict or prove otherwise of the findings of the Ld. CIT(A). in view of the above, we find no merits in the Grounds of Appeal of the Revenue. Accordingly the Grounds of Appeal of the Revenue are hereby dismissed.
Since, we have dismissed the Appeal of the Revenue, the C.O. No. 50/Del/2025 filed by the Assessee dismissed for having become in-fructuous.