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Judgment
PER SUDHIR KUMAR, JM:
This is appeal filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 29/12/2019 for Assessment Year 2016-17.
The revenue has raised the following ground of appeal:
“Whether the decision of Hon’ble CIT(A) is right in deleting of additions made by the AO. Ld. CIT(A) has erred in allowing the appeal of the assessee while passing the order u/s. 250 i.e. admitting the additional evidences under Rule 46A in spite of remand report. Ld. CIT(A) erred in admitting additional evidences even when the order has been passed u/s. 143(3) by providing adequate opportunities to assessee of being heard in fact more than 7 times alongwith final show cause notice. Ld. CIT(A) erred allowing additional evidences without actual genuine hardship /cause for assessee not submitting the documents during the course of assessment proceedings.”
The brief facts of the case are that the assessee is a Firm filed its ITR on 26.09.2016 by declaring a total income of Rs.24,09,160/- for the A.Y. 2016-17. The case was selected for scrutiny through CASS. During the assessment proceedings, the AO issued notices u/s. 143(2), 142(1), show-cause letters etc. and in response to the assessee furnished written submission with respect to unsecured loans. On perusal of the details furnished by the assessee, the AO observed that the assessee firm failed to prove creditworthiness and genuineness of the transactions of the following parties i.e., 1) Mr Ashok Mehra – Rs.140 Lakhs; 2) M.L.Jain (HUF) – Rs.41 Lakhs; 3) Mr Hitesh Jain – Rs.20 Lakhs; 4) Mr Davinder Kumar Jain – Rs.35 Lakhs; 5)Mr Nitish Jain – Rs.20 Lakhs; 6) M/s Sarathal Buildwell Pvt. Ltd., - Rs.50 Lakhs; & 7)Mr Tanya Jain – Rs.35 Lakhs totalling to Rs.341 Lakhs. Thus, the AO treated the sum of Rs.3,41,00,000/- as un-explained credit u/s.68 of the Act, also the interest paid on the said unsecured loans to the tune of Rs.17,79,786/- was added as income of the assessee and added to the total income of the assessee. The AO also observed from the details with respect to expenses claimed in the Profit & Loss a/c that most of the expenses were cash payment and some expenses were personal in nature and thus the sum of Rs.3,00,000/- was disallowed and added to the total income of the assessee. The AO completed the assessment u/s. 143(3) of the Act on 29.12.2019. Aggrieved by the assessment order dated 29.12.2019, the assessee preferred the appeal before the Ld. CIT(A).
In first appeal, the Ld. CIT(A) allowed the appeal of the assessee. Aggrieved, revenue is in appeal before us.
Ld. Sr. DR vehemently supported the order of the Assessing Officer and reiterated the contentions raised in the grounds of appeal.
On the other hand, Ld. AR of the assessee relied upon the order of the Ld. CIT(A).
We have heard both the sides and perused the records. We note that the Revenue has preferred the appeal mainly to the admission of additional evidences by the Ld. CIT(A). We further note that in the instant case following additions were made by the AO:-
S. No. Description Amount (in Rupees) (i) Unsecured loans held as unexplained credits under section 683,41,00,000 (ii) Disallowance of interest paid on these unsecured loans 17,79,786 (iii) Ad hoc disallowance of expenses 3,00,000 Total amount of additions made 3,61,79,786
The AO issued the Show cause notice on 26.12.2019, which required the assessee to explain as to why an addition of Rs. 5.26 crore may not be made under section 68 of the Act by holding the unsecured loans taken by the Respondent from 14 persons as unexplained credits. The show cause notice as issued on 26.12.2019 (APB-Pages 17-19) at 4:35 PM and required the assessee to make compliance by 27.12.2019 at 4:00 PM. Thus, the opportunity was neither sufficient nor reasonable. As per records, the Assessee furnished sufficient documentary evidence, which consisted of the following evidence pertaining to the unsecured loans taken from various persons:
Ashok Mehra (Rs. 1.40 crore):
Copy of ledger account duly confirmed by the lender
Copy of bank statement of the lender highlighting therein the cheques for loan given to the Respondent
Copies of acknowledgements of ITRs filed by the lender for A.Y. 2014-15, A.Y. 2015-16 and A.Y. 2016-17 with declared total income of Rs. 94,87,150/-, Rs. 99,12,388/- and Rs. (-) 8,95,67,978/- respectively
M.L. Jain HUF (Rs. 41 lakh):
Copy of ledger account duly confirmed by the lender
Copy of acknowledgement of ITR of the lender for A.Y. 2016-17 with declared total income of Rs. 4,81,360/-
Copy of bank statement of the lender highlighting therein the cheques for loan given to the Respondent
Hitesh Jain (Rs. 20 lakh):
Copy of ledger account duly confirmed by the lender
Copy of acknowledgement of ITR of the lender for A.Y. 2016-17 with declared total income of Rs. 9,34,630/-
Copy of bank statement of the lender highlighting therein the cheques for loan given to the Respondent
Davinder Kumar Jain HUF (Rs. 35 lakh):
Copy of ledger account duly confirmed by the lender
Copy of acknowledgement of ITR of the lender for A.Y. 2016-17 with declared total income of Rs. 6,23,510/-
Copy of bank statement of the lender highlighting therein the cheques for loan given to the Respondent
Nisha Jain (Rs. 20 lakh):
Copy of ledger account duly confirmed by the lender
Copy of acknowledgement of ITR of the lender for A.Y. 2016-17 with declared total income of Rs. 4,54,300/-
Samarthal Buildwell P Ltd (Rs. 50 lakh):
Copy of ledger account duly confirmed by the lender
Copy of bank statement of the lender highlighting therein the cheques for loan given to the Respondent
Balance Sheet of the lender for the year ended on 3 1.03.2016 relevant to A.Y. 2016-17 showing reserves and surplus of Rs. 6,61,60,757/-
Tanya Jain (Rs. 35 lakh):
Copy of ledger account duly confirmed by the lender
Copy of bank statement of the lender highlighting therein the cheques for loan given to the Respondent
Copy of acknowledgement of ITR of the lender for A.Y. 2016-17 with declared total income of Rs. 5,22,870/- (P. 90 of Compilation of Papers)
Copies of TDS returns in Form 26Q evidencing tax deducted on interest paid was also submitted before the learned AO.
However, the AO completed the assessment stating that the Respondent has failed to prove the creditworthiness of lenders and genuineness of transactions.
The Respondent also filed the following additional evidence, which was forwarded by the Ld. CIT(A) to the learned AO calling for remand report:
Confirmations from the lenders
Affidavits from the lenders
In the remand proceedings, the learned AO called for the status of repayment of loans, whereupon it was submitted that the entire loan had duly been repaid and evidence regarding repayment of loans was also submitted. Thereafter, the AO submitted the remand report to the Ld. CIT(A) on 04.06.2024, wherein, the AO gave a categorical finding that the Respondent had duly submitted the documentary evidence for unsecured loans to prove the identity, creditworthiness and genuineness. Based on this undisputed fact that the AO had verified and concurred with the assessee’s submissions regarding the unsecured loans amounting to Rs. 3,41,00,000/-, interest on unsecured loans amounting to Rs. 17,79,786/-and expenses incurred amounting to Rs. 3,00,000/-, the Ld. CIT(A) has rightly deleted the additions and allowed the appeal of the assessee, thus, we do not find any infirmity in the order of the Ld. CIT(A), hence, uphold the same and reject the grounds raised by the revenue.
In the result, Revenue’s Appeal is dismissed.