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Judgment
PER MANISH AGARWAL, A.M.:
The present appeal is filed by Revenue against the order dated 30.05.2025 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Gurgaon-1/11425/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 29.12.2019 passed u/s 143(3) of the Act pertaining to Assessment Year 2017-18.
Brief facts of the case are that the assessee is a partnership firm, filed its return of income on 05.10.2017, declaring total income of INR 35,90,615/- which was subsequently, revised on 14.08.2018 at INR 18,77,060/-. The case of the assessee was selected for scrutiny under CASS and notice u/s 143(2) of the Act was issued on 22.02.2019. The assessee is a firm, having business of JBM Textile Pvt. Ltd. and manufacturing cotton fabrics. The AO alleged that assessee has received loans of INR 1.15 crores from 02 parties, namely, Shri Ashok Mehra of INR 1.00 crores and Samartal Buildwell Pvt. Ltd. of INR 15.00 Lakhs however, failed to prove the creditworthiness and genuineness of transactions and accordingly, made the addition u/s 68 r.w.s. 115BBE of the Act. The AO further disallowed being interest of INR 40,26,515/- paid on the said loans and further, disallowed a sum of INR 3.00 Lakhs out of various expenses by holding that they were mostly paid in cash and some expenses were personal in nature. In first appeal, assessee filed certain additional evidences such as affidavits, confirmations from the lenders and the evidences showing the source in their hands such as their bank statements etc. All these documents are placed at pages 66 to 73 and 91 to 95 of the Paper Book. Ld. CIT(A) after obtaining the Remand Report from the AO, has deleted the additions /disallowances made and allowed the appeal of the assessee.
Aggrieved by the said order, the Revenue preferred the present appeal before the Tribunal wherein main thrust of the Revenue is that ld. CIT(A) has admitted the additional evidences and deleted the additions.
Heard the contentions of both the parties at length and perused the material on record. At the outset, from the perusal of the appellate order, it is observed that ld. CIT(A) in para 5.2 of its order has reproduced the Remand Report submitted by the AO dated 04.06.2024. In the said Remand Report, the AO has made following observations with respect to both the creditors in para 5.2 placed at page 17 to page 19 of the impugned order with regard to both the lenders :-
| Name of the Party Loan amount | Comments |
|---|---|
| Sh. Ashok Mehra Rs.1.00 C | During the assessment proceedings, the assessee did not produce or submitted the evidences / documents to prove the creditworthiness of the lender and genuineness of the transactions. In absence of documents, the AO made addition of Rs.1.00 Cr on account of unsecured loan to the income of the assessee. Now, during the appellate proceedings, the assessee submitted bank statements, evidence of source of source, confirmation and also affidavit of the lender under Rule 46A. From the documents submitted, it is perused that Sh. Ashok Mehra has losses in the previous year 2016-17 whereas during the year and in earlier years except 2016-17, the assessee has shown profit. From the ITR and bank statement, it is perused that assessee was having sufficient funds to lend the money. From the detail of source of funds, it is found that the lender was doing business in the share market and real estate business and funds were taken from Gen Y Commodities (PAN – AADCG9745N) as per detail and bank statement provided. Further assessee has also repaid the loan amount of Rs.1.00 Cr. to the lender and submitted copy of ledger and bank statement. |
| Samarthal Buildwe P. Ltd. Rs. 15 Lakh | During the assessment proceedings, the assessee did not produce or submit the document regarding credit worthiness of the |
transaction. The assessee only submitted the copy of balance sheet. No copy of ITR for the A.Y. 2016-17 & 2017-18 was filed. Further from the balance sheet, it was found by the AO that the lender company was not doing any business during the year and showed gross revenue from the operations at Rs. NIL. Now during the appellate proceedings, assessee submitted copy of balance sheet for the A.Y. 2016-17 & 2017-18, copy of the ITR for the A.Y. 2018-19, confirmation from the lender, bank statement, source of source and copy of affidavit. On perusal of balance sheet, it is perused that M/s Smarthal Buildwell P. Ltd. is having net worth Rs.6.66 Cr. as on 31.03.2017. In its confirmation, M/s Smarthal Buildwell P. Ltd. Submitted that unsecured loan given to Cotton Works was interest bearing loan and for business purposes. Assessee has also submitted the data on MCA Portal that M/s Smarthal Buildwell P. Ltd. is active as on date and has filed its balance sheet for the 2022-23 and also filed copy of AGM held on 29.09.2023. Further assessee has also repaid the loan amount of Rs. 15 lakh vide ledger details and bank statement.
During the assessment proceedings, the Assessing Officer made addition of Rs. 115 Lakhs on account of unsecured loans, therefore, the interest paid on unsecured loan was also disallowed and addition of Rs.40,26,515/- was made. During the appellate proceedings, the assessee has submitted the documentary evidence for unsecured loans under Rule 46A to prove the identity, credit worthiness and genuineness.
Addition of Rs.3,00,000/- on account of expenses being in personal nature :
During the assessment proceedings, the AO made addition of Rs.3,00,000/- on account of expenses claimed in the P&L account being payment made in cash or personal nature. During the appellate proceedings and enquiry u/s 250(4) of the I.T. Act, 1961, the assessee submitted ledgers of the expense claimed. On perusal of ledger, it is revealed that there are petty payments made in cash and from bank which includes telephone expense, misc. expense, repair & maintenance of vehicle which looks like of office expense.
It is further observed that during the course of assessment proceedings, the assessee has filed confirmations, copy of the account of the lenders, their ITRs and financial statements to establish their identity as well as creditworthiness however, the AO has not accepted the same and made the addition. It is further observed that AO vide show cause notice dated 26.12.2019 has asked the assessee to explain why this addition should not be made and the reply was to be filed on or before 27.12.2019 and thereafter, 29.12.2019 after receiving the submission of the assessee, impugned assessment order was passed wherein the AO has discussed the unsecured loans taken from 12 parties for which show cause notice was issued and made the addition of INR 1.15 crores from the aforesaid 02 parties. It is observed that in the Remand Report as reproduced above, AO has accepted the facts that assessee had filed the necessary details of both the parties which were found in the order and nowhere in the Remand Report, the AO has objected for admission of these documents and further, has not pointed out any defect or deficiency in the additional evidence so filed by the assessee. Once the assessee has filed all the particulars and relevant details to establish the genuineness of transactions and creditworthiness of the lender parties which have been accepted after examination in the remand proceedings and no question was raised by the AO. Now before us, the revenue has challenged the action of admission of such additional evidences by the ld. CIT(A) and deletion of the addition made by the AO. Before us, Revenue has failed to controvert the findings given by ld. CIT(A) based on the evidences filed and Remand Report submitted by the AO thus we find no reason to interfere in the order of ld. CIT(A) which is hereby, upheld. Accordingly, all the Grounds of appeal raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed.