Meenakshi Saree Centre (P) Ltd vs DCIT

PER M. BALAGANESH, AM

The appeal in ITA No.1470/Del/2025 for AY 2016-17, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 14.02.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.12.2018 by the Assessing Officer, DCIT, Circle-16(2), Delhi (hereinafter referred to as ‘ld. AO’).

The only issue to be decide din this appeal is as to whether the Learned CITA was justified in confirming the addition made on account of unsecured loans received from two Directors as unexplained cash credit under section 68 of the Act in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the materials available on record. The Assessee Company is engaged in the business of trading of Sarees. The return of income for the assessment year 2016-17 was electronically filed by the Assessee Company on 24-09-2016 declaring loss of Rs. 80,66,772. During the course of assessment proceedings, the Learned AO noted that the turnover of the Assessee was reduced from Rs. 11.30 crores to Rs. 6.43 lakhs and that no purchases were made during the year and Assessee had huge loans in its balance sheet on which interest has been paid. The Assessee was asked to furnish the details of loans received by it along with documentary evidences. The Assessee replied vide letter dated 4-10-2018 that it had accepted fresh loan of Rs. 1,43,50,000 from Ms. Mohini Agarwal, Director of the Company and Rs. 6,34,30,000 from Ms. Richa Agarwal, Director of the Company and furnished copy of confirmation of account from them. The Learned AO on perusal of confirmation of account of Ms. Richa Agarwal observed that loan received during the year by the Assessee amounts to Rs. 6,34,30,000 and the Assessee made repayment of loan amounting to Rs.1,63,367 and from perusal of confirmation of account of Ms. Mohini Agarwal, the Learned AO noted that during the year amount of loan received was Rs. 1,43,50,000 and repayment of Rs. 3,43,367 was made by the Assessee. The Learned AO issued notice under Section 133(6) of the Act to Ms. Mohini Agarwal and Ms. Richa Agarwal seeking certain documents from them. The said notices were returned undelivered. Later, the Assessee furnished the copy of income tax returns of Ms. Mohini Agarwal and Ms. Richa Agarwal of last 3 years. The Learned AO noted that on examination of returns of income of the lenders, they had meagre income and the same was not commensurate with the amount of loans advanced by them to the Assessee. The Assessee also furnished the bank statements of Ms Richa Aggarwal and Ms Mohini Aggarwal before the Learned AO. The Learned AO noted that there were lot of credits in the said bank statements of the lenders which represent amounts received by them from third parties. The Learned AO concluded that the Assessee had not duly proved the creditworthiness of the lenders and accordingly treated the amounts received as unsecured loans from the two lenders (directors of the Assessee company) as unexplained cash credit under section 68 of the Act. This action of the Learned AO was upheld by the Learned CITA.

It is not in dispute that Assessee had received unsecured loans from Richa Agarwal to the tune of Rs 6,34,30,000 and from Ms Mohini Agarwal in the sum of Rs 1,43,50,000. It is not in dispute that both Richa Agarwal and Mohini Agarwal are directors of the Assessee company. It was submitted by the Learned AR that the Learned AO had misconstrued the entire facts while doubting the credit worthiness of the lenders. It was submitted that the loan given in assessment year 16-17 was received in assessment year 15-16 partly by Assessee company and partly by Ms Mohini and Ms Richa Agarwal, mother and wife of late Vineet Agarwal from various insurance companies as insurance claims on death of director Vineet Agarwal. It was submitted that Assessee Vineet Agarwal was the managing director and working director of the Assessee company and on his death, insurance claims were received by Assessee company as well as by Mohini and Richa Agarwal. So, in assessment year 15-16, the amounts received from insurance companies were parked in the bank accounts of three close relatives namely Rohit Gupta, Karan Gupta and Akhil Jindal immediately after receipt of money by the Assessee company, Mohini Agarwal and Richa Agarwal due to threats received by the family immediately after the death of Vineet Agarwal. In assessment year 16-17, these three relatives returned back the parked amount to Mohini Agarwal and Richa Agarwal which in turn were utilized by Mohini Agarwal and Richa Agarwal to advance loans to the Assessee company. Hence it was submitted that the credit worthiness is proved out of insurance claims received in earlier years which were parked with the relatives and thereafter those relatives had paid back the monies to Richa Agarwal and Mohini Agarwal who in turn had advanced the monies to the Assessee company. These facts, however, in our considered opinion, require factual verification and hence in interest of justice and fair play, we deem it fit and appropriate to restore this entire appeal to the file of Learned AO for denovo adjudication in accordance with law. Needless to mention that the Assessee be given reasonable opportunity of being heard. The Assessee is at liberty to furnish fresh evidences, if any, in support of its contentions. With these observations, the grounds raised by the Assessee are allowed for statistical purposes.

In the result, the appeal of the Assessee is allowed for statistical purposes.