M.L. Singhi & Associates (P) Ltd. Vs DCIT (ITAT Delhi)
No addition could be made against the assessee if no incriminating material was found during the course of search
It is not in dispute that whatever queries were raised by the A.O. time to time, have been replied by assessee along with documentary evidences. All the replies filed by assessee along with documentary evidences are filed in the paper book. The assessee explained each and every Investor Company. It is not in dispute that all the Investor Companies are corporate entities and registered with ROC, therefore, it being a legal entity and assessed to tax with the Income Tax Department, their identity cannot be disputed by the A.O. The assessee also explained the issue of their creditworthiness and genuineness of the transaction by filing the documents of Investor Companies i.e., confirmations, confirmation of accounts, affidavits of the Investor Companies, bank accounts, ITRs, Audited balance-sheets, Memorandum and Articles of Associations, Master Datas, share allotment advise and issue of Share Certificate etc., Resolution of Investor Companies and assessment orders of the Investor Companies etc., Similar type of documents have been filed in the case of each and every Investor Companies which have not been doubted by the A.O. The assessee explained in its reply before the A.O. on the basis of the documentary evidences on record that all the Investor Companies are identifiable corporate entities and assessed to tax and have worth to make investment in assessee company. Merely because Investor Companies were showing low income or meagre income in the return of income, is not a sole criteria to disbelieve the explanation of assessee. Actual Share Certificates were also issued to the Investor Companies. The bank statements of the Investor Companies shows that they have sufficient bank balance with them and all the transactions with the assessee company are routed through banking channel. All the Investor Companies have confirmed their transactions with the assessee company. The Investor Companies have also confirmed the transaction directly to the A.O. in response to the notice issued under section 133(6) of the I.T. Act, 1961. The assessee is a NBFC Company registered with the RBI. The A.O. has wrongly mentioned in the assessment order that reply of the assessee of February have been considered in January. The assessee also explained before the A.O. that in the case of 02 Investor Companies their address were incorrect in the notices issued under section 133(6) of the Act and correct addresses were supplied later on. Therefore, no fault could be found with the explanation of assessee. The assessee produced 02 Directors of the Investor Companies who have also confirmed their transaction with the assessee company in their statements recorded by the A.O. The A.O. later on did not fix any other date for recording the statements of remaining Directors of Investor Companies. The A.O. received report from the Investigation Wing at Kolkata, but, it is not clarified in the assessment order if the report of Investigation Wing, Kolkata was ever supplied to the assessee or confronted to the assessee so that assessee could rebut the same. Therefore, in the absence of any confrontation of the report of the Investigation Wing to the assessee, the same cannot be read in evidence against the assessee. Whatever the objections have been raised by the A.O. in the assessment order for disbelieving the explanation of assessee on the basis of some material found during the course of search, material found from the Chartered Accountant of the assessee, statement of Shri Sampath Sharma, Director of the assessee company etc., and low income declared by the Investor Companies have already been considered by the ITAT, Delhi Benches in Group cases on identical facts and entire addition have been deleted on merits as well as it was held that no addition could be made against the assessee because no incriminating material was found during the course of search. Therefore, all the points raised by the A.O. have already been considered and decided by different Benches of the ITAT, Delhi Benches, Delhi in the Group cases as noted above.
Considering the above discussion in the light of Order of the Tribunal in the Group Cases and in case of assessee and the decisions of various High Courts referred to above and the decisions relied upon by the Learned Counsel for the Assessee, it is clear that assessee proved identity of the Investors and also furnished sufficient documentary evidences to prove creditworthiness of the Investors, genuineness of the transaction in the matter. Therefore, initial onus upon the assessee to prove ingredients of Section 68 of the I .T. Act, 1961 stands discharged. The decisions relied upon by the Ld. D.R. have also been considered in the Group cases as above and did not find in favour of the Revenue because the assessee has been able to prove creditworthiness of the creditors and genuineness of the transaction. Therefore, the decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case and above discussion, we are of the view that entire addition made by the authorities below of Rs.6.7 crores is wholly unjustified and is liable to be set aside. In view of the above, we set aside the Orders of the authorities below and delete the entire addition of Rs.6.7 crores.
**
When money lending was part of the business of the assessee company, no addition under section 2(22)(e) of the I.T. Act, 1961 could be made
In the case of Parle Plastic Ltd., 332 ITR 63 it was held that when money lending was part of the business of the assessee company, no addition under section 2(22)(e) of the I.T. Act, 1961 could be made. In the case of Creative Dyeing & Printing Ltd., 318 ITR 476 (Del.) the Hon’ble Delhi High Court held that business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act, 1961. In the case of Shri P.K. Malhotra 338 ITR 538 (Cal.) (HC) the Hon’ble Calcutta High Court held that when shareholder permitted to mortgage its properties for loan and received loan, it would not attract the provisions of Section 2(22)(e) of the I.T. Act. Since the assessee is NBFC Company registered with RBI and as per assessment order itself the nature of business of assessee is financing and investment and the details submitted by Learned Counsel for the Assessee clearly show that assessee is mainly engaged in finance business for giving loans and advances and earn interest thereon, would clearly prove that assessee is mainly in the business of lending of money to others, therefore, business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act and as such the case of the assessee would fall to the exception provided in sub-clause-(ii) of Section 2(22)(e) of the I.T. Act, 1961. In view of the above, we set aside the Orders of the authorities below and delete the addition of Rs.20 lakhs. Accordingly, Ground No.3 of the appeal of the Assessee is allowed. No other point is argued.
FULL TEXT OF THE ITAT JUDGEMENT
Both the appeals by the Assessee are directed against the different Orders of the Ld. CIT(A)-35, New Delhi, Dated 27.03.2017, for the A.Ys. 2009-2010 and 2010-2011.
2. We have heard the Learned Representatives of both the parties through video conferencing and perused the material on record.
3. In both the appeals assessee challenged the addition of Rs.6.70 crores and Rs.9.60 crores respectively under section 68 of the I.T. Act, 1961 on account of unexplained share capital / premium. Learned Representatives of both the parties mainly argued in A.Y. 2009-2010 and have submitted that the issue is same in A.Y. 2010-2011 also and documentary evidences and facts are identical. Therefore, the Order in A.Y. 2009-2010 may be followed in A.Y. 2010-2011. We, therefore, proceed to decide the appeal of assessee for the A.Y. 2009-2010 as under :
4. The facts of the case are that original return in this case was filed on 19.02.2010 declaring income of Rs.13,46,170/- which was processed under section 143(1) of the I.T. Act, 1961. Subsequently, a search and seizure operation under section 132 of the I.T. Act was conducted in
Brahmaputra Group of cases including the assessee on 28.09.2010 and various books of account and documents including those belonging to the assessee were found and seized. Notice under section 153A was issued on 02.02.2021 requiring the assessee to file return of income. In response thereto, assessee filed letter submitting before A.O. that original return filed by it may be treated as return having been filed in response to notice under section 153A of the I.T. Act, 1961, declaring income of Rs.13,46,170/-. The assessee produced the books of account and other documents time to time before A.O. which have been examined.
4.1. From the details submitted by the assessee and material available with the Department, it was found that during financial year relevant to assessment year under appeal, assessee has raised share capital money to the tune of Rs.6.70 crores from Kolkata-Howrah based Companies as under :
