GM Overseas Vs ACIT (ITAT Delhi)
Assessee, during the course of assessment proceedings has filed various documents substantiating the identity and credit worthiness of the loan creditor and genuineness of the transaction. The assessee has accepted the loan amount of Rs. 4 crores in two tranches i.e., Rs.2,50,00,000/- and Rs.1,50,00,000/- on 05.01.2010 and 11.01.2011 respectively and repaid the entire loan on 18.01.2010 by paying interest of Rs.1,79,166/- after deducting TDS of Rs.17,917/- u/s 194A of the Act. The assessee had filed the confirmation of loan of ISRPL, Copy of the ITR of the above lender entity for AY 2010-11, Copy of PAN, Bank statement of the relevant period, Master Data from MCA Site and Form 16A issued as certificate of deduction of TDS, etc. Referring to the decision of the Hon’ble Delhi High Court in the case of Director of Income-tax vs. Modern Charitable Foundation, 335 ITR 105, and the decision of Hon’ble Mumbai High Court in the case of Pr.CIT Vs Skylark Build 2018-TIOL-2323-HC-MUM, he submitted it has been held in the above decisions that ‘when unsecured loans were paid back even in subsequent years, it shows that these were genuine loans taken by the assessee. Relying on various other decisions, he submitted that when the Department has accepted the factum of repayment, the additions under section 68 is not sustainable in law. For the above proposition, he relied on the decisions of (i) the Hon’ble Gujarat High Court in the case of CIT vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251; and CIT vs. Mahavir Crimpers, 95 Taxman.com 323; (ii) the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Karaj Singh (2011) 15 taxmann.com 70 (P&H); and (iii) the decision of the Hon’ble Bombay High Court in the case of Panna Devi Chowdhary vs. CIT, 208 ITR 849 (Bom.).
He submitted that the AO should have enquired from the AO of the loan creditor as to the genuineness of the transaction as to whether the loan creditor’s AO has accepted the loan transactions as genuine or not. The AO, in the instant case, without doing this exercise made the addition u/s 68 r.w.s. 115 BBE of the Act which is not justified. Referring to the decision of the Hon’ble Calcutta High Court in the case of CIT Vs Dataware Pvt Ltd., ITA 263 of 2011 ldated 21/09/2011, he drew the attention of the Bench to the following observations:-
”…….. So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established.”
Referring to various other decisions, the ld. Counsel for the assessee submitted that when the the assessee has fulfilled all the three ingredients i.e., identity and creditworthiness of the loan creditors and the genuineness of the transaction by producing documentary evidence on record such as Copy of A/c of the lender for the succeeding financial year showing repayment of loan through banking channel and the TDS duly deducted on the interest paid on the unsecured loan and thus the unsecured loan stands explained.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order dated 26th February, 2019 of the CIT(A)-16, New Delhi, relating to assessment year 2010-11.
2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of trading of rice and other food grains and sorting of rice. It filed its return of income on 27th September, 2010 declaring the income at Rs.25,85,610/-. The assessment was completed u/s 143(3) vide order dated 01.02.2013 determining the total income at Rs.27,10,350/-. Subsequently, the AO, on the basis of the information received from the Investigation Wing of the Department that the assessee has received credit of Rs.4,00,00,112/- from M/s Index Securities and Research Pvt. Ltd., during FY 2009-10 which is nothing, but, an accommodation entry, recorded the following reasons to reopen the assessment u/s 147:-
“As per the information received from ADIT(Inv), Unit-5(3), New Delhi vide letter No.ADIT(Inv.)/Unit-5(3)/Asharam/2016-17/278 dated 27.03.2017, M/s GM Overseas has received credit of Rs.4,00,00,112/- from M/s Index Securities & Research Pvt. Ltd. During FY 2009-10 relevant to A.Y. 2010-11.
As per the information received, the statement of one Sh. Devidas Tikamdas Chattani alias Dev Kumar was recorded u/s 131A r.w.s. 131 of the I.T. Act, 1961 on 25th and 26th September 2015. He was one of the most confidant people of Asharam Bapu and on Asharam’s instance he had conducted an audit of Cash loans account. Sh Devidas, while explaining the contents of the data identified the ledger bearing title “Bhagat” as that
pertained to the funds managed by Shri Santlal Agarwal alias Bhagat amounting to Rs. 200 Crores.
On the basis of the information, a survey action was conducted on office premises of Shri Santlal Agarwal on 09.03.2016 including 5586, Lahori Gate, Naya Bazar, Delhi and 802, Arnbadeep Building, Connaught Place, Delhi. Sh. Santlal Agarwal was one of the directors in M/$ Jagat Agro Commodities Pvt. Ltd. And a partner in M/s Jagat Overseas. From the office premise of M/s Jagat Agro Commodities Pvt. Ltd at 802, Arnbadeep Building, Connaught Place, Delhi a part copy of account statement of M/s Index Securities and Research Pvt. Ltd was found and impounded. On perusal of the bank account statement it was observed that the account is credited mainly with cheque and transfers are through cheque or RTGS leaving a minimum balance.
It was gathered that the DDIT (Inv.,) Unit-6(3), Delhi carried out search and seizure action at premises of M/s KBRL, During this operation it was found that M/s Index Securities & Research Pvt. Ltd has provided accommodation entry to KRBL Group of Companies. A survey u/s 133A of the IT Act, 1961 was also carried out the business premise of M/s Index Securities and Research Pvt. Ltd. Further search action was also conducted at the residence of the directors of M/s Index Securities & Research Pvt. Ltd. During the search operation, statements of the Directors of M/s Index Securities and Research Pvt. Ltd namely Sh. Vinod Kumar Taneja and Smt. Chanchal Taneja were recorded on oath. They have in statement on oath admitted that it is Paper Company and doing no business in actual and is involved in providing loans to various companies. Shri Santlal Aggarwal and Shri Satish Pahwa are the only persons who run this company.
From the statement of Sh. Vinod Kumar Taneja and Chanchal Taneja, directors in M/s Index Securities & research Pvt. Ltd. it is clear that both of them did not have any knowledge about the financials of M/s Index Securities & Research Pvt. Ltd. They both have also accepted that the company is not doing any business activity in reality. It is observed that the bank accounts statement number 00000065056415724 in the name of M/s Index Securities & Research Pvt. Ltd, is immediately debited once an amount is credited leaving a minimum balance. Thus it is clear that the company is involved in providing accommodation entries to various beneficiaries.
In view of the above, M/s G M Overseas is one of the entity who has received credits amounting to Rs. 40000112/- during FY 2009-10 from the above mentioned account in the name of M/s Index Securities & Research Pvt. Ltd. and is one of the beneficiary of the accommodation entries from M/s Index securities and Research Pvt. Ltd. Thus it is clear that it has routed its unaccounted income through M/s Index Securities and Research Pvt. Ltd. Thus the amount of Rs.4,00,00,112/- credited in the account of M/s G M Overseas is the unaccounted income of the entity during FY 2009-10. The details of the amount credited in the account of M/s G M Overseas from the account of M/s Index Securities’ and Research Pvt. Ltd. is as under:-
