BMM Ispat Limited Vs ACIT (ITAT Bangalore)
Introduction: The case of BMM Ispat Limited versus ACIT (Income Tax Appellate Tribunal, Bangalore) revolves around disputes concerning unsecured loan sources. In this detailed analysis, we delve into the contentions raised by both parties, the arguments presented, and the tribunal’s ruling.
Detailed Analysis: The appellant, BMM Ispat Limited, contested the order of the National Faceless Assessment Centre (NFAC) for the assessment year 2016-17, wherein additions totaling Rs. 150,13,10,676/- were made under section 68 read with section 115BBE of the Income Tax Act, 1961. The appellant raised various grounds challenging the addition, including assertions of insufficient opportunity provided by the assessing officer (AO), lack of jurisdiction, and violation of natural justice.
The appellant argued that it had submitted all relevant details regarding the loans received from directors and related parties, demonstrating the transactions’ genuineness. The loans were transacted through banking channels, supported by account payee cheques and RTGS. Moreover, the appellant highlighted the longstanding tax assessment history of the lenders and the adequacy of their financial resources.
However, the respondent, represented by the Departmental Representative (DR), contended that the appellant failed to adequately establish the creditworthiness of the lenders and the genuineness of the transactions. It was argued that the documents provided were self-serving and insufficient to justify the substantial loan amounts. The DR raised doubts about the capacity of the creditors to extend such significant loans, given their reported income levels.
The tribunal examined the arguments of both parties and emphasized the onus on the appellant to not only prove the identity of the lenders but also their capacity to lend and the genuineness of the transactions. While acknowledging the submission of documents, the tribunal noted the need for further inquiry to verify the creditors’ creditworthiness and the authenticity of the transactions.
In its ruling, the tribunal partially allowed the appeal, remitting the issue back to the NFAC/CIT(A) for further inquiry and adjudication. The tribunal emphasized the importance of conducting an independent examination to ascertain the credibility of the lenders and the genuineness of the transactions. This case underscores the significance of thorough documentation and comprehensive verification in tax assessments involving unsecured loans.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by assessee is directed against order of NFAC for the assessment year 2016-17 dated 20.3.2023 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). The assessee has raised following grounds of appeal:
1. “That the orders of the authorities below in so far as it is against the assessee is against the law, facts, circumstances, natural justice, equity, without jurisdiction, bad in law and all other known principles of law.
2. That the total income computed and the total tax computed is hereby disputed.
3. The AO erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled.
4. On the facts and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of learned Assessing Officer in making addition of Rs. 150,13,10,676/- as unaccounted cash credit u/s 68 rws 115BBE of the Act.
5. On the facts and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of learned Assessing Officer in treating the loan from Dinesh Kumar Singhi of Rs. 78,39,89,104/- as accounted cash credit u/s 68 rws 115BBEof the Act.
6. On the facts and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of learned Assessing Officer in treating the loan from Snehalatha Singhi of Rs. 1,03,21,572/- as unaccounted cash credit u/s 68 rws 115BBE of the Act.
7. On the facts and circumstances of the case as well as in law, the learned CIT(A) has erred in confirming the action of learned Assessing Officer in treating the loan from Laxmipat Dudheria of Rs. 70,70,00,000/- as unaccounted cash credit u/s 68 rws 115BBEof the Act.
8. That the authorities below erred in resorting to section 68 and section 115BBE of the Act.
9. That the authorities below erred in ignoring the relevant details and relying on surmises, suppositions and conjectures in support of the addition. The authorities below erred in making the addition even after giving a finding that the said funds belong to the directors and not to the company. Thus they failed to act on their own finding and consequently the orders below are perverse in nature.
10. That the case laws relied on by the authorities below are not relevant and out of context.
11. The appellant denies the liabilities for interest u/s 234B & 234C of the Act. Further prays that the interest if any should be levied only on returned
12. No opportunity has been given before levy of interest u/s 234B & 234C of the Act.
13. Without- prejudice to the appellant’s right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234B & 234C of the Act.
14. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered.
15. The appellant craves leave to add, amend, alter or delete the grounds of ”
2. Facts of the case are that the assessee is a Public Limited Company. For the above assessment year, the assessee company filed its Return of Income on 26.11.2016 declaring a loss of Rs.247,23,15,045/-. A notice u/s 143(2) of the Act was issued dt.03.07.2017. The assessee’s case was selected for making a reference to the Transfer pricing officer in respect of certain Specified Domestic Transactions vide reference dt. 18.09.2018. After elaborate hearing the learned TPO determined that no adjustment was required u/s 92CA rws 92C to the arm’s length price determined by the assessee vide order u/s 92CA of the Act dt.22. 10.20 19. For the impugned year several hearings were scheduled, however no effective hearing took place for a long period of time in view of change in jurisdiction of the AO. Finally, and penultimately a notice dt. 28.11.2019 was issued u/s 142(1) of the Act with the compliance date of 10.12.2019 calling for several details many of which are very basic like seeking copy of the Balance Sheet, Profit & Loss etc. Thereafter another notice dt. 16.12.2019 was issued seeking several details fixing the compliance and also hearing fixed on 20.12.2019 at 11.47 am. On going through the details, the ld. AO did not seek any further details nor expressed any adverse view about the details fifed or raised any issue of contention. From the assessment order in para 3.6, it is seen that the AO has caused certain enquiry and collected information on 25.12.2019 from Karur Vysya Bank with a stated view to verify money trail related to unsecured loan. The AO is on record to say that it received only partial details. The assessee received the assessment order dt. 31.12.2019 and was utterly shocked and dismayed to learn that as against the loss of Rs. 247,23,15,045/-, the AO had made addition of Rs.150,13,10,676/- u/s 68 rws 115BBE of the Act. The details of the addition is in para 5.11 of the assessment order.
2.1. Against this assessee went in appeal before NFAC. NFAC confirmed the order of the ld. AO. Against this assessee is in appeal before us.
3. The above ground Nos.1, 2, 14 & 15 are general which do not require any adjudication.
4. Ground Nos.4 to 10 are with regard to sustaining addition of Rs.1,50,13,10,676/-.
4.1 The ld. A.R. submitted that the assessee has furnished the details sought for and also duly appeared before ld. AO. On going through the details, the ld. AO did not seek any further details nor expressed any adverse view about the details filed or raised any issue of contention. In the assessment order at para 3.6, the ld. AO has caused certain enquiry and collected information on 25.12.2019 from Karur Vysya Bank with a view to verify money trail related to unsecured loan. The AO is on record to say that it received only partial details. The assessee received the assessment order dt. 31.12.2019 and came to know that as against the loss of Rs. 247,23,15,045/-, the AO had made addition of Rs.150,13,10,676/- u/s 68 rws 115BBE of the Act. The details of the addition is in para 5.11 of the assessment order. The queries on all other issues has been duly accepted by the AO. The addition made u/s 68 rws 115BBE of the Act is incorrect and contrary to the evidence on record. The genesis of the addition can be traced to the show cause notice dt.16.12.2019 in para 3 of the assessment order which he extracted as hereunder:
“3. During the year assessee has received loan from directors/related parties. As per ITR, the lenders does not have source to lend such amount during the year. Assessee also failed to prove the source for such loan amount transaction. Hence, assessee is show caused why same shall not be taxed u/s 68 and taxed u/s 115 BBE of IT Act.”
4.2 He submitted that the respective details were filed by the assessee on 20.12.2019, which are extracted from para 5.3 of the assessment order as below:
“The details of loans from directors/related parties are as under:
