Case Law Details
DCIT Vs Vaishnodevi Buildcon Private Limited (ITAT Kolkata)
Suspicion Isn’t Evidence – Documentary Proof Triumphs Over Doubt – ITAT Kolkata Upholds ₹2.5 Cr Loan as Genuine, Deletes Additions u/s 68 & 69C
AO reopened the Assessee’s assessment u/s 147 based on information from the Investigation Wing alleging that M/s Shivaangan Merchandise Pvt. Ltd., from which Assessee had taken an unsecured loan of ₹2.50 crore, was a shell or struck-off company. Despite the Assessee furnishing confirmations, ITRs, audited financials, & bank statements of the lender along with proof of TDS on interest paid, AO treated the amount as unexplained cash credit u/s 68 & added the interest payment of ₹8.46 lakh as unexplained expenditure u/s 69C. CIT(A)/NFAC, after verifying all evidences, deleted both additions, holding that the lender company was active on the MCA portal, had filed its returns, paid due taxes of ₹23.94 lakh, possessed a net worth exceeding ₹51 crore, & had been assessed u/s 143(3) for the same year. AO had merely relied on the Investigation Wing report without conducting any independent verification.
ITAT observed that Assessee had produced complete documentary evidence establishing the identity, creditworthiness, & genuineness of the loan transaction, including audited accounts, confirmations, ITR acknowledgments, & bank statements. AO failed to undertake any inquiry or bring adverse material on record to rebut these evidences. Tribunal emphasized that suspicion cannot substitute evidence, & once the primary onus is discharged by the Assessee, the burden shifts to the Revenue to disprove it through concrete inquiry. CIT(A)’s detailed findings, based on verification of factual & financial data, were consistent with the law laid down in PCIT v. Sreeleathers (Cal HC, ITAT No. 18/2022, dated 14.02.2022) & ITO v. Megasun Merchants Pvt. Ltd. (ITA No. 1038/KOL/2015, dated 29.03.2019).
Accordingly, the ITAT held that there was no infirmity in the CIT(A)’s order & dismissed both Revenue appeals.
Held
- The unsecured loan of ₹2.50 crore from M/s Shivaangan Merchandise Pvt. Ltd. is genuine & fully explained.
- Addition u/s 68 on account of alleged unexplained cash credit deleted.
- Consequential addition u/s 69C for interest payment of ₹8.46 lakh also deleted.
- AO’s order based on unverified third-party report set aside; CIT(A)’s reasoned order upheld.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These are the appeals preferred by the Revenue against the orders of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 16/04/2025 for the AY 2018-19.
ITA No. 1382/KOL/2025
2. The only issue raised by the Revenue is against the deletion of addition of ₹2,50,00,000/- by the ld. CIT (A) as made by the ld. AO on account of unexplained cash credit u/s 68 of the Income-tax Act, 1961 (the Act) in respect of unsecured loans raised by the assessee during the year.
3. The facts in brief are that the assessee filed the return of income on 29.10.2018, declaring total income at ₹nil. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148(1) of the Act on 24.03.2022, after AO received information from investigation wing through insight portal that assessee has received loan from M/s Shivaangan Merchandise Pvt. Ltd. According to the ld. AO, the information received, the said company is either struck off or is a shell company. The ld. AO after following the procedure under the Act issued show cause notice u/s 148A(b) of the Act to the assessee and after taking into account the response of the assessee passed the order u/s 148A(d)of the Act and only thereafter, issued notice u/s 148 of the Act as refereed to (supra). Though the assessee did not comply with the questionnaire and notice issued initially but afterwards furnished all the details/ information qua the said loan including confirmation, details of interest paid and TDS deducted at sources and payment thereof. However, the ld. AO noted that the assessee has failed to provide the satisfactory explanation/ submission/ evidences to explain the said loan from M/s Shivaangan Merchandise Pvt. Ltd. and accordingly treated the same as unexplained cash credit and added to the income of the assessee in the assessments framed u/s 147 read with section 144B of the Act vide order dated 27.03.2023.
4. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee after taking into consideration the reply/ submission of the assessee.
5. After hearing the rival contentions and perusing the materials available on record, we find that the assessee during the year has raised an unsecured loan of ₹2,50,00,000/- from M/s Shivaangan Merchandise Pvt. Ltd. and paid interest at the rate of 8.5% per Anum which worked out to ₹8,46,061/-. We observe that the lender company is active on the ROC portal as per the database of Ministry of Corporate Affairs and has been regularly filing the return of income. We even note that the assessment has been framed u/s 143(3) of the Act for A.Y. 2018-19, in the case of the lender. We also note that the lender has filed the return of income and paid the tax amounting to ₹23,94,863/- and was having a net worth of ₹51,11,78,732/- during the impugned assessment year. We note that the assessee has filed before the ld. AO the name, address, audited accounts, IT return, bank statement and confirmation etc. and also provided details in respect of utilization of funds raised from the said lender. We note that the ld. AO has not carried out any independent enquiry on the evidences filed by the assessee and only relied on the report of investigation wing. We have perused the order passed by the ld. CIT (A) and find that the ld. CIT (A) has allowed the appeal of the assessee after discussing the facts in detail from para no.5.2 to 5.14 of the appellate order and while allowing the appeal of the assessee has followed the decision of Calcutta High Court in case of PCIT vs. Sreeleathers in ITAT No. 18/2022, IA no. GA/02/2022 dated 14.02.2022 and also the decision of the co-ordinate bench in the case of ITO, Ward 2(1), Siliguri Vs. M/s Megasun Merchants Pvt. Ltd. in ITA No. 1038/KOL/2015 dated 29.03.2019. Therefore, we do not find any infirmity in the order of the ld. CIT (A) which warrant our interference as the order passed is very reasoned and speaking. Since the AO has not done any enquiry on the evidences filed by the assessee before the AO and made the addition on suspicion basis that the assessee is either struck off or is a shell company. Accordingly, we uphold the order of the ld. CIT (A) by dismissing the appeal of the Revenue.
ITA No. 1382/KOL/2025
6. The issue raised in ITA no. 1383/KOL/2025 is in respect of interest of ₹8,46,061/- which was deleted by the ld. CIT (A) by reversing the order of the ld. AO, wherein the said interest was added to the income of the assessee as unexplained expenditure u/s 69C of the Act. Pertinent to state that interest was paid on the loan of ₹2,50,00,000/-taken from M/s Shivaangan Merchandise Pvt. Ltd. Since, we have upheld the order of ld. CIT (A) by dismissing the appeal of the Revenue on the issue of unsecured loan by holding that the ld. CIT (A) has rightly deleted the addition after taking into consideration the reply and submission of the assessee and evidences filed in connection therewith. This being a consequential issue to our decision in ITA No. 1382/KOL/2025 and accordingly, the appeal of the Revenue is dismissed by upholding the order of ld. CIT (A) on this issue. Noteworthy to state that this appeal has emanated from the order of ld. CIT (A) which was passed in the context of order passed by the ld. AO u/s 154 of the Act.
7. In the result, both the appeals of the of the Revenue are dismissed.
Order pronounced in the open court on 04.11.2025.
Author Bio
