Case Law Details
Standard Fiscal Markets Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Introduction: In a recent ruling by the Income Tax Appellate Tribunal (ITAT) Mumbai in the case of Standard Fiscal Markets Pvt. Ltd. vs DCIT, the tribunal has addressed the issue of addition under Section 68 for loans received by the taxpayer. The case involves a search conducted under Section 132 and subsequent proceedings under Section 153C of the Income Tax Act.
Facts:
A search was conducted u/s. 132 of the Act and the ledger of the assessee was found in the digital data backup seized from the premises of M/s Trimax IT Infrastructure and Services Ltd. Accordingly, proceedings u/s. 153C of the Act were initiated against the assessee. From the perusal of the return filed, the AO noted that the assessee has taken loans of Rs. 13,95,00,000/- from 3 different parties. Notice u/s. 142(1) of the Act was issued, requesting the assessee to substantiate the identity, creditworthiness of the creditor, and genuineness of the transaction. In response, the assessee furnished the names, addresses, and PAN of the aforesaid creditors. The assessee was then asked to show cause as to why the sum credited in their books should not be added u/s. 68 of the Act, as during the search conducted on Trimax IT, it was found that the aforesaid 3 creditors had received funds from Trimax IT pursuant to bogus purchase transaction. In response, the assessee submitted that the loans are genuine and made through proper banking channels. The assessee further submitted that the loans received from the aforesaid parties were invested in M/s Trimax IT and there is a possibility that in some of the cases, money was transferred from M/s Trimax IT to the parties who have given loans to the assessee for business transaction purpose. The assessee also submitted that against the unsecured loan, the assessee had issued secured compulsory convertible non-transferable debentures.
The AO held that the assessee failed to establish the creditworthiness of the lender and genuineness of the transaction. The AO also held that it would be imprudent for any businessman to advance loan without charging any interest, and also the debentures issued by the assessee have no market value. Furthermore, the Directors/CFO of the aforesaid creditors admitted that they had provided accommodation entries of bogus purchase bills to Trimax IT, and on the instructions of Trimax IT the funds were transferred to various companies including the assessee. The AO disregarded the submissions made by the assessee and made an addition of Rs. 13,95,00,000/- u/s. 68 of the Act. The CIT(A) confirmed the order of the AO. Against the addition made u/s.68, the assessee has preferred an appeal before the Hon’ble ITAT.
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