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2020 (3) TMI 417 - AT - Income TaxAddition u/s 68 - None of the twelve companies could be located on the given address from whom the assessee company had claimed to have taken unsecured loan - HELD THAT - In this case on hand, the assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the loan creditors, thereafter the onus shifted to AO to disprove the documents furnished by assessee. The documents furnished by assessee cannot be brushed aside by the AO without cogent reasons. AO s action to draw adverse view in the light of the documents discussed supra cannot be countenanced. In the absence of any investigation, much less gathering of evidence by the Assessing Officer, we hold that addition cannot be sustained merely based on inferences drawn by circumstance. We are inclined to uphold the order of the Ld. Commissioner of Income Tax (Appeals) To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature source of the loan received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the loan creditors. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO's record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction were placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified. In the facts and circumstances of the case as discussed above, no addition was warranted under Section 68 of the Act. Therefore, we do not want to interfere in the impugned order of Ld. CIT(A) which is confirmed and consequently the appeal of Revenue is dismissed. Addition on account of interest payment to bogus loan creditors - AO disallowed the interest expenditure which were paid by the assessee to the aforesaid twelve (12) loan creditors, on the reason that the loan creditors were bogus entities/companies - HELD THAT - While adjudicating ground nos. 1 5 we have found that loan creditors are not bogus companies and that the interest were paid through banking channel and TDS have been duly deducted by the assessee. We find that the ld. CIT(A) has rightly deleted the impugned addition. We confirm the action of the ld. CIT(A) and dismiss this ground of appeal of Revenue. Employees contribution of PF/ESI - Addition of non-deposit within due date as prescribed in PF/ESI Act - HELD THAT - We note that the ld. CIT(A) has given the relief to the assessee after taking note that the assessee had deposited on account of employees contribution to PF/ESI before the due date of filing of return of income, which factual finding is corroborated from perusal of pages 35-36 of the PB (Tax Audit Report) from where, we note that the assessee, in fact, had remitted the employees contribution of PF/ESI before due date of filing of return of income. Therefore, we confirm the order of the ld. CIT(A) by relying on the decision of the Hon ble Jurisdictional High Court in the case of Vijay Shree Ltd dt. 2011 (9) TMI 30 - CALCUTTA HIGH COURT Disallowance being the interest on late payment of TDS - AO disallowed since this amount has been remitted by the assessee for late payment of TDS - HELD THAT - We note that the ld. CIT(A) has given relief taking note of the decision of this Tribunal in the case of M/s. Narayani Ispat Pvt. Ltd 2017 (10) TMI 67 - ITAT KOLKATA as well as the decision of the Hon ble Allahabad High Court in the case of Triveni Engineering Works Ltd. vs Commissioner Of Income-Tax 1983 (10) TMI 49 - ALLAHABAD HIGH COURT . We note that this issue is no longer res integra. This Tribunal in Narayani Ispat P. Ltd. has decided this issue by holding as under The issue of delay in the payment of service tax is directly covered by the judgment of Hon'ble Apex Court in the case of Lachmandas Mathura Vs. CIT 1997 (12) TMI 16 - SUPREME COURT in favour of assessee to conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well' as TDS liability are allowable expenses u/s 37(1) of the Act. The interest expenses claimed by the assessee on account of delayed deposit of service tax as well' as TDS liability are allowable expenses u/s 37(1) of the Act. - Decided against the revenue.
Issues Involved:
1. Deletion of addition under Section 68 of the Income-tax Act, 1961. 2. Deletion of addition on account of interest payment to bogus loan creditors. 3. Deletion of addition due to non-deposit of employees' contribution to PF and ESI within the due date. 4. Allowance of interest on late payment of TDS. Issue-wise Detailed Analysis: 1. Deletion of Addition under Section 68 of the Income-tax Act, 1961: The main grievance of the revenue was that the CIT(A) erred in deleting the addition of ?2,60,67,315/- under Section 68 of the Income-tax Act, 1961, without calling for a remand report when twelve companies that provided loans to the assessee could not be located at the given addresses. The AO had added the amount as unexplained cash credit, suspecting the companies to be paper entities. However, the CIT(A) deleted the addition based on the documentation provided by the assessee, which included balance sheets, bank statements, and ITRs of the loan creditors. The Tribunal noted that the AO had not provided any substantial evidence to disprove the documents submitted by the assessee. The AO's assertion that the loan creditors could not be located was not supported by any physical verification or inspector's report. The Tribunal found that nine out of the twelve loan creditors had responded to the AO's notices under Section 133(6), and the assessee had provided sufficient documentation to establish the identity, creditworthiness, and genuineness of the loan transactions. The Tribunal upheld the CIT(A)'s decision, emphasizing that the onus had shifted to the AO to disprove the materials placed before him, which he failed to do. 2. Deletion of Addition on Account of Interest Payment to Bogus Loan Creditors: The AO had disallowed interest expenditure of ?12,75,987/- paid to the twelve loan creditors, considering them bogus entities. However, the Tribunal, while adjudicating the first issue, found that the loan creditors were not bogus and that the interest was paid through banking channels with TDS duly deducted. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the addition. 3. Deletion of Addition Due to Non-Deposit of Employees' Contribution to PF and ESI within the Due Date: The AO had added ?8,46,634/- to the assessee's income for non-deposit of employees' contribution to PF and ESI within the due date prescribed under the respective Acts. The CIT(A) deleted the addition, noting that the assessee had deposited the amount before the due date for filing the return of income. The Tribunal confirmed the CIT(A)'s order, relying on the decision of the Hon'ble Jurisdictional High Court in the case of Vijay Shree Ltd. 4. Allowance of Interest on Late Payment of TDS: The AO had disallowed ?3,15,107/- being the interest on late payment of TDS. The CIT(A) allowed the deduction, taking note of the Tribunal's decision in the case of M/s. Narayani Ispat Pvt. Ltd. and the Hon'ble Allahabad High Court's decision in Triveni Engineering Works Ltd. The Tribunal upheld the CIT(A)'s decision, stating that the interest on delayed payment of TDS is an allowable expense under Section 37(1) of the Income-tax Act. Conclusion: The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s order on all grounds. The Tribunal emphasized the importance of substantial evidence and proper verification by the AO before making additions under Section 68 and disallowing expenses.
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