2021 (11) TMI 137 - AT - Income Tax

Addition u/s 68 - Unexplained loan received from 11 parties - HELD THAT - As assessee has old running accounts with the aforesaid parties - alleged report of the inspector in respect of the three parties was never confronted to the assessee. The assessee was never asked to produce any other information by the Ld. AO before arriving at the conclusions. The statement recorded of some persons/parties relied on by the Ld. AO was never confronted to the assessee. Even the alleged statements recorded in some other cases were allegedly recorded in the year 2014, whereas, the assessee had taken loan in the FY 2015-16 from the said parties, hence, the alleged statement relied upon by the Ld. AO was prior to the said loan transactions - persons on whose statement has been relied upon by the Ld. AO were neither operating nor controlling the said concerns at the time of the transactions done by the assessee. The Ld. Counsel in this respect has also relied upon the balance sheets and submitted that the creditors had sufficient net worth to advance loans to the assessee - CIT(A) considering the entire facts and circumstances of the case has rightly deleted the addition so made by the ld. AO. Having gone through the impugned order of the ld. CIT(A) and considering the submissions of the ld. Counsel of the assessee, which the ld. DR could not rebut, we do not find any justification to interfere in the order of the ld. CIT(A) on this issue, the same is accordingly upheld. This ground of revenue s appeal is dismissed. Delayed payment of interest on service tax and TDS holding the same as penal in nature - CIT-A deleted the addition - HELD THAT - We find that the ld. CIT(A) has relied upon the decision of the Hon ble Apex Court in the case of Lachmandas Mathura 1997 (12) TMI 16 - SUPREME COURT and further on the decision of Tribunal in the case of DCIT vs. Narayani Ispat Pvt. Ltd 2017 (10) TMI 67 - ITAT KOLKATA wherein it has been held that the delayed payment of interest on service tax was compensatory in nature and the same was an allowable deduction. The Ld. DR could not point out any infirmity in the above observations of the ld. CIT(A). The order of the ld. CIT(A) on this issue is accordingly upheld. This ground of revenue s appeal is dismissed.

Issues Involved:
1. Deletion of addition of ?12,56,40,000/- made by the Assessing Officer under Section 68 of the Income Tax Act, 1961, treating loans received by the assessee as not genuine.
2. Deletion of addition of ?56,36,542/- in respect of interest payments on the unaccounted loans.
3. Deletion of addition of ?27,034/- on account of delayed payments of interest on service tax and TDS.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?12,56,40,000/- under Section 68:

The revenue contested the action of the Learned Commissioner of Income-tax (Appeals) [Ld. CIT(A)] in deleting the addition made by the Assessing Officer (AO) regarding loans received from 11 parties. The AO had issued notices under Section 133(6) of the Income Tax Act, 1961, to verify these transactions. Replies and confirmations were obtained from the said parties. However, the AO found that 8 parties were paper companies, and 3 others did not physically exist at the given address. The AO relied on statements recorded in other cases where certain persons admitted to providing accommodation entries in lieu of commission. The AO held that the loans were bogus and added them as unaccounted income.

Upon appeal, the Ld. CIT(A) considered the explanations and evidence furnished by the assessee regarding the identity, creditworthiness, and genuineness of the transactions. The Ld. CIT(A) observed that the assessee had provided detailed information, including PAN, addresses, and financial statements of the lenders. The AO’s reliance on statements recorded in other cases was deemed irrelevant as they were not directly related to the assessee’s transactions. The Ld. CIT(A) noted that the AO did not provide any material evidence to the assessee for rebuttal. The Ld. CIT(A) concluded that the assessee had discharged its initial onus of proving the genuineness of the transactions, and the AO failed to bring any positive evidence against the assessee. The addition was deleted based on various judicial precedents supporting the assessee’s case.

2. Deletion of Addition of ?56,36,542/- in Respect of Interest Payments:

The Ld. CIT(A) held that since the loan transactions were accepted as genuine, the interest payments on these loans were consequential and allowable. Both the representatives agreed that this issue was consequential to the first issue. The tribunal upheld the Ld. CIT(A)’s decision, stating that the interest payments were allowable as the loans were genuine.

3. Deletion of Addition of ?27,034/- on Account of Delayed Payments of Interest on Service Tax and TDS:

The department contested the deletion of ?27,034/- made by the AO on account of delayed payment of interest on service tax and TDS, which was treated as penal in nature. The Ld. CIT(A) relied on the decision of the Hon’ble Apex Court in Lachmandas Mathura vs. CIT and the co-ordinate bench of the Tribunal in DCIT vs. Narayani Ispat Pvt. Ltd., which held that delayed payment of interest on service tax was compensatory and allowable as a deduction. The tribunal found no infirmity in the Ld. CIT(A)’s observations and upheld the deletion.

Conclusion:

The tribunal dismissed the revenue’s appeal, upholding the Ld. CIT(A)’s order in deleting the additions made by the AO. The tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the loan transactions, and the AO failed to provide any substantial evidence to contradict the assessee’s claims. The appeal of the department was dismissed, and the order was pronounced in open court on 26.10.2021.

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