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2024 (12) TMI 503 - AT - Income TaxAdditions u/s 68 - assessee has declared long term borrowings received from related parties - onus to prove the identity, creditworthiness and genuineness of the share applicants/loans - CIT(A) deleted addition - HELD THAT - With regard to Manoj Sethi, CIT(A) observed that he is a Director of the assessee company and assessee has declared a loan. He further observed that there was an opening credit balance and out of the above said amount, assessee has repaid sum during the year and closing balance on 31.03.2012 was shown. In support of the above, assessee also filed return of income of Manoj Sethi for AY 2012-13 wherein he has declared an income of Rs. 2,94,79,060/-. He observed that bank statement of Manoj Sethi was also submitted before him and the relevant transactions were confirmed by Manoj Sethi and even, in remand proceedings, the Assessing Officer has not found any negative observations. Therefore, substantial amount received by the assessee during the year was already repaid. Accordingly, he came to the conclusion that identity, creditworthiness and genuineness was established by the assessee. Therefore, we do not see any reason to disturb the findings of ld. CIT(A). Crayons Advertising Pvt. Ltd., ld. CIT (A) deleted the addition with the observation that the said company has filed the reply u/s 133 (6) of the Act before the Assessing Officer and confirmed the transactions. He also observed that they have declared an income in their return of income. Therefore, we are inclined to accept the same. Mani Mudra Vincom Pvt. Ltd., this company also replied to the notice issued/ u/s 133(6) of the Act during the remand proceedings and they have confirmed the transactions before ld. CIT(A). Further, he observed that the assessee also paid interest @ 12% after deducting TDS and all these transactions were routed through banking channel, they also submitted copy of bank statements, copy of books of account and Balance Sheet along with return of income. Accordingly, ld. CIT (A) after due consideration gave the relief. Therefore, we are inclined to accept the same. Omni Media Communication Pvt. Ltd., ld. CIT (A) observed that this amount also received by the assessee through banking channel. This company also submitted the confirmations in reply to notice issued u/s 133 (6) of the Act during remand proceedings. assessee has shown the same in loans and advances . Since it is a minor error on the part of classification by the assessee, however the company has submitted the confirmation of transaction. Accordingly, ld. CIT (A) found that the identity, creditworthiness and genuineness of the transaction are already established. Since the assessee has submitted relevant documents to prove the conditions laid down u/s 68 of the Act, ld. CIT (A) has appreciated the issue under consideration. The issue has to be verified on the basis of credit on the books of account and the amended provisions shall apply for AY 2013-14. Therefore, we are inclined to accept the findings of ld. CIT (A). Pawansut Media Services Pvt. Ltd. CIT (A) also deleted the addition by analysing their balance sheet and confirmation of the transactions. Real Vyapar Pvt. Ltd., after going through the reply, found that they have confirmed that they lent the loan to the assessee on 07.10.2011 and confirmed the transaction. In support of the same, they also filed copy of bank statement of Standard Chartered Bank though which the said amount was paid. Further he noticed that the assessee has repaid the same in FY 2013-14 through banking channel vide cheque no.173903 of Axis Bank, Lajpat Nagar. After considering the balance sheet submitted by them, ld. CIT (A) found that they have sufficient creditworthiness and accordingly, he deleted the addition by observing that assessee has established identity, genuineness and creditworthiness of the transaction. Therefore, we after analysing the same hold that the assessee has established the genuineness, creditworthiness and identity in this case. Hence, we are inclined to accept the findings of ld. CIT(A). Loan from M/s. Ambika Tradeexpo Pvt. Ltd., ld. CIT (A) observed that on receipt of loan of Rs. 1 crore from M/s. Ambika Tradeexpo Pvt.Ltd. vide cheques dated 04.06.2011 and 09.06.2011, assessee has filed confirmations from them. However, he also observed that during remand proceedings, they have not replied to the Assessing Officer. Further when the assessee was updated with the fact and assessee has submitted that assessee will provide the confirmation from them and ld. CIT (A) while verifying the assessment record found that no such reply was received by the Assessing Officer and not found any other documents substantiating the transactions. Accordingly, he sustained the addition of Rs. 1 crore. After considering the details findings of the ld. CIT (A), since there is no submission made by either party on addition of Rs. 1 crore towards M/s. Ambika Tradeexpo Pvt. Ltd., we are not sustaining the same. Accordingly, the appeal filed by the Revenue is dismissed.
Issues Involved:
1. Legitimacy of the assessment under Section 144 of the Income Tax Act. 2. Validity of additions under Section 14A of the Act. 3. Validity of additions under Section 68 concerning unsecured loans. 4. Creditworthiness and genuineness of transactions with specific parties. 5. Treatment of share application money versus loans and advances. Detailed Analysis: 1. Legitimacy of the Assessment under Section 144: The assessment was conducted under Section 144 due to the non-compliance of the assessee with the notices issued under Sections 143(2) and 142(1). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the assessment under Section 144, confirming that the Assessing Officer (AO) followed due procedure. The non-compliance justified the AO's decision to proceed with a best judgment assessment. 2. Validity of Additions under Section 14A: The CIT(A) deleted the additions under Section 14A, noting that the assessee did not receive any exempt income during the relevant assessment year. This decision was based on the principle that Section 14A disallowance is not applicable in the absence of exempt income. 3. Validity of Additions under Section 68 Concerning Unsecured Loans: The AO made additions under Section 68, suspecting the unsecured loans as unexplained cash credits. The CIT(A) reviewed the evidence provided by the assessee, including confirmations and supporting documents, and remanded the matter for further verification. Post-verification, the CIT(A) deleted most of the additions, except for Rs. 1 crore from M/s. Ambika Tradeexpo Pvt. Ltd., due to insufficient evidence to prove identity, creditworthiness, and genuineness. 4. Creditworthiness and Genuineness of Transactions with Specific Parties: - Manoj Sethi: The CIT(A) found the identity, creditworthiness, and genuineness of the transaction with Manoj Sethi, a director of the company, to be established, as substantial amounts were repaid during the year. - Crayons Advertising Ltd.: The CIT(A) accepted the transactions as genuine based on confirmations and substantial declared income by the party. - Mani Mudra Vincom Pvt. Ltd.: Despite initial concerns about creditworthiness, the CIT(A) accepted the transactions as genuine after considering interest payments and supporting documents. - Omni Media Communication Pvt. Ltd.: The CIT(A) acknowledged a minor classification error but accepted the transactions as genuine due to confirmations and supporting documents. - Pawansut Media Services Pvt. Ltd.: The CIT(A) accepted the transactions based on balance sheet analysis and confirmations. - Real Vyapar Pvt. Ltd.: Despite initial concerns, the CIT(A) found the transactions genuine after verifying the reply and supporting documents. 5. Treatment of Share Application Money Versus Loans and Advances: The CIT(A) noted misclassifications in the balance sheet regarding amounts received as share application money versus loans and advances. However, these were considered minor errors, and the transactions were accepted as genuine where appropriate confirmations were provided. Conclusion: The Tribunal upheld the CIT(A)'s decision to delete most additions under Section 68, except for the Rs. 1 crore from M/s. Ambika Tradeexpo Pvt. Ltd., due to insufficient evidence. The appeal by the Revenue was dismissed, and the cross-objections by the assessee were also dismissed, as the issues were resolved in favor of the assessee. The Tribunal emphasized the importance of proving identity, creditworthiness, and genuineness in transactions involving unsecured loans and share application money.
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