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TMI Blog2020 (1) TMI 1028X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,crore from Rampion Eyetech Pvt.Ltd., Rs. 18,54,000/- from Shri Sunil K Jain, HUF, Rs. 1,27,626/- from Shri Anuj R Mehta were shown to have been received otherwise than by account payee cheques/drafts and the assessee had failed to produce bank accounts to enable the A.O. to verify the genuineness of the transactions. 3. The Ld.CIT(A) has erred in law and on facts by not appreciating that the loans amounting to Rs. 1,21,00,000/- were squired up during the year and the assessee has failed to furnish documentary evidences to prove the genuineness of the transactions and creditworthiness of the lenders. 4. The Ld.CIT(A) has erred in law and on facts by not considering the facts that the assessee failed to furnish relevant evidences in support of loan amounting to Rs. 10,00,000/- shown in the name of Vishal Agencies in tax audit report. 5. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 11,23,686/- made u/s.36(1)(iii) on account of disallowance of interest expenses. 6. The Ld.CIT(A) has erred in law and on facts by not appreciating that when the assessee itself had become sick, there cannot be any expediency in giving interest free loan to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar K Jain HUF a) Confirmation along with PAN and address of the party. b) Ledger Copy of the assessee in the books of account of party. c) Copy of the ITR of shri Sunil Kumar K Jain HUF iii. Anuj R. Mehta a) Confirmation along with PAN and address of the Party. b) Copy of the ITR of Shri R. Mehta 3.4 The Ld.CIT (A) called for the remand report on the submissions/details filed by the assessee from the AO who submitted as under: i. The assessee has taken loan in the year under consideration amounting to Rs. 3,89,81,726/- as evident from the tax audit report. Out of such loan, the assessee has squared up the loan for Rs. 1,21,00,000/- in the year under consideration. Thus the fresh loan which remained outstanding as on 31st 2003 is of Rs. 2,68,81,726/-. ii. The assessee has taken a loan of Rs. 10 lakhs from M/s Vishal agencies which was not squared up in the year under consideration. But the assessee failed to furnish the details of such loan during the remand proceedings. iii. The assessee has not furnished the copies of the ledger with respect to the loans for Rs. 1,21,00,000.00 squared up during the year under consideration. iv. The creditworthiness of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of Rs. 9.84 lacs and from Anuj R.Mehta for an amount of Rs. 31,22,726/-. The additional evidences has been filed by the appellant in respect of three loans except for Vishal Agencies as mentioned above. Rampion Eyetech Pvt.Ltd. and Anuj R. Mehta were assessed by the same A.O. hence, all the details in respect of the two were already available with the A.O. In respect of Sunilkumar K. Jain HUF, the appellant as filed the copy of return of income along with PAN for the said person. As far as Vishal Agencies is concerned it is mentioned by the appellant that the opening balance of unsecured loan was of Rs. 30,41,308/-. During the year under consideration an addition of Rs. 10 lacs was made to this unsecured loan. During the year there was a repayment of Rs. 9,41,308/- leaving behind the blance of Rs. 21 lacs. Hence, the unsecured loan from Vishal Agencies was the brought forward loan and Rs. 21 lac is the part of total unsecured loan of Rs. 4.48 crores. The A.O. in his remand report has mentioned that the appellant has not furnished the bank statements or the ledgers from the persons from whom new loans were taken. The appellant in its reply to the remand report has stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us filed a paper book running from pages 1 to 85 and submitted that the assessee has repaid the loan amount in subsequent year. The assessee to substantiate its claim submitted the following details: 1) A chart depicting the payment and the balance of all unsecured loan details from AY 2003-04 to AY 2011-12 with respect to all the parties. (pages nos. 42 and 43 of paper nook) 2) Ledger account of Vishal agencies showing the payment from AY 2004-05 to AY 2005-06. (pages nos. 62 and 63 of paper book ) 3) Ledger Account of Sunil Kumar K Jain HUF showing the payment from AY 2003-04 to AY 2010-11. (pages nos. 64 to 71 of paper book) 4) Ledger account of Rampion Eyetech Pvt Ltd. from AY 2003-04 to AY 2010-11. (Pages nos. 72 to 79 of paper book) 5) Ledger account of Anuj R Mehta showing the payment from AY 2003- 04 to AY 2005-06. (pages nos. 80 to 85of paper book ) 5.1. The ld. AR regarding the loans which were squared up during the year submitted that the AO neither the assessment proceedings nor the remand proceedings required the assessee to furnish the details about such loans. Similarly, the learned AR also submitted that the matter was remanded by the learned CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque was not sacrosanct nor could it make a non-genuine transaction genuine." 6.2. The AO in the assessment proceedings has treated the entire amount of loan shown by the assessee in its balance sheet for Rs. 4,48,03,196/- as unexplained cash credit. But the AO in his remand report has given a finding that the assessee has taken fresh loan of Rs. 3,89,81,726/- only during the year. Thus the assessee in effect gets the relief for the amount of Rs. 58,21,470/-. 7. Now taking up the matter further, we note that the assessee has taken the loan through the banking channel as well as in cash from the parties detailed as under: S.No. Lender Name Total fresh Loan Amount Cash element i. Rampion evetech 2,00,00,000/- 1,00,00,000/- ii. Sunil Kumar K HUF 20,54,000/- 18,54,000/- iii. Anuj R Mehta 3827726/- 1,27,726/- 7.1. Regarding the loan taken from Rempion Eyetech Pvt Ltd, we note that the assessee has filed the confirmation along with the PAN, copy of the ITR, ledger account of the assessee in the books of Rempion eyetech pvt ltd. ledger account in the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n't charge interest on its own funds passed on to outside agencies or be it, to ones own associate concern. Accordingly, for the reasons as aforesaid and the stand adopted by the assessee in not furnishing the details/reasoning for having not charged interest on such loans and advances passed on to an associate concern, as amount equal to 12% out of such loans and advances advanced is disallowed u/s.36(1)(iii), treating the same as being incurred for non-business purposes." 7.3. Now coming to the loan accepted from Sunil Kumar K Jain HUF, we note that the assessee has filed the confirmation along with the PAN, copy of the ITR, ledger account of the assessee in the books of Sunil Kumar K Jain HUF and ledger copy of assessee's books which are placed on pages 87,94, and 89 of the paper book. 7.4. Now coming to the loan accepted from Anuj R Mehta, we note that the assessee has filed the confirmation along with the PAN, copy of the ITR, and ledger copy of assessee's book which are placed on pages 86 and 95 of the paper book. 7.5. Similarly, we also note that the assessee in respect of source of fund in the hands of the above mention lender i.e. Rempion Eyetech Pvt Ptd, Sunil Kumar K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to accept the loan in cash under the provisions of section 68 of the Act. As such the provision of section 68 of the Act has not differentiated the amount of cash credit accepted by the assessee through the cash and cheque. It means the test laid down to justify the cash credit under section 68 of the Act is same when the loan is taken in cash and through banking channel. 7.11. In our considered view, once the assessee has discharged primary onus by proving the identity of lender, genuineness of transaction and capacity to advance the loan then it is the burden of the Revenue to prove it otherwise. In this regards we drew guidance and support from decision of Hon'ble Madhya Pradesh High Court in the case of CIT vs. Metachen Industries reported in 116 Taxman 572 where it was held as under; "Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment, whether the money invested is properly taxed or not. The assessee is only to explain that the investment has been made by the particular individual and it is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiries. But the AO failed to do so. However assessee has discharged its onus by providing the documents such as confirmation, ITR, address of the lender, ledger copy of the lender. The AO has not pointed out any specific defect in documents furnished by the assessee. In view of the above, we find no reason to interfere in the order of Ld. CIT (A) to the extent of the loan from the parties as discussed above. 7.14 Now, coming to the amounts of loans for Rs. 1,31,00,000/- which were accepted by the assessee during the year from the parties and squared up in the year under consideration. The details of such parties stand as under: S.NO. Lender Name Amount (Rs.) 1. Shree Mangal Finance 99,00,000/- 2. Vishal Agencies 10,00,000/- 3. Babul Bhai R Patel 22,00,000/- 7.15. Regarding the loan accounts squared up in the year under consideration, we find that such loan accounst were never subject to the addition in the original assessment proceedings which was framed under section 144 of the Act. 7.16. Similarly, we also note that the learned CIT (A) has called for the remand report from the AO on the amount of loan appearing in the balance sheet of the assessee as on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were squared up in the year under consideration. Thus, the controversy arises whether the AO can extend the scope of dispute beyond the direction provided by the learned CIT (A). The answer stand negative in view of the judgement of Hon'ble Gujarat High Court in the case of Saheli Synthetics Pvt. Ltd Vs. CIT reported in 302 ITR126 wherein it was held as under: "Similarly even where an assessment is set aside simpliciter, without any enhancement proposal, it is always in the context of the appeal against an order of assessment and cannot be read to mean that the appellate authority granted powers to the Assessing Officer in relation to items of assessment which were never forming part of the appeal before the appellate authority. At the cost of repetition it is required to be noted that processing a new source of income which was on the record before the Assessing Officer but is not forming part of subject-matter of appeal before the appellate authority can be undertaken by the appellate authority only in the course of enhancement of the assessment and, therefore, any set aside, which does not involve a proposal for enhancement, cannot be used for the purpose of expanding the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of interest of Rs. 11,23,686/- has been made u/s.36(1)(iii) on account of interest free loans of Rs. 74,91,240/- given to its sister concern/subsidiary company namely M/s.Ramprasad Trading and investment Pvt.Ltd. The A.O. in the remand report has alleged that the appellant has not been able to furnish any evidence to establish the business purpose as well as no evidence of the said company acting as distributor have been furnished. It is pointed out by the appellant that the same issue had arisen during the A.Y. 2002-03. On perusal of the assessment order for A.Y.2002-03. It is noticed and accepted by the then A.O. that originally the loan to the subsidiary company was given in 1997-98 was to the tune of Rs. 61.81 lacs and over a period of time it has increased to Rs. 71.64 lacs. As per the said assessment order the amount of loan advanced is changing every year. The A.O. in the said order has concluded as follows: "Since the company to whom assessee company has advanced interest free loan is a person specified u/s.40A(2)(b). It is concluded that on the fact of the case of the assessee company provision of Sec.40A(2)(a) is clearly attracted and therefore interest to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 95,470,157 100,629,421 Loan Funds: Secured Loans III 40,050.236 57,774.375 Deferred Payments Credits (Guaranteed to Vijaya Bank Against hypothecation of Specific machinery and third Charge over existing Plant & Machineries and other Assets of the company) 4,391,306 4,285,506 Unsecured Loans IV 44,803,196 26,096,221 Deferred Tax Liability (See Note No.17 of Schedule XX) 1,633,117 665,493 TOTAL 186,348,022 189,451,016 11.1. From the above, it is clear that the own fund of the assessee exceeds the interest free loans and advances as discussed in the assessment order. In such facts and circumstances, a presumption can be drawn that the loans has been provided out of the owned funds of the assessee. In holding so, we find support and guidance from the judgment of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 wherein it was held as under:- "The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of the expenses such statement of foreign travelling expenses, JK industries Bill regarding purchase of Foreign exchange, Receipt of LKP Finance Merchant Financing Ltd. which are available on record. 15. We have heard the rival contentions and perused the materials available on record. In the instant case, the AO made the disallowances of the foreign travelling expenses on the ground that the personal nature cannot be overruled. Subsequently the Ld. CIT(A) deleted the addition made by the AO by observing that the AO has not brought on record from which it can be proved that the expenses are personal in nature. Therefore the Revenue is in appeal before us. At the outset, we note that the assessee has not provided any documentary evidences to prove that the expenditure on foreign travelling was for the business purpose. Admittedly there is no doubt that the expense has been incurred on foreign travelling. But such expenses incurred for the business needs to be justified by furnishing the details of the person travelled, email correspondence, any business expansion from such foreign tour. However we note that the Ld. AR for the assessee has furnished before us detail of f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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