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TMI Blog2020 (7) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the confirmation of the additions of 5 Crores u/s 68 of the act with respect to above unsecured loan. X X X X Extracts X X X X X X X X Extracts X X X X ..... isions Pvt. Ltd. has received the loan from MKT Investments Private Limited, which has been extended to the Assessee Company. It is pertinent to note here that MKT Investments Private Limited is a company engaged in the business of making investments in securities etc and of granting loans / advances to parties. From the bank statements, your good-self would note that nowhere cash has been credited in the books. The Assessee has received the loan through proper banking channels only. The Assessee has passed necessary entry in the books of accounts. By producing the documentation, the assessee has evidenced and established the identity of the lender. The assessee has no-where hidden the identity of the lender. The assessee has also established the genuineness of the transaction by producing ample documentation. The assessee has clearly explained the nature and source of credit though producing the bank statements of parties. " 4.3 The reply of the assessee has been carefully examined but found not tenable in view of the discussion in the succeeding paragraphs. From evidence on record, it is seen that the assessee company has received unsecured loan from M/s Maharaasa Visions Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider it an insufficient and unsatisfactory explanation u/s 68. Accordingly, it is held that unsecured loan availed from M/s Maharaasa Visions Pvt Ltd is not genuine and by invoking' provisions of section 68 of the act, the same is added to income of the assessee. Addition : ₹ 50000000/- " 05 Against this order, the assessee preferred an appeal before the ld. CIT (Appeals). The ld. CIT (Appeals) vide para Nos. 5.4.1 to 5.4.5 dealt with the addition as under :- "5.4.1 Vide Ground Nos. II to 15 the appellant has contested the addition of ₹ 5,00.00,000/- on account of non-genuine unsecured loan by invoking the provisions of section 68 of the Act. During the assessment proceedings the AO noted that the appellant has availed unsecured loan of ₹ 5,00,00,000/- from M/s Maharaasa Visions Pvt. Ltd. on 18.09.2015. The appellant was asked vide notice li/s 142(1) of the Act to prove genuineness of unsecured loan and creditworthiness of the lender. As there was no response the appellant was issued show cause notice as to why section 68 of the Act should not be invoked in relation to the unsecured loan transaction. 1 he AO carefully examined the reply to the show c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial statements and confirmations of the parties before the AO. The lender company received the loan from M/s MKT Investment Pvt. Ltd. which was extended to the appellant. It has been submitted that from the bank statements it has been established that nowhere cash has been credited in the books of accounts. The appellant received the loan through proper banking channel and passed necessary entry in the books of accounts. By producing documentation the appellant has established the identity of the lender and genuineness of the transaction. The appellant has explained the nature and source of credit through bank statements of concerned parties. 5.4.4 On thorough consideration 1 find that the AR of the appellant even in his written submission dated 10.05.2019 has not commented upon the creditworthiness of the lender which was the main issue raised by the AO in the assessment order. Neither during the assessment proceedings nor in the appellate proceedings, the appellant has been able to establish creditworthiness of the lender company. In the absence of creditworthiness of the lender the genuineness of the transaction is also not established. The AO has analysed the bank statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e after these transactions was a small amount and moreover assessee failed to produce these lenders for verification, impugned amount was rightly brought to tax under section 68. vi. In the case of Sitaram Ramchanddas Patel Vs. ITO (2018) 95 taxmann.com 290 (Gujarat) the Hon'ble Gujarat High Court held that where assessee failed to prove capacity of concerned persons who alleged to have given unsecured loan and/or gift, impugned addition made under sec. 68 was to be confirmed. 5.4.5 Thus, in view of the facts stated above since the appellant has failed to establish the creditworthiness of the Lender Company as well as genuineness of transaction, the action of the AO in treating the non-genuine unsecured from M/s Maharaasa Visions Pvt. Ltd. As unexplained cash credit under Section 68 of the Act is fully justified and therefore, addition of ₹ 5,00,00,000/- made by the AO under Section 68 of the Act on this account is confirmed. Accordingly, Ground Nos. 11 to 15 are dismissed. " 06 Thus, assessee, aggrieved has preferred this appeal. 07 The ld AR submitted that a. Assessee has received the above loan from M/s. Maharassa Visions Pvt. Ltd., which is one of the group concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source of funds available with the lender, the funds received by the assessee company. h. There is no allegation that any third party is involved or there is any malafide intention of the assessee. He submitted that there is no allegation at all that it is an accommodation entry. He submits that funds flow is not at all doubted. i. He submitted that Lender Company was for specific purposes of filing a real estate tender; therefore, assessee transferred the funds to the lender through MKT Investments Pvt Ltd, another Group company. Assessee paid ₹ 5 Crore to MKT Investments, MKT Investments in turn Paid 5 Crore to lender. As the project did not fructify, the money was returned to the assessee by lender. However as in the group concerns there were accounting entries at the time of receipt of money, same needs to be reversed, in next year assessee returned this money to lender, lender returned, money to MKT Investments and In turn MKT Investments returned money to the appellant. He explained the whole cycle of the fund movement. j. He submitted that as the project for which the company was formed by the group, did not fructify, there are no assets and liabilities of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness of the transaction. In support of this contention assessee submitted, that it has received the loan from a group concern, which was repaid in subsequent year. To substantiate its claim the assessee submitted the copy of the income tax return of the lender, bank statement, confirmation as well as the financial statements in the form of balance sheets of the lender. The assessee also submitted that in the balance sheet, the assessee's name is shown as a debt by lender company. There is a creditor by the name of MKT investments private limited, which is also group concern, who has given a loan to the lender and that lender in turn has deposited the money with the assessee company. Subsequently, assessee returned the money to the lender, the lender returned money to the MK investments private limited and MKT investments private limited returned the loan taken from the assessee. Therefore, there is a complete trace of the transaction of the above loan received. To substantiate the above transaction the assessee has submitted a bank statement of the assessee, MKT Investments Pvt Ltd and lender i.e. Maharasaa Vision Pvt Ltd. The assessee by production of the balance sheet has sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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