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TMI Blog2023 (3) TMI 354X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement given by the director in a third party proceeding without confronting the same with the assessee. On the contrary, the fact remains that both the above said companies have duly responded to the AO during the course of current assessment proceedings by furnishing replies to the notices issued u/s 133(6) of the Act and the summons issued u/s 131 of the Act. All the relevant financial statements have been filed before the AO in respect of above said two companies in order to prove the three main ingredients, viz., identity of the creditor, credit worthiness of the creditor and the genuineness of transactions. Accordingly, we are of the view that the CIT(A) was not justified in sustaining addition relating to the above said two companies. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to the above said two companies. Consequently, the interest disallowance made in AY 2013-14 and 2014-15 are directed to be deleted. Assessee appeal allowed. - I.T.A. No. 4181/Mum/2019 And I.T.A. No. 4182/Mum/2019 And I.T.A. No. 6198/Mum/2019 - - - Dated:- 28-2-2023 - Shri B.R. Baskaran (AM) And Shri Rahul Chaudhary (J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Pushpanjali Commo Trade Pvt Umeah Kolkata 10,00,000 7,101 6. Smart Pay Card Pvt. Ltd Tu-shar Kolkata 19, 00,000 7,309 7. Frank Mercantile Pvt Ltd Avinash Mumbai 31,00,000 2,27,508 8. Lena Mercantile Pvt Ltd Avinash Mumbai 1,40,00,000 4,51,528 9. Virgo Mercantile Pvt Ltd Tushar Mumbai 35,00,000 58,882 5,35,00,000 25,25,841 Further, the AO noted that the findings in respect of unsecured loans from various companies based in Mumbai and Kolkata show that these parties are merely paper entities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have any business, operated from a very small room with only one employee, source of funds is from share premium and there is no capacity to raise huge share premium. The Director Shri Avinash Jajoo admitted that these are paper concerns. Shri Tushar Sharma, a director of M/s Smart Pay Card Pvt. Ltd. was an employee of Shri Jajoo and is a director in numerous companies and this company does not have creditworthiness to lend huge unsecured loans to assessee. 02 Frank Mercantile Pvt. Ltd. 03 Virgo Mercantile Pvt. Ltd. 04 Smart Pay Card Pvt. Ltd. 05 Kingfisher Properties Pvt. Ltd. Para 10 to 10.8 The Director, Shri Umesh Singh who has signed the confirmation letters has admitted that he is a mere peon of Shri Parveen Agarwal who has floated numerous jama Kharchi companies to give accommodation entries. Shri Parveen Agarwal has also accepted that these are his companies and he has used these companies to provide accommodation entries. 06 Lily Construction Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. M/s. Smart Pay Card Pvt. Ltd. 48,64,200 9,07,56,601 19,00,0001 Total 5,05,00,000 7.4.1 The above demonstrates that the lender companies had the capacity to lend funds to the appellant. No discrepancy has been pointed out in the assessment order of the instant appellant by the AC in respect of the above documents submitted by the appellant during the assessment proceedings. As a matter of fact, the financial statements of the above lender companies are also available on the public domain of Ministry of Corporate Affairs, The appellant has received the borrowings from the aforesaid lender companies through banking channels as reflected-in the bank-account of the appellant. Further, it is observed that there is no direct evidence, which has been brought on record by the AO to point out that the said transactions arc accommodation entries. No nexus is established that the funds have been circulated or that cash was paid by the appellant company to the aforesaid lender-companies to obtain the cheques for unsecured loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.40 lakhs has been received from the companies i.e. M/s, Rashiamrit Projects Pvt. Ltd. and M/s. Speed Fast Developers Pvt. Ltd. in which Shri Umesh Singh was director out of reserves of Rs.99.5crs. Hence, the statement of the AO in the assessment order, that the entire Reserves of Rs.99.5Crs. is received from the aforesaid companies in which Shri Umesh Singh was director is misplaced. There is no material on record to pinpoint that the loans received by the appellant, from M/s. King Fisher Properties Pvt. Ltd. has been given from the funds received from the 'aforesaid two companies in which Shri Umesh Singh was director, Therefore, in view of the above facts, it cannot be concluded that the funds amounting to Rs.20 lakhs received from M/s.Kingfisher Properties Pvt. Ltd. are non-genuine. 7.4.6 Coming to the other two companies namely, M/s. Arm nay Commosale Pvt. Ltd. and M/s. Devesh Commosale Pvt. Ltd., I find that the AO formed the opinion that the aforesaid two lender companies are no I creditworthy and proceeded to make the addition u/s.68 solely on the basis of low income earned during the concerned year. In this respect, the fact remains that these lender companies had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. The assessee had also produced the entire record regarding issuance of shares, i.e., allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account The balance sheet and profit and loss account of those persons disclosed that they had sufficient funds in their accounts for investing in the shares of the assessee, In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. Therefore, the addition was liable to be deleted. (c) CIT vs. Creative World Telefilms Ltd 333 1TR 100 (Bombay HC): In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and rea.ch the shareholders. The Assessing Officer did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f -these parties is confirmed. The Ld CIT(A) deleted interest disallowance relating to Rs.5.05 crores and confirmed remaining amount of interest disallowance in both the years. 6. With regard to the relief of Rs.5.05 crores granted by Ld CIT(A), the ld D.R submitted that the AO had made the addition on sound reasoning and accordingly contended that the Ld CIT(A) was not justified in deleting the above said addition. The Ld A.R, on the contrary, submitted that the Ld CIT(A) has deleted the addition on noticing that the assessee has discharged the initial burden placed upon its shoulders. He further submitted that the Ld CIT(A) has duly addressed various other reasoning given by AO for making the addition. Accordingly, he submitted that there is no reason to interfere with the order passed by Ld CIT(A) in respect of addition of Rs.5.05 crores. 7. With regard to the addition of Rs.30 lakhs made by Ld CIT(A), the Ld A.R submitted that the assessee has taken above said amount as loans from M/s Lity Star Constructions Ltd (Rs.20.00 lakhs) and M/s Pushpanjali Commo Trade P Ltd (Rs.10.00 lakhs) and it has discharged initial burden placed upon it in respect of above said loan of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the above said statements have not been taken during the course of present assessment proceedings of the assessee. Hence, we are of the view that the tax authorities are not justified in placing reliance on the statement given by the director in a third party proceeding without confronting the same with the assessee. On the contrary, the fact remains that both the above said companies have duly responded to the AO during the course of current assessment proceedings by furnishing replies to the notices issued u/s 133(6) of the Act and the summons issued u/s 131 of the Act. All the relevant financial statements have been filed before the AO in respect of above said two companies in order to prove the three main ingredients, viz., identity of the creditor, credit worthiness of the creditor and the genuineness of transactions. Accordingly, we are of the view that the Ld CIT(A) was not justified in sustaining addition of Rs.30 lakhs relating to the above said two companies. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.30 lakhs relating to the above said two companies. Consequently, the interest disallowance ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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