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03-06-2019, WEL Intertrade, Section 68, 133(6), 131(1)(d), Tribunal Delhi

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1 week 4 days ago #9667 by amit
Section - 68, 133(6), 131(1)(d), 131
Order Date - 03-06-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - WEL Intertrade Pvt Ltd.
Respondent - ACIT
Justice - N.K. BILLAIYA AM & K.N. CHARY JM
Citation - 619Taxpundit83
Appeal No. - ITA No. 7166/DEL/2018
Asstt. Year - 2013-14

Order

PER : N.K. BILLAIYA

This appeal by the assessee is preferred against the order of the Commissioner of Income Tax [Appeals] - 9, New Delhi dated 20.09.2018 pertaining to assessment year 2013-14.

2. The solitary grievance raised by the assessee is that the CIT(A) erred in confirming an aggregate addition of Rs. 4.50 crores made u/s 68 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act'.

5. Brief facts relating to this case are that while framing assessment order u/s 143(3) of the Act dated 28.03.2016, on perusal of the balance sheet of the assessee, the Assessing Officer found that the assessee has received unsecured loans from the following three entities:

i) Glorious Holding Pvt Ltd Rs. 1.50 crores
ii) Kallol Kutir Pvt Ltd Rs. 1.50 crores
iii) New KMS Finance Ltd Rs. 1.50 crores

6. The assessee was asked to establish the identity, genuineness and credit worthiness of the aforesaid parties.

7. In response, the assessee submitted confirmations of the parties, copies of income tax returns, relevant pages of the bank statements, balance sheets and profit and loss account of the aforementioned three companies. The relevant details, as extracted by the Assessing Officer, at page 2 of his order is as under:

8. The Assessing Officer was of the opinion that these three companies have no business activities and their respective balance sheets do not reflect any creditor/debtor/fixed assets/inventories. The assessee was further asked to justify that the funds extended to the assessee company were earned through any real business activity.

9. In its reply, the assessee once again summarised the balance sheets of each of these companies and stated that the said funds extended to the assessee during the year were through disinvestment of non-current equity investments held by the lender companies.

10. The Assessing Officer was not convinced with the reply of the assessee and was of the opinion that the submissions of the assessee do not throw any light on the actual source of funds. The Assessing Officer concluded by holding that the assessee has failed to discharge the onus cast upon it by provisions of section 68 of the Act by observing as under:

 “These creditor companies have shown very low/nil returned income

 The Reserve and Surplus account of these companies consists of mostly share premium received. There is negligible accumulated profit in reserve and surplus.

 They have negligible revenue from operations in comparison to reserves & surplus and is mainly in the nature of interest income on loans. It is pertinent to mention that In the case M/s Kallol Kutir Pvt Ltd and M/s KMS Finance Pvt Ltd the entire revenue from operations is the interest earned on the unsecured loan extended to the assessee company during the year. This Is evident from the two tables produced above.

 Bank statements of these creditor companies show maize of debit/credit entries of identical or equivalent amounts, which appear to be on account of round tripping of money before passing on to beneficiaries like the assessee The amounts used to extend unsecured loans to the assessee company were deposited in bank accounts of parties on same day or on proximate days. The opening and closing balance of their bank accounts is negligible. This is a prima facie sign of entry operation.

 The B/s and Prof t & Loss A/c of these companies reflects no sundry credito s, sundry debtors, inventories and fixed assets. This Is primarily a sign of no genuine business activity undertaken by these companies.

 It is uncertain as to what Is relation of these companies with the parties from whom money is being circulated before the present entries. All these companies have given unsecured loan from the funds taken other companies.”

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