DCIT,Circle-1,Ghaziabad. Vs. Daisy Investment (P) Ltd.,Modi Bhawan,Modi Nagar, Ghaziabad.AABCD1827E
July, 23rd 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `B', NEW DELHI
BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
ITA No. 37/Del/2011
Assessment Year: 2006-07
DCIT, Vs. Daisy Investment (P) Ltd.,
Circle-1, Modi Bhawan,
Ghaziabad. Modi Nagar, Ghaziabad.
Appellant by : Dr. B.R.R. Kumar, Sr. DR
Respondent by : Sh. Pradeep Denodia, CA
PER A.D. JAIN, J.M.
This is Department's appeal for A.Y. 2006-07 against the order dated
07.10.2010 passed by the ld. CIT(A)-Ghaziabad.
2. The only issue raised by the Department is against the action of the
ld. CIT(A) in deleting the addition of Rs. 75,25,000/- made by the AO,
representing loans received by the assessee during the year as follows: -
(i) M/s Ashoka Mercantile Ltd. Rs. 64,25,000/-
(ii) M/s Sunrise Soya Products Ltd. Rs. 11,00,000/-
Total Rs. 75,25,000/-
Both these loans were received by cheque.
3. The AO required the assessee to furnish bank statement and
confirmations from the creditor parties. As per the assessment order,
however, the assessee furnished neither the bank statements, nor the
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 2
confirmations from the parties and simply confirmed the transactions on its
letter head. The AO observed that copies of returns filed by the creditor
Companies had also been filed, but they were of no avail to the assessee,
as they did not make transparent the creditworthiness of the creditor
Companies and only showed the income earned by them. The AO
observed that in the absence of confirmations from the parties and the
bank statement of the assessee, the unsecured loans of Rs. 75,25,000/-
remained unexplained. It was, as such, that the AO added this amount to
the income of the assessee Company u/s 68 of the I.T. Act, as unexplained
4. The ld. CIT(A), by virtue of the impugned order, deleted the addition
made by the AO.
5. Challenging the said action of the ld. CIT(A) before us, the ld. DR has
argued that the ld. CIT(A) has erred in deleting the addition correctly made
by the AO; that while doing so, the ld. CIT(A) failed to consider the fact that
the assessee Company had failed to adduce any evidence in support of its
claim of having raised two unsecured loans totaling to Rs. 75,25,000/-; that
no such evidence had been produced by the assessee Company in the
assessment proceedings, in spite of the fact that in the questionnaire dated
28.07.2008 issued by the AO to the assessee, the assessee was
specifically asked, as per point nos. 7 and 14, to file the complete details of
the unsecured loans, to furnish names, PANs, assessment status and
evidence to prove the identity/capacity and genuineness of the loan
creditors; that also, vide order sheet entry dated 30.12.2008, the assessee
was asked to furnish confirmations from the creditor Companies who had
advanced the unsecured loans to the assessee; that the ld. CIT(A) has
erred in giving relief to the assessee Company, even though the assessee
Company had miserably failed to discharge its onus to prove the identity,
capacity and genuineness of the loan creditors during the assessment
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 3
proceedings, despite ample opportunity having been granted to the
assessee for the purpose; and that the ld. CIT(A) has erred in taking into
cognizance fresh evidence in violation of the provisions of Rule 46A of the
6. The ld. Counsel for the assessee, on the other hand, has placed
strong reliance on the impugned order. It has been submitted that the ld.
CIT(A) has not committed any error in deleting the addition which was
wrongly made by the AO; that the creditor Companies had submitted their
confirmations dated 20.02.2010 and 02.05.2009, respectively (copies at
APB 65 & 66), which the assessee had filed before the CIT alongwith its
written submission, on 26.03.2010; since the AO, in the assessment
proceedings, had not required the assessee to file such confirmations and
as such, there had been no occasion to file such confirmations before the
AO in the assessment proceedings, that the CIT(A) had remanded the
matter to the AO; that in the remand proceedings, the creditor companies
had filed their confirmations alongwith complete details directly before the
AO u/s 133(6) of the Act and satisfied therewith, the AO did not submit any
remand report to the CIT(A); that it was therefore, that the CIT(A) correctly
took them into consideration and deleted the addition on the basis thereof;
and that therefore, there being no merit in the appeal of the Department,
the same be dismissed.
7. We have heard the parties and have perused the material on record.
The AO made the addition by observing as follows: -
"The assessee vide questionnaire dated
28.07.2008 was required to furnish the bank statements.
Vide order sheet entry dated 30.12.2008, the assessee
was also required to furnish confirmation from the above
mentioned two parties. But the assessee has neither
furnished the bank statement nor the confirmations from
the above mentioned two parties. The assessee company
has simply confirmed the transaction on its letter head.
Copy of e-returns filed by the above companies have also
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 4
been filed but the same are of no help as it does not make
transparent the creditworthiness of these companies. It
only shows the income earned by the said companies. In
absence of confirmations from the parties who have
advanced loans and the bank statement from the
assessee, the unsecured loans raised during the year of
Rs. 75,25,000/- remain unexplained and added to the
income of the assessee company u/s 68 of the Income Tax
Act, 1961 being unexplained credit."
8. It is, thus, apparent that the addition was made for the absence of
confirmations from the creditor parties of the assessee.
9. Before the ld. Commissioner (Appeals), in the written submissions
filed by the assessee, it was, inter-alia, contended as follows: -
"Further, without prejudice to what has been submitted
herein-in-above, it is stated that as revealed from the
impugned assessment order (last page of the order), the
AO has observed in that order as under:
"...vide order sheet entry dated 30.12.2008,
the assessee was also required to
confirmation from the above mentioned two
It is submitted with due respect and humility that the
assessee company vehemently denies the aforesaid
observations of the Assessing Officer as the assessee
company's representative did appear before the AO on
30.12.2008 with company's letter of even date pursuant
to notice dated 26.12.2008 addressed to the Principal
Officer of the company in connection with queries with
respect of directors of the company and one firm.
It is stated that had anything was not to the satisfaction
of AO then he could have confronted the assessee
company to enable it (assess-company) to file the details
and information to his satisfaction. He did not ask for, to
the best of our knowledge and belief, hence, could not be
The tenor of the AO's letter dated 04.11.2008 would
reveal that after submission of information the matter
ended. Had the AO needed any further information he
could have informed the assessee about the same. He
could have also summoned the creditors to verify these
loans. Nothing was heard from the AO except though the
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 5
impugned assessment order. So far as the bank
statement is concerned. It was filed before the AO as
early as 04.11.2008.
Now the confirmation letters, copy of their bank
statement(s)/their bank ledger(s) are also contained in
the paper book from page 65-127 as detailed and
referred to in the paper book.
Be that as it may, as we have filed the confirmations from
the parties concerned and their bank statements/bank
ledger(s) in their books which were obtained from them
and request your honor to kindly delete the impugned
additions and oblige."
10. From the above, it comes out that it is the stand of the assessee that
the AO had never required the assessee to file the confirmations and it was
therefore, that none were filed during the assessment proceedings. The
CIT(A) remanded the matter to the AO. In the remand proceedings, the
AO, invoking the provisions of section 133(6) of the Act, directly required
the creditor Companies to furnish the particulars of their transactions with
the assessee. The creditor Companies made full compliance, furnishing
their confirmations and complete details before the AO and forwarded
copies thereof to the assessee. The AO got satisfied with such compliance
u/s 133(6) of the Act. As such, the AO did not submit any remand report to
the CIT(A) despite reminders. The ld. CIT(A) deleted the addition on the
basis of the confirmations and other supporting documents, explanations
and copies of account, observing as follows: -
"From the perusal of documentary evidence and
submissions filed during appellate proceedings, it is
more than clear that proper confirmation letters along
with supporting documents, explanations and also copies
of accounts have been furnished in respect of the two
impugned loans. Not only the two parties have
confirmed to have given these loans but also have
submitted their PAN and also the exact nature of these
In absence of any remand report, it is considered
that nothing adverse has been noted by the Assessing
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 6
In view of proper confirmation and detailed
convincing narration and explanation regarding the
transactions, I consider the impugned loans to be
genuine and explained. The addition of Rs. 7,25,000/- is,
11. Though the Department has contended that the ld. CIT(A) has
violated the provisions of Rule 46A of the I.T. Rules in admitting and taking
into consideration the aforesaid evidence, we find no force in such stand of
the Department. This is so, because of the reason delineated herein
12. Before the ld. CIT(A), as noted above, the assessee had filed written
submissions, which are, inter alia, to the following effect: -
"Our submission with respect to the various grounds of
appeal, in seriatim, are as under:
Ground No. 1 & 2: - These are general grounds and do
arise out of the impugned assessment order.
Ground Nos. 3 & 6: - This ground relates to addition of
Rs. 75,25,000/- being loans received during the previous
year relevant to the assessment year 2006-07 under
reference, from the following two parties: -
(i) M/s Ashoka Mercantile Ltd. Delhi 64,25,000/-
(ii)Sunrise Soya Products Ltd., Delhi 11,00,000/-
Vide questionnaire dated 28.07.2008 (appearing at pages
1-5 of the paper book) the following query was raised by
the AO: -
"7 complete details along with supporting
evidences of the utilization of unsecured loans
and secured loans raised during the year".
The assessee company furnished, vide its letter dated
10.10.2008 (appearing at pages 6-15 of the paper book),
the complete details of utilization of unsecured loans
taken by the company, as under: -
"7. Complete details of utilization of
unsecured loans taken by the company are
Name of party Address of party Amount of Utilization of
Loan unsecured loan
Ashoka Mercantile CR-234, Ground 60,00,000/- Use for
Ltd. Floor, business
Laxmi Nagar, Delhi- purpose
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 7
Sunrise Soya CR-234, Ground 11,00,000/- Use for
Products Ltd. Floor, Laxmi Nagar, business
Further, vide question no. 14 of the aforesaid
questionnaire dated 28.07.2008 the following question
"14. Furnish the name, PAN and place of
assessment of the person(s) from whom the unsecured
loan(s)/share application money/share capital (if any)
have been obtained during the year along with the
evidence(s) to prove the identity (photocopy of PAN
Card), capacity (copy of ITR) and genuineness (copy of
bank statement showing the relevant transaction) of the
The assessee company replied the question No. 14 under
the impression that it was relating to share application
money and therefore stated vide letter dated 10.10.2008,
supra, as under:
"14. During the year company has not taken any
share application money"
Later on, during the course of assessment proceedings,
the AO asked for certain information and explanation in
respect of `Loans and advances' which were duly
submitted before him vide letter dated 04.11.2008 (refer
to pages 16-34 of the paper book)
It was submitted by the assessee company vide letter
dated 04.11.2008, supra, before the AO that it had
obtained `loans and advances' from time to time from
M/s Ashoka Mercantile Ltd. and M/s Sunrise Soya
Products Ltd. for the business purpose.
It, further, submitted before the AO the copies of
accounts of the two parties in its books of accounts and
also acknowledgement receipts of E-Returns of the said
two parties i.e. M/s Ashoka Mercantile Ltd. and M/s
Sunrise Soya Products Ltd. which provided PAN of the
The assessee company also filed copy of its bank account
with State Bank of Bikaner and Jaipur, New Delhi where
the receipts of the amount from the parties concerned are
From the copy of the account of M/s Ashoka Mercantile
Ltd. (refer to page 17 of the paper book) it would be
evident that during previous year relevant to assessment
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 8
year in reference the outstanding loan was only Rs. 60
lacs and not Rs. 64.25 lacs as added by the AO. It would
be observed from the statement that the amounts taken
from it during the year itself leaving a balance of Rs. 60
lacs as outstanding at the end of the year. Therefore, the
AO made addition of Rs. 64.25 lacs instead of Rs. 60 lacs
in the impugned assessment order.
In the balance sheet also unsecured loans have been
shown at Rs. 71,00,000/- which comprise of Rs.
60,00,000/- pertaining to M/s Ashoka Mercantile Ltd.
and Rs. 11,00,000/- pertaining to M/s Soya Products Ltd.
(for Balance Sheet etc. refer to pages 35-43 of the paper
It is worthwhile mentioning here that the interest paid
amounting to Rs. 2,31,336/- (refer to page 44 of the
paper book) on such loans from the two parties
concerned has duly been allowed by the AO while
computing the assessment as the net loss as returned by
the assessee amounting to Rs. 1,70,200/- has been
accepted as such. The details of interest paid of Rs.
2,31,336/- along with E-TDS return are appearing at
pages 53 and 54-64 respectively of the paper book.
In the view of the above facts and in the circumstances,
of the case the additions made of Rs. 64,25,000/- and Rs.
11,00,000/- may kindly be directed to be deleted..."
(the remaining relevant portion of the written
submissions of the assessee, as filed before the ld.
CIT(A) already stands reproduced hereinabove)
13. On receipt of the said written submissions of the assessee, the ld.
CIT(A) remanded the matter to the AO. However, despite reminders, no
remand report was furnished by the AO. In this regard, the ld. CIT(A) has
observed as follows in para 5 of the order under appeal;
"the matter was remanded to the AO. However, no remand report
received from the AO in spite of reminders. Therefore, the appeal is
being decided on merits".
14. In the remand proceedings, it is seen, the AO directly required the
creditor Companies, under section 133(6) of the Act, to furnish the
particulars of their transactions with the assessee. It was in compliance of
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 9
this mandatory legal requirement that the creditor Companies filed before
the AO, their respective confirmations and all the particulars, as follows:
a) Copy of Letter to DCIT, Ghaziabad
b) Copy of PAN CARD of Ashoka Mercantile Ltd.
c) Copy of Assessment Order of A.Y. 2006-07
d) Copy of Acknowledgement Receipt of E-Return
e) Copy of Annual Accounts for the year ended 31.03.2006
f) Confirmation of amount paid and receipt to Daisy
g) Copy of Bank Statements
h) Details of amount received from Daisy against loan paid
i) Details of Interest received on ICD as on 31.03.2006
SUNRISE SOYA PRODUCTS LTD.
a) Copy of Letter to DCIT, Ghaziabad
b) Copy of PAN CARD of Sunrise Soya Products Ltd.
c) Copy of Acknowledgement Receipt of E-Return
d) Copy of Annual Accounts for the year ended 31.03.2006
e) Confirmation of amount paid and receipt to Daisy
f) Copy Bank Statements
g) Copy of Assessment Order of A.Y. 2006-07
h) Copy of Ledger of Daisy Investment
i) Details of ICD as on 31.03.2006
Copies of all the above documents have also been filed before us and
are placed at pages 128 to 185 of the assessee's Paper Book. In the
Index to the Paper Book, in accordance with Rule 18(3) of the ITAT
Rules, 1963, it has been certified that all the aforesaid documents were:
"Filed with AO by the creditors and copy to Assessee". This has
nowhere been disputed by the Department. It, therefore, stands
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 10
established that in the remand proceedings, the AO, exercising power
under section 133(6) of the Act, required the assessee's creditors
directly to file the complete details of the transactions entered into by
them with the assessee. The creditor Companies made full compliance
and duly furnished before the AO, their confirmations, dated 25.06.2010
(copies at APB 128 to 129 and 151 to 152, respectively). The factum of
these confirmations having been filed before the AO u/s 133(6) of the
Act is available from the confirmations themselves, wherein, the
addressee has been given as:
`The Deputy Commissioner of Income Tax Circle-1, Room No. 201,
C.G.O. Complex, Ghaziabad.' (APB 128 and 151, respectively). Then,
the Subject in the confirmations states as follows:
`Information u/s 133(6) of the Income Tax Act,1961 in the case of M/s
Daisy Investment Pvt. Ltd. for F.Y. 2005-06'
(APB 128 and 151, respectively)
Alongwith their confirmations, the creditors also filed before the AO:
ASHOKA MERCANTILE LTD:
i. Copy of PAN card on M/s Ashoka Mercantile Ltd.
ii. Copy of assessment order for A.Y. 2006-07
iii. Copy of acknowledgement receipt of e-return
iv. Copy of annual accounts for the year ended on 31.03.2006
v. Confirmation of amount paid and receipt to Daisy (the assessee)
vi. Copy of bank statements
vii. Details of amount received from Daisy against loan paid
viii. Details of interest received on ICD as on 31.03.2006
SUNRISE SOYA PRODUCTS :
i. Copy of PAN card of Sunrise Soya Products Ltd.
ii. Copy of acknowledgement receipt of e-return
iii. Copy of annual accounts for the year ended on 31.03.2006
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 11
iv. Confirmation of amount paid and receipt to Daisy (the assessee)
v. Copy of bank statements
vi. Copy of assessment order for A.Y. 2006-07
vii. Copy of ledger of Daisy (the assessee)
viii. The details of ICD as on 31.03.2006
15. The receipt of both the confirmations alongwith annexures by the ITI
on 25.6.2010 is available at APB 121 and 151, respectively.
16. In their aforesaid confirmations, both the creditor parties of the
assessee have specifically stated as follows: -
"(e) Company had given the said loan to Daisy Investment
Pvt. Ltd. on interest @ 10% per annum.
(f) Company has received back the said loan along with
interest thereon from the above said party. Copy of
statement & copy of Bank Statement of the company is
(g) We hereby certify that we had paid the said loan from our own funds
and we have already received back the same from M/s Daisy
Investment Pvt. Ltd. along with interest thereon."
17. In both the confirmations, the names and addresses of the directors
of the Companies stand also given.
18. The fact is that it was the creditor Companies who forwarded to the
assessee, copies of all the above documents filed by them before the AO in
the remand proceedings in compliance of the requirement of the provisions
of section 133(6) of the Act, as stated by the assessee in the index to the
Paper Book filed before us, as noted herein above.
19. It appears that, obviously, the AO was fully satisfied with the
compliance made by the creditor Companies u/s 133(6) of the Act and it
was hence, that no remand report was furnished, despite reminders by the
CIT(A). After the compliance by the creditors, the AO was not left with
anything further to say in the matter.
20. As such, there is no force in the contention on behalf of the
Department that the ld. CIT(A) erred in admitting additional evidence in
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 12
violation of the provisions of Rule 46A of the Rules. It is worthy of note that
whereas the confirmations filed by both the creditor Companies in
compliance u/s 133(6) of the Act in the remand proceedings are dated
25.06.2010 and were also received by the ITI on 25.6.10 itself, the
assessee Company's written submissions and application for additional
evidence before the CIT(A) are of 26.3.10. This shows that it was after the
filing of the application for additional evidence before the CIT(A), that the
evidence was filed before and considered by the AO three months
thereafter. Thus, the Department cannot have any grievance against the
CIT(A) having entertained additional evidence at the back of the AO,
particularly when the AO was duly supplied with the confirmations and all
connected material and the AO, having considered the same, did not
furnish any remand report before the CIT(A) inspite of reminders. In fact,
by remaining thus tacit, the AO conveyed his satisfaction qua the evidence
filed before him in the remand proceedings. The CIT(A) never entertained
any additional evidence at all and deleted the addition on the basis of the
aforesaid material filed with the AO in the remand proceedings.
21. As for the merits of the action of the ld. CIT(A), it is seen that the
assessee had duly discharged its onus u/s 68 of the Act by filing complete
details of the unsecured loans taken, the utilization thereof, the copies of
account of the two creditor Companies in the books of account of the
assessee Company, the acknowledgement receipts of their e-returns,
providing their respective PANs, copy of the assessee's bank account with
State Bank of Bikaner and Jaipur, New Delhi, wherein the receipts of the
loans had been duly reflected. The ld. CIT(A) duly took into consideration
that from the copy of the account of M/s Ashoka Mercantile Ltd., the
outstanding loan was of only Rs. 60 lakhs, rather than that of Rs. 64.25
lakhs, as added by the AO. The ld. CIT(A) further took into consideration
the fact that in the balance sheet, unsecured loans of Rs. 71 lakhs had
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 13
been shown, comprising of Rs. 60 lakhs pertaining to M/s Ashoka
Mercantile Ltd. and Rs. 11 lakhs regarding M/s Soya Products Ltd. The ld.
CIT(A) also took note of the fact that the interest of Rs. 2,31,336/-, paid on
such loans stood duly allowed by the AO, since the net loss of Rs.
1,70,200/-, as returned by the assessee, had been accepted as such. The
ld. CIT(A) also took into consideration the confirmations from the creditor
22. It was on the above that the ld. CIT(A) observed that the assessee
had duly furnished proper confirmation letters alongwith supporting
documents, explanations and copies of account and that not only had the
two creditor parties confirmed having given the loans, but they had also
submitted their PANs and also the exact nature of these loan transactions,
and that in the absence of any remand report from the AO, it was being
considered that nothing adverse had been noted by the AO.
23. To reiterate, though the matter was remanded by the ld. CIT(A) to the
AO on receipt of the assessee's written submissions (supra), despite
reminders, no remand report was filed. The ld. CIT(A) took the entire
evidence filed before the AO in remand proceedings into consideration. It
was only thereafter, and, in our considered opinion, rightly so, that the ld.
CIT(A) deleted the addition wrongly made by the AO.
24. Hence, finding no error whatsoever in the Order of the ld.
Commissioner (Appeals), we hereby confirm the same. The grievance
sought to be raised by the Department is found to be shorn of merit and it is
rejected as such.
ITA No. 37/D/2011 Daisy Investment (P) Ltd. 14
25. In the result, the appeal filed by the Department is dismissed.
Order was pronounced in the open court on 20.07.12
(T.S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Copy forwarded to: -
5. DR, ITAT