Principal Commissioner Of Income Tax, Jaipur-Ii, At New Centralrevenue Building Statue Circle, Jaipur (Raj.) v. Ratan Lal Agarwal

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 31/2024 Principal Commissioner Of Income Tax, Jaipur-II, At New CentralRevenue Building Statue Circle, Jaipur (Raj.)- 302005 ----Appellant Versus Ratan Lal Agarwal, 421, Harsh Villa Mahaveer Nagar Tonk RoadJaipur ----Respondent For Appellant(s) : Mr. Sandeep Pathak, Adv. with Ms. Jaya P. Pathak, Adv.For Respondent(s): - HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE ASHUTOSH KUMAROrder 26/09/2024 -AVNEESH JHINGAN, J: 1.This appeal is filed against order of the Income Tax AppellateTribunal, Jaipur Bench, Jaipur (for short ‘the Tribunal’) dated17.04.2023. 2.The brief facts are that the respondent filed income taxreturns for assessment year 2014-15 declaring an income ofRs.7,60,050/-. The assessee was a proprietorship concern and hadobtained a loan of Rs.4,18,48,000/- from M/s Inner MercantilePvt. Ltd. The case was taken up in scrutiny and the loan receivedwas doubted. The Assessing Officer (for short ‘A.O.’) due to non-service of notice under Section 133(6) on the lender companyconsidered it to be a shell company and vide order dated31.12.2016 made an addition of the loan borrowed, treating it tobe an unexplained cash credit under Section 68 of the Income TaxAct, 1961 (for short ‘the Act’). 3.In the first appeal, apart from the evidence adduced by theassessee before the A.O., the affidavits of the lender companywere filed but the CIT(A) dismissed the appeal vide order dated26.04.2019. The Tribunal considered that company was neverdeclared a Shell Company by Ministry of Corporate Affairs; theassessee produced evidence to prove the identity,creditworthiness and the genuineness of the transaction byproducing PAN details, balance-sheet, copy of ITR, bankstatement and confirmation of the lender company of havingadvanced the loan. It was further considered that in the balance-sheet, the lending company had a reserve and surplus amountingto Rs.36,36,90,414/-, the addition was deleted. Hence, thepresent appeal. 4.Learned counsel for the appellant submits that the tax effectinvolved in the present appeal is less than two crores but the casefalls within the exception mentioned in Clause 3.1(h) of circularNo.5 of 2024 dated 15.03.2024. The argument is that it is a caseof accommodation entries from shell company. 5.Before proceeding further, it would be relevant to quoteClause 3.1(h) of circular No.5 of 2024. "(h) Cases involving organized tax evasionincluding cases of bogus capital gain/loss through penny stocks and cases ofaccommodation entries." 6.The contention of learned counsel for the appellant that theappeal falls within the exception lacks merit. The A.O. had looselyused the word "Shell Company" without realising the pre-requisites for a company to be declared as a Shell Company.Merely that the notice under Section 133(6) of the Act could notbe served, company cannot be termed 'shell company'. 7.The foundation for making additions of borrowed loans wasnon-service of the notice and non-appearance of the Directorbefore the A.O. The evidence adduced by the assessee to provethe identity, creditworthiness and the genuineness of thetransaction were brushed under the carpet by the A.O. 8.Neither it is case of shell company nor of the accommodatingentries, rather genuineness of transaction was considered. TheTribunal after considering the facts and appreciating the evidenceadduced, upheld the genuineness of the loan transaction. 9.The appeal is not maintainable in view of the circular No.9 of2024 dated 17.09.2024. The language of the circular isunambiguous that excepts for appeals falling in the exceptionscarved out in Para 3.1 and 3.2 of circular No.5 of 2024, even thepending appeals having tax effect of less than two crores are to bewithdrawn by the Department. 10.The appeal is dismissed as not maintainable. 8.Neither it is case of shell company nor of the accommodatingentries, rather genuineness of transaction was considered. TheTribunal after considering the facts and appreciating the evidenceadduced, upheld the genuineness of the loan transaction. 9.The appeal is not maintainable in view of the circular No.9 of2024 dated 17.09.2024. The language of the circular isunambiguous that excepts for appeals falling in the exceptionscarved out in Para 3.1 and 3.2 of circular No.5 of 2024, even thepending appeals having tax effect of less than two crores are to bewithdrawn by the Department. 10.The appeal is dismissed as not maintainable. 11.It is clarified that substantial question of law proposed in theappeal are kept open. (ASHUTOSH KUMAR),J (AVNEESH JHINGAN),J Chandan/Mohita/5