AMITKUMAR AGRAWAL,SURAT V. ACIT, CIRCLE 1(2), SURAT

ITA 25/SRT/2024

AI Insights

The case involves Amitkumar Agrawal, an individual engaged in the business of trading cloth and garments, who appealed against the order of the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals) for the assessment year 2017-18. The primary issues in the appeal were the additions made under section 68 of the Income Tax Act for unsecured loans and the disallowance of interest payments, as well as the disallowance of indirect expenses and the application of an enhanced tax rate under section 115BBE. The Tribunal's decision addressed these issues by examining the evidence provided by the assessee and the legal provisions applicable.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29801 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: RASESH SHAH
• Keywords: Business income; TDS
• Section: 68; 69C

Judgement Text

" आयकर अपीलीय अिधकरण, सूरत Ɋायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 25/SRT/2024 (AY 2017-18) (Physical court hearing) Amitkumar Agrawal I-2474-75, Millennium Textile Market, Ring Road, Surat-395 002 [PAN : AJTPA 4052 E] बनाम Vs Assistant Commissioner of Income- tax, Circle-1(2), Surat, Room No.213, 2nd Floor, Aaykar Bhavan, Opp. New Civil Hospital, Majura Gate, Surat-395 001 अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Rasesh Shah, CA राजˢ की ओर से /Revenue by Shri Mukesh Jain– Sr-DR सुनवाई की तारीख/Date of hearing 10.12.2024 उद ्घोषणा की तारीख/Date of pronouncement 10.02.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals) [for short to as “NFAC/Ld.CIT(A)] dated 29.11.2023 for assessment year (AY) 2017-18, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) 18.12.2019. The assessee has raised the following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the addition of Rs.7,03,700/- out of the addition of Rs.24,83,700/- made by the Assessing Officer. 2.Further, on the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the disallowance of ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 2 Rs.2,32,950/- for payment of interest on the amount of loan confirmed in ground no.1. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the addition of Rs.7,57,499/- when he has only confirmed the addition of Rs.2,32,950/- on account of the interest payment on unsecured loan confirmed by him. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of the Assessing Officer in disallowing indirect expenses amounting of Rs.5,62,978/- (i.e. 20% of total indirect expense of Rs.28,14,890/-). 5. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer has erred in taxing the addition by taking the rate @ 77.25% by attracting S.115BBE instead of taxing as per normal tax slab. The addition if any that may be confirmed should be taxed as business income. 6. Even otherwise on the facts and circumstances of the case as well as law on the subject, the Assessing Officer has erred in taxing the income u/s 115BBE @ 77.25% in a retrospective manner by applying the duly substituted S.115BBE inserted retrospectively instead of taxing it at 33.54% as per the old provisions of S.115BBE. 7. It is therefore prayed that the above additions made by the Assessing Officer and confirmed by the CIT(A) may please be deleted. 8. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. Brief facts of the case are that assessee is an individual and engaged in the business of trading and cloth, fabric, garments in the name and style of “Mahadev Lifestyle”. The assessee filed his return of income for AY.2017-18 on 30.09.2017, declaring total income of Rs.20,25,110/-. The case was selected for scrutiny. During the assessment, the Assessing Officer noted that assessee has availed unsecured loan of Rs.24,83,700/- from 11 parties, details of loan and interest paid to such parties are recorded in para 3.1 of assessment order. The Assessing Officer issued show cause notice dated 18.09.2019 to furnish details ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 3 of unsecured loan and interest paid along with copy of ITR, confirmation of loan and source of their money. In response to such show cause notice, the assessee filed his reply on 09.12.2019 and furnished required details. The Assessing Officer has not recorded the contents of reply, however the reply of assessee was not accepted. The Assessing Officer in para 3.3 in a tabulated form in his order recorded the amount of loan, interest paid, total income declared by lender, whether ITR, confirmation of loan, balance sheet is filed or not. The Assessing Officer in his summary recorded that in respect of all lenders, the assessee filed their confirmations, however, in certain cases, ITR and bank statement were filed and in certain cases in bank statement or ITR was not filed. The Assessing Officer in para 3.4 of assessment order held that income of various lenders was meagre and the assessee could not furnish complete details of lenders. The Assessing Officer disallowed the entire unsecured amount of unsecured loan as well as interest paid thereon, thereby the Assessing Officer made addition of Rs.24,83,700/- and added the same under section 68 and taxed under section 115BBE of the Act. 3. The Assessing Officer further noted that in the profit and loss account, the assessee has debited various indirect expenses aggregating to Rs.28,14,890/-, details of which are recorded in para 5 of assessment order. The Assessing Officer noted that despite giving various opportunity, thus, in absence of any details, the Assessing Officer treated the expenses as doubtful and disallowed 20% thereof and worked out disallowance of Rs.5,62,978/-. 4. Aggrieved by the additions in the assessment order, the assessee filed appeal before CIT(A). Before CIT(A), the assessee filed detailed written submission. Against the ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 4 addition of unsecured loan, added under section 68, the assessee submitted that he is engaged in the business of sarees and dress material in the name of “Mahadev Lifestyle”. The business turnover of assessee is more than Rs.10.00 Crore and has shown net profit of Rs.20.63 lakhs. During the year under consideration, the assessee has availed unsecured loan from different persons through cheque. To substantiate such loan, the assessee during the assessment provided complete details. To prove the identity, genuineness and creditworthiness of the lender and genuineness of transaction, the assessee filed confirmation, PAN and relevant bank statement of lender. The assessee also filed ITR, balance sheet of immediate preceding year of all the lenders. The assessee paid interest and deducted TDS, they have given loan from their own capital and they have not borrowed any amount from anybody, their balance sheet and other documents were furnished. The part of written submission of assessee is recorded by ld. CIT(A) from page 14 to 19. 5. The ld. CIT(A) on considering the submission of assessee in sub para (j) at page no.19 of his order recorded that assessee has received amount from a company which is controlled by Shri Anirudh Joshi, who admitted to have provided accommodation entry through his concern. The assessee has not discharge onus in respect of loan received from Payal Tarun Agarwal, Tarun Kumar Agarwal, Gourav Raval and Dinesh Kumar Agarwal along with their amount of loan interest paid and evidences furnished below: Sl No. Name of the loanee Amount of loan in Rs along with interest Document uploaded 1 Payal Tarun Kumar Agarwal 20000 70360 No bank statement, ITR filed only confirmation filed. 2 Gaurav Raval 30370 46080 No bank statement, ITR filed only confirmation filed. 3 Tarun Kumar Agarwal 100000 73499 No bank statement, ITR filed only confirmation filed. 4 Dinesh Kumar Agarwal 100000 43011 No bank statement, ITR filed only confirmation filed. 5 TOTAL including interest 7,57,499/- 2,32,950/- ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 5 6. The ld. CIT(A) without discussing the nature and evidence thereby upheld the addition to the extent of Rs.24,83,700/- and interest amount of Rs.2,32,950/-, thereby upheld total addition u/s 68 and 69C of Rs.9,36,650/-. The ld. CIT(A) also upheld the action of Assessing Officer in taxing the addition at the enhanced rate u/s 115BBE. 7. On the ad hoc disallowance of direct and indirect expenses @ 20% of total expenses, the assessee also furnished detailed written submission. The ld. CIT(A) has not mentioned the reference of written submission in his order. The assessee also explained nexus of each and every expenses along with relevant evidence. Copy of written submission filed by assessee is placed at page no.22 to 24 of the paper book. On considering the submissions of assessee, the ld. CIT(A) held that there was no compliance of notice under section 142(1). Thus, the Assessing Officer has rightly disallowed 20% of the expenses. Further aggrieved, the assessee has filed present appeal before this Tribunal. 8. We have heard the submission of ld. AR of the assessee and the ld. Sr. DR for the revenue. The ld. AR of the assessee submitted that during assessment proceedings, assessee furnished complete details of unsecured loan, which consist of details of identity of lender, their name, address, PAN and ITR. The assessee also furnished the evidence of creditworthiness of each and every lender by filing their confirmation and ITR. The assessee has paid interest to all the lenders by deducting TDS. The Assessing Officer has not investigated the fact. The Assessing Officer has not disputed to the identity of person, the assesse has proved creditworthy of lenders and genuineness of transaction. The assessee has availed loan ranging from Rs.1.00 lakhs to Rs.3.00 lakhs from each individual lender. The Assessing Officer without making every investigation, added the entire unsecured loans, however, the ld. CIT(A) restricted the addition in respect of four lender aggregating to Rs 7,57,499/- and interest amount for ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 6 Rs.2,32,950/-. The ld. CIT(A) in his finding has noted that assessee has availed loan from entry provider Shri Anirudh Joshi, which observation is contrary to the facts. Neither the assessee availed from Anirudh Joshi nor from his any concern. The assessee availed loans from his friends and relatives. The ld. CIT(A) made cut paste the paragraph from some other/ different assessee’s order. The ld. CIT(A) confirmed the addition in respect of loan availed from Payal Tarun Agarwal, Tarun Agarwal, Gourav Raval and Manish Agarwal, from whom the assessee has availed very meagre amount of loan ranging from Rs.1.00 lakh, Rs.2.00 lakhs and Rs.3.00 lakh only. The assessee submitted that Payal Tarun Agarwal shown the return of Rs.3,50,000/- in AY 2017-18 . Her computation of income and capital accounts was furnished. She is having capital account and more than Rs.9.00 lakh and in AY.2016-17, she has shown return of income Rs.2,83,213. Gourav Raval has shown taxable income of Rs.2,68,564/- in AY.2016-417 and Rs.4,40,000/- in AY.2017-18 and he was having capital and more than Rs.8.00 lakhs as on 31.03.2016. Shri Tarun Kumar Agarwal has shown return of income of Rs.4,40,000/- for AY.2017-18 and more than Rs.4.00 lakh in AY.2016-17. The assessee has availed loan of Rs.1.00 lakh only. Moreover, his credit balance forwarded for earlier years of rupees for more than Rs.1.00 lakh, which is never doubted in past. From Manish Kumar Agarwal, the assessee has availed a loan of Rs.1.00 lakh only. The ld. CIT(A) wrongly mentioned his name ‘Dinesh Kumar Agarwal’. His ITR for AY.2017-18 and AY.2016-17 is filed. He was having taxable income for AY.2016-17 and Rs.2,88,573/- and in AY.2017-18 of more than Rs.6.00 lakhs. The assessee furnished their confirmation and complete ITR. The ld. CIT(A) without discarding such submission, confirmed the addition of their loan amounts. No investigation of fact was carried out either by ld. CIT(A) or by AO. Once the assessee discharged his primary onus, in term of section 68, the onus shifts on the revenue/ Assessing Officer (AO) to make further investigation. To disprove such evidence, the ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 7 AO should verify the genuineness of transaction from the Income-tax Returns from lenders. The AO and ld. CIT(A) have not discussed anything about the payment of interest made after deducting TDS. To support his submission, ld. AR of the assessee relied upon the decision of jurisdictional High Court in case of DCIT vs. Rohini Builders, 256 ITR 360 (Guj.), CIT vs. Orissa Corporation (P) Ltd., 159 ITR 78 (SC), CIT vs. Ranchod Jivabhai Nakhava, (2012) 21 taxmann.com 159 (Guj.). 9. On the issue of disallowance of indirect expenses of ad hoc basis, the ld. AR of the assessee submits that expenses incurred by assessee for the purpose of business. The assessee furnished the details, however, Assessing Officer disallowed the expenses @ 20%. Before ld. CIT(A), the assessee again furnished complete details, yet he without discussing the facts and evidence furnished by assessee upheld the action of Assessing Officer. The ld. AR of the assessee submits that all the expenses were incurred for the purpose of business, yet to avoid further litigation for some token disallowance may be upheld. On the issue of taxing the additions under section 115BBE, the ld AR of the assessee submits that applicability of section 115BBE is not retrospective rather than perspective has been held in various decisions by various Benches of Tribunal including by Surat Bench. 10. On the other hand, ld. Sr. DR for the revenue, on the addition of unsecured loan submitted that assessee failed to discharge his onus. The ld. CIT(A) in his findings has clearly written that assessee failed to furnish the bank account of the lenders. The ld CIT(A) upheld the addition in respect of lenders to whom the assessee failed to prove creditworthy. On the ad hoc disallowance of expenses, ld. Sr. DR submitted that AO reasonably made disallowance for the want of necessary documents. On taxing the addition under section 115BBE, the ld Sr DR for the revenue supported the order of lower authorities. ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 8 11. We have considered the rival submission of ld AR for the assessee and Ld. ld. Sr-DR for the Revenue. Ground No.1, 2 & 3 relates to upholding the addition on account of unsecured loan, added u/s 68 and unexplained interest disallowance u/s 69C. We find that Assessing Officer made addition of entire amount of unsecured loan, without detailed discussion of various evidences furnished by assessee. No independent investigation of facts was carried out except recording certain remarks about the creditworthiness of lenders. In certain cases, there was similar unsecured loan in earlier years. We find that before the CIT(A), the assessee filed detailed statement of facts as well as detailed written submission. Copy of written submission filed before CIT(A) is placed before Tribunal at page no.1 to 24 of paper book. The ld. CIT(A) has not included entire submission or gist of submission in his order. The ld. CIT(A) in sub-para (j) of page no.19 referred the facts which is not related with the facts of the assessee before us. The ld. CIT(A) wrongly recorded that assessee availed loan from accommodation entry provider Anirudh Joshi. The Assessing Officer nowhere recorded such facts. We find that ld. CIT(A) upheld the addition of unsecured loan of four lenders namely, Payal Tarun Kumar Agarwal, Tarun Kumar Agarwal, Gourav Raval and Dinesh Kumar Agarwal. The name of Dinesh Agarwal is recorded in para table on page 19/20 is incorrect rather the correct name of lender is Manish Kumar Agarwal. We find that a very meagre amount of loan either of Rs.1.00 lakhs or Rs.2.00 lakhs given by these lenders, except in case of Gourav Raval who has given about Rs.3.00 lakhs. The assessee has furnished ITR of Gourav Raval, his trading account, profit and loss account, capital account and balance sheet, copy of which is available at page no.77 to ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 9 84 of the paper book. The assessee has paid interest @ 15% per annum on which TDS of Rs. 4,608/- is deducted. Gourav Raval has shown capital of Rs.8,64,154/- in his balance sheet as on 31.03.2016. Admittedly, neither the AO nor CIT(A) verified the details of Gourav Raval. So far as other creditors / lenders are concerned, they are given very meagre amount of Rs.1.00 lakh or Rs.2.00 lakh to the assessee on which TDS was deducted. Deduction of tax at source on payment of interest is not doubted. Thus, the assessee has primarily discharged his onus in providing identity, creditworthiness and genuineness of transaction. The Hon’ble jurisdictional High Court in The Hon'ble Jurisdictional High Court in CIT Vs. Amber Tradecorp (P) ltd. ((2022) 145 taxmann.com 27 (Guj) also held that where the assessee took loan from certain parties and has furnished requisite material showing identity of loan givers and that assessee was not beneficiary as loan was repaid in subsequent year, no addition under Section 68 could be made on account of such loan. The Hon'ble Gujarat High Court in the case of DCIT Vs Rohini Builders CIT Vs Ranchod Jivabhai Nakhava in Tax Appeal No. 50 of 2011 dated 20.03.2012, also held that when the assessee has discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers, PAN and copy of assessment orders wherever readily available and proved the capacity of creditors that amounts were paid through cheques, no addition is to be made. The Hon’ble jurisdictional High Court in the case of Ranchod Jivabhai Nakhava (supra), also held that once the assessee has discharged their onus the burden shift on the assessing officer to prove otherwise or to bring adverse evidence on record or to make further investigation. In absence of adverse addition, the additions of loan under ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 10 section 68 is not sustainable. Thus, considering the aforesaid factual and legal discussion, we do not find any justification in upholding the addition on account of unsecured loan of four persons of Rs.7,03,700/-. Thus, ground No.1 of appeal is allowed. Considering the fact that, we have allowed ground No.1, therefore interest disallowance of Rs.2,32,950/- which is consequential to ground No.1, is also allowed. In the result ground Nos. 1 to 3 are allowed. 12. Ground No.4 relates to ad hoc disallowance indirect expenses. We find that Assessing Officer disallowed 20% of expenses by holding that no details of expenses were furnished. The ld. CIT(A) also confirmed the action of Assessing Officer by taking view that no details were furnished before Assessing Officer. We find that before ld. CIT(A), the assessee filed detailed submission of various expenses. The ld. CIT(A) neither considered such submission nor made reference thereof. Considering the nature of expenses which includes the salary of staff, bonus to staff, brokerage expenses, packing expenses, travelling expenses, convenience expenses etc. All the expenses are related to business expenses. Considering the fact that bonus expenses are more than the salary expenses, similarly the assessee has claimed travelling expenses and convenience expenses is seemed to be higher side. The assessee in his submission, before CIT(A), explained that assessee travel at various destination to procure order and to negotiate the deal. In our view, the ad hoc disallowance of all the expenses in the present case, is on higher side, therefore, disallowance is restricted to 10% on total indirect expenses. Thus, the assessee is allowed part relief. In the result, ground No.4 is partly allowed. ITA No.25/SRT/2024 (A.Y.17-18) Amitkumar Agrawal 11 13. So far as taxing the addition under section 115BBE is concerned, we find that Divisions Bench as well as SMC Bench of this Tribunal in a series of case has held that enhance rate prescribed under section 115BBE is not applicable for AY 2017-18, reference is made in case of Samir Shantilal Mehta Vs ACIT ITA No. 42/Srt/2022 (Surat Trib), Arjunsinh Harisinh Thakor vs. ITO in ITA No. 245/Srt/2021 and in Jitendra Nemichand Gupta Vs ITO ITA No. 211/Srt/2021 and Indore Bench in DCIT vs. Punjab Retail Pvt. Ltd 677/Ind/2019 (Indore Trib) and Jabalpur Bench in ACIT vs. Sandesh Kumar Jain in ITA No. 41/Jab/2020. In the result, ground of the appeal is allowed 14. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 10/02/2025. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) लेखा सद˟/Accountant Member Ɋाियक सद˟/Judicial Member सूरत / Surat Dated: /02/2025 Dkp Outsourcing Sr.P.S* आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :  अपीलाथŎ/ The Appellant  ŮȑथŎ/ The Respondent  आयकर आयुƅ/ CIT  िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडŊ फाईल/ Guard File By order/आदेश से, // TRUE COPY // सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत "