Sureshkumar Suvalal Jaiswal, Ahmedabad V. The DCIT, Circle-2(2), Ahmedabad

CO 22/AHD/2020

AI Insights

The case involves appeals by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) which had deleted the additions made by the Assessing Officer concerning unsecured loans taken by the assessee, Sureshkumar Suvalal Jaiswal, and the disallowance of interest on these loans. The loans in question were from Silverline Mercantile Pvt. Ltd. and Omrim Securities Pvt. Ltd. The Assessing Officer had treated these loans as unexplained cash credits under section 68 of the Income Tax Act, 1961, due to doubts about the creditworthiness and genuineness of the transactions. However, the CIT(A) found that the loans were genuine and had been properly accounted for, leading to the deletion of the additions. The Tribunal agreed with the CIT(A)'s decision, noting that the revenue had not provided sufficient evidence to contradict the findings of the CIT(A).

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135599 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-02-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 17-02-2020
• Other Referred Cases: Shri Ayashi Chandrashekhar (ITA No.1010/Rjt/2010), CIT Vs. Rohini builders reported in 256 ITR 360
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Reassessment proceedings; TDS; Capital Gains
• Section: 68; 143(3); 22

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ C’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI TR SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./ITA Nos. 1705 & 1706/AHD/2019 With C.O Nos. 22 &23/Ahd/2020 िनधा रण िनधा रणिनधा रण िनधा रण वष वष वष वष /Asstt. Years: 2011-12 & 2013-14 D.C.I.T, Circle-2(2), Ahmedabad. Vs. Sureshkumar Suvalal Jaiswal, 27, Shubh Sonal Society, IOC Road, D Cabin, Sabarmati, Ahmedabad PAN: ADIPJ6108K (Applicant) (Respondent) Revenue by : Shri Rakesh Jha, Sr.D.R Assessee by : Shri P.F Jain, A.R सुनवाई क तारीख/Date of Hearing : 07/02/2023 घोषणा क तारीख /Date of Pronouncement: 29/03/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeals have been filed at the instance of the revenue and CO filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-10, Ahmedabad of even dated 04/09/2019 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2011-12 & 2013-14. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 2 2 First, we take up the ITA No. 1705/Ahd/2019 for AY 2011-12, an appeal by the Revenue. 2.1 The Revenue has raised the following grounds of appeal: 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition made by the Assessing Officer of Rs.1,50,00,000/- with regard to the unsecured loan taken by the assessee from Silverline Mercantile Put. Ltd. without properly appreciating the facts of the case with regard to the identity of the creditors, creditworthiness of the creditors and genuineness of the transactions ? 2. The Ld.CIT(A) has erred in law and on facts in deleting the additions made by the Assessing Officer of Rs. 66,50,000/- with regard to the unsecured loan taken by the assessee from. Omrim Securities Put. Ltd. without properly appreciating the facts of the case with regard to the identity of the creditors, creditworthiness of the creditors and genuineness of transactions? 3 The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of interest of Rs.3,60,543/- without properly appreciating the facts of the case? 4 The appellant craves leave to amend alter any ground or add a new ground, which may be necessary. 3. The interconnected issue raised by the Revenue is that the Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 2,20,10,543/- representing the unexplained loan of Rs. 2,16,50,000/- and interest thereon at Rs. 3,60,543/- under the provision of section 68 of the Act. 4. The facts in brief are that the assessee in the present case is an individual and engaged in the business of trading in scrap. The assessee in the year under consideration has accepted secured loans from the parties as detailed below: Sr.No. Parties Amount (in Rs.) 1. Silverline Mercantile Pvt. Ltd. 1.50 crores 2. Omrim Securities Pvt. Ltd. 66,50,000/- 4.1 It was submitted by the assessee that the amount of loan taken from Silverline Mercantile Pvt. Ltd. was utilized for the purchase of properties. As per ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 3 the assesse, the amount of loan of Rs. 1.50 crore was forfeited and the same was reduced from the cost of land in the Assessment Year 2016-17, while offering income under the head “capital gain” on the sale of such. Accordingly, the assessee contended that the amount of loan received from Silverline Mercantile Pvt. Ltd. of Rs. 1.50 crore has already been suffered to tax and therefore no addition for such loan can be made. 4.2 The assessee with respect to the loan of Rs. 66,50,000/-, obtained from Omrim Securities Pvt. Ltd., submitted that the assessee has incurred interest cost on such loan of Rs. 4,00,603/- only in the year under consideration. Likewise, the TDS on such interest of Rs. 40,060/- was also deducted. Thus, as per the assessee the question of treating such loan as unexplained cash credit u/s 68 of the Act, does not arise. 5. However, the AO found that both the loan parties namely M/s Silverline Mercantile Pvt. Ltd. and Omrim Securities Pvt. Ltd. are engaged in providing accommodation entries. Furthermore, their bank accounts were credited immediately before transferring the fund to the assessee. Likewise, the income declared by these loan parties were of negligible amount which was not commensurate to the amount of loan given to the assessee. Accordingly, the AO concluded that the assessee failed to justify the credit worthiness of the parties and genuineness of the transaction. Hence, an addition of Rs. 2,16,15,000/- was made to the total income of the assessee. 5.1 The AO further observed that once the amount of loan received from Omrim Securities Pvt. Ltd has been treated as unexplained cash credit u/s 68 of the Act, then the corresponding interest of Rs. 3,60,543/- is not eligible for deduction. Thus, the AO disallowed such interest expenses of Rs. 3,60,543/- and added to the total income of the assessee. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 4 6. Aggrieved assessee preferred an appeal to the Ld.CIT(A). 6.1 The assessee before the Ld.CIT(A), submitted that all the details with respect to the deduction of the cost of land for Rs. 1.50 crores, while offering capital gain in the A.Y. 2016-17, were duly furnished and the same were also accepted by the revenue. Accordingly, there cannot be any addition of Rs.1.50 crores in the year under consideration otherwise it would lead to double addition which is not desirable under the provision of law. 6.2 The assessee with respect to the loan taken from Omrim Securities Pvt. Ltd. submitted that the amount of loan was repaid over a period of time and remained outstanding in the AY 2016-17, at Rs. 10,36,000/- only. In the AY 2014-15, there was repayment of Rs. 75,00,000/- which was duly accepted by the AO in reassessment proceedings by observing as under: “during the reassessment proceeding, it is noticed that during the year under consideration, the assessee has made repayment of Rs.75,00,000/- to Om Rim Securities Pvt. Ltd. out of advance received against the land. The transaction made by the assessee has already been reflecting in the bank statement of assessee as well as of M/s.Om Rim Securities Pvt. Ltd.” 6.3 As per the assessee once, the repayment of the loan has been accepted by the revenue there cannot be any addition to the total income of the assessee. The assessee further contended that once, the loan amount is accepted as genuine the question of making disallowance of interest expenses does not arise. As such the amount of interest of Rs. 3,60,543/- requires to be deleted. The Ld.CIT(A), after considering the submission of the assessee deleted the addition made by the AO by observing as under: The fact remains that the assessments of the assessee have been reopened from A.Ys.2010-11 to 2014-15 and the reasons in details have been recorded in A.Y.2011-12. This is also fact that no addition has been made in A.Y. 2010-11 & 2014-15. Now, coming to the specifics, the addition of Rs. 1,50,00,000/- has been made in relation to advance received from Silverline Mercantile Pvt. Ltd. The appellant has explained that this amount was received for purchase of land at Ahmedabad for which MOU was executed by which ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 5 the appellant was having a share of 50% and the another half was of Silverline Mercantile Pvt. Ltd. AR explained that this was also explained to Investigation Wing as well as to the AO during assessment proceedings. AR read out certain portion of assessment order to emphasize the issue of advance received to purchase a piece of land. Appellant has filed documentary evidence by way of MOU, Bank statement, confirmation, audited accounts and same are on record. It was also explained that as the further amount for purchase of land was not received, this amount was forfeited and the cost of land purchased has been reduced by amount of Rs.1.50 crores and this land has been finally sold and the resultant capital gains have been declared in A.Y.2016-17, which have been duly accepted by the Department. Therefore, the amount of Rs.1.50 crores has already been offered for tax by reducing the cost of land purchased on behalf of both the parties. The full facts with regard to this amount were explained by AR as under:- The amount was received in A.Y,2011-12 which was carried forward and on account of non-receipt of further amount, this amount has been forfeited on 31/03/2014 and the Satnam Export Land Deal which was executed and the land cost account has been credited by this amount The documents for this land have been executed in F.Y.2015-16 and the cost of this land was Rs.5,20,90,536/- which has been reduced by an amount of Rs.1,50,00,OOO/- on 31/03/2014. Consequently, the reduced cost of Rs.3,61,68,366/- has been considered while computing of capital gains for A.Y.2016-17 and as per books, the profits were at Rs.1,07,36,942/-. The sale deed has been executed on 24/09/2015 for Rs.2,03,83,490/- and Rs.2,71,37,163/- respectively. The account of land right from F.Y.2011-12 till 31/03/2016 has been placed on record. The purchase of land duly reflected in the books of accounts and has been accepted in A.Y.2012-13, 2013-14 and 2014-15 even during reassessment proceedings. The capital gains on sale of this land have also been accepted by the department. The cost of land has been reduced by amount of Rs.1.50 crores resulting into higher capital gains in A.Y.2016-17. The appellant emphasized that the addition cannot be sustained because of assessment becoming final in A.Y. 2016- 17 and filed following documents in support of amount received from above company (Silverline Mercantile Pvt. Ltd.) in the Paper / Book as detailed below :- A) The ledger a/c. appears on Page No. 170 showing transfer of amount to the cost of land as per Journal Entry passed on 31/03/2014. B) The account of land purchased has been placed on Page No. 173 to 174 from the cost of which amount of Rs.1.50 crores has been deducted and the profit on sale of land after deducting reduced cost \ oflandisRs.1,07,36,942/-. C) The capital gain has been in A.Y.2016-17 and the return receipt with statement of total income appears on page No.61 to 65 of paper book. D) In the statement recorded u/s.131 on 25/02/2014 of the assessee by the Investigation Wing the entire facts with regard to Silverline Mercantile P.Ltd. have been explained by the assessee and the said statement appears at Paper Book Page No.137 to 144. From above documentary evidence, the statement of the AO in the assessment order in para 4.2 in the last para, that the assessee has not submitted any details which prove that amount of Rs.1.50 crores were offered for taxation in A.Y.2016-17,-: is apparently wrong. This is wrong observation because the land account as well as account of the said company and the return of assessee for A.Y.2016-17 are already on record. Therefore, considering the totality of the facts, the addition of Rs.1.50 crores already reduced from the cost of land, and duly considered while computing LTCG in A.Y.2016-17 cannot be sustained. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 6 Now, coming to the amount of Rs. 66,50,000/- from M/s. Om Rim Securities P. Ltd. and interest of Rs.4,00,603/- paid to Om Rim Securities P. Ltd- after deducting TDS of Rs.40,060/-, it is submitted that the assessee received principle amount by cheque in F.Y.2010-11 on which interest was also paid of Rs.4,00,603/- after deducting TDS of Rs.40,060/-. AR submitted that this amount was also examined in original scrutiny assessment. The account of M/s. Om Rim Securities P. Ltd. continued up-to A.Y.2016-17 in the books of appellant. Repayment was made in A.Y.2014-15, 2015-16, 2016-17 and only amount of Rs.10,36,000/- is outstanding as on 31-3-2016. The copy of ledger "a/c has been placed on record. It is observed that in A.Y.2014-15, the repayment of Rs.75,00,000/- made on 09/10/2013 has been accepted. The AR submitted that this fact has confirmed the genuineness of transaction. In the reassessment order, for A.Y.2014-15, in para.3.1, the A.O. has observed as under- "During the reassessment proceeding, it is noticed that during the year under consideration, the assessee has made repayment of Rs. 75,00,000/- to Om Rim Securities Pvt. Ltd- out of advance received against the land. The transaction made by the assessee has already been reflecting in the bank statement of assessee as well as of M/s. Om Rim Securities Pvt.Ltd." The copy of assessment order for A.Y.2014-15 has been placed at Paper Book Page No. 178 to 180 and is on record. When the repayment has been treated as genuine, the question of treating the receipt of amount by cheque cannot be treated as unexplained as per provisions u/s. 68 of the I.T. Act. The ledger account of M/s. Om Rim Securities P. Ltd. appears at Paper Book Page No.175 to 177 from which it can be seen that the outstanding amount payable is Rs.10,36,OOO/-. On such facts, when repayment has been accepted, the ITAT, Rajkot Bench in the case of Shri Ayashi Chandrashekhar (ITA No.1010/Rjt/2010) A.Y.2006-07, has dismissed the appeal of department and upheld the order of CIT{A) deleting the addition u/s.68. Further, the appeal filed by the department against this decision of ITAT, Rajkot, the Hon'ble Gujarat High Court vide Tax Appeal No.992 of 2013 decided on 02/12/2013 and dismissed the departmental appeal. Both the orders have been placed in paper book for A.Y.2013-14 at Page No.65 to 68 and 69 to 73. In view of these facts, the addition of Rs.66,50,000/- pertaining to Om Rim Securities P.Ltd. cannot be sustained. As the transaction itself is held to be genuine and disallowance deleted, the disallowance of interest paid net of TDS of Rs. 3,60,543/- cannot be sustained. - 7. Being aggrieved by the order of the Ld.CIT(A), the Revenue is in appeal before us. 8. The Ld. DR before us reiterated the findings contained in the assessment order. 9. On the other hand, the Ld. AR before us filed a paper book running from page 1 to 220 and submitted that the addition of Rs.1.50 crores if sustained will lead to double addition which is prohibited under the provision of law. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 7 9.1 Likewise, the Ld. AR contended that there was re-payment of loan made to Om Rim Securities Pvt Ltd. which was accepted by the revenue and therefore no addition is called for. The Ld. AR vehemently supported the order of the Ld. CIT(A). 10. We have heard the rival contentions of both the parties and perused the materials available on record. The fact of the case are not in dispute which have been elaborated in the preceding paragraph. Therefore, we are not inclined to repeat the same for the sake of brevity and convenience. As regards the loan of Rs. 1.50 crores taken from Silver Mercantile Pvt. Ltd., we note that the amount was forfeited and the same was reduced from the cost of land in the AY 2016-17, while calculating the income under the head capital gain on the sale of impugned land. This fact can be verified from the return of income which is placed on pages 61 to 65 of paper book. Thus, it becomes evident that any addition if sustained in the year under consideration will lead to the double addition which is not desirable under the provision of law. At the time of hearing the Ld. DR has not brought anything on record contrary to the findings of Ld. CIT(A). Hence, we declined to interfere in the finding of Ld.CIT(A). 11. As regard the loan taken from Omrim Securities Pvt. Ltd., we note that the Revenue in the own case of the assesse for the AY 2014-15 has accepted the repayment of the loan to the OMRIM Securities Pvt. Ltd. in the assessment framed under section 143(3) r.w.s. 147 of the Act. The relevant extract of the assessment order is reproduced below: During the reassessment proceeding it is noticed that during the year under consideration the assessee has made repayment of Rs.75,00,000/- to Omrim Securities Pvt. Ltd out of advance received against the land. The transaction made by the assessee has been already reflecting in the bank statement of assessee as well as of M/s.Omrim Securities Pvt. Ltd. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 8 11.1 Furthermore, we have perused the ledger copy of OMRIM Securities Pvt. Ltd. placed on pages 176 to 177 of the paper book and find that the assesse has been making payment continuously to the party for the loan borrowed by him. We also feel pertinent to refer the judgment of the Hon’ble Gujarat high court in case of the CIT Vs. Rohini builders reported in 256 ITR 360 wherein it was held as under: “The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques.” 11.2 Besides the above we note that the assesse has claimed interest expenses of Rs. 4,00,603.00 but the interest expenses of 3,60,543 has been disallowed meaning thereby the revenue has treated the interest expenses to the tune of Rs. 40,060.00 as genuine. It transpires that part of the interest expenses was accepted by the revenue as genuine whereas part of the expense was treated as not genuine which is contradictory stand taken by the Revenue. In view of the above and after considering the facts in totality, we are of the opinion that the assessee cannot be held for guilty for accepting the cash credit in the manner specified under section 68 of the Act. Therefore, we direct the AO to delete the addition made by him. Hence, the ground of appeal of the Revenue is hereby dismissed. 11.3 In the result, the appeal filed by the revenue is dismissed. Now Coming to the CO No. 22/Ahd/2020 in (IT(SS)A No.1705/Ahd/2019) raised by the assessee for the AY 2011-12 12. At the time of hearing, the Learned Counsel has submitted that he has been instructed not to press the CO raised by the assessee. Therefore, the same is dismissed as not pressed. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 9 12.1 In the result, the CO filed by the assessee is dismissed. Now coming to the ITA No. 1706/Ahd/2019 for A.Y 2013-14. 13. At the outset, we note that the issues raised by the Revenue in its grounds of appeal for the A.Y 2013-14 are identical to the issues raised by the Revenue in ITA No. 1705/Ahd/2019 for the assessment year 2011-12. Therefore, the findings given in 1705/Ahd/2019 shall also be applicable for the year under consideration i.e. AY 2013-14. The ground appeal of the Revenue for the assessment 2011-12 has been decided by us vide paragraph No. 11 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2013-14. Hence, the grounds of appeal filed by the Revenue is hereby dismissed. 14.1 In the result the appeal filed by the Revenue is dismissed. Now Coming to the CO No. 23/Ahd/2020 (In ITA No.1706/Ahd/2019) raised by the assessee for AY 2013-14. 15. At the outset, we note that the issue raised by the assessee in the CO is identical to the CO bearing No.22/Ahd/2020 for AY 2011-12 which has been dismissed as not pressed vide paragraph No. 12 of this order as instructed by the Ld. Counsel for the assessee. Thus, respectfully following the same, we dismissed the CO raised by the assessee as not pressed. 15.1 In the result, the CO raised by the assessee is dismissed as not pressed. ITA nos.1705 & 1706/Ahd/2019& with C.O No.22-23/Ahd/2020 A.Y. 2011-12 & 2013-14 10 16. In the combined result, the appeals filed by the revenue are dismissed and the COs filed by the assessee are also dismissed as not pressed. Order pronounced in the Court on 29/03/2023 at Ahmedabad. Sd/- Sd/- (T.R SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 29/03/2023 Manish