Sureshkumar Kashmirialal Agarwal, Pune V. Assistant Commissioner of Income-tax,

CO 57/PUN/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9460 (ITAT-PUNE)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 14-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHE A, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1801/PN/2012 (ASSESSMENT YEAR : 2007-08) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE. . APPELLANT VS. SURESHKUMAR KASHMIRILAL AGARWAL, PLOT NO.15, SECTOR NO.25, PCNTDA, PUNE 44. PAN : ACUPA6602L . RESPONDENT C.O. NO.57/PN/2013 (ARISING OUT OF ITA NO.1801/PN/2012) (ASSESSMENT YEAR : 2007-08) SURESHKUMAR KASHMIRILAL AGARWAL, PLOT NO.15, SECTOR NO.25, PCNTDA, PUNE 44. PAN : ACUPA6602L . CROSS OBJECTOR VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE. . APPELLANT IN APPEA L DEPARTMENT BY : MR. P. L. PATHADE ASSESSEE BY : MR. PRAMOD S. SHINGTE DATE OF HEARING : 02-01-2014 DATE OF PRONOUNCEMENT : 28-02-2014 ORDER PER G. S. PANNU, AM THE CAPTIONED APPEAL BY THE REVENUE AND THE CROSS- OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST AN ORDER OF THE COMMI SSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 06.06.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 29.12.2009 PASSED BY THE ASSESSING OFFICER U/ S 143(3) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2007-08. ITA NO.1801/PN/2012 C.O. NO.57/PN/2013 A.Y. 2007-08 2. IN THE APPEAL OF THE REVENUE, THE FOLLOWING GROU ND OF APPEAL HAS BEEN RAISED :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) WAS JUSTIFIED IN HOLDING THAT THE INTERE ST-FREE LOANS CLAIMED BY THE ASSESSEE WERE GENUINE, WHEN CREDIBILITY BEING THE I DENTITY, CREDITWORTHINESS AND GENUINENESS OF THE LOANS WAS DOUBTFUL INASMUCH AS THE LOAN CONFIRMATIONS FILED BY THE ASSESSEE BEFORE THE CIT( A) WERE NOT VERIFIED. 2. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE ABOVE GROUNDS OF APPEAL. 3. IN ITS CROSS-APPEAL OF THE ASSESSEE, THE FOLLOWI NG GROUND HAS BEEN RAISED :- GROUND NO. 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.5,33,000/- BEING A LOAN RECEIVED FROM SHRI AJAY MEDIRATTA BY INVOKING THE PROVISIONS OF SECTION 56( 2)(VI) OF THE INCOME TAX ACT, 1961 BY DISREGARDING APPELLANTS CONTENTION IN THIS REGARD. GROUND NO. 2 2.1 THE LEARNED AO HAS ERRED IN OBJECTING THE ORDER PASSED OF THE LEARNED CIT(A) ON THE GROUND THAT LOAN CONFIRMATION S WERE NOT VERIFIED. THE AO ERRED IN SAYING THAT GENUINENESS, IDENTITY, CREDIT WORTHINESS, OF THE LOANEE WAS DOUBTFUL AS THOSE HAVE NOT BEEN VERI FIED BY LEARNED CIT(A). 2.2 THE LEARNED AO SHOULD HAVE APPRECIATED THAT CIT (A) HAS CALLED FOR REMAND REPORT FROM THE AO AND AFTER CONS IDERING THE SAME HE HAS DELETED THE ADDITION AND HENCE ORDER OF CIT( A) TO THE EXTENT CANNOT BE OBJECTED. WHERE CIT (A) HAD DOUBT HE HAS CONFIRMED THE ADDITION AND HENCE AO COULD NOT HAVE GRIEVANCE. 4. BRIEFLY PUT THE CONTROVERSY IN THIS APPEAL CAN B E SUMMARIZED AS FOLLOWS. THE ASSESSEE IS A PROPRIETOR OF GOYAL FOUNDRY AND I S INTER-ALIA ENGAGED IN MANUFACTURING OF NON-FERROUS CASTINGS. IN THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT ASSES SEE HAD CLAIMED TO HAVE RECEIVED INTEREST-FREE LOANS FROM THE FOLLOWING PAR TIES AMOUNTING TO RS.26,58,000/- : PARTICULARS AMOUNT (RS.) GIRISH SARDESAI 2,50,000/- AJAY MEDIRATTA 5,33,000/- SWAMINATHAN TANJORE 8,75,000/- SUNIL SHARMA 10,00,000/- TOTAL : 26,58,000/- ITA NO.1801/PN/2012 C.O. NO.57/PN/2013 A.Y. 2007-08 5. THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE FAILED TO PRODUCED VALID CONFIRMATIONS FROM THE SAID FOUR CREDITORS AN D THEREFORE HE TREATED THE AFORESAID SUMS AS INCOME CHARGEABLE TO TAX U/S 56(2 )(VI) OF THE ACT ON THE GROUND THAT THE SAID SUM WAS RECEIVED WITHOUT CONSI DERATION. THE STAND OF THE ASSESSEE WAS THAT ALL THE AFORESAID LOANS WERE REPAYABLE AND MERELY BECAUSE THE SUM WAS RECEIVED FREE OF INTEREST FROM UNRELATED PERSONS, IT COULD NOT BE CONSIDERED AS INCOME WITHIN THE MEANING OF S ECTION 56(2)(VI) OF THE ACT. 6. IN APPEAL BEFORE THE CIT(A), ASSESSEE REITERATED THAT THE SAID AMOUNTS WERE LOAN LIABILITIES AND ALSO FURNISHED CONFIRMATI ON FROM SOME OF THE SAID PARTIES. THE CIT(A) FORWARDED THE MATERIAL FURNISH ED BY THE ASSESSEE TO THE ASSESSING OFFICER AND OBTAINED HIS COMMENTS. AFTER CONSIDERING THE MATERIAL ON RECORD AND THE COMMENTS OF THE ASSESSING OFFICER , HE HAS DELETED THE ADDITION OF RS.21,25,000/- AND RETAINED THE BALANCE OF RS.5,33,000/-. THE CIT(A) HAS DELETED THE ADDITION OF RS.21,25,000/- W ITH RESPECT TO THE THREE CREDITORS WHOSE CONFIRMATIONS WERE BEFORE HIM AND W ITH RESPECT TO THE BALANCE OF RS.5,33,000/- IN RELATION TO MR. AJAY MEDIRATTA, ONE OF THE FOUR CREDITORS, THE ADDITION OF RS.5,33,000/- HAS BEEN SUSTAINED IN THE ABSENCE OF ANY CONFIRMATION. ON THE BASIS OF THE CONFIRMATIONS RE CEIVED, THE CIT(A) TREATED THE SUMS AS LOAN AMOUNTS WHICH WERE REPAYABLE AND T HUS OUTSIDE THE PURVIEW OF SECTION 56(2)(VI) OF THE ACT. AGAINST THE ADDIT ION DELETED BY THE CIT(A), REVENUE IS IN APPEAL BEFORE US WHEREAS ASSESSEE HAS FILED CROSS-OBJECTION WITH REGARD TO AN ADDITION OF RS.5,33,000/- SUSTAIN ED BY THE CIT(A). 7. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT IT WAS INCONCEIVABLE THAT UNRELATED PERSONS WOULD ADVA NCE MONEYS WITHOUT INTEREST TO THE ASSESSEE, AND THEREFORE THE ADDITIO N WAS JUSTIFIED. ON THAT BASIS, ORDER OF THE ASSESSING OFFICER IS SOUGHT TO BE DEFENDED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. ITA NO.1801/PN/2012 C.O. NO.57/PN/2013 A.Y. 2007-08 8. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE A SSESSEE HAS RELIED UPON THE JUDGEMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SARANAPAL SINGH (HUF), (2011) 237 CTR 50 (P&H) TO SUPPORT THE STAND OF THE CIT(A) THAT THE AMOUNTS CONTEMPLATED U /S 56(2)(VI) OF THE ACT DO NOT INCLUDE LOAN LIABILITIES. EVEN WITH REGARD TO THE ADDITION OF RS.5,33,000/- SUSTAINED BY THE CIT(A), IT IS CONTENDED THAT IT WA S A LOAN LIABILITY, THOUGH THE CONFIRMATION IN THIS REGARD COULD NOT BE FURNISHED. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THE PRESENT CASE, THE PERTINENT POINT RELATES TO ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 56(2)(VI) OF THE ACT. ASSESSEE WA S FOUND TO HAVE RECEIVED CERTAIN AMOUNTS WHICH WERE CLAIMED AS LOAN LIABILIT IES FREE OF INTEREST. THE ASSESSING OFFICER INVOKED SECTION 56(2)(VI) OF THE ACT ON THE GROUND THAT THE SUMS WERE RECEIVED FREE OF INTEREST. THE CIT(A) HA S DELETED THE ADDITION TO THE EXTENT WHERE ASSESSEE WAS ABLE TO ESTABLISH, ON THE BASIS OF THE CONFIRMATIONS, THAT SUCH CREDITS WERE LOAN LIABILIT IES, WHICH WERE REPAYABLE. SECTION 56(2)(VI) OF THE ACT CONTEMPLATES THAT RECE IPTS WITHOUT CONSIDERATION TO BE TAKEN AS INCOME, SO HOWEVER IT DOES NOT CONTEM PLATE AMOUNTS RECEIVED AS LOANS WITH LIABILITY TO REPAY. EVEN WHERE A LOA N HAS BEEN RECEIVED FREE OF INTEREST YET IT DOES NOT FALL WITHIN THE SCOPE OF S ECTION 56(2)(VI) OF THE ACT BECAUSE, IT IS FASTENED WITH A LIABILITY TO REPAY. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SARANAPAL SINGH (HUF) (SU PRA) HAS UPHELD THE PROPOSITION THAT AMOUNTS CONTEMPLATED U/S 56(2)(V) OF THE ACT WOULD NOT INCLUDE INTEREST-FREE LOANS, BECAUSE A LOAN RECEIVE D CARRIES A LIABILITY TO REPAY. TO PUT IT IN OTHER WORDS, SECTION 56(2)(VI) OF THE ACT CONTEMPLATES A RECEIPT OF MONEY WITHOUT CONSIDERATION WHICH POSSESSES CHARACT ERISTICS OF INCOME I.E. THE MONEY RECEIVED BY AN ASSESSEE SHALL BE ACCOMPAN IED BY AN UNFETTERED RIGHT TO ENJOY IT; BUT, IF THERE EXISTS A LIABILITY TO REPAY THE SAME, SUCH A TRANSACTION CANNOT BE CONSIDERED AS FALLING WITHIN THE SCOPE OF SECTION 56(2)(VI) OF THE ACT. ITA NO.1801/PN/2012 C.O. NO.57/PN/2013 A.Y. 2007-08 10. IN THE PRESENT CASE, THE CIT(A) HAS DELETED THE AMOUNT OF RS.21,25,000/- RECEIVED FROM THREE OF THE CREDITORS ON THE GROUND THAT THE PARTIES HAVE CONFIRMED ITS NATURE OF BEING A LOAN L IABILITY, THOUGH INTEREST-FREE. IN THE ABSENCE OF ANY OTHER MATERIAL TO NEGATE THE NATURE OF SUCH RECEIPTS, WE FIND NO ERROR IN THE PART OF THE CIT(A) IN DELETING THE ADDITION OF RS.21,25,000/-. ACCORDINGLY, THE REVENUE HAS TO FAIL. 11. IN SO FAR AS THE ADDITION OF RS.5,33,000/- SUST AINED BY THE CIT(A) IS CONCERNED, IT IS EVIDENT THAT THE ASSESSEE HAS FAIL ED TO ESTABLISH ITS NATURE. IN THE ABSENCE OF ANY CONFIRMATION OR ANY OTHER MATERI AL TO SHOW THAT THE SAID AMOUNT WAS REPAYABLE OR THAT THE SAME HAS BEEN ACTU ALLY REPAID, THE SAID AMOUNT HAS BEEN RIGHTLY CLASSIFIED BY THE INCOME-TA X AUTHORITIES AS A RECEIPT OF MONEY WITHOUT CONSIDERATION, FALLING WITHIN THE PUR VIEW OF SECTION 56(2)(VI) OF THE ACT. THUS, FACTUALLY SPEAKING, ON THIS GROUND ASSESSEE FAILS. 12. RESULTANTLY, THE APPEAL OF THE REVENUE AS WELL CROSS-OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2014. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 28 TH FEBRUARY, 2014. SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-V, PUNE; 4) THE CIT-V, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY I.T.A.T., PUNE