COMMISSIONER OF INCOME TAX-III V. M/S SHREENATH INTERMEDIATES C/O BHAILALBHAI T AKHANI

TAXAP/403/2011

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax-III against M/S Shreenath Intermediates concerning the addition of unexplained loan credits to the assessee's income under section 68 of the Income Tax Act, 1961. The Assessing Officer initially added Rs.9,03,228 as unexplained loans and interest to the assessee's income for the assessment year 1994-95. The appellate Commissioner and subsequently the Tribunal partially deleted these additions after finding some confirmations and evidence provided by the assessee. The Tribunal's decision to remand the matter for further consideration was challenged by the Commissioner in the High Court, which upheld the Tribunal's decision and dismissed the appeal.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 729502 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 12-06-2012
• Assessment Year: misc
• Other Referred Cases: DCIT vs. Rohini Builders (256 ITR 360)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: MAUNA BHATT
• Keywords: Addition under Section 68; Creditworthiness; Genuineness of transaction; Income tax appellate tribunal; Unexplained loan credit
• Section: 143(3); 68; 260A

Judgement Text

"TAXAP/403/2011 1/6 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 403 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX-III - Appellant(s) Versus M/S SHREENATH INTERMEDIATES C/O BHAILALBHAI T AKHANI - Opponent(s) ========================================================= Appearance : MRS MAUNA M BHATT for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 12/06/2012 ORAL JUDGMENT TAXAP/403/2011 2/6 JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The Revenue has preferred this appeal under Section 260A of the Income T ax Act, 1961, to challenge order dated 09.07.2010 of the Income T ax Appellate T ribunal, Ahmedabad, proposing the following substantial question of law formulated in the memorandum of appeal. “Whether the Appellate Tribunal is right in law and on facts in deleting the addition u/s.68 of Rs.9,03,228/- being, (1) Unexplained loan credit in the name of Chandan Tea Enterprise Rs.7,00,000/- (2) Unexplained loan credit in the name of Anand Corporation Rs.2,00,000/- (3) Interest on above two loan credits Rs.0,03,228/- ============= Rs.9,03,228/- ============= 2. The relevant facts are that the Assessing Officer passed order under section 143(3) in respect of return of income for the assessment year 1994- 95, by determining total income of the assessee at Rs.19,40,292/-, against the total income of Rs.7,48,890/- shown by the assessee. The Assessing Officer in his order of assessment dated 26.03.1997 made additions/disallowances under the various heads. One of the item was the addition of Rs.9,03,228/- on account of unexplained loans and interest thereon. According to the Assessing Officer, the amount of Rs.7,00,000/- shown as loan taken from one Chandan T ea Enterprises and Rs.2,00,000/- shown as loan credit from one Anand Corporation, had no confirmation. The officer invoked the provisions of section 68 of the Act and added the amount of both the loans plus interest of Rs.3,228/- paid in respect of loan to Chandan T ea Enterprise, being consequential addition, treating the total amount of Rs.9,03,228/- as income of the assessee. 2.1 In the appeal by the assessee, the appellate Commissioner found that for the loan credit of Rs.2,00,000/-, confirmation from Anand Corporation TAXAP/403/2011 3/6 JUDGMENT was available bearing its partner's signature and had also the income-tax Permanent Account Number (PAN). The addition of that amount was directed to be deleted. As regards the loan from Chandan T ea Enterprises, the appellate authority concluded that out of the total amount, amount of Rs.1.5 lacs represented loan, however there was no confirmation therefor from the party and the addition of that amount under section 68 of the Act was proper. The rest of the amount was accepted for deletion on the basis of the material placed before it by the assessee. 2.2 Before the Income T ax Appellate T ribunal, cross appeals were filed, being ITA No.2031/Ahd/2004 by the Department and ITA No.2080/Ahd/2004 by the assessee, which were decided by common impugned judgment. The T ribunal dismissed the departmental appeal and partly allowed the appeal of the assessee. 2.3 On the issue of addition of amounts of loan credit under section 68 of the Act, the T ribunal considered the matter and observed inter-alia that the amount of Rs.1,50,000/- was part of the total amount and the other part was considered by the authorities below for the purpose of deleting the addition. The T ribunal observed inter-alia as under: “On ground No.11, the assessee challenged the addition of Rs.1,50,000/- u/s 68 of the IT Act. The facts have been noted while considering ground No.3 in the departmental appeal above in which with regard to M/s. Chandan Tea Enterprises the learned CIT(A) deleted the addition of Rs.5,50,000/- and confirmed by the Tribunal. It was noted that Rs.1,50,000/- was received by the assessee as deposit on 20.09.1993 which was repaid on 22.10.1993. The learned CIT(A) noted that the assessee has not filed any confirmation of the loan. However it was explained before the learned CIT(A) that copy of the account of the party was filed along with confirmation to show that Rs.5,50,000/- was the amount advanced by the assessee to M/s. Chandan TAXAP/403/2011 4/6 JUDGMENT Tea Enterprises and only Rs.1,50,000/- was represented as loan. In view of the above, it is clear from the copy of the account and confirmation filed on record now that the amount of Rs.1,50,000/- is also same part of the amount which has been considered by the authorities below for the purpose of deleting the addition. The learned CIT(A) also noted that creditworthiness and genuineness of the transaction is not proved in the matter. However, out of the same transactions when the other transactions have been taken into consideration in respect of the same party, therefore, the authorities below should have considered the issue in the light of the statement of account of the aforesaid party filed at page 52 of the paper book. This party is also assessed to tax and Permanent Account Number is given in the confirmation filed at PB 53. The creditworthiness and genuineness of the transaction could be considered from these documents. The confirmation filed at PB-53 is stated to be filed before the AO and the learned CIT(A) as per certificate given by the learned Counsel for the assessee in the paper book.” 3. Upon the above reasoning and observations, the T ribunal set aside the order of appellate Commissioner and remanded the matter for reconsideration of the issue, directing the Appellate Commissioner to redecide the issue by giving opportunity of being heard to the assessee and permitting the assessee to furnish further evidences to his satisfaction. 4. We heard learned advocate Mrs. M.M. Bhatt for the Revenue. She submitted that the decision of the T ribunal was erroneous because according to her, the T ribunal only considered one requirement for furnishing confirmation, without going into the other requirements for proving the genuineness of credit, creditworthiness of the parties, etc. It was submitted that the entire amount of loan credit in the name of Chandan T ea Enterprises was not proved as genuine and, therefore, the T ribunal was not justified in restoring the issue back to the CIT(A) and directing it to re-decide the same. With respect of the deleted addition of Rs.2,00,000/-, it was submitted that TAXAP/403/2011 5/6 JUDGMENT on behalf of the appellant that it had remained unexplained loan credit as the T ribunal upheld the finding on the same ground as in respect of the other cash credit. It was submitted that in the facts of the case the proposed question of law was arising as substantial question of law for consideration in the appeal. 5. The total amount of cash credit sought to be dealt with under section 68 of the Act by adding the same in the income were the loans from two parties, out of which for the amount of Rs.2 lacs from Anand Corporation, the confirmation was available with signatures of the partners and PAN. In DCIT vs. Rohini Builders (256 ITR 360), our High Court has taken a view that the identity of creditor could be proved from PAN. As far as loan from Chandan T ea Enterprise was concerned, the T ribunal has dealt with the same by rightly observing that Rs.1,50,000/- was part of the same total amount which was considered for deleting the addition under section 68. When two amounts belonged to the same transaction, and in respect of one part, the confirmation was available from PAN and the statement of account filed by the very party, the creditworthiness and genuineness of the whole transaction could have been considered from those documents. When on such reasoning, which is reproduced in paragraph 2.3 above, the T ribunal has remanded the issue to the appellate Commissioner for reconsideration, no illegality can be said to have been committed by the T ribunal. We are in complete agreement with the reasoning provided by the T ribunal in its impugned order. 6. In the above facts and circumstances, we do not find that any substantial question of law arises in this T ax Appeal. In absence of any TAXAP/403/2011 6/6 JUDGMENT substantial question of law, the appeal cannot be entertained. 7. This appeal is accordingly dismissed. (V.M. SAHAI, J.) (N.V. ANJARIA, J.) (SN DEVU PPS) "