CHANDULAL C. JAIN, MUMBAI V. INCOME TAX OFFICER 30(1)(2), MUMBAI

ITA 1064/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4543 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 1064 / MUM . /2018 ( ASSESSMENT YEAR : 20 12 13 ) CHANDULAL C. JAIN SHOP NO.5, 49/8 ISMAIL BAUG ANAND ROAD, MALAD (WEST) MUMBAI 400 064 PAN ADCPJ3749A . APPELLANT V/S INCOME TAX OFFICER WARD 30 ( 1 )(2), MUMBAI . RESPONDENT ASSESSEE BY : SHRI RAJESH SANGHVI REVENUE BY : SHRI VIVEK ANAND OJHA DATE OF HEARING 05 . 0 3 .201 9 DATE OF ORDER 20.03.2019 O R D E R A FORESAID APPEAL HA S BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 2 ND NOVEMBER 2017 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) 4 1 , MUMBAI , PERTAINING TO THE ASSESSMENT YEAR 20 12 13 . 2 . T HE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE ADDITION OF ` 10 LAKH UNDER SECTION 68 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ). 2 CHANDULAL C. JAIN 3 . B RIEF FACTS ARE, THE ASSESSEE , AN INDIVIDUAL , IS CARRYING ON BUSINESS AS A RESELLER OF FABRICS THROUGH HIS PROPRIETARY CONCERN M/S. MAHARA SHTRA TEXTILE S . FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED HIS RETURN OF INCOME ON 24 TH SEPTEMBER 2012, DECLARING TOTAL INCOME OF ` 2,63,667. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICING THAT THE ASSESSEE HAS SHOWN UNSECURED LOAN OF ` 5 LAKH EACH FROM TWO INDIVIDUALS CALLED UPON THE ASSESSEE TO FURNISH THE NECESSARY DETAILS OF THE LENDERS SUCH AS COPIES OF INCOME TAX RETURNS, PAN DETAILS AND BANK STATEMENT COPIES. AFTER PERUSING THE DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THOUGH THE LENDERS HAVE ADVANCED THE LOANS THROUGH CHEQUES, HOWEVER, PRIOR TO ISSUANCE OF CHEQUE TO THE ASSESSEE CASH WAS DEPOSITED TO THE BANK ACCOUNT. FURTHER, ON VERIFYING THE RETURN OF INCOME FILED BY THE LENDERS FOR THE ASSESSMENT YEAR 2012 13, HE FOUND THAT THE INCOME SHOWN BY THEM IS NOT SUFFICIENT TO ADVANCE THE LOAN. AS OBSERVED BY THE ASSESSING OFF ICER, THOUGH, AS PER HIS DIRECTION THE ASSESSEE PRODUCED THE LENDERS BEFORE HIM, HOWEVER, THE LENDERS DID NOT PRODUCE BANK BOOK AND OTHER BOOKS OF ACCOUNT. FURTHER, ON VERIFYING THE DETAILS OF BOTH THE LENDERS THE ASSESSING OFFICER ULTIMATELY CONCLUDED THA T CREDITORS DID NOT HAVE THE CREDITWORTHINESS TO ADVANCE LOAN TO THE ASSESSEE. HE ALSO OBSERVED THAT CASH DEPOSIT IN THE BANK ACCOUNT OF THE CREDITORS PRIOR TO ISSUANCE OF CHEQUE TO THE 3 CHANDULAL C. JAIN ASSESSEE INDICATE THAT THE FUNDS WERE PROVIDED BY THE ASSESSEE FOR ADV ANCING THE LOAN. THE ASSESSING OFFICER ALSO OBSERVED THAT IN THE RETURNS OF INCOME FILED BY THE LENDERS NO INTEREST INCOME IS RECEIVED FROM THE ASSESSEE HAS BEEN SHOWN. THUS, ULTIMATELY THE ASSESSING OFFICER DISBELIEVING THE GENUINENESS OF THE LOAN TRANSAC TION S TREATED THEM AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4 . THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE THE FIRST APPELLATE AUTHORITY, HOWEVER, LEARNED COMMISSIONER (APPEALS) SU STAINED THE ADDITION MADE BY THE ASSESSING OFFICER. 5 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS NOT ONLY PRODUCED ALL DOCUMENTARY EVIDENCES INCLUDING LOAN CONFIRMATION FROM THE LENDERS , BUT , THE LENDERS WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. HE SUBMITTED , IN COURSE OF EXAMINATION BY THE ASSESSING OFFICER, THE LENDERS HAVE CATEGORICALLY ADMITTED OF HAVING ADVANCED THE LOANS TO THE ASSESSEE. HE SUBMITTED , BOTH THE LENDERS ARE INCOME TAX ASSESSEES FILING THEIR RETURN OF INCOME REGULARLY. HE SUBMITTED , THE BALANCE SHEET OF THE LENDERS WAS ALSO FILED BEFORE THE ASSESSING OFFICER WHEREIN AVAILABILITY OF FUND TO ADVANCE THE LOAN TO THE ASSESSEE WAS DEMONSTRATED. HE SUBMITTED , THE ASSESSEE HAS REGULARLY PAID INTEREST 4 CHANDULAL C. JAIN ON LOAN TO THE LENDERS WHICH ARE REFLECTED IN THE BANK STATEMENT. FURTHER, HE SUBMITTED , LOAN WAS ALSO REPAID TO THE LENDERS SUBSEQUENTLY. HE SUBMITTED , WHEN THE ASSESSEE HAS FURNISHED ALL DOCUMENTARY EVIDENCES TO PROVE THE GENUINENESS OF LOA NS AND THE LENDERS THEMSELVES HAVE APPEARED BEFORE THE ASSESSING OFFICER AND CONFIRMED OF ADVANCING THE LOAN TO THE ASSESSEE , THERE IS NO JUSTIFICATION IN TREATING THE LOAN TRANSACTION AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. HE SUBMITTED , B OTH THE LENDERS ARE INCOME TAX ASSESSEE S AND HAVE REFLECTED THE LOAN TRANSACTIONS IN THEIR STATEMENT OF ACCOUNT. THEREFORE, THERE IS NO REASON TO DOUBT THE LOAN TRANSACTION. 6 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELYING UPON THE OBSERVATIONS OF LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER SUBMITTED , SINCE THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF THE CREDITOR S, ADDITION MADE UNDER SECTION 68 OF THE ACT IS PROPER. 7 . I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD. AS COULD BE SEEN, THE DISPUTED ADDITION IS WITH REGARD TO TWO UNSECURED LOANS OF ` 5 LAKH EACH AVAILED BY THE ASSESSEE FROM TWO INDIVIDU ALS NAMELY SHRI KAUSTUBH BANDIW ADEKAR AND SHRI DHARM ENDRA JAIN. THE ASSESSING OFFICER HAS TREATED THE UNSECURED LOANS AS 5 CHANDULAL C. JAIN UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT DOUBTING THE CREDITWORTHINESS OF THE LENDERS. L EARNED COMMISSIONER (APPEALS) HAS UPHELD THE DECISION OF THE ASSESSING OFFICER MERELY ON THE REASONING THAT PRIOR TO ADVANCEMENT OF LOAN THERE WERE CASH DEPOSITS IN THE BANK ACCOUNT OF THE LENDERS. FURTHER, LEARNED COMMISSIONER (APPEALS) HAS OBSERVED THAT THE ASSESSEE HAS NEITHER PAID INTEREST ON THE LOAN AMOUNT NOR HAS REPAID THE LOAN AMOUNT BEFORE THE DATE OF THE ASSESSMENT ORDER. IT IS OBSERVED , IN COURSE OF ASSESSMENT PROCEEDINGS , IN COMPLIANCE TO THE DIRECTIONS OF THE ASSESSING OFFICER , THE ASSESSEE HAS FURNISHED THE REQUIRED DOCUMENTARY EVIDENCES INCLUDING THE PAN CARD COPY OF THE LENDER S, RETURN OF INCOME COPIES FILED BY THEM, LOAN CONFIRMATIONS, FINANC IAL STATEMENTS INCLUDING BALANCE S HEET, HIS OWN BANK ACCOUNT, ETC. IT IS ALSO A FACT ON RECORD THAT BOTH THE LENDERS HAVE APPEARED BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS AND HAVE CATEGORICALLY STATED ON OATH THAT THEY HAVE ADVANCED THE LOANS TO THE ASSESSEE. THE AFORESAID STATEMENTS GIVEN UNDER OATH BY THE LENDERS HAVE NOT BEEN PROVED TO BE FALSE BY THE ASSESSING OFFICER. MER ELY BECAUSE IN THE BANK ACCOUNT OF T HE LENDERS THERE ARE CASH DEPOSITS PRIOR TO ISSUANCE OF CHEQUE TO THE ASSESSEE AND FURTHER THE INCOME RETURNED BY THE LENDERS ARE NOT SUBSTANTIAL , IT CANNOT BE PRESUMED THAT THE LENDERS DID NOT HAVE THE CREDITWORTHINESS TO ADVANCE THE LOANS TO THE ASSESSEE . MOREOVER, THE 6 CHANDULAL C. JAIN ASSESSEE HAS FILED THE BALANCE S HEET OF THE CREDITORS TO DEMONSTRATE AVAILABILITY OF FUND. FURTHER, THE LENDERS ARE INCOME TAX ASSESSEE S AND FILING THEIR RETUR N OF INCOME REGULARLY. THE LOAN TRANSACTIONS HAVE ALSO BEEN REFLEC TED IN THEIR RE TURN OF INCOME FOR THE CONCERNED ASSESSMENT YEAR. NOTHING HAS BEEN BROUGHT TO OUR NOTICE BY THE DEPARTMENT TO INDICATE THAT THE LOAN TRANSACTIONS HAVE BEEN DISALLOWED OR DOUBTED IN CASE OF THE LENDERS. THEREFORE, MERELY ON PRESUMPTION AND SURMISES, IT CANN OT BE HELD THAT THE LENDERS DID NOT HAVE THE CREDITWORTHINESS. FURTHER, THE OBSERVATION OF THE LEARNED COMMISSIONER (APPEALS) THAT THE ASSESSEE HAS NOT PAID INTEREST ON THE LOAN TO THE LENDER S IS FACTUALLY INCORRECT. ON A PERUSAL OF THE BANK ACCOUNT COPY F URNISHED IN THE PAPER BOOK WE HAVE NOTICED THAT THE ASSESSEE HAS REGULARLY PAID INTEREST ON THE LOAN ADVANCED . M ERELY BECAUSE THE LENDERS HAVE NOT SHOWN THE INTEREST INCOME IN THEIR RETURN OF INCOME , DOES NOT MEAN THE ASSESSEE HAS NOT PAID INTEREST. IT IS ALSO SEEN THAT THE ASSESSEE HAS REPAID THE LOAN AMOUNT TO THE LENDER THOUGH SUBSEQUENT TO THE DATE O THE ASSESSMENT ORDER. THEREFORE, ON OVERALL CONSIDERATION OF FACTS AND MATERIAL ON RECORD, I AM OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS CAST UPON HIM TO PROVE THE GENUINENESS OF LOAN TRANSACTION AS CONTEMPLATED UNDER SECTION 68 OF THE ACT. THAT BEING THE CASE, THE ADDITION MADE OF ` 10 LAKH IS NOT SUSTAINABLE. ACCORDINGLY, I DELETE THE SAME. GROUNDS ARE ALLOWED. 7 CHANDULAL C. JAIN 8 . IN THE RE SULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.03.2019 SD/ SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 20.03.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (SR. PRIVATE SECRETARY) ITAT, MUMBAI