PRAKASH T. SAVLA, THANE V. DCIT CIR 3, THANE

ITA 1068/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0124 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 02-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Section: 143(3); 68; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 1068 / MUM/ 20 1 6 ( / ASSESSMENT YEAR: 2 0 10 - 11 ) SHRI PRAKASH T SAWALA 4, CHITTATOSH APARTMENTS, VEER SAVAKAR MARG, NEAR MALTIBAI HOSPITAL, THANE (W) - 400601 / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE - 3, ROOM NO.2, B WING, 6 TH FLOOR, ASHAR IT PARK, WAGLE ESTATE, THANE(W) - 400604 PAN : AMQPS9365Q ( / APPELLANT) : ( / RESPONDENT ) / ASSESSEE BY : SHRI DEVENDRA JAIN / REVENUE BY : SHRI RAJAT MITTAL / DATE OF HEARING : 16 . 8 . .2017 / DATE OF PRONOUNCEMENT : 28. 8 . 201 7 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED IS APPEAL BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 20 10 - 11 . THE APPEAL ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) - 2 , THANE , DATED 31.12.2015 WHICH IN TURN HAS ARISE N FROM AN ORDER PASSED BY THE ASSESS ING OFFICER DATED 22.2.2013 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2 ITA NO. 1068 /MUM/201 6 2. THE ONLY ISSUE INVOLVED IN THE APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.17,89,218/ - BY THE LD.CIT(A) AS MADE BY THE AO ON ACCOUNT OF UNSECURED LOANS BEING CEASED TO BE PAYABLE AND ASSESSING THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. 3. FACTS OF THE CASE ARE THE ASSESSEE FILED RETURN OF INCOME ON 29.7.2010 DECLARING TOTAL INCOME OF RS.21,71,680/ - . THE CASE OF THE ASSESSEE WAS SELECTED FO R SCRUTINY UNDER CASS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR THE DETAILS OF UNSECURED LOANS WHICH W ERE REPLIED BY THE ASSESSEE VIDE LETTER DATED 9.10.2012 BY SUBMITTING THAT THESE LOANS WERE RAISED/ RECEIVED FROM THREE PARTIES VIZ H J THAKKAR RS.10,19,218/ - , DHIREN CHAMPAK RS.4,40,000, AND DHIREN SARAIYA RS.3,30,000/ - DURING THE FINANCIAL YEAR 2003 - 04. THE ASSESSEE SUBMI TT ED THAT THE SAID LENDERS/ PARTIES WERE ABSCONDING FOLLOWING A POLICE COMPLAINT FILED AGAINST THEM WITH ECONOMIC OFFENCE WING, CRIME BRANCH, CID, MUMBAI. IT WAS FURTHER STATED TH A T IT IS NOT POSSIBLE FOR THE ASSESSEE TO PRODUCE THE LOAN CONFIRMATION LETTERS FROM THEM AS THEY ARE3 BEING UNDERGROUND AND NOT TRACEABLE . THE AO DID NOT AGREE WITH THE EXPLA NATION OF THE ASSESSEE AND ADDED THE ENTIRE AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE BY OBSERVING THAT THE LOAN S HA VE CEASED TO BE LIABILITY ON THE ASSESSEE AND ASSESSEE BECAME OWNER OF THE FUND S WHICH 3 ITA NO. 1068 /MUM/201 6 WERE CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SO URCES BY COMPLET ING THE ASSESSMENT U/S 143(3) OF THE ACT ON 22.2.2013 ASSESSING THE INCOME AT RS.39,60,898/ - . ASSESSEE APPEALED BEFORE THE LD.CIT(A), WHO ALSO CONFIRMED THE ACTION OF THE AO AFTER CONSIDERING VARIOUS CONTENTIONS AND SUBMISSIONS OF THE ASS ESSEE WHICH HAS BEEN INCORPORATED IN PARA 6 AND 7 OF THE APPELLATE ORDER BY OBSERVING AND HOLDING AS UNDER : I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, FINDINGS OF THE AO IN THE ASSESSMENT ORDER, SUBMISSIONS OF THE LD AR AND MATERIAL PLACED ON REC ORD. FROM THE FACTS OF THE CASE, IT IS NOTICED THAT THE UNSECURED LOAN, UNDER DISPUTE WERE BORROWED IN THE F YR 2003 - 04 AND THE SAME REMAIN PAYABLE EVEN AFTER LAPSE OF MORE THAN 6 YEARS. IT IS FURTHER NOTICED THAT TILL THE DATE OF FINALIZATION OF APPELLANT PROCEEDINGS, I.E. 28TH DECEMBER 2015, THE SAME HAVE NOT BEEN REPAID. DURING THE COURSE OF APPELLANT PROCEEDINGS, THE LD AR WAS REQUESTED TO FURNISH DOCUMENTS/ CORRESPONDENCE , IF ANY IN CONNECTION WITH THE BORROWINGS OF ABOVE LOANS VIZ - A - VIZ FOLLOW OF REC OVERY OF LOANS BY THESE CREDITORS OR THEIR FAMILY MEMBERS, FROM T HE APPELLANT, WHICH CAN PROVE THE GENUINENESS OF APPELLANT'S CLAIM. IN COMPLIANCE, THE STAND THE LD AR, REMAIN THE SAME, AS HAD BEEN TAKEN BEFORE THE A.O., THEREFORE, HE DID NOT FILE ANY DETA ILS IN SUPPORT OF ABOVE CLAIM. HOWEVER, VIDE ORDER SHEET NOTING DATED 28.12.2015, IT IS REQUESTED THAT THE ABOVE LOANS, CAN BE ADDED AS UNEXPLAINED LOAN, ONLY IN THE YEAR OF RECEI PT THAT IS F YR 2003 - 04 AND NOT IN THE YEAR OF APPEAL, I.E. F YR 2009 - 10, AS PER THE PROVISIONS OF SEC 68 OF THE ACT. IT IS FURTHER INFORMED BY THE LD AR, THAT THE CREDITORS ARE NOT TRACEABLE TILL DATE, EVEN BY THE ECONOMIC OFFENCE WING, CRIME BRANCH, CID, MUMBAI, THEREFORE, IT IS NOT POSSIBLE FOR THE APPELLANT TO FURNISH ANY DOCUM ENTARY EVIDENCE, IN SUPPORT OF HIS ABOVE CLAIM IN THE ASSESSMENT ORDER, ON ACCOUNT OF THESE FACTS, THE AO HAS TREATED THE ABOVE UNEXPLAIN ED LIABILITY AS TAXABLE INCOME OF THE APPELLANT, UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. IN THIS CASE, IT IS CLEAR THAT THE APPELLANT HAS SQUARELY FAILED TO ESTABLISH THE GENUINENESS OF THE LIABILITY BY FURNISHING THE REQUIRED DETAILS, AS PER PROVISIONS OF THE ACT; THEREFORE, THE SAME REMAIN UNEXPLAINED, 4 ITA NO. 1068 /MUM/201 6 WITHIN THE MEANING OF PROVISIONS OF THE ACT. THE PROVISIONS OF SUB - S EC IV TO SECTION 28 OF THE ACT, PROVIDED THAT ANY BENEFIT, DERIVED BY THE ASSESSEE, IS LIABLE TO BE ASSESSED AS INCOME OF THE YEAR IN WHICH IT IS ESTABLISHED THAT THE SAME HAS ACCRUED TO THE ASSESSEE. IN THIS YEAR, THE AO HAS PROVED THE FACT THAT THE ABOVE LIABILITIES IS NOT AT ALL GENUINE AND EVEN THE BANK HAS REFUSED TO CERTIFY THE KYC OF THESE CREDITORS AS THEY H AVE NEVER MAINTAINED ANY BANK ACCOUNT WITH THAT BANK, THEREFORE, THE IDENTITY OF CREDITORS COULD NOT BE ESTABLISHED. EVEN, IF THE CREDITOR S ARE NOT TRACEABLE, THEIR RESIDENTIAL ADDRESSES COULD HAVE BEEN FURNISHED BY THE APPELLANT, TO ESTABLISH THE GENUINENESS OF THE CREDITORS. SECOND LY THE FAMILY MEMBERS OF THE CREDITORS WOULD HAVE ALSO FOLLOWED UP FOR RECOVERY OF THESE LOA NS BUT THIS IS NO T THE CASE IN HIS CASE. SECONDLY, THE APPELLANT HAD NOT PAID ANY INTEREST TO ANY PARTY, IN ANY YEARS TILL DATE I.E. IN 11 YEARS. THUS THE APPELLANT HAS SQUARELY FAILED TO ESTABL ISH THE GENUINENESS OF THE CREDITORS AS WELL GENUINENESS OF THE TRANSACTIONS / LIABILITY / REFLECTED IN THE BALANCE SHEET. FROM THESE FACTS, IT APPEARS THAT THE APPELLANT HAD INTRODUCED HIS OWN UNDISCLOSED TAXABLE INCOME, UNDER THE GARB OF UNSECURED LOAN, IN THE NAME OF PERSONS, WH OSE . KYC COULD NOT BE ESTABLISHED. THEREFORE, THESE LIABILITIES CEASED TO EXIST, IN THE EYE OF LAW AS THE CREDITORS COULD NOT BE LOCATED BY THE APPELLANT AND THE APPELLANT HAD GAINED THE BE NEFIT AS PER PROVISIONS OF SECTION 28(IV) OF THE ACT. CONSIDERING THE FACTS , AS DISCUSSED ABOVE, IN MY CONSIDERED OP INION, THE GENUINENESS OF LIABILITY OF RS.17,89,218/ - COULD NOT BE ESTABLISHED BY THE APPELLANT, THEREFORE, THE ADDITION MADE BY THE AO, IS HEREBY, SUSTAINED 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE MATERIAL P LACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS RAISED A SUM OF RS.17,89,218/ - FROM THREE PARTIES IN THE FINANCIAL YEAR 2003 - 04 WHICH COULD NOT CONFIRMED BEFORE THE AO DURING THE ASSESSMENT PROCE EDINGS PRIMARILY FOR THE REASONS THAT THE LENDERS/ PARTIES WERE ABSCONDING 5 ITA NO. 1068 /MUM/201 6 FOLLOWING A POLICE COMPLAINT FILED AGAINST THE M WITH ECONOMIC OFFENCE WING, CRIME BRANCH, CID, MUMBAI. WE ALSO FIND THAT DURING THE ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2005 - 06 IN WHICH ASSESSMENT WAS FRAMED U/S 143(3) R.W.S.147 OF THE ACT THE SE LOANS WERE ACCEPTED BY THE DEPARTMENT AS GENUINE AND EVEN IN THE CURRENT YEAR AS ON 31.3.2010 THE SAID AMOUNT S HAVE BEEN SHOWN AS OUTSTANDING IN THE BALANCE SHEET OF THE ASSES SEE. WE FIND MERIT IN THE ARGUMENTS OF LD.AR THAT THE LOAN S WHICH WERE ACCEPTED BY THE DEPARTMENT AS GENUINE IN THE EARLIER YEARS COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE MERELY ON THE GROUND THAT THE LIABILITY ON ACCOUNT OF THESE LOANS HA VE CEASE D TO BE POYABLE UNILATERALLY. THE LD. CIT(A) HAS GONE ONE STEP AHEAD BY HOLDING THAT THE ASSESSEE HAS GAINED THE BENEFIT UNDER THE PROVISIONS OF SECTION 28(IV) OF THE ACT. THE LD. C IT(A) ALSO OBSERVED THAT THE ASSESSEE HAS SQUARELY FAILED TO ESTABLISH THE GENUINENESS OF THE CREDITORS A S WELL AS GENUINENESS OF THE TRANSACTIONS/LIABILITY/REFLECTED IN THE BALANCE SHEET AND T HE ASSESSEE HAS INTRODUCED HIS OWN UNDISCLOSED TAXABLE INCOME UNDER THE GARB OF UNSECURED LOAN, IN THE NAME OF THOSE PERSONS, WHOSE K Y C COULD NOT BE ESTABLISHED. THE VIEW OF THE LD.CIT(A) IS IN CONTRADICTION TO THE STAND TAKEN BY THE REVENUE IN THE EARLIER ASSESSMENT YEARS IN WHICH THE LOAN S WERE DULY VERIFIED AND ACCEPTED BY THE REVENUE . WE ARE NOT IN 6 ITA NO. 1068 /MUM/201 6 CONCURRENCE WITH THE FINDIN GS OF THE LD.CIT(A). IN OUR CONSIDERED VIEW, THE SAID LOAN S COULD NOT BE ADDED EITHER ON ACCOUNT OF LIABILITY BEING CEASED AS HAS BEEN DONE BY THE AO OR U/S 28(IV) OF THE ACT AS BENEFIT ACCRUING TO THE ASSESSEE BY THE LD.CIT(A). IN OUR OPINION, THE ORD ER OF THE LD.CIT(A) IS NOT CORRECT AND HIS BEING HEREBY REVERSED. THE AO IS DIRECTED TO DELETE THE ADDITION ACCORDINGLY . 5 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH AUG , 2017. S D SD ( MAHAV IR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 8 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI