JCIT (OSD), Panvel Circla, Panvel V. M/s. Ganga Associates, Raigad

ITA 1123/PUN/2019

AI Insights

The case involves M/s. Ganga Associates, a partnership firm engaged in the business of construction, which filed an appeal against the order of the Commissioner of Income Tax (Appeals)-2, Pune. The firm had declared an income and had substantial unsecured loans, the genuineness of which was questioned during the assessment. The Assessing Officer (A.O.) made additions to the income on account of unexplained cash credits from certain loan creditors after finding that notices to these creditors were unserved and their offices were either closed or had false addresses. The CIT(A) initially allowed the appeal of the assessee based on documents provided during remand proceedings, but the Tribunal found that the CIT(A) did not independently verify the facts concerning the loan creditors.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 124332 (ITAT-PUNE)
• Duration Of Justice: 20 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-11-2022
• Assessment Year: misc
• Appeal Filed On: 18-02-2002
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Set aside
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No. 1123/PUN/2019 : A.Y. 2014-15 Jt. C.I.T. (OSD) Panvel Circle, Panvel Appellant Vs. M/s. Ganga Associates, C-6, 04, Near Abhyudaya Bank, Sector 18, New Panvel, Dist. Raigad – 410 206 PAN: AAKEG 4858 L Respondent Appellant by : Shri Rajesh Shah Respondent by : Shri Ramnath P. Murkunde Date of Hearing : 24-11-2022 Date of Pronouncement : 25-11-2022 ORDER PER PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER This appeal preferred by the Revenue emanates from order of the ld. Commissioner of Income Tax (Appeals)-2, Pune dated 02-04-2019 for A.Y. 2014-15 as per the grounds of appeal on record. 2. Parties heard and the case is adjudicated on merits. 3. The relevant facts are that the assessee is a partnership firm engaged in the business as builders and developers. During the year under consideration, the assessee constructed a project called as “Ganga Regency”. The return of income declaring income of Rs.1,43,50,470/- was filed by the assessee on 30- 09-2014. The assessee had earned profit at Rs. 1,43,50,470/- against closing stock at Rs. 7,50,64,715. The case was selected for scrutiny through CASS. During the assessment proceedings, it was observed that the assessee had raised unsecured loans amounting to Rs. 2,13,62,500/- and interest paid on the said loans at Rs. 8,41,376/- as under: 2 ITA No. 1123/PUN/2019 Ganga Associates A.Y. 2014-15 Sr.No. Name of the party Loan amount (including interest) Interest paid 1. M/s. Frontline Diamond Pvt. Ltd. 15,00,000 1,24,274 2. M/s. Krishnaraj Diamond Pvt. Ltd. 45,00,000 1,29,534 3. M.s, Yashoda Gems Pvt. Ltd. 35,00,000 1,07,199 4. M/s. Rajat Diamond Exim Pvt. Ltd. 22,00,000 1,32,164 5. M/s. Siddeshwar Infra Pvt.Ltd. 30,00,000 2,06,137 6. M/s. Rohit Diagem Pvt. Ltd. 20,00,000 43,397 7. Ganga Homes (loan a/c) 16,58,000 - 8. M/s. Kamdhenu Dimantarie & Jewellers 10,00,000 56,548 9. Tararam Choudhary (Loan a/c) 10,00,000 10,000 10. Tejaram V. Choudhary HUF 10,04,500 32,123 4. During the assessment proceedings, the ld. A.O issued notices u/s 133(6) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) calling for confirmations along with supporting evidences to the said unsecured lenders. Though the confirmations were received from local parties (Sr. No. 7 to 10), but the notices sent to the lenders from Surat at Sr. No. 1 to 6 were returned unserved. The ld. A.O then issued Commission to the ADIT (Inv.) Surat to examine the identity, credit worthiness and genuineness of these lenders. In response to this Commission the ADIT (Inv.) Surat replied that notices issued were unserved as the Offices were either closed or addressed were false. Hence the assessment u/s 143(3) of the Act was completed on 26- 12-2016 assessing total income at Rs. 3,17,93,175/- by making an addition of Rs. 1,67,00,000/- on account of unexplained cash credits from the parties at Sr. No. 1 to 6 above by disallowing interest paid thereon. 5. When the matter travelled upto the ld. CIT(A), a Remand Report was called for from the ld. A.O. dated 13-02-2019 which forms part of the ld. CIT(A)‟s order. During these remand proceedings, the ld. A.R of the assessee submitted various documents such as PAN, address proof, copies of bank statements and copy of return of income along with P & L a/c and balance sheet in order to prove the identity, genuineness and creditworthiness of the 3 ITA No. 1123/PUN/2019 Ganga Associates A.Y. 2014-15 loan creditors. The ld. CIT(A) based on the said Remand Report allowed the appeal of the assessee. 6. We have heard the parties, considered the facts and circumstances in this case and perused the relevant materials on record. That, from the order of the ld. A.O., it is clearly evident that notices issued u/s 133(6) of the Act were issued calling for confirmations along with supporting evidences to the loan creditors. It is also evident that the lenders from Surat i.e. Sr. No. 1 to 6 in the list mentioned in the preceding para of this order were returned unserved. Thereafter, the A.O had issued Commission to the ADIT (Inv.) Surat to examine the identity, credit worthiness and genuineness of these loan creditors. There is a categorical finding given by the ADIT (Inv.) Surat saying that notices issued remained unserved on these loan creditors as the Offices were either closed or addresses were false. The ld. CIT(A) has not dealt with these facts in his order. He has simply relied on the remand report where some documents were submitted such as PAN, address proof, copies of assessment orders, etc.,but the fact remains with regard to the loan creditors at Sr. No. 1 to 6 appearing in the above mentioned list, whatever addresses were provided, those addresses were reported to be false addresses and the identity of these loan creditors has not been ascertained by the ld. CIT(A) before giving relief to the assessee. We have perused the findings of the ld. CIT(A) and he has not given a finding on an independent application of mind, his power being co-terminus with that of the ld. A.O., the ld. CIT(A) has failed to carry on an independent examination of facts and verification of the said loan creditors regarding whose whereabouts were not found even by the ADIT (Inv.) Surat. We are of the considered view that the ld. CIT(A) has given a mechanical finding which is not appropriate in administration of justice. Even the ld. A.R could not establish the identity, creditworthiness and genuineness of these loan creditors through any evidences or materials at the time of hearing before this Bench. We therefore, 4 ITA No. 1123/PUN/2019 Ganga Associates A.Y. 2014-15 set aside the order of the ld. CIT(A) and remand the matter back to his file for detailed factual verification as to those loan creditors appearing at Sr. No. 1 to 6 of the list from Surat and other factual matters and then decide the issue as per law complying with principles of natural justice. The grounds of appeal raised by the Revenue are allowed for statistical purposes. 7. In the result, appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open Court on this 25 th day of November, 2022 Sd/- sd/- (INTURI RAM RAO) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Pune; Dated, the 25 th November 2022 Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT 2 Pune 4. The CIT(A)-2 Pune 5. D.R. ITAT „A‟ Bench 5. Guard File BY ORDER, Sr. Private Secretary ITAT, Pune. /// TRUE COPY /// 5 ITA No. 1123/PUN/2019 Ganga Associates A.Y. 2014-15 1 Draft dictated on 24-11-2022 Sr.PS/PS 2 Draft placed before author 24-11-2022 Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order