ITO, Chandigarh V. Sh. Rajesh Gulati, Chandigarh

ITA 1129/CHANDI/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8507 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-08-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Gift
• Section: 56(2); 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1129/CHD/2009 ASSESSMENT YEAR: 2006-07 THE ITO, WARD 3(4), VS. SHRI RAJESH GULATI, CHANDIGARH CHANDIGARH PAN NO. ADOPG2718E (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JAI SHREE SHARMA RESPONDENT BY: SHRI TEJ MOHAN SINGH ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A), CHANDIGARH DATED 25.9.2009 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143 (3) OF THE I.T. ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPELLATE- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 14,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT RECEIPT OF LOANS WITHOUT ADEQUAT E CONSIDERATION. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T THE DELETION OF ADDITION MADE TOTALING RS. 14 LACS. THE ASSESSEE DU RING THE YEAR UNDER 2 CONSIDERATION HAD RECEIVED INTEREST FREE UNSECURED LOANS OF RS. 4 LACS FROM SHRI LAKHWINDER SINGH KANG AND RS. 10 LACS FRO M SHRI KESAR SINGH. 4. THE CLAIM OF THE ASSESSEE BEFORE THE ASSESSING O FFICER WAS THAT THE AMOUNTS WERE RECEIVED INTEREST FREE FROM THE SAID PARTIES AND HAD BEEN REPAID TO BE ABOVE PERSONS DURING THE FINANCIAL YEA R 2008-09 AND HENCE THE PROVISIONS OF SECTION 56(2) (V) OF THE INCOME T AX ACT WERE NOT APPLICABLE. THE ASSESSING OFFICER OBSERVED THAT TH E SAID AMOUNTS WERE BORROWED ON 31.3.2006 AND NO INTEREST WAS PAID OR C REDITED IN THE ACCOUNT OF THE LENDERS AND HENCE THE AMOUNT WAS HELD TO HAV E BEEN RECEIVED WITHOUT CONSIDERATION AND ADDITION OF RS. 14 LACS W AS MADE UNDER THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT. THE CIT (A) NOTED THAT THE ASSESSEE HAVE REPAID THE LOAN OF RS. 10 LACS RECEIV ED FROM SHRI KESAR SINGH EVIDENCING WHICH THE ASSESSEE HAS FILED A COP Y OF THE DEMAND DRAFT AND ALSO THE BANK STATEMENT. THE ASSESSEE ALSO PRO VED THE SOURCE OF ADVANCING OF RS. 10 LACS IN THE HANDS OF SHRI KESAR SINGH. THE CIT(A) ALSO NOTED THE ASSESSEE TO HAVE FILED CONFIRMATION OF SHRI LAKHINDER SINGH KANG REGARDING PAYMENT OF LOAN OF RS. 4 LACS VIDE C HEQUE DRAWN ON PUNJAB & SIND BANK. THE SAID LOAN WAS REPAID BY THE ASSESSEE VIDE CHEQUE DATED 18.12.2008 DRAWN ON PUNJAB NATIONAL BA NK. SHRI LAKHWINDER SINGH KANG WAS ASSESSED TO TAX. THE CIT (A) IN TURN RELYING ON THE RATIO LAID DOWN BY THE MUMBAI BENCH OF THE T RIBUNAL IN CHANDERKANT H. SHAH [19 DTR (MUM) TRI 241], DELETED THE ADDITION OF RS. 14 LACS. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT(A). 5. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE IN THE PRESENT APPEAL STANDS COVERED BY THE DIFFERENT ORDE RS OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SARA NPAL SINGH, HUF IN 3 ITA 692/CHD/2009 AND IN ITO VS. MS MEENA IN ITA NO . 174/CHD/2010. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ISSUE RAISED IN THE PRESENT APPEAL IS IN RELATION T O THE INVOKING OF THE PROVISIONS OF SECTION 56 (2) (V) OF THE INCOME TAX ACT IN CONNECTION WITH UNSECURED LOANS RECEIVED TOTALING RS. 14 LACS BY TH E ASSESSEE DURING THE ACCOUNTING PERIOD. WE FIND THAT THE ISSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN ACIT VS. SHRI SARANPAL SINGH, HUF ( SUPRA) AND ITO VS. MS MEENA (SUPRA). THE TRIBUNAL IN ITO VS. MS MEE NA (SUPRA) HAD IN TURN RELIED ON THE ORDER IN SMT. KANTA RANA VS. ITO (ITA NO. 517/CHD/2010 RELATING TO ASSESSMENT YEAR 2006-07 ORDER DATED 18.6.2010), HELD AS UNDER:- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ONLY ISSUE ARISING IN THE PRESENT APP EAL IS AGAINST THE ADDITION OF RS.10,20,000/- U/S 56(2) (V ) OF THE ACT. WE FIND THAT ISSUE OF ADVANCEMENT OF INTEREST FREE LOAN AND ITS TREATMENT U/S 56(2)(V) OF THE ACT WAS DECIDED BY TH E TRIBUNAL IN ACIT VS. SHRI SARANPAL SINGH HUF (ITA NO. 697/CH D/2009- ASSESSMENT YEAR 2006-07) VIDE ORDER DATED 9.9.2009, IN TURN FOLLOWING THE RATIO LAID DOWN BY MUMBAI BENCH OF TR IBUNAL IN CHANDERKANT H.SHAH [19 DTR 241 (MUM)] WHEREIN IT WA S HELD THAT FROM THE AFORESAID IT IS EVIDENT THAT THE TRI BUNAL NOTICED THE INTENTION BEHIND THE INSERTION OF SECTION 56(2) (V) OF THE ACT AND IN THIS CONTEXT, IT HAS BEEN INFERRED THAT SUCH PROVISION SEEKS TO BRING TO TAX CASES OF BOGUS GIFTS IT HAS, THEREAFTER CONCLUDED THAT LOANS ARE NOT COVERED WITH THE PROVI SIONS OF SECTION 56(2)(V ) OF THE ACT. 7. IT WAS FURTHER HELD AS UNDER:- .. IN OUR CONSIDERED OPINION, THE FACTUM OF THE ASSESSEE BEING LIABLE TO REPAY THE IMPUGNED UNSECU RED LOAN, IMPLIES THE SAME WITH CHARACTERISTICS OF A LIABILITY . M ERELY BECAUSE THE AMOUNT OF LOAN HAS BEEN RAISED WITHOUT INVOLVING PAYMENT OF INTEREST, CANNO T BE SEEN TO HAVE VESTED THE IMPUGNED AMOUNT WITH CHARACTERISTICS OF AN INCOME, WITHIN THE MEANING OF SECTION 56(2)(V) OF THE ACT. THE EXISTENCE OF EXPRE SSION WITHOUT CONSIDERATION IN SECTION 56(2)(V) CANNOT 4 DISTRACT FROM THE FACT THAT IN THE IMPUGNED CASE, T HE SUM OF MONEY RECEIVED IN QUESTION CARRIED A LIABILI TY OF ITS REPAYMENT AND THE SAME WAS NOT RECEIVED BY T HE ASSESSEE WITH AN ABSOLUTE UNFETTERED RIGHT OF POSSESSION. THEREFORE, IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE FIND NO JUSTIFICATION TO UPHOLD THE STAND OF THE ASSESSING OFFICER AND THE CIT(A) WAS JUSTIFIED IN DELETING TH E IMPUGNED ADDITION. ACCORDINGLY, THE CONCLUSION OF THE CIT(A) IS CONFIRMED. 8. THE TRIBUNAL IN PRINCIPLE LAID DOWN THE PROPOSIT ION THAT THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT SEEKS TO BRING TO TAX THE CASES OF BOGUS GIFTS AND DOES NOT COVER WITHIN ITS PROVISIONS THE LOANS RAISED. IN THE FAC TS OF THE PRESENT CASE BEFORE US, THE ASSESSEE CLAIMS TO HAVE RECEIVED LOANS FROM THE AFORESAID PARTIES TOTALING RS. 10,20 ,000/-. THE SAID LOANS WERE RECEIVED WITH PROMISSORY NOTES, DU LY EXECUTED IN EACH CASE WITH PROVISION OF INTEREST TO BE PAID ON THE ABOVE SAID AMOUNTS. THE CLAIM OF THE ASSESSEE W AS REJECTED BY THE ASSESSING OFFICER AS THE ASSESSEE H AD NOT PAID ANY INTEREST ON THE ABOVESAID LOANS EITHER DUR ING THE YEAR UNDER CONSIDERATION OR IN THE SUBSEQUENT YEARS . THE SAID AMOUNTS WERE PAYABLE TILL THE CLOSE OF THE ASS ESSMENT PROCEEDINGS. BEFORE THE CIT(A) THE ASSESSEE IN OR DER TO JUSTIFY ITS CLAIM MADE AN EFFORT TO REPAY PART OF T HE LOAN AMOUNT TO TWO OF THE LOAN CREDITOR/S BY ISSUING CHE QUES OF RS. 1.50 LACS AND RS. 2 LACS FAVOURING MR. AMIT RAJ AND M/S GATHA INTERNATIONAL RESPECTIVELY, WHICH WERE CLEAR ED AFTER DEPOSIT OF CASH IN THE ACCOUNT OF THE ASSESSEE. H OWEVER, THE MODE OF REPAYMENT DOES NOT FIND FAVOUR WITH THE CIT (A) AS ACCORDING TO HIM THE SAID AMOUNTS WERE NEVER INTEND ED TO BE LOANS. WE ARE NOT IN CONFORMITY WITH THE FINDING OF CIT(A) AS NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE RE VENUE AUTHORITIES TO PROVE THE CONTRARY. THE STAND OF TH E ASSESSEE BEFORE THE AUTHORITIES WAS THAT IT HAD RECEIVED THE ABOVE SAID LOANS AMOUNTING TO RS. 10,20,000/- FOR THE PURPOSE OF INVESTING IN THE PURCHASE OF PLOT. THE CONFIRMATIO N OF THE SAID LOANS WAS EVIDENCED BY THE PROMISSORY NOTES EX ECUTED BY THE RESPECTIVE PARTIES, EVIDENCE OF WHICH WAS FU RNISHED ON RECORD AND HAS BEEN COMMENTED UPON BY THE LOWER AUTHORITIES. THE PARTIES HAVE CONFIRMED TO HAVE A DVANCED LOANS AND THERE IS NO EVIDENCE BROUGHT ON RECORD TO PROVE THE CONTRARY. ADMITTEDLY, THERE IS NO DISPUTE REG ARDING THE NATURE AND SOURCE OF THE IMPUGNED UNSECURED LOANS. THE TRIBUNAL IN ACIT VS. SHRI SARANPAL SINGH HUF, (SUP RA) HAD LAID DOWN THE PROPOSITION THAT THE PROVISIONS OF SE CTION 56(2)(V ) OF THE ACT ARE APPLICABLE TO BOGUS GIFTS AND LOANS ARE NOT COVERED UNDER THE AFORESAID SECTIONS. IN T HE FACTS AND CIRCUMSTANCES OF THE CASE AND APPLYING THE RATI O LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL IN ACI T VS. SHRI SARANPAL SINGH HUF (SUPRA), WE HOLD THAT THE L OANS RAISED BY THE ASSESSEE ARE NOT COVERED UNDER THE PR OVISIONS OF SECTION 56(2)(V) OF THE INCOME TAX ACT. THE AS SESSEE HAS 5 FURTHER FURNISHED EVIDENCE TO HAVE REPAID PART OF THE LOANS RAISED, DURING THE COURSE OF APPELLATE PROCEEDINGS AND THERE IS NO MERIT IN THE ORDER OF CIT(A) IN HOLDING THE S AME TO BE AN AFTER THOUGHT IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY. ACCORDINGLY, WE DIRECT THE ASSESSING OFF ICER TO DELETE THE ADDITION OF RS. 10,20,000/- MADE ON THIS ACCOUNT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE TH US ALLOWED. 7. IN THE FACTS OF THE PRESENT CASE THE ASSESSEE DURING THE YEAR UNDER APPEAL HAD RECEIVED RS. 10 LACS FORM SHRI KESAR SIN GH AND RS. 4 LACS FORM SHRI LAKHINWINDER PAL KANG. THE SAID LOAN WAS RECEIVED VIDE CHEQUES DRAWN ON THE SEPARATE ACCOUNTS OF THE LENDE R AND THE NECESSARY CONFIRMATIONS IN THAT REGARD WERE FURNISHED ON RECO RD. THE SOURCE OF RS. 10 LACS RECEIVED FROM SHRI KESAR SINGH WAS EXPLAIN ED TO BE OUT OF SALE PROCEEDS OF AGRICULTURAL LAND AND THE ASSESSEE HAD FURNISHED THE COPY OF THE BANK STATEMENT OF THE LENDER. THE SUM OF RS. 4 LACS WAS RECEIVED FROM SHRI LAKHINDER SINGH KANG AND THE INCOME TAX PARTICULARS OF THE SAID PERSON WERE FILED ON RECORD BY THE ASSESSEE. BOTH THE SAID LOANS WERE REPAID VIDE CHEQUES BY THE ASSESSEE DURING THE FINANCIAL YEAR 2008- 09. THE LEARNED DR FOR THE REVENUE HAS FAILED TO CONTROVERT THE FINDINGS OF THE CIT(A) IN THIS REGARD. ACCORDINGLY, WE ARE IN CONFORMITY WITH THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS . 14 LACS. WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS _____DAY OF AUGUST, 2010. (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : AUGUST, 2010 6 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR