PATIDAR MILLS, JETPUR V. THE PR. CIT-1, RAJKOT, RAJKOT

ITA 113/RJT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8310 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-02-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 20-04-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Change of opinion
• Section: 68; 263; 143(3); 142(1); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o .1 1 3 /R j t /2 02 3 ( A s se ss m e nt Y e a r : 20 18- 1 9 ) M/ s . Pa ti da r M i ll s, N a v ag ad h St at io n R oa d , N a v a g a dh , J et p u r , G uj ar a t- 36 0 37 0 V s . Pr i ncip al C o m mi s s i one r of In c o me Ta x, Ra j ko t- 1 [ P A N N o . AA K F P9 3 4 7B ] (Appellant) .. (Respondent) Appellant by : Shri Mehul Ranpura, A.R. Respondent by: Shri Shramdeep Sinha, CIT DR D a t e of H ea r i ng 12.02.2024 D a t e of P r o no u n ce me nt 08.03.2024 O R D E R PER SIDDHARTHA NAUTIYAL, JM: This appeal has been filed by the assessee against the order passed by the Ld. Principal Commissioner of Income Tax-1, (in short “Ld. PCIT”), Rajkot vide order dated 27.03.2023 passed for Assessment Year 2018-19. 2. The assessee has taken the following grounds of appeals:- “1. The grounds of appeal mentioned hereunder are without prejudice to one another. 2. The order passed by Pr. Commissioner of Income, Rajkot-1 [hereinafter referred as to the "Pr. CIT"] is bad and illegal and requires to be quashed. 3. Ld. Pr. CIT erred in law and on facts in exercising revisional jurisdiction ignoring the fact that AO made full inquiry and satisfied with the reply/submission of the appellant related to unsecured loans received and accordingly the order passed by Ld. Pr.CIT is required to be quashed and may kindly be quashed. 4. The learned Pr. CIT erred on facts as also in law in alleging that the order under Section. 143(3) is erroneous and prejudicial to the interest of revenue as the AO had not made inquiry and verification in terms of provision of Section 68 of the Act in respect of unsecured loan obtained from (1) Pushti Trust of Rs.10,00,000/-and (2) Sanchit Trust of Rs.10,00,000/- and thereby setting aside the order passed under Section. 143(3) of the Act ITA No.113/Rjt/2023 M/s. Patidar Mills vs. PCIT Asst.Year –2018-19 - 2 - dated 03.02.2021. The order passed under Section 263 of the Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed. 5. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.” 3. The brief facts of the case are that PCIT, on perusal of assessment records noted that the assessee received unsecured loans from 22 persons out of which 02 persons / entities (Pushti Trust and Sanchit Trust) did not have sufficient credit worthiness to give such huge unsecured loan which casted serious doubts on the genuineness of the transactions. In these two cases, the PCIT observed that the bank statements have only two entries of credit and debit of Rs. 10,00,000/- on same date in F.Y. 2017-18. These two entities have received loan from other persons and transferred the same to the assessee and no business or financial activity has been carried out by during the year under consideration by the alleged entities. Further, there are no other entries in the bank statements of these two entities advancing the loans to the assessee. The impugned transactions do not prove the credit worthiness and genuineness of the loan providers. The total amount of such unsecured loans with the assessee from these 02 persons comes to Rs. 20,00,000/-. The PCIT observed that during the course of assessment proceedings, assessee has only submitted bank statement of depositors which contains only a few transactions wherein both Trust has received Rs 10,00,000/- from - Navinchandra Dayalal Patel and Subhashchandra Dayalal Patel HUF respectively and such funds were transferred to assessee. The Assessee has not submitted annual accounts and sources of such credit in the hands of depositors Pushti Trust and Sanchit Trust. Thus, creditworthiness and genuineness of transactions are found to be doubtful and while passing the assessment order, the Assessing Officer has not made any inquiries on this issue which makes assessment order to be erroneous and prejudicial to interest of revenue. The PCIT further observed that during ITA No.113/Rjt/2023 M/s. Patidar Mills vs. PCIT Asst.Year –2018-19 - 3 - the 263 proceedings, assessee has submitted return of income filed by Navinchandra Dayalal Patel and Subhash Chandra Dayalal Patel HUF who had given advances to above referred Trusts and such Trusts have given advances to assessee firm. The PCIT noted that assessee is paying interest expenditure of Rs. 9,97,478/- from loan taken from Pushti Trust and same is gross total income of such Trust. When Pushti Trust has received Rs. 10,00,000/- from Navinchandra Dayalal Patel he is not charging any interest. When bank account of depositors only show two or three entries and there is no significant bank balance in their hands, AO ought to have verified genuineness and creditworthiness of such depositors. Accordingly, the PCIT held that the assessment order is erroneous and prejudicial to the interests of the Revenue in light of the above observations. 4. The assessee is in appeal before us against the order passed by PCIT. The Ld. Counsel for the assessee submitted before us that facts relating to all the issues raised in the notice under Section 263 supra have been have been verified in detail by the AO during the course of assessment proceedings and as such any modification thereto would tantamount to change of opinion which is not permitted under the Act. The records reveal that the AO vide annexure to notice under Section 142(1) dated 23.11.2020 had called for the various details inter alia include the details of unsecured loans at para 3 of the annexure in prescribed format. The assessee in turn vide para 3.1 of its letter dated 16.01.2021 has furnished the said details in the format required by the Ld. Assessing Officer. The Ld. Counsel for the assessee submitted that from the copies of accounts it is evident that Pusti Trust and Sanchit Trust are having opening credit balance of Rs. 49.80 lakhs and Rs. 49.37 lakhs respectively. Further unsecured loans from Pusti Trust and Sanchit Trust to the assessee are ITA No.113/Rjt/2023 M/s. Patidar Mills vs. PCIT Asst.Year –2018-19 - 4 - supported by their PAN, return of income and bank statement, which were submitted again before PCIT during the course of 263 proceedings. It can also be perused from bank statements of Pusti Trust and Sanchit Trust that names of persons from whom they have received funds are duly reflected therein. It may be seen that Pushti Trust have received Rs. 10,00,000/- from Shri Navinchandra Dayalal Patel and Sanchit Trust have received Rs. 10,00,000/- from Shri Subhashchandra Dayalal Patel. Further, these two persons (Shri Navinchandra Dayalal Patel and Shri Subhashchandra Dayalal Patel) have given unsecured loans to the assessee during previous year under consideration and their details were also filed before the Ld. Assessing Officer. Thus, source of the source though not required to be looked into in the hands of depositors, has also established by the assessee during the course of assessment proceedings. In addition to the above, the assessee also submitted the following details with the PCIT during the course of 263 proceedings to again establish the creditworthiness of the depositors: • Copy of ledger of Pusti Trust in the books of Sri Navinchandra Patel, ROl and balance sheet as at. 31.03.2018 of Navinchabdra Patel who had advanced an amount of Rs. 10,00,000/- to the said trust on 22.08.2017 • Copy of ledger of Sanchit Trust in the books of Sri Subhash D. Patel HUF, ROI and balance sheet as at 31.03.2018 of Sri Subhash D. Patel who had advanced an amount of Rs. 10,00,000/- to the said trust on 22.08.2017. • Copy of ledger of Pushti Trust in the books of the assessee, ROI and balance sheet as at 31.03.2018 of Pushti Trust (who had advanced an amount of Rs. 10,00,000/- to the assessee firm. ITA No.113/Rjt/2023 M/s. Patidar Mills vs. PCIT Asst.Year –2018-19 - 5 - • Copy of ledger of Sanchit Trust in the books of the assessee, ROI and balance sheet as at 31.03.2018 of Sanchit Trust who had advanced an amount of Rs. 10,00,000/- to the assessee firm. 5. Therefore, it was submitted that it may observed from the above that credit of Rs. 10,00,000/- appearing in the bank statement of Pushti Trust in the name of Shri Navinchandra Dayalal Patel, is a person of sound means and has disclosed an income of more than Rs. 10 lakhs in his return of income and the deposits also reflect in his balance sheet. Similarly, credit of Rs. 10,00,000/- appearing in the bank statement of Sanchit Trust in the name of Shri Subhashchandra Dayalal Patel HUF is also an assessee of sound means and has disclosed an income of more than Rs. 10 lakhs in its return of income and the deposits reflect in its balance sheet. 6. Accordingly, since adequate evidence was placed on record both during the course of assessment proceedings as well as 263 proceedings to prove the creditworthiness of the depositors coupled with the fact that the issue was examined in detail during the course of assessment proceedings, this is not a fit case for setting aside the assessment order under Section 263 of the Act. 7. In response, DR submitted that from the facts placed on record, it is evident that it is only a circular movement of funds which is happening in this case and therefore, the genuineness of the transactions under serious doubt. 8. On going through the instant facts, we are of the considered view that the assessee has been able to establish the source of funds in the hands of the depositors. The details of bank accounts of depositors, their return of income, their ledger accounts with the assessee, have all been furnished by the assessee both during the course of assessment proceedings as well as during the course ITA No.113/Rjt/2023 M/s. Patidar Mills vs. PCIT Asst.Year –2018-19 - 6 - of 263 proceedings before the PCIT. In addition to that, the assessee has also filed details of the source of funds in the hands of the depositors as well, including the name of the persons advancing money to the deposits, their returns of income, their PAN numbers etc. Further, the assessee has also established before us that details of the depositors were called for during the course of assessment proceedings and the same were also furnished before the assessing officer. Further, these details were again furnished before the PCIT during the course of 263 proceedings. Accordingly, in our view, this is not a fit case for setting aside assessment order on the ground that it is erroneous and prejudicial to the interest of the Revenue, looking into the instant facts which have been placed on record before us. 9. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 08/03/2024 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 08/03/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot