Pramod Kumar Agarwalla, Angul V. ITO, Angul Ward, Angul

ITA 12/CTK/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5311 (ITAT-CUTTACK)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 09-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BANDYOPADHYAY
• Assessee Lawyers: D K SHETH

Judgement Text

, . . , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH CUTTACK BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER ./ ITA NO. 12 / CTK /20 1 7 ( / ASSESSMENT YEAR : 20 1 2 - 20 1 3 ) PRAMOD KUMAR AGARWALLA, PROP: PRA MOD TRADING CO., SHANKAR CINEMA ROAD, ANGUL - 759122 VS. ITO ANGUL WARD - ANGUL ./ ./ PAN/GIR NO. : A AXPA 8746 Q ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI D.K.SHETH , AR /REVENUE BY : SHRI S.K.BANDYOPADHYAY , DR / DATE OF HEARING : 1 3 / 1 2 /201 7 / DATE OF PRONOUNCEMENT 26 / 12 /201 7 / O R D E R TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 2 , BHUBANESWA R , DATED 22.08.2016 . 2. GROUND NO.1 OF THE APPEAL IS DIRECTED AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF PAYMENT OF INTEREST TO LOAN CREDITORS RS.8,16,618/ - U/S.40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TDS. 3. BRIEF FACTS OF THE CASE ARE T HAT THE AO MADE ADDITION OF RS. 8,16,618/ - BY DISALLOWING INTEREST U/S.40(A)(IA) OF THE ACT FOR NON - DEDUCTION OF TAX AT SOURCE. THE AO OBSERVED THAT ON GROWING THROUGH THE LEDGER COPY OF UNSECURED LOAN IT WAS FOUND THAT THE AMOUNT OF INTEREST PAID/CREDITED TO THE PAYEE EXCEEDED THE MINIMUM AMOUNT NOT CHARGEABLE TO TAX AND, THEREFORE, HE DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE THAT SINCE THE ASSESSEE HAD COLLECTED FORM NO.15G FOR NON - DEDUCTION OF TAX FROM THE PAYEE, HENCE, NO TDS WAS DEDUCTED FROM THE PAYMENTS OF INTEREST MADE. ACCORDING TO THE AO COLUMN NO.4 OF THE FORM NO.15G READ ITA NO. 12 /CTK/201 7 2 WITH RULE 29C OF THE I.T.RULES, 1962 STIPULATES THAT THE PAYEE SHOULD FURNISH THE DECLARATION THAT THE AGGREGATING AMOUNT OF INCOME WILL NOT EXCEED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO TAX. HENCE, HE HELD THAT THIS FORM CANNOT BE USED BY THE PAYEE IF HIS INCOME FROM THE SOURCES STATED THEREIN ARE EXCEEDING THE TAXABLE LIMIT OF INCOME. IF THE FORM IS USED BY THE PAYEE, IT WILL BE INVALID AND WILL NOT BE ACTED UPON BY THE PAYER. 4. BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) HELD THAT SECTION 40(A)(IA) OF THE ACT PROVIDES THAT ANY INTEREST PAYABLE TO A RESIDENT PERSON ON WHICH TAX IS CHARGEABLE AT SOURCE UNDER CHAPTER XVII - B AND SUCH TAX HAS NOT BEEN DEDUCTED OR AFTER DEDUCTION HAS NOT BEEN PAID ON BEFORE THE DUE DATE OF FILING OF THE RETURN, THE INTEREST AMOUNT IS NOT A DEDUCTIBLE EXPENDITURE AND, HENCE, CONFIRMED THE ORDER OF AO. 5. THE AR OF THE ASSESSEE SUBMITTED THAT ONCE FORM 15G WA S FILED THE ASSESSEE COULD NOT DEDUCT TAX AT SOURCE FROM THE INCOME PAYABLE TO THE PAYEE AND, THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF AO. 6. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. I HAVE HEARD RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED DEDUCTION FOR INTEREST PAYMENT OF RS.8,16,618/ - MADE TO THE LOAN CREDITORS. THE ASSESSEE DID N OT DEDUCT ITA NO. 12 /CTK/201 7 3 TDS FROM THE PAYMENT OF INTEREST. THE ASSESSEE EXPLAINED BEFORE THE AO SINCE FORM NO.15G WAS FILED BY THE RECIPIENT OF INTEREST, THEREFORE, NO TAX WAS DEDUCTED BY THE ASSESSEE. THE AO FOUND THAT IN CASE OF INTEREST PAYMENT TO SRINIWAS AGARWAL (HU F) RS.3,09,456/ - , SHANTI DEVI AGARWAL RS.2,83,466/ - AND SHYAMA AGARWAL RS.2,23,696/ - AGGREGATING TO RS.8,16,618/ - , THE AMOUNT OF INTEREST PAYMENT EXCEED THE TAXABLE LIMIT OF INCOME AND, THEREFORE, FORM 15G COULD NOT HAVE BEEN UTILISED BY THE RECIPIENT OF T HE INCOME. AS NO TDS WAS DEDUCTED FROM THE PAYMENTS MADE, THEREFORE, HE DISALLOWED THE DEDUCTION OF INTEREST EXPENDITURE OF RS.8,16,618/ - . ON APPEAL, THE CIT(A) CONFIRMED THE ACTION OF AO. BEFORE US, NO MATERIAL WAS BROUGHT ON RECORD BY THE AR OF THE ASSES SEE TO SHOW THAT EVEN WHERE INTEREST PAYMENT EXCEEDED THE TAXABLE LIMIT OF INCOME STILL FORM NO.15G COULD BE FILED BY THE RECIPIENT OF INCOME AND ASKING THE ASSESSEE TO NOT TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE TO THEM. FURTHER NO MATERIAL COULD BE BR OUGHT ON RECORD BY THE AR OF THE ASSESSEE TO SHOW THAT THE RECIPIENT OF INTEREST INCOME HAD FILED RETURN OF INCOME AND SHOWN THE AMOUNT OF INTEREST RECEIVED FROM THE ASSESSEE AS THEIR INCOME AND PAID DUE TAXES THEREON. IN ABSENCE OF THE SAME, I FIND NO GOO D REASON TO INTERFERE WITH THE ORDER OF CIT(A), WHICH IS CONFIRMED AND THIS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 8 . GROUND NO.2 IN THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) MAKING ADDITION OF RS.23,00,000/ - U/S.68 OF THE ACT. 9 . BRIEF FACTS OF THE CASE ARE THAT THE AO FOUND THAT THE ASSESSEE CLAIMED TO HAVE RECEIVED LOAN FROM 19 PERSONS AGGREGATING TO ITA NO. 12 /CTK/201 7 4 RS.35,77,200/ - . THE AO ASKED THE ASSESSEE TO FILE CONFIRMATIONS, ACKNOWLEDGEMENTS OF ITR, STATEMENT OF TOTAL INCOME, BANK S TATEMENTS AND BALANCE SHEETS. THEREAFTER, THE ASSESSING OFFICER ANALYSED THE DIFFERENT DOCUMENTS FILED BY THE ASSESSEE . HE FOUND THAT IN CASE OF 9 PERSONS, THERE IS DEPOSIT OF CASH JUST BEFORE THE ISSUE OF CHEQUE. HE ALSO FOUND THAT THE DOCUMENTS SUBMITTED OF THESE ALLEGED LOAN CREDITORS DO NOT PROVE THEIR CAPACITY TO GIVE THE LOANS. THE DETAILS OF PERSONS ARE AS BELOW: - SL.NO. NAME OF THE LENDER AMOUNT 1. ASHA AGARWAL RS.1,50,000/ - 2. ARUN KUMAR AGARWAL RS.2,50,000/ - 3. BIMAL KUMAR AGARWAL(HUF) RS.2,50, 000/ - 4. BHAVANA JETHWA RS.2,00,000/ - 5. BHAVESH B. JETHWA RS.2,00,000/ - 6. FATECHAND AGARWAL RS.2,00,000/ - 7. KAMAL KUMAR AGARWAL(HUF) RS.4,00,000/ - 8. LAXMINARAYAN PATTNAIK RS.2,00,000/ - 9. SUNIL AGARWAL (HUF) RS.2,50,000/ - HE, THEREFORE, HELD TH AT ALLEGED LOAN TRANSACTIONS IN RESPECT OF 9 PERSONS IS NOT GENUINE AS THEY DO NOT HAVE THE CAPACITY TO ADVANCE ALLEGED LOANS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE U/S.68 OF THE ACT. 1 0 . ON APPEAL BEFORE THE CIT(A), THE ASSESSEE SUBMITTED THAT A LL THE PERSONS WERE ASSESSED TO TAX AND AMOUNTS WERE RECEIVED BY THE CHEQUE AND CONFIRMATION LETTERS WERE FILED BY THE SAID CREDITORS. THEREFORE, THE ADDITION MADE BY THE AO BY CITING IRRELEVANT DECISIONS IS IMPROPER, ARBITRARY AND UNJUSTIFIED. IT WAS SUBM ITTED THAT IN THE CASE OF CIT VS. BAISHNAB CHARAN MOHANTY 212 ITR 199, THE HONBLE ORISSA HIGH COURT HELD THAT IF THE ASSESSEE ESTABLISHES ( 1 ) IDENTITY OF THE CREDITOR & (2) GENUINENESS OF THE TRANSACTION THEN THE ONUS SHIFTS TO THE DEPARTMENT TO ITA NO. 12 /CTK/201 7 5 DISPROVE THE SAME. IN THESE CIRCUMSTANCES, THE ADDITION AS MADE IS UNCALLED FOR AN UNJUSTIFIED. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT IN RESPECT OF 9 PERSONS THERE IS DEPOSIT OF CASH IMMEDIATELY BEFORE THE ISSUE OF CHEQUES. FURTHE R AS PER THE BALANCE SHEET AND INCOME TAX RETURN, IN CASE OF ALLEGED LOAN GIVERS, WHOSE DETAILS HAVE BEEN FILED BY THE ASSESSEE DO NOT HAVE THE CAPACITY TO ADVANCE THE LOANS TO THE ASSESSEE. HE RELIED ON THE DECISION OF HONBLE CHHATTISGARH HIGH COURT IN T HE CASE OF KUSHAL PRASAD MANHAR VS. CIT, 52 TAXMANN.COM 335, WHEREIN IT WAS HELD THAT WHERE LOANS HAD BEEN CHANNELLED THROUGH BANK ACCOUNTS BY DEPOSITING CASH IN BANK ACCOUNT AND THEN BY ISSUING ACCOUNT PAYEE CHEQUES IN FAVOUR OF THE ASSESSEE IMMEDIATELY THEREAFTER, LOAN TRANSACTIONS WERE NOT GENUINE. 11 . BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . 12 . I FIND THAT IT IS NOT DISPUTED THAT ALLEGED LOAN TAKEN BY THE ASSESSEE FROM 9 PERSONS OF RS.19 LAKHS THROUGH ACCOUNT PAYEE CHEQUES WAS G IVEN BY THE LOAN CREDITORS BY DEPOSITING CASH IN THE BANK ACCOUNT ARE DAY PRIOR TO THE ISSUANCE OF THE CHEQUES TO THE ASSESSEE. THE AO DOUBTED THE CREDITWORTHINESS OF THE LOAN CREDITORS FOR ADVANCING LOAN TO THE ASSESSEE FOR THE REASON THAT BEFORE ISSUANCE OF CHEQUE TO THE ASSESSEE THE LOAN CREDITORS HAVE DEPOSITED CASH IN HIS ACCOUNT ON A DAY PRIOR TO THE ISSUANCE OF THE CHEQUE. THUS, THE ORDER OF AO WAS CONFIRMED BY THE CIT(A) IN APPEAL. IN THE ABOVE BACKGROUND OF THE CASE, I AM OF THE CONSIDERED VIEW THA T DEPOSITING OF CASH BY LOAN CREDITORS ARE DAY PRIOR TO ITA NO. 12 /CTK/201 7 6 THE ISSUANCE OF CHEQUE TO THE ASSESSEE CAN RAISE A DOUBT ABOUT THE CREDITWORTHINESS OF THE LOAN CREDITOR. IT IS TRITE LAW THAT SUSPICION HOWSOEVER THE CASE CANNOT TAKE PLACE. IT WAS INCUMBENT UPON THE AO TO INVESTIGATE THE MATTER FURTHER AND BRING MATERIAL ON RECORD TO SHOW THAT THE LOAN CREDITORS DID NOT HAVE CASH BALANCE IN HAND ON THE DATE OF DEPOSIT THE CASH IN THE BANK ACCOUNT FOR ISSUANCE OF CHEQUES TO THE ASSESSEE. NO SUCH MATERIAL HAS BEEN BROU GHT ON RECORD BY THE AO. THEREFORE, IN ABSENCE OF THE SAME, THE ADDITION MADE U/S.68 OF THE ACT BY THE AO MERELY ON THE BASIS OF SUSPICION CANNOT BE SUSTAINED IN LAW. MY VIEW FIND SUPPORTS WITH THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF D CIT VS. ROHINI BUILDERS, (2002) 256 ITR 360 (GUJ). I, THEREFORE, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE ADDITION OF RS.19 LAKHS MADE U/S.68 OF THE ACT AND ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 13 . GROUNDS NO. 3,4&5 ARE GENERAL IN N ATURE AND, HENCE, REQUIRE NO FURTHER ADJUDICATION BY ME. 14 . IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 / 12 /201 7 . S D/ - (N. S. SAINI) / ACCOUNTANT MEMBER CUTTACK ; DATED 26 / 12 /201 7 . . / PKM , SENIOR PRIVATE SECRETARY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT - 2. / THE RESPONDENT - 3. ( ) / THE CIT(A), 4. / CIT 5. , , / DR, ITAT, CUTTACK 6. / GUARD FILE. ITA NO. 12 /CTK/201 7 7 / BY ORDER, ( SENIOR PRIVATE SEC RETARY ) , / ITAT, CUTTACK //TRUE COPY//