Shri Chirag H. Shah, HUF, Ahmedabad V. The ITO, (OSD), Range-9, Presently Ward-5(3)(1), Ahmedabad

ITA 1256/AHD/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2078 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bogus Share capital; Salary income; Additional evidence; Corroborative evidences; Third party statement
• Section: 68; 201; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH Before: Ms. Annapurna Gupta, Accountant Member And Shri TR Senthil Kumar, Judicial Member Chirag H Shah-HUF 3, Sukrut Flat, Opp. Anandji Kalyanji Pedhi, Nr PNB, Vasantkunj, Ahmedabad PAN: AANHS4164G (Appellant) Vs ITO (OSD), Range-9, Ahmedabad (Respondent) Appellant by : Shri Rupesh Mehta, A.R. Respondent by : Shri Alpesh Parmar, Sr.D.R. Date of hearing : 07-04-2022 Date of pronouncement : 29-06-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:- The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad, (in short referred to as CIT(A)), dated 22-05-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2009-10. 2. The solitary issue, it was common ground, related to addition made to the income of the assessee on account of unsecured loan taken from ITA No. 1256/Ahd/2019 Assessment Year 2009-10 I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 2 various friends and relatives amounting to Rs. 26,25,200/- remaining unexplained. The addition was made u/s. 68 of the Act as unexplained credits. 2.1. At the outset itself, it was pointed out that this was the second round before us. That in the first round the ld. CIT(A) had dismissed the assessee’s appeal refusing to entertain the additional evidences filed by the assessee before him in support of his claim of genuineness of the unsecured loan, which matter travelled to the ITAT who restored back the issue to the Ld.CIT(A) directing him to admit the additional evidences and to decide the issue thereafter on merits. That in pursuance to the same, the impugned order has been passed by the ld. CIT(A). 3. As transpires from the orders of the authorities below, the unsecured loan pertained to the following 10 parties: Sr.No. Name of the person Amount (In Rs.) 1. Darshanben P. Chowi 50,000 2. Gautam Shantilal Shah 4,24,000 3. Hiral A, Shah 1,01,000 4. Kanubhai Patel 10,39,000 5. Pareshbhai Dave 2,00,000 6. Samprati Enterprise 4,24,000 7. Sulochan B. Shah 1,00,000 8. Swetaben Shah 2,00,000 9. Trivedi Deven K 43,600 10. Trivedi Naren 43,600 TOTAL 26,25,200 I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 3 4. Additional evidences in the form of confirmation of these parties copy of the bank accounts, copy of the ITR etc. were filed which were forwarded to the A.O. for examining the evidences and giving his comments on merit. The A.O. submitted his comments, rejecting the assessee’s contention of having proved the genuineness of the unsecured loan with respect to each such loan in a tabular form reproduced at page 6 & 7 of the Ld. CIT(A) order is as under: Sr. No. Name of Party Amount Documents submitted Remarks 1 Dharshanaben Chokshi 50,000 Copy of ledger, PAN Confirmation, bank statement On verification of bank statement, it is noticed that immediately before lending the amount of Rs.50,000/- to the assessee, an amount of Rs.50,000/- had been deposited in the bank account of the individual. Copy of return of income not filed. Hence genuineness of transaction & creditworthiness of the loan depositor could not be established. 2 Gautam Shantilal Shah 4,24,000 Copy of Ledger, PAN, Confirmation, incomplete bank statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.4 lacs to the assessee, an amount of Rs.4,00,000/- had been deposited in the bank account of the individual. Moreover, bank statement also reveals that most of the time the bank balance is having minimum deposit and before transferring amount to other account immediately before that nearly same amount deposited in the bank account. Hence genuineness of transaction could not be established. Also, the loan depositor has filed his return of income at Rs. 2,51,176/- However advanced Rs.4,24,000/- to the assessee. Hence, creditworthiness of the loan depositor could not be established. 3 Hiral A. Shah 1,01,000 Copy of ledger, PAN, confirmation, Bank Statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.l,00,000/- to the assessee, an amount of Rs.1,00,000/- had been deposited in the bank account of the individual. Hence genuineness of transaction could not be established" 4 Kanubhai patel 10,39,000 Copy of ledger, PAN, confirmation, Bank Statement, return of income A.Y. "of, 201 1-12 has been filed Return of income for A.Y. 2011-12 has been filed instead of relevant period i.e. A.Y.2009-10. Secondly, on perusal of return for A.Y.201 1- 12, it is noticed that the party has filed return of income at Rs.59,010/-. Looking to the quantum I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 4 of loan advanced to the assessee of Rs. 10,39,000/-creditworthiness of the loan depositor could not be established: 5 Pareshbhai Dave 2,00,000 Copy of ledger, PAN, confirmation, Bank statement Copy of return of income has not filed. Hence creditworthiness of the loan depositor could not be established. 6 Samprati Enterprise 4,24,000 Copy of ledger, PAN, confirmation Bank statement as well as return of income have not been filed. Hence, Genuineness of transaction & creditworthiness of the loan depositor could not be established. 7 Sulochana R Shah 1,00,000 Copy of Ledger, PAN, Confirmation, Incomplete Bank Statement Creditworthiness of the loan depositor could not be established as Return of income has not been filed. 8 Swetaben Shah 2,00,000 Copy of Ledger, PAN, Confirmation, Incomplete Bank Statement complete Bank Statement and return of income have not been filed. Hence genuineness of transaction & creditworthiness of the loan depositor could not be established. 9 Trivedi Deven K 43,600 Copy of Ledger, PAN, Confirmation, Bank Statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.40,000/- to the assessee, an amount of Rs.40,000/- had been deposited in cash in the bank account of the party. Moreover, bank statement also reveals that most of the time the bank balance is having minimum deposit and before transferring amount to other account immediately before that nearly same amount deposited in the bank account in cash. Hence genuineness of the transaction could not be established. 10 Trivedi Niren 43,600 Copy of Ledger, PAN, Confirmation, Bank Statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.40,000/- to the assessee, an amount of Rs.40,000/- had been deposited in cash in the bank account of the party. Hence genuineness of transaction could not be established. 5. It is evident from the above that the A.O. rejected the contention of the assessee of the genuineness of the unsecured loan, either for the reason that their creditworthiness could not be established since return of income and/ or complete bank statement of the depositors was not filed or for the reason that he found that cheque of the same amount as that advanced to the assessee as loan, deposited in the bank account of the unsecured loan depositors. I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 5 5.1. The Ld.CIT(A) found merit in the findings of the A.O. noting that he had examined each unsecured loan vis a vis the evidences filed by the assessee to prove their genuineness and had given specific finding for the creditworthiness and genuineness having not been established by the assessee. The findings of the CIT(A) at para 4.9 & 4.10 of the order in this regard are as under: 4.9. It is seen from the remand report dtd. 26.05.2014 submitted during the first round of appeal before the CIT(A), that the AO has given categorical finding in para 4.1 of the above remand report. The AO has examined each unsecured loan, copy of confirmation, bank statement, PAN and after examining given specific finding that the credit worthiness and genuineness of the unsecured loans lenders have not been established by the assessee during the remand report. In the rejoinder, the appellant merely submitted that he has discharged his burden of proof by submitted contra confirmation letter, copy of bank statement and IT return etc., hence the addition should be deleted. 4.10 4.10. The contention of the appellant is not tenable in view of the specific finding of the AO during the remand report there is no proper source of deposit of the lender. Hence genuineness, and credit worthiness is not proved. The reliance is also placed in the following decisions- a. In a recent decision of Hon'ble Ahmedabad ITAT in the case of Pavankumar M. Sanghavi v/s ITO. The Hon'ble ITAT ( 81 taxmann.com 308 ) which has ben confirmed by the Hon'ble Gujrat High Court and Hon'ble Supreme Court, it has been held that when Assessee received unsecured loan but could not produce lenders for verification and these lenders were found to be shell companies, said loan transactions could not be said to be genuine merely because assessee filed loan confirmations copies of ledger accounts and other supporting evidences. The relevant observation of the ITAT is also reproduced herein below: "8 As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realties. It will, therefore, be useful to understand as to how the shell entities, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it color of a normal business entity, used as a vehicle for various financial maneuvers. A shell entity, by itself, is not an illegal entity but it is their act of abatement of, and being part of, financial maneuverings to legitimize illicit I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 6 monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial maneuverings for the benefit of its clients, or, with that predominant underlying objective, to give the color of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities." The Hon'ble Gujarat High court has confirmed the above decision of the ITAT and held as under:- "3. Perusal of the orders on record and in particular, the above quoted portion of the order of the Tribunal would make it clear that the entire issue is based on appreciation of evidence on record and thus factual in nature. The Tribunal has given elaborate reasons to come to the conclusion that the entire transaction was not genuine. In absence of any perversity, we do not see any reason to interfere. 4. Learned counsel for the assessee however vehemently contended that the assesses had received loans through cheques from lenders who had confirmed the same. Their accounts are audited and filed before the Revenue authorities. Thus, the genuineness of the transactions, the capacity of the lender and the factum of lending all have been established. Addition under section 68 of the Act there could not have been made. However, as noted, the Tribunal has minutely examined the position of the lenders, the circumstances under which, the amounts were allegedly loaned to come to the conclusion that the "transactions were not genuine." The Hon'ble Apex Court on 01.5.2018 also dismissed the SLP filed against the order of the Hon'ble Gujarat High Court . b. In the latest decision of Hon'ble Apex court in the case of NRA Iron and Steel Pvt. Ltd. dated 05.03.2019 arising out of SLP (Civil) No. 29855 of 2018 , the Hon'ble apex court has laid down principle and ratio that genuineness of the transaction and circumstantial evidence are crucial to determined the true nature of any transaction . The Hon'ble Supreme Court has decided the issues as under- "10. On the issue of unexplained credit entries/share capital, we have examined the following judgments: i. in Sumati Dayal v. CIT this Court held that: "if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 7 the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably" ii'. "A bare reading of section 68 of the Income-tax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (Hi) either (a) the assessee offers no explanation about the nature and source of such credits found on the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to Income-tax s the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature." (emphasis supplied) ii. The Delhi High Court in a recent judgment delivered in PR.CIT -6, New Delhi v. NDR Promoters Pvt. Ltd.10 upheld the additions made by the Assessing Officer on account of introducing bogus share capital into the assessee company on the facts of the case. iv. The Courts have held that in the case of cash credit entries, it is necessary for the assessee to prove not only the identity of the creditors, but also the capacity of the creditors to advance money, and establish the genuineness of the transactions. The initial onus of proof lies on the assessee. This Court in Roshan Pi Hatti v. CIT11, held that if the assessee fails to discharge the onus by producing cogent evidence and explanation, the AO would be justified in making the additions back into the income of the assessee. v. The Guwahati High Court in Nemi Chand Kothari v. CIT held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to provide the identity of the creditors and genuineness of the transaction. "It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has provded the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthinss of his creditors vis-a-vis the transactions which he had with the creditors, his burden sands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself." vi. In a recent judgment the Delhi High Court13 held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 8 parties approached each other, whether the transaction is entered into through written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received by an assessee was examined in the context of Section 68 are CIT v. Divine Leasing & Financing Ltd.14, and CIT v. Value Capita/ Service (P.) Ltd.15 11. The principles which emerge where sums of money are credited as Share Capital/Premium are: i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established. In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act. 12. In the present case, the A.O. had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. For example: a. The companies Hema Trading Co. Pvt. Ltd. and Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non-existent at the address given, and the premises was owned by some other person. b. The companies at Kolkatta did not appear before the A.O., nor did they produce their bank statements to substantiate the source of the funds from which-the alleged investments were made. c. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be nonexistent at the address provided. , The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs. I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 9 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example: Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company. Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company -Respondent, etc. Hi. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs. 190 per share, even though the face value of the share was Rs. 10/- per share. iv. Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act. 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assesses. 14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 10 15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income. 16. The Appeal filed by the Appellant - Revenue is allowed. In the aforesaid facts and circumstances, and the law laid down above, the judgment of the High Court, the IT AT, and the CIT are hereby set-aside. The Order passed by the AO is restored." 6. Aggrieved by the same, the assessee has raised the following grounds of appeal before us. 1. Your appellant has discharged the onus lies on him as required u/s 68 of the IT Act regarding unsecured loan taken from various friends and relatives. And therefore, we request the Hon'ble Court to delete the entire addition of Rs. 26,25,200/- made u/s 68 on this ground. 2. The Ld. CIT (A) failed to appreciate that your appellant has deposited the cash out of withdrawal from the same bank account only. Since the Ld. CIT(A) fails to give credit I of cash withdrawal from bank of Rs. 7,44,000/- we request the Hon'ble Court to ' delete the addition made u/s 68 on this ground. 3. The Ld. CIT (A) failed to appreciate that except one person loan of Rs. 50,000/- we have repaid all the amount with interest to our depositor through a/c payee cheque only and therefore we request the Hon'ble Court to delete the addition made u/s 68 on this ground. 7. Before us, the contention of the Ld. Counsel for the assessee was that all necessary documents evidencing the genuineness of the unsecured loans had been filed before the CIT(A) by way of their confirmations, the bank book of the assessee and the depositor proving that the transaction took place through banking channel, that even the source of the depositor was pointed out, copy of ITR’s filed and also the fact that the parties had also been paid interest on the loans and the amounts of loan had been subsequently repaid in the subsequent year. A summary showing the details of various evidences submitted before the Ld. CIT(A) with respect to I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 11 each depositor mentioning the paper book page number also where the evidences was filed was placed before us. Chirag H Shah-HUF Asst Year -2009-10 Summary showing Details and page no. of paper book submitted on 11-3-2022 for various evidence submitted before the CIT(A) from time to time to prove genuineness of Transaction and Credit Worthiness of Depositors Copy of Copy of Copy of Bank Letter from Ledger Bankbook of Statement of depositor Repaid on from the Cross Ledger Appellant depositor mentioning Cheque Copy of Amount of Nam e of Depo sitor Amou nt of Loan taken Taken on books of Appellant Confirmat ion submitted on 03-03- 2014 reflecting such transcation .. reflecting such transactio n Source of depositor i.e. Source issued after depositio n of ITR submitted on 03-03- 14 Total Interest paid Loan Repaid submitted submitted on submitted on of source 14- on 18-09-14 21-04-14 03-03-14 05-19 Dars hana Chok shi 50,000 07-04- 08 - 8 53 9-10 95 Cheque - Note - 1 Gaut am Shant ilal Shah 4,00,0 00 04-10- 08 69 11 54 12 Cheque 13 46,000 4,70,000 25-02-2010 Hiral A Shah 1,00,0 00 10-03- 09 67 14 56 15-16 99 Cheque 17 4,500 1,04,500 11-06-2009 Kanu bhai Patel 10,00, 000 06-08- 08 84 18 54 20 Note - 2 Cheque Note - 2 2,28,67 5 2,00,000 23-04-2010 10,00,000 03-11-2010 31,675 28-03-2011 Pares hbhai Dave 2,00,0 00 26-12- 08 72 22 55 24-25 104 Cheque - 2,00,000 06-12-2010 Bam prati Enter prise 4,00,0 00 04-10- 08 74 26 54 - - - 27 56,900 4,56,900 25-11-2009 I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 12 3uloc hana B shah 1,00,0 00 19-12- 08 78 28 55 30-33 109 Cheque Note - 3 - 1,00,000 06-12-2010 5wet aben Shah 2,00,0 00 19-12- 08 76 34 55 36-37 116 Cheque Note - 4 - 2,00,000 06-12-2010 Frive di Deva n K 40,000 27-09- 08 80 38 54 39-40 121 Cash 41 14,712 54,712 28-03-2011 Frive di Nare n 40,000 27-09- 08 82 42 54 43-44 126 Cash 45 14,712 54,712 28-03-2011 Note: - 1.. Unsecured loan Taken from Darshana Chokshi of Rs. 50,000/- is not repaid yet. Your appellant is regularly paying interest through proper ranking channel on the same on regular basis of Rs. 9,000/- per annum. Refer Appendix - I 2. Kanubhai Patel has given loan out of the sale proceeds received by him on sale of land. Your appellant has already submitted copy of Statement of Income reflecting same with CIT(A)-XX, Ahmedabad vide Annexurej3of Submission dated 18-09-2014. However, at the time of preparing 'aperbook dated 11-03-2022, through oversight, we forgot to attach that copy. PI. also find herewith the copy of the same for your reference. Refer Appendix - II 3. Sulochanaben Shah is aged about 82 Years. She has given loan to your appellant out of her own saving. Further, there might be a case that during he year under consideration, her total taxable income is less than basic exemption Limit. And therefore, she has not filed her IT Return. 4.. Swetaben Shah has given loan to your appellant out of her own saving from her salary income. Further, during the year under consideration, her total taxable income is less than basic exemption Limit, and therefore, she has not filed her IT Return. 7.1. Ld. Counsel for the assessee also submitted his rejoinder to the findings of the A.O. in the remand report for the basis of holding that the genuineness of the unsecured loans were not proved as under: Sr. No. Name of Party Amount Documents submitted Remarks Our comment 1 Dharshanaben Chokshi 50,000 Copy of ledger, PAN Confirmation, bank statement On verification of bank statement, it is noticed that immediately before lending the amount of Rs.50,000/- to the assessee, an amount of Rs.50,000/- had been deposited in the bank account of the individual. Copy of Pg No. 95 my paper book dated 11-03- 2022 Rs. 50,000/- she has confirmed that loan was given out of amount reed, I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 13 return of income not filed. Hence genuineness of transaction & creditworthiness of the loan depositor could not be established. from her Debtor on 02-04-2008 in cheque. 2 Gautam Shantilal Shah 4,24,000 Copy of Ledger, PAN, Confirmation, incomplete bank statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.4 lacs to the assessee, an amount of Rs.4,00,000/- had been deposited in the bank account of the individual. Moreover, bank statement also reveals that most of the time the bank balance is having minimum deposit and before transferring amount to other account immediately before that nearly same amount deposited in the bank account. Hence genuineness of transaction could not be established. Also, the loan depositor has filed his return of income at Rs. 2,51,176/- However advanced Rs.4,24,000/- to the assessee. Hence, creditworthiness of the loan depositor could not be established. Pg. No. 13 of my paper book dated 11-03-2022 Gautambhai Shah is engaged in the business the same can be verified on the copy of ITR -4. Pg. No. 12 of my paper book dated 11-03-2022, He has made payment of Rs. 4 lakhs to me from his current Account with Shri Vinayak Sahkari Bank Limited out of amount received from "Om Bhagwati Textile" in cheque. The same can be verified on the copy of Bank Statement. 3 Hiral A. Shah 1,01,000 Copy of ledger, PAN, confirmation, Bank Statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.l,00,000/- to the assessee, an amount of Rs.1,00,000/- had been deposited in the bank account of the individual. Hence genuineness of transaction could not be established" Pg. 99 of our paper book, she confirm that she has given the loan through cheque from her saving out of her income of Rs. 3,79,257/-. 4 Kanubhai patel 10,39,000 Copy of ledger, PAN, confirmation, Bank Statement, return of income A.Y. "of, 201 1-12 has been filed Return of income for A.Y. 2011-12 has been filed instead of relevant period i.e. A.Y.2009-10. Secondly, on perusal of return for A.Y.201 1- 12, it is noticed that the party has filed return of income at Rs.59,010/-. Looking to the quantum of loan advanced to the assessee of Rs. 10,39,000/-creditworthiness of the loan depositor could not be established: Pg. No. 66 of my paper book dated 11-03-2022 2nd last para and also Refer Appendix - II of today's summary chart. Kanubhai Patel has given loan through cheque from his OD Account out of the sale proceeds received by him on sale of land. Your appellant has already submitted copy of Statement of Income for the A.Y.2009-10 reflecting same with CIT(A)-XX, Ahmedabad vide Annexure -B of Submission dated I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 14 18-09-2014. N.B.:- at the time of preparing Paper book dated 11-03- 2022, through oversight, we forgot to attach that copy. 5 Pareshbhai Dave 2,00,000 Copy of ledger, PAN, confirmation, Bank statement Copy of return of income has not filed. Hence creditworthiness of the loan depositor could not be established. Pg. No. 25 of my paper book dated 11-03-2022. Amount was given out of balance in Saving account 6 Samprati Enterprise 4,24,000 Copy of ledger, PAN, confirmation Bank statement as well as return of income have not been filed. Hence, Genuineness of transaction & creditworthiness of the loan depositor could not be established. Pg. No. 27 of my paper book dated 11-03-2022. Copy of ITR of Ashok Jethalal Shah Prop:- of Samprati Enterprise reflecting income of Rs. 2,17,429/-. Though given at the time submission of additionalevidences on 03-03-2014 vide Ann. H. Pg. No. 2 of my paper book dated 11-03-2022. For any reason Ld. AO has not considered that. 7 Sulochana R Shah 1,00,000 Copy of Ledger, PAN, Confirmation, Incomplete Bank Statement Creditworthiness of the loan depositor could not be established as Return of income has not been filed. Pg. No. 109 of my paper book dated 11-03-2022. She is 82 years old. Amount was given through cheque out of balance in Saving account. 8 Swetaben Shah 2,00,000 Copy of Ledger, PAN, Confirmation, Incomplete Bank Statement complete Bank Statement and return of income have not been filed. Hence genuineness of transaction & creditworthiness of the loan depositor could not be established. Pg. No. 116 of my paper book dated 11-03-2022. Amount was given through cheque out of balance in Saving account accumulated from Salary income. 9 Trivedi Deven K 43,600 Copy of Ledger, PAN, Confirmation, Bank Statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.40,000/- to the assessee, an amount of Rs.40,000/- had been deposited in cash in the bank account of the party. Moreover, bank statement also reveals that most of the time the bank balance is having Pg. No. 121 of my paper book dated 11-03-2022. He is brother of Niren Trivedi (My Brother-in-Law). He has given money through I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 15 minimum deposit and before transferring amount to other account immediately before that nearly same amount deposited in the bank account in cash. Hence genuineness of the transaction could not be established. cheque after cash deposit of Rs. 40,000/- out of his saving. He is residing outside India and since long., His Last Year ITR i.e. AY. 2008-09 was reflecting income of Rs. 1,21,3237- Refer Pg. No. 125. 10 Trivedi Niren 43,600 Copy of Ledger, PAN, Confirmation, Bank Statement, return of income On verification of bank statement, it is noticed that immediately before lending the amount of Rs.40,000/- to the assessee, an amount of Rs.40,000/- had been deposited in cash in the bank account of the party. Hence genuineness of transaction could not be established. Pg. No. 126 of my paper book dated 11-03-2022. He is My Brother- in-Law. He has given money through cheque after cash deposit of Rs. 40,000/- out of his AutoCAD design work income. He is residing outside India and since long. His Last Year ITR i.e. AY. 2008-09 was reflecting income of Rs. 1,14,457/- Refer Pg. No. 130. 8. Ld. Counsel for the assessee heavily relied on the submission made above supported with documents filed in the paper book before us. 9. Ld. D.R. on the other hand relied on the order of the ld. CIT(A). 10. We have heard both the parties and have also gone through the order of the Ld.CIT(A) before us. We have also carefully gone through the summary details of the arguments made by the Ld. counsel for the assessee before us as also the documents referred to therein placed before us in the I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 16 paper book filed by the assessee. We are sufficiently convinced that the assessee had discharged its onus of proving the genuineness of the unsecured loans and the findings of the A.O. to the effect their genuineness were not proved has been sufficiently demonstrated by the assessee to have been met during proceedings before the CIT(A) themselves. 11. With respect to all the 11 parties involved undisputedly their PAN details and confirmations and copies of bank statements reflecting the transactions have been filed. All the parties have admittedly given the loans through cheques/banking channels. There is no cash deposit in any bank account of depositors prior to issue of cheque. In almost all cases the source of depositors has also been explained and copies of their ITR’s also filed in several cases. Also interest has been paid on most of these loans and all loans except one amounting to Rs.50,000/-, stand repaid in subsequent years . Further we find, each and every adverse observation made by the A.O. with respect to the loans have been sufficiently met by the assessee. 12. With respect to parties listed at S. No. 1 to 3 in the table above at para 7, the AO has doubted their creditworthiness since he found cheque deposited in their accounts immediately before issue of cheque to the assessee. In this regard we find that all these loan depositors had explained their sources in the confirmations filed as being out of money received from debtors in the case of Darshanaben Choksi who had advanced Rs.50,000/-; out of payment received from one party by cheque in the I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 17 proprietorship concern of Gautam Shantilal Shah who had advanced Rs.4,24,000/- ; and out of her savings in the case of Hiralal Shah who had advanced Rs.1,00,000/-.Clearly the source of making the advances was also explained in each of the above cases. And we find no adverse observation with respect to the same by the Revenue authorities. The fact of cheque deposited in their accounts immediately before issuance of cheque to the assessee either stands explained or is of no consequence as long as the source of deposit is sufficiently explained. 13. Similarly in the case of Kanubhai Patel ,who had advanced Rs,10,39,000/- the AO found that the assessee had filed the depositors return of income for some other year, i.e A.Y 2011-12,instead of A.Y 2009- 10 the impugned year, and even the same reflected very low income of Rs,59,010/-which did not substantiate the creditworthiness of the said party to advance loan of Rs. 10,39,000/-To this we find that the assessee has pointed out that it was submitted to the Ld.CIT(A) that the loan had been advanced out of sale proceeds received from sale of land and return of income for the impugned year of the loan provider reflecting capital gain from sale of land was filed to the Ld.CIT(A) vide submission dated 18-09-14. 13.1. In the case of Paresh Bhai Dave, Sulochana Shah and Swetaben Shah who had advanced Rs, 2 lacs, 1 lacs and Rs.2 lacs respectively, the AO doubted their creditworthiness since their Return of Income was not filed. The assesses contention is that the said amounts were stated to have been advanced from their savings. The fact that the amounts have been I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 18 advanced through banking channels and there is no allegation of cash deposit prior to advancing such amounts, we see no reason to disbelieve the explanation of the assessee. 14. In the case of Samprati Enterprises which had advanced Rs.4,24,000/- the creditworthiness has been doubted since return of income not filed. To this we find the assessee has pointed out that the ITR of the proprietor of the firm, Sh.Ashok Jethalal Shah had been filed as additional evidence vide letter dated 03-03-2014 which the AO failed to take note of. The Ld.DR was unable to controvert the same. 15. With respect to Rs. 43,600/- each advanced by Shri Trivedi Deven K and Trivedi Niren the findings of the A.O. are that there was cash deposited immediately before issuance of cheque. Ld. Counsel for the asessee has pointed out that it was demonstrated that both the persons were brother in law who resided abroad and had field return of income of Rs. 1,20,000/- odd in the preceding year and for the purposes of advancing the loan had deposited cash out of their savings. 16. In our view the evidences filed by the assessee sufficiently demonstrate the genuineness of the unsecured loans taken, coupled with the fact that the unsecured loan were returned in the subsequent years and also the fact of having paid interest on them to the loan depositors. I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No Shri Chirag H. Shah HUF vs. ITO 19 17. Considering the above, we hold that the assessee had sufficiently demonstrated the genuineness of the unsecured loan receipt and the findings of the ld. Counsel for the assessee in this regard were not based on proper appreciation of the facts before them. 18. In view of the same, therefore we deleted the addition made u/s. 68 of the Act amounting to Rs. 26,25,200/-. 19. In effect, appeal of the assessee is allowed. Order pronounced in the open court on 29-06-2022 Sd/- Sd/- (TR SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad : Dated 29/06/2022 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद