Shri Vijay Girdharlal Shah, Vadodara V. The DCIT, Circle-3(1), Vadodar

ITA 1259/AHD/2019

AI Insights

The case revolves around an appeal by Shri Vijay Girdharlal Shah against the order of the Learned Commissioner of Income Tax (Appeals)-3, Vadodara, which upheld the addition of Rs. 15,00,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The assessee had taken loans from various parties, which the AO initially treated as unexplained due to insufficient documentary evidence. The CIT(A) upheld this decision, leading to the current appeal. The Tribunal noted that the assessee had provided adequate documentation to substantiate the loans and criticized the AO for not conducting proper verification of the loan parties.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127155 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-01-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 29-07-2019
• Other Referred Cases: PCIT vs NRA Iron & Steel Pvt Ltd. (2019) 412 ITR 161 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Set aside
• Section: 68; 22

Judgement Text

आयकर अपील य अ धकरण, अहमदाबाद यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC” BENCH, AHMEDABAD SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकरअपीलसं./ITA No. 1259/AHD/2019 नधा रणवष /Asstt. Year: 2012-2013 Shri Vijay Girdharlal Shah, Shop No.11, Opp. Police Chowki, Nava Bazar, Vadodara. PAN: AFOPS8967H Vs. D.C.I.T., Circle-3(1), Vadodara. (Applicant) (Respondent) Assessee by : Shri Mukund Bakshi, A.R Revenue by : Shri Sanjaykumar, Sr. D.R स ु नवाईक तार ख/Date of Hearing : 10/01/2023 घोषणाक तार ख/Date of Pronouncement: 31/01/2023 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-3, Vadodara, dated 22/05/2019arising in the matter of assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-13. 2. The assessee has raised the following grounds of appeal: 1. The Ld.CIT(Appeals) has erred in not considering the documents and evidences submitted during the course of appeal proceedings with respect to Unsecured Loans available during the year under consideration. ITA no.1259/AHD/2019 A.Y. 2012-13 2 2. The Ld.CIT(A), (Appeals) erred in law and in facts in upholding the addition of Rs.15,00,00/- u/s.68 of the Act without considering the facts of the case and the documents/details submitted by the appellant. 3. At the outset we note that there is a delay in filing the appeal by the assessee for 3 days only. Considering the length of delay, the Ld.DR did not raise any objection if the delay is condoned. Accordingly, we condone the delay of 3 days in filing the appeal by the assessee and proceed to adjudicate the issue on merit. 4. The only issue raised by the assessee is that the Ld. CIT(A) erred in confirming the addition made by the AO for Rs.15,00,000/- on account of unexplained cash credit u/s 68 of the Act. 4.1 The necessary facts in brief are that the assessee in the present case is an individual and engaged in the business of trading of cotton cloth and construction and commercial complex. The assessee in the year under consideration has taken loan amounting to Rs.15,00,000/- from the parties as detailed below: Sr.No. Name Loan or Deposit accepted or taken during the year 1. D.V. & Co. 5,00,000 2. K.C. Shah 5,00,000 3. Bhavna Sharma 2,50,000 4. Jagdish Sharma 2,50,000 15,00,000 5. The AO during the assessment proceedings found that the assessee has not furnished sufficient documentary evidences in respect of loan transaction. As such the assessee has not furnished bank statement in the case of K.C. Shah and Bhavna J. Sharma. Likewise, there were cash deposits in the bank account of D.V. & Co. and Jagdish Sharma before transferring the loan to the assessee. Furthermore, the loan parties were not charging any interest from the assessee. Similarly, the income shown by the loan parties in their respective return was not sufficient enough to advance loan to the assessee without charging any interest. In view of the above, the AO held that the assessee failed to discharge the onus ITA no.1259/AHD/2019 A.Y. 2012-13 3 specified u/s 68 of the Act and treated the amount of loan of Rs.15,00,000/- as unexplained cash credit u/s 68 of the Act. 6. Aggrieved assessee preferred an appeal before the learned CIT-A. 7. The assessee before the Ld.CIT(A), submitted that the loans have been accepted by him through banking channel. To prove the genuineness of loan, the confirmation containing the name, address, bank account and cheques nos. were filed along with the copy of return of income and bank statement. 8. The assessee is not under the obligation to justify the source of source in the hands of the loans parties. Had there been any doubt about the genuineness of the loan, the AO was entitled to issue summons u/s131 of the Act to the loan parties but he has not done so. However, the Ld.CIT(A), dis-regarded the contention of the assessee by observing that no prudent person will advance money without charging any interest and will carry risk of loan without any rewards. Accordingly, the circumstantial evidences suggest that the genuineness of loan is not reliable. In fact,the loan creditor namely K.C. Shah, only bank statement reflecting transfer of loan of Rs.5,00,000/- was furnished instead of detailed statement. Thus, the availability of money with K.C Shah cannot be relied upon. In the case of loan party namely shri BhavnaJ Sharma and Jagdishchandra Natvarlal Sharma, there were cash deposits before transferring the loan to the assessee. Same was in the case of Shri Alpesh (D.V. & Company) where the cash was deposited before transferring the fund to the assessee.In view of the above, the Ld.CIT(A), after placing reliance on the judgement of Hon’ble S.C in the case of PCIT vs NRA Iron & Steel Pvt Ltd. (2019) reported in 412 ITR 161 has confirmed the order of the AO which is reproduced as under: In view of the above, I have no reason to defer the findings of the Assessing Officer, Reliance is also placed on Supreme Court decision in the case of PCIT vs. NRA Iron & Steel Pvt. Ltd. (2019) 412 ITR 161 (SC) where it was held that merely proving identity does not discharge onus of the assessee if capacity or creditworthiness is not established by cogent and credible evidence. The practice of conversion of unaccounted money needs to be curbed. The addition made is confirmed. ITA no.1259/AHD/2019 A.Y. 2012-13 4 9. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 10. The Ld.AR before us filed a paper book running from pages 1 to 22 and contended that all the details of the loan parties such as confirmation, Income tax return, bank statement were furnished in respect of loan taken by him.The Ld.AR to the effect has drawn our attention on pages 1 to 22 of the paper book where the necessary details were placed on record. 11. The Ld.AR further contended that the AO has not carried out any verification from the loan parties despite having the complete details of such parties. Therefore, the principle laid down by the Hon’ble SC in the case of NRA Iron & Steel Pvt. Ltd. (Supra) are not applicable to the facts of the case on hand. 12. On the contrary, the Ld.DR vehemently supported the order of the authorities below. 13. We have heard the rival contentions of both the parties and perused the materials available on record. There is no dispute to the fact that the assessee has discharge his onus by furnishing the details about the loan parties which can be verified from the paper book. It is pertinent to note that no inquiry has been conducted by the AO from the loan parties despite having requisite details of the loan parties and having power under the statue. In other words, the assessee by furnishing the details as discussed above has discharged his onus cast under section 68 of the Actupon it. As such, the onus shifted upon the revenue to prove the contention/details filed by the assessee based on the documentary evidence. However, what we find is this that the revenue has not pointed out any flaw in the details filed by the assessee. As regard to principles laid down by the Hon’ble SC in the case of NRA Iron & Steel Pvt. Ltd. (Supra), we note that the facts are distinguishable from the present facts of the case. For this purpose, we refer the order of Pune Tribunal in the case of Deputy Commissioner of Income Tax Central ITA no.1259/AHD/2019 A.Y. 2012-13 5 Circle, Aurangabad v. Mahalaxmi TMT (P.) Ltd. Reported in 190 ITD 582 wherein it was held as under: “12. Now proceeding to examine whether the principles laid down by the Hon'ble Supreme Court in the case of Pr. CIT v. NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48/262 Taxman 74/412 ITR 161 are applicable to the present facts of the case. In that case, the assessee-company received share capital and premium of Rs. 17.60 crores in all from nineteen parties (six from Mumbai, eleven from Kolkata and two from Guwahati). The shares had a face value of Rs. 10 and were subscribed by the investor-companies at a premium of Rs. 190 per share. The AO made the addition of Rs. 17.60 crores after carrying out various inquiries as under- (i) To verify the veracity of the transactions, the notices were served on three investor-companies namely Clifton Securities Pvt. Ltd.-Mumbai, Lexus Infotech Ltd.-Mumbai, Nicco Securities Pvt. Ltd. Mumbai but no reply was received. (ii) The address with respect to a company namely Real Gold Trading Co. Pvt. Ltd.-Mumbai was not correct. (iii) The notice could not be served on two investor-companies, namely Hema Trading Co. Pvt. Ltd.- Mumbai, Eternity Multi Trade Pvt. Ltd.-Mumbai. (iv) Submissions from nine companies were received (Neha Cassetes Pvt. Ltd.-Kolkata, Warner Multimedia Ltd. Kolkata, Gopikar Supply Pvt. Ltd. Kolkata, Gromore Fund Management Ltd. Kolkata, Bayanwala Brothers Pvt. Ltd. Kolkata, Shivlaxmi Export Ltd. Kolkata, NatrajVinimay Pvt. Ltd. Kolkata, Neelkanth Commodities Pvt. Ltd. Kolkata, Prominent Vyappar Pvt. Ltd. Kolkata), however, they had not given any reasons for paying such a huge premium. Furthermore, they had declared very low income in their respective returns of income. (v) The details of share purchased and the amount of premium were not specified by certain companies namely Super Finance Ltd. Kolkata, Ganga Builders Ltd. Kolkata. Furthermore, these companies had not enclosed the bank statement. (vi) In addition to above, ld. AO found that: a. Out of the four companies at Mumbai, two companies were found to be non-existent at the address furnished. b. With respect to the Kolkata companies, nobody appeared nor did they produce their bank statements to substantiate the alleged investments. c. Guwahati companies - Ispat Sheet Ltd. and Novelty Traders Ltd., were found non-existent at the given address. d. None of the investor-companies appeared before the A.O. 12.1 Based on the above it was held the by the Hon'ble Apex Court, that the Assessee-Company failed to discharge the onus required under section 68 of the Act. Therefore, the Assessing Officer was justified in adding back the amounts to the Assessee's income. However in the case on hand, we find that the assessee has discharged its onus cast upon it under the provisions of section 68 of the Act which has been elaborated in the preceding paragraphs. 12.2 In our humble understanding, we also note that the decision in the case of NRA Iron & Steel (P.) Ltd. (supra) is based on facts. Thus such case will become binding on those cases having similar facts and circumstances and not other cases having different facts and circumstances. In this regard, we draw support and guidance from the judgment of Hon'ble Calcutta High court in the case of CIT v. Peerless General Finance & Investment Co. Ltd. [2006] 154 Taxman 179/282 ITR 209- wherein it was observed that the binding nature of a decision is of two kinds—one is in relation to the facts and the other is in relation to the principles of law. A principle of law declared would be treated as precedent and binding on all. The finding of facts would bind only the parties to the decision itself and it is the ultimate decision that binds. Where facts are distinguishable, such as assessee has replied and clarified all the doubts like non-service of summons on the directors of the investing companies due to change of address, existence of the investing companies on the portals of MCA/ROC and with the Income-tax Department long after investment, providing DIN of directors of investing companies and their other particulars, providing reasons for charging huge premium, adequate creditworthiness on the basis of assets, source of immediate availability of funds for investment, etc., then this decision in NRA Iron & Steel (P.) Ltd. (supra) cannot be applied. 12.3 Admittedly, the assessee in the case on hand has sufficiently furnished the details of the parties which have been elaborated ITA no.1259/AHD/2019 A.Y. 2012-13 6 somewhere in the preceding paragraph. Therefore in our humble understanding the principles laid down by the Hon'ble Apex court in the case of NRA Iron & steels (P.) Ltd. (supra) are not applicable to the facts of the case. 12.4 It is also pertinent to note that various Hon'ble court after considering the judgment of Hon'ble Supreme Court in the case of NRA Iron & Steel (P.) Ltd. (supra) has deleted the addition made by the AO under the provisions of section 68 of the Act. In this connection we draw support and guidance form the judgment of Hon'ble Bombay High Court in case of Pr. CIT v. Ami Industries (India) (P.) Ltd. [2020] 116 taxmann.com 34/271 Taxman 424 ITR 219 where it was held as under: "21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRA Iron & Steel (P.) Ltd. (supra), the Assessing Officer had made independent and detailed inquiry including survey of the investor companies. The field report revealed that the shareholders were either nonexistent or lacked credit-worthiness. It is in these circumstances, Supreme Court held that the onus to establish identity of the investor companies was not discharged by the assessee. The aforesaid decision is, therefore, clearly distinguishable on facts of the present case." 13.1 In view of the above and after considering the facts in entirety, we hold that no addition is warranted in the given case under the provisions of section 68 of the Act. Accordingly, we set aside the finding of the learned CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed. 14. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 31/01/2023 at Ahmedabad. Sd/-/- (WASEEM AHMED) ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 31/01/2023 Manish/Tanmay