Shri Sanjay K. Bishnoi, Ahmedabad V. The Deputy Commissioner of Income Tax, Circle-2(2), Ahmedabad

ITA 1321/AHD/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8007 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 31-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUDIT NAGPAL SRDR
• Assessee Lawyers: VIPUL B KHANDHAR
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 68; 69

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1321/AHD/2017 ( ASSESSMENT YEAR : 2013-14) SHRI SANJAY K. BISHNOI, 11, NIRAV PALACE, CHANDKHEDA, AHMEDABAD - 382424 / VS. DCIT, CIRCLE 2(2), AHMEDABAD ././ PAN/GIR NO. : AMUPB7496D ( APPELLANT ) .. ( !' / RESPONDENT ) # / APPELLANT BY : SHRI VIPUL B. KHANDHAR, A.R. !' $# / RESPONDENT BY : SHRI MUDIT NAGPAL, SR. D.R. % &'($) DATE OF HEARING 04/06/2018 *+, $) / DATE OF PRONOUNCEMENT 27/06/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-10, AHMEDA BAD (CIT(A) IN SHORT), DATED 20.03.2017 ARISING IN THE ASSESSMENT ORDER DATED 29.02.2016 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING ASSES SMENT YEAR 2013- 14. 2. ASSESSEE HAS FILED BELATED APPEAL BY TWELVE DAY S. CONSIDERING THE SMALLNESS OF DELAY, THE SAME STANDS CONDONED AN D THE APPEAL IS ADMITTED FOR HEARING. ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 2 - 3. AS PER THE CAPTIONED APPEAL, THE ASSESSEE HAS C HALLENGED THE ADDITION AGGREGATING AMOUNT OF RS.1,19,00,000/- ON ACCOUNT OF TEMPORARY LOANS TAKEN FROM FIVE PARTIES AS UNEXPLAI NED CASH CREDIT. 4. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL, IS ENGAGED IN THE BUSINESS OF WHOLESALES, TRADING, IMPORT AND EXPORT IN FOOD GRAIN AND PULSES. THE RETURN FILED BY THE ASSESSEE WAS SUBJE CTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF SCRUTINY ASSESSMENT, THE AO NOTICED THAT THE ASSESSEE HAS OBTAINED UNSECURED LOANS FROM CERT AIN PARTIES. IT WAS OBSERVED BY THE AO THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE DEPOSITORS. IN THIS REGARD, THE AO ALSO FOUND THAT THE PARTIES HAVE NOT RESPONDED T O THE NOTICES UNDER S. 133(6) OF THE ACT AND WERE NOT FOUND TRACEABLE. THE AO ACCORDINGLY CONCLUDED THAT THE UNSECURED LOAN AGGRE GATING TO RS.1,19,00,000/- IN RESPECT OF FOLLOWING PARTIES RE MAINS UNEXPLAINED. THE FIVE PARTIES ARE; (I) ANMOL TRADERS RS.20,00,00 0/-, (II) JALARAM FINVEST LTD. RS.34,00,000/-, (III) KALPANA TEXTILE RS.25,00,000/-, (IV) M. K. SALES RS.35,00,000/- AND (V) S. V. ENTERPRISE RS.5,00,000/-. HE ACCORDINGLY ADDED THE SAME TO THE TOTAL INCOME OF T HE ASSESSEE BY RESORTING TO SECTION 68 OF THE ACT. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 5.1. BEFORE THE CIT(A), THE ASSESSEE FILED ADDITION AL EVIDENCE IN THE FORM OF LEDGER COPY OF THE PARTIES AND BANK STATEME NTS. THE ASSESSEE ALSO SUPPORTED THE BONAFIDES OF THE LOANS BY WAY OF A CERTIFICATE FROM PUNJAB NATIONAL BANK REGARDING DEBIT AND CREDIT TRA NSACTIONS OF AFORESTATED PARTIES IN THE BANK ACCOUNT OF THE ASSE SSEE. THE CIT(A) OBTAINED A REMAND REPORT DATED 03.03.2017 FROM THE AO ON THE ISSUE. THE CIT(A), HOWEVER, DID NOT FIND MERIT IN THE APPE AL OF THE ASSESSEE AND CONFIRMED THE ACTION OF THE AO. ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 3 - 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6.1 THE LEARNED AR FOR THE ASSESSEE SHRI VIPUL B. KHANDHAR, AT THE OUTSET, SUBMITTED THAT THE ASSESSEE IS ENGAGED IN T HE BUSINESS OF TRADING, IMPORT AND EXPORT OF FOOD GRAINS AND PULSE S ETC. IN ORDER TO EXECUTE THE TRANSACTIONS OF IMPORT AND EXPORT. THE ASSESSEE OBTAINED SHORT TERM CREDIT FACILITIES FROM THE PRIVATE PARTI ES WHICH WERE REPLENISHED ALMOST IMMEDIATELY. THE CREDITS OBTAIN ED FROM THE BORROWERS WERE TEMPORARY AND FOR A VERY SHORT TERM PERIOD. THE LEARNED AR THEREAFTER REFERRED TO THE LEDGER ACCOUN T OF ALL THE FIVE PARTIES IN QUESTION AND SUBMITTED THAT AS REGARDS L OAN FROM ANMOL TRADERS AT PAGE NO.1 OF THE PAPER BOOK, THE ASSESSE E OBTAINED LOAN ON 03.04.2012 AMOUNTING TO RS.20 LAKHS, WHICH WAS REPA ID ON WITHIN 18- 20 DAYS ON 21.04.2012. THE LEARNED AR THEREAFTER R EFERRED TO THE BANK STATEMENTS OF THE ASSESSEE AS WELL AS THE BANK CERT IFICATE OBTAINED FROM ITS BANKER-PNB (PRODUCED BEFORE THE REVENUE AU THORITIES) TO ESTABLISH THAT THE LOAN OF TEMPORARY NATURE TO MEET ITS BUSINESS REQUIREMENT WAS OBTAINED FROM ANMOL TRADERS INDEED. THE RE-PAYMENT WAS ALSO MADE IN FEW DAYS TIME. SIMILARLY, AS REG ARDS JALARAM FINVEST LTD., THE TRANSACTIONS OF RECEIPTS AND REPA YMENT TO THE PARTY IS VOUCHED BY THE BANK STATEMENT AND CERTIFICATE. THE LEARNED AR THEREAFTER REFERRED TO ANOTHER PARTY NAMELY KALPANA TEXTILE WHERE THE LOAN WAS TAKEN ON 03.04.2012 AND REPAID ON 10.04.20 12 IN A GAP OF MERE SEVEN DAYS. THE LEARNED AR NEXT REFERRED TO T HE PARTY NAMELY M. K. SALES AND POINTED OUT THAT LOAN OF RS.15 LAKH S WAS REPAID THROUGH BANKING CHANNEL WITHIN TWO DAYS. ANOTHER A MOUNT OF RS.20 LAKHS WAS ALSO ALBEIT PAID IN FY 2014-15 THROUGH BANKING CHANNEL. THE LEARNED AR THEREAFTER REFERRED TO YET ANOTHER P ARTY, NAMELY, S. V. ENTERPRISE WHERE TEMPORARY LOAN OF RS.5 LAKHS WAS T AKEN ON 03.04.2012 AND REPAID WITHIN 20-25 DAYS ON 26.04.20 12. THE LEARNED ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 4 - AR, THUS, SUBMITTED IN ELABORATION THAT THIS PECULI AR FACTS OF PAYMENT RECEIVED FOR A VERY SHORT PERIOD AND REPAID THROUGH BANKING CHANNEL AS AFFIRMED BY THE SPECIFIC CERTIFICATE FROM THE BANK HAS BEEN TOTALLY OVERLOOKED BY THE REVENUE. 6.2 LEARNED AR SUBMITTED THAT IT IS NOT A CASE WHER E THE LOANS HAVE BEEN AVAILED FOR A LONG PERIOD OR REMAINED OUTSTAND ING. THE SHORT TERM TRADE LOANS CARRIED WITH IT OBLIGATION OF THE RE-PAYMENT IN THE NEAR PERIOD. THE ASSESSEE DULY DISCHARGED SUCH OBL IGATION. THE MONEY BY WAY OF TRADE LOANS WAS IN THE NATURE OF MO NEY TRANSACTED TO GIVE EFFECT TO THE BUSINESS OF IMPORT / EXPORT OF F OOD GRAINS AND PULSES. 6.3 THE LEARNED AR EMPHASIZED THAT THE CERTIFICATE FROM THE BANK ASSUMES A GREAT SIGNIFICANCE IN THE SENSE THAT LOAN S WERE TAKEN AND REPAID THROUGH BANKING CHANNEL TO THE SAME PARTIES. THE LEARNED AR POINTED OUT THAT IN SUCH CIRCUMSTANCES, IT IS HIGHL Y UNREASONABLE TO SAY THAT THE PARTIES ARE NOT IDENTIFIABLE. THE PARTIES HAVE BANK ACCOUNTS, WHICH NECESSARILY PRE-SUPPOSES EXISTENCE OF PAN AND CURRENT ADDRESS. THE LEARNED AR THEREAFTER EMPHASIZED THAT THE OVERW HELMING FACT OF RE-PAYMENT OF ALL LOANS IN A SHORT PERIOD CANNOT BE IGNORED. THE RECEIPT OF LOAN CANNOT BE CONSIDERED UNEXPLAINED ON THE FACT OF RE- PAYMENT THEREOF IN ENTIRETY. THE LEARNED AR SUBMIT TED THAT THE ASSESSEE IS NOT BENEFITTED IN THE FORM OF WRONGFUL FORMATION OF CAPITAL BY INTRODUCTION OF UNEXPLAINED CREDIT AS ALLEGED WH ICH IS TYPICAL OF WRONGFUL ENTRIES. THIS IS OWING TO THE FACT THAT L OANS RECEIVED FROM THE PARTIES HAVE BEEN RETURNED AFTER MEETING THE TE MPORARY BUSINESS REQUIREMENT. THE LEARNED AR SUBMITTED THAT THE ASS ESSEE HAS NO CONTROL OVER THE INFORMATION TOWARDS CREDITWORTHINE SS ETC. IN POSSESSION OF THE LENDER. THE ASSESSEE HAS NOT AVA ILED SUCH LOANS IN FUTURE AND THEREFORE IS NOT IN CONTACT WITH THESE P ARTIES. ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 5 - 6.4 THE LEARNED AR THEREAFTER SUBMITTED THAT WITH R EFERENCE TO ONE PARTY NAMELY JALARAM FINVEST LTD., THE AO HIMSELF IN THE REMAND REPORT HAS ACCEPTED THE IDENTIFICATION OF THE PARTY . THE LEARNED AR ALSO POINTED OUT THAT THE AFORESAID PARTY (JALARAM FINVEST LTD.) IS ON THE RECORD OF OTHER STATUTORY AUTHORITIES ALSO NAME LY MINISTRY OF CORPORATE AFFAIRS (MCA). THE REQUISITE DETAILS OF LENDERS UNDER THE STRICT GOVERNANCE OF THE MCA AS UPLOADED BY THE LEN DER ITSELF WAS PROVIDED TO THE REVENUE AUTHORITIES. 6.5 THE LEARNED AR ACCORDINGLY SUBMITTED THAT THE I NFERENCE DRAWN AGAINST THE ASSESSEE IN THE PECULIAR FACTS OF THE C ASE IS TOTALLY UNWARRANTED. THE CRUCIAL FACT OF RE-PAYMENT OF SUC H LOANS CANNOT BE IGNORED. THE LEARNED AR CONTENDED THAT THE ADDRESS ES PROVIDED BY THE LENDER AT THE TIME OF SHORT TERM LENDING, WAS SUBMI TTED TO THE AO WHICH MIGHT HAVE CHANGED. HOWEVER, THE FACTUM OF R E-PAYMENT TO SUCH PARTIES CANNOT BE IGNORED. THE LEARNED AR THUS SUBMITTED THAT THERE IS NO JUSTIFICATION FOR THE REVENUE TO INCREA SE THE ASSESSED INCOME ON ACCOUNT OF LOANS ALREADY RE-PAID. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND MATERIAL RE FERRED TO AND RELIED UPON IN THE COURSE OF HEARING. AS NOTED, THE ASSES SEE IN THE INSTANT CASE HAS DISPUTED THE ADDITIONS MADE ON ACCOUNT OF LOANS RECEIVED FROM FIVE PARTIES NAMED ABOVE. WHILE IT IS THE CAS E OF THE REVENUE THAT THE FIVE PARTIES WERE NOT FOUND AVAILABLE AT T HE ADDRESSES PROVIDED BY THE ASSESSEE AND THE ASSESSEE HAS FAILED TO PROV E THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION AND HENCE THE PROVISIONS OF SECTION 68 GET TRIGGERED, THE ASSESSE E ON THE OTHER HAND PLEADS THAT THE BONAFIDES OF THE TRANSACTIONS REQUI RES TO BE SEEN HAVING REGARD TO THE ENTIRETY OF THE FACTS. ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 6 - 7.1 ON GOING THROUGH THE FACTS OF EACH BORROWING, W E OBSERVE THAT WITH REGARD TO THE PARTIES NAMELY (I) ANMOL TRADERS , (II) KALPANA TEXTILE AND (III) S. V. ENTERPRISE; THE LOANS ARE A PPARENTLY VERY TEMPORARY IN NATURE FOR VERY FEW DAYS. APPARENTLY, THE RECEIPT OF LOAN IS THROUGH BANKING CHANNEL FROM THE BANK ACCOUNT OF LENDER. THE RE- PAYMENTS IN ALL THE THREE CASES HAVE BEEN MADE WITH IN A VERY SHORT SPAN OF TIME RANGING FROM TWO DAYS TO 25 DAYS. THU S, THE LOANS STOOD RE-PAID PROMPTLY. THIS OVERWHELMING FACT OF RE-PAY MENT ITSELF TRANSCENDS ALL OTHER CONSIDERATIONS. COUPLED WITH THIS, THE PATTERN OF RECEIPT AND RE-PAYMENT THEREOF CLEARLY SHOWS THE TR ANSACTION IN THE ORDINARY COURSE OF BUSINESS. NO DOUBT, THE ASSESSE E IS UNDER OBLIGATION TO PROVE THE NATURE AND SOURCE OF DEPOSI TS. THE REQUIREMENT, HOWEVER, CANNOT BE STRETCHED TO THE HI LT. THE NAME OF THE PARTIES FROM WHOM THE MONEY HAS BEEN RECEIVED A ND RE-PAID ARE APPEARING IN THE BANK STATEMENT WHICH IS FURTHER CO NFIRMED BY THE SPECIFIC CERTIFICATE OF RECEIPT AND RE-PAYMENT FROM THE BANK. THUS, WE ARE OF THE CONSIDERED VIEW THAT THE ONUS CAST UPON THE ASSESSEE IN TERMS OF SECTION 68 STANDS DISCHARGED IN RESPECT OF LOAN TRANSACTIONS FROM THESE THREE PARTIES. THUS, THE ORDER OF CIT(A ) CANNOT BE SUSTAINED IN RESPECT OF ADDITIONS ATTRIBUTABLE TO T HESE PARTIES. THE ADDITION MADE IN RESPECT OF THESE THREE PARTIES IS THEREFORE QUASHED. 7.2 WE SHALL NOW ADVERT TO ANOTHER PARTY NAMELY JAL ARAM FINVEST LTD. A PERUSAL OF THE ORDER OF THE CIT(A) CLEARLY SHOWS THAT THE AO HAS HIMSELF ACCEPTED THE IDENTIFICATION OF THE AFOR ESAID PARTY IN THE REMAND PROCEEDINGS. THIS APART OTHER FEATURES OF S IMILAR NATURE EXISTS IN THIS TOO I.E. THE LOANS ARE VERY TEMPORARY AND P ROMPTLY RE-PAID WITHIN A VERY SHORT SPAN OF TIME OF FEW DAYS. THE LENDER IS A REGISTERED COMPANY WITH THE MCA. THE MASTER DATA O F THE LENDER COMPANY IS AVAILABLE IN PUBLIC DOMAIN WHICH IS ALSO PLACED ON RECORD. THE TRANSACTIONS ARE VOUCHED FROM THE BANK CERTIFIC ATE. IN THESE CIRCUMSTANCES, THE PLEA OF THE ASSESSEE THAT THE LO AN OBTAINED FROM ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 7 - JALARAM FINVEST LTD. TO BE GENUINE IS WELL FOUNDED. THE ACTION OF REVENUE AUTHORITIES IS THUS SET ASIDE. THE ADDITIO N MADE ON THIS SCORE IS QUASHED. 7.3 WE SHALL NOW ADVERT TO THE LOAN TAKEN FROM ANOT HER PARTY, NAMELY, M. K. SALES AMOUNTING TO RS.35 LAKHS. A PE RUSAL OF THE BANK STATEMENT SHOWS THAT THE ASSESSEE HAS OBTAINED LOAN S OF RS.20 LAKHS AND ANOTHER RS.15 LAKHS DURING THE FINANCIAL YEAR. WHILE THE LOAN OF RS.15 LAKHS WAS RETURNED TO THE LENDERS WITHIN TWO DAYS, THE REMAINING LOAN OF RS.20 LAKHS WAS SHOWN TO BE OUTST ANDING DURING THE YEAR. IT IS THE CASE OF THE ASSESSEE THAT THE OUTS TANDING LOAN HAS ALSO BEEN EVENTUALLY RE-PAID IN THE FY 2014-15. HOWEVER , THE RE-PAYMENT OF RS.20 LAKHS IS NOT VOUCHED BY ANY BANK STATEMENT / BANK CERTIFICATE. THEREFORE, WE ARE UNABLE TO ASCERTAIN THE BONAFIDES OF LOAN OUTSTANDING OF RS.20 LAKHS. THUS, WE CONSIDER IT A PPROPRIATE TO SET ASIDE AND RESTORE THE ISSUE BACK ON ACCOUNT OF ADDI TIONS IN RESPECT OF LOANS FROM M. K. SALES TO THE FILE OF THE AO. THE AO IS DIRECTED TO VERIFY THE FACTUAL ASPECTS ON CLAIM OF RE-PAYMENT T O THE PARTY AND IF FOUND PROPER, IS DIRECTED TO GRANT APPROPRIATE RELI EF. IT SHALL BE OPEN TO THE AO TO MAKE APPROPRIATE INQUIRY FROM THE BANK TO LOCATE TOWARDS THE FACT OF RE-PAYMENT IF SO CONSIDERED EXPEDIENT. THUS, THE ACTION OF CIT(A) IS CANCELLED AND THE ADDITIONS MADE ON ACCOU NT OF RECEIPT FROM M. K. SALES IS REMITTED BACK TO THE FILE OF THE AO FOR NECESSARY VERIFICATION AS NOTED ABOVE TO ENABLE HIM TO PASS A FRESH ORDER IN ACCORDANCE WITH LAW. 7.4 AT THIS JUNCTURE, IT WILL BE RELEVANT TO NOTE T HE PERTINENT OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT VS. SMT. P. K. NOORJAHAN (1999) 237 ITR 570 (SC) IN THE CONT EXT OF THE EXPRESSION MAY WITH REFERENCE TO SECTION 69 OF TH E ACT. THE HONBLE SUPREME COURT IN THAT CASE OBSERVED THAT TH E WORD MAY SHOULD NOT BE READ AS SHALL. THE HONBLE SUPREME COURT HELD THAT ITA NO. 1321/AHD/17 [SHRI SANJAY K. BISHNOI VS. DCIT] A.Y. 2013-14 - 8 - THE EXPRESSION MAY INDICATES THAT THE INTENTION O F PARLIAMENT IN ENACTING SECTION 69 (SIMILAR TO SECTION 68) WAS TO CONFER A DISCRETION ON THE AO IN THE MATTER OF TREATING THE SOURCE OF I NVESTMENT, WHICH HAS NOT BEEN SATISFACTORILY EXPLAINED BY THE ASSESS EE. IN TERMS OF THE DECISION OF THE HONBLE SUPREME COURT, THE AO IS NO T OBLIGED TO INVOKE SECTION 68/S. 69 OF THE ACT IN EVERY CASE WH ERE THE EXPLANATION OFFERED IS FOUND TO BE UNSATISFACTORY IN THE OPIN ION OF THE AO. IN VIEW OF THE OVERRIDING FACT THAT LOANS SO OBTAINED STOOD RE-PAID THROUGH BANKING CHANNEL WITHOUT ANY REAL ADVANTAGE TO THE ASSESSEE, THE ONUS CAST UPON THE ASSESSEE IS SUBSTANTIALLY DI SCHARGED IN VIEW OF THE OBSERVATIONS OF THE HONBLE SUPREME COURT. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 27/06/2018 TRUE COPY S. K. SINHA / COPY OF ORDER FORWARDED TO:- ..' / REVENUE 2.' / ASSESSEE 0. ) % 1) / CONCERNED CIT 4. % 1)- / CIT (A) 4.5'67!8)8& 9 9 / DR, ITAT, AHMEDABAD :.7;<= / GUARD FILE. BY ORDER / 9 / 9 THIS ORDER PRONOUNCED IN OPEN COURT ON 27/06/20 18