Rattha Holding Company Pvt. Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1350/CHNY/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6575 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOMI RAJVANSH
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Unexplained cash credit; Onus to prove; Set aside
• Section: 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1350/CHNY/2017 ( )( / ASSESSMENT YEAR : 2006-07 M/S RATTHA HOLDING COMPANY PVT. LTD., 37, TTK ROAD, ALWARPET, CHENNAI - 600 018. PAN : AACCR 8160 K V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE V(3), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. B. RAMAKRISHNAN, FCA -.+, / 0 / RESPONDENT BY : SHRI HOMI RAJVANSH, CIT 1 / 2% / DATE OF HEARING : 11.04.2019 3') / 2% / DATE OF PRONOUNCEMENT : 30.04.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNA I, DATED 31.03.2017 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. SH. B. RAMAKRISHNAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERATION IS 2 I.T.A. NO.1350/CHNY/17 DISALLOWANCE OF 2,85,00,000/- AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') . THE ASSESSING OFFICER HAS ALSO DISALLOWED ANOTHER SUM OF 24,00,000/- BEING THE INTEREST PAID TO LOAN CREDITORS. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE BORROWED LOAN FROM 115 PERSONS THROUGH TWO FINANCIERS, NAMELY, SHRI ARUN P. KINGER AND SHRI PR EMCHAND KHAIRAN TO THE EXTENT OF 2,85,00,000/-. THE ASSESSEE FILED CONFIRMATION LETTERS FROM RESPECTIVE CREDITORS, THE IR ADDRESS AND PAN BEFORE THE ASSESSING OFFICER DURING THE SCRUTIN Y PROCEEDING. HOWEVER, ACCORDING TO THE LD. REPRESENTATIVE, THE A SSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE CREDITORS WERE NOT PRODUCED BY THE ASSESSEE FOR EXA MINATION. THE ASSESSING OFFICER ALSO FOUND THAT THE CREDITWORTHIN ESS OF THE CREDITORS WAS NOT ESTABLISHED. ACCORDING TO THE LD . REPRESENTATIVE, THE ASSESSEE BORROWED MONEY THROUGH TWO FINANCIERS. THE CREDITORS PAID THE LOAN TO THE ASSESSEE DIRECTLY. THEY HAVE ALSO FILED CONFIRMATION LETTERS, COMPLETE ADDRESS AND TH EIR PAN. THE ENTIRE LOAN WAS BORROWED THROUGH BANKING CHANNEL. ACCORDING TO THE LD. REPRESENTATIVE, WHEN THE ASSESSEE HAS FILED CONFIRMATION LETTERS, ADDRESS OF CREDITORS AND THEIR PAN, THE AS SESSEE HAS DISCHARGED ITS ONUS. THE ASSESSING OFFICER CAN SUM MON THEM IF 3 I.T.A. NO.1350/CHNY/17 NECESSARY, AND FIND OUT THEIR IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS. WITHOUT EXAMINING AND WITHOU T EVEN SUMMONING, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER CAME TO A CONCLUSION THAT THE CREDITWORTHIN ESS OF THE CREDITORS WAS NOT ESTABLISHED. THEREFORE, ACCORDIN G TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS ESTABLISHED IDENTI TY OF CREDITORS, CREDITWORTHINESS OF CREDITORS AND GENUINENESS OF TR ANSACTION. SINCE THE ASSESSING OFFICER HAS NOT TAKEN ANY STEP TO VER IFY THE DETAILS FILED BY THE ASSESSEE, THE BURDEN OF PROOF CANNOT B E SHIFTED TO THE ASSESSEE. THEREFORE, ACCORDING TO THE LD. REPRESEN TATIVE, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE ADD ITION MADE BY THE ASSESSING OFFICER. 3. ON THE CONTRARY, SHRI HOMI RAJVANSH, THE LD. DEP ARTMENTAL REPRESENTATIVE, SUBMITTED THAT SHRI PREMCHAND KHAIR AN, ONE OF THE FINANCIERS, WHO ARRANGED THE LOAN, WAS EXAMINED BY THE ASSESSING OFFICER. IN THE BOOKS OF SHRI PREMCHAND KHAIRAN, N O DETAILS OF THE LOAN GIVEN TO THE ASSESSEE-COMPANY WERE FOUND. ACC ORDING TO THE LD. D.R., THE CIT(APPEALS) ALSO CALLED FOR REMAND R EPORT FROM THE ASSESSING OFFICER. ON THE BASIS OF THE EXAMINATION MADE BY THE ASSESSING OFFICER, ACCORDING TO THE LD. D.R., THE L OAN TRANSACTION 4 I.T.A. NO.1350/CHNY/17 WAS FOUND TO BE BOGUS AND IT WAS ALSO FOUND THAT TH E CREDITORS HAVE NO CREDITWORTHINESS TO ADVANCE LOAN TO THE ASSESSEE -COMPANY. ACCORDING TO THE LD. D.R., THE ASSESSEE HAS NOT PRO DUCED THE CREDITORS BEFORE THE ASSESSING OFFICER EITHER AT TH E TIME OF ORIGINAL ASSESSMENT OR AT THE TIME OF REMAND PROCEEDING. AC CORDING TO THE LD. D.R., MERE SUBMISSION OF CONFIRMATION LETTERS F ROM THE CREDITORS ALONG WITH THEIR INCOME-TAX RETURNS WOULD NOT AMOUN T TO DISCHARGING OF RESPONSIBILITIES BY THE ASSESSEE. ACCORDING TO THE LD. D.R., THE ASSESSEE OUGHT TO HAVE PRODUCED CREDITORS FOR EXAMI NATION, THEREFORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED T HE ADDITION MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. FOR ESTABLISHING CREDIT IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAS TO NECESSARILY ESTABLISH THE IDENTITY OF CREDITORS, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF CREDITORS. IN THE CASE BEFORE US, THE ASSESSEE ADMITTEDLY RECEIVED LOAN FROM 115 PERSONS. THE CIT (APPEALS) AT PARA 6.4. OF HIS ORDER HAS OBSERVED AS FOLLOWS:- I HAVE PERUSED THE ASSESSMENT ORDER, REMAND REPORT AND CONSIDERED THE SUBMISSIONS ALONG WITH REJOINDER FILED BY THE LD. AR. THE UNDISPUTED FACTS ARE THAT APPELLAN T HAD 5 I.T.A. NO.1350/CHNY/17 TAKEN LOANS AMOUNTING TO 2,85,00,000/- FROM 115 PERSONS. THE SAID LOANS WERE DIRECTLY RECEIVED FROM 115 PERSO NS BY THE APPELLANT COMPANY AND THE SAME WERE CREDITED IN ITS BOOKS OF ACCOUNT. IT IS ALSO A FACT THAT CREDITORS HAS GIVEN LOAN BY WAY OF CHEQUE TO THE APPELLANT COMPANY. TH E FACT SHOWS THAT THE TRANSACTIONS OF LOAN HAVE BEEN CONDU CTED THROUGH BANKING CHANNELS. FURTHER, AS REGARDS THE TWO FINANCIERS ARE CONCERNED, THE FACTS INDICATE THAT T HE FINANCIERS, NAMELY, SHRI ARUN P. KHINGER AND SHRI P REMCHAND KHAIRAN, HAD ONLY BROKERED IN ARRANGING LOAN BUT LO ANS WERE DIRECTLY GIVEN BY 115 CREDITORS TO THE APPELLANT. 5. IN VIEW OF THE ABOVE OBSERVATION OF THE CIT(APPE ALS), IT IS OBVIOUS THAT THE MONEY AS LOAN FROM THE ACCOUNTS OF 115 PERSONS WERE TRANSFERRED TO THE ASSESSEE-COMPANY THROUGH BA NKING CHANNEL. THE ASSESSEE IS EXPECTED TO ESTABLISH THE IDENTITY OF CREDITORS, CREDITWORTHINESS OF CREDITORS AND GENUIN ENESS OF TRANSACTION. IT IS NOT IN DISPUTE THAT THE ASSESSE E HAS FILED CONFIRMATION LETTERS FROM THE RESPECTIVE CREDITORS, COPIES OF INCOME- TAX RETURNS, ETC. PERTAINING TO ABOVE SAID CREDITOR S. IN FACT, THE CIT(APPEALS) AT PARA 6.8 OF HIS ORDER HAS OBSERVED AS FOLLOWS:- 6.8 IN THE APPELLANTS CASE, LOANS WERE ADVANCED BY 115 PERSONS. IT IS AN ADMITTED FACT OF THE CASE THA T THE CREDITORS WERE NOT PRODUCED BEFORE THE A.O. AT THE TIME OF ASSESSMENT OR AT THE TIME OF REMAND PROCEEDINGS. M ERE SUBMISSION OF CONFIRMATION LETTERS ALONG WITH INCOM E TAX RETURNS FILED, PERTAINING TO 115 PERSONS, CANNOT BE CONSIDERED AS ONUS IS DISCHARGED. 6 I.T.A. NO.1350/CHNY/17 6. THE QUESTION ARISES FOR CONSIDERATION IS WHEN TH E ASSESSEE HAS FILED CONFIRMATION LETTERS ALONG WITH INCOME-TA X RETURNS BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS), WHETHER THAT WOULD AMOUNT TO DISCHARGE OF ITS LIABILITY? WE HAV E CAREFULLY GONE THROUGH THE COPIES OF CONFIRMATION LETTERS AVAILABL E AT PAPER-BOOK. THE CONFIRMATION LETTERS CLEARLY INDICATE THE NAMES , ADDRESS OF CREDITORS AND THEIR PAN. WHEN THE ASSESSEE HAS FU RNISHED THE ADDRESS OF THE CREDITORS AND THEIR RESPECTIVE PAN, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS DISCHA RGED ITS LIABILITY. THEREFORE, IT IS FOR THE ASSESSING OFFICER TO TAKE ACTION AS FOUND BY THE APEX COURT IN CIT V. ORISSA CORPORATION P. LTD. (1986) (159 ITR 78). ONCE THE ASSESSEE HAS DISCHARGED ITS LIABILIT Y BY IDENTIFYING THE CREDITORS AND TRANSACTION DETAILS, THIS TRIBUNA L IS OF THE CONSIDERED OPINION THAT THE ONUS OF PROOF IS SHIFTE D ON THE SHOULDER OF ASSESSING OFFICER. THEREFORE, THE ASSESSING OFF ICER CANNOT BLAME THE ASSESSEE BY SAYING THAT THE ASSESSEE HAS NOT PRODUCED THE CREDITORS BEFORE HIM EITHER IN THE ASSESSMENT P ROCEEDINGS OR IN THE REMAND PROCEEDINGS. 7. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE HAS FURNISHED DETAILS, IT IS FOR THE ASSES SING OFFICER TO 7 I.T.A. NO.1350/CHNY/17 SUMMON THOSE PERSONS IN EXERCISE OF HIS POWER IN CA SE HE DOUBTS THE TRANSACTION. IN THOSE CIRCUMSTANCES, THIS TRIB UNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS ESTABLISHE D THE IDENTITY OF CREDITORS. THE ASSESSEE HAS RECEIVED MONEY THROUGH BANKING CHANNEL. NO DOUBT, MERE TRANSFER OF FUNDS THROUGH BANKING CHANNEL MAY NOT ESTABLISH THE GENUINENESS OF TRANSACTION. IN THIS CASE, THE ASSESSEE HAS FURNISHED DETAILS BEFORE THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS). BOTH THE AUTHORITIES BELOW HA VE NOT EXAMINED THE GENUINENESS OF TRANSACTION. THE CONTENTION OF THE REVENUE IS THAT THE ASSESSEE HAS NOT PRODUCED THE CREDITORS. HAVING FILED THE DETAILS OF NAME, ADDRESS AND PAN OF RESPECTIVE CRED ITORS, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT IT IS FO R THE ASSESSING OFFICER TO EXAMINE FURTHER. 8. SINCE THE ASSESSING OFFICER HAS NOT TAKEN ANY FU RTHER ACTION, AS HELD BY THE APEX COURT IN ORISSA CORPORATION P. LTD. (SUPRA), THE ASSESSING OFFICER CANNOT DOUBT THE GENUINENESS OF T RANSACTION AND CREDITWORTHINESS OF CREDITORS. IN VIEW OF THE ABOV E, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS EST ABLISHED THE REQUIRED FACTS AND ALSO DISCHARGED ITS ONUS BY PROD UCING NECESSARY MATERIAL. IN SUCH CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED 8 I.T.A. NO.1350/CHNY/17 OPINION THAT THERE CANNOT BE ANY DISALLOWANCE. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF THE BOTH THE AUTHORITIES BELOW. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ADDITION MADE BY THE ASSESSIN G OFFICER IS DELETED. 9. SINCE THE ADDITION MADE ON ACCOUNT OF LOAN WAS D ELETED, NATURALLY THE PAYMENT OF INTEREST HAS ALSO TO BE AL LOWED AS DEDUCTION. THEREFORE, THE DISALLOWANCE OF 24,00,000/- BEING THE INTEREST ON THE ABOVE SAID LOAN IS ALSO DELETED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 30 TH APRIL, 2019 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESA N) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 30 TH APRIL, 2019. KRI. 9 I.T.A. NO.1350/CHNY/17 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-3, CHENNAI-34 4. PRINCIPAL CIT-5, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.