AI Insights
The case involves Shree Shivam Cotton Industries appealing against the order of the National Faceless Appeal Centre (NFAC), which had confirmed additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The additions pertained to unsecured loans taken from two depositors, which the NFAC upheld due to insufficient evidence of their creditworthiness and genuineness. The Tribunal, after examining the detailed submissions and evidence provided by the assessee, including confirmations and bank statements, concluded that the assessee had adequately proved the legitimacy of the loans and thus allowed the appeal.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 124025 (ITAT-RAJKOT)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
9 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-02-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
DB
Next Hearing Date
06-02-2023
Assessment Year
2017-2018
Appeal Filed On
28-04-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH VIRTUAL COURT ] Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Shree Sh ivam Co tto n In dustries, At Rohishala, Ro hishala Road, Tal, Tankara, Dist-Rajk ot-3 63650 PAN: ACCF S5899 R (Appellant) Vs The ITO, Ward-5, Morbi (Resp ondent) Asses see by : Shri Sumit Shing ala, A.R. Revenue by : Shri B. D. Gupta, Sr. D. R. Date of hearing : 07-02 -2 023 Date of pronouncement : 22-02 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This assessee’s appeal for A.Y. 2017-18, arises from order of National Faceless Appeal Centre (NFAC), Delhi dated 17-09-2021, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”. 2. The assessee has taken the following grounds of appeal:- ITA No. 142/Rjt/2022 Assessment Year 2017-18 I.T.A No. 142/Rjt/2022 A.Y. 2017-18 Page No Shree Shivam Cotton Industries vs. ITO 2 “1. The Ld. AO has erred in making addition u/s. 68 towards Loan of Rs.1,29,000/- and Rs.1,00,000/- accepted during the year under reference. 2. The Ld. CIT(A) has erred in passing a summary order without giving any finding on the submission made and case laws cited by the appellant. The appellant herein, craves leave to add, amend, alter, and/or delete any or more grounds of appeal, on or before hearing of the appeal.” 3. Before we go into the merits of the case, we observe that there is delay of 164 days in filing of appeal. The counsel for the assessee submitted that the order was passed by ld. CIT(A) u/s. 250 of the Act and was served electronically on the assessee on 17-09-2021. The limitation period being 60 days would have expired on 16-12-2021. However, owing to the Covid Pandemic and considering the effect of order passed by Hon’ble Supreme Court in the case Re: Cognizance for Extension of Limitation, Suo Moto Writ (Civil) No. 3 of 2020, the period till 28-02-2022 would have excluded in computing the limitation period. Accordingly, in view of the above, there is no delay in filing of appeal by the assessee. In view of the above contentions of the assessee, since, the delay of the assessee is falling in the Covid period and the limitation period has been excluded in view of the judgment cited by the assessee by Hon’ble Supreme Court, the delay in filing of appeal by the assessee is hereby condoned. 4. On merits, the brief facts of the case are that the assessee is a partnership ship firm engaged in the business of cotton ginning & pressing. During the year under consideration, the assessee had shown total income of Rs. 87,680/-. During the course of assessment, the Assessing Officer observed that the assessee had taken unsecured loan from three depositors I.T.A No. 142/Rjt/2022 A.Y. 2017-18 Page No Shree Shivam Cotton Industries vs. ITO 3 but the asessee had not submitted any evidence to show the creditworthiness and genuineness of the three depositors. Accordingly, a show cause notice was issued to the assessee to provide evidence in support of the aforesaid depositors. The submissions filed by the assessee taken on record and the Assessing Officer accepted the contentions of the assessee in respect of unsecured loan taken from Shri Jayesh Chandalal for a sum of Rs. 2,50,000/-. However, the Assessing Officer added a sum of Rs. 2,29,000/- in respect of unsecured loan taken from two persons Shri Prakashbhai Shivbhai (Rs. 1,29,000/-) and Shri Shivbhai Manjibhai (Rs. 1,00,000/-). 5. The assessee appeal filed before ld. CIT(A) and also filed certain additional evidences in the form of confirmation of Shri Prakashbhai Shivbhai and certain other details were also filed before ld. CIT(A). However, the ld. CIT(A) rejected the contentions of the assessee and dismissed the appeal of the assessee with the following observations:- “1. DECISION:- The order u/s 143(3), statement of facts and the submission furnished by the appellant have been considered. 2. In this case, the appellant received unsecured loan amounting to Rs. 4,79,000/- from three parties. Out of which, the A.O. disallowed Rs. 2,29,000/- as the credit worthiness of the transaction could not be established and added back the same to the total income of the appellant. 3. In respect of loan taken from Prakashbhai Shivlal Koringa amounting to Rs. 1,29,000/- , it is seen that he has a total annual income of Rs. 2,50,000/- only. From his bank account, it is seen that he deposited cash of Rs 1,52,5007- in his bank account which was later on transferred to the appellant by way of a demand draft. 4. In respect of loan taken from Shivlal Manjibhai Patel amounting to Rs. 1,00,000/-, it is seen that the depositor is an agriculturist and is not assessed to tax. From the bank account of Shivlal Manjibhai Patel it is seen that he received an amount of Rs 97,000/- from Laxmiben Manjibhai, his close family member. Another amount of Rs. 3000 was deposited in cash and an amount of Rs 1,00,000/- was transferred to the appellant. From the bank account of Laxmiben Manjibhai it is seen that before transferring the amount of Rs 97,000/-, cash of Rs 1,47,000/- was deposited in cash in her account This amount of Rs 1,47,000/- was deposited in cash on 18-11-2016 (Rs. I.T.A No. 142/Rjt/2022 A.Y. 2017-18 Page No Shree Shivam Cotton Industries vs. ITO 4 49,000/-), 21-11-2016 (Rs 49,000/-) and 22-11-2016 (Rs 49,000/-). It shows that cash of Rs 1,49,000/- was deposited in sums just below Rs. 50,000/- to avoid detection by system. 5. Therefore, the credit worthiness of the depositors could not be established. In view of the above, the addition made by the AO of Rs. 2,29,000/- is confirmed and accordingly ground no.1 of the appeal is DISMISSED.” 6. The assessee is in appeal before us against the order passed by ld. CIT(A). The counsel for the assessee submitted that in the instant facts the assessee has clearly proved the identity of the parties, creditworthiness of the parties and the genuineness of the transaction and both the additions in respect of the two depositors were added without any basis in the hands of the assessee. In respect of the first depositor, Shri Prakashbhai Shivbhai, the assessee submitted that Shri Prakashbha Shivbhai is a mechanical engineer and was working with M/s. Ajanta India Ltd. for a long time. His yearly salary was about 2,50,000/-. He is having PAN No. CURPK2255A and had filed return of income for assessment year 2016-17 & 2017-18 even though his income was below taxable limit. The counsel for the assessee submitted that Shri Prakashbhai Shivbhai was receiving salary in cash from the company and he was handing the salary to his father Shri Shivlal Manjibhai who is an agriculturist. At the time of demonetization, his father gave him old currency note of Rs. 1,52,500/- to deposit in the bank account and accordingly on the first day of cancellation of old notes i.e. 09-12-2016 he made cash deposits in his bank account. The depositor/creditor gave loan to the assessee from the aforesaid cash deposits in this bank account. The counsel for the assessee drew our attention to page 18 of the paper book which is the Confirmation of the depositor Shri Prakashbhai Shivbhai. Accordingly, the counsel for the assessee submitted that in the instant facts, I.T.A No. 142/Rjt/2022 A.Y. 2017-18 Page No Shree Shivam Cotton Industries vs. ITO 5 the identity, genuineness of the transaction and creditworthiness of the party has been clearly established. 6.1 In respect of the second depositor, the counsel for the assessee submitted that Shri Shivlal Manjibhai, who had advanced a sum of Rs. 1,00,000/-, the counsel for the assessee submitted that he is an agriculturist having 9 bighas of agricultural land. The depositor Shri Shivlal Manjibhai had taken loan of Rs. 97,000/- on 22-02-2017 from Smt. Laxmiben Manjibhai who is having 12 bighas of agricultural land as per copy of agricultural forms. The counsel for the assessee submitted that the details of land possessed by Smt. Laxmiben Manjibhai, copy of confirmation to the effect she had given a sum of Rs. 97,000/- to Shri Shivlal Manjibhai and copy of bank passbook of Shri Shivlal Manjibhai were already submitted during the course of appellate proceedings before ld. CIT(A). Accordingly, not only has the assessee demonstrated the identity of the creditor but has also furnished proof of source of source of money received by the creditor from which the above amount of Rs. 1,00,000/- was advanced to the assessee. Copy of bank passbook of the depositor/creditor, copy of confirmation of depositor Shri Shivlal Manjibhai, copy of confirmation of Smt. Laxmiben Manjibhai, details of possession of agricultural land by Shri Shivlal Manjibhai have all been furnished. Accordingly, the ld. CIT(A) has erred in confirming addition of Rs. 1,00,000/- in the hands of the assessee firm from Shri Shivlal Manjibhai. In response, the ld. Departmental Representative relied upon the observations made by the ld. CIT(A) in the appellate proceedings. I.T.A No. 142/Rjt/2022 A.Y. 2017-18 Page No Shree Shivam Cotton Industries vs. ITO 6 7. We have heard rival contentions and perused the material on record. We observe that the ld. Assessing Officer has made two additions in respect of unsecured loans taken from Shri Prakashbhai Shivbhai of Rs. 1,29,000/- and from Shri Shivlal Manjibhai of Rs. 1,00,000/-. In our considered view from the details placed on record before us, we observe that so far as the first creditor, Shri Prakashbhai Shivbhai is concerned, the assessee has placed on record confirmation from such creditor. Further, we also observe that the creditor is having PAN and had filed return of income of approximately Rs. 2,50,000/- for assessment years 2016-17 & 2017-18, he is a mechanical engineer by profession and has been working for M/s. Ajanta India Ltd. for past many years, copy of his bank passbook was also furnished. We also observe that the aforesaid loan was also repaid back by the company to Shri Shivlal Manjibhai and copy of account statement reflecting the repayment to Shri Prakashbhai Shivbhai has also been produced before us. Accordingly, looking into the above facts, we are of the considered view that the assessee has been able to substantiate identity, creditworthiness and genuineness of transactions in respect of unsecured loan taken from Shri Prakashbhai Shivbhai. Coming to the second creditor Shri Shivlal Manjibhai, we observe that the assessee has filed various details like copy of confirmation from Shri Shivlal Manjibhai before ld. CIT(A), copy of agricultural forms Shri Shivlal Manjibhai, copy of confirmation from Smt. Laxmiben Manjibhai dated 10- 06-2021 to the effect that he had advanced a sum of Rs. 97,000/- to Shri Shivlal Manjibhai, copy of agricultural forms of Shri Shivlal Manjibhai were also furnished before ld. CIT(A) during the course of appellate proceedings. Further, before us, the counsel for the assessee has also produced extracts of the bank statement reflecting repayment of the above I.T.A No. 142/Rjt/2022 A.Y. 2017-18 Page No Shree Shivam Cotton Industries vs. ITO 7 amount back to Shri Laxmiben Manjibhai which was repaid through banking channel. In the light of the above facts, we are of the considered view that the assessee has been able to establish identity, creditworthiness and genuineness of the transaction in respect of both the unsecured loans. Accordingly, in the light of the above facts, we are of the considered view that in the instant set of facts, the above amount of unsecured loan are not liable to be added to the income of the assessee and accordingly, the additions are directed to be deleted. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 22-02-2023 Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/02/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot
