Assistant Commissioner of Income Tax , Vapi Circle, Vapi V. M/s Vishal Ispat, Pardi

ITA 154/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3844 (ITAT-SURAT)
• Duration Of Justice: 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-01-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 01-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Unexplained investment; Capital asset; Business income; Depreciation; Source of fund; Deemed to accrue or arise in india; Additional evidence; TDS; Set aside
• Section: 68; 69; 37; 2; 43B; 143(3); 142(1); 143(2); 194A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.154/SRT/2023 Assessment Years: (2017-18) (Physical Hearing) Assistant Commissioner of Income Tax,Vapi Circle, Fortune Square-II, 7thFloor,Room No.704, Daman Road, Chala, Vapi-396191 Vs. M/s Vishal Ispat, 38/2P, 39/4, 5 & 6, Vishal Ispat, Vatar Road, Moral, Pardi – 396191. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAHFV8677R (Appellant) (Respondent) Appellant by Shri Ravinder Sindhu, CIT(DR) Respondent by Shri Rasesh Shah, CA Date of Hearing 12/01/2024 Date of Pronouncement 15/02/2024 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 03.01.2023, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 17.12.2019. 2. The grounds of appeal raised by the Revenue are as follows: “1. Whether on the facts and in the circumstances of the case in law, the Ld.CIT(A) has erred in deleting the addition made on account of section 69 of the I.T. Act. 2 154/SRT/2023/AY.2017-18 M/s Vishal Ispat 2. Whether on the facts and in the circumstances of the case and in Law, the learned CIT(A) has erred in deleting the addition made on the account of section 24 of the I.T. Act. 3. Whether on the facts and circumstances of the case and in Law, the Ld.CIT(A) has erred in deleting the addition made on the account of cash deposit under Section 68 of the I.T. Act. 4. Whether on the facts and circumstances of the case and in Law, the Ld.CIT(A) has erred in not providing sufficient time to the assessing officer to provide its comment on the Remand report which is clear violation of Rule 46A of the I.T. Rules, 1962. 5. It is therefore, prayed that the order of the CIT(A) may be directed to afford the reasonable opportunity to the assessing officer to examine the fresh evidence submitted by the assessee and admitted by the appellate authority and thus, the matter may be set aside to the file of the Ld.CIT(A) to afford the reasonable opportunity to the assessing officer to examine the veracity and merits of the fresh evidences submitted by the assessee. 4. The appellant craves to add, modify or alter any grounds during the course of appeal proceedings.” 3. Ground No.1 raised by the Revenue, relates to deletion of addition made by the Assessing Officer under section 69 of the Act. 4. Brief facts of the issue in dispute are stated as under. The assessee is an individual and is engaged in the business of manufacturing and trading of steel. The assessee has earned income from House Property, Income from Business and Profession and income from other sources. The assessee filed return of income for assessment year (A.Y.) 2017-18 on 27/10/2017, declaring a total income of Rs.81,34,710/-. Thereafter, the case was selected for complete scrutiny through CASS. A notice u/s 143(2) of the Income Tax Act, 1961 was issued on 21/09/2018, which was duly served on the assessee on 21/09/2018. Thereafter, a notice u/s 142(1) of the Income Tax Act, 1961 along with a detailed questionnaire, calling for details and explanations, was issued on 09/11/2019, and 02/12/2019. In 3 154/SRT/2023/AY.2017-18 M/s Vishal Ispat response to notices, the assessee has e-filed his submissions and furnished the required details before the assessing officer on 15/11/2019, 13/12/2019, 16/11/2019. 5. On perusal of the unsecured loans as seen from the Balance sheet for the year ending 31.3.2017, the assessing officer noted the assessee has during the year squared off unsecured loans from Tushit Bansal amounting to Rs.20,00,000, Kavita Bansal amounting to Rs.30,00,000, Ankur Thakkar Rs.87,10,700. It is observed that the assessee has taken a loan of Rs.70,89,932/- during the year, being difference of unsecured loan as at 31.03.2017 and as at 31.03.2016. It has squared off, the unsecured loan to the extent of Rs.1,37,10,700/- in addition to other loans squared off, as seen from Form 3CD, in the following cases: The confirmations of the said loans and documents pertaining to their creditworthiness was obtained and analyzed in cases in which the assessee gave confirmations as indicated above. Perusal of the same shows that the said loan has been acquired from relatives. Though interest has been shown to have been paid but no TDS u/s 194A has been deducted as per the confirmations given. Perusal of the Form 4 154/SRT/2023/AY.2017-18 M/s Vishal Ispat no.3CD, clause 23 in respect of 40A(2)(b) transactions does not match with the repayment schedule as seen in clause 31(c) of the said Tax audit report. No confirmation in these instances of squaring of the loans has been given. Moreover, the bank statement and the capital account have not been furnished though several opportunities were given. The copies of the financial statements and ITR have also not been filed. This shows that the said above parties are dubious and the transactions as noted above are also suspicious and non-genuine. Since, the transactions were not explained with evidences and circumstances of the case, this amount of Rs.3,72,10,700 which has been squared off for repaying the unsecured loan of Rs.3,72,10,700/- was found to be unexplained investment u/s 69 of the Income-tax Act, and therefore assessing officer made the addition. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition made by the Assessing Officer, observing as follows: “Decision: It can be noticed from the assessment order that the assessing officer had called for the details of loans repaid during the relevant previous year in respect of the above 5 loan creditors. As already mentioned above, the assessing officer found that the compliance by the assessee is inadequate and so held the said "repayments" as unexplained investments u/s 69 of the I T Act. The assessing officer in initial part of order stated that the confirmations of the said loans and documents pertaining to their creditworthiness was obtained and analyzed and that perusal of the same shows that the said loan has been acquired from relatives. The assessing officer contradicts this by also stating in the same para that "No confirmations in these instances of squaring of the loans has been given and also that the bank statement as well as the capital account has not been furnished though several opportunities were given even as the copies of the Financial statements & ITR has also not been filed. While this contradiction is so, the appellant filed all the said details upon which the assessing officer had not submitted any comments/remarks inspite of a remand report specifically being called for upon the additional evidences submitted by the appellant. 5 154/SRT/2023/AY.2017-18 M/s Vishal Ispat Before adverting further, it is pertinent to take a look at the evidences submitted by the appellant in respect of the said repayments. Ankur Sadrubhai Thakkar He is assessed to with ITO ward-1[New], Vapi, Gujarat under PAN: ABBPT9708Q. For the relevant AY the loan creditor filed his RoI vide Ack. No.263241611281017 dated 28-10-2017. He is in the business of trading in the name and style of Ankur Traders and clocked a turnover of Rs 2.70 crores in the relevant year. He had confirmed the transactions with the appellant and the same are reflected in the bank statements held by him in Cosmos Cooperative Bank and HDFC Bank. As seen from the accounts, the loan transaction between this creditor and the appellant is as follows: 6 154/SRT/2023/AY.2017-18 M/s Vishal Ispat It can be noticed that there is an opening balance of Rs.82,01,976 and a further loan of Rs.12,00,000 on two occasions. As against the total sum of Rs.94,01,976 due, the appellant repaid an amount of Rs.87,10,700 on 11 occasion starting from 27.04.2016 to 26.12.2017 leaving a balance of Rs.6,91,976 due to the loan creditor. The repayments transactions that were doubted by the assessing officer were perused from the evidences submitted and it is noticed that all the repayments to the tune of Rs.87,10,700 were all made from the appellants cash credit account held with M/s Cosmos Cooperative Bank and from the credit funds available from the cash credit facility. This shows that the immediate and effective source of the funds that were utilised to repay the loans is the cash credit facility provided by the Cosmos Cooperative bank. Further, the said bank account is duly disclosed in the books of account. Secondly, most of the repayment was against the previously availed loan as the opening balance itself is Rs.82,01,976. As stated above, the assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. Kavita Bansal She is assessed to with ITO ward-2[New], Vapi, Gujarat under PAN: AGKPK2150K. For the relevant AY the loan creditor filed his RoI vide Ack. No.281202020311017dated 31-10-2017. In the return of income filed by her, She had shown an income from house property and other sources (interest) to the tune of Rs.8,97,670 apart from share of profits from partnership firms to the tune of Rs.44,37,061 in the relevant year. She had confirmed the transactions with the appellant and the same are reflected in the bank statements held by her in Cosmos Cooperative Bank and HDFC 7 154/SRT/2023/AY.2017-18 M/s Vishal Ispat Bank. As seen from the accounts, the loan transaction between this creditor and the appellant is as follows: It can be noticed that there is an opening balance of Rs.35,51,736 and a further loan of Rs.37,00,000 on two occasions. As against the total sum of Rs.76,86,868 due, the appellant repaid an amount of Rs.30,00,000 on 29.09.2016 leaving a balance of Rs.46,86,868 due to the loan creditor. The repayments transactions that were doubted by the assessing officer were perused from the evidences submitted and it is noticed that all the repayments to the tune of Rs.30,00,000 was entirely made from the appellants cash credit account held with M/s Cosmos Cooperative Bank and from the credit funds available from the cash credit facility. This shows that the immediate and effective source of the funds that were utilized to repay the loans is the cash credit facility provided by the Cosmos Cooperative bank. Further, the said bank account is duly disclosed in the books of account. Further the appellant paid an interest on the loan availed and the same is subjected to TDS by the appellant which same is seen as reflected in the creditors return of income. As stated above, the assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. 8 154/SRT/2023/AY.2017-18 M/s Vishal Ispat Lakshit Bansal It can be noticed from the above that the appellant received Rs.50,00,000 from the loan creditor on 27-05-2016 through HDFC bank and returned the same on 31-05-2016 again through HDFC bank. The loan transactions are reflected in the appellant’s 3CD report in columns 31(a) and 31(c). As stated above, the assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. Naveen Bansal He is assessed to with ITO Circle [New], Vapi, Gujarat under PAN: AANPB7475M. For the relevant AY the loan creditor filed his RoI vide Ack. No. 185383081240817 dated 24-08-2017. He is in the business of trading in the name and style of Naveen Steels and clocked a turnover of Rs.385 crores in the relevant year. He had confirmed the transactions with the appellant and the same are reflected in the bank statements held by him and the loan transaction between this creditor and the appellant is a s follows: 9 154/SRT/2023/AY.2017-18 M/s Vishal Ispat It can be noticed from the above that the appellant received funds from the above loan creditor on 5 occasions from 30.05.2016 to 31.03.2017 in all amounting to Rs.3,48,50,000 while the appellant repaid an amount of Rs.1,53,50,000 on 4 occasions between 22.05.2016 to 23.03.2017 leaving a balance due of Rs.1,95,00,000. A perusal of the above shows that the receipt and repayment of Rs.80,00,000 and Rs.16,50,000 on 31.05.2016 & 06.06.2016 respectively were on the same day. This being so, the assessing officer while douting the repayment had added back the closing balance of Rs.1,95,00,000 while the actual repayment is Rs.1,53,50,000 i.e., the assessing officer added the closing balance lying in the account while is the amount received by the appellant on 31.03.2017 through HDFC bank of loan creditor to HDFC bank account of appellant. As stated above, the assessing officer had not submitted any comments/remarks in spite of a 10 154/SRT/2023/AY.2017-18 M/s Vishal Ispat remand report specifically being called for upon the additional evidences submitted by the appellant. Nawal Bansal HUF He is assessed to with ITO ward-2[New], Vapi, Gujarat under PAN: AAFHN2284L. For the relevant AY the loan creditor filed his RoI vide Ack. No.592592321310318 dated 31-03-2018. He had confirmed the transactions with the appellant and the same are reflected in the bank statements held by him in Cosmos Cooperative Bank. As seen from the accounts, the loan transaction between this creditor and the appellant is as follows: It can be seen that the appellant availed a loan of Rs.10,00,000 on 11.07.2016 and returned the same on 24.12.2016. From the bank accounts statement it is noticed that both the transactions are through Cosmos Bank and that both are shown in columns 31(a) and 31(c) of the 3CD report filed the appellant. The repayment transaction that was doubted by the assessing officer was perused from the evidences submitted and it is noticed that it was entirely made from the appellants cash credit account held with M/s Cosmos Cooperative Bank and from the credit funds available from the cash credit facility. This shows that the immediate and effective source of the funds that were utilized to replay the loans is the cash credit facility provided by the Cosmos Cooperative Bank. Further, the said bank account is duly disclosed in the books of account. As stated above, the assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. Doubting the repayments made by the appellant against the loans, the assessing officer had rested his inference on the following grounds: (1) Though interest has been shown to have been paid (to the loan creditors) but no TDS u/s 194A has been deducted as per the confirmations given. 11 154/SRT/2023/AY.2017-18 M/s Vishal Ispat (2) Perusal of the Form no.3CD, clause 23 in respect of 40A(2)(b) transactions does not match with the repayment schedule as seen in clause 31 (c) of the said Tax audit report. (3) No confirmations in these instances of squaring of the loans has been given. Moreover, the bank statement and the capital account has not been furnished. The copies of the Financial statements and ITR has also not been filed. As far as (1) is concerned the contention of the appellant as verified from the details filed is that interest had not been paid to the above parties except in the case of Smt Kavita Bansal to whom interest is stated to have been paid as per the ledger confirmation and the same is reflected in column 23 of the 3CD report filed by the appellant. As seen from the computation of total income filed by Smt Kavita Bansal along with her RoI, the interest received from the appellant is declared and the IDS upon is also claimed. As regards the other 4 parties are concerned, it is the claim of the appellant that no interest is paid, which is confirmed by the said parties. As regards (2) i.e., mismatch between clause 23 and clause 31 (C) of the 3CD report, the contention of the appellant is that “particulars of any payment made to persons specified under section 40A(2)(b)” are to be reported under Clause 23. Section 40A deals with “Expenses or payment not deductible in certain circumstances and clause (b) of sub-section 2 of section 40A specified the persons to whom clause (a) of sub-section 2 of section 40A is applicable. Section 40A(2)(a) pertains to expenditure incurred by an assessee. According to the appellant the repayment of loan is not an expenditure incurred and so the same would not be reported in clause 23 BUT instead gets reflected in clause 31 of the 3CD report. In clause 31(c) of CD report, the “particulars of each payment of loan or deposit or any specified advance is an amount exceeding the limit specified in section 269T made during the year” are to be reported while in clause 31(a) “particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during the previous year are to be reported. From the 3CD report is it noticed that the appellant reported the transactions with the above parties in clause 31 of the report. The contention of the appellant is valid as the items to be reported in clause 23 of the 3CD report are expenditures i.e., items of P&L account/computation of total income while items reported in clause 31 are balance sheet items. If the contention of the assessing officer is right, then there would be duplication between clause 23 and clause 31 of the 3CD report. As regards (3) that neither confirmations were given nor the bank statement nor the capital account has not been furnished nor even the copies of the Financial statements / ITR were filed, the contention of the appellant is that there was no sufficient time give during the assessment proceedings to furnish complete details and so the certain additional evidences like ITR copies/bank statements were filed during appellate 12 154/SRT/2023/AY.2017-18 M/s Vishal Ispat proceedings is accepted and the same are put forth to the assessing officer who, As stated above, the assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the appellant. So, it is clear from the assessment order that the addition u/s 69 of amounts representing repayments is only on account of non-furnishing of certain details/confirmations from the loan creditors and of course erroneously view of mismatch in the disclosures in clauses 23, 31 (a) and 31 (c) of 3CD report. It is also pertinent to mention here that the appellant-assessee had reported repayment of loan to 14 parties vice clause 31 (c) of the 3CD report and the assessing officer selected above mentioned 5 parties of these 14 parties. Whether repayment of loan can be treated as unexplained investment u/s 69 Section 69 of the I T Act states as follows: Unexplained investments 69. Where in the financial year immediately preceding the assessment year the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year. From the above it is clear that only those ‘investments’ that are found to have been ‘not recorded in the books’ qualify for addition under the said section if assessee fails to offer proper/satisfactory explanation. In the instant case the transactions made by the appellant that are subjected to addition under this section are all reflected in the books of account maintained by him. Nowhere did the assessing officer state that these repayments were made from undisclosed sources. Moreover the assessing officer perused 3CD report and found that that repayments have been disclosed in clause 31(c). Further the repayments cannot be regarded as 'investments' for the reason that investments are assets of the investor which are likely to yield returns and investment as a such can be redeemed to obtain the principal. So, the repayment of loan disclosed in the books of account would not come under the purview of section 69. In similar facts and circumstances, the Hon'ble ITAT Delhi “A” Bench in the case JCIT(OSD) vs. Sarvhit Trust ITA No. 2745/Del/2016held that there is no justification to invoke the provisions of section 69 of the act of repayment of loans taken earlier and the loans were duly recorded in the 13 154/SRT/2023/AY.2017-18 M/s Vishal Ispat books of account and repayment was made through banking channel and also duly recorded, in the books of account therefore, assessing officer had wrongly applied the provisions of section 69 of the Act to the case of the Assessee. In the case ACIT vs. Heena Investment (P.) Ltd the Hon'ble ITAT jodhpur Bench reported in 141 TTJ 772 held that a plain reading of both the section would reveal that according to s. 69, there should be investment which is not recorded in the books of accounts, if any maintained by the assessee and that the repayment of earlier loans would not come under the ambit of section 69. Similar view is expressed by the Hon'ble ITAT “F” Bench Mumbai in the case of DCIT Vs. M/s Karthik Construction Co ITA No.2292/Mum./2016 wherein it is held that when it is not the case of the Department that the loan repayment made during the year was either not recorded in the books of account or the source of fund utilized in repaying the loan is doubtful, then addition as deemed income cannot be made. In view of the foregoing discussion, the addition made by the assessing officer u/s 69 of the IT Act holding the repayment of loan as unexplained, is deleted.” 7. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 8. The Learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR), argued that from the balance sheet for the year ending 31.03.2017, it was observed by assessing officer that during the year the assessee squared off loans form Tushit Bansal amounting to Rs.20,00,000, Kavita Bansal amounting to Rs.30,00,000, Ankur Thakkar Rs.87,10,700. Further, during the year the assessee took loan of Rs.1,37,10,700/-. It is pertinent to mention that even if a loan was squared off, the assessee is shown to have paid interest but did not deduct TDS u/s 194A of the Income Tax. Further, no concrete confirmations of these squaring off the loans were provided, and therefore, the veracity of the same cannot be proven. Therefore, ld 14 154/SRT/2023/AY.2017-18 M/s Vishal Ispat Counsel contended that addition made by the assessing officer may be confirmed. 9. Shri Rasesh Shah, Learned Counsel for the assessee argued that there is no justification to invoke the provisions of section 69 of the Act. The ld Counsel stated that in assessee`s case there was repayment of loans taken earlier. The ld Counsel further stated that the loans were duly recorded in the books of accounts and repayment was made through banking channel, hence no addition should be made under section 69 of the Act. Therefore, ld Counsel contended that order of ld CIT(A) may be upheld. 10. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We find from the computation of total income filed by Smt. Kavita Bansal along with her return of income (ROI), the interest received from the assessee is declared and the TDS upon is also claimed. As regards the other 4 parties are concerned, it is the claim of the appellant that no interest is paid, which is confirmed by the said parties. According to the assessee the repayment of loan is not an expenditure incurred and so the same would not be reported in clause 23 but instead gets reflected in clause 31 of the 3CD report. In clause 31(c) of CD report, the “particulars of each payment of loan or deposit or any specified advance is an amount exceeding the limit specified in section 269T made during the year” are to be reported while in clause 31(a) “particulars of each loan or deposit in an amount exceeding the limit specified in section 269SS taken or accepted during 15 154/SRT/2023/AY.2017-18 M/s Vishal Ispat the previous year are to be reported. From the 3CD report it is noticed that the appellant reported the transactions with the above parties in clause 31 of the report. The contention of the assessee is valid as the items to be reported in clause 23 of the 3CD report are expenditures i.e., items of Profit &Loss account/computation of total income while items reported in clause 31 are balance sheet items. If the contention of the assessing officer is right, then there would be duplication between clause 23 and clause 31 of the 3CD report. Besides, assessing officer had not submitted any comments/remarks in spite of a remand report specifically being called for upon the additional evidences submitted by the assessee. The assessee had reported repayment of loan to 14 parties vide clause 31 (c) of the 3CD report and the assessing officer selected above mentioned 5 parties of these 14 parties. The ld CIT(A) observed that only those ‘investments’ that are found to have been ‘not recorded in the books’ qualify for addition under the said section, if assessee fails to offer proper/satisfactory explanation. In the instant case the transactions made by the assessee that are subjected to addition under this section are all reflected in the books of account maintained by him. Nowhere did the assessing officer state that these repayments were made from undisclosed sources. Moreover, the assessing officer perused 3CD report and found that that repayments have been disclosed in clause 31(c) of the Tax Audit Report. The ld CIT(A) also observed that repayments of loan/creditor cannot be regarded as 'investments' for the reason that investments are assets of the investor which are likely to yield returns and investment as such can be redeemed to obtain the principal. So, the repayment of loan disclosed in the books of account would not come under the purview of Section 69. We also note that repayment of amount was made through banking channel and also duly recorded, in the books of accounts. We 16 154/SRT/2023/AY.2017-18 M/s Vishal Ispat have gone through the party-wise, unsecured loan, findings given by the ld CIT(A) and noted that there is no infirmity in the conclusion reached by ld CIT(A). On a careful reading of the Ld.CIT(A) order and the findings thereon, we do not find any valid reason to interfere with the decision and findings of the Ld.CIT(A) in deleting the addition made by the Assessing Officer. Hence, we dismiss ground No.1 raised by the Revenue. 11. In the result, ground No.1 raised by the Revenue is dismissed. 12. Ground No.2 raised by the Revenue relates to deleting the addition made by Assessing Officer on the account of Section 24 of the Act. 13. Succinct facts qua the issue are that during the assessment proceedings it was observed by the assessing officer from Schedule 13 of the profit and loss account, that a sum of Rs.51,86,006/- has been claimed under the head ‘Interest on DHFL loan’, from the details on record and the submissions made it was noted that the assessee has obtained a housing loan on mortgage for Flat No.801, Juhu, Mumbai. Interest has been paid on such loan which has been used for business purposes. Such interest paid on housing loan qualifies for deduction u/s 24 of the Act, against income from house property. However, in the instant case, the assessee has claimed such expenses under business head u/s 37 of the Act. This is further confirmed from the fact that the assessee has shown the said residential property in its fixed asset schedule as office premises. Depreciation at the rate of 5% has also been claimed which shows that the premises has been used as 17 154/SRT/2023/AY.2017-18 M/s Vishal Ispat commercial property. Hence, the Assessing Officer held that the same cannot be allowed and therefore Rs.51,86,006/- was added back to the total income of the assessee. 14. On appeal, ld CIT(A) deleted the addition. The ld CIT(A) held that as per Section 36(1)(iii) of the Act, which is the relevant provision regarding Interest on borrowed capital, according to which the amount of interest paid in respect of capital borrowed for the purpose of Business and Profession of assessee shall be allowed. Aggrieved by the order of ld.CIT(A), the Revenue is in appeal before us. 15. Learned DR for the Revenue argued that assessee had obtained a housing loan on mortgage for Flat no. 801, Juhu, Mumbai. The assessee paid interest on this loan and such interest on housing loan qualifies for deduction u/s 24 of the Income Tax under the head income for house property. However, this was shown by assessee under business head in Section 37 of the Income Tax Act, which is wrong, hence addition made by the Assessing Officer may be sustained. 16. On the other hand, Shri Rasesh Shah, Ld. Counsel for the assessee defended the order passed by the ld. CIT(A) and argued that asset was being used for business purposes and therefore assessee claimed depreciation. Hence interest expenses on loan for such asset should be allowed as business expenses and ld CIT(A) has rightly allowed the same, therefore order of Ld CIT(A) may be upheld. 17. We have heard the Learned Counsel appearing on behalf of the respective parties at length. Facts of the case are that Assessing Officer 18 154/SRT/2023/AY.2017-18 M/s Vishal Ispat after a perusal of the details on record and the submissions made noted that the assessee has obtained a housing loan on mortgage for flat No. 801, Juhu, Mumbai and that interest has been paid on such loan which has been used for business purposes. Thereafter, the Assessing Officer opined that such interest paid on housing loan qualifies for deduction u/s 24 of the Act against Income from house property but, the assessee has claimed such expenses under business head u/s 37 of the Act. Noting that the assessee has shown the said residential property in its fixed asset schedule, as office premises, upon which depreciation @ 5% has also been claimed, the Assessing Officer resorted to disallowance of interest finding that the premises has been used as commercial property. The Assessing Officer had noted that the property is a business asset figuring in the block of assets of the depreciation schedule. It is also noted by the Assessing Officer that a loan is availed on it. The Assessing Officer had not disputed that the loan is not used for business purpose. While this is so, the Assessing Officer opined that the interest ought to have been claimed u/s 24 of the Act and not u/s 37 of the Act. Hence, it is not the contention of the Assessing Officer as it appears from the assessment order that the claim is not allowable altogether. Instead, the Assessing Officer holds it allowable under a different Section i.e. u/s 24 instead of section 37 of the Act. While holding so, the Assessing Officer had just disallowed the claim made u/s 37 of the Income Tax Act, but had not allowed it alternately u/s 24 of the Income Tax Act, as opined. 18. The provisions of Section 24 of the Act are different from the provisions of Section 37 of the Act. While section 24 of the Act, permits deduction of interest on loan utilised for the purpose of 19 154/SRT/2023/AY.2017-18 M/s Vishal Ispat acquiring the property against the income declared therefrom that property. The provisions of Section 37 is a general in nature allowing deduction of an expenditure laid out or expended wholly and exclusively for the purposes of the business. Since, Assessing Officer in the assessment order had given a categorical finding that the assessee had availed a loan by mortgaging a business asset and that the loan is utilised for the purposes of business, then the deduction claimed by the assessee towards interest paid on such loan utilised for the purpose of business is an allowable deduction under the head “income from business” and not under the head “income from house property”. The Ld. CIT(A) observed that section 36(1)(iii) of the Act, which is the relevant provision regarding Interest on borrowed capital, according to which, the amount of interest paid in respect of capital borrowed for the purpose of Business & Profession of assessee shall be allowed subject to the section 43B of the Act. The ld CIT(A) observed that when the capital is borrowed for acquisition of a capital asset, then interest liability pertaining to the period till the date such asset is put to use shall not be allowed as deduction. Going by the fact noted by the Assessing Officer, in the assessment order and the relevant provisions of the IT Act, it is held by ld CIT(A) that the disallowance of interest claim to the tune of Rs.51,86,006/- made by the Assessing Officer is not in accordance with the provisions of the statute and therefore, ld CIT(A) deleted the same. We have gone through the above findings of ld CIT(A) and noted that there is no infirmity in the order of ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 19. In the result, ground No.2 raised by the Revenue is dismissed. 20 154/SRT/2023/AY.2017-18 M/s Vishal Ispat 20. Ground No.3 raised by the Revenue relates to addition made on account of cash deposits under section 68 of the Act. 21. Brief facts qua the issue are that Assessing Officer noted that during the demonetization period, the assessee has deposited cash in the Cosmos Co-op Bank, Bank of Baroda and HDFC, as per follows detail: Name of the Bank Account No. Date Amount The Cosmos Co-oP Bank 038600101557 23.11.2016 9,00,000 Bank of Baroda 25580200001395 07.12.2016 6,50,000 HDFC 50200013907 08.12.2016 19,00,000 Since, the assessee did not submit any details, the source and nature of the above cash deposit remained unexplained. The identity and creditworthiness of the persons involved, the genuineness of the transactions can be proved only when the assessee makes its compliances by furnishing evidences in the form of confirmations, bank statements, copies of financials, returns filed and income declared therein. In the instant case, the assessee has not been able to produce any evidence on that account. Therefore, entire cash deposits made during demonetization period of Rs.34,50,000/- was treated as unexplained credit attracting the provision of section 68 of the Act. The Assessing Officer also noted that a sum of Rs.34,50,000/- is subjected to application of section 115BBE, on account of unexplained cash deposit. 22. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition made by the Assessing Officer. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 21 154/SRT/2023/AY.2017-18 M/s Vishal Ispat 23. The Learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR) argued that assessee has failed to explain the source of cash deposit with documentary evidences, hence addition made by the Assessing Officer may be sustained. 24. The Ld. Counsel for the assessee defended the order passed by the ld. CIT(A) and argued that assessee submitted cash book, bank statement, ledger account, and source of cash deposit was explained to the Assessing Officer with documentary evidences. The cash deposits in question were made out of assessee`s duly disclosed business receipts. Therefore, ld Counsel contended that order passed by ld CIT(A) may be upheld. 25. We have heard both the parties. During the appellate proceedings, the ld CIT(A) noted that it was the claim of the assessee that the cash deposits of Rs.34,50,000/- made in its bank accounts during the demonetization period were sourced out of its business receipts, that were duly recorded in its books of account. On the contrary, the Assessing Officer for the aforesaid reasons had rejected the claim of the assessee and had held the entire amount of Rs.34,50,000/- as an unexplained cash credit u/s.68 of the Act. Ostensibly, the Assessing Officer had though rejected the assessee's claim that the cash deposit of Rs.34,50,000/- was sourced out of its business receipts, but on the other hand he had accepted its returned income, and thus without rejecting the books of account of the assessee had framed the assessment u/s. 143(3) of the Act. Thus, ld CIT(A) observed that the Assessing Officer though had rejected the assessee's claim that the cash deposits of Rs.34,50,000/- were sourced out of the business receipts for the year under consideration, but acting contrary 22 154/SRT/2023/AY.2017-18 M/s Vishal Ispat to his aforesaid observation had at the same time accepted its book results, which, in fact, supports the assessee's claim. This leads to an incongruous situation, wherein the Assessing Officer while framing assessment had rejected the assessee's claim that the cash deposits of Rs.34,50,000/- in its duly accounted bank accounts was made out of the cash in hand as was available with it out of the business receipts, but to the contrary, while framing the assessment had simultaneously subscribed to its claim by accepting the disclosed business receipts out of which the cash deposits in question were claimed by the assessee to have been sourced. Therefore, ld CIT(A) noted that if the assessee's claim that the cash deposits in question were made out of its duly disclosed business receipts was not to be accepted, then, the Assessing Officer was obligated to have rejected the books of account of the assessee, for the reason, that by not doing so he had on the one hand held the cash deposits to have been sourced out of an unexplained source, while for at the same time by accepting its books of account had accepted it claim that the cash deposits in duly accounted bank accounts were sourced out of the duly disclosed source of the assessee. 26. The ld CIT(A) noted from the assessee`s balance sheet that the bank accounts in question in which the cash deposits were made by the assessee during the demonetization period formed part of its books of account. Considering the aforesaid facts, when the bank accounts in question, viz.(i) A/c. No.038600101557 with Cosmos Bank Ltd.; (ii) A/c. No.25580200001395 with the Bank of Baroda and (iii) A/c. No.50200013907230 with HDFC Bank Ltd are all duly been accounted for by the assessee in its books of account for the year under consideration, therefore, the Assessing Officer by not rejecting the said books of account had clearly accepted that the cash deposited by the 23 154/SRT/2023/AY.2017-18 M/s Vishal Ispat assessee firm during the year under consideration in the said bank accounts was out of its disclosed sources. Based on this factual position, the ld CIT(A) deleted the addition. We note that ld CIT(A) has passed a reasoned and speaking order. The conclusions arrived at by the CIT(A) are, therefore, correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss the ground raised by the Revenue. 27. In the result, ground No.3 raised by the Revenue is dismissed. 28. Ground No.4 and 5 raised by the Revenue relates to violation of Rule 46A of the Income Tax Rules. Learned DR for the Revenue argued that Ld.CIT(A) has erred in not providing sufficient time to the Assessing Officer to provide its comment on the remand report which is clear violation of Rule 46A of the I.T. Rules, 1962. Therefore, ld DR contended that ld CIT(A) may be directed to afford the reasonable opportunity to the Assessing Officer to examine the fresh evidence submitted by the assessee. On the other hand, ld Counsel argued that additional evidences were sent to the Assessing Officer for his comment, however, the Assessing Officer failed to submit its report, hence there is no violation of Rule 46A of the I.T. Rules. 29. We have heard both the parties and gone through the order of ld CIT(A). We note that ld CIT(A), during the appellate proceedings, vide its letter dated 07.12.2022, the additional evidences submitted by the assessee before ld CIT(A), were forwarded to Assessing Officer for his examination and remand report thereon. The additional evidences were resent to Assessing Officer also, however, Assessing Officer failed to submit the remand report. Hence, we note that there was no 24 154/SRT/2023/AY.2017-18 M/s Vishal Ispat violation of provisions of Rule 46A of the I.T. Rules, therefore, we dismiss both the grounds raised by the Revenue. 30. In the result, Ground No.4 and 5 raised by the Revenue are dismissed. 31. In the result, the appeal of Revenue is dismissed. Order is pronounced on 15/02/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 15/ 02/2024 SAMANTA /Dkp Outsourcing Sr.P.S Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat