AI Insights
The case involves an appeal by the Income Tax Department against the order of the CIT(A) which had deleted the additions made by the Assessing Officer under section 68 of the Income Tax Act, 1961. The additions pertained to unsecured loans shown in the assessee's books. The Assessing Officer had added these amounts to the assessee's income, suspecting the genuineness and creditworthiness of the transactions. However, the CIT(A) found that the assessee had provided sufficient evidence to substantiate the transactions, leading to the deletion of the additions. The Tribunal, after reviewing the facts and legal provisions, agreed with the CIT(A)'s decision and dismissed the Department's appeal.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 131347 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 4 month(s) 7 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-03-2023
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
01-03-2023
Assessment Year
2011-2012
Appeal Filed On
13-11-2019
Judgement Text
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Annapurna Gupta, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e ITO, Ward-2(2 )(5), Ah medabad (Appellant) Vs Samir J. Shah, 26, Abu Street, Ramn agar, Sab ar mati, Ah med abad PAN: ADSP S76 30K (Resp ondent) Asses see b y : Shri Tushar Hema ni, A.R. Revenue by : Shri Vijay Kumar J aisw al, CIT-D. R. Date of hearing : 02-03 -2 023 Date of pronouncement : 22-03 -2 023 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the Department against the order of the ld. Commissioner of Income Tax (Appeals)-10, Ahmedabad, in proceeding u/s. 250 vide order dated 04/09/2019 passed for the assessment year 2011-12. 2. The Department has taken the following grounds of appeal:- ITA No. 1707/Ahd/2019 Assessment Year 2011-12 I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 2 “1. The Ld.CIT(A) has erred in law and on facts of the case in deleting the additions made by the A.O. of Rs 7,63,88,871/- U/s 68 of the Act without properly appreciating the facts of the case with regard to identity of the transactions, creditworthiness of the creditor and genuineness of the transaction. 2. The appellant craves to leave and amend or alter any ground or add a new ground which may be necessary.” 3. The brief facts of the case are that during the course of assessment, the Assessing Officer observed that the assessee had made huge credit/debit transactions in his bank account. The total of such credit entries were to the tune of Rs. 18.55 crores and debit entries amounted to Rs. 18.63 crores. In response to notices issued, the assessee filed submission on various dates. The Assessing Officer observed that the assessee has shown unsecured loan of Rs. 8.13 crores as on 31-03-2011. The unsecured loan was received from more than 70 persons. The main submission of the assessee was that all unsecured loans are closing balance of last financial year i.e. F.Y. 2009-10. Further, during the year under consideration, the assessee received a loan of Rs. 50 lacs, the source of which stands fully explained and the assessee received another amount of Rs. 2.89 crores towards advance against land from Vinita Neshvi Infrastructure Pvt. Ltd., the details of which we are also fully verifiable. However, the Assessing Officer made an addition of Rs. 7, 63,88,871/- u/s. 68 of the Act on the ground that the assessee has not been able to establish the genuineness and creditworthiness of the parties. 4. In appeal before ld. CIT(A), the assessee submitted details of unsecured loans received of Rs. 50 lakhs from Dharamdev Infrastructure I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 3 Pvt. Ltd., the assessee also submitted copy of balance sheet, income tax return of the party and submitted that the creditworthiness of the party is clearly established. Further, the assessee submitted that during the year under consideration, the assessee received a sum of Rs. 289 lakhs from Vinita Neshvi Infrastructure Pvt. Ltd. towards advance against land. In support thereof, the assessee submitted copy of confirmation, income tax return and balance sheet of Vinita Neshvi Infrastructure Pvt. Ltd. Therefore, the assessee submitted that he only received a sum of Rs. 50 lakhs and Rs. 289 lakhs from M/s Dharamdev Infrastructure Pvt. Ltd. and M/s. Vinita Neshvi Infrastructure Ltd. respectively as fresh unsecured loans during the year under consideration, the source of which was fully explained. Regarding the balance addition amounted to Rs. 4,74,88,871/-, the assessee submitted that this amount represented closing balance of the previous financial year and the Assessing Officer erred in facts and in law in adding this amount u/s. 68 of the Act since the lender had not lent any money to the assessee as fresh unsecured loan during the year under consideration and addition had been made by the Assessing Officer only on account of unsecured loans which were taken by the assessee in earlier financial years. The assessee submitted that since the amount of Rs. 4.74 crores had been received by the assessee during earlier financial years, there was no question of making additions during the year under consideration u/s. 68 of the Act. Further, the assessee also submitted that all details regarding the unsecured loans i.e. income tax returns along with the statements of the respective parties, PAN card of the respective parties etc. were furnished to the Assessing Officer. However, the Assessing Officer made the addition only on the basis that the assessee was unable to produce the creditors/parties in I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 4 person. It was submitted before ld. CIT(A) that name, addresses, confirmations and income tax returns of all parties was provided to the Assessing Officer and the Assessing Officer erred in law in making the addition u/s. 68 of the Act simply on the basis that the creditors could not be produced before him. In the light of the above facts, the ld. CIT(A) allowed the appeal of the assessee with the following observations:- “Decision : 4. I have perused the facts of the case as enumerated by the AO and as submitted by the appellant. The AR highlighted the denial of all the evidences by the AO by highlighted certain portions of assessment order and the same reproduced as under: In this regard you have submitted copy of ITR, confirmation from your side in respect of unsecured loan obtained. Subsequently, notices u/s 133(6) have been issued to these persons but all the notices issued are returned to the department undelivered. Therefore identity, genuineness and creditworthiness of these persons are remained to be proved. The appellant vehemently argued that name / address / confirmation / ITR were provided to the AO but nothing was considered simply because the creditors could not be produced. It was argued that the appellant can't be punished for default, if any, of related party as it has been held in CIT Vs. CARBO IND HOLD LTD 244 ITR 0422 (Cal) such as "if share broker, even after issue of summons does not appear, for that reason, the claim of assessee should not be denied, especially in the cases when the existence of broker is not in dispute, nor the payment is in dispute. Merely because some broker fa/led to appear, assessee should not be punished for the default of a broker and on mere suspicion the claim of assessee should not be denied." I agree with the contention of the appellant that the plethora of evidences on record cannot be ignored. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx The appellant has also given details of PAN Nos. and address of each of the above depositors but have not been reproduced in the above table owing to I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 5 limitation of space. The appellant also relied on the ratio of following case laws : • Dy CIT vs Amod Petrochem (P) Ltd (2008) 23 (I) ITCL 145 (Guj-HC); (2008) 217 CTR (Guj) 401 • CIT vs Usha Stud Agricultural Farms Ltd (2008) 301 ITR 384 (Del): (2009) 183 Taxman 277 (Del), • Mahabir Prasad Prem Chand Jain vs. ITO (1988) 40 Taxman 35 (Del- Trib) (Tax Mag) • Nuchem Ltd vs Dy CIT (2004) 87 TTJ (Del-Trib) • Shri Vardhman Overseas Ltd vs Asstt. CIT (Del-Trib); 24 SOT 393 • Standard Leather Pvt Ltd (Cal.) • Saraswati Industrial Syndicate Ltd (SC) • DCIT Vs. Mahaluxmi Marketing Pvt. Ltd., IT(SS) A No. 118/Kol/2017 (A Y 2012-13) ITA T (Kol) • Glen Williams Vs. The ACIT, ITAT "A"Bench Bangalore I have also perused the case law relied both by the AO and the appellant. ' It is evident that during the relevant previous year - i.e. fiscal year 2010-11 the only credits received by the appellant were from M/s Dharmadev Infrastructure Ltd. being an amount of Rs.50,00,0007- and also an amount of Rs.2,89,00,000/- received by the appellant from M/s Binita Nesvi Infrastructure Pvt. Ltd. In fact, an amount of Rs. 28318000/- has been repaid to the creditors through banking channel in the year under consideration. The amount of Rs. 647147/- addition to creditors is the interest portion arising in the year under consideration as per normal operations of the business. The appellant has submitted satisfactory explanation about these credits and also the confirmation/ supporting evidence to the AO. The information has been perused-once-again as per ratio laid down in Jute Corporation of India Ltd. 187 ITR 688 (SC) and find the explanation furnished as logical. No inconsistency in the stand of appellant has been noticed. In other words from the summarised account position as tabulated above, it is clear that except for the above two credits received during the year there were no additional amounts received in respect of unsecured loans from various lenders. The amounts credited to the respective accounts only pertain to the credits in respect of interest payable Jo the respective parties and this does not constitute any fresh receipt during the year. On the contrary the appellant has repaid sizeable amount as against the opening balances during the year. The provisions of Section 68 of the IT Act, 1961 (relevant portion) is reproduced below: "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 6 explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year", (Emphasis provided). The first proviso to Section 68 further stipulates certain additional requirements in case of an assessee being a company where such sums so credited consist of share application money, share capital or share premium, etc. However, in this case since the appellant is an individual and credits are not in the nature of share capital or share premium, etc. the additional conditions stipulated in the first proviso are not applicable. Thus, a plain reading of the provisos of Section 68 make it quite clear that the AO is required to make addition of unexplained cash credit only in the previous year in which such cash credit has been made and the assessee is not in a position to offer satisfactory explanation relating thereto. This view is also supported by various case laws relied by the appellant where the unanimous view taken by the courts/ITAT is also the same and thus the law is well settled that the addition u/s 68 could be made only during the year in which such credit has been received and that if the credit balance appearing in the account of the assessee is not pertaining to the year under consideration, the assessing officer cannot make addition u/s 68 in the subsequent previous year i.e. the year under consideration in this case. The reconciliation/break-up of the total additions of Rs.7,63,88,871/- made by the AO is as under: a) Summation of all the closing balances of the accounts of the unsecured loans in the books of account of the appellant as of 31.03.2011 52488871 b) Less: Outstanding balance of M/s Dharmadev Infrastructure Limited 5000000 accepted by the AO and no addition made Net amount representing addition pertaining to opening balances and credits pertaining to interest payable during the relevant previous year 47488871 c) Add: Advance against sale of property received from M/s Binita Nesvi Infrastructure Pvt. Ltd., added by the AO. 28900000 I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 7 d) Total addition 76388871 From the above analysis of the factual and legal position, it is clear that the AO was not justified in making addition u/s 68 based on the opening balances when no such credits were received during the relevant previous year FY 2010-11. Again, the credits made in the respective accounts during the relevant previous year on account of interest credited cannot be regarded as any fresh sum found credited in the books of accounts as contemplated u/s 68 for which no explanation has been offered by the assessee. Thus, the addition of Rs.47488871/- made by the AO as above is deleted. Further the addition of Rs.2,89,00,000/- received from M/s Binita Nesvi Infrastructure Pvt. Ltd. for which satisfactory explanation has been given by the appellant is also deleted. In effect the entire addition of Rs.76388871/- made by the AO cannot stand scrutiny of law, therefore, is hereby ordered to be deleted. It is hereby clarified that though the amounts appear to be from specified PAN holders and also through banking channel but genuineness or creditworthiness of the creditors has not been commented as the total addition has been deleted on Technical ground. The AO is directed to issue revised demand notice and challan. 4. In result, the appeal is allowed.” 5. The Department is in appeal before us against the order passed by the ld. CIT(A) deleting the additions made by the ld. Assessing Officer u/s. 68 of the Act. The ld. Departmental Representative primarily relied upon the observations made by the ld. Assessing Officer in the assessment order. In response, the counsel for the assessee submitted that a total addition of Rs. 7,63,88,871/- was made by the ld. Assessing Officer u/s. 68 of the Act, the break-up of which is below:- On account of “opening balance” Rs. 4,74,88,871/- On account of “fresh receipt during the year “ Rs. 2,89,00,000/- I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 8 Total Rs. 7,63,88,871/- The counsel for the assessee submitted that it is a well settled law that “Opening Balance” cannot be added u/s. 68 of the Act. Since in the instant facts, the amount of Rs. 4.74 crores represented the opening balance of unsecured loans taken by the assessee during earlier financial years, the same cannot be the subject matter of addition u/s. 68 of the Act. Regarding the fresh unsecured loans taken during the year under consideration, the counsel for the assessee submitted that the assessee had furnished adequate documentation to prove the creditworthiness of the parties and genuineness of the transactions and it was on appreciation of the details provided by the assessee during appellate proceedings that the ld. CIT(A) gave relief to the assessee. 6. We have heard the rival contentions and perused the material on record. We observe that additions made u/s. 68 of the Act amounting to Rs. 4,74,88,871/- was on account of opening balance in respect of unsecured loans taken by the assessee in earlier financial years. It is a well settled law that addition u/s. 68 can be made only during the year in which such credit has been received and if the credit balance appearing in the account of the assessee is not pertaining to the year under consideration, the Assessing Officer cannot make addition u/s. 68 of the Act in the subsequent assessment year. This view is supported by the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Jagatkumar Satishkumar Patel (2014) 45 taxman.com 441 (Gujarat). Similar view was also taken by the Gujarat High Court in the case of Dy. CIT vs. Amod Petro-Chem (P) Ltd. 2008 I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 9 217 CTR (Guj) 401. The Delhi High Court in the case of CIT vs. Usha Stud Agricultural Farms Ltd. 301 ITR 384 (Del) also held that when the credit balance appearing in the account of the assessee did not pertain to the year under consideration, the Assessing Officer was not justified in making the impugned addition u/s. 68 of the Act. Again, the Delhi ITAT in the case of Mahaveer Prasad vs. ITO 40 taxman 35 (Del Trib) (Tax Magazine) held that amounts found in the books of accounts of the assessee were in existence much prior to the beginning of the accounting period and therefore the same cannot be treated as income of the assessee during the relevant previous year. Again, the Delhi ITAT in the case of Nuchem Ltd. vs. DCIT 87 TTJ (Delhi Trib) 166 held that since Revenue has failed to prove that the amounts were credited to the books of the assessee during the year and these amounts were brought forward from earlier years, therefore, it is a settled law that addition u/s. 68 could be made only if the amount was credited in the accounts of the assessee in the relevant financial year. Accordingly, the Delhi ITAT directed the addition to be deleted. Further, in the case of Shri Vardhman Overseas Ltd. vs. ACIT 24 SOT 393 (Delhi Trib.) held that since no new amount has been credited by the assessee in its account during the year under consideration, applicability of section 68 of the Act is ruled out. Therefore, in view of the above judgments, we observe that it is a settled law that opening balance of unsecured loans coming from previous financial years cannot be added u/s. 68 of the Act to the income of the assessee. We further observe that even the PAN numbers as well as addresses of all such parities were duly furnished by the assessee to the ld. Assessing Officer during the course of assessment proceedings. The copy of chart containing details of unsecured I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 10 loans which were provided to the Assessing Officer is produced before us at pages 9 to 13 of the paper book. We observe that ld. CIT(A) also gave due consideration to the above chart giving details of party wise break up of loans (at pages 12 to 14 of the order of the CIT(A)), while giving relief to the assessee. Accordingly, so far as addition u/s. 68 of the Act on account of opening balance of Rs.4,74,88,871/- is concerned, we find no infirmity in the order of ld. CIT(A) so as to call for any interference. 7. With respect to unsecured loans of Rs. 289 lakhs received during the year under consideration from Vinita Neshva Infrastructure Pvt. Ltd., we observe that various documentary evidences were placed on record by the assessee in respect of such fresh credits received during the year under consideration viz. confirmation of the party at “page 19 of the paper book, acknowledgement of ITR and statement of total income of the party at page 21-22 of paper book, annual report of the lender at page 23 to 58 of the paper book, audit report of the party (page 59-78 of the paper book). Therefore, in our considered view, the assessee has been able to give satisfactory documentary evidences in support of the genuineness and creditworthiness of the aforesaid party. Further, in respect of the fresh unsecured loan of Rs. 50 lakhs from Dharamdev Infrastructure Ltd., the assessee had furnished copy of the balance sheet of the said party before ld. CIT(A) in order to establish creditworthiness of such party and a copy of PAN and Income Tax Return of such party had been furnished by the assessee before the A.O. Accordingly, in our considered view, the assessee has given satisfactory documentary evidences in respect of fresh unsecured loans taken during the year under consideration, which were also rightly I.T.A No. 1707/Ahd/2019 A.Y. 2011-12 Page No. ITO vs. Shri Samir J. Shah 11 appreciated by the ld. CIT(A) in the appellate order. Accordingly, in the light of the above observations, we find no infirmity in the order of ld. CIT(A) so as to call for interference 8. In the result, the appeal of the Department is dismissed. Order pronounced in the open court on 22-03-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 22/03/2023 TRUE COPY 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/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 15 /03/2023 2) Date on which the typed draft is placed before the Dictating Member & Other Member 16/03/2023 (15 pages of dictation notebook attached) 3) Date on which the approved draft comes to the Sr. P.S./P.S. /03/2023 4) Date on which the fair order is placed before the Dictating Member for pronouncement /03/2023 5) Date on which the fair order comes back to the Sr. P.S./P.S. 22/03/2023 6) Date on which the file goes to the Bench Clerk 22/03/2023 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order a.k
Other Referred Cases
CIT Vs. CARBO IND HOLD LTD 244 ITR 0422 (Cal), Dy CIT vs Amod Petrochem (P) Ltd (2008) 23 (I) ITCL 145 (Guj-HC), CIT vs Usha Stud Agricultural Farms Ltd (2008) 301 ITR 384 (Del), Mahabir Prasad Prem Chand Jain vs. ITO (1988) 40 Taxman 35 (Del- Trib), Nuchem Ltd vs Dy CIT (2004) 87 TTJ (Del-Trib), Shri Vardhman Overseas Ltd vs Asstt. CIT (Del-Trib); 24 SOT 393, Standard Leather Pvt Ltd (Cal.), Saraswati Industrial Syndicate Ltd (SC), DCIT Vs. Mahaluxmi Marketing Pvt. Ltd., IT(SS) A No. 118/Kol/2017 (A Y 2012-13), Glen Williams Vs. The ACIT, ITAT 'A'Bench Bangalore
Laws Referred To
Income Tax Act, 1961
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