ITO, Chandigarh V. Ms. Meena W/o Sh. Shri Kishan, Chandigarh

ITA 174/CHANDI/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5064 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 09-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 11-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Keywords: Gift
• Section: 143(3); 56(2); 56

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 174/CHD/2010 ASSESSMENT YEAR: 2006-07 THE ITO, VS. MS. MEENA WARD-3(3). W/O SHRI KISHAN, CHANDIGARH CHANDIGARH PAN NO. AEMPM1879R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAISHREE SHARMA, DR RESPONDENT BY: SHRI TEJ MOHAN SINGH ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A), CHANDIGARH DATED 20.11.2009 RELATING TO ASSESSMENT YEAR 2006-07 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT. 2. THE ONLY ISSUE IN THE PRESENT APPEAL IS AGAINST DELETION OF ADDITION OF RS. 8 LACS. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD RECEIVED LOAN OF RS. 8 LACS FROM SMT. RENU MITTAL V IDE CHEQUES AS UNDER:- DATE PARTICULARS CREDIT 9/3/06 CHEQUE NO. 899033 2,00,000/- 14/3/06 CHEQUE NO. 899034 2,00,000/- 23/3/06 CHEQUE NO. 899035 2,00,000/- 25/3/06 CHEQUE NO. 899036 2,00,000/- 2 3. THE CONFIRMATION OF SMT. RENU MITTAL WAS FILED O N RECORD BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE WAS THAT IT HA D RECEIVED LOAN WITHOUT INTEREST FROM SMT. RENU MITTAL. THE ASSESSING OFFI CER INVOKED THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT AND INCLU DED THE SUM OF RS. 8 LACS AS INCOME OF THE ASSESSEE AS THE SAID AMOUNT W AS RECEIVED WITHOUT CONSIDERATION BY ASSESSEE FROM A FRIEND AND FRIEND IS NOT COVERED BY THE DEFINITION OF RELATIVE. THE CIT(A) ALLOWED THE CLAI M OF THE ASSESSEE IN TURN RELYING THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN SARANPAL SINGH, HUF (ITA NO. 692/CHANDI/2009). T HE CIT(A) ALSO NOTED THAT OUT OF LOAN OF RS. 8 LACS, THE ASSESSEE HAD ALREADY REPAID RS. 7 LACS VIDE ACCOUNT PAYEE CHEQUES ON VARIOUS DATES TI LL 31.3.2009. THE CIT(A) THUS HELD THAT THIS WAS ENOUGH EVIDENCE TO P ROVE THAT IT WAS A LOAN AND NOT A GIFT. THE REVENUE IS IN APPEAL AGAINST T HE SAID ORDER OF THE CIT(A). 4. THE LEARNED AR FOR THE ASSESSEE POINTED OUT THAT THE ISSUE IS COVERED BY THE ORDERS OF CHANDIGARH BENCH OF THE TR IBUNAL IN ACIT VS. SARANPAL SINGH, HUF WHICH HAS FURTHER BEEN FOLLOWED IN SMT. KANTA RNA VS. ITO IN ITA NO. 517/CHD/2010 FOR ASSESSMENT YEAR 2006-07. THE LEARNED DR PLACED RELIANCE ON THE ORDER OF THE ASSE SSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ONLY ISSUE RAISED BEFORE US IN THE PRESENT APPEAL I S AGAINST THE DELETION OF ADDITION MADE U/S 56 (2)(V) OF THE I.T. ACT AMOUNTI NG TO RS. 8 LACS. WE FIND THAT THE ISSUE STANDS COVERED BY THE ORDER OF THE TRIBUNAL IN ACIT VS. SHRI SARANPAL SINGH, HUF (SUPRA) AND SMT. KANTA RANA VS. ITO (SUPRA). THE TRIBUNAL IN SMT. KANTA RANA VS. ITO (S UPRA) VIDE ORDER DATED 18.6.2010 HELD AS UNDER:- 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ONLY ISSUE ARISING IN THE PRESENT APP EAL IS AGAINST THE ADDITION OF RS.10,20,000/- U/S 56(2) (V ) OF TH E ACT. WE FIND THAT ISSUE OF ADVANCEMENT OF INTEREST FREE LOA N AND ITS TREATMENT U/S 56(2)(V) OF THE ACT WAS DECIDED BY TH E TRIBUNAL IN ACIT VS. SHRI SARANPAL SINGH HUF (ITA NO. 697/CHD/2009- ASSESSMENT YEAR 2006-07) VIDE ORDER D ATED 9.9.2009, IN TURN FOLLOWING THE RATIO LAID DOWN BY MUMBAI BENCH OF TRIBUNAL IN CHANDERKANT H.SHAH [19 DTR 241 (MUM)] WHEREIN IT WAS HELD THAT FROM THE AFORESAID IT IS EVIDENT THAT THE TRIBUNAL NOTICED THE INTENTION BEH IND THE INSERTION OF SECTION 56(2)(V) OF THE ACT AND IN THI S CONTEXT, IT HAS BEEN INFERRED THAT SUCH PROVISION SEEKS TO BRIN G TO TAX CASES OF BOGUS GIFTS IT HAS, THEREAFTER CONCLUDED T HAT LOANS ARE NOT COVERED WITH THE PROVISIONS OF SECTION 56(2)(V ) OF THE ACT . 7. IT WAS FURTHER HELD AS UNDER:- .. IN OUR CONSIDERED OPINION, THE FACTUM OF THE ASSESSEE BEING LIABLE TO REPAY THE IMPUGNED UNSECU RED LOAN, IMPLIES THE SAME WITH CHARACTERISTICS OF A LIABILITY . M ERELY BECAUSE THE AMOUNT OF LOAN HAS BEEN RAISED WITHOUT INVOLVING PAYMENT OF INTEREST, CANNO T BE SEEN TO HAVE VESTED THE IMPUGNED AMOUNT WITH CHARACTERISTICS OF AN INCOME, WITHIN THE MEANING OF SECTION 56(2)(V) OF THE ACT. THE EXISTENCE OF EXPRE SSION WITHOUT CONSIDERATION IN SECTION 56(2)(V) CANNOT DISTRACT FROM THE FACT THAT IN THE IMPUGNED CASE, T HE SUM OF MONEY RECEIVED IN QUESTION CARRIED A LIABILI TY OF ITS REPAYMENT AND THE SAME WAS NOT RECEIVED BY T HE ASSESSEE WITH AN ABSOLUTE UNFETTERED RIGHT OF POSSESSION. THEREFORE, IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE FIND NO JUSTIFICATION TO UPHOLD THE STAND OF THE ASSESSING OFFICER AND THE CIT(A) WAS JUSTIFIED IN DELETING TH E IMPUGNED ADDITION. ACCORDINGLY, THE CONCLUSION OF THE CIT(A) IS CONFIRMED. 8. THE TRIBUNAL IN PRINCIPLE LAID DOWN THE PROPOSIT ION THAT THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT SEEKS TO BRING TO TAX THE CASES OF BOGUS GIFTS AND DOES NOT COVER WITHIN ITS PROVISIONS THE LOANS RAISED. IN THE FAC TS OF THE PRESENT CASE BEFORE US, THE ASSESSEE CLAIMS TO HAVE RECEIVED LOANS FROM THE AFORESAID PARTIES TOTALING RS. 10,20 ,000/-. THE SAID LOANS WERE RECEIVED WITH PROMISSORY NOTES, DU LY EXECUTED IN EACH CASE WITH PROVISION OF INTEREST TO BE PAID ON THE ABOVE SAID AMOUNTS. THE CLAIM OF THE ASSESSEE W AS REJECTED BY THE ASSESSING OFFICER AS THE ASSESSEE H AD NOT PAID ANY INTEREST ON THE ABOVESAID LOANS EITHER DUR ING THE YEAR UNDER CONSIDERATION OR IN THE SUBSEQUENT YEARS . THE SAID AMOUNTS WERE PAYABLE TILL THE CLOSE OF THE ASS ESSMENT PROCEEDINGS. BEFORE THE CIT(A) THE ASSESSEE IN OR DER TO JUSTIFY ITS CLAIM MADE AN EFFORT TO REPAY PART OF T HE LOAN 4 AMOUNT TO TWO OF THE LOAN CREDITOR/S BY ISSUING CHE QUES OF RS. 1.50 LACS AND RS. 2 LACS FAVOURING MR. AMIT RAJ AND M/S GATHA INTERNATIONAL RESPECTIVELY, WHICH WERE CLEAR ED AFTER DEPOSIT OF CASH IN THE ACCOUNT OF THE ASSESSEE. H OWEVER, THE MODE OF REPAYMENT DOES NOT FIND FAVOUR WITH THE CIT (A) AS ACCORDING TO HIM THE SAID AMOUNTS WERE NEVER INTEND ED TO BE LOANS. WE ARE NOT IN CONFORMITY WITH THE FINDING OF CIT(A) AS NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE RE VENUE AUTHORITIES TO PROVE THE CONTRARY. THE STAND OF TH E ASSESSEE BEFORE THE AUTHORITIES WAS THAT IT HAD RECEIVED THE ABOVE SAID LOANS AMOUNTING TO RS. 10,20,000/- FOR THE PURPOSE OF INVESTING IN THE PURCHASE OF PLOT. THE CONFIRMATIO N OF THE SAID LOANS WAS EVIDENCED BY THE PROMISSORY NOTES EX ECUTED BY THE RESPECTIVE PARTIES, EVIDENCE OF WHICH WAS FU RNISHED ON RECORD AND HAS BEEN COMMENTED UPON BY THE LOWER AUTHORITIES. THE PARTIES HAVE CONFIRMED TO HAVE A DVANCED LOANS AND THERE IS NO EVIDENCE BROUGHT ON RECORD TO PROVE THE CONTRARY. ADMITTEDLY, THERE IS NO DISPUTE REG ARDING THE NATURE AND SOURCE OF THE IMPUGNED UNSECURED LOANS. THE TRIBUNAL IN ACIT VS. SHRI SARANPAL SINGH HUF, (SUP RA) HAD LAID DOWN THE PROPOSITION THAT THE PROVISIONS OF SE CTION 56(2)(V ) OF THE ACT ARE APPLICABLE TO BOGUS GIFTS AND LOANS ARE NOT COVERED UNDER THE AFORESAID SECTIONS. IN T HE FACTS AND CIRCUMSTANCES OF THE CASE AND APPLYING THE RATI O LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL IN ACI T VS. SHRI SARANPAL SINGH HUF (SUPRA), WE HOLD THAT THE L OANS RAISED BY THE ASSESSEE ARE NOT COVERED UNDER THE PR OVISIONS OF SECTION 56(2)(V) OF THE INCOME TAX ACT. THE AS SESSEE HAS FURTHER FURNISHED EVIDENCE TO HAVE REPAID PART OF THE LOANS RAISED, DURING THE COURSE OF APPELLATE PROCEEDINGS AND THERE IS NO MERIT IN THE ORDER OF CIT(A) IN HOLDING THE S AME TO BE AN AFTER THOUGHT IN THE ABSENCE OF ANY EVIDENCE TO THE CONTRARY. ACCORDINGLY, WE DIRECT THE ASSESSING OFF ICER TO DELETE THE ADDITION OF RS. 10,20,000/- MADE ON THIS ACCOUNT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE TH US ALLOWED. 6. IN THE FACTS OF THE PRESENT CASE BEFORE US THE A SSESSEE HAD RECEIVED LOAN OF RS. 8 LACS FROM SMT. RENU MITTAL. THE SAID LOAN WAS RECEIVED VIDE CHEQUES ON VARIOUS DATES AND WAS RECEIVED INTEREST FREE. THE ASSESSEE HAS FURNISHED THE EVIDENCE BEFORE THE CIT(A) TO HAVE RE PAID RS. 7,00,000/- OUT OF THE SAID AMOUNT ON VARIOUS DATES VIDE CHEQ UES UPTO 31.3.2009. THE LEARNED DR HAS FAILED TO CONTROVERT THE FINDING OF THE CIT(A) IN THIS REGARD. IN THE ABOVE SAID FACTS AND CIRCUMSTANCES O F THE CASE, WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) IN DELETING THE ADDITION OF RS. 8 LACS. 5 CONFIRMING THE SAME, WE DISMISS THE GROUND OF APPEA L RAISED BY THE REVENUE. 7. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JULY, 2010. SD/- SD/- (G.S.PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 23 RD JULY, 2010 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR