Harshadrai Chaturdas Patel, Kolhapur, V. Income-tax Officer, Ward - 2 (2), Kolhapur

ITA 1781/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2594 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 24-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Keywords: Gift

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1781/PUN/2017 / ASSESSMENT YEAR : 2010-11 HARSHADRAI CHATURDAS PATEL, SHREE LAXMI TRADERS, 573, SHAHUPURI, KOLHAPUR 416 001, MAHARASHTRA PAN : AODPP5142B . /APPELLANT VS. ITO, WARD-2(2), KOLHAPUR . / RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI RAJESH GAWLI / DATE OF HEARING : 20.08.2018 / DATE OF PRONOUNCEMENT: 21.08.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-2, KOLHAPUR, DATED 02-06-2017 FOR THE ASSESSMENT YEAR 2010-11. 2. BEFORE US, THERE IS NONE TO REPRESENT THE ASSESSEE DESPITE SUCCESSFUL SERVICE OF NOTICE ON THE ASSESSEE. HOWEVER, CONSIDERING T HE SMALLNESS OF THE ADDITION AND ALSO AVAILABILITY OF THE ASSISTANCE OF LD. DR FOR THE REVENUE FOR EXPLAINING THE FACTS RELATING TO THE ISSUES, WE PROCEED TO ADJUDICATE THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON R ECORD. WE FURTHER NOTICED THAT THERE IS SERVICE OF DEFECT NOTICE WITH REGARD TO FURNISHING OF ASSESSMENT ORDER IN THE APPEAL MEMO. THE A SSESSEE CORRECTED THE SAME BY SENDING THE REQUIRED PAGES THROUGH THE P OST. ITA NO.1781/PUN/2017 HARSHADRAI CHATURDAS PATEL 2 3. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED HERE AS UNDER : 1. THE LD.CIT(A) ERRED IN CONSIDERING THE TRANSFE R OF LOAN TO CAPITAL ACCOUNT AS GIFT. 2. THE LD.CIT(A) ERRED IN CONFIRMING THE ADDITION O F RS.2,43,768/-. 3. THE LD.CIT(A) ERRED IN NOT CONSIDERING THE FACT THAT THE LOAN HAD ALREADY BEEN RETURNED AND WAS NOT A GIFT. 4. ANY OTHER GROUND THAT MAY ALLOWED TO BE RAISED A T THE TIME OF HEARING. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUDE THAT THE ASSESSEE IS AN INDIVIDUAL AND FILED THE RETURN OF INCOME ON 24-09-2010 D ECLARING TOTAL INCOME OF RS.9,43,920/-. DURING THE ASSESSMENT PROCEEDINGS , AO NOTICED A CREDIT OF RS.2,43,768/- IN THE ACCOUNTS. ENQUIRIES REVEALED THAT THE S AID AMOUNT IS GIVEN BY A CREDITOR NAMED MR. RINKI SOMBHAI PATE L. HE IS SAID TO BE A DISTANT RELATIVE AND CLOSE FRIEND WHO RESIDES ABRO AD (USA). ASSESSEE FURNISHED COPIES OF E-MAIL FROM MR. RINKI SOMBHAI PA TEL, WHO GAVE SAID INTEREST FREE UNSECURED LOAN TO ASSESSEE THR OUGH THE BANKING CHANNELS. HOWEVER, THE AO INVOKED PROVISIONS OF SECTION 5 6(2)(V) OF THE ACT AND TAXED THE SAME AS PER THE DISCUSSION GIVEN IN P ARA NOS. 5.1 AND 5.2 OF THE ASSESSMENT ORDER. AO DETERMINED THE ASSESSE D INCOME AT RS.11,87,690/-. DURING THE FIRST APPELLATE PROCEEDINGS, THE ASSESSEE MADE ELABORATE WRITTEN SUBMISSIONS. AFTER CONSIDERING THE SAME, AS PER TH E DISCUSSION GIVEN IN PARA NO.5.1, THE CIT(A) DISMISSED THE APPEAL OF THE A SSESSEE FOR THE YEAR UNDER CONSIDERATION. FOR THE SAKE OF CONVENIEN CE, RELEVANT OPERATIONAL LINES ARE REPRODUCED HERE AS UNDER : 5.1.......................... ............................TO MY MIND, THIS ARGUME NT OF THE APPELLANT IS MISCONCEIVED AND MISINTERPRETS THE WORDS WITHOUT C ONSIDERATION IN SEC.56(2)(V). THE APPELLANT ALSO PRODUCED BEFORE M E A SET OF EMAIL ITA NO.1781/PUN/2017 HARSHADRAI CHATURDAS PATEL 3 CORRESPONDENCE BETWEEN VIKALP PATEL, S/O. THE APPEL LANT AND MR. RINKI PATEL DATED FEB & MARCH 2016 WHEREIN ONCE AGAIN MR. PATEL OF USA HAS CONFIRMED HAVING GIVEN THE MONEY TO THE APPELLA NT AND ALSO REQUESTED HIM TO PAY THE SAME TO SOME OTHER PERSON IN INDIA. (IT IS TO BE NOTED THAT THE FIGURE OF LOAN MENTIONED IN THIS EMAIL IS RS.2,00,000/- ONLY). TO MY MIND THIS EVIDENCE IS I RRELEVANT FOR THE CONTROVERSY AT HAND. THE LOAN HAS BEEN APPROPRIATE D BY THE APPELLANT AS HIS CAPITAL IN THE A.Y. 20100-11 ON THE BASIS OF INSTRUCTIONS FROM THE LOAN CREDITOR HIMSELF. THUS AT THAT POINT OF TIME, THE SAME HAS CHANGED NATURE FROM A LOAN TO A RECEIPT GRATIS, I.E. WITHOU T CONSIDERATION. IT THEREFORE FALLS WITHIN THE MISCHIEF OF SEC.56(2)(V) AS IT SATISFIES ALL INGREDIENTS OF THE SECTION. IT IS ALSO NOT THE CAS E OF THE APPELLANT THAT HE HAS THE PROTECTION OF THE PROVISO TO SEC.56(2)(V ). THE SUBSEQUENT PAYMENT OF THE MONEY TO SOMEONE ELSE ON BEHALF OF R INKI PATEL IS MERELY APPLICATION OF INCOME OF THE APPELLANT. I A M UNABLE TO AGREE WITH THE APPELLANT ON THIS ISSUE AND THEREFORE UPHO LD THE ACTION OF THE AO IN ASSESSING RS.2,43,768/- AS INCOME U/S.56(2)(V ). ACCORDINGLY APPEAL FOR AY 2010-11 IS DISMISSED. 5. WE HEARD THE LD. DR FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ON PERUSING THE FACTS OF THE CASE, WE FIND THIS IS A CASE WHERE ASSESSEE RECEIVED UNSECURED LOAN FROM MR. RINKI SOMBHAI PATEL, WHO RESIDES IN USA. IN PRINCIPLE, T HE LOAN IS CONFIRMED BY MR. RINKI SOMBHAI PATEL, THE LOAN CREDI TOR. THEREFORE, THERE IS NO DISPUTE ABOUT THE IDENTITY OF THE PERSO N. THE PAYMENT IS RECEIVED BY THE ASSESSEE THROUGH BANKING CHANNELS FR OM THE PERSON STAYING ABROAD. IT IS NOT THE CASE OF THE AO THAT T HE GENUINENESS OF THE TRANSACTION OR CREDIT WORTHINESS OF THE TRANSAC TION IS SUSPICIOUS. THEREFORE, WE ARE OF THE OPINION THAT, IN PRINCIPLE , THE LOAN CONSTITUTE A GENUINE ONE AND THE ADDITION MADE BY THE AO IS UNS USTAINABLE AS SUCH. 5.1 NOW COMING TO THE APPLICABILITY OF THE PROVISIO NS OF SECTION 56(2)(V) OF THE ACT, IT IS THE CASE OF THE REVENUE THAT THE PROVISIONS OF SAID SECTION ATTRACT SUCH CREDITS. IN OUR VIEW, TH IS VIEW OF AO/CIT(A) IS UNSUSTAINABLE FOR THE REASON THAT THE SAID CLAUS E (V) DEALS WITH A SITUATION WHERE THE AMOUNT IS RECEIVED WITHOUT CON SIDERATION. ITA NO.1781/PUN/2017 HARSHADRAI CHATURDAS PATEL 4 HOWEVER, THE TRANSACTION IN THE PRESENT CASE IS THA T IT IS AN INTEREST FREE LOAN AND THE SAME IS REPAYABLE TO THE CREDITOR AT THE CONVENIENCE OF THE ASSESSEE. IT DOES NOT MEAN THE CREDITOR FOR FEITED THE LOAN. THEREFORE, SUCH LANGUAGE MENTIONED IN THE SAID EMAI L COPY CANNOT BE EQUATED WITH PAYMENT RECEIVED BY THE ASSESSEE WITH OUT CONSIDERATION. THE AMOUNT REPAYABLE BY THE ASSESSE E CANNOT BE CONSIDERED AS A RECEIPT WITHOUT CONSIDERATION. T HEREFORE, THIS LINE OF APPROACH OF THE AO/CIT(A) IS UNSUSTAINABLE IN LA W. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED ON 21 ST DAY OF AUGUST, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 21 ST AUGUST, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-2, KOLHAPUR 4. THE PR.CIT-2, KOLHAPUR 5. , , SMC BENCH PUNE; 6. / GUARD FILE.