OTIBAI, DHAR V. ITO , DHAR

ITA 183/Ind/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0279 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 07-08-2024
• Assessment Year: misc
• Appeal Filed On: 03-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Principle of natural justice; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 147; 68; 69C; 250; 153C

Judgement Text

आयकर अपीलȣय अͬधकरण, इंदौर Ûयायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE SMC BENCH, INDORE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA No.493/Ind/2023 (Assessment Year: 2015-16) Shri Prateek Soni, 46 Krishna Bag Colony, Indore Vs. Income Tax Officer, Delhi (Appellant / Assessee) (Respondent/ Revenue) PAN: BKSPS0203G Assessee by Shri Pankaj Shah, Ms. Ayushi Garg and Ms. Ankshika Goyal, ARs Revenue by Shri Ashish Porwal, Sr.DR Date of Hearing 08.08.2024 Date of Pronouncement 09.08.2024 O R D E R This appeal by the assesse is directed against the order dated 15.11.2023 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centers,(NFAC), Delhi for A.Y.2015-16 which is arising from the assessment order u/s 147 r.w.s. 144 of the Act dated 22.09.2021. 2. Assessee has raised following grounds of appeal: ITA No.493/Ind/2023 Prateek Soni 2 1. On the facts and circumstances of the case and applicable law, the Learned CIT(A) has erred in making confirmation of reopening the case U/s 148 of the Act and further initiating assessment proceedings U/s 147 of the Act. 2. The Learned CIT(A) has erred in making confirmation of the addition made by Learned Assessing Officer of Rs.150000/- on account of unexplained cash credit U/s 68 of the Act. 3. The Learned CIT(A) has erred in making confirmation of the addition made by Learned Assessing Officer of Rs.513654/- on account of expenditure towards development cost U/s 68 of the Act. 3. At the outset Ld. Counsel for the assesse requested for not pressing the legal issue raised in Ground No.1 challenging the reassessment proceedings. Therefore Ground No.1 is dismissed as NOT PRESSED. 3.1 As regards Ground No.2 & 3 brief facts are that the assessee is an individual and furnished return of income for Assessment Year 2015-16 on 07.03.2016 declaring income of Rs.1,71,620/-. The return processed u/s 143(1)(a) of the Act on 26.5.2016. Thereafter based on the reasons recorded, notice u/s 148 of the Act was issued and reassessment proceedings were carried out. Ld. A.O after considering the submissions of the assessee concluded the reassessment proceedings making two additions, firstly for ITA No.493/Ind/2023 Prateek Soni 3 unexplained cash credit u/s 68 of the Act at Rs.1,50,000/- for the loan received from M/s Suzlon Securities Private Limited and secondly on account of unexplained expenditure u/s 69C of the Act of Rs.5,13,654/- claimed to be incurred by the assessee towards development/ improvement/construction cost. 3.2 Aggrieved assessee preferred appeal before Ld. CIT(A) but failed to succeed. 3.3 Now the assessee is in appeal before this Tribunal. 3.4 Ld. Counsel for the assessee referred to the following written submissions: 1. Following addition u's 68 in respect of unsecured loan received during year is under appeal: Name of lender Addition based on alleged loan Salween Securities Private Limited formerly known as Suzlon Securities Private Limited 1,50,000 Total 1,50,000 2. At the outset it is submitted that the reopening is made based on incorrect information and without carrying out proper verification based on ITA No.493/Ind/2023 Prateek Soni 4 conjectures and surmises. Reliance is placed on decision of ITAT Delhi in case of Kunwar Ayub Ali. Ghaziabsaly ITO. 3. Primary onus u/s 68 of Act discharged by Appellant as follows: Name of lender PAN Amount received during the year Confirmation ITR Bank statement of lender Audited Financials Repayment status Salween Securities P Limited AANCS5746H Y 1.5 lakh Y Y Y Continuing 4. Creditworthiness of lenders lender Share capital (A) Net Reserves & surplus (B) Share application money and loans ( C ) Total Investible surplus (A+B+C) Loan advanced to applicant Capacity to advance loan (Investible surplus/loan) Salween Securities P Limited 33.16 342.12 0 275.28 1.5 250 times 5. That the lender company is 'active' companies in ROC records till date. 6. Only reason for making the addition is borrowed satisfaction of AO relying on findings of investigation in different cases related to Shri Sharad Darak 7. Copy of statement of Shri Sharad Darak which is foundation of the reopening and additions has not been confronted to Appellant therefore the addition based thereon is not permissible in law. Reliance is placed on decision of SC in C. Vasantlal [1962] 45 ITR 206 (SC) 8. Further inspite of specific request no opportunity to cross examine has been provided. In absence of such cross examination the addition made by AO based on statement is not tenable in law. Reliance is placed on decision of SC in Andaman Timber Industries vs. CCE (2015) 62 taxmann.com 3 (SC) 02-09-2015) 9. The Appellant has discharged its primary onus by proving identity, credit worthiness and genuineness of the loans however learned AO has merely relied on the investigation wing report without any application of mind and conducting any enquiry in assessment on borrowed satisfaction which is not permissible. See. PCIT e Shodiman Investments (P) Ltd ITA No.493/Ind/2023 Prateek Soni 5 10. Further the major loans have been repaid which establishes the genuineness, 11. Without prejudice to above the jurisdiction existed in Section 153C of the Act and not under S.148 since the reopening is based on search as stated in AO order. See. Flexituff International Lid v. DCIT at pg 1 of PB In view of above it is submitted that the reopening be held as without jurisdiction, based on incorrect information, made on borrowed satisfaction in violation to principles of natural justice. It be further held that the loans are genuine and proved and the consequent addition be deleted. 3.5 He further submitted that so far as the addition for unexplained expenditure incurred on construction/development of the house at Rs. 5,13,654/- is concerned out of total expenditure of Rs.12,63,654/- Ld. A.O has accepted the claim only to the extent of payments made cash withdrawn from bank at Rs. 7,50,000/- but failed to give any credit for the accumulated savings of the assessee and his family members for the past many years. 4. On the other hand Ld. Departmental Representative vehemently argued supporting the orders of lower authorities and also stated that assessee failed to provide any evidence of cash expenditure of Rs.5,13,654/-. ITA No.493/Ind/2023 Prateek Soni 6 5. I have heard rival contentions and perused the records placed before me. The first issue for my consideration is the addition for unexplained cash credit u/s 68 of the Act at RDs.1,50,000/- for the loan received by the assessee from M/s Suzlon Securities Private Limited (presently known as M/s Salween Securities Private Limited). Both the lower authorities have confirmed the addition based on their observation that M/s Salween Securities Private Limited is allegedly controlled by the accommodation entry provider Shri Sharad Darak and is a paper company. 5.1 I however on going through the documents filed by the assessee notice that the confirmation of the account has been filed along with the copy of Income Tax Return of the alleged cash creditor for Assessment Year 2015-16 as well as the bank statement. Perusal of the bank statement indicates that there are consistent withdrawals from the bank and there is no cash deposit prior to the cheque issued to the assessee. Bank statement also reveals that sufficient bank balance is regularly maintained and at some point of time the balance is approximately 79 lakhs also. The financials of the alleged cash creditor as stated in the written ITA No.493/Ind/2023 Prateek Soni 7 synopsis shows that the share capital and reserves & surplus are more than approximate 250 times of the loan advanced to the applicant. The alleged cash creditor company is also active and regularly filing its Income Tax Returns and furnishes its Annual Report and Financial statement on the portal of Ministry of Corporate Affairs. All these factual details were there before the Ld.A.O and Ld. CIT(A) but they have not been controverted except for giving general remarks that the lender is a shell company. Section 68 of the Act can be invoked only if the assessee is unable to discharge its primary onus casted upon it if and fails to prove nature and source of the alleged sum to the satisfaction of the Ld. A.O. However in the instant case assessee has successfully discharged its primary onus and what was needed to explain the nature and source of alleged sum has been complied by the assessee and as held consistently by Hon’ble Courts that Ld. A.O in order to make addition u/s 68 of the Act had to first controvert the evidence filed by the assessee indicating any discrepancy in such documents but in the instant case revenue authorities have failed to negate the correctness of details filed by the assessee. ITA No.493/Ind/2023 Prateek Soni 8 5.2 Under the given facts and circumstances since Ld. Counsel for the assessee has proved the identity and creditworthiness of the cash creditor and genuineness of the transaction to my satisfaction, I hold that the impugned addition u/s 68 of the Act is uncalled for. Accordingly the findings of Ld. CIT(A) is deleted and the impugned addition of Rs.1,50,000/- is deleted and Ground No.2 raised by the assessee is allowed. 5.3 As regards Ground No.3 raised against the addition for unexplained expenditure u/s 69C of the Act at Rs. 5,13,654/- I observe that the assessee constructed immoveable property during the year and has reported short term capital gain from sale thereof. In the computation of Short term Capital Gain assessee has claimed cost of improvement/construction at Rs.12,63,654/-. Ld. A.O allowed the claim of expenditure to the extent of Rs.7,50,000/- as the same was withdrawn in cash from IDBI Bank on 04.04.2014. As far as remaining amount of Rs. 5,13,654/- is concerned lower authorities have negated the submissions of the assessee that he along with his family members have sufficient withdrawals in past many years and the alleged sum has been incurred out of the ITA No.493/Ind/2023 Prateek Soni 9 accumulated savings. Before me Ld. Counsel for the assessee referred to chart of income offered by the family members in last 5 years which includes the assessee, his wife, his parents, his brother and brothers wife. From Assessment Year 2011-12 to 2015-16 the total income offered by the family members cumulatively comes to Rs.62,78,070/-. It is also claimed that all the family members live together and shared the income for living and also for construction of the property in question. The submissions of Ld. Counsel for the assessee are general in nature and the claim of accumulated cash balance of Rs.5,13,654/- cannot be accepted fully. However considering the facts of the case and also assessee regularly filing the Income Tax Return along with other family members and even if a pessimistic view of saving of around 0% of the total income of the family members for 5 years at Rs.62,78,070/- is considered then also saving amount comes to Rs.6,27,807/-. But one cannot ignore the other investments made by family members. Therefore considering the overall facts and circumstances of the case I hold that the assessee had accumulated savings in cash to the tune of Rs.4 lakh which he had incurred for the cost of improvement and construction. Thus the assessee get one part relief out of the total ITA No.493/Ind/2023 Prateek Soni 10 addition for unexplained expenditure of Rs.5,13,654/- the addition to the extent of Rs.4 lakh is deleted and the remaining amount of Rs.1,13,654/- is confirmed. Accordingly the finding of Ld. CIT(A) is set aside and Ground No.3 is partly allowed. 6. In the result appeal of the assessee is allowed. Order pronounced in the open court on 09.08.2024. Sd/- (MANISH BORAD) Accountant Member Indore, 09.08.2024 Dev/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore