The DCIT, Circle-4(1)(1), Ahmedabad V. Shrenik Ltd., Ahmedabad

ITA 1921/AHD/2019

AI Insights

The case revolves around an appeal by the Deputy Commissioner of Income Tax against Shrenik Limited concerning the Assessment Year 2016-17. The primary issues in the appeal were the deletions made by the CIT(A) regarding additions made by the Assessing Officer under Section 68 of the IT Act, 1961, which included unexplained share capital, unexplained unsecured loans, and additions related to sundry creditors and purchases. The CIT(A) had partly allowed the appeal of the assessee, leading to the Revenue's appeal to the Tribunal. The Tribunal examined the evidence and submissions presented, including the remand report from the Assessing Officer, and upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 129302 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-05-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 29-12-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH; NOT ONLY
• Keywords: Bogus Share capital; Additional evidence; Corroborative evidences; Bogus
• Section: 68; 144; 142(1); 133(6); 143(2)

Judgement Text

ITA No.1921/Ahd/2019 A.Y. 2016-17 Page 1 of 5 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.1921/Ahd/2019 Assessment Year: 2016-17 Dy. Commissioner of Income Tax, vs. Shrenik Limited, Circle-4(1)(1), Ahmedabad. D/87, New Grain Market, Opp. Anupam Cinema, Khokhra, Ahmedabad. [PAN – AASCS 4384 C] (Appellant) (Respondent) Assessee by : Shri Biren Shah, A.R. Respondent by : Shri Vijay Kumar Jaiswal, CIT DR Date of hearing : 10.05.2023 Date of pronouncement : 26.05.2023 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER : This appeal is filed by the Revenue against order dated 11.10.2019 passed by the CIT(A)-8, Ahmedabad for the Assessment Year 2016-17. 2. The Revenue has raised the following grounds of appeal :- “1. Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.12,60,00,000/- under Section 68 of the IT Act, 1961 on account of unexplained share capital. 2. Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.7,20,74,000/- under Section 68 of the IT Act, 1961 on account of unexplained unsecured loan. 3. Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,34,05,759/- on account of sundry creditors. 4. Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.31,27,13,596/- on account of purchases. 5 Whether the Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.1,12,48,270/- on account of other expenses.” ITA No.1921/Ahd/2019 A.Y. 2016-17 Page 2 of 5 3. The assessee company is engaged in the business of trading in paper like coated wood paper, uncoated paper etc. Return of income was filed on 17.10.2016 declaring total income of Rs.4,78,55,700/-. Notice under Section 143(2) of the Income Tax Act, 1961 was issued on 23.08.2017, notice under Section 142(1) dated 30.01.2018 was also issued to the assessee. In response to these notices, the assessee filed its submissions vide letter dated 15.02.2018 alongwith Income Tax Return, Balance Sheet, Profit & Loss Account, Bank details, Audit Report etc. The Assessing Officer issued notice under Section 142(1) read with Section 129 of the Act dated 25.07.2018 alongwith detailed questionnaire to the assessee but the assessee did not file the reply at the relevant time. Final notice under Section 142(1) of the Act dated 18.12.2018 was issued but the assessee did not file any reply to that notice, so the assessment was finalised under Section 144 of the Act. The Assessing Officer made addition of unexplained share capital/share premium to the extent of Rs.12,60,00,000/- as unexplained cash credit under Section 68 of the Act. The Assessing Officer further made addition of unexplained unsecured loan under Section 68 amounting to Rs.7,20,74,000/-. The Assessing Officer made addition of Rs.31,27,13,596/- as non-genuine sundry creditors as the assessee failed to furnish complete details and treated the 10% of purchase as bogus. The Assessing Officer also made disallowance of other expenses to the extent of Rs.1,12,48/-270/- 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. As regards ground no.1 related to addition of Rs.12,60,00,000/- under Section 68 on account of unexplained share capital, the Ld. DR submitted that to the extent of Rs.7,65,00,000/- the assessee has given the details before the CIT(A) but for the remaining amount the assessee has not proved the genuineness and creditworthiness of the transactions. The CIT(A) has overlooked creditworthiness of those parties in respect of their total income as per the ITR which is lesser than the amount which was given by them as loan to the assessee. Thus, the Ld. DR relied upon the Assessment Order. 6. The Ld. AR relied upon the order of CIT(A) and submitted that all the relevant documents were presented before the CIT(A) and the CIT(A) has made the ITA No.1921/Ahd/2019 A.Y. 2016-17 Page 3 of 5 observation that the transactions of loans are given and received back on continuous basis with these parties and the capacity of giving the loan of these parties were proved by the assessee through Bank statement and ITR of the companies. The Ld. AR submitted that the assessee has discharged his own regarding genuineness and creditworthiness of the transactions and, therefore, the CIT(A) has rightly deleted the entire addition. 7. We have heard both the parties and perused all the relevant material available on record. The assessee before the CIT(A) has given additional evidence in respect of source of funds as claimed by the assessee from the partiers from whom the assessee received the loans. The observations made by the CIT(A) from page nos. 55 to 58 has categorically taken into account in the remand report filed by the Assessing Officer during the appellate proceedings before the CIT(A) which was not doubted these transactions. In case of the contentions of Ld. DR that some of the parties were having lesser capacity as per their ITR amount to be not correct as the assessee has given the details of the funds of those companies which is substantial for giving amount to the assessee. Thus, the onus was discharged by the assessee by not only filing the return of income and confirmation but also through the source of source which was also explained by the assessee before the CIT(A). The Assessing Officer has also not commented any adverse remark in the remand report. Therefore, the addition towards share capital amounting to Rs.12,60,00,000/- was rightly deleted by the CIT(A). Ground no.1 is, therefore, dismissed. 8. As regards ground no.2 relating to addition of Rs.7,20,74,000/- under Section 68 on account of unexplained unsecured loans, the Ld. DR submitted that the creditworthiness of these parties were doubted as it was actually routed to the assessee company and again repaid to the assessee company as well. In fact, the funds were of companies only and, therefore, it is a sham and bogus transaction. 9. The Ld. AR relied upon the order of the CIT(A). 10. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that unsecured loan received by Shrenik Limited was from one of the Director namely Shri Shrenik S. Vimawala. The assessee had filed ITA No.1921/Ahd/2019 A.Y. 2016-17 Page 4 of 5 return of income, Balance Sheet, PAN of its creditors. From the account it was observed that there were inward transactions from certain parties such as Dilip Kumar Atmaram, Kalidas Bhaiji Bhaikal, Kalidas Atmaram in the Account of Rishit S. Vimwala and again Rishit Vimwala to assessee through some other entity appears to be incorrect as the source of the source was explained by the assessee and, therefore, the addition made by the Assessing Officer to the extent of Rs.7,20,74,000/- was rightly deleted by the CIT(A). There is no need to interfere with the same. Hence ground no.2 is dismissed. 11. As regards to ground no.3 related to addition of Rs.2,34,05,759/- on account of Sundry Creditors, the Assessing Officer has issued notices under Section 133(6) of the Act and all these parties have confirmed that they have sold the impugned material to the assessee. These observations of the CIT(A) is not correct as per the contentions of the Ld. DR. The Ld. DR relied upon the Assessment Order. 12. The Ld. AR relied upon the order of the CIT(A). 13. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that all the purchases made by the assessee was justified by the assessee through supporting evidences including delivery challans and the purchase bills and vouchers. The parties also have confirmed the material which they have sold to the assessee. Thus, the transaction is justified by the assessee before the CIT(A) and in the remand report also the Assessing Officer could not give any adverse remark and hence the CIT(A) has rightly deleted this addition. Ground no.3 is dismissed. 14. As regards ground no.4 related to disallowance of Rs.31,27,13,596/- on account of purchase, the Ld. DR relied upon the Assessment Order. 15. Ld. AR relied upon the order of the CIT(A). 16. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that this is adhoc disallowance by the Assessing ITA No.1921/Ahd/2019 A.Y. 2016-17 Page 5 of 5 Officer, at the same time, the assessee has given all the details about the purchase and, therefore, the CIT(A) has rightly deleted this addition. Ground no.4 is dismissed. 17. As regards ground no.5 relating to disallowance of Rs.1,12,48,270/- on account of other expenses, the Ld. DR submitted that the assessee has not demonstrated the other expenses and, therefore the Assessing Officer has rightly added/made disallowance to the extent of 20%. 18. The Ld. AR relied upon the order of the CIT(A). 19. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the 20% disallowance of other expenses is also on adhoc basis. The assessee has given the details in the books of accounts related to these expenditures and treating the 20% of Office Expenses as non-genuine was not justifiable by the Assessing Officer despite giving the evidences. The CIT(A) has rightly deleted this disallowance and hence ground no.5 is dismissed. 20. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on this 26 th May, 2023. Sd/- Sd/- (ANNAPURNA GUPTA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 26 th day of May, 2023 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad