The ACIT, Circle-6, Surat V. M/s. Vinayak Enterprises, Surat

ITA 1935/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6042 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 26-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Unexplained cash credit
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D.AGRAWAL, V.P. & HONBL E SHRI T.K. SHARMA, J.M.) I.T.A. NO. 1935/AHD./2009 : ASSESSMENT YEAR : 2006-2007 ACIT, CIRCLE-6, SURAT VS- VINAYAK ENTERPRISES, SURAT (PAN : ACRPM 8222H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.L.YADAV, D.R . RESPONDENT BY : SHRI HARDIK VORA, A.R . O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 25-03-2009 OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-IV, SUR AT FOR THE ASSESSMENT YEAR 2006-2007. THE TWO EFFECTIVE ISSUES RAISED BY THE R EVENUE ARE AS UNDER: [1] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A)-IV,SURAT HAS ERRED IN DELETING THE ADDITI ON OF RS.50,25,000/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE INCOME TAX ACT. [2] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A)-IV, SURAT HAS ERRED IN DELETING THE ADDIT ION OF RS.1,86,339/-MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST DISALL OWED ON LOANS WHICH WERE TREATED AS UNEXPLAINED CASH CREDIT U/S 68 OF THE IN COME TAX ACT. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A FIRM. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN OF INCOME ALONG W ITH THE COPIES OF AUDITED ACCOUNTS ON 06.12.1996 DECLARING TOTAL INCOME AT RS.24,29,489/- . THE AO FRAMED THE ASSESSMENT ON 29.12.2008 UNDER SECTION 143(3) WHEREIN HE MADE AN ADDITION OF RS.50,25,000/- UNDER SECTION 68 OF THE I.T. ACT IN RESPECT OF UNSE CURED LOAN RECEIVED BY THE ASSESSEE FROM 15 PARTIES WHICH WAS ALSO REPAID DURING THE YE AR. THE AO ALSO DISALLOWED INTEREST ON THE AFORESAID LOANS AMOUNTING TO RS.1,8 6,339/-. ITA NO.1935-AHD-09 2 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION OF RS.50,25,000/- AS WELL AS INTEREST THEREON AMOUNTIN G TO RS.1,86,339/- FOR THE DETAILED REASONS GIVEN IN THE LAST TWO PAGES, WHICH ARE EXTR ACTED BELOW: I HAVE CONSIDERED THE SUBMISSIONS AND HAVE GONE TH ROUGH THE DETAILS. IT IS SEEN THAT THE AO HAS MADE THE ADDITION ONLY ON THE GROUND THAT THE DEPOSITORS CREATED 'TEMPORARY CREDITWORTHINESS' AT THE TIME OF MAKING THE DEPOSITS WITH THE APPELLANT AND THE FACT THAT THE CREDITWORTHINES S OF THE DEPOSITORS WAS DOUBTFUL SINCE THEIR CURRENT YEAR'S INCOME RANGED F ROM RS.75,000/- TO RS.1.5 LACS. HOWEVER, IT IS TO BE NOTED THAT NONE OF THE D EPOSITORS HAS CLAIMED TO HAVE MADE THE DEPOSIT OUT OF THE CURRENT YEAR'S INCOME. THE SOURCE OF THESE DEPOSITS WITH THE APPELLANT, AS ALSO ADMITTED BY THE AO IS R EPAYMENT OF LOANS MADE EARLIER WITH M/S. RAJHANS BUILDERS. AS PER THE CHAR T SUBMITTED BY THE APPELLANT, THESE AMOUNTS WERE ADVANCED TO VARIOUS CONCERNS IN EARLIER YEARS WHICH HAVE BEEN RECEIVED BACK BY ACCOUNT PAYEE CHEQUES BY THE DEPOSITORS, DEPOSITED IN THEIR BANK ACCOUNTS AND SUBSEQUENTLY LOANED TO THE APPELLANT BY ACCOUNT PAYEE CHEQUES. THIS MEANS THAT NOT ONLY THE SOURCE OF DEP OSITS WITH THE APPELLANT STANDS ESTABLISHED BUT ALSO THE SOURCE OF THE SOURC E. ALL THE CREDITORS ARE ASSESSED TO TAX AND THEIR IDENTITY IS ALSO ESTABLISHED. THE CONCEPT OF 'TEMPORARY CREDITWORTHINESS' AS STATED BY THE A O IS WITHOUT ANY BASIS SINCE AT THE POINT OF MAKING THE DEPOSITS WITH THE APPELL ANT, THESE CREDITORS HAD SUFFICIENT FUNDS TO MAKE DEPOSITS WITH THE APPELLAN T AND THE OF THESE FUNDS COULD ALSO NOT BE DOUBTED HAVING BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES FROM M/S. RAJHANS BUILDERS. THEREFORE, I AM OF THE CONSIDERED VIEW THAT THE IDENTITY AND CREDITWORTHINESS OF THE DEPOSITORS AND THE GENUINEN ESS OF TRANSACTIONS STANDS ESTABLISHED AND THERE IS NO JUSTIFICATION IN TREATI NG THE SAID CREDITS AS UNEXPLAINED AND MAKING AN ADDITION U/S 68 OF THE AC T ON THIS ACCOUNT. THE ADDITION THEREFORE, IS DIRECTED TO BE DELETED. THE NEXT GROUND OF APPEAL IS REGARDING DISALLOWANCE OF INTEREST OF RS.1,86,339/-. THE AO MADE THE DISALLOWANCE ON THE GROUND THAT SINCE THE LOANS WERE NON-GENUINE, INTEREST PAID THEREON WOULD ALSO BE NON-GENUINE. SINCE I HAVE ALREADY HELD THAT THE GENUINENESS OF C ASH CREDITS STOOD ESTABLISHED, INTEREST PAID THEREON AFTER MAKING TDS CANNOT BE DISALLOWED. THE ADDITION ON THIS ACCOUNT IS ALSO DIRECTED TO BE DEL ETED. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE , SHRI B.L.YADAV, D.R. APPEARED AND POINTED OUT THAT IN ORDER TO VERIFY TH E GENUINENESS OF THE LOAN TRANSACTIONS FROM 14 PARTIES, THE AO ISSUED NOTICE UNDER SECTION 133(6) TO THE LENDERS CALLING FOR LEDGER ACCOUNT, COPY OF RETURN OF INCOM E ALONG WITH THE COMPUTATION OF ITA NO.1935-AHD-09 3 INCOME. ON SCRUTINY OF THE DETAILS, THE AO GATHERED THAT LENDERS WERE NOT HAVING SUBSTANTIAL CREDITWORTHINESS TO MAKE SUCH HUGE LOAN S AND EVEN THE AMOUNT OF TEMPORARY CREDITWORTHINESS WERE CREATED IN THEIR RESPECTIVE BANK ACCOUNTS TO MAKE TRANSFER ENTRIES. THE ENQUIRY MADE BY THE AO ALSO R EVEALED THAT THIS TEMPORARY CREDITWORTHINESS WAS PROVIDED BY ONE M/S. RAJHANS B UILDERS, CLOSE SISTER CONCERN OF THE ASSESSEE FIRM. THE LD. D.R. FURTHER CONTENDED T HAT THE DECISION OF THE LD. CIT(A) DELETING THE ADDITION OF RS.50,25,000/- AS WELL AS INTEREST THEREON AMOUNTING TO RS.1,86,339/- IS NOT ACCEPTABLE BECAUSE IT APPEARS THAT TRANSACTIONS WERE FABRICATED BY ONE OF THE SISTER CONCERNS OF THE ASSESSEE FIRM WIT H THE SOLE INTENTION TO TRANSFER FUNDS TO THE ASSESSEE FIRM AND THE SAME FUNDS ON THE VERY SAME DAY OF RECEIPT WERE AGAIN REACHED BACK TO THE SISTER CONCERNS OF THE ASSESSEE FIRM. RELYING ON THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER, THE LD. D. R. POINTED OUT THAT THE ADDITION MADE UNDER SECTION 68 AMOUNTING TO RS.50,25,000/- A ND DISALLOWANCE OF INTEREST THEREON AMOUNTING TO RS.1,86,339/- BE RESTORED. 6. ON THE OTHER HAND, SHRI HARDIK VORA, APPEARING O N BEHALF OF THE ASSESSEE, VEHEMENTLY SUPPORTED THE ORDER OF THE LD. CIT(A). H E POINTED OUT THAT LOANS IN QUESTION WERE RECEIVED BY ACCOUNT PAYEE CHEQUES AND ALL THE DEPOSITORS WERE ASSESSED TO TAX FOR THE LAST 10 TO 15 YEARS. THE DEPOSITORS HAD WITHDRAWN THEIR DEPOSITS WITH ANOTHER FIRM BY ACCOUNT PAYEE CHEQUE AND THEREAFTER THE RESPECTIVE AMOUNTS WERE ADVANCED AS LOANS TO THE ASSESSEE FIRM. THE COUNSEL OF THE ASSESSEE FURTHER EXPLAINED THAT IN THIS CASE, THE ASSESSEE HAS NOT ONLY PROVED THE SOURCE BUT ALSO THE SOURCE OF SOURCE. THEREFORE, THE VIEW TAKEN BY THE LD. CIT(A) BE UPHELD. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE LOANS WERE RECEIVED BY ACCOUNT PAYEE CHEQUES AND ALL THE DEPOSITORS WERE ASSESSED TO TAX FOR THE LAST 10 TO 15 YEARS. THE DEPOSITORS HAD WITHDRAWN THEIR DEPOSITS WITH ANOTHE R FIRM BY ACCOUNT PAYEE CHEQUES AND THEREAFTER RESPECTIVE AMOUNTS WERE ADVANCED AS LOANS TO THE ASSESSEE FIRM. THE COMPLETE CHART OF SOURCE FROM WHICH THE AMOUNT IN Q UESTION WAS RECEIVED BY THE DEPOSITORS AND ADVANCED TO THE ASSESSEE FIRM WERE F URNISHED. COPIES OF ACCOUNTS OF THE DEPOSITORS ALONG WITH THEIR BANK ACCOUNTS AND R ETURNS OF INCOME WERE ALSO ITA NO.1935-AHD-09 4 FURNISHED. IN THESE CIRCUMSTANCES, WE ARE OF THE VI EW THAT THE ADDITION MADE UNDER SECTION 68 OF THE I.T. ACT AND INTEREST THEREON AMO UNTING TO RS.1,86,339/- DISALLOWED BY THE AO WAS ON DOUBTS AND SUSPICION AND THE LD. C IT(A) IS LEGALLY AND FACTUALLY CORRECT IN DELETING THE SAME. THEREFORE, WE INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.07.2 011 SD/- SD/- (G.D.AGRAWAL) (T.K. SHARMA) VICE PRESIDENT JUDICIAL MEMBER DATED : 28/07/2011 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.