SURYA PRAKASH TOSHNIWAL, Kolkata V. ITO, Kolkata

ITA 209/KOL/2023

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0734 (ITAT-KOLKATA)
• Duration Of Justice: 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-10-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 14-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Accommodation entries; TDS
• Section: 147; 68; 143(3); 142(1); 133(6); 250

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘बी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèय एवं Įी ͬगरȣश अĒवाल, लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal.....................................................Appellant Room No.73, 7 Swallow Lane, Dalhousie, Kolkata-1. [PAN: ABNPT5132E] vs. ITO, Ward-36(1), Kolkata................................................................ Respondent Appearances by: Shri Siddharth Agarwal, Advocate, appeared on behalf of the appellant. Shri Abhijit Kundu, CIT-DR, appeared on behalf of the Respondent. Date of concluding the hearing : 17.10.2023 Date of pronouncing the order : 17.10.2023 आदेश / ORDER संजय गग[, ÛयाǓयक सदèय ɮवारा / Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 16.01.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has taken following revised grounds of appeal. “1. (a) For that the Ld. CIT(A) ought to have quashed the re-assessment proceedings since the same was initiated without recording proper reasons to belief I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 2 (b) For that the re-opening proceedings are barred by limitation as per the proviso to section 147 inasmuch the proceedings have been initiated beyond four years in violation of the said provision. 2. Without prejudice to ground no. 1, that the Ld. CIT(A) ought to have quashed the re-assessment proceedings inasmuch as there was lack of proper reasons to belief and/or applicability of independent mind on the part of the A.O. 3. For that the Ld. CIT(A) ought to have held that the entire re-assessment proceedings as invalid since the same was initiated on mere change of opinion on the same set of facts. 4. For that on the facts and in the circumstances of the case, the Ld. CIT(A) was not justified in confirming the addition of Rs. 1,95,00,000/- on account of unsecured loan by wrongly treating the loan as unexplained cash credits u/s 68 of the Act.” A perusal of the above grounds of appeal would reveal that the assessee in this appeal, apart from contesting the validity of the reopening of the assessment being hit by the First Proviso to Section 147 of the Income Tax Act, has also contested the additions made/confirmed by the lower authorities of ₹19500000/- on account of unsecured loans by treating the same as unexplained income of the assessee. 3. The brief facts of the case are that assessee filed his return of income on 8.8.2013, declaring total income of Rs.646230/-. The case was selected for scrutiny assessment u/s 143(3) of the act and the income of the assessee was assessed at Rs. 1642160/-. Thereafter, the case of the assessee was reopened u/s 147 of the Act and the notice u/s 148 of the act was issued on 31.03.2021, which was beyond the four years from the end of the relevant assessment year. In this case, the following reasons have been recorded by the Assessing Officer for reopening of the assessment: I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 3 “The assessee is an individual who filed its return of income for the relevant assessment year on 08.08.2013 declaring total income of Rs. 6,46,230/-. Information was received from the Directorate of Investigation, Kolkata that one company namely M/s Venus Financial Consultants Pvt. Ltd. maintained a current bank account no. 018705008559 with ICICI Bank with declaration of making business activity. On going through the bank statements of these concerns, it was observed that there were high value non-cash transactions made in the current account followed by immediate withdrawal by making fund transfers through RTGS. The total credit between 01.03.2012 to 16.02.2013 was approx. Rs. 13.21 Crores which were received from various entities, the investigation reported that these entities are shell companies run only on papers. These transactions didn't match with the declare profile of the company as the company has no creditworthiness. As per ITR it is showing income of Rs. 8,068/- and Rs. 10,106/- in the AY 2012-13 and 2013-14 respectively. Without having creditworthiness, during the FY 2012-13, the company M/s Venus Financial Consultants Pvt. Ltd. gave loan and advances to various persons/ entities total amount of Rs. 10.74 Crores. The investigation further stipulates that the account of M/s Venus Financial Consultants Pvt. Ltd. was purely used as the conduit for layering of unaccounted funds of various beneficiaries in the guise of unsecured loan. It was further disseminated that the assessee namely Surya Prakash Toshniwal is also one of the beneficiary of accommodation entries in the form of unsecured loan amounting to Rs. 5000000/- in the F.Y. 2012-13 relevant to A.Y. 2013-14 from paper company namely Venus Financial Consultants Pvt. Ltd. A notice u/s 133(6) of I.T. Act 1961 was issued to the assessee for furnishing, inter-alia, the complete details of its transactions made with Venus Financial Consultants Pvt. Ltd. pertaining to A.Y. 2013-14 with supporting documents. The assessee made a written submission in response to the notice u/s 133(6), which has been analyzed with respect to the materials available on records in this case. After analyzing the information received from Investigation Wing, written submission of the assessee in response to notice u/s 133(6) and other materials available on records, it has been found that the assessee has made transaction with M/s Venus Financial Consultants Pvt. Ltd. in the form of taking unsecured loan which was not repaid during the same year. The transactions cannot be considered genuine merely for the reason that they were carried out through banking channel in a known sequence with no apparent aberrations. In fact, it was the modus operandi just to give a semblance of genuineness and correctness of the transactions. Various judgments have also held that the money came by cheque and I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 4 was paid through the process of banking transactions was not by itself of any consequences and sufficient enough to prove the genuineness of transaction. In view of the above, I have reason to believe that the assessee had suppressed its income to the tune of Rs. 5000000/- through availing accommodation entry in the guise of Unsecured Loan and by doing this, the assessee is found to have failed to disclose fully and truly all material facts necessary for its assessment. Thus, income to that extent of Rs. 5000000/- has escaped assessment in terms of section 147 of the Income Tax Act, 1961. It is true that the assessee had filed a copy of annual report and audited P&L A/c and balance sheet along with return of income where various information/ material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of accounts, annual report, audited P&L A/c and balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered now after the enquiries made by the Investigation wig, accordingly attracting provisions of Explanation 1 of section 147 of the Act. It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment. This fact is corroborated from the contents of notices issued by the A.O u/s 143(2)/ 142(1) during 143(3)/447 proceedings. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in annual report, audited P&L A/c, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For foretasted reasons, it is not a case of change of opinion by the A.O. In this case, since more than four years have lapsed from the end of assessment year under consideration, a proposal is put up before Ld. Pr. C.I.T.-12, Kolkata through Joint C.l.T., Range-36, Kolkata for seeking necessary sanction to issue notice u/s. 148 of the 1.T. Act, 1961 for the A.Y. 2013-14 as per the provisions u/s 151 of the I.T. Act, 1961.” A perusal of the above reasons recorded would show that there is no mention that as to what material facts necessary for his assessment for I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 5 the assessment year under consideration have not been disclosed by the assessee which he was otherwise required to disclose. The gist of the reasons recorded for reopening of the assessment is that the information was received from Investigation Wing that there were high value non-cash transactions made in the current account followed by immediate withdrawal by making fund transfers through RTGS in the bank account of one company namely M/s Venus financial Consultants Pvt. Ltd. That the credits in the said company were received from various entities, which in the view of the Investigation Wing were shell companies. That the said company M/s Venus financial Consultants Pvt. Ltd. had given loan/advance to various persons, and that the assessee was one of the beneficiaries of accommodation entries in the form of unsecured loan amounting to ₹5000000/- in the financial year 2012-13. The Assessing Officer made pre-reopening enquiries by issuing notice u/s 133(6) of the Income Tax Act. In response, the assessee made written submissions and furnished the required documents. After analyzing the details submitted by the assessee, the Assessing Officer observed that the assessee had taken unsecured loan from the said M/s Venus financial Consultants Pvt. Ltd. However, the said loan was not repaid during the same year. The Assessing Officer, thereafter, held that the transactions cannot be considered genuine merely for the reason that it was carried out through banking channel in a known sequence with no apparent aberrations. The Assessing Officer merely on the above observations, formed the belief of escapement of income of the assessee of ₹5000000/- in respect of the aforesaid transaction. In the further paras of the reasons recorded, the Assessing Officer, himself has mentioned that the assessee has filed the required documents such as copy of annual report and audited P&L I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 6 A/c and balance sheet along with return of income, wherein all the material information were disclosed; however, he observed that the requisite material facts were embedded in such a manner that material evidence could not be discovered by the Assessing Officer and could have been discovered now after the inquiries made by the Investigation Wing and that accordingly explanation 1 of section 147 of the act was attracted. 4. The Assessing Officer, thereafter, reopened the assessment. During the assessment proceedings, the Assessing Officer noted that the assessee during the year had taken the total loans aggregating of Rs. 31700000 during the financial year 2012-13 from 15 parties. However, the Assessing Officer made the impugned addition of ₹19500000 in respect of 7 parties only, observing that though the assessee had submitted loan confirmations from the aforesaid parties along with bank statement, copy of ITRs and other documents, however, he observed in the case of these parties that the credit in their bank account and the debits appear on the same date or on a nearer date and that this led to conclusion that the credit worthiness of the lender was not satisfactorily explained. 5. A perusal of the reasons recorded as well as the impugned assessment order would reveal that there is no mention as to what material facts which the assessee had failed to disclose fully and truly in response to the notice issued under section 142(1), which were necessary for his assessment. The ld. Counsel in this request has placed reliance on the copy of the original assessment order dated 9.10.2015 passed under section 143(3) of the Income Tax Act to submit that the Assessing Officer has duly enquired the issue relating to the I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 7 unsecured loans and had found that the assessee had paid interest @12% to the related parties, whereas, the assessee had paid interest @9% p.a to other parties. The Assessing Officer had made addition of ₹208404/- on account of interest paid in excess of 9% p.a to the related parties u/s 40A(2a) read with section 40A(2b) of the Income Tax Act. 6. A perusal of the aforesaid original assessment order passed u/s 143(3) of the Act would reveal that the assessee had duly disclosed all the loan transactions which were duly examined by the Assessing Officer and even the aforesaid additions were made on account of excess interest paid. The ld. Counsel has further invited our intention to page 23 of the paper-book which is a chart showing details of loan taken, details of the bank and bank statement, details of the interest, TDS deducted and paid, and also, the details of the repayment of the loan amount. A perusal of the details furnished by the assessee would show that out of the loan taken from the 7 parties, the loan in respect of 5 parties was repaid/refunded in the same financial year. However, the loan in case of other 2 parties was repaid within few months from the beginning of the next financial year. All the details relating to the loans, name of parties, their identity, bank statements showing their credit worthiness were duly furnished. There is no mention either in the reasons recorded or in the assessment made u/s 147 of the Income Tax Act as to what information the assessee has not furnished or as to what information was not true or correct which was furnished in the return of income or in response to the notices issued during the original assessment proceedings u/s 143(3) of the Income Tax Act. Even the assessment year under consideration is AY 2013-14 and the assessee being individual, there was no requirement, under the provisions of I.T.A. No.209/Kol/2023 Assessment Year: 2013-14 Surya Prakash Toshniwal 8 Section 68 of the Income Tax Act, upon the assessee to furnish the details of source of source of creditors. In view of the above discussion, the reopening of the assessment beyond four years of the relevant assessment year is squarely hit by the first Proviso to Section 147 of the Income Tax Act and therefore, the reopening of the assessment being bad in law, is hereby quashed. Consequently, the impugned additions stand deleted. 7. In the result, the appeal of the assessee stands allowed. Kolkata, the 17 th October, 2023. Sd/- Sd/- [ͬगरȣश अĒवाल /Girish Agrawal] [संजय गग[ /Sanjay Garg] लेखा सदèय/Accountant Member ÛयाǓयक सदèय/Judicial Member Dated: 17.10.2023. RS Copy of the order forwarded to: 1. Surya Prakash Toshniwal 2. ITO, Ward-36(1), Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches