I.T.O. Ward -1(5), Nagpur V. SHRI PARAMVEER ABHAY SANCHETI, Nagpur

ITA 215/NAG/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5407 (ITAT-NAGPUR)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 19-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K BARAL
• Keywords: Gift; Question of law
• Section: 56(2); 131; 68; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA N O. 215 /NAG. / 2015 ( ASSESSMENT YEAR : 2010 - 11 ) I.T.O. WARD 1(5), ROOM NO. 516, 5 TH FLOOR, MECL BLDG., SEMINARY HILLS, NAGPUR - 440 006 APPELLANT V/S SHRI PARAMVEER ABHAY SANCHETI 267, GANESH PHADNAVIS BHAWAN, OPP. TRIANGULAR PARK, DHARAMPETH, NAGPUR - 440 010 PAN:BVLPS 7776 N .... RESPONDENT A S SESSEE BY : SHRI R. K. BARAL REVENUE BY : SHRI MUKESH AGRAWAL DATE OF HEARING 11.05.2018 DATE OF ORDER 02.07. 2018 O R D E R PER SHAMIM YAHYA , A .M. THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I, NAGPUR DATED 27.03.2015 AND PERTAINS TO THE ASSESSMENT YEAR 2010 - 11. 2. T HE GROUNDS OF APPEAL READ AS UNDER : (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION U/S 56(2)(VII)(A) OF THE I.T. ACT, 1961 OF RS.65,05,768/ - MADE TO THE RETURNED INCOME BY THE AO. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) HAS ERRED IN LAW IN HOLDING THAT THE TRANSACTION OF RS.65,05,768/ - WAS A GENUINE TRANSACTION OF LOAN BETWEEN THE ASSESSEE AND THE LENDER, M / S SAN FINANCE CORPORATION AND CONSEQUENTLY IN DELETING THE ADDITION MADE BY THE AO. 2 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI 3. B RIEF FACTS OF THE CASE ARE AS UNDER : IN THIS CASE, IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE PAYMENT AMOUNTING TO RS.65,05,768/ - DURING THE YEAR TO THE ADARSH CO - OP. HOUSING SOCIETY (HEREINAFTER REFERRED TO AS ACHS), MUMBAI AS AN ADVANCE FOR PURCHASE OF ONE FLAT. THE AO RECORDED THE STATEMENT OF THE APPELLANT U/S 131 WHEREIN IT WAS EXPLAINED THAT HE HAD RAISED A LOAN OF RS. 70,57 , 180 / - FROM M/S SAN FINANCE CORPORATION (HEREINAFTER REFERRED TO AS SFC), NAGPUR ON DIFFERENT DATES AND THAT DURING THE YEAR UNDER CONSIDERATION AN AMOUNT OF RS.65,05,768/ - WAS PAID TO ACHS, MUMBAI. THE SAID CASE WAS SELECTED FOR SCRUTINY. DURING THE COUR SE OF SCRUTINY PROCEEDINGS, THE ASSESSING OFFICER CALLED FOR VARIOUS DETAILS. FROM THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE STATEMENT RECORDED U/S 131 OF THE ACT, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT FOR THE PURPOSES OF RAISING THE SAID LOAN OF RS.70,57, 180 / - , THE ASSESSEE HAD: I) NOT ENTERED INTO ANY WRITTEN MOU WITH THE LENDER M/S SAN FINANCE CORPORATION II) NOT FURNISHED ANY GUARANTEE FOR TAKING LOAN III) NOT MORTGAGED ANY PROPERTY AS SECURITY AGAINST THE LOAN IV) NO LEGAL B INDING AGREEMENT WAS OBTAINING LOAN CREATED FOR V) NO LEGAL BINDING AGREEMENT WAS CREATED FOR REPAYMENT OF LOAN VI) THERE WAS NO WRITTEN AGREEMENT FOR REPAYMENT OF THIS LOAN AND IT IS ALSO AN INTEREST FREE ADVANCE. 7. THE ASSESSING OFFICER , THEREFORE, CONCLUDED THAT IN THE ABSENCE OF A LEGALLY ENFORCEABLE REPAYMENT AGREEMENT, IT WAS EVIDENT THAT THE LOAN IS NOT REPAYABLE AND THE LENDER IS NOT INTERESTED TO RECOVER THE LOAN THROUGH THE PROCESS OF LAW IN CASE OF DEFAULT. 8. THUS, ACCORDING TO THE ASSESS ING OFFICER , THE TRANSACTION IN QUESTION BY THE ASSESSEE WITH M/S SAN FINANCE CORPORATION (S FC), NAGPUR IS NOT IN THE NATURE OF LOAN TRANSACTION WITHIN THE MEANING OF SECTION 2(9) OF THE BOMBAY MONEY LENDERS ACT, 1946 3 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI WHREIN THE LOAN IS DEFINED AS 'LOAN ME ANS AN ADVANCE AT INTEREST WHEREOF MONEY OR IN KIND'. THEREFORE, THE ASSESSING OFFICER CONCLUDED AS UNDER: 'THE MAIN CHARACTERISTICS OF A LOAN ARE AS UNDER: 1. INTEREST. 2. SECURITY. 3. REPAYMENT SCHEDULE, AND 4. TIME OF MATURITY IN THE AFORESAID TRANSACTI ONS NONE OF THE FOUR CHARACTERISTICS OF A LOAN ARE VISIBLE AS IS EVIDENT FROM THE REPLIES FILED BOTH BY THE ASSESSEE AS WELL AS M/S SAN FINANCE CORPORATION.' IN VIEW OF THE ABOVE FACTS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE SAID AMOUNT OF RS.65,05,768 / - CLAIMED TO HAVE BEEN ADVANCED BY THE SFC TO THE ASSESSEE IS A BENEFIT HAVING N O CHARACTERISTIC FEATURES OF A LOAN' AND HE, THEREFORE, BROUGHT THE SAID AMOUNT TO TAX BY INVOICING THE PROVISIONS O F SECTION 56(2) (VII) OF THE INCOME - TAX ACT, 1961 AND ADDED THE AMOUNT OF RS.65,05,768/ - ADVANCED BY THE ASSESSEE TO ACHS DURING THE YEAR UNDER CONSIDERATION TO THE INCOME OF THE ASSESSEE . 9 . A GAINST THE ABOVE ORDER , THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 10 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NOT ED THAT SEVERAL EVIDENCES HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE TO ESTABLISH THAT THE SAID AMOUNT RECEIVED BY THE ASSESSEE FROM M/S. SAN FINANCE CORPORATION IS IN THE NATURE OF THE LOAN . HE OBSERVED THA T T HE SAME BECOMES EVIDENT FROM THE FACT THAT SFC HAS SHOWN THE SAID AMOUNT AS LOAN IN ITS BOOKS OF ACCOUNT AND IN ITS BALANCE SHEET. TH AT TH E ASSESSEE HAD ALSO FILED A CONFIRMATION BEFORE THE ASSESSING OFFICER FROM THE SAID SFC DURING THE COURSE OF ASSESS MENT PROCEEDINGS. TH AT TH E ASSESSING OFFICER HAS ALSO VERIFIED THE SAID FACT INDEPENDENTLY BY 4 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI ISSUE OF NOTICE U/S. 1 33(6) OF THE ACT TO SFC. TH AT TH E ASSESSEE HAS ALSO BEEN SHOWING THE SAID AMOUNT AS HAVING BEEN RECEIVED FROM SFC AS LOAN. THAT I N SUCH CIRCU MSTANCES, IT IS EVIDENT THAT THE SAID AMOUNTS RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION ARE IN THE NATURE OF LOAN' ONLY. 11 . THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER OBSERVED THAT THE R EVENUE DEPARTMENT IN THE ASSESSMENT PROCEEDINGS OF THE M/S. SAN FINANCE CORPORATION HAS TREATED THESE TRANSACTIONS BETWEEN THE M/S. SAN FINANCE CORPORATION AND THE ASSESSEE AS A LOAN AND HAS DISALLOWED THE INTEREST ON THE AMOUNT OF LOAN GIVEN BY THE FINANC E COMPANY TO THE ASSESSEE INTEREST FREE . IN THE ASSESSMENT OF THE M/S. SAN FINANCE CORPORATION , THE ASSESSING OFFICER DISALLOWED 12% ON INTEREST - FREE LOAN GIVEN TO VARIOUS PERSONS WHICH INCLUDED THE INTEREST - FREE ADVANCES MADE BY THE M/S. SAN FINANCE CORPO RATION TO THE ASSESSEE. IN THESE CIRCUMSTANCES , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) RE FERRED TO THE MAXIM OF APPROBATE AND REPROBATE. HE OPINED THAT THE RE VENUE CANNOT TAKE CONTRADICTORY STAND FOR THE SAME TRANSACTION. IT CANNOT TREAT THE SAME AS LOAN GIVEN IN THE HAND OF THE M/S. SAN FINANCE CORPORATION AND ON THE CONTRARY , TREAT THE SAME AS ADDITION U /S. 56 IN THE HANDS OF THE ASSESSEE , BEING GIFT OR AMOUNT RECEIVED WITHOUT CONSIDERATION. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER REFERRED TO CASE LAWS FROM THE HON'BLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. CHANDRAKANT J. SHAH IN ITA NO. 3154 OF 2009 VIDE ORDER DATED 0 6 .0 9 .2 010 . 12 . IN THESE CIRCUMSTANCES , BY AN ELABORATE ORDER , THE LD. COMMISSIONER OF IN COME TAX (APPEALS) DELETED THE ADDITION. THE CONCLUDING PORTION OF THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) READS AS UNDER: 5 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI 6.12 CONSIDERING THE ABOVE CUMULATIVE FACTORS, IT IS EVIDENT THAT THE AMOUNTS WHICH HAVE BEEN SHOWN IN THE BALANCE SHEET AS LOAN' AND ALSO CONFIRMED BY THE LENDERS TO BE LOAN ARE NOT GIFT AND CANNOT BE BROUGHT TO TAX U/S 56 (2) (V) OF THE ACT, EVEN IF THE SAME REMAINED UNPAID. IT IS NOT A REQUIREMENT OF LAW OR CONTRACT THAT THE WRITTEN AGREEMENT SHOULD BE ENTERED INT O WHILE TAKING A LOAN'. ABSENCE OF REPAYMENT SCHEDULED DOES NOT ALTER THE FACTS THAT THE AMOUNT TAKEN BY THE APPELLANT IS IN THE NATURE OF LOAN. THE INTENTION OF THE APPELLANT HAS TO BE GATHERED FROM THE CIRCUMSTANTIAL EVIDENCE AND THE INTENTION TO REPAY THE LOAN IS ESTABLISHED BY THE FACT THAT THE SAID AMOUNT IS SHOWN AS LOAN IN THE BALANCE SHEET OF THE APPELLANT AS WELL AS OF SFC. IT IS ALSO A FACT THAT THAT ALL THE REQUIREMENTS OF SECTION 68 I.E. IDENTITY, CREDITWORTHINESS AND GENUINENES S OF TRANSACTIONS STAND ESTABLISHED AS THE SAID SFC IS ASSESSED IN NAGPUR ONLY, AS MENTIONED ABOVE. CONSIDERING THE ABOVE MATERIAL FACTS AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT, MUMBAI, THE ADDITION MADE BY T HE AO OF RS.65,05 ,768 IS DIRECTED TO BE DELETED. 13 . A GAINST THE ABOVE ORDER , THE R EVENUE IS IN APPEAL BEFORE US. 14 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER'S OF THE ASSESSING OFFICER. 1 5 . PER C ONTRA , THE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED THAT THE AMOUNT OF LOAN HAS BEEN CORRECTLY APPRECIATED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). H E RELIED UPON FOLLOWING CASE LAWS: 1. CHANDRAKANT J. SHAH VS. ITO 121 TTJ 145 (MUM - ITAT) ; 2. CIT VS. CHANDRAKANT J. SHAH (IN ITA NO. 3154 OF 2009) (BOM - HC) ; AND 3. NILESH J. THAKUR VS. ITO (168 ITD 143) (MUM - ITAT) 1 6 . WE FIND THAT SECTION 56(2)(VII) ( A ) PROVIDES FOR INCLUSION AS INCOME FROM OTHER SOURCES AND RECEIPT OF ANY SUM, WITHOUT CONSIDERATION EXCE EDING RS.50,000/ - . 1 7 . UP ON CAREFUL CONSIDERATION , WE NOTE THAT IN THIS CASE THE ASSESSEE HAS CLAIMED TO HAVE RECEIVED A LOAN OF RS .65,05,768/ - FROM M/S. S AN FINANCE CORPORATION. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE AGREEMENT IN THIS REGARD WAS NOT PROPER AGREEMENT . HE 6 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI NOTED THAT THERE WAS AN ABSENCE OF G UARANTEE OR MORTGAGE. HE HELD THAT T HE SAID INTEREST - FREE RECEIPT CANNOT BE TREATED AS LOAN. HOWEVER , AS NOTED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE AMOUNT RECEIVED FROM THE M/ S. S AN FINANCE CORPORATION BY THE ASSESSEE FULLY QUALIFIES AS LOAN. THE M/S. S AN FINANCE CORPORATION HAS SHOWN THE SAME AMOUNT AS LOAN IN ITS BALANCE SHEET, THE SAME HAS BEEN DULY ACCEPTED BY THE R EVENUE. AS A MATTER OF FACT , IN THE HANDS OF M/S. S AN FINAN CE CORPORATION , THE ASSESSING OFFICER HAS DISALLOWED 12% ON THE INTEREST - FREE LOAN GIVEN BY THE M/S. S AN FINANCE CORPORATION TO VARIOUS PERSONS INCLUDING THE ASSESSEE. IN THESE CIRCUMSTANCES , IN OUR CONSIDERED OPINION , THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) IS QUITE CORRECT IN HOLDING THAT R EVENUE CANNOT TAKE CONTRADICTORY STANDS. IN THE CASE OF THE M/S. S AN FINANCE CORPORATION , IT HAS HELD THAT THE SAME IS LOAN. WHEN SUCH A STAND HAS BEEN TAKEN , THE R EVENUE CANNOT TAKE UP A CONTRARY STAND AND TREAT T HE SAME LOAN IN THE HANDS OF THE ASSESSEE AS A GIFT OR A SUM RECEIVED WITHOUT CONSIDERATION TAXABLE UNDER SECTION 56(2)(VII)(A) OF THE ACT . 1 8 . IN THIS REGARD , WE NOTE THAT THE HONBLE HIGH COURT HAD OCCASION TO CONSIDER SIMILAR ISSUE IN THE CASE OF CHANDRAKANT J. SHAH (SUPRA). T HE HONBLE HIGH COURT HAS EXPOUNDED AS UNDER : 2. THE QUESTION OF LAW RAISED IN THE APPEAL REVOLVES AROUND DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER UNDER SECTION 56(2) (V) OF THE INCOME TAX ACT. THE TRIBUNAL HAS TA KEN INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CASE AND AFTER APPRECIATION THEREOF, RECORDED A FINDING OF FACT IN PARAGRAPH NO.14, WHICH READS AS UNDER: 14. IN THE END, WE WOULD LIKE TO EMPHASISE ON THE FACT THAT SEVERAL COMMERCIAL CONSIDERATIONS PREVAIL IN THE BUSINESS WORLD FOR ENTERING INTO BUSINESS TRANSACTIONS OF VARIOUS TYPES AND AS OBSERVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF KESHUB MAHI NDRA (SUPRA) IF THE REVENUE 7 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI AUTHORITIES TAX SUCH TRANSACTIONS IN THIS MANNER, THEN, THE CONDUCT OF BUSINESS WOULD BECOME IMPOSSIBLE. IT IS ALSO PERTINENT TO MENTION HERE THAT '0'% INTEREST LOAN OR INTEREST FREE LOAN HAVE BEEN INSTITUTIONALIZED WHERE THE MA NUFACTURING COMPANIES OR MARKETING COMPANIES COMPENSATE THE FINANCING COMPANIES WHO GIVE MONEY TO THE CUSTOMERS INTEREST FREE TO BUY THE PRODUCTS AND THESE TYPES OF LOAN RESULT INTO A VIBRANT ECONOMY BENEFITING ALL CONCERNED AND IF THE VIEW TAKEN BY THE RE VENUE AUTHORITIES IS ACCEPTED THEN, ALL SUCH TRANSACTIONS CAN BE TAXED AS INCOME U/S.56(2)(V) OF THE ACT WHICH CANNOT BE THE INTENTION OF THE LEGISLATURE, HENCE, IN OUR VIEW, THE INTERPRETATION OF SECTION 56(2) (V) MADE BY THE REVENUE AUTHORITIES IS NOT AT ALL VALID AND JUSTIFIED. ACCORDINGLY, WE HOLD THAT A TRANSACTION OF LOAN CAN BE WITHOUT INTEREST AND A TRANSACTION OF LOAN IMPLIES AN AGREEMENT TO REPAY THE MONEY I.E. BORROWED WHICH ALSO GIVES REPLY TO THE REVENUE'S QUERY REGARDING EXISTENCE OF THE OBLIG ATION TO REPAY THE MONEY AT THE TIME OF TAKING OF SUCH LOAN.' 3. IN THE ABOVE VIEW OF THE MATTER, IT IS DIFFICULT TO FIND FAULT WITH THE VIEW TAKEN BY THE TRIBUNAL. THE APPEAL IS, THEREFORE, DISMISSED FOR WANT OF SUBSTANTIAL QUESTION OF LAW WITH NO ORDER AS TO COSTS. 19 . IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT , IN OUR CONSIDERED OPINION , THE IMPUGNED TRANSACTION HAS TO BE TREATED AS LOAN. HENCE, WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ). ACCORDINGLY , WE UPHOLD THE SAME. 20 . IN THE RESULT , THIS APPEAL BY THE R EVENUE STANDS DISMISSED O RDER PRONOUNCED BY LISTING THE RESULT ON THE NOTICE BOARD OF THE BENCH UNDER RULE 34(4) OF THE APPELLATE TRIBUNAL RULES, 1963. SD/ - RAM LAL NEGI JUDICIAL MEMBER SD/ - SHAMIM YAHYA ACCOUNTANT MEMBER DATED : 02.07.2018 8 ITA NO. 215/NAG./2015 SHRI PARAMVEER ABHAY SANCHETI COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR ; (6) GUARD FILE . // TRUE COPY // BY ORDER ROSHANI , SR. PS ( SR. P.S. / P.S. ) ITAT,