I.T.O. Ward -3(5), Nagpur V. SHRI MUKUNDRAO GOVINDRAO MANKAR, KATOL

ITA 223/NAG/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9678 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 03-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Gift; Additional evidence; Question of law; Capital receipt
• Section: 56(2); 131; 68; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO. 223/NAG./2015 ( ASSESSMENT YEAR : 201011 ) INCOME TAX OFFICER WARD3(5), NAGPUR APPELLANT V/S SHRI MUKUNDRAO GOVINDRAO MANKAR AT & POST DIGRAS, TEHSILKATOL DIST. NAGPUR 441 302 PAN BNXPM3931R .... RESPONDENT ASSESSEE BY : SHRI K.P. DEWANI REVENUE BY : SHRI A.R. NINAWE DATE OF HEARING 22.06.2017 DATE OF ORDER 28.06 .2017 O R D E R PER AMARJIT SINGH, J.M. THE PRESENT APPEAL PREFERRED BY THE REVENUE IS DIRE CTED AGAINST THE THE IMPUGNED ORDER DATED 14 TH APRIL 2015, PASSED BY THE LEARNED COMMISSIONER (APPEALS)2, NAGPUR, FOR THE ASSESSMEN T YEAR 201011, ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION O F ` 61,74,880 IN RESPECT OF LOAN TAKEN BY THE ASSESSEE FROM M/S. LAN DSCAPER REALTORS PVT. LTD. 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE F ACTS AND 2 SHRI MUKUNDRAO GOVINDRAO MANKAR CIRCUMSTANCES OF THE CASE AT HAND ARE DIFFERENCE FR OM THOSE OF THE CASE LAW RELIED UPON I.E., CHANDRAKANT H. SHAH V/S ITO, 121 TTJ 145 (MUM.) (2009). 2. BRIEF FACTS OF THE CASE ARE THE ASSESSEE IS AN EXML A AND IS HAVING AGRICULTURAL INCOME AS WELL AS INCOME FROM P ENSION. FOR THE YEAR UNDER ASSESSMENT, THE ASSESSEE FILED HIS RETUR N OF INCOME ON 7 TH SEPTEMBER 2011, DECLARING TOTAL INCOME TO THE TUNE OF ` 1,15,260. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE ACQUIRED A RESIDENTIAL FLAT AT ADARSH COOPERATIVE HOUSING SOCIETY AND THAT THE MA JOR SOURCE OF PAYMENT WITH REGARD TO THE SAID INVESTMENT WAS BORR OWINGS FROM ONE M/S. LANDSCAPER REALTORS PVT. LTD. (LRPL) AND FROM HIS SON. THE ASSESSING OFFICER FURTHER NOTED THAT THE TOTAL PAYM ENT MADE BY THE ASSESSEE TO ADARSH COOPERATIVE HOUSING SOCIETY, WE RE TO THE TUNE OF ` 76,49,461 FOR THE PERIOD FROM 22 ND JULY 2009 TO 21 ST AUGUST 2010 IN LIEU OF ALLOTMENT OF THE SAID FLAT. THE ASSESSEE FU RNISHED VARIOUS DETAILS INCLUDING COPY OF ACCOUNT OF THE SAID LRPL, SOURCE OF PAYMENT MADE TO ADARSH COOPERATIVE HOUSING SOCIETY, LOAN AGREEMENT S WITH LRPL, SECURITY PROVIDED FOR THE SAID LOAN, INTEREST PAID TO LRPL, ETC. THE ASSESSING OFFICER FURTHER CARRIED OUT ENQUIRIES BY WAY OF ISSUING NOTICE UNDER SECTION 131 TO LRPL WITH CERTAIN DIRECTIONS C ONTAINED IN THE SAID NOTICE. THE LRPL COMPLIED TO THE SAID DIRECTIONS OF THE ASSESSING OFFICER AND FURNISHED VARIOUS DETAILS INCLUDING COP Y OF CONFIRMATION OF THE ASSESSEE'S A/C, ITS INCOME TAX RETURN, COPY OF BALANCE SHEET, RATE 3 SHRI MUKUNDRAO GOVINDRAO MANKAR OF INTEREST CHARGED AND COPY OF LOAN AGREEMENT AND EXPLAINED THAT ITS RELATION WITH THE ASSESSEE WAS THAT OF LENDER AND B ORROWER. THE ASSESSING OFFICER CONSIDERED THE VARIOUS SUBMISSION S OF THE ASSESSEE AND ALSO EXAMINED THE EVIDENCES THAT HE HAD COLLECT ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND CAME TO THE CO NCLUSION THAT UNSECURED LOAN OBTAINED BY THE APPELLANT FROM LRPL IS WITHOUT ENTERING INTO A PROPER AGREEMENT AND WITHOUT A STAM P PAPER AND THAT NO REPAYMENT AGREEMENT OR TERMS AND CONDITIONS FOR THE REPAYMENT HAVE BEEN DRAWN OR PREPARED AND HENCE CONCLUDED THA T THE ASSESSEE WAS NOT IN A POSITION TO REPAY THE SAID HUGE LOAN I N VIEW OF ITS LIMITED EARNINGS. THE ASSESSING OFFICER DISAGREED WITH THE SUBMISSIONS OF THE ASSESSEE THAT THE FINANCER WILL COLLECT THE FIRST I NSTALLMENT OF PRINCIPAL AND INTEREST AFTER ONE YEAR FROM THE DATE ON WHICH THE SAID FLAT IS GIVEN ON RENT. HE CAME TO THE CONCLUSION THAT THE S AID UNSECURED LOAN TAKEN BY THE ASSESSEE FROM LRPL IS NOTHING BUT AN A MOUNT PASSED ONTO THE ASSESSEE WITHOUT CONSIDERATION WHICH IS NO T LIABLE FOR REPAYMENT AND THE CHARACTERISTIC FEATURES OF LOAN A RE ABSENT AND THAT, THEREFORE, THE SAID AMOUNT WAS LIABLE TO BE TAXED A S THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 56(2)(VI) / 56(2)(VII) OF THE ACT. THE ASSESSING OFFICER, THEREFORE, ADDED AN AMO UNT OF ` 61,74,880 TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED BY TH E ORDER SO PASSED 4 SHRI MUKUNDRAO GOVINDRAO MANKAR BY THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 3. THE LEARNED COMMISSIONER (APPEALS) CONFIRMED THE AS SESSMENT ORDER BY OBSERVING AS FOLLOWS: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND THE WRITTEN SUBMISSIONS OF THE APPELLANT. I FIND SUBSTA NTIAL FORCE IN THE SUBMISSION MADE BY THE APPELLANT. THE LD. AO HAS AD DED THE SAID AMOUNT BY INVOKING THE PROVISIONS OF SECTION 56(2)( VII)(A) IN VIEW OF THE FOLLOWING:- A) NO PROPERTY WAS MORTGAGED TOWARDS SECURITY OF TH E LOAN. B) NO SECURITY WAS PROVIDED AGAINST THE LOAN. C) NO PROPER LEGAL DOCUMENT WAS CREATED FOR OBTAINI NG LOAN. D) NO LEGAL BINDING AGREEMENT WAS EXECUTED. 5.1 THUS IT IS SEEN THAT IT IS THE CONTENTION OF TH E LD. AO THAT THE SAID TRANSACTION DOES NOT HAVE THE CHARACTERISTIC F EATURES OF A LOAN AND LACKS THE FEATURES, WHICH WE GENERALLY ASS OCIATE WITH THE TERM LOAN. THE TERM LOAN' HAS BEEN EXAMINED IN DETA IL IN VARIOUS COURT'S RULING. AS PER HM REVENUE AND CUSTOMS (ACCE SSED AT HTTP: //WWW.HMRC.GOV.UK/MANUALS/CFMMANUAL/CFM30140. HTM) THE KEY DEFINITION OF A LOAN RELATIONSHIP IS THAT I T IS A: MONEY DEBT ARISING FROM A TRANSACTION FOR THE LENDING OF MONEY . AS PER THE WEBSITE; BOTH ELEMENTS HAVE TO BE PRESEN T FOR THE ARRANGEMENT TO BE A LOAN RELATIONSHIP AND STATES TH AT NEITHER PART OF THE DEFINITION IS ITSELF DEFINED IN THE LEGISLAT ION, ALTHOUGH LOAN IS SAID TO INCLUDE 'ANY ADVANCE OF MONEY'. IT FURTHER CLARIFIES THAT A LOAN INVOLVES REPAYMENT AND CENTRAL TO THE IDEA OF A MOAN' IS THAT IT INVOLVES ONE PERSON (THE CREDITOR) AGREEING TO L END MONEY TO ANOTHER (THE DEBTOR) IN CONSIDERATION OF PROMISE TO REPAY THAT SUM, ON DEMAND OR AT SOME FUTURE POINT, OR ON CONDI TION OF SOME EVENT HAPPENING. IT ALSO STATES THAT A LOAN USUALLY , BUT NOT NECESSARILY INVOLVES THE PAYMENT OF INTEREST OR AN INTEREST-LIKE RETURN BY THE DEBTOR AND THAT THE OBLIGATION TO REP AY IS CENTRAL TO THE IDEA OF A DEBT. 5.2 THUS THE TRANSACTION OF LOAN IMPLIES AN AGREEME NT TO REPAY THE AMOUNT THAT IS BORROWED AND IS DEFINED AS 'A CO NTRACT BY 5 SHRI MUKUNDRAO GOVINDRAO MANKAR WHICH ONE DELIVERS A SUM OF MONEY TO ANOTHER AND TH E LATTER AGREES TO RETURN AT A FUTURE TIME A SUM EQUIVALENT TO THAT WHICH HE BORROWS'. THUS CLEARLY A LOAN INVOLVES AN ENFORC EABLE AGREEMENT BETWEEN TWO PARTIES, ONE OF WHOM IS THE L ENDER AND THE OTHER THE BORROWER AND THE LATTER RECEIVES THE SUM AND PROMISES TO REPAY IT BY AN EQUIVALENT AMOUNT AT A F UTURE DAY WITH OR WITHOUT INTEREST. IT IS NOT NECESSARY THAT A LOA N HAS TO BE REPAID ALONG WITH INTEREST. AS A MATTER OF FACT NO CONDITION EXISTS IN LAW OF CONTRACT THAT A LOAN CAN BE GIVEN WITH IN TEREST ONLY. SIMILARLY IT IS NOT A REQUIREMENT OF LAW OF CONTRAC T THAT THE LOAN AGREEMENT HAS TO BE NECESSARILY IN WRITTEN. ALSO, W ITH REGARD TO THE ISSUE OF REPAYMENT SCHEDULE NOT BEING SPECIFIED , THE SAME IS NOT MATERIAL TO ALTER THE NATURE OF THE TRANSACTION BECAUSE THE TERM OF REPAYMENT COULD BE ALTERED/ EXTENDED/CHANGE D BY MUTUAL CONSENT OF BOTH THE PARTIES. 5.3 IT IS IMPORTANT TO NOTE THAT SEVERAL EVIDENCES HAVE BEEN BROUGHT ON RECORD BY THE APPELLANT TO ESTABLISH THA T THE SAID AMOUNT RECEIVED BY THE APPELLANT FROM LRPL IS IN TH E NATURE OF LOAN AND THAT THE SAME IS REQUIRED TO BE REPAID. TH E APPELLANT HAS BEEN SHOWING THE SAID AMOUNT RECEIVED FROM LRPL AS LOAN. THE APPELLANT HAD ALSO FILED A CONFIRMATION BEFORE THE LD. AO FROM THE SAID LRPL DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THE LD. AO HAS ALSO VERIFIED THE SAID FACT INDEPENDENTLY BY ISSUE OF NOTICE U/S 131 OF THE ACT TO LRPL. THE NATURE OF THE TRANS ACTION ALSO BECOMES EVIDENT FROM THE FACT THAT LRPL HAS SHOWN T HE SAID AMOUNT AS LOAN IN ITS BOOKS OF ACCOUNT AND IN ITS B ALANCE SHEET. IN SUCH CIRCUMSTANCES IT IS EVIDENT THAT THE SAID AMOU NTS RECEIVED BY THE APPELLANT DURING THE YEAR UNDER CONSIDERATION A RE IN THE NATURE OF LOAN ONLY. 5.4 DURING THE COURSE OF ASSESSMENT PROCEEDINGS SUF FICIENT EVIDENCES NAVE BEEN BROUGHT ON RECORD BY THE APPELL ANT TO CONCLUSIVELY ESTABLISH THE RELATIONSHIP OF BORROWER AND LENDER WITH THE SAID LRPL. THE SAID LRPL HAS FURNISHED VARIOUS DETAILS BEFORE THE LD. AO INCLUDING ITS BALANCE SHEET, COPY OF ACC OUNT, RETURN OF INCOME ETC. TO CONCLUSIVELY ESTABLISH THAT IT HAS G IVEN A LOAN OF THE SAID AMOUNT TO THE APPELLANT AND IT HAS DULY RE FLECTED IN ITS BALANCE SHEET AS A LOAN. AS CLARIFIED BY THE APPELL ANT AND BY LRPL, LRPL HAS ALSO CHARGED INTEREST ON THE AMOUNT AND AM OUNT OF INTEREST CHARGED HAS ALSO SPECIFIED AND DULY CONFIR MED BY BOTH THE PARTIES INVOLVED. 5.5 IT IS ALSO IMPORTANT TO NOTE THAT LRPL HAS CHAR GED INTEREST ON THE SAID AMOUNT AND AMOUNT OF INTEREST CHARGED HAS BEEN OFFERED TO TAX IN ITS RETURN OF INCOME. THUS WHILE IN THE A SSESSMENT OF LRPL, THE RELATIONSHIP OF LENDER AND BORROWER IS BE ING ACCEPTED AND THE INTEREST INCOME IS BEING ACCEPTED AND TAXED , A CONTRARY 6 SHRI MUKUNDRAO GOVINDRAO MANKAR VIEW CANNOT BE TAKEN IN THE CASE OF THE APPELLANT. IT IS SETTLED LAW THAT THE INCOME TAX AUTHORITY HAVING RELIED ON ONE PART OF A TRANSACTION CANNOT REJECT THE OTHER PART OF THE SAM E TRANSACTION AND TAKE AN ENTIRELY DIFFERENT VIEW. ONCE HAVING HE LD THAT THE SAID LRPL HAD ADVANCED LOANS TO THE APPELLANT AND HAVING CHARGED INTEREST IN RESPECT OF THE INTEREST FREE LOAN GIVEN BY THE LRPL TO THE APPELLANT, THE DEPARTMENT CANNOT NOW TAKE A CON TRARY VIEW IN THE HANDS OF THE RECIPIENT OF THE LOAN AND HOLD THA T THE SAID AMOUNT IS A GIFT IN THE HANDS OF THE RECIPIENT APPE LLANT. THE DEPARTMENT CANNOT APPROBATE AS WELL AS REPROBATE. T HE MAXIM QUI APPROBATION REPROBATE (ONE WHO APPROBATES CANNO T REPROBATE) IS FIRMLY EMBODIED IN ENGLISH COMMON LAW AND OFTEN APPLIED BY COURTS IN THIS COUNTRY. IT IS AKIN TO THE DOCTRINE OF BENEFITS AND BURDENS, WHICH AT ITS MOST BASIC LEVEL PROVIDES THA T A PERSON TAKING ADVANTAGE UNDER AN INSTRUMENT THAT BOTH GRAN TS A BENEFIT, AND IMPOSES & BURDEN, CJNNOT TAKE THE FORMER WITHOU T COMPLYING WITH THE LATTER. A PERSON CANNOT APPROBATE AND REPR OBATE OR ACCEPT AND REJECT THE SAME INSTRUMENT. HE CANNOT, T O USE THE WORDS OF HONYMAN, J. IN SMITH V. BAKER (1878) LR 8 CP 350 AT P. 357 V AT THE SAME TIME BLOW HOT AND COLD. HE CANNOT SAY AT ONE TIME THAT THE TRANSACTION IS VALID AND THEREBY OBTA IN SOME ADVANTAGE TO WHICH HE COULD ONLY BE ENTITLED ON THE FOOTING THAT IT IS VALID, AND AT ANOTHER TIME SAY IT IS VOID FOR TH E PURPOSE OF SECURING SOME FURTHER ADVANTAGE'. 5.6 THUS IN THE GIVEN SET OF CIRCUMSTANCES, IT IS E VIDENT THAT THE .SAID AMOUNT OF MONEY ADVANCED BY THE LRPL TO THE A PPELLANT IS IN THE NATURE OF LOAN. ON ALMOST IDENTICAL FACTS TH E HON'BLE MUMBAI ITAT IN THE CASE OF CHANDRAKANT H. SHAH V/S. ITO 121 TTJ 145 (SUPRA) HAS HELD THAT ONCE AMOUNTS HAVE BEE N SHOWN IN THE BALANCE SHEET AS LOAN AND ALSO SHOWN CONFIRMATI ON BY THE LENDERS THAT THEY WERE LOAN AND NOT GIFTS, THE SAME CANNOT BE BROUGHT TO TAX U/S 56(2)(V) EVEN IF THE SAID AMOUNT ARE NOT REPAID AND THAT THE LOAN TRANSACTION OUGHT TO BE CONSIDERE D U/S 68 ONLY AND NOT U/S 56(2)(V). IT HAS BEEN HELD THEREIN THAT INTEREST FREE LOAN WITHOUT REPAYMENT STIPULATION OBTAINED FROM SI STER CONCERNS FOR PURCHASE OF FLAT FROM ONE OF THEM - LOANS TO BE EXAMINED IN CONTEXT OF S.68. IT HAS BEEN FURTHER HELD THAT IF T HE REQUIREMENT OF SECTION 68 STANDS APPROVED THE LD. AO CANNOT THEN A DD THE SAID AMOUNT U/S 56(2)(V) AS THERE CANNOT BE TWO PROVISIO NS ENABLING ADDITION IN RESPECT OF THE SAID TRANSACTION. 6. IN THE SAID CASE, THE ASSESSING OFFICER FROM THE PERUSAL OF THE BALANCE SHEET FOR THE YEAR ENDED ON 31-3-2005, NOTE D THAT THE ASSESSEE, AN INDIVIDUAL, HAD SHOWN A SUM OF RS. 54, 70,000 AS LOANS TAKEN FROM THE FOUR CONCERNS, NAMELY, ND, UTC , NLL, AND ME. THE ASSESSEE FILED CONFIRMATION LETTER OF THE L ENDERS BEFORE THE ASSESSING OFFICER WHO FOUND THAT THE PARTIES/CO NCERNS FROM 7 SHRI MUKUNDRAO GOVINDRAO MANKAR WHOM THE ASSESSEE HAD TAKEN LOANS, WERE BUILDERS BY PROFESSION AND WERE SISTER CONCERNS AND THAT THE ASSESSEE WAS ALSO EMPLOYED WITH ONE OF THE CONCERNS, VIZ., ND AS SITE SUPERVISOR, HE ALSO NOTED THAT THE ASSESSEE HAD USED THE LOANS FOR PURCHASE OF A RESIDENTIAL FLAT FROM THE SAME BUILDER. THE AS SESSING OFFICER FURTHER FOUND THAT THE ASSESSEE WAS HAVING TOTAL IN COME FOR THE YEAR UNDER CONSIDERATION, OF RS. 2.62 LAKHS, HENCE, REPAYMENT CAPACITY OF THE ASSESSEE WAS VERY POOR. ACCORDINGLY , THE ASSESSING OFFICER FORMED AN OPINION THAT SINCE THE ASSESSEE WAS WORKING WITH THE GROUP FOR SEVERAL DECADES, THOSE P ARTIES GAVE SUCH A HUGE LOAN TO THE ASSESSEE WITHOUT ANY SECURI TY AND INTEREST AS A MARK OF GRATITUDE, IRRESPECTIVE OF HI S REPAYMENT CAPACITY AND, THEREFORE, IN THE ABSENCE OF ANY OBLI GATION ON THE PART OF THE ASSESSEE TO REPAY THE LOANS, THE ENTIRE TRANSACTION WAS OF THE NATURE OF GIFT WHICH WAS GIVEN A COLOUR OF L OAN. THE ASSESSING OFFICER, THEREFORE, ADDED A SUM OF RS. 54 ,45,000 AFTER GIVING A REBATE OF RS. 25,000 TO THE INCOME OF THE ASSESSEE AS INCOME CHARGEABLE TO TAX UNDER SECTION 56(2)(V).IN THE SAID SET OF FACTS, IT HAS BEEN HELD AS UNDER: WE ARE, HOWEVER, UNABLE TO FIND ANY MATERIAL BEING BROUGHT ON RECORD BY THE REVENUE TO SUPPORT THESE FINDINGS, HE NCE, THE ORDERS OF REVENUE AUTHORITIES APPEAR TO BE PASSED O N ASSUMPTIONS AND PRESUMPTIONS AND, PARTICULARLY, WHE N APPARENTLY, THERE EXIST NO PROVISION IN THE SECTION 56(2)(V) TO TREAT LOANS, WHICH MAY NOT BE REPAID, AS INCOME OF THE ASSESSEE..' 6.1 IT HAS BEEN FURTHER HELD AS UNDER: '11.1 HAVING STATED SO, THIS ADDITION ALSO PUZZLES US AS TO WHAT WOULD HAPPEN IN THE CASE OF GENUINE LOANS GIVEN AND TAKEN IN THE NORMAL COURSE OF COMMERCIAL PRACTICE OR ON ACCOUNT OF SOCIAL CONSIDERATIONS. TO PUT IT IN OTHER WORDS, IF A INTE REST FREE LOAN CANNOT BE ADDED UNDER SECTION 68, THEN, SUCH LOAN S HOULD BE ADDED AS INCOME OF THE RECIPIENT UNDER SECTION 56(2 )(V) OF THE ACT WHICH ALSO MEANS THAT THERE WOULD NOT BE ANY DIFFER ENCE BETWEEN CAPITAL RECEIPT/LIABILITY AND REVENUE LIABILITY/REC EIPT. THIS TYPE OF ADDITION ALSO LEAVES TO A SITUATION OF HAVING TWO P ROVISION FOR CHARGING ONE TYPE OF INCOME, I.E., THE LEGISLATURE HAS PROVIDED TWO CHARGING SECTIONS, I.E., SECTIONS 68 AND 56(2)( V) WHICH CANNOT BE SO AS IN THAT CASE THE LEGISLATION WOULD HAVE MA DE THE PROVISIONS OF SECTION 56(2)(V) EITHER OF OVERRIDING NATURE BY STATING THAT 'NOTWITHSTANDING ANYTHING CONTAINED I N SECTION 68'OR BY PROVIDING FOR APPLICABILITY OF PROVISIONS OF SEC TION 56(2)(V) IN ANY OTHER MANNER, IN CASE PROVISIONS OF SECTION 68 COULD NOT BE INVOKED. IN THIS REGARD, WE ARE FURTHER OF THE OPIN ION THAT WHEN A SPECIFIC PROVISION EXIST IN LAW FOR PARTICULAR THIN G, THEN, THAT THING IS LIABLE TO BE EXAMINED THEREUNDER ONLY AND IF THA T ITEM CANNOT 8 SHRI MUKUNDRAO GOVINDRAO MANKAR BE TAXED UNDER THAT PROVISION, THEN, THAT THING CAN NOT BE CHARGED TO TAX UNDER OTHER PROVISIONS OF THE ACT. FOR EXAMP LE, IF AN ITEM FALLS UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' BUT IF THE SAME CANNOT BE TAXED THEREUNDER FOR ANY REASON, THEN, THAT CANNOT BE TAXED UNDER ANY OTHER HEAD. SURPRISI NGLY, IN PRESENT CASE, IT IS NOT THAT PROVISIONS OF SECTION 68 WERE NOT APPLICABLE AT ALL, HENCE, THE ASSESSING OFFICER INV OKED THE PROVISIONS OF SECTION 56(2)(V). ON THE CONTRARY, TH E ASSESSING OFFICER HAS MADE NECESSARY ENQUIRIES IN THAT REGARD AND THE ASSESSING OFFICER HAS NOT MADE ADDITION UNDER SECTI ON 68 FOR THE REASON THAT ALL THE REQUIREMENTS OF THAT SECTION, I .E., IDENTITY; CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS HA VE BEEN PROVED. HENCE, IN OUR VIEW, A LOAN TRANSACTION HAS TO BE TREATED AS A LOAN TRANSACTION ONLY AND IT SHOULD BE EXAMINE D IN THE LIGHT OF PROVISIONS OF SECTION 68 AND NOT UNDER PROVISION S OF SECTION 56(2)(V) OF THE ACT AND FOR THIS REASON ALONE, THIS ADDITION IS LIABLE TO BE DELETED... 11.16 THUS, IN VIEW OF ABOVE DISCUSSION, WE HOLD TH AT THE SAID TRANSACTION MEETS ALL THE REQUIREMENTS OF GENERAL L AW WHICH IS ONLY TO BE LOOKED INTO WHILE INVOKING PROVISIONS OF SECTION 56(2)(V) OF THE ACT AND, THEREFORE, IN OUR VIEW IT IS A TRANSACTION HAVING A CONSIDERATION AND, THEREFORE, THE SAME DOE S NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 56(2) (V) OF THE ACT FOR THIS REASON ALSO. 11.17 HAVING HELD SO NOW, WE WOULD LIKE TO DEAL WIT H OTHER CONTENTIONS OF THE REVENUE. IT WAS CONTENDED THAT T HERE MUST BE AN AGREEMENT IN WRITING WHICH IS NOT A REQUIREMENT OF LAW OF CONTRACT AS THE AGREEMENT CAN BE ORAL OR IN WRITING , HENCE, WE REJECT THIS CONTENTION OF THE REVENUE. SIMILARLY, A CONTENTION WAS RAISED THAT THE REPAYMENTS SCHEDULE WAS NOT PRESCRI BED AND, HOWEVER, IN OUR OPINION, THIS FACT IS NOT MATERIAL SO AS TO ALTER THE NATURE OF THE TRANSACTION BECAUSE THE TERM OF REPAY MENT CAN BE EXPENDED BY MUTUAL CONSENT OF BOTH THE PARTIES. THE PROVISIONS OF SECTION 63 OF THE INDIAN CONTRACT ACT, 1872 ALSO PR OVIDE FOR NOTATION OF CONTRACT WHICH READS AS UNDER: 'EVERY PROMISEE MAY DISPENSE WITH OR MAY FRAME, WHO LE OR IN PART, THE PURPOSE OF THE PROMISE MADE TO HIM OR MAY EXTEND THE TIME OF SUCH PERFORMANCE, OR MAY ACCEPT IN RESPECT OF IT ANY SATISFACTION WHICH HE THINKS FIT.' 11.18 THUS, WE DO NOT FIND ANY MERIT IN THE CONTENT ION OF THE REVENUE, HENCE, WE REJECT THE SAME. 11.19 ANOTHER CONTENTION RAISED BY THE REVENUE WAS THAT THE LIABILITY TO REPAY NEVER EXISTED AT> THE TIME OF RE CEIPT OF THE SAID 9 SHRI MUKUNDRAO GOVINDRAO MANKAR SUMS AND THIS FACT WAS NOT PROVED BY THE ASSESSEE. IN THIS REGARD, AS STATED EARLIER, THAT A CONTRACT CAN BE O RAL AS WELL AND IN SUCH A SITUATION, INTENTION HAS TO BE GATHERED FROM THE CIRCUMSTANTIAL EVIDENCES. IN THE PRESENT CASE, THE INTENTION TO REPAY GETS ESTABLISHED BY THE FACT THAT THE ASSESSE E HAS SHOWN IT AS A LOAN IN THE BALANCE SHEET AND THIS FACT HAS BE EN FURTHER SUPPORTED BY THE PARTIES BY SUBMITTING LOAN CONFIRM ATION CERTIFICATES DURING THE COURSE OF THE ASSESSMENT PR OCEEDINGS. THEREFORE, WE REJECT THIS CONTENTION OF THE REVENUE ALSO. 11.20 ANOTHER CONTENTION RAISED BY THE REVENUE WAS THAT PROOF OF REPAYMENT HAD BEEN FURNISHED SUBSEQUENTLY AND THIS BEING ADDITIONAL EVIDENCE, THE MATTER SHOULD GO BACK TO T HE FILE OF THE ASSESSING OFFICER. IN THIS REGARD, WE HAVE TO STATE THAT AS WE HAVE FOUND THAT THE TRANSACTION IS WITH CONSIDERATI ON AND LOAN TRANSACTIONS, AS SUCH, ARE NOT CHARGEABLE UNDER THE PROVISIONS OF SECTION 56(2)(V) OF THE ACT, HENCE, WE DO NOT FIND ANY NECESSITY TO SEND THE MATTER BACK TO THE FILE OF THE ASSESSING O FFICER FOR THIS PURPOSE. THUS, THIS CONTENTION OF THE REVENUE IS A/ SO REJECTED... 14. IN THE END, WE WOULD LIKE TO EMPHASISE ON THE F ACT THAT SEVERAL COMMERCIAL CONSIDERATIONS PREVAIL IN THE BU SINESS WORLD FOR ENTERING INTO BUSINESS TRANSACTIONS OF VARIOUS TYPES AND AS OBSERVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF KESHUB MAHINDRA (SUPRA) IF THE REVENUE AUTHORITIES TAX SUC H TRANSACTIONS IN THIS MANNER, THEN, THE CONDUCT OF BUSINESS WOULD BECOME IMPOSSIBLE. IT IS ALSO PERTINENT TO MENTION HERE TH AT '0' PER CENT INTEREST LOAN OR INTEREST FREE LOAN HAVE BEEN INSTI TUTIONALIZED WHERE THE MANUFACTURING COMPANIES OR MARKETING COMP ANIES COMPENSATE THE FINANCING COMPANIES WHO GIVE MONEY T O THE CUSTOMERS INTEREST FREE TO BUY THE PRODUCTS AND THE SE TYPES OF LOAN RESULT INTO A VIBRANT ECONOMY BENEFITING ALL C ONCERNED AND IF THE VIEW TAKEN BY THE REVENUE AUTHORITIES IS ACCEPT ED THEN, A/I SUCH TRANSACTIONS CAN BE TAXED AS INCOME UNDER SECT ION 56(2)(V) OF THE ACT WHICH CANNOT BE THE INTENTION OF THE LEG ISLATURE, HENCE, IN OUR VIEW, THE INTERPRETATION OF SECTION 56(2)(V) MADE BY THE REVENUE AUTHORITIES IS NOT AT A/I VALID AND JUSTIFI ED. ACCORDINGLY, WE HOLD THAT A TRANSACTION OF LOAN CAN BE WITHOUT I NTEREST AND A TRANSACTION OF LOAN IMPLIES AN AGREEMENT TO REPAY T HE MONEY I.E. BORROWED WHICH A/SO GIVES REPLY TO THE REVENUE'S QU ERY REGARDING EXISTENCE OF THE OBLIGATION TO REPAY THE MONEY AT T HE TIME OF TAKING OF SUCH LOAN. 15. THUS, IN VIEW OF ABOVE DISCUSSION, WE ACCEPT GR OUND NO, 3 OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DE LETE THE ADDITION IN TOTO. 10 SHRI MUKUNDRAO GOVINDRAO MANKAR 6.2 THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CA SE OF MR. CHANDRAKANT SHAH VS. CIT IN ITA NO. 3154 OF 2009 DA TED 6 TH SEPTEMBER, 2010 HAS UPHELD THE ORDER OF HON'BLE ITA T. 6.3 CONSIDERING THE ABOVE TOTALITY OF FACTS IT IS E VIDENT THAT THE AMOUNTS WHICH HAVE BEEN SHOWN IN THE BALANCE SHEET AS LOAN AND ALSO CONFIRMED BY THE LENDERS TO BE LOAN ARE NOT GI FT AND CANNOT BE BROUGHT TO TAX U/S 56(2)(V) OF THE ACT EVEN IF T HE SAME REMAINED UNPAID. IT IS NOT A REQUIREMENT OF LAW OR CONTRACT THAT THE WRITTEN AGREEMENT SHOULD BE ENTERED INTO ON A S TAMP PAPER WHILE TAKING A LOAN. ABSENCE OF REPAYMENT SCHEDULED DOES NOT ALTER THE FACT THAT THE AMOUNT TAKEN BY THE APPELLA NT 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 AMOUN T IS SHOWN AS LOAN IN THE BALANCE SHEET OF THE APPELLANT AS WELL AS OF LRPL. IT IS ALSO A FACT THAT THAT ALL THE REQUIREMENTS OF SECTI ON 68 I.E., IDENTITY; CREDITWORTHINESS AND GENUINENESS OF TRANS ACTIONS STAND ESTABLISHED AS CONFIRMATION LETTER FROM THE SAID LR PL HAS BEEN FILED BY THE APPELLANT. CONSIDERING THE ABOVE TOTAL ITY OF FACTS THE ADDITION MADE BY THE LD. AO OF RS. 6174880/- IS HER EBY DELETED. THE ASSESSEE BEING AGGRIEVED BY THE AFORESAID ORDE R OF THE LEARNED COMMISSIONER (APPEALS), IS IN FURTHER APPEA L BEFORE THE TRIBUNAL. 4. BEFORE US, THE LEARNED COUNSEL FOR ASSESSEE, AT THE VERY OUTSET, SUBMITTED THAT THE ISSUE IN DISPUTE IN THE PRESENT APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT IN MR. CHANDRAKANT SHAH, ITA NO.3154 OF 2009, VIDE ORDER DATED 6 TH SEPTEMBER 2010. THE LEARNED COUNSEL SUBMITTED THAT THE FINANCIAL STATEMENT OF M/S. LANDSCAPER REALTORS PVT. LTD. CLE ARLY DEPICT THAT IT HAS ADVANCED LOAN TO ASSESSEE AND AMOUNT GIVEN IS S HOWN RECEIVABLE IN BALANCE SHEET. HE SUBMITTED THAT THE INTEREST REC EIVABLE FROM 11 SHRI MUKUNDRAO GOVINDRAO MANKAR ASSESSEE HAS BEEN SHOWN AND ASSESSED AT THE HANDS O F M/S. LANDSCAPER REALTORS PVT. LTD. THERE REMAINS NO SCOP E FOR INVOCATION OF PROVISION OF SECTION 56(2)(VI) / 56(2)(VII) AT THE HANDS OF ASSESSEE. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE ASSE SSING OFFICER HAS OBTAINED INFORMATION UNDER SECTION 131 OF ACT FROM M/S. LANDSCAPER REALTORS PVT. LTD., WHEREIN THE AFORESAID COMPANY H AS SUBMITTED THE DETAILS OF LOAN GIVEN BY SUCH COMPANY TO ASSESSEE. THE ASSESSEE HAS FURTHER SUBMITTED CONFIRMATION OF LOAN AND LOAN AGR EEMENT BEFORE THE ASSESSING OFFICER AND AS BEFORE THE LEARNED COMMISS IONER (APPEALS) AND THE SAME ARE PLACED IN PAPER BOOK AT PAGE-24 TO 29. THE LEARNED COUNSEL FOR ASSESSEE FURTHER SUBMITTED THAT ON A BA RE PERUSAL OF PROVISIONS OF SECTION 56(2)(VI)/(VII) OF ACT WOULD INDICATE THAT THE AFORESAID PROVISIONS ARE APPLICABLE WHEN ANY MONEY IS RECEIVED BY AN INDIVIDUAL OR HUF WITHOUT CONSIDERATION FROM THE PER SON OTHER THAN RELATIVE. HE SUBMITTED, THE AFORESAID PROVISIONS AR E INAPPLICABLE IN RESPECT TO LOAN OBTAINED IN THE NORMAL COURSE OF CO NTRACTUAL TRANSACTION BETWEEN TWO PARTIES. THE LEARNED COUNSE L FURTHER SUBMITTED THAT THE ASSESSEE HAS TO REPAY THE LOAN O BTAINED FOR PURCHASE OF FLAT AND THE MODE AND MANNER OF REPAYME NT IS ALSO PLACED ON RECORD OF ASSESSING OFFICER AND THE LEARNED COMM ISSIONER (APPEALS) AND SAME IS PLACED IN PAPER BOOK PAGE-29. THE ASSES SEE HAS ALSO MADE PART PAYMENT OF AMOUNT PAYABLE TO SUCH COMPANY AND THE SAME 12 SHRI MUKUNDRAO GOVINDRAO MANKAR IS A TRANSACTION OF LOAN ON INTEREST, HENCE, THE AD DITION MADE BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. HE FURTHER SUB MITTED THAT THE AMOUNTS RECEIVED BY ASSESSEE HAVING BEEN SHOWN AS L OAN BY ASSESSEE AND SAME ALSO CONFIRMED BY LENDERS AS LOAN AND NOT GIFT CANNOT BE BROUGHT TO TAX UNDER THE PROVISIONS OF SECTION 56(2 )(VI)/(VII) OF THE ACT EVEN IF IT IS NOT REPAID. THE ASSESSES HAS MADE PA RT PAYMENT OF AMOUNT PAYABLE TO M/S. LANDSCAPER REALTORS PVT. LTD . IN SUBSEQUENT FINANCIAL YEARS AS FOLLOWS: F.Y. AMOUNT 2013-14 ` 3,00,000 2014-15 ` 19,75,000 2015-16 ` 5,00,000 2016-17 ` 9,50,000 THE LEARNED COUNSEL FOR ASSESSEE IN SUPPORT OF HIS CONTENTIONS RELIED UPON THE FOLLOWING CASE LAWS: I) (2010) 3 ITR 398 (MUM.) CHANDRAKANT H. SHAH VS. ITO (P- 34) II) BOMBAY HIGH COURT JUDGMENT IN ITA NO.3154 OF 2 009, MR. CHANDRAKANT H. SHAH, DATED 06.09.2010 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE DUTIFULLY R ELIED UPON THE ORDER OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT ASSESSEE HAS RECEIVED LOAN OF ` 13 SHRI MUKUNDRAO GOVINDRAO MANKAR 61,74,880 FROM M/S. LAND SCRAPPER REALTORS PVT. LTD . THE AFORESAID LOAN OUTSTANDING WAS VERIFIED BY ASSESSING OFFICER FROM THE SAID COMPANY AND IT WAS FOUND THAT THE SAME IS REFLECTED AS AMOUNT RECEIVABLE FROM ASSESSEE IN BALANCE SHEET OF THE SA ID COMPANY. THE CONFIRMATION IN RESPECT TO AMOUNT RECEIVED BY ASSES SEE AS LOAN HAS BEEN SUBMITTED IN ASSESSMENT PROCEEDINGS AND IS PLA CED IN PAPER BOOK BEFORE US. THE LOAN OBTAINED IS ALSO VERIFIABLE WIT H REFERENCE TO COPY OF LOAN AGREEMENT ON RECORD. THE INTEREST PAYABLE BY A SSESSEE HAS BEEN SHOWN AS INCOME BY THE SAID COMPANY IN ITS BOOKS OF ACCOUNT. THE TRANSACTION OF LOAN CANNOT BE SUBJECTED TO TAX UNDE R THE PROVISIONS OF SECTION 56(1) (VII)OF INCOME TAX ACT 1961. THE HON BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. SHRI CHANDRAKANT SHAH , IN ITA NO. 3154/2009 IN JUDGMENT DATED 6 TH SEPTEMBER 2010 WHILE CONSIDERING THE PROVISIONS OF SECTION 56(2)(V), HAS HELD AS UND ER: 2. THE QUESTION OF LAW RAISED IN THE APPEAL REVOLV ES AROUND DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICE R UNDER SECTION 56(2)(V) OF THE INCOME TAX ACT. THE TRIBUN AL HAS TAKEN INTO ACCOUNT THE FACTS AND CIRCUMSTANCES OF THE CAS E 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 TRANSACTI ONS OF VARIOUS TYPES AND AS OBSERVED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF KESHUB MAHINDRA (SUPRA) I F THE REVENUE AUTHORITIES TAX SUCH TRANSACTIONS IN THIS M ANNER, THEN, THE CONDUCT OF BUSINESS WOULD BECOME IMPOSSIB LE. IT IS ALSO PERTINENT TO MENTION HERE THAT 0% INTE REST LOAN OR INTEREST FREE LOAN HAVE BEEN INSTITUTIONALIZED W HERE THE 14 SHRI MUKUNDRAO GOVINDRAO MANKAR MANUFACTURING COMPANIES OR MARKETING COMPANIES COMPENSATE THE FINANCING COMPANIES WHO GIVE MONEY T O THE CUSTOMERS INTEREST FREE TO BUY THE PRODUCTS AND THESE TYPES OF LOAN RESULT INTO A VIBRANT ECONOMY BENEFIT ING ALL CONCERNED AND IF THE VIEW TAKEN BY THE REVENUE AUTHORITIES IS ACCEPTED THEN, ALL SUCH TRANSACTIONS CAN BE TAXED AS INCOME U/S 56(2)(V) OF THE ACT WHICH CANNO T BE THE INTENTION OF THE LEGISLATURE, HENCE, IN OUR VI EW, THE INTERPRETATION OF SECTION 56(2)(V) MADE BY THE REVE NUE AUTHORITIES IS NOT AT ALL VALID AND JUSTIFIED. AC CORDINGLY, WE HOLD THAT A TRANSACTION OF LOAN CAN BE WITHOUT I NTEREST AND A TRANSACTION OF LOAN IMPLIES AN AGREEMENT TO R EPAY THE MONEY I.E. BORROWED WHICH ALSO GIVES REPLY TO THE REVENUES QUERY REGARDING EXISTENCE OF THE OBLIGATI ON 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 W ITH NO ORDER AS TO COSTS. 7. THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL H IGH COURT SQUARELY APPLIES TO THE FACTS IN CASE OF ASSESSEE. THE LEARNED COMMISSIONER (APPEALS) HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN CASE OF SHRI CHANDRAKANT SHAH V/S ITO, 121 TTJ 145. THE AFORESAID DECISION HAS BEEN UPHELD BY THE HONBLE JURISDICTIO NAL HIGH COURT AND IS REPRODUCED HEREINABOVE. IN VIEW OF ABOVE, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER (APPEALS) HAS PASSED THE O RDER JUDICIOUSLY AND CORRECTLY WHICH IS NOT REQUIRED TO BE INTERFERE D WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED AGAINST THE REVENUE. THE GROUNDS OF APPEAL OF REVENUE HAVE NO MERIT AND THUS SAME ARE DISMISSED. 15 SHRI MUKUNDRAO GOVINDRAO MANKAR 8. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.06.2017 SD/ - P.K. BANSAL VICE PRESIDENT SD/ - AMARJIT SINGH JUDICIAL MEMBER NAGPUR, DATED: 28.06.2017 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 PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, NAGPUR