DCIT 32(2), MUMBAI V. KARTHIK CONSTRUCTION CO., MUMBAI

ITA 2292/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0406 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: KETAN
• Keywords: Source of fund
• Section: 133(6); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I RAJESH KUMAR , ACCOUNTANT MEMBER ITA NO . 2292 /MUM. /2016 ( ASSESSMENT YEAR : 2011 12 ) DY. COMMISSIONER OF INCOME TAX CIRCLE 32(2), MUMBAI . APPELLANT V/S M/S. KARTHIK CONSTRUCTION CO. SHOP NO.10/11, SHANGRILA APARTMENTS L.T. ROAD, BORIVALI (WEST) MUMBAI 400 092 AAFFK3535K . RESPONDENT REVENUE BY : MS. POOJA SWAROOP ASSESSEE BY : SHRI KETAN PANCHMIA DATE OF HEARING 20.02.2018 DATE OF ORDER 23.02.2018 O R D E R PER SAKTIJIT DEY, J.M. CAPTIONED APPEAL AT THE INSTANCE OF THE REVENUE IS DIRECTED AGAINST ORDER DATED 25 TH FEBRUARY 2016, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 44, MUMBAI, FOR THE ASSESSMENT YEAR 2011 12. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIO NER (APPEALS) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 69A OF THE I.T. ACT, 1961 OF ` 80,71,317 WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE GOT ITS MONEY ROUTED IN THE FORM OF UNSECURED LOANS AND AFTER REPAYMENT TO PARTIES, THE MONEY WAS TRANS FERRED / WITHDRAWN TO THE ASSESSEE. 2 M/S. KARTHIK CONSTRUCTION CO. 2 . BRIEF FACTS ARE, THE ASSESSEE A PARTNERSHIP FIRM IS ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER 2011, DECLARING TOTAL INCOME OF ` 39,84,250. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICING THAT IN THE RELEVANT PREVIOUS YEAR THE ASSESSEE HAS MADE SUBSTANTIAL PAYMENTS TOWARDS REPAYMENT OF OLD UNSECURED LOANS CALLED UPON THE ASSESSEE TO FURNISH THE DETAILS OF THE SQUARED UP LO AN S ALONG WITH THE DURATION OF SUCH LO AN S. AFTER VERIFYING THE DETAILS SUBMITTED BY THE ASSESSEE, THE ASSESSING OFFICER FOUND THAT UNSECURED LOANS WERE TAKEN PRIOR TO THE YEAR 2005 AND WERE REPAID DURING THE YEAR. TO VERIFY THE GENUINENESS OF LOAN REPAYMENT, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 133(6) AND SUMMONS UNDER SECTION 131 OF THE ACT TO SOME OF THE PARTIES. AS OBSERVED BY THE ASSESSING OFFICER, IN RESPONSE TO NOTICE ISSUED UNDER SECTIO N 133(6), THE CONCERNED PERSONS FILED THEIR REPLIES IN DEPARTMENT. OUT OF THE PERSONS TO WHOM SUMMONS WERE ISSUED TWO PERSONS APPEARED AND STATEMENTS WERE RECORDED FROM THEM . AFTER EXAMINING THE WITNESS ES THE ASSESSING OFFICER ACCEPTED THE LOAN TAKEN FROM KIRAN A. SHAH TO BE GENUINE. HOWEVER, AS FAR AS UNSECURED LOANS ADVANCED BY OTHER CREDITORS, THE ASSESSING OFFICER UPON VERIFYING THE RETURN OF INCOME FILED BY THEM FOR ASSESSMENT YEAR 2011 12, DOUBTED THEIR CREDITWORTHINESS. ACCORDINGLY, HE HELD THAT THE UNSECURED LOANS 3 M/S. KARTHIK CONSTRUCTION CO. CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM THE CONCERNED PERSONS ARE NOT GENUINE. HE OBSERVED THAT THE ASSESSEE WAS INTRODUCING HIS UNEXPLAINED MONEY TO THE BUSINESS THROUGH THE CREDITORS AND AFTER COMPLETION OF BUSINESS, HE IS AGAI N SIPHONING OF F THE MONEY THROUGH THE SAME PEOPLE BY TRANSFERRING TO THEIR ACCOUNT AND SUBSEQUENTLY WITHDRAWING IT. THEREFORE, HE HELD THAT THE REPAYMENT OF LOAN TO PARTIES WHOSE CREDITWORTHINESS IS DOUBTFUL CANNOT BE HELD TO BE GENUINE. ACCORDINGLY, HE AD DED BACK THE AMOUNT OF ` 80,71,317 UNDER SECTION 69A OF THE ACT. BEING AGGRIEVED, ASSESSEE CHALLENGED THE ADDITION BEFORE THE FIRST APPELLATE AUTHORITY. 3 . THE LEARNED COMMISSIONER (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE FOUND THAT THE UN SECURED LOANS WERE RECEIVED BY THE ASSESSEE IN FINANCIAL YEAR S 2000 01, 2001 02 AND 2002 03. HOWEVER, IN THE ASSESSMENT YEARS RELEVANT TO THE SE FINANCIAL YEARS, THE ASSESSING OFFICER HAD NOT RAISED ANY DOUBT WITH REGARD TO GENUINENESS OF THE LOAN TRANSACTI ONS WHICH IS EVIDENT FROM THE FACT THAT NO ADDITIONS WERE MADE UNDER SECTION 68 OF THE ACT IN THE RELEVANT ASSESSMENT YEAR S . FURTHER, LEARNED COMMISSIONER (APPEALS) OBSERVED THAT THE ADDITION UNDER SECTION 69A OF THE ACT CAN ONLY BE MADE IF THE ASSESSEE IS FOUND TO BE IN POSSESSION OF MONEY, BULLION, JEWELLERY, ETC. WHICH ARE NOT RECORDED IN HIS BOOKS. HE OBSERVED , IN ASSESSEES CASE THAT IS NOT THE FACT AS THE ASSESSING OFFICER HAS STARTED 4 M/S. KARTHIK CONSTRUCTION CO. HIS ENQUIRY AFTER EXAMINING THE RECEIPT AND PAYMENT OF LOAN RECORDED IN THE BOOKS OF THE ASSESSEE. HE, THEREFORE, HELD THAT DEEMING PROVISIONS OF SECTION UNDER SECTION 69A OF THE ACT WILL NOT APPLY TO THE FACTS OF THE ASSESSEES CASE. THE LEARNED COMMISSIONER (APPEALS) OBSERVED, WHEN THE IDENTITY OF THE CREDITORS H AVE BEEN ESTABLISHED AND THE ENTIRE LOAN TRANSACTION WAS DONE THROUGH REGULAR BANKING CHANNEL , ADDITION UNDER SECTION 69A OF THE ACT IN THE IMPUGNED ASSESSMENT YEAR CANNOT BE MADE. ACCORDINGLY, HE DELETED THE ADDITION. 4 . LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED, WHEN THE SOURCE OF LOAN IS NOT PROVED AND REPAYMENT OF LOAN IS DOUBTFUL, THE ASSESSING OFFICER CAN INVOKE THE PROVISIONS OF SECTION 69A OF THE ACT. IN SUPPORT OF HER CONTENTION, THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S K. CHINNATHAMBAN, [2007] 162 TAXMAN 459 (SC). 5 . LEARNED AUTHORISED REPRESENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 6 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIAL ON REC ORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISION RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. AS COULD BE SEEN, THE ASSESSING OFFICER RAISED SUSPICION ON THE LOAN REPAYMENT BY DOUBTING THE GENUINENESS OF THE UNSECURED LOAN AVAILED BY THE ASSES SEE AGAINST 5 M/S. KARTHIK CONSTRUCTION CO. WHICH SUCH LOAN REPAYMENT W AS MADE. HOWEVER, AS PER THE FACTS ON RECORD, UNSECURED LOANS WHICH WERE REPAID BY THE ASSESSEE DURING THE YEAR WERE AVAILED IN FINANCIAL YEAR S 2000 01, 2001 02 AND 2002 03. IN FACT, THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THAT THE UNSECURED LOANS WHICH WERE REPAID DURING THE YEAR WERE AVAILED BEFORE 1 ST APRIL 2005. IT IS ALSO ADMITTED FACTUAL POSITION THAT IN THE EARLIER YEAR S WHEREIN SUCH UNSECURED LOANS WERE AVAILED BY THE ASSESSEE NO DOUBTS WERE RAISED BY THE AS SESSING OFFICER AND THE UNSECURED LOANS HAVE BEEN ACCEPTED . FURTHER, TO VERIFY THE GENUINENESS OF THE UNSECURED LOAN S TAKEN FROM A LARGE NUMBER OF PERSONS THE ASSESSING OFFICER ISSUED NOTICE S UNDER SECTION 133(6) ON RANDOM BA SIS TO 15 CREDITORS AND SUMMONS UNDER SECTION 131 OF THE ACT TO FIVE CREDITORS. THE ASSESSING OFFICER HAS HIMSELF OBSERVED IN THE ASSESSMENT ORDER THAT IN RESPONSE TO THE NOTICE S ISSUED UNDER SECTION 133(6) THE CONCERNED PARTIES SUBMITTED THEIR REPLIES BEFORE THE DEPARTMENT. OUT OF FIVE PERSONS TO WHOM SUMMONS WERE ISSUED T WO PERSONS ACTUALLY APPEARED BEFORE THE ASSESSING OFFICER AND WERE EXAMINED. THE ASSESSING OFFICER ACCEPTED THE UNSECURED LOAN TAKEN FROM ONE SUCH PERSON TO BE GENUINE WHILE HOLDING THE LOAN S TAKEN FROM OTHER PERSONS T O BE NON GENUINE DOUBTING THE CREDITWORTHINESS OF THE CONCERNED PARTIES ON THE BASIS OF INCOME DECLARED BY THEM IN THE IMPUGNED ASSESSMENT YEAR. THUS, AS COULD BE SEEN FROM THE FACTS ON RECORD, THE EXISTENCE OF THE 6 M/S. KARTHIK CONSTRUCTION CO. CREDIT OR S HAVE BEEN ESTABLISHED. MOREOVER, WHEN THE UNSECURED LOANS WERE NOT TAKEN IN THE IMPUGNED ASSESSMENT YEAR BUT WERE TAKEN IN EARLIER ASSESSMENT YEARS WHEREIN THE GENUINENESS OF SUCH LOANS WERE NEVER QUESTIONED , IT CANNOT BE QUESTIONED IN THE IMPUGNED ASSESSMENT YEAR. THEREFORE, THE ONLY THI NG WHICH REQUIRES TO BE EXAMINED IN THE PRESENT APPEAL IS WHETHER THE ADDITION MADE UNDER SECTION 69A OF THE ACT CAN BE SUSTAINED. A READING OF SECTION 69A OF THE ACT MAKES IT CLEAR, ADDITION CAN ONLY BE MADE WHEN THE ASSESSEE IS FOUND TO BE IN POSSESSION OF MONEY BULLION JEWELLERY, ETC., NOT RECORDED IN HIS BOOKS OF ACCOUNT. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE LOAN REPAYMENT MADE DURING THE YEAR WAS EITHER NOT RECORDED IN THE BOOKS OF ACCOUNT OR THE SOURCE OF FUND UTILISED IN REPAYING THE LOAN IS DOUBTFUL. THAT BEING THE CASE, THE ADDITION UNDER SECTION 69A OF THE ACT CANNOT BE MADE. THEREFORE, THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) HAS TO BE SUSTAINED. SO FAR AS THE DECISION CITED BEFORE US BY THE LEARNED DEPARTMENTAL REPRESENTATIVE , ON CAREFUL READING OF THE SAME, IT IS FOUND TO BE FACTUALLY DISTINGUISHABLE AS IN THE FACTS OF THAT CASE, A LARGE AMOUNT OF MONEY WERE FOUND DEPOSITED IN VARIOUS BANK ACCOUNT S HELD BY THE ASSESSEE AND THE ASSESSEE WAS UNABLE TO EXPLAIN THE SOURCE OF SUCH DEPOSITS. WHEREAS, IN THE FACTS OF THE PRESENT CASE, THERE IS NO DOUBT WITH REGARD TO RECORDING OF REPAYMENT OF LOAN IN THE BOOKS OF ACCOUNT AND THE SOURCE OF SUCH 7 M/S. KARTHIK CONSTRUCTION CO. FUND. WHAT THE ASSESSING OFFICER HAS DOUBTED TO DISALLOW THE REPAYMENT IS THE GENUINENESS OF UNSECURED LOANS RECEIVED BY THE ASSESSEE IN THE EARLIER ASSESSMENT YEARS. IN THE AFORESAID VIEW OF THE MATTER, THE DECISION CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE WILL BE OF NO HELP TO THE REVENUE. ACCORDINGLY, WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) BY DISMISSING THE GROUND RAISED. 7 . IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.02.2018 SD/ - RAJESH KUMAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 23.02.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR/SR.P.S) ITAT, MUMBAI