Sri Jitendra Jain , Kolkata V. ITO, Ward - 35(2) , Kolkata

ITA 2488/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2777 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 09-05-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 28-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PINAKI MUKHERJEE
• Assessee Lawyers: RAKESH JAIN
• Keywords: Unexplained cash credit; Unexplained investment; Earning of tax free income; Rule 8D
• Section: 14A; 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT, KZ] I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN..................................................................................APPELLANT 12, INDIA EXCHANGE PLACE, 2 ND FLOOR, JUTE HOUSE, KOLKATA 700 001. [PAN: ACQPJ 2027 E] ITO, WARD 35(2), KOLKATA................................RESPONDENT 110, SHANTI PALLY, AAYAKAR BHAWAN POORVA, KOLKATA 700 107. APPEARANCES BY: SHRI RAKESH JAIN, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI PINAKI MUKHERJEE, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : MAY 09, 2019 DATE OF PRONOUNCING THE ORDER : JUNE 07, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 10, KOLKATA DATED 21.09.2018. 2. GROUND NO. 1 INVOLVES THE ISSUE RELATING TO DISALLOWANCE OF RS. 1,49,519/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 14A OF THE INCOME TAX ACT, 1961. 3. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 27.09.2012 DECLARING A TOTAL INCOME OF RS. 8,54,550/-. IN THE SAID RETURN, DIVIDEND INCOME RECEIVED DURING THE YEAR UNDER CONSIDERATION WAS CLAIMED TO BE EXEMPT BY THE ASSESSEE FROM TAX. NO DISALLOWANCE ON ACCOUNT OF EXPENDITURE INCURRED IN RELATION TO THE SAID EXEMPT INCOME HOWEVER WAS OFFERED BY THE ASSESSEE. THE AO, THEREFORE, WORKED OUT SUCH 2 I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN EXPENDITURE BY APPLYING RULE 8D AND SINCE THE DISALLOWANCE SO WORKED OUT WAS MORE THAN THE ACTUAL EXEMPT DIVIDEND INCOME OF RS. 1,49,519/- RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION, THE DISALLOWANCE U/S 14A WAS RESTRICTED BY THE AO TO RS. 1,49,519/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE AO. 4. I HAVE HEARD THE ARGUMENTS OF BOTH SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LIMITED CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE ACTUAL DIVIDEND INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS ONLY RS. 9,687/- AND, THEREFORE, THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED RS. 9,687/-. HOWEVER, AS POINTED OUT BY THE LEARNED DR FROM THE ORDER OF THE ASSESSING OFFICER, THE AMOUNT OF EXEMPT INCOME WAS MENTIONED BY THE AO AS RS. 1,49,519/-. I, THEREFORE, DIRECT THE AO TO VERIFY THE ACTUAL AMOUNT OF EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AND RESTRICT THE DISALLOWANCE U/S 14A TO THAT EXTENT. GROUND NO. 1 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 5. GROUND NO. 2 INVOLVES THE ISSUE RELATING TO ADDITION OF RS. 9,00,000/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) BY TREATING THE LOAN RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS UNEXPLAINED CASH CREDIT. 6. DURING THE YEAR UNDER CONSIDERATION, A LOAN OF RS. 9,00,000/- WAS CLAIMED TO BE RECEIVED BY THE ASSESSEE FROM M/S. MADHUBAN VANIJYA PVT. LTD. ALTHOUGH THE CONFIRMATION OF THE SAID LOAN CREDITOR WAS FILED BY THE 3 I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO, THE NOTICE ISSUED BY THE AO TO THE SAID LOAN CREDITOR U/S 133(6) AT THE ADDRESS GIVEN IN THE CONFIRMATION WAS RETURNED UNSERVED. EVEN THE ASSESSEE FAILED TO PRODUCE THE DIRECTOR OF THE LENDER COMPANY FOR VERIFICATION / EXAMINATION BEFORE THE AO. THE ASSESSEE HOWEVER PRODUCED THE FINAL ACCOUNT AND COPY OF BANK STATEMENT OF THE LOAN CREDITOR, A PERUSAL OF WHICH BY THE AO REVEALED THAT THERE WAS A HUGE CASH DEPOSIT MADE BY THE LOAN CREDITOR IN THE BANK ACCOUNT BEFORE ISSUING CHEQUE TO THE ASSESSEE TOWARDS A LOAN OF RS. 9,00,000/-. THE AO ALSO NOTED THAT THE TURNOVER OF THE LENDER COMPANY DURING THE YEAR UNDER CONSIDERATION WAS ONLY RS. 16,30,159/-. KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO HELD THAT THE CREDITWORTHINESS OF THE CONCERNED LOAN CREDITOR WAS NOT SATISFACTORILY ESTABLISHED AND EVEN THE GENUINENESS OF THE TRANSACTION WAS NOT PROVED. HE ACCORDINGLY TREATED THE LOAN OF RS. 9,00,000/- CLAIMED TO BE RECEIVED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT AND ADDITION OF RS. 9,00,000/- WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE U/S 68. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID ADDITION HOLDING THAT EVEN THOUGH THE IDENTITY OF THE LOAN CREDITOR WAS ESTABLISHED, THE CREDITWORTHINESS OF THE SAID CREDITOR AS WELL AS THE GENUINENESS OF THE LOAN TRANSACTION WAS NOT PROVED. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CONFIRMATION LETTER OF THE CONCERNED LOAN CREDITOR WAS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO. HE INVITED OUR ATTENTION TO THE COPY OF SAID LETTER PLACED AT PAGE NO. 73 OF THE PAPER BOOK AND POINTED OUT THAT ALL THE RELEVANT INFORMATION INCLUDING NAME AND ADDRESS OF THE LOAN CREDITOR, THEIR PAN NO., MODE OF PAYMENT OF LOAN ETC. WAS GIVEN IN THE SAID CONFIRMATION. HE CONTENDED 4 I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN THAT THE PRIMARY ONUS TO EXPLAIN THE RELEVANT CASH CREDIT IN THE FORM OF LOAN THUS WAS DULY DISCHARGED BY THE ASSESSEE IN TERMS OF SECTION 68 AND THERE WAS NO JUSTIFICATION ON THE PART OF THE AO AS WELL AS LD. CIT(A) TO TREAT THE SAME AS UNEXPLAINED CASH CREDIT WITHOUT BRINGING ANYTHING ADVERSE ON RECORD. HE ALSO INVITED OUR ATTENTION TO THE COPY OF IT RETURN ACKNOWLEDGEMENT AND FINAL ACCOUNTS OF THE LOAN CREDITOR AND POINTED OUT THAT THE LOAN OF RS. 9,00,000/- GIVEN TO THE ASSESSEE WAS DULY REFLECTED IN THE BALANCE SHEET OF THE CONCERNED LOAN CREDITOR. HE SUBMITTED THAT INTEREST WAS PAID BY THE ASSESSEE ON THE SAID LOAN AND THE SAID INTEREST WAS ALLOWED BY THE AO AS DEDUCTION IN THE ASSESSMENT COMPLETED U/S 143(3). HE ALSO POINTED OUT FROM THE RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF LEDGER ACCOUNT OF THE CONCERNED LOAN CREDITOR AND THE COPY OF BANK STATEMENT THAT THE LOAN OF RS. 9,00,000/- TAKEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WAS REPAID ALONG WITH INTEREST DURING THE YEAR UNDER CONSIDERATION FOR F.Y. 2013-14. HE CONTENDED THAT THE LOAN IN QUESTION RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION THUS WAS DULY EXPLAINED BY THE ASSESSEE IN TERMS OF SECTION 68 BY DISCHARGING THE PRIMARY ONUS THAT LAY ON HIM AND THE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) U/S 68 BY TREATING THE SAME AS UNEXPLAINED CASH CREDIT IS NOT SUSTAINABLE. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ORISSA CORPORATION PVT. LTD. 159 ITR 78 AND GUJARAT HIGH COURT IN THE CASE OF ROHINI BUILDERS 256 ITR 360. 8. THE LEARNED DR, ON THE OTHER HAND, RELIED ON THE ORDER OF THE AUTHORITIES BELOW IN SUPPORT OF THE REVENUES CASE THAT THE CREDITWORTHINESS OF THE CONCERNED LOAN CREDITOR AS WELL AS GENUINENESS OF THE RELEVANT LOAN TRANSACTION HAVING NOT BEEN SATISFACTORILY 5 I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN ESTABLISHED BY THE ASSESSEE, SECTION 68 WAS RIGHTLY INVOKED TO TREAT THE LOAN OF RS. 9,00,000/- AS THE INCOME OF THE ASSESSEE U/S 68. HE POINTED OUT THAT CASH DEPOSITS WERE FOUND TO BE MADE BY THE CONCERNED LOAN CREDITOR IN THE BANK ACCOUNT BEFORE ISSUING THE CHEQUE TO THE ASSESSEE ON ACCOUNT OF THE LOAN IN QUESTION AND THERE WAS NO RESPONSE FROM THE SAID LOAN CREDITOR TO THE NOTICE ISSUED BY THE AO U/S 133(6). HE CONTENDED THAT IT APPEARS THAT THE LOAN CREDITOR IS AN ENTRY OPERATOR AND KEEPING IN VIEW THIS FACT AS WELL AS ALL OTHER FACTS OF THE CASE AS HIGHLIGHTED BY THE AO, THE ADDITION U/S 68 IS FULLY JUSTIFIED. 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT LOAN CONFIRMATION OF THE CONCERNED LOAN CREDITOR GIVING ALL THE RELEVANT DETAILS SUCH AS NAME AND ADDRESS OF THE CONCERNED CREDITOR, PAN OF THE SAID CREDITOR AND MODE OF PAYMENT ETC. WAS FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO. BANK ACCOUNT OF THE CONCERNED LOAN CREDITOR WAS ALSO FILED BY THE ASSESSEE ALONG WITH FINAL ACCOUNTS TO SHOW THAT THE LOAN GIVEN TO THE ASSESSEE BY CHEQUE THROUGH PROPER BANKING CHANNEL WAS DULY REFLECTED IN THE ACCOUNTS OF THE CONCERNED LOAN CREDITOR. THE PRIMARY ONUS THAT LAY ON THE ASSESSEE TO PROVE IDENTITY AND CAPACITY OF THE CONCERNED LOAN CREDITOR AS WELL AS TO ESTABLISH THE GENUINENESS OF THE RELEVANT LOAN TRANSACTION THUS WAS DULY DISCHARGED BY THE ASSESSEE. IT IS ALSO OBSERVED THAT INTEREST WAS PAID BY THE ASSESSEE ON THE SAID LOAN AND DEDUCTION CLAIMED BY THE ASSESSEE FOR SUCH INTEREST WAS ALSO ALLOWED BY THE AO. IT IS OBSERVED THAT THE AO STILL TREATED THE LOAN IN QUESTION RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS UNEXPLAINED CASH CREDIT U/S 68 FOR THE REASON THAT THE NOTICE ISSUED U/S 133(6) TO THE CONCERNED LOAN CREDITOR WAS RETURNED BACK UNSERVED BY THE POSTAL AUTHORITY AND THERE WERE CASH 6 I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN DEPOSITS FOUND TO BE MADE IN THE BANK STATEMENT OF LOAN CREDITOR BEFORE ISSUING CHEQUE TO THE ASSESSEE FOR THE LOAN IN QUESTION. IN THE CASE OF ORISSA CORPORATION PVT. LTD. (SUPRA) CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE, IT WAS HELD BY THE HONBLE SUPREME COURT THAT MERELY BECAUSE SUMMONS ISSUED TO SOME OF THE CREDITORS COULD NOT BE SERVED OR THEY FAIL TO APPEAR BEFORE THE ASSESSING OFFICER CANNOT BE THE BASIS TO TREAT THE LOANS TAKEN BY THE ASSESSEE FROM THOSE CREDITORS AS NON-GENUINE. IT WAS ALSO HELD THAT IF THE ASSESSING OFFICER WAS NOT SATISFIED ABOUT THE CASH AMOUNT DEPOSITED BY THOSE CREDITORS IN THEIR BANK ACCOUNT, THE PROPER COURSE SHOULD HAVE BEEN TO MAKE ASSESSMENTS IN THE CASE OF THOSE CREDITORS BY TREATING THE CASH DEPOSITS IN THEIR BANK ACCOUNT AS UNEXPLAINED INVESTMENT OF THOSE CREDITORS U/S 69. IN MY OPINION, THE RATIO OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF ORISSA CORPORATION PVT. LTD. IS SQUARELY APPLICABLE IN THE FACTS OF THE PRESENT CASE AND RESPECTFULLY FOLLOWING THE SAME, I DELETE THE ADDITION OF RS. 9,00,000/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) BY TREATING THE LOAN IN QUESTION RECEIVED BY THE ASSESSEE AS UNEXPLAINED CASH CREDIT U/S 68. GROUND NO. 2 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 07/06/2019 BISWAJIT, SR. PS 7 I.T.A. NO. 2488/KOL/2018 ASSESSMENT YEAR: 2012-13 SHRI JITENDRA JAIN COPY OF ORDER FORWARDED TO: 1. SHRI JITENDRA JAIN, 12, INDIA EXCHANGE PLACE, 2 ND FLOOR, JUTE HOUSE, KOLKATA 700 001. 2. ITO, WARD 35(2), KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA