VIMLA P.KATIRA, MUMBAI V. ITO9 23(3)(4), NAVI MUMBAI

ITA 2532/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0286 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Accommodation entries; Notional interest; Onus to prove
• Section: 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI D.T GARASIA , JUDICIAL MEMBER AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA NO.2532/MUM./2014 (ASSESSMENT YEAR: 2009 - 10) VIMLA P. KATIRA P BORTHRA AND CO. CAS, 207, COMMERCE HOUSE, 140, N.M. RD. FORT, MUMBAI 400023 PAN ABHPK5201D . APPELLANT V/S ITO, 23(3)(4) NAVI MUMBAI . RESPONDENT ASSESSEE BY : SHRI. VIMAL PUNMIYA REVENUE BY : M S. POOJA SWAROOP DATE OF HEARING 17.05.2017 DATE OF ORDER - 14 .06 .2017 O R D E R PER: MANJUNATHA G. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE CIT(A) - 33, MUMBAI DATED 03.02.2014 AND IT PERTAINS TO THE ASSESSMENT YEAR 2009 - 10. VIMLA P. KATIRA ITA NO.2532/MUM./2014 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE ENGAGED IN THE BUSINESS OF PURCHASE AND SALES OF SHARES AND DEALING IN DERI VATIVES TRANSACTION , FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009 - 10, DECLARING TOTAL INCOME OF RS. NIL. THE CASE WAS SE LECTED FOR SCRUTINY AND NOTICE U/S. 143(2) OF INCOME TAX ACT, 1961 WAS ISSUED AND SERVED ON THE ASSESSEE. IN RESPONSE TO NOTICE, THE AUTHORISED REPRESENTATIVE APPEARED FROM TIME TO TIME AND SUBMITTED THE REQUISITE DETAILS CALLED FOR. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T THE ASSESSEE HAS INCURRED LOSS FROM TR ADING IN SHARES AND DERIVATIVES OF RS.1,14,35 ,207/ - AND HAS TAKEN UNSECURED LOANS OF RS. 1,91,61,486/ - . THE ASSESSEE HAS FILED CONFIRMATION LETTERS IN RESPECT OF UNSECURED LOANS. SUMMONS WERE ISSUED IN RESPECT OF FOUR PARTIES TO VERIFY THE GENUINENESS OF LOAN TAKEN AND CREDITWORTHINESS OF THE LOAN CREDITORS. AFTER VERIFICATION OF LOAN S BY WORK INSPECTOR , THE A.O ISSUED A SHOW CAUSE NOTICE AND ASKED AS TO WHY THE LOAN CONFIRM ATIONS FILED IN RESPECT OF HARIRAM M. CHOUDHARY, REKHABEN PARASMAL BORANA, SHESHRAM TRUST AND BACHHAN RAMVILAS MORYA SHOULD NOT BE REJECTED AND LOANS ALLEGED TO HAVE BEEN TAKEN AMOUNTING TO RS. 22,40,000/ - SHOULD NOT BE TREATED AS INCOME FROM UNDISCLOSED S OURCES U/S.68 OF THE I.T ACT, 1961. IN RESPONSE TO THE SHOW CAUSE NOTICE , THE ASSESS HAS FILED DETAILS OF LOAN CREDITORS VIMLA P. KATIRA ITA NO.2532/MUM./2014 3 ALONG WITH COPIES OF INCOME TAX RETURNS AND ALSO BANK STATEMENTS TO P ROVE THE IDENTITY, GENUINENESS OF TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE ALSO PRODUCED TRUSTEES OF SHESHRAM TRUST AND D. K MALI TRUST AND THEIR STATEMENTS U/S. 131 WAS RECORDED. THEY HAVE FILED THE COPIES OF BANK ACCOUNTS. IN RESPECT OF HARIRAM M. CHOUDHARY, REKHABEN PARASMAL BORANA AND BACHHAN RAM VILAS MORYA , THE ASSESSEE HAS FILED A LETTER DATED 23.02.2011 STATING THAT THE PARTIES ARE NOT COOPERATIVE AS THE LOAN S ARE REPAID TO THE PARTIES IN THE FINANCIAL YEAR 2009 - 10 , AND NO INTEREST HAS BEEN PAID TO THESE PARTIES . I N THIS REGARD , FILED COPIES OF BANK STATEMENTS EVIDENCING REPAYMENT OF LOAN IN THE FINANCIAL YEAR 2009 - 10. 3. THE. A . O AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE , HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE LOAN CREDITORS. THE A. O FURTHER OBSERVED THAT THE LOAN CREDITORS ARE NOT FOUND AT THE ADDRESS GIVEN. THE LOAN CREDITORS ARE SHOWING NOMINAL INCOME AND HENCE , ACCUMULATION OF FUND TO SUCH AN EXTENT IS NOT POSSIBLE. THOUGH, THE ASSESSEE HAS FILED BANK STATEMENTS TO PROVE THE ACCEPTANCE OF LOAN BY CHEQUE , BUT THE FACT REMAINS THAT PRIOR TO PAYMENT OF LOAN EQUAL AMOUNT HAS BEEN CREDITED TO THE BANK ACCOUNT OF THE L OAN CREDITORS , THEREFORE OPINED THAT THE LOAN CREDITORS DOESNT HAVE CAPACITY TO LEND SUCH A VIMLA P. KATIRA ITA NO.2532/MUM./2014 4 HUGE AMOUNT OF LOAN TO THE ASSESSEE. ACCORDINGLY , REJECTED EXPLANATIONS OF THE ASSESSEE AND MADE ADDITIONS OF RS.22,40,000/ - U/.S 68 OF THE I.T. ACT, 1961. IN ADD ITION , THE A.O MADE DISALLOWANCE OF RS.2,68,800/ - TOWARDS INTEREST ON LOAN. 4. AGGRIEVED BY THE ASSESSMENT ORDER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE , THE CIT(A) , THE ASSESSEE HAS FILED ELABORATE WRITTEN SUBMISSIONS AND CONTENDED THA T HE HAD DISCHARGED PRIMARY ONUS CAST UPON HIM BY FILLING CONFIRMATION LETTERS ALONG WITH I.T RETURNS AND BANK STATEMENT OF LOAN CREDITORS TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE FURTHER CONTENDED THAT THE LOAN CREDITORS HAVE SUFFICIENT SOURCES TO EXPLAIN LOAN GIVEN AND ALSO FILED NECESSARY BANK STATEMENTS TO PROVE THE GENUINENESS OF TRANSACTION . THE LOAN HAS BEEN ACCEPTED BY CHEQUE AND THE SAME HAS BEEN REPAID BY CHEQUE IN NEXT FINANCIAL YEAR. THE A.O , IGNORING ALL THE EVIDENCES, SIMPLY MADE ADDITION ON THE GROUND THAT THE CREDITORS ARE NOT FOUND AT THE ADDRESS GIVEN AND ALSO EQUAL AMOUNT HAS BEEN CREDITED TO CREDITOR BANK ACCOUNT PRIOR TO THE DATE OF LOAN. BUT , THE FACT REMAINS THAT ONCE ASSESSEE PROVES THE IDE NTITY AND GENUINENESS OF TRANSACTION, HE NEED NOT TO PROVE THE SOURCES OF SOURCE , THEREFORE THE A.O WAS INCORRECT IN MAKING ADDITIONS TOWARDS LOAN CREDITORS U/S. 68 OF THE ACT. VIMLA P. KATIRA ITA NO.2532/MUM./2014 5 5. THE CIT(A) , AFTER CONSIDERING RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING RELEVANT MATERIALS PLACED BEFORE HIM , OBSERVED THAT THE ASSESSEE HAS FILED TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE PARTIES. THE CIT(A) , FURTHER OBSERVED THAT ON VERIFICATION OF DETAILS FILED BY THE ASSESSEE , IT IS NOTICED THAT THE CREDITORS DOESNT HAVE SUFFICIENT SOURCE OF INCOME TO EXPLAIN THE LOAN ADVANCED TO THE ASSESSEE. ON FURTHER VERIFICATION OF INCOME TAX RETURNS OF THE CREDITORS , IT WAS NOTICED THAT THESE TRU STS ARE INDULGED IN MERELY GIVING ENTRIES OF LOAN BY PROVIDING ACCOMMODATION ENTRIES. IT WAS FURTHER OBSERVED THAT IN RESPECT OF SHESHRAM MALI TRUST AND D.K. MALI TRUST , THESE TRUSTS HAVE FILED THEIR RETURN OF INCOME WITH MEAGRE TOTAL INCOME AND ITS TRUST FUND AND CAPITA L IS FULLY UTILISED FOR ADV ANCING LOANS WITHOUT THEIR BEING ANY INTEREST INCOME, THEREFORE OPINED THAT THESE TRUST ARE MERELY EXISTED FOR PROVIDING ACCOMMODATION ENTRIES , THEREFORE HELD THAT THE ASSESSEE HAS NOT DISCHARGED ITS PRIMARY ONUS CAST UPON HIM U/S 68 OF THE ACT. IN SO FAR AS , HARIRAM M. CHOUDHARY, REKHABEN PARASMAL BORANA AND BACHHAN RAMVILAS MORYA, THOUGH THE PARTIES HAVE FILED CONFIRMATION AND INCOME TAX RETURNS, IT IS NOTICED THAT THESE PARTIES FILED INCOME TAX RETURNS AFTER RECEIPT OF NOTICE U/S. 143(2) BY THE ASSESSEE TO COVER UP THE LOAN GIVEN TO THE ASSESSEE. THEREFORE, OPINED THAT THE CREDITORS DO ESNT HAVE CAPACITY TO EXPLAIN LOAN GIVEN VIMLA P. KATIRA ITA NO.2532/MUM./2014 6 TO THE ASSESSEE . W ITH THESE OBSERVATIONS , CONFIRMED ADDITIONS MADE BY THE A.O TOWARDS UNSECURED LOAN U/S. 68 OF THE ACT. HOWEVER , D ELETED ADDITIONS MADE TOWARDS NOTIONAL INTEREST ON THE GROUND THAT THE ASSESSEE HAS CATEGORICALLY ADMITTED THAT THESE CREDITOR S HAVE NOT BEEN PAID ANY INTEREST ON THE LOANS . AGGRIEVED BY THE CIT(A) ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 6 . T HE LD. A . R FOR THE ASSESSEE , SUBMITTED THAT THE LD. CIT(A) WAS ERRED IN CONFIRMING ADDITIONS IN RESPECT OF UNSECURED LOANS RECEIVED FROM THE ALLEGED FIVE PARTIES, ON IGNORING THE VITAL FACTS THAT THE ASSESSEE HAS THOROUGHLY DISCHARGED THE ONUS TO PROVE THE IDENTITY, GENUINENESS OF THE LOANS AND CREDITWORTHINESS OF THE PARTIES. THE ASSESSEE HAS FILED CONFIRMATION LETTER ALONG WITH I.T RETURNS OF THE CREDITORS AND ALSO BANK STATEMENTS. THE A.R FURTHER SUBMITTED THAT , THE PARTIES HAVE APPEARED BEFORE THE A.O IN RESPONSE TO SUMMONS U/S. 131 AND FILED NECESSARY DETAILS TO PROVE THE GENUINENESS OF TRANSACTION . I N SO FAR AS OTHER THREE PARTIES , THOUGH THEY HAVE NOT APPEARE D BEFORE THE A.O, THESE LOANS ARE REPAID IN THE SUBSEQUENT FINANCIAL YEAR BY CHEQUE, THEREFORE THE A.O WAS INCORRECT IN TREATING THE SAID LOANS AS UNEXPLAINED INCOME OF THE ASSESSEE. VIMLA P. KATIRA ITA NO.2532/MUM./2014 7 7. THE LD. DR , ON THE OTHER HAND STRONGLY SUPPORTING ORDER OF THE CIT(A) , SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THE INITIA L BURDEN CAST UPON HIM BY PROVING THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE PARTIES. THE A.O AS WELL AS THE CIT(A) HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THESE ARE BOGUS CREDITORS EXISTED MERELY FOR PROVIDING ACCOMMODATION ENTRIES, THEREFORE THE A.O HAS RIGHTLY MADE ADDITIONS U/S. 68 OF THE ACT, AND HIS ORDER SHOULD BE UPHELD. 8. WE HAVE HEARD BOTH THE PARTIES , PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. T HE A .O MADE ADDITIONS TOWARDS UNSECURED LOANS U/S. 68 OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAS FAILED TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHI NESS OF THE PARTIES. ACCORDING TO THE A.O , THREE CREDITORS WERE NOT FOUND AT THE ADDRESS GIVEN IN THE CONFIRMATION LETTER AS PER WORK INSPECTOR REPORT. THE A.O FURTHER OBSERVED THAT THE PARTIES DOESNT HAVE SUFFICIENT SOURCE OF INCOME TO EXPLAIN THE LOAN GIVEN TO THE ASSESSEE. IT WAS FURTHER OBSERVED THAT PRIOR TO THE DATE OF LOAN EQUA L AMOUNT HAS BEEN CREDITED TO THE CREDITORS ACCOUNT, THEREFORE OPINED THAT THE ASSESSEE HAS FAILED TO PROVE THE CREDITWORTHINESS OF CREDITORS WHICH IS THE ESSENTIAL REQUIREMENT OF SECTION 68 OF THE ACT. IT IS THE CONTENTION OF THE ASSESSEE TH AT HE HAD DISC HARGED INITIAL VIMLA P. KATIRA ITA NO.2532/MUM./2014 8 BURDEN CAST UPON HIM BY FILING CONFIRMATION LETTERS ALONG WITH OTHER EVIDENCES TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. ONCE , THREE INGREDIENTS ARE PROVED , THE ASSESSEE DOESNT REQUIRED TO PR OVE THE SOURCES OF SOURCE. THE ASSESSEE FURTHER CONTENDED THAT THE A.O MADE ADDITIONS MERELY ON THE GROUND THAT THE CREDITORS ARE NOT FOUND AT THE ADDRESS GIVEN IN THE CONFIRMATION LETTERS. BUT , THE FACT REMAINS THAT T HE Y HAVE FILED CONFIRMATION LETTERS AN D ALSO INCOME TAX RETURNS. IF IT ALL , THE AO HAS ANY DOUBT OF THEIR EXISTENCE HE CAN PROCEED TO TAKE ACTION UNDER THE ACT , ON THE CREDITORS AS THEY ARE INCOME TAX ASSESSEES AND THEIR INCOME TAX PARTICULARS ARE BEFORE THE A.O. THE A.O WITHOUT EXERCISING IS POWERS , SIMPLY MADE ADDITIONS ON THE GROUND THAT TH E ASSESSEE HAS NOT PROVED THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS, DESPITE THE FACT THAT THE ASSESSEE HAS FURNISHED ALL EVIDENCES TO PROVE THE LOANS. 9. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL ON THE RECORD , WE FIND THAT THE ASSESSEE HAS FURNISHED CONFIRMATION LETTERS IN RESPECT OF ALL LOAN CREDITORS. WE FURTHER OBSERVED THAT THE ASSESSEE HAS FILED INCOME TAX RETURNS ALONG WITH BANK STATEMENTS OF ALL LOAN CREDITORS. ALL THE L OAN CREDITORS ARE ASSESSED TO INCOME TAX AND LOAN S HAS BEEN GIVEN BY CHEQUE. WE FURTHER OBSERVED THAT THE A.O HAS SUMMONED TRUSTEES OF THE TRUST WHO HAD APPEARED VIMLA P. KATIRA ITA NO.2532/MUM./2014 9 BEFORE THE A.O AND GIVEN A STATEMENT U/.S 131 , WHEREIN TH EY HAVE CLEARLY ADMITTED THAT THEY H AVE ADVANCED LOAN TO THE ASSESSEE. IN RESPECT OF REMAINING THREE PARTIES , THOUGH THEY ARE NOT APPEARED BEFORE T HE A.O, THE ASSESSEE HAS FILED NECESSARY DETAIL S THAT THESE LOANS HAVE BEEN REPAID BY CHEQUE IN THE NEXT FINANCIAL YEAR. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED HIS INITIAL BURDEN CAST UPON HIM BY FILING IDENTITY, GENUINENESS AND CREDITWORT HINESS OF THE PARTIES. ONCE, THREE ASPECTS HAS BEEN PROVED, THEN THE ONUS SHIFT S TO THE A.O TO PROVE OTHERWISE. IN THIS CASE , THE A.O IGNO RING ALL EVIDENCES FILED BY THE ASSESSEE , SIMPLY MADE ADDITIONS ON THE SIMPLE REASON THAT CREDITORS ARE NOT HAVING SUFFICIE NT SOURCE OF INCOME TO EXPLAIN LOAN GIVEN TO THE ASSESSEE. IF AT ALL , THE A.O HAVING ANY DOUBT ON THE CAPACITY OF THE LOAN CREDITORS , HE IS FREE TO PROCEED AGAINST THE LOAN CREDITORS AS PER THE LAW , BUT HE CANNOT MAKE ADDITIONS TOWARDS, LOAN CREDITORS U/S. 68 OF THE ACT, ONC E THE ASSESSEE HAS DISCHARGED HI S INITIAL BURDEN. 10. IN THIS CASE , ON PERUSAL OF THE FACTS AVAILABLE ON RECORD , WE FIND THAT THE ASSESSEE HAS FILED NECESSARY EVIDENCES TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE PARTIES. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE A . O WAS ERRED IN MAKING ADDITIONS TOWARDS UNSECURED LOANS U /S. 68 OF THE ACT . T HE CIT(A) , WITHOUT APPRECIATING THE FACTS, SIMPLY CONFIR MED VIMLA P. KATIRA ITA NO.2532/MUM./2014 10 ADDITIONS MADE BY THE A.O. T HEREFORE, WE DIRECT THE A.O TO DELETE ADDITIONS MADE TOWARDS UNSECURED LOANS U/S. 68 OF THE ACT. 11 . IN THE RESULT , APPEAL FILLED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 14 / 06 / 2017 SD/ - SD/ - ( D.T. GARASIA ) ( MANJUNATHA G ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14 / 06 / 2017 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. BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI VIMLA P. KATIRA ITA NO.2532/MUM./2014 11