ANAND NITIN MAVANI, MUMBAI V. INCOME TAX OFFICER-24(1)(2), MUMBAI

ITA 2662/MUM/2022

AI Insights

The case involves Anand Nitin Mavani, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi / CIT(A) concerning reassessment proceedings under sections 143(3) r.w.s 147 and 250 of the Income Tax Act. The primary contention was the validity of the reassessment and the addition of Rs. 21,00,000 as unexplained cash credit under section 68. The Assessing Officer had reopened the assessment based on information from DGIT (Inv) regarding alleged accommodation entries linked to the assessee. The Tribunal examined the submissions and evidence presented, including the financial statements and confirmations from the loan creditors, and found that the assessee had adequately proved the genuineness of the loan transactions.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300221 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-01-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 19-10-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Onus to prove; Retraction; Reason to believe; Reassessment proceedings
• Section: 147; 68; 148; 143(3); 142(1); 133(6); 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC”BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 2662/Mum/2022 (A.Y: 2013-14) Anand Nitin Mavani 201-B, Arshie Complex Panch Marg, Off Yari Road, Versova, Andheri (W), Mumbai -400061. Vs. ITO – 24(1)(2) Kautilya Bhavan, Room No.605, 6 th Floor, Piramal Chamber, Lalbaug,Parel, Mumbai-400012. ./ज आइआर ./PAN/GIR No. : AFWPM7725H Appellant .. Respondent Appellant by : Mr.Rajiv Khandelwal.AR Respondent by : Ms.Richa Gulati.DR Date of Hearing 03.01.2023 Date of Pronouncement 24.01.2023 आद श / O R D E R PER PAVAN KUMAR GADALE JM: The assessee has filed the appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi / CIT(A) passed u/s 143(3) r.w.s 147 and U/sec 250 of the Act. The assessee has raised the fallowing grounds of appeal. As regards validity of reassessment proceedings: 1. The learned Assessing Officer ('AO') erred in reopening the proceedings u/s 147. ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 2 - 2. The learned AO erred in initiating reassessment proceedings without appreciating the fact that no income of the appellant chargeable to tax had escaped assessment. There was no reason to believe that income chargeable to tax had escaped assessment. 3. The learned AO has blindly reopened the assessment on the basis of some information received from the DDIT(Inv) without any independent application of mind. 4. The case was reopened merely on suspicion, conjecture and surmises to make roving inquiries. 5. The reassessment proceedings are not according to the laws, rules and regulations and hence are invalid and bad in law. As regards violation of principles of natural justice 6. The learned AO has violated the basic principles of natural justice. 7. The learned AO has failed to provide a copy of the statement / documents / seized material information which proves the alleged transaction mentioned in the reasons recorded and relied upon against the assessee. 8. The learned AO failed to provide opportunity of cross examination of all the persons whose statements have been used against the appellant. ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 3 - As regards addition of Rs. 21,00,000/- u/s 68 in relation to unexplained cash credit: 9. The learned AO erred in making an addition of Rs. 21,00,000 u/s 68 in relation to loan borrowed during the year from following parties- Sr. No Name Amount 1 Sumukh Commerical 10,00,000 2 Apurva Arvindbhai Mehta 4,00,000 3 Arunaben Girish Penta 2,00,000 4 Girish Elaiya Penta 2,00,000 5 Kaushikumar Sevantilelal Shah 3,00,000 Total 21,00,000 10. The learned AO failed to consider the documentary evidences submitted during the course of Assessment proceedings which proves the identity, genuineness of loan transactions and credit worthiness of the parties from whom the loan is borrowed. 11. The learned AO has also failed to consider the responses filed by the parties to whom notices u/s 133(6) were issued. 12. The learned AO failed to appreciate that additions cannot be made merely on the basis of documents found at the premises of third party. The learned AO failed to appreciate that the documents proposed to be used against assessee were found from the premises of a third party. In such cases, even the presumption u/s. 132(4A) and/or section 292C is not available. Relief Sought: Your appellant prays that the order of the Learned Assessing Officer be modified by: ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 4 - 1. Reassessment proceedings be held as invalid and bad in law. 2. Alternatively, addition of Rs. 21,00,000/- u/s 68 in relation to unexplained cash credit be deleted. Your appellant craves leave to add, to, amend or delete any of the above ground on or before the final date of hearing. 2. The brief facts of the case are that the assessee is an individual and engaged in the business of supplies of cement, ship orel and other building materials and filed the return of income for the A.Y 2013-14 on 25.09.2013 disclosing a total income of Rs.76,090/- and the return of income was processed u/s 143(1) of the Act. subsequently the Assessing officer (AO) has received information from DGIT (Inv) that there was a search and seizure operations u/s 132 of the Act conducted on Shri Praveen Kumar Jain & Group and they are engaged in the business of providing accommodation entries against the transactions and the assessee is one of the beneficiary of obtaining unsecured loans from five group companies/entities aggregating to Rs.21lakhs The Assessing Officer(A.O.) has reason to believe that the income has escaped the assessment and issued notice U/sec 148 of the Act. In compliance to the ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 5 - notice, the assessee has filed return of income on 02.04.2019 and a letter was filed seeking the reasons for reopening of assessment and the same was provided to the assessee. The assessee has filed the objections on the reasons of reopening and the same were disposed off by order dated 22.08.2019. Subsequently, the AO has issued notice u/ s 143(2) and 142(1) of the Act along with the questionnaire. In the assessment proceedings, the Ld.AR of the assessee appeared from time to time and submitted the various details/information and the case was discussed. 3. Further the assessee was called to submit the details in a format referred at Para 5 of the assessment order to establish identity, creditworthiness and genuineness of the transactions. Whereas the assessee has filed the details substantiating the claim. The AO has perused the financial statements and dealt on the transactions of the unsecured loans obtained in the F.Y 2012-13 and found that the transactions are not genuineness and dealt on the facts, statement and search operations of Shri Pravin Kumar Jain & group and issued notice, ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 6 - and the assessee has furnished the submissions/details as referred at page 7 of the AO order. Whereas the AO is of the opinion that the assessee has not discharged the burden of proof and issued notice u/s 133(6) of the Act on the parties and the said notices were returned back by the postal authorities. The assessee has submitted the details i.e confirmation of lenders/parties, bank account statements and Audited financial statements etc to substantiate genuineness, identity and creditworthiness of the loan creditors. But the AO was not satisfied with the information and explanations and observed that the assessee has not satisfied the ingredients required u/s 68 of the Act and made an addition of Rs.21,00,000/- as unexplained cash credit and assessed the total income of Rs.21,76,000/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 25-12-2019. 4. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), the CIT(A) considered the grounds of appeal, submissions of the assessee and findings of the A.O Whereas, the CIT(A) was not satisfied with the submissions and material ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 7 - information has upheld the validity of assessment and sustained the addition of unsecured loans and dismissed the assesses appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal with the Honble Tribunal. 5. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the addition of unsecured loans u/s 68 of the Act irrespective of the fact that the assessee has filed the details in respect of the loans and submitted the confirmation of the loan creditors along with other vital details. Further, the Ld. AR submitted that the assessee maintains the regular books of accounts and has furnished the confirmation of loans, bank statement of both the assessee and loan creditors, audited financial statements and emphasized on the retraction statement of Shri Praveen Kumar Jain to substantiate the genuineness, identity and creditworthiness of the loan creditors and the assessee has paid interest on loans and was confirmed by the parties and the assessing officer has allowed the interest on unsecured loan creditors in the assesssement proceedings.The Ld.AR supported the facts with the ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 8 - evidences in the paper book, submissions, chart and judicial decisions and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A). 6. Heard the rival submissions and perused the material on record. The Ld. AR submitted that the CIT(A) has erred in sustaining the addition u/s 68 of the Act of unsecured loans though the assesses has filed the requisite details before the lower authorities. Whereas before the Assessing Officer, the assessee has submitted information in respect of unsecured loan creditors and the A.O. has issued notice u/s 133(6) of the Act. On perusal of the assessment order, the assessee has submitted the documentary evidences but the A.O has over looked/doubted the documents/details in respect of the sources filed by the assessee. The assessee has submitted the written submissions before the CIT(A) and the confirmation of loan creditors, bank account details and the Income Tax returns. The assessee has to satisfy the 3 ingredients with respect to identity, creditworthiness and genuineness of the transactions and the unsecured loans were obtained and repaid in the regular course of business through proper banking ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 9 - channels and the Interest have been paid regularly and was allowed. The CIT(A) has discussed on the provisions of the Act but has confirmed the action of the A.O and primafacie the assessee has discharged the burden of proof in filling the documents. 7. Whereas the A.O has ignored the information and audited financial statements and unilaterally made addition u/sec68 of the Act only on the basis of statement provided by third party without any iota of evidences discrediting the evidence furnished by the assessee and the Statement of Shri Praveen Kumar Jain has been retracted which cannot use as reliable evidence. The Ld. AR emphasized that the assessee has discharged its burden by submitting the financial statements of the lenders where the payment is made through banking channel and identity, creditworthiness and genuineness of the lender company was proved in the assessment proceedings. Further the assessee has submitted the audited financial statements, confirmations, Bank statements, copy of the income tax returns and the repayment details to substantiate the genuineness and credit worthiness of loan creditors, which are placed at page ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 10 - 55 to 118 of paper book. Further, the A.O has failed to make further enquiries and relied on the statement recorded, overlooking the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The Ld.DR submitted that the A.O. has issued notice U/sec133(6) of the Act on the loan creditors and they were not complied. The Ld.AR has filed details of emails submitted on 21-12-2019 by the loan creditors along with the information much before the completion of the assessment.The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 of the Act. Further the A.O. has allowed the interest on unsecured loans in the F.Y.2012-13, and the loan transactions are not believed and alleged as non genuine and treated as unexplained cash credit U/sec68 of the Act and these unsecured loans were repaid through account payee / banking channels in the current financial year and subsequent year which is not disputed. The Ld.AR submitted that the assessee has substantiated the stand by submitting the details before the A.O. and CIT(A) and discharged the burden and the interest on unsecured loans were ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 11 - allowed by the A.O. and supported the arguments with the coordinate bench decisions. Hence considering the facts, circumstances and judicial decisions set-aside the order of the CIT(A) and direct the Assessing officer to delete the addition. 8. Since the case is decided on the merits , the grounds of appeal with respect to validity of re-assessment proceedings raised by the assessee becomes academic and are left open. 9. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 24.01.2023. Sd/- (PAVAN KUMAR GADALE) JUDICIAL MEMBER Mumbai, Dated 24.01.2023 KRK, PS /Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. आ र आ / The CIT(A) 4. आ र आ ( ) / Concerned CIT 5. "#$ % & &' , आ र ) र*, हमद द / DR, ITAT, Mumbai 6. % -. / 0 / Guard file. ान ु सार/ BY ORDER, ITA No. 2662/Mum/2022 Anand Nitin Mavani, Mumbai. - 12 - " & //True Copy// 1. ( Asst. Registrar) ITAT, Mumbai