DCIT, Circle, Ambala V. Sh. B.K. Bhasin, HUF, Ambala City

ITA 304/CHANDI/2018

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9943 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-08-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 07-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68; 69; 13

Judgement Text

आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘A’, CHANDIGARH BEFORE SHRI A.D. JAIN, VICE PRESIDENT & SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 304/CHD/2018 Ǔनधा[रण वष[ / Assessment Year : 2013-14 The DCIT, Circle Ambala Vs. बनाम M/s B.K. Bhasin (HUF), Prop. M/s Bhuvan Marketing, Naraingarh Road, Near Baldav Nagar, Ambala City. èथायी लेखा सं./PAN No. AAFHB9530F अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Ǔनध[ǐरती कȧ ओर से/Assessee by : Shri Tej Mohan Singh, Advocate राजèव कȧ ओर से/ Revenue by : Shri Amanpreet Kaur, Sr.DR स ु नवाई कȧ तारȣख/Date of Hearing : 30.08.2023 उदघोषणा कȧ तारȣख/Date of Pronouncement : 21.11.2023 आदेश/Order Per A.D. Jain, Vice President: This is Department’s appeal against the order of the ld. CIT(A)-14, Chennai, for the Assessment Year 2013-14, taking the following Revised Grounds of Appeal: 1. Whether on the facts and circumstances of the case the ld. CIT(A) has erred in law by holding that the lenders of loans had creditworthiness, whereas it is 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 2 a case of diversion of funds by the assessee, which have been rotated through various accounts on the same day from which no creditworthiness proves. 2. Whether on the facts & circumstances of the case, the ld. CIT(A) has erred in law by holding the cash deposit / transfer of funds in the accounts of the related parties as genuine loans (Amounting to Rs. 1,83,57,717/-), which remained unsubstantiated. 3. Whether on the facts and circumstances of the case the ld. CIT(A) has erred in law by holding the interest (Amounting to Rs.33,19,945/-) paid on loan as allowable, while loans were actually not genuine. 2. The facts are that the Assessee is the proprietor of M/s Bhuvan Marketing, which is a distributor of electronic goods and derives income from Business and income from other sources. During the course of scrutiny assessment proceedings, the Assessing Officer had, on 21.3.2016, called for the details of loans taken by the Assessee and after considering the submissions of the Assessee, filed on 24/03/2016, held that the Assessee’s funds were being transferred to the sister concerns and relatives of the Assessee and again received back by the Assessee in its books as a loan and interest was debited in the books of the Assessee for the loans received. In view of the said finding, the Assessing Officer held that the Assessee was simply circulating its own money amongst its relatives and showing it as loan. 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 3 The Assessing Officer, treated the closing balances of the said loans (even though much of the closing balances pertain to earlier assessment years), amounting to Rs.1,83,57,717/-, as unexplained cash credit u/s Sec 68 of the I.T. Act and similarly, the interest debited to the books on the loans taken and also on the closing balance of the said loans (which was disallowed), amounting to Rs.33,19,945/-, was also disallowed and treated as the unexplained expenditure incurred by the Assessee u/s Sec 69 C of the I.T. Act. 3. By virtue of the impugned order, the ld. CIT(A) deleted the additions made by the Assessing Officer. 4. Aggrieved, the Department has filed the present appeal. 5. The ld. DR challenged in the impugned order and contended that on the facts and circumstances of the case, the ld. CIT(A) has erred in law by holding that the lenders of loans had creditworthiness, whereas, it is a case where money has been rotated from one account to the other just to give it a colour of genuineness; that the ld. CIT(A) has erred in law by holding that the loan transactions were genuine, whereas, there are cash deposits in certain accounts of the parties which remained unsubstantiated; and that as such, the order of the ld. CIT(A) be set-aside and that of the Assessing Officer be restored. 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 4 6. It is contended that the Assessee had taken a number of squared-up loans from related parties, on which, interest was being paid by the Assessee and was claimed as a deduction; that eight of these lenders were educational and marriage trusts established in the name of children of the members of the HUF and other relatives; that the Assessing Officer, while going through their bank statements, noted that these trusts had very low balance in their accounts; that the Assessing Officer noted that occasionally, they got deposits from certain parties, who happened to be either members of the Assessee HUF, or other related parties, and then, on the very same day, that money was transferred to the bank account of the Assessee, which the Assessee had shown as loan from these parties in the books of the HUF; that from the entries, as taken note of by the Assessing Officer, it is seen that the Assessee transferred the amounts first, which was being contended to be repayment of earlier loan and was receiving back as new loan; that the sudden need of new loan, on the same day on which an earlier loan was being paid, was never explained, nor substantiated, though this was done frequently; that the Assessee has not been able to prove that the loans were being taken for any business expediency; that the original source of the money which was being transferred by the Assessee to the related parties, was not explained; and that the Assessee was not able to prove that the loans were taken for any business expediency. It has been submitted that 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 5 with regard to the creditworthiness of the related parties, the source of income of the individual related parties and the related HUF trust are as follows:- Sr.No Particulars of Related Party Gross Total Income Salary from Bhuvan Marketing (proprietors hip of assessee) Interest income from M/s B.K. Bhasin (HUF) / Bhuvan Marketing (proprietorship of assessee) 1 Rajni Bhasin 16,99,437/- 15,00,000/- -- 2 Jitesh Bhasin 11,32,310/- -- 9,87,857/- 3 Rajinder Arora 13,71,937/- 9,00,000/- 5,93,256/- (as per submission before AO) 4 Seema Arora 13,85,309/- 9,00,000/- 4,16,416/- 5 Rajinder Arora (HUF) 2,07,979/- — 1,88,781/- 6 K.Vikas 4,61,761/- 1,60,000/- 2,18,427/- 7 Hemalatha 12,84,242/- 9,00,000/- 36,653/- 8 Vikas Bhasin (HUF) 1,60,543/- -- 1,34,742/- 9 Jitesh Education Trust 1,98,953/- -- 74,374/- 10 Jitesh Marriage Trust 1,98,790/- -- 78,995/- 11 Bhuvan Education Trust 1,98,646/- -- 29,083/- 12 Bhuvan Marriage Trust 1,98,190/- -- 87,618/- 13 Barkha Marriage Trust 1,98,567/- -- 47,730/- 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 6 7. It has been contended that as available from this table, all related parties were getting a substantial part of their income in the year under consideration, in the form of interest income on loans / salaries from the Assessee, M/s B.K. Bhasin (HUF) or from M/s Bhuvan Marketing, which is a proprietorship concern of the Assessee; that those related parties were getting only meager income from other entities besides the Assessee, or its said proprietary concern; that there is a great possibility that these related parties might have been earning income in the same way in the earlier years also; that, therefore, the creditworthiness concerning the closing balance has not been established by the Assessee; that likewise, the genuineness of the transaction is also doubtful, as these related entities were getting income either from the Assessee, or its proprietary concern, and were granting loan to the Assessee in lieu of the interest; and that thus, the nexus of money transfer has been used as a colorable device to avoid payment of tax by resorting to dubious methods. The ld. DR has sought to place reliance on ‘Mc Dowell and Co. Ltd vs. CIT’, 154 ITR 14 Barkha Education Trust 1,98,626/- -- 50,068/- 15 Ishaan Education Trust 1,97,634/- -- 51,628/- 16 Ishaan Marriage Trust 1,98,103/- -- 51,502/- 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 7 148 (SC), ‘Sumati Dayal vs. CIT’, [1995] 80 taxman 89 (SC) and ‘CIT vs. Durga Prasad More’, 82 ITR 540 (SC). 8. The ld. Counsel for the Assessee, on the other hand, has placed strong reliance on the impugned order. 9. It has been contended that as rightly observed by the ld. CIT(A), the Assessing Officer had not granted any opportunity to the Assessee, nor had she issued any Show Cause Notice to the Assessee and had made the additions in a wholly arbitrary manner; that the Assessing Officer had not considered the fact that all the loans were continuing from earlier years and were not fresh loans; that the transactions undertaken during the year had all been made through banking channels and account payee cheques and the source thereof had been proved beyond doubt; that the Assessing Officer had made the additions on the basis of mere presumption and surmises; that the findings of the Assessing Officer were not arrived at on facts and were not backed by evidence; that the transactions were between the Assessee and its sister concerns and relatives were running account transactions which had been going on for the last number of years and had been accepted by the Department in the earlier years; that whenever funds were required by the Assessee, they were taken by the Assessee from its sister concern and relatives and whenever they were were not required, they were repaid to them; that therefore, the 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 8 persons from whom the loans were received by the Assessee, are regular tax payers and they are filing their returns of income regularly with the Department; that they are also showing the loans given by them to the Assessee and received by them from the Assessee, in their respective returns of income filed with the Department; that they are also showing the interest received from and paid to the Assessee, in their respective returns of income, for the relevant years; that if any cash is deposited in the books of the persons who are giving loans to the Assessee, it has to be considered in the hands of those persons and not in the hands of the Assessee; that the cash deposits and cash balances reflected in their respective books are accounted for in their respective books and are explained in their returns of income filed with the Department, copies of which returns of income were duly filed alongside their bank statements for the year under consideration, before the ld. CIT(A); that, therefore, the genuineness of the transactions and the identity of the creditors was proved beyond doubt; that therefore, there was no force in the findings of the Assessing Officer that it was the Assessee’s own money that the Assessee was circulating; that cash transactions to the tune of Rs. 9,50,000/- and other sources of cash deposits were fully explained; that this was also available from the bank statement, wherein, cash had been withdrawn from the bank a few days earlier and deposited again in the bank account; that this had been explained to the ld. 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 9 CIT(A) with the help of the return of income and bank statements of the loan creditors; that it was not the money of the Assessee which had been circulated, rather, it was the loan creditors’ own capital created from their past tax paid income and it was repaid and taken as per requirement in the business; that the loan creditors were filing their computation of income, Profit and Loss account, Balance Sheet and its schedules in their respective returns of income; and that, therefore, the Assessee had clearly and successfully proved the three ingredients of the provisions of the section 68 of the Act, i.e., the identity and creditworthiness of the loan creditors and the genuineness of the transactions. It has been contended that the ld. CIT(A) has duly taken into consideration all these aspects of the matter and has rightly deleted the additions. 10. Having heard both the parties and having perused the material on record, we find that a break-up of the closing balances of loans received, amounting to Rs. 1,83,57,717/-, has been given by the Assessee at APB 238. These details are as follows:- 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 10 11. As available from these details, as rightly pointed out on behalf of the Assessee, Rajinder Arora, Seema Arora and V. Hemlatha are having running accounts and they are having substantial opening balances as on 1.4.2012, out of the six parties, who had a closing balance as on 31.3.2013. Rajinder Arora had an opening balance of Rs. 47,47,870/-, Seema Arora had opening balance of Rs. 54,39,503/- and V. Hemlatha had an opening balance of Rs. 28,48,410/-. Then, as made available at APB 239, Barka Arora, Eshaan Arora and Rajinder 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 11 Arora had given unsecured loans to the Assessee in the earlier year, which were squared off in the last year itself. 12. Then, the Assessing Officer did not make out any case that there had been cash deposits in the accounts of the persons who had given loans to the Assessee and that thereafter, the amount had been given to the Assessee firm. In fact, it is patent that the amount transferred by the loan creditors to the Assessee were all transferred only through banking channels. It was only in the case of V. Hemlatha, that there was a cash deposit. This too, was accepted by the Assessee before the ld. CIT(A), as reproduced at pages 6 -7 of the order under appeal. It was only after taking into consideration the facts, explanation and evidences as furnished by the Assessee, that the ld. CIT(A) deleted the additions of the closing balance, as made by the Assessing Officer. In fact, as rightly contended, the accounts were running accounts and addition of closing balances with regard thereto could not have been made. 13. Further, though the Department alleges it to be so, there is no evidence whatsoever on record to establish that it was the Assessee’s own money, which was circulated. The Department’s pleading in this regard is nothing else, but merely surmise, conjecture and suspicion. It has not been disputed that had the Assessee wanted to do so, it could have taken these loans directly into the account of the firm and 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 12 the interest thereon could have been legitimately claimed as an expenditure in the account of the firm. The firm is into the business of distribution of electronic goods and nothing has been brought on record by the Assessing Officer to establish that income of the magnitude assessed could have been earned in this line of business. There is no rebuttal to the assertion that it was in business prudence that the Assessee decided to raise the loans in its capacity of HUF and claimed interest expenditure while filing the return of income. This stands amply borne out from the copies of the computation sheets for assessment years 2011-12 to 2013-14, placed at APB 10-12, 22-26 and 43-44, respectively. In such undisputed facts, there was no occasion for the Assessing Officer to treat all the closing balances as unexplained cash credits, even though most of these closing balances were pertaining to earlier years. The Assessing Officer has also not expressed that the interest expenditure is not allowable. Rather, she has only observed that no business expediency for taking such loans was shown by the Assessee. To reiterate, it is established on record that there was no loan transaction undertaken during the year and most of the loans are old loans continuing from earlier years. Over the years, the Assessee has seen an increase in its turnover, which was of Rs. 23,86,64,533/- in assessment year 2011-12 and increased to Rs. 29,56,64,999/- in A.Y. 2012-13 and to Rs. 34,34,37,627/- in A.Y. 2013-14. 304-Chd-2018- – M/s B.K.Bhasin (HUF), Ambala City 13 14. The ld. CIT(A), we find, has duly and correctly taken all the above facts and circumstances into the consideration and has rightly deleted the additions wrongly made by the Assessing Officer. In these specific facts and circumstances, we find the case laws sought to be relied on by the Department to be not applicable. 15. Accordingly, finding no force, in the grievance sought to be raised by the Department by way of the Grounds of appeal, we reject the same, while confirming the action of the ld. CIT(A) in deleting the additions made by the Assessing Officer. 16. In the result, the appeal is dismissed. Order pronounced on 21.11.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) Accountant Member Vice President “आर.के.” आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आय ु Èत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशान ु सार/ By order, सहायक पंजीकार/ Assistant Registrar