Madhur Capital & Finance Ltd., Ahmedabad V. The Dy. Commissioner of Income Tax, Circle-2(1)(2), Ahmedabad

ITA 3102/AHD/2016

AI Insights

The case revolves around an appeal by Madhur Capital & Finance Ltd. against the order of the CIT(A)-2, Ahmedabad, which confirmed the addition of Rs.9.42 crores as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer (AO) based on the grounds that the assessee failed to establish the identity, creditworthiness, and genuineness of the cash credit received from PFMS. The Tribunal noted that in the first round, the issue was restored back to the AO for further examination as the assessee had not provided complete details initially. In the second round, despite the assessee providing detailed evidence including PAN, income tax returns, and bank statements, the AO and CIT(A) upheld the addition, leading to the current appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133552 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2023
• Assessment Year: 2000-2001
• Appeal Filed On: 27-11-2016
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Principle of natural justice; Additional evidence; Set aside
• Section: 68

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ]BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER, JUDICIAL MEMBER ITA No.3102/Ahd/2016 Assessment Year : 2000-01 Madhur Capital & Finance Ltd. Madhur Complex Stadium Circle Navrangpura Ahmedabad. PAN : AABCM 3158 K Vs. The DCIT, Cir.2(1)(2) Ahmedabad. अपीलाथ / (Appellant) यथ /(Respondent) Assessee by : Shri S.N. Divatia, AR Revenue by : Shri Sudhendu Das, CIT-DR स ु नवाई क तार ख/Date of Hearing : 06/07/2023 घोषणा क तार ख /Date of Pronouncement: 03/10/2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The above appeal has been filed by the assessee against the order passed by the ld.CIT(A)-2, Ahmedabad dated 19.9.2016 under section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), for the assessment year 2001-02. 2. The ld.counsel for the assessee drew our attention to the grounds raised before us, and pointed out that the only effective issue in the present appeal relates to the addition made under section 68 of the Act on account of alleged unexplained cash credit amounting to Rs.9,42,00,000/- from one M/s.Panther Fincap and Management Services Ltd. (PFMS). ITA No.310/Ahd/2016 2 3. He drew our attention to ground of appeal, being Ground no.2 to 4, which reads as under: “2. "The Id. CIT(A) has erred in law and on facts of the case in confirming the action of Ld. AO in making addition of Rs.9,42,00,000/- u/s 68 of the Act on account of alleged unexplained cash credit of an amount received from Panther Fincap and Management Services Ltd. 3. Both the Id. Authorities have erred in law and on facts of the case in not appreciating the facts of the case that the Appellant has completely discharged its onus in establishing identity, creditworthiness and genuineness of the amount received from Panther Fincap and Management Services Ltd., and therefore, no addition should have been made u/s 68 of the Act. 4. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order.” 4. The ld.counsel for the assessee pointed out that this was second round before Tribunal; that in the first ground, this issue had been restored back by the ITAT noting that the assessee had merely filed a copy of account of the creditor, viz. M/s Panther Fincap and Management Services Ltd.,(PF & MSL) which was signed by some authorized signatory but the name of the sundry creditor had not been given along with PAN, nor details submitted regarding where it was assessed, if at all assessed to tax. The ITAT noted that the assessee was ready to provide these details, and therefore, restored the issue back to the AO. Our attention in this regard was drawn to the finding of the ITAT noted at page no.3 and 4 of the CIT(A)’s order as under: “it is noted by Ld. CIT(A) in para 8.3 of his order that the assessee had simply filed a copy of the accounts which has been signed by some authorised signatory on behalf of PantharFincap& Management Services Ltd. but the name of the signatory has not been given and along with PAN also, names and ward/circle where this company is assessed was also not given and, therefore, complete details were not available. He submitted that now, the assessee is ready to provide all these details. Ld.D.R. supported the orders of authorities below. ITA No.310/Ahd/2016 3 We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below. We find that the assessee has furnished a confirmation along with PAN but the names of authorized signatory on the confirmation was not given and the details of ward /circle where the creditor was assessed, has not been given. There is no mention about any material supplied in support of the creditworthiness of this creditor. Under these facts, we feel that this issue cannot be decided without examining all these documents and in the interest of justice, the assessee deserves one more opportunity to furnish those requirements and hence, we set aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of the A.O. for a fresh decision in the light of various decisions cited by Ld. A.R. before us as noted above./we would like to make it clear that the burden is on the assessee to bring necessary details and evidences on record such as name of authorized signatory on the confirmation along with details of ward / circle where the creditor was being assessed along with the details of present A.O. of the concerned creditor. The assessee should also furnish evidence in support of creditworthiness of the creditor. The A.O. should pass necessary order as per law in the light of above discussion after providing adequate opportunity of being heard to the assessee. 5. The ld.counsel for the assessee contended that before the AO, the assessee did file requisite details, which are reproduced at page no.5 of the CIT(A)’s order as under: 6. He pointed out that the AO did not find any merit in the same, and confirmed the addition made under section 68 of the Act of Rs.9.24 crores in the second round also. He, thereafter, pointed out that before the ld.CIT(A) the assessee had filed evidences relating to the creditorincluding certain additional evidences , being PAN, return of income, details of MCA, bank statement of the assessee- ITA No.310/Ahd/2016 4 company etc. which he pointed out find mention at para no.4.2 (page no.9) of the CIT(A)’s order as under: “The appellant had .proved identity of PFMS by producing PAN, details from MCA and its return of income. The genuineness of the transactions were proved by amounts in question received by Tel. transfer (TT) as evident from bank statement of Madhupura Bank and contra account of the said party. Now, so far as the creditworthiness of the said party is- concerned, the appellant had submitted the audited annual account for FY 1999-2000 and copy of its return of income for AY 2000-2001. It will be notice therefrom that the said party has declared total income of Rs.29,31,30,342/- and even the net profit before taxes as per its P&L was Rs. 29,51,19,9577- and had made provision for taxation of Rs.l 1.40 cr.: 7. Referring to the same, he pointed out that the assessee had discharged its onus of proving genuineness of the cash creditors by establishing the identity of the said party by filing PAN, return of income and details from MCA; proving genuineness of the transaction by filing bank statements of the assessee reflecting the transaction by telegraphic transfer, and also confirmation from the said party also, and proving credit-worthiness of the said party from the detail of profits declared in its total income of Rs.29,31,30,342/- and net profit before tax as per its P&L account of Rs.29,51,19,957/-. He contended, thereafter, that the ld.CIT(A) forwarded all the documents to the AO and sought remand report from him; that the AO offered no comments on the details and only objected to the furnishing of evidence at appellate stage. He drew our attention to para 3.7 (Pg.No.14) of the CIT(A)’s order noting the above facts as under: 3.7 ..... However, being the additional evidence, the same along with the written submissions were forwarded to the AO for his remand report. Thereafter the remand report has-been received from the AO objecting to the admission of the additional evidences and a copy thereof has been provided to the appellant for the rejoinder. Subsequently, the appellant filed the rejoinder to the remand report vide letter dtd. 1.8.2016 which has also been reproduced in the preceding paras of this order. 8. The ld.counsel for the assessee contended that despite the assessee having discharged its onus of proving the genuineness of ITA No.310/Ahd/2016 5 cash credit received, the ld.CIT(A) held the genuineness not proved on grounds which were not even confronted to the assessee during the appellate proceedings. He pointed out from para 3.9 of the order that the ld.CIT(A) noted that the balance sheet and profit & loss account of the creditor filed by the assessee did not reflect any balance relating to the assessee and thus, on this basis, he held that the audited balance sheet did not support the case of the assessee in any way. He drew our attention to para 3.9 of the CIT(A)’s order holding as under: 9. In this regard, the ld.counsel for the assessee contended that firstly this fact was never confronted to the assessee. Further,he pointed out that copy of ledger account of the creditor PF&MSL was submitted to the ld.CIT(A) which reflected NIL balance as at the end of the year. He drew our attention to copy of ledger account at PB Page No.94 reflecting the aforesaid fact. He therefore stated that there wasno question of any balance pertaining to the assessee being reflected in the balance sheet of PF&MSL. Therefore this finding of the ld.CIT(A), he contended, was based on incorrect appreciation of facts. Thereafter, he pointed out from para 3.10 of the impugned order that the ld.CIT(A) noted that as per the ledger account copy of ITA No.310/Ahd/2016 6 the creditor the assessee had shown repayment of loan of Rs.89 lakhs to PFMS on 6.1.2000 but the same was not reflected in the copy of bank statement of the assessee in Mercantile Co-op Bank Ltd. which created doubt on the genuineness of the loan and repayment thereof. He drew our attention to para 3.10 of the CIT(A)’s order as under: “3.10. Moreover the appellant has not provided the copy of the bank statement of M/s.PF and MSL to verify whether the account payee cheque have been given by the said party from its bank account to the appellant. In absence of the bank account of the said party, the genuineness cash credits does not get established. Even the appellant has submitted the bank statement copy of its own in Madhavpura Mercantile Co.Op. Bank Ltd but the same is found illegible and the column of date is disappearing. Therefore, the date of credits in is bank accounts is unverifiable. As per the ledger account copy the appellant has shown repayment of loan of Rs.89 lakhs to the aforesaid party on 6.1.2000 but such entry is not appearing in the bank statement of the appellant which also creates the doubts on the genuineness of the loans and repayments thereof. The appellant has also relied upon certain judgments of the Hon’ble Courts but reliance is misplaced as the facts of the case are different with the facts of the cited cases.” 10. The ld.counsel for the assessee contended that even this adverse finding of the ld.CIT(A) which formed basis for rejecting the assessee’s contention was never confronted to the assessee. He further pointed out that a proper confirmation of the said party had been filed to authority below reflecting the said payment. He drew our attention to PB Page No.151 wherein the confirmation was filed. He stated, therefore, that the ld.CIT(A) had passed the order dismissing assesses contention of the creditor being genuine on grounds which were not confronted to the assessee, and in total disregard to all the documents submitted by the assessee in discharge of its onus under section 68 of the Act. He therefore stated that order of the ld.CIT(A) confirming the disallowance under section 68 of the Act of Rs.9.42 crores being balance of M/s PF&MSL , needed to be deleted. ITA No.310/Ahd/2016 7 11. The ld.DR relied of the order of the ld.CIT(A), though he was unable to rebut the factual contentions of the assessee that all documentary evidences to prove the genuineness of the transaction was filed by the assessee, and the assessee’s contention were rejected based on findings which were not confronted to the assessee. 11. In view of the above, we agree with the ld.counsel for the assessee that basis for holding cash credit as ingenuine by the ld.CIT(A) was against the principles of natural justice. Clearly the credit balance pertaining to M/s MS&FSL of Rs.9.42 crs was held not genuine based on adverse findings which not even confronted to the assessee which the assessee has even otherwise demonstrated before us as meriting no consideration. 12. It is not disputed that the assessee filed confirmation of the said party, PAN, Income Tax Return, details of the creditor company from MCA, audited Financials of the creditor company and also copy of bank statement of the assessee reflecting transactions undertaken with the creditor through telegraphic transfer. The ROI and audited financials reflect huge profits earned by the creditor during the year amounting to Rs.29 Crs. These documents undoubtedly suffice to prove the identity, genuineness and creditworthiness of the creditor. No adverse comments were offered by the AO in his remand report vis a vis these documents. Even the Ld.CIT(A) did not doubt the details or documents furnished by the assessee. The only reason with the Ld.CIT(A) for treating the credit non genuine is that the Balance Sheet of M/s PF& MSL did not reflect any balance pertaining to the assessee. This has been shown to us as being of no consequence since there was no balance outstanding of the said party at the end of the year which fact was clearly reflected in the ledger account of the party ,copy of which was ITA No.310/Ahd/2016 8 placed before the Ld.CIT(A). The other reason with the Ld.CIT(A) for treating the credit as not genuine was that one particular transaction of money/fund reflected in the ledger account was not found reflected in the bank statement of the assessee. This finding of the Ld.CIT(A) was not confronted to the assessee. The Ld DR was unable to demonstrate before us that the Ld.CIT(A) had confronted this fact noted by him to the assessee. Therefore going by the principles of natural justice this adverse finding could not have been used against the assessee behind his back. Even otherwise the Ld.Counsel for the assessee has demonstrated that the ledger account was duly confirmed by the said party. Therefore, all the more reason the assessee ought to have been confronted with this fact before using it against him. 13. In view of the same, we agree with the ld.counsel for the assessee that the assessee having discharged its onus of proving the genuineness of the cash credit received from M/s PF&MSL sufficiently, and the Ld.CIT(A) treating the same as ingenuine without any basis, the confirmation of addition of Rs.9.42 Crs under section 68 needs to be set aside. The addition made under section 68 is directed tobe deleted. Ground of appeal No.2-4 are allowed as above. 14. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 3 rd October, 2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 03/10/2023