Shri PRAMOD KUMAR SETHI, Indore V. THE ACIT 3(1), Indore

ITA 392/IND/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2794 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-09-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THRIBHUVAN SACHDEVA
• Assessee Lawyers: P K MITRA
• Keywords: Unexplained cash credit; Unexplained expenditure; Business income; Question of law; Accommodation entries
• Section: 143(3); 142(1); 133A; 153A; 133(6); 68

Judgement Text

PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 , , IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ITA NO.382 & 383/IND/2014 ASSESSMENT YEARS:2006-07 & 2007-08 ITA NO.392/IND/2014 ASSESSMENT YEAR 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, 3(1), INDORE VS. SHRI PRAMOD KUMAR SETHI, 106, NAVNEET DARSHAN, 16/2 OLD PALASIA, INDORE (APPELLANT) (RESPONDENT ) PAN NO. AEXPS7774Q SHRI PRAMOD KUMAR SETHI, 106, NAVNEET DARSHAN, 16/2 OLD PALASIA, INDORE VS. ASSTT. COMMISSIONER OF INCOME TAX, 3(1), INDORE (APPELLANT) (RESPONDENT ) PAN NO. AEXPS7774Q REVENUE BY SHRI P.K.MITRA, SR. DR RESPONDENT BY SHRI THRIBHUVAN SACHDEVA, CA DATE OF HEARING: 10.09.2018 DATE OF PRONOUNCEMENT: 06 .11.2018 PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 2 / O R D E R PER MANISH BORAD, A.M: THE ABOVE CAPTIONED CROSS APPEALS FOR ASSESSMENT YE AR 2006- 07 AND REVENUES APPEAL FOR A.Y. 2007-08 ARE DIRECT ED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS)-I, INDORE, (IN SHORT CIT(A)), VIDE APPEAL NO. IT-433/2008-08 & 2 90/2009-10 ORDER DATED 21.02.2014 WHICH IS ARISING OUT OF THE ORDER U/S 143(3) OF THE INCOME TAX ACT 1961(HEREINAFTER CALLED AS TH E ACT) FRAMED ON 27.02.2015 BY ACIT, RANGE-3, INDORE. 2. AS THE FACTS AND ISSUES RAISED IN THESE APPEALS ARE MOSTLY COMMON AND RELATING TO THE SAME ASSESSEE, THESE WER E HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER FOR SAKE OF CONVENIENCE AND BREVITY. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECO RDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS O F REAL ESTATE. HE DECLARED INCOME OF RS. 15,56,530/- IN THE RETURN OF INCOME FILED ON 13.10.2006. CASE SELECTED FOR SCRUTINY. NOTICES U/ S 143(2) AND PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 3 142(1) OF THE ACT WERE DULY SERVED UPON THE ASSESSE E. LD.A.O WHILE EXAMINING THE FINANCIAL STATEMENTS NOTICED THAT CER TAIN UNSECURED LOANS WERE TAKEN DURING THE YEAR FROM FOUR PARTIES FOR A TOTAL AMOUNT OF RS.1,02,00,000/- AND INTEREST OF RS.6,14, 855/- WAS PAID THEREON. IN ORDER TO SATISFY ABOUT THE IDENTITY, G ENUINENESS AND CREDITWORTHINESS OF ALLEGED UNSECURED LOANS, LD.A.O CALLED FOR VARIOUS INFORMATION WHICH WERE DULY SUPPLIED BY HIM . LD.A.O LINKED THE ALLEGED CASH CREDITOR COMPANIES AS PART OF LUNKARD GROUP OF COMPANIES ON WHICH SURVEY WAS CONDUCTED U /S 133A OF THE ACT ON 2.5.2006 WHEREIN IT WAS NOTICED THAT SOM E OF THE GROUP COMPANIES ARE ALLEGED TO BE IN THE PRACTICE OF PROV IDING ACCOMMODATION ENTRIES. LD.A.O GAVE HIS FINDING OF F ACT THAT THE ALLEGED CASH CREDITOR COMPANIES WHICH GAVE LOAN TO THE ASSESSEE WERE NOT PART OF THE GROUP OF COMPANIES HELD BY TH E LUNKARD GROUP BUT THEY WERE IN ASSOCIATION WITH THE LUNKARD GROUP OF COMPANIES. THOUGH THE ASSESSEE FURNISHED ALL NECESS ARY EVIDENCES TO PROVE THE IDENTITY, GENUINENESS AND CREDITWORTHI NESS OF THE CASH CREDIT COMPANIES BY WAY OF PROVIDING VARIOUS DOCUME NTARY EVIDENCES ALONG WITH THE CONFIRMATION LETTERS TO SH OW THAT THE ALLEGED LOANS WERE REPAID DURING THE YEAR ITSELF AN D THE INTEREST FOR PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 4 THE PERIOD FOR WHICH THEY WERE HELD AS LOAN WAS GIV EN AFTER DEDUCTING TAX AT SOURCE AND ALL THE TRANSACTIONS WE RE CARRIED OUT THROUGH ACCOUNT PAYEE CHEQUE. BUT THESE EVIDENCES W ERE NOT SUFFICIENT TO SATISFY THE LD.A.O AND HE HELD THAT T HE ALLEGED UNSECURED LOANS ARE NOT GENUINE AND MADE ADDITION U /S 68 OF THE ACT AT RS.1,05,00,000/-. LD.A.O ALSO DISALLOWED IN TEREST EXPENDITURE OF RS. 6,14,855/- CLAIMED ON THESE UNSE CURED LOANS. LD.A.O ALSO MADE ADDITION FOR UNEXPLAINED EXPENDITU RE OF RS.5,25,000/- BEING THE AMOUNT THAT THE ASSESSEE MA Y HAVE INCURRED FOR PROCURING ALLEGED ACCOMMODATION ENTRIE S. 4. DURING THE ASSESSMENT PROCEEDINGS LD.A.O ALSO OB SERVED THAT THE ASSESSEE HAS SHOWN RENTAL INCOME OF RS.26,87,63 5/- AND HAS CLAIMED DEDUCTION U/S 24 OF THE ACT AT RS.7,99,35 0/-. LD.A.O DENIED THIS DEDUCTION BY TAKING A VIEW THAT AS THE ASSESSEE IS ENGAGED IN THE REAL ESTATE BUSINESS, THE ALLEGED RE NTAL INCOME SHOULD BE TREATED AS BUSINESS INCOME. AFTER MAKING ABOVE ADDITION INCOME ASSESSED AT RS.1,39,88,735/- IN FOLLOWING MA NNER; INCOME AS PER RETURN RS. 15,56,530/- ADD: 1. ADDITION U/S 68 OF THE I.T. ACT, 1961 RS.1,05, 00,000/- PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 5 2. INTEREST ON THE LOANS RS. 6,14,855/- 3. EXPENDITURE INCURRED FOR PROCURING LOANS RS. 5 ,25,000/- 4. ADDITION ON ACCOUNT OF RENTAL INCOME TREATED AS BUSINESS INCOME RS. 7,92,350 /- TOTAL ASSESSED INCOME RS.1,39,88,735/- 5. SIMILARLY FOR ASSESSMENT YEAR 2007-08, THE ASSES SEE DECLARED INCOME OF RS.27.72,380/- IN THE INCOME TAX RETURN F ILED ON 25.10.2007. THE CASE WAS SELECTED FOR SCRUTINY. S IMILAR ISSUE OF UNSECURED LOAN AT RS.1,25,00,000/- CAME UP BEFORE L D.A.O FROM THE SAME CASH CREDITORS AS WERE THERE IN A.Y. 2006- 07. THIS YEAR THE TOTAL SUM WAS RS.1,25,00,000/-. TAKING THE SAME VIEW AS THAT FOR ASSESSMENT YEAR 2006-07, LD.A.O MADE THE ADDITI ON FOR UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT AND THE I NTEREST ON THE LOANS AND EXPENDITURE INCURRED FOR ACCOMMODATION EN TRIES AT RS.1,25,00,000/-, RS.5,55,875/-, AND RS.6,25,000/- RESPECTIVELY THEREBY ASSESSING INCOME AT RS.1,64,53,255/- IN FOL LOWING MANNER; INCOME AS PER RETURN RS. 27,72,380/- ADD: 1. ADDITION U/S 68 OF THE I.T. ACT, 1961 RS.1,25, 00,000/- PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 6 2. INTEREST ON THE LOANS RS. 5,55,875/- 3. EXPENDITURE INCURRED FOR PROCURING LOANS RS. 6,25,000/- TOTAL ASSESSED INCOME RS.1,64,53,255/- 6. AGGRIEVED ASSESSEE PREFERRED APPEAL BEFORE THE L D.CIT(A) FOR ASSESSMENT YEAR 2006-07 AND 2007-08. LD.CIT(A) DEL ETED THE ADDITION RELATING TO UNEXPLAINED CASH CREDIT AND IN TEREST PAID THERE ON AND UNEXPLAINED EXPENDITURE ALONG WITH THE RELEV ANT GROUND RAISED BY THE ASSESSEE. HOWEVER THE ADDITION FOR D ISALLOWANCE OF DEDUCTION U/S 24 CLAIMED BY THE ASSESSEE ON THE REN TAL INCOME WAS SUSTAINED AT RS.7,92,350/-. 7. NOW BOTH THE REVENUE AND ASSESSEE ARE IN CROSS A PPEAL FOR ASSESSMENT YEAR 2006-07 AND REVENUE APPEAL FOR ASSE SSMENT YEAR 2007-08. 8. WE WILL FIRST TAKE UP REVENUES APPEALS I.T.A.NO .382/IND/2014 & I.T.A.NO. 383/IND/2014 RAISING FOLLOWING COMMON G ROUND FOR ASSESSMENT YEAR 2006-07 AND 2007-08 RESPECTIVELY. 1. DELETING THE ADDITION OF RS.1,05,00,000/- & RS. 1,25,00,000/- FOR A.Y. 2006-07 & 2007-08 RESPECTIVELY. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE IDENTITY, CREDITWORTHINESS AND GENUIN ENESS OF THE CREDITORS WAS NOT PROPERLY PROVEN BEFORE AO AND THEREFORE THE SAME NEEDED TO BE ADDED. PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 7 2. DELETING THE ADDITION OF RS.6,14,855/- AND RS.5, 55,875/- ON ACCOUNT OF INTEREST ON THESE LOANS. THAT ON THE FACTS & CI RCUMSTANCES OF THE CASE, AS THE CREDITORS WERE NOT PROPERLY PROVEN AND THERE FORE THE SAME NEEDED TO BE ADDED. 3. DELETING ADDITION ON ACCOUNT OF ESTIMATION OF EX PENDITURE INCURRED FOR PROCURING THE ABOVE MENTIONED LOANS OF RS.5,25,000/ - AND RS.6,25,000/- BY SIMPLY STATING THAT THE SAME WAS C ONSEQUENTIAL IN NATURE. 9. THE LD. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY A RGUED SUPPORTING THE ORDERS OF LD.A.O SUBMITTING THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE ALLEGED UNSECURED L OANS. 10. PER CONTRA LD. COUNSEL FOR THE ASSESSEE SUPPORT ED THE FINDING OF LD.CIT(A) AND ALSO SUBMITTED THAT ALL THE UNSECU RED LOANS ARE TAKEN THROUGH ACCOUNT PAYEE CHEQUE AND ARE REPAID D URING THE YEAR ITSELF. INTEREST HAS BEEN PAID AFTER DEDUCTION OF TAX. ALL THE FOUR COMPANIES GIVING UNSECURED LOANS TO THE ASSESSEE FO R BOTH THE ASSESSMENT YEARS 2006-07 AND 2007-08 ARE DULY ASSES SED TO TAX AND THEIR ASSESSMENT U/S 143(3) OF THE ACT HAS BEEN FRAMED AND THE COPIES OF THE SAME ARE AVAILABLE AT PAGE 66-73 OF THE PAPER BOOK. LD. COUNSEL ALSO SUBMITTED THAT UNSECURED LO ANS FROM THESE PARTIES WERE TAKEN IN THE PRECEDING YEARS ALSO BUT NO SUCH ADDITION HAVE BEEN MADE IN THE ASSESSMENT PROCEEDINGS COMPLE TED BY THE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 8 REVENUE AUTHORITIES. LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ISSUE RAISED IN THE GROUND RAISED BY THE R EVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF HON'BLE INDORE TRIBUNAL IN THE CASE OF ACIT V/S GIRISH KUMA R SHARDA (2014) 23 ITJ 701 (TRIB. INDORE) ORDER DATED 30.1.2 014 AS THE VERY SAME SET OF FACTS CAME UP FOR ADJUDICATION REGARDIN G UNSECURED LOAN TAKEN FROM SAME COMPANIES AND WERE HELD TO BE UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT. LD.CIT(A) IN THIS CASE DELETED THE ADDITION AND WHEN THE REVENUE CAME IN APPEAL BEFORE THE TRIBUNAL, THE ISSUE WAS DECIDED AGAINST THE REVENUE AND IN FA VOUR OF THE ASSESSEE HOLDING THAT ALL THE FOUR ALLEGED CASH CRE DITORS ARE GENUINE AND THE LOAN TAKEN FROM THESE CASH CREDITORS ARE DU LY EVIDENCED BY NECESSARY DOCUMENTS WHICH PROVES THE IDENTITY, GENU INENESS AND CREDITWORTHINESS. 11. THE LD. COUNSEL ALSO PLACED RELIANCE ON THE FOL LOWING JUDGMENTS; 1. MOD CREATIONS (P) LTD V/S ITO 354 ITR 282 (DELHI) 2. CIT V/S PEOPLES GEN. HOSPITAL LTD 356 ITR 65 (M.P) 3. CIT V/S KINETIC COP FINANCE 354 ITR V/S 296 (DELHI) 4. GANGESHWARI METAL (P) LTD INCOME-TAX ACT, 1961, 597 /2012 ORDER DATED 21.01.2013 (HIGH COURT OF DELHI) PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 9 12. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND GONE THROUGH THE JUDGMENTS CAR EFULLY. REVENUE IS AGGRIEVED WITH THE DELETION OF FOLLOWING ADDITIONS BY LD.CIT(A) MADE BY THE A.O FOR ASSESSMENT YEAR 2006- 07 AND 2007- 08 FOR THE ALLEGED UNEXPLAINED CASH CREDIT AND INTE REST PAID THERE ON AND UNDISCLOSED EXPENDITURE FOR PROCURING ACCOMM ODATION ENTRIES. S.NO. NAME OF THE COMPANY UNSECURED LOANS TAKEN INT EREST PAID 1 TRIMURTI FINVEST P.LTD 30,00,000/ - 1,65,040/ - 2 PURVI FINVEST LTD 5,00,000/ - 63,782/ - 3 K.K. PATEL FINANCE LTD 40,00,000/ - 3,08,740/ - 4 EAST WEST FINVEST INDIA LTD 27,00,000/ - 77,293/ - 1,02,00,000/ - 6,14,855/ - ADDITION OF RS.5,25,000/- MADE FOR ASSESSMENT YEAR 2006-07 FOR PROCURING LOANS. S.NO. NAME OF THE COMPANY UNSECURED LOANS TAKEN INTEREST PAID 1 TRIMURTI FINVEST P.LTD 35,00,000/ - 1,80,875/ - 2 P URVI FINVEST LTD 30,00,000/ - 1,25,250/ - 3 K.K. PATEL FINANCE LTD 30,00,000/ - 1,05,000/ - 4 EAST WEST FINVEST INDIA LTD 30 ,00,000/ - 1,44,750 / - 1,25,00,000/ - 5,55,875/ - PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 10 ADDITION OF RS.6,25,000/- MADE FOR ASSESSMENT YEAR 2007-08 FOR PROCURING LOANS. 13. FROM THE PERUSAL OF THE ASSESSMENT ORDER FOR AS SESSMENT YEAR 2006-07 AS WELL AS DETAILS ANNEXED IN THE PAPER BOO K WE FIND THAT THE UNSECURED LOANS TAKEN FROM THE FOUR COMPANIES I S IN TOTAL RS.1,02,00,000/- BUT THE ADDITION MADE BY THE A.O I S AT RS.1,05,00,000/- AND THIS PARTICULAR FIGURE OF RS.1 ,05,00,000/- IS CONSISTENTLY APPEARING IN ALL THE COMMUNICATIONS AS WELL AS APPELLATE ORDER AND THE GROUND OF APPEAL RAISED BY THE REVENUE. CONFIRMATION OF ACCOUNT SUBMITTED BY THE ASSESSEE R EVEALS THAT THE CORRECT FIGURE OF UNSECURED LOAN REFERRED FROM THE ABOVE FOUR PARTIES TOTALS RS.1,02,00,000/- AND NOT RS.1,05,00,000/-. 14. WE FIND THAT THE ABOVE ADDITIONS MADE BY THE LE ARNED ASSESSING OFFICER WERE DELETED BY THE LD.CIT(A) FOR BOTH ASSESSMENT YEARS 2006-07 & 2007-08 OBSERVING AS FOLLOWS; 5.GR. NO. 1 ST OF APPEAL IS AGAINST ADDITION OF UNSECURED LOANS O F RS.L,05,00,000/--& RS.L,25,00,000/- AND INTEREST TH EREON OF RS.6,14,855/- & RS.5,55,875/- FOR AY 2006-07 AND AY 2007-08 THE ADDITION HAS BEEN MADE BY AO ON THE BASIS OF A GENERAL OBSERVATION THAT SUCH CREDITORS HAVE BEEN FOUND TO BE PROVIDING ACCOMMODATION ENTRIES TO A LARGE NUMBER OF PERSONS. THE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 11 CONFIRMATION LETTER AND COPY OF RETURNS OF SUCH DEP OSITORS WAS FURNISHED BEFORE AO, BUT AO WAS OF THE VIEW THAT TH EY HAVE LOW INCOME & THUS THEY WERE NOT HAVING CREDITWORTHINESS TO PROVIDE SUCH UNSECURED LOAN. THE APPELLANT SUBMITTED THAT C ONFIRMATION FROM ALL DEPOSITORS WERE FILED ALONGWITH PAN NUMBER S. ALL THE AMOUNT WERE RECEIVED BY CHEQUES. 6. DURING APPELLATE PROCEEDINGS APPELLANT FILED COP Y OF CONFIRMATION LETTER OF DEPOSITORS, COPY OF THEIR AC KNOWLEDGEMENT OF INCOME TAX RETURNS, COPY OF BANK ACCOUNTS OF DEPOSI TORS AND EVEN ASSESSMENT ORDERS U/S 143(3) IN CASE OF ALL THE 4 D EPOSITOR COMPANIES, WHICH WERE FORWARDED TO AO FOR HIS COMM ENTS. THE AO HAS ONLY REFERRED TO THE DECISION IN CASE OF NAR MADA EXTRUSION P. LTD. (ITAT, INDORE) AND TO THE EXAMINATION OF MR . LUNKAD AS REGARDS THE MATERIAL FOUND IN SURVEY, WHO ACCORDING TO AO WAS EVADING APPEARANCE. AO COULD NOT FURNISH FINAL REMA ND REPORT DESPITE GIVING OPPORTUNITIES ON 10-12-2010, 08-01-2 013, 09-10- 2013, 31-10-2013, 23-12- 2013, 17-01-2014 AND 21-02 -2014. ACCORDING TO APPELLANT CASE OF NARMADA EXTRUSION P. LTD. IS NOT APPLICABLE TO THEIR CASE, AS THAT WAS REGARDING ADD ITION OF SHARE CAPITAL WHILE APPELLANT'S CASE IS THAT OF RECEIVING OF UNSECURED LOANS, WHEREIN IDENTITY OF ALL DEPOSITORS IS ESTABL ISHED, AS THEY ARE ASSESSED TO TAX AND EVEN ASSESSMENT MADE IS] S 143( 3) IN CASE OF DEPOSITORS IS ALSO FILED. THEY FURTHER SUBMITTED TH AT AO FRAMED ASSESSMENT ASSUMING THAT VARIOUS DEPOSITORS WERE OF LUNKED GROUP, BUT NONE OF THESE COMPANIES BELONG TO LUNKAD GROUP AS THEY ARE BELONGING TO DARAK GROUP. 7. I HAVE GONE THROUGH THE ARGUMENTS OF BOTH AO AS WELL AS THAT OF PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 12 APPELLANT. SINCE ALL THE DEPOSITORS HAVE CONFIRMED ABOUT GIVING SUCH DEPOSITS, THE AMOUNTS WERE GIVEN 'THROUGH ACCO UNT PAYEE CHEQUES, THE DEPOSITORS WERE ALL FILING RETURNS OF INCOME, PROOF OF WHICH IS FURNISHED AND EVEN BANK STATEMENTS OF DEPO SITORS WERE FURNISHED AND IN SUCH BANK ACCOUNTS OF DEPOSITORS, NO CASH DEPOSITS WERE SEEN. FURTHER THE REFERENCE OF AO TO SURVEY OF LUNKAD GROUP & TO THE TERM OF ACCOMMODATION ENTRY P ROVIDER DOES NOT HELP REVENUE'S CASE BECAUSE THAT SURVEY TOOK PL ACE IN 2006 AND AFTER CONSIDERING THE FINDINGS OF SURVEY THE HO N'BLE ITAT, INDORE IN CASE OF MIS NARMADA EXTRUSION P. LTD CAME TO CONCLUSION THAT VARIOUS CREDITS PROVIDED BY LUNKAD GROUP COULD BE CONSIDERED AS UNEXPLAINED ONLY IF NAME OF SUCH PARTY APPEARED IN THE CASH BOOK IMPOUNDED DURING SURVEY OF LUNKAD GROUP AND LU NKAD GROUP FAILED TO EXPLAIN SOURCE OF THE SAME. HOWEVER NAME OF APPELLANT DO NOT APPEAR IN CASH BOOK IMPOUNDED IN S URVEY OF LUNKAD GROUP REPRODUCED ON PAGE 9,10 AND 11 OF ASSE SSMENT ORDER AND THAT IS WHY AO DID NOT REFER TO ANY ADVER SE MATERIAL DIRECTLY IMPLICATING APPELLANT BUT MADE A BALD REMA RK WITHOUT ANY EVIDENCE. AO FAILED TO EXAMINE THE DEPOSITORS OR AP PELLANT AND FAILED TO ESTABLISH THAT SUCH UNSECURED LOAN TRANSA CTION WAS A PART OF PRE MEDITATED PLAN - A SMOKESCREEN - CONCEIVED A ND EXECUTED WITH THE CONNIVANCE OF THE ASSESSEE. IN THESE CIRC UMSTANCES THE APPELLANT HAS DISCHARGED THE INITIAL ONUS AS HELD I N CASES OF M/S KINETIC CAPITAL FINANCE LTD.(2013) 354 ITR 296 (DEL ) AND MOD CREATIONS (P) LTD (2013)354 ITR 282 (DEL). 8. IN THE EVENT THE REVENUE STILL HAD A DOUBT WITH REGARD TO GENUINENESS OF TRANSACTION OR AS REGARDS TO CREDITW ORTHINESS OF CREDITORS, IT WOULD HAVE TO DISCHARGE THE ONUS WHIC H HAS SHIFTED ON IT. IF REVENUE HAS ANY DOUBTS WITH REGARD TO CREDIT WORTHINESS OF DEPOSITORS, THE REVENUE COULD ALWAYS BRING IT TO TA X IN THE HANDS OF PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 13 CREDITORS AS HELD IN CASE OF LOVELY EXPORTS (P) LTD (2008) 216 CTR (SC) 195 AND MOD CREATIONS (P) LTD (2013) 354 ITR 2 82 (DEL). SINCE APPELLANT DISCHARGED INITIAL ONUS, THE ONUS SHIFTED ON REVENUE AND THERE WAS NO LEGAL OBLIGATION ON THE APPELLANT TO P RODUCE DIRECTORS OF CREDITORS BEFORE AO AND IF AO HAD ANY DOUBT ABOU T IDENTITY OF SHARE APPLICANTS DESPITE THEIR FILING INCOME TAX RE TURNS, HE COULD HAVE SUMMONED THEM AS HELD IN CASE OF VICTOR ELECTR ODES LTD (2010) 329 ITR 271 (DEL). WHERE ROI (RETURN OF INCO ME) WAS FILED BY CREDITORS OF APPELLANT AND WAS ACCEPTED BY AO OF THE CREDITORS EVEN U/S 143(3) OF LT. ACT. AND PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES, GENUINENESS OF TRANSACTION C ANNOT BE DOUBTED, AO HAS NOT CONDUCTED ANY ENQUIRY INTO THE SAME OR HAS NO MATERIAL IN HIS POSSESSION TO SHOW THOSE PARTICU LARS ARE FALSE AND CANNOT BE ACTED UPON, THEN NO ADDITION CAN BE M ADE IN HANDS OF APPELLANT VI] S 68 AS HELD IN CASE OF GANGEHWARI METAL P. LTD (2013) 214 TAXMAN 423 (DEL). IN THIS CASE IT WAS NO TED BY THE HON'BLE JUDGES THAT AO SAT WITH FOLDED HANDS TILL T HE APPELLANT EXHAUSTED ALL THE EVIDENCE OR MATERIAL IN HIS POSSE SSION AND THEN CAME FORWARD TO MERELY REJECT THE SAME ON .THE PRES UMPTIONS. IN SUCH AN EVENTUALITY NO ADDITION CAN BE MADE U/ S 68 OF LT. ACT. 9. ON THE BASIS OF FACTS OF THE CASE AND RELYING ON VARIOUS CASE LAWS DISCUSSED ABOVE THE ADDITION OF UNSECURED LOAN S RS.1 ,05,00,000 1- & RS.1,25,00,0001- AND INTEREST ON SU CH LOANS OF RS.6,14,855/- & RS.5,55,875/- IN AY 2006-07 & AY 20 07-08 IS DELETED. GR. NO. 1&2 OF APPEAL ARE ALLOWED. 15. IT IS ALSO OBSERVED THAT LD. COUNSEL FOR THE AS SESSEE PLACED HEAVY RELIANCE ON THE DECISION OF THE INDORE TRIBUN AL IN THE CASE OF ACIT V/S GIRISH KUMAR SHARDA ( SUPRA ) WHEREIN SIMILAR ISSUE OF PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 14 UNEXPLAINED CASH CREDIT FROM THE SAME SET OF FOUR C OMPANIES CAME UP FOR ADJUDICATION AND THE TRIBUNAL DISMISSED THE REVENUES APPEAL OBSERVING AS FOLLOWS; 9. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECO RDS PERUSED. FROM THE RECORD, WE FOUND THAT THE ASSESSEE HAD BORROWED LOA NS FROM THE FOLLOWING PARTIES. 9. S.NO. NAME OF THE PARTIES & ADDRESS PAN NO 1 M/S. K.K. PATEL FIANANCE LTD, 114, SARLIT TOWER, Y.N. ROAD, INDORE AABCK4282G 2 M/S PURVI FINVEST LTD, G-1 RUDRASH, 127 BAIKUNTHDHAM COLONY, INDORE (M.P) AABCCP6564C 3 M/S TRIMURTI FINVEST LTD, 9, BHOJ NAGAR, ANNAPURNA ROAD, INDORE AAACT6383N 4 M/S. EAST WEST FINVEST LTD, G-1 RUDRASH, 127 BAIKUNTHDHAM COLONY, INDORE (M.P) AAACE6834D 10. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER ASKED THE ASSESSEE TO ESTABLISH IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THESE CREDITORS. IT WAS SUBMITT ED THAT MIS. K.K. 'PATEL FINANCE LIMITED, INDORE, IS BEING REGUL ARLY ASSESSED TO TAX AND ENGAGED IN THE FINANCE ACTIVITIES AND TH EY HAVE GIVEN THE DEPOSITS ON INTEREST BASIS TO OTHER ALSO. AS PE R BALANCE SHEET FILED WITH THE DEPARTMENT THEY HAVE SHARE CAPITAL T O THE TUNE OF RS.89,32,500/AND RESERVE AND SURPLUS OF RS. 6,14,53 ,923/- TOTAL AMOUNTING TO RS.1,50,76,423/-. M/S. EAST WEST FINVEST INDIA LIMITED, INDORE, IS BEING REGULARLY ASSESSED TO TAX AND FILED CONFIRMATION OF ACCOUNT ALONG WITH THE BANK S TATEMENT IN WHICH . TRANSACTION OF ASSESSEE IS REFLECTED, THE S AID COMPANY ALSO ENGAGED IN THE BUSINESS OF FINANCE ACTIVITIES AND THEY HAVE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 15 GIVEN THE DEPOSITS AS AND WHEN MATURITY OF DEPOSITS RECEIVED FROM OTHERS. M/ S. PURVI FINVEST LIMITED, INDORE, I S BEING REGULAR! ASSESSED TO TAX. AND FILED CONFIRMATION OF ACCOUNT ALONG WITH THE BANK STATEMENT IN WHICH TRANSACTION OF ASSESSEE IS REFLECTED. THE ADDRESS OF THE CREDITOR AND M/ S. EAST WEST FIN VEST INDIA LIMITED IS COMMON AND IT MAY BE POSSIBLE THAT THE' DIRECTORS ARE COMMON AND HENCE SIGNED BY ONE PERSON. THE S-AL COM PANY ALSO ENGAGED IN THE BUSINESS OF FINANCE ACTIVITIES AND T HEY HAVE GIVEN DEPOSITS AS AND WHEN MATURITY OF DEPOSITS REC EIVED FROM OTHERS. 11.FROM THE RECORD, WE ALSO FOUND THAT THE LD. ASSE SSING OFFICER ASKED TO EXPLAIN THE GENUINENESS OF THE CREDITS AS WELL AS IDENTITY AND CREDITWORTHINESS Q CREDITORS. IN RESPO NSE, THE ASSESSEE FILED CONFIRMATION FROM THE CREDITORS. 12.HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WIT H THE ASSESSEE'S CONTENTION AND ADDED THE AMOUNT U/S 68 OF THE INCOM E-TAX ACT, 1961. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION BY FOLLOWING HIS ORDER IN ANOTHER ASSESSEE, WHEREIN SIMILAR ADDITIONS WERE DELETED BY OBSERVING THAT THESE ADDI TIONS WERE NOT WARRANTED IN THE HANDS OF THE ASSESSEE BUT IN T HE HANDS OF THE LENDERS. DURING THE COURSE OF HEARING, THE LD. CIT DR DREW OUR ATTENTION TO THE ORDER OF THE TRIBUNAL, IN THE CASE OF ASSTT. CIT VS. NARMADA EXTRUSION LTD. (2012) 19 ITJ 202 (TRIB. -INDORE), ORDER DATED 30.12.2011, WHEREIN THE TRIBUNAL HAVE O BSERVED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING T HE ADDITION ON THE GROUND THAT THE ADDITION IS TO BE MADE IN THE H ANDS OF THE PERSON WHO HAS GIVEN THE LOAN AND NOT IN THE HANDS OF THE BENEFICIARIES. IT IS CLEAR FROM THE ORDER OF THE TR IBUNAL IN THAT ORDER OF THE LD. CIT(A) WAS REVERSED ON THE ISSUE O F TAXABILITY OF PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 16 THE IMPUGNED AMOUNT IN THE HANDS OF CREDITORS OR AS SESSEE WHO WAS BENEFICIARIES. THE TRIBUNAL HAVE HELD THAT AMOU NT IS REQUIRED TO BE ADDED IN THE HANDS OF THE BENEFICIAR IES, THUS, REASONING GIVEN BY THE LD. CIT(A) WAS NOT ACCEPTED. HOWEVER, IN THIS ORDER OF NARMADA EXTRUSIONS (SUPRA), THE TRIBU NAL HAVE ALSO DEALT WITH THE MERIT OF THE ADDITION AND FOUND THAT ADDITION TO BE RESTRICTED TO THE EXTENT OF ENTRIES FOUND IN THE MA TERIAL COLLECTED DURING THE COURSE OF SURVEY AT LUNKAD GROUP AND NOT TO THE EXTENT OF ENTIRE AMOUNT OF LOAN SO TAKEN FROM LUNKA D GROUP. 13.FROM THE RECORD, WE FOUND THAT ASSESSING OFFICER HAS MADE ADDITION IN RESPECT OF THE LOANS WHICH WERE TAKEN A ND EVEN REPAID BY THE ASSESSEE. WHILE MAKING THE ADDITION, FOLLOWING WAS THE PRECISE OBSERVATIONS OF THE ASSESSING OFFIC ER :-. 'THE ASSESSEE'S BALANCE SHEET REFLECTS CREDITS AMO UNTING TO RS. 2,70,21,800/-. HE ASKED TO EXPLAIN THE GENUINENESS OF THE CREDITS AS WELL AS IDENTITY AND CREDITWORTHINESS OF THE CREDITOR, IN RESPONSE, THE ASSESSEE HAS FILED CONFIRMATIONS F ROM THE SAID CREDITORS, IN RESPONSE, THE ASSESSEE HAS FILED CONF IRMATIONS FROM THE SAID CREDITORS, COPIES OF FINAL ACCOUNTS HAVE B EEN FILED IN RESPECT OF ONE CREDITOR AND COPY OF ACKNOWLEDGEMENT OF RETURN IN RESPECT OF ONE PERSON. THE LENDER'S NAMES INCLUDE S OME OF THE PERSONS WHO ARE CONSIDERED TO BE REGULAR NAME LENDE RS'. THE NAMES IN QUESTION ALONGWITH THE AMOUNT SHOWN AS REC EIVED FROM THEM ARE REFLECTED BELOW :- 1 M/S. K.K. PATEL FIANANCE LTD,INDORE RS.10,00,000/ - 2 M/S. EAST WEST FINVEST LTD, INDORE RS.35,00,000/- 3 M/S PURVI FINVEST LTD, INDORE RS.29,00,000/- 4 MS/ TRIMURTI FINVEST LTD, INDORE RS.61,50,000/- TOTAL RS.1,35,50,000/- PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 17 THE SAME WORDINGS ARE GIVEN IN THE SUBSEQUENT ASSES SMENT YEARS FOR MAKING THE ADDITION OF CASH CREDIT.' 14.THE LD, CITCA) HAS DELETED THE ADDITION BY OBSER VING THAT ADDITION IS WARRANTED IN THE HANDS OF LENDERS AND N OT IN THE HANDS OF THE ASSESSEE, OTHERWISE IT WILL AMOUNT TO DOUBLE ADDITION. ON MERIT OF THE ADDITION SO MADE B THE AS SESSING OFFICER, WE DO NOT FIND ANY SUBSTANCE IN SO FAR AS THE ASSESSEE HAS DISCHARGED THE ONUS CASTED UPON A COST UPON HIM BY FILING A CONFIRMATION CERTIFICATE OF THE CREDITORS DULY SIGN ED AND SPECIFYING FULL NAME, ADDRESS AND PAN OF THE CREDIT ORS. IN ADDITION TO THE CONFIRMATION CERTIFICATE THE ASSESS EE HAS ALSO FILED THE ACKNOWLEDGEMENT FOR FILING OF RETURN OF I NCOME BY THE CREDITOR ALONG WITH THEIR COMPUTATION OF INCOME, AU DITED ACCOUNTS, BANK STATEMENTS AND COPIES OF ACCOUNT. 15.AFTER PERUSING BANK STATEMENT OF THE CREDITORS A S PLACED ON RECORD, WE FIND THAT NO CASH WAS DEPOSITED IN THE B ANK PRIOR TO ISSUANCE OF CHEQUE MOREOVER THERE IS NO CASH TRANSA CTION IN THE BANK STATEMENT AND WE FOUND THAT ALL THE AMOUNTS AR E RECEIVED AND PAID THROUGH ACCOUNT PAYEE CHEQUES. 16.AS PER MATERIAL PLACED ON RECORD, WE FOUND THAT THE LD. ASSESSING OFFICER HAS NOT MADE ANY EFFORTS BY CALLI NG INFORMATION VIS 133(6) OR BY ISSUING SUMMON VIS 131 TO ANY OF THE CREDITORS WHICH IS EVIDENT FROM THE, ASSESSMENT ORDER ITSELF. MOREOVER, IT IS ALSO CLEAR FROM THE ASSESSMENT ORDE R THAT THE ASSESSING OFFICER HAD NEVER ASKED THE ASSESSEE TO P RODUCE THE CREDITORS. PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 18 17.AS PER REQUIREMENT OF SECTION 68 THE SUM CREDI TED IN THE BOOKS OF ACCOUNTS CAN BE CONSIDERED TO BE THE INCOME OF T HE ASSESSEE IN A CASE WHERE THE ASSESSEE DOES NOT OFFER ANY EXP LANATION OR THE EXPLANATION OFFERED BY HIM, IN THE OPINION OF A SSESSING OFFICER IS NOT SATISFACTORY. THE EXPLANATION OF THE ASSESSEE IN THE PRESENT CASE IS THAT ALL THESE CREDITORS ARE INCOME TAX ASSESSE ES AND THEIR PANS HAVE GIVEN ALONGWITH THEIR COPY OF B ANK ACCOUNT AS WELL AS PRECEDING YEARS. BY FILING THESE EVIDENC ES, IT CAN BE SAID THAT THE ASSESSEE HAD IS CHARGED THE INITIAL B URDEN LAID UPON HIM UNDER SECTION 68. WHEN THE PARTICULARS REG ARDING INCOME TAX ASSESSMENT AND BANK ACCOUNT, AUDITED BAL ANCE SHEET DULY INDICATING ADVANCING OF LOAN TO THE ASSE SSEE, HAVE BEEN FILED THEN INITIAL BURDEN HAS TO BE HELD TO BE DISCHARGED AND THEN THE BURDEN SHIFTS ON THE REVENUE TO SHOW T HAT WHAT IS STATED OR EXPLAINED BY THE ASSESSEE IS NOT SATISFAC TORY. NO MATERIAL WHATSOEVER, HAS BEEN BROUGHT ON RECORD BY THE LD. ASSESSING OFFICER TO SHOW THAT WHAT WAS EXPLAINED B Y THE ASSESSEE, WAS NOT A CORRECT STATE OF AFFAIRS. IF AN Y SUM IS FOUND CREDITED IN THE ACCOUNTS OF THE CREDITORS. THEN THE CREDITORS MAY BE EXAMINED SO AS TO EXPLAIN THE CREDIT SO FAR AS T HE SOURCE OF DEPOSIT IN THE ACCOUNT OF THE ASSESSEE IS CONCERNED . THE ASSESSEE CAN BE CONSIDERED TO HAVE EXPLAINED BY BRI NGING THE MATERIAL ON RECORD IN THE SHAPE OF CONFIRMATIONS, B ANK ACCOUNT AND INCOME TAX NUMBERS OF THAT PERSON. THUS THE ASS ESSEE HAD FILED AMPLE EVIDENCE TO DISCHARGE THE BURDEN CAST U PON HIM AND THE LD. ASSESSING OFFICER HAS NOT BROUGHT ANY MATER IAL ON RECORD TO SHOW THAT THE EXPLANATION FILED BY THE ASSESSEE, WAS IN ANY MANNER, UNSATISFACTORY CONSEQUENT THERETO THE EVIDE NCE FILED B THE ASSESSEE REMAIN UNREBUTTED, 18.THERE IS NO DISPUTE TO THE FACT THAT THE LOAN TA KEN FROM THESE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 19 CREDITORS WERE WERE DULY REPAID BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES IN THE ASSESSMENT YEARS 200.5-06 TO 2 007-08 I.E, MUCH PRIOR TO THE DATE OF SEARCH CARRIED BY THE DEP ARTMENT WHICH IS EVIDENT FROM COPIES OF ACCOUNT OF THESE CR EDITORS. 19.AFTER PERSUING THE BALANCE SHEET OF VARIOUS LEND ER COMPANIES AS PER THE AU TED ACOOUNTS, WE FOUND THAT ALL THE PART IES FROM WHOM LOAN WAS TAKEN WERE HAVING SUBSTANTIAL FUNDS AVAILA BLE WITH THEM TO ADVANCE THE MONEY. POSITION OF SHARE CAPITA L, RESERVES AND SURPLUS CASH AND BALANCE, AS PER THE AUDITED BA LANCE, AS PER THE AUDITED BALANCE SHEET WITH VARIOUS COMPANIE S WERE AS UNDER : NAME OF THE CREDITOR PAIDUP SHARE CAPITAL AS ON 31 ST MARCH RESERVE & SURPLUS AS ON 31 ST MARCH CASH & BANK BALANCE AS ON 31 ST MARCH EAST WEST FINVEST INDIA LTD 3,67,11,000/- 86,424/- 21,31,898/- PURVI FINVEST LTD 4,47,67,000/- 63,229/- 20,62,494/- TRIMURTI FINVEST PVT. LTD 3,60,00,000/- 3,08,99,041/- 21,23,021/- K.K. PATEL FINANCE LTD 89,32,500/- 61,43,922/- 26,73,752/- 20.MERELY ON THE BASIS OF RETURNED INCOME, THE ASSE SSING OFFICER JUMPED TO THE CONCLUSION THAT THESE LENDERS WERE NO T HAVING SUFFICIENT FUNDS TO ADVANCE THE MONEY TO THE ASSESS EE. THE LD. ASSESSING OFFICER WITHOUT GOING THROUGH THE AUDITED ACCOUNTS UNNECESSARILY GONE ON THE FACT THAT THESE CREDITORS ARE NOT HAVING SUFFICIENT INCOME TO ADVANCE THE MONEY. IT I S SETTLED LAW THAT THE FINANCIAL WORTH OF A COMPANY COULD NOT BE JUDGED WITH ITS INCOME BUT ONE HAS TO SEE THAT HOW MANY FUNDS I S AVAILABLE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 20 WITH IT IN THE BANK ACCOUNT AT THE TIME OF ADVANCIN G LOAN. 21.IT WAS ALSO CONTENTION OF LD. AUTHORIZED REPRESE NTATIVE THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION BY RELY ING ON VARIOUS DECISIONS GI YEN IN HIS ORDER IN ADDITION TO THAT R ELIANCE WAS ALSO PLACED ON THE FOLLOWING DECISION :- (A) CIT V. ORISSA CORPORATION P. LTD., (1986) 159I TR 78 (SC) (1986) 52 CTR 138 IN THE INSTANT CASE, THE HON'BLE APEX COURT HELD AS UNDER : 'IN THIS CASE, THE ASSESSEE HAD GI VEN THE NAMES AND ADDRESS OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME TAX ASSESSEES. THEIR INDEX NUMBERS WERE INCOME TAX ASSESSEES. THEI R INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENU E DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CR EDITORS TO FIND OUT WHETHER THEY WERE CREDIT WORTHY OR WERE SUCH WH O COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTA NCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREM ISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE H AS DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COUL D NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PRESERVE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SAME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES.' 22.NOW COMING TO THE DECISION OF ARMADA EXTRUSIONS LIMITED IN IT(SS).A. NOS. 3271JNDL2011 ORDER DATED 30.12.2011, AS CITED BY THE LD. CIT DR, WE FOUND THAT IN THIS CASE ALSO ON MERIT IT WAS HELD THAT THE ADDITION SHOULD BE RESTRICTED WITH RE FERENCE TO THE INCRIMINATING DOCUMENTS FOUND DURING COURSE OF SURV EY LA THE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 21 CASE OF LUNKAD GROUP FROM 1.4.2006 TO 1.5.2006. IT WAS ALSO OBSERVED AT PAGE 53 OF THE SAID ORDER THAT THE ADDI TION SHOULD BE MADE WITH REFERENCE TO THE AMOUNT OF CASH FOUND TO BE GIVEN BY THE ASSESSEE TO THE LUNKAD GROUP AS PER INCRIMIN ATING DOCUMENTS SO FOUND AT LUNKAD GROUP DURING SURVEY AF TER GIVING OPPORTUNITY TO THE ASSESSEE FOR CROSS EXAMINATION. MERELY PRESUMPTION WITHOUT ANY MATERIAL ON RECORD TO THE E FFECT THAT EVEN IN RESPECT OF EARLIER YEARS, THE ASSESSEE MIGH T HAVE GIVEN CASH TO THE LUNKAD GROUP FOR GETTING UNSECURED LOAN , IS NOT JUSTIFIED. IN THE INSTANT CASE BEFORE US, THE ASSES SING OFFICER COULD NOT BRING OUT ANY MATERIAL TO SUGGEST THAT AN Y INCRIMINATING ENTRY WAS FOUND IN THE DOCUMENTS SO C OLLECTED BY THE DEPARTMENT FROM LUNKAD GROUP WHICH PERTAINS TO THE PERIOD 1.4.2006 TO 1.5.2006. IT IS NOT IN DISPUTE THAT ALL THE LOAN TRANSACTIONS WERE THROUGH ACCOUNT PAYEE CHEQUES, CO NFIRMATIONS WERE GIVEN, CREDITWORTHINESS WERE ALSO PROVED FROM THE BALANCE SHEET. FURTHERMORE, ALL THE LOANS WERE ALSO REPAID BY CHEQUES, WE, THEREFORE, DO NOT FIND ANY MERIT IN THE ACTION OF ASSESSING OFFICER FOR MAKING ANY ADDITION IN RESPECT OF THESE LOAN TRANSACTIONS. 23.AS THE ADDITION MADE U!S 68 IS HELD TO BE NOT JU STIFIED, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR D ELETING THE DISALLOWANCE OF INTEREST, WHICH WAS BASED ON THE AD DITION OF CASH CREDIT U IS 68. 24.AS WE HAVE ALREADY DEALT WITH THE ISSUE ON MERIT WE ARE NOT GOING IN THE VALIDITY OF THE ASSESSMENT FRAMED U/S 153A READ WITH SECTION 143(3) FOR MAKING ADDITION, WHERE NO I NCRIMINATING MATERIAL RELATING TO ASSESSMENT YEARS IN QUESTION W ERE FOUND AND SEIZED FROM THE PREMISES OF THE ASSESSEE. PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 22 16. EXAMINING THE FACT OF INSTANT APPEAL FOR ASSESS MENT YEAR 2006-07 AND 2007-08 IN THE LIGHT OF THE ABOVE JUDGM ENT OF THE CO-ORDINATE BENCH IN THE CASE OF ACIT V/S SHRI GIRI SH KUMAR SHARDA ( SUPRA ), WE FIND THAT THE SAME SET OF COMPANIES I.E. M/S. K.K. PATEL FINANCE LIMITED, INDORE, M/S. EAST WEST FINVEST INDIA LIMITED, INDORE, M/S. PURVI FINVEST L TD, INDORE AND M/S. TRIMURTI FINVEST LTD, INDORE ARE IN QUESTI ON BEFORE THE TRIBUNAL IN THE INSTANT TWO APPEALS BEFORE US. IT HAS BEEN CLEARLY HELD BY THE HON'BLE TRIBUNAL THAT ALL THE A LLEGED FOUR COMPANIES ARE GENUINE AND UNSECURED LOANS FROM THES E COMPANIES CANNOT BE HELD TO BE UNEXPLAINED CASH CRE DIT U/S 68 OF THE ACT. EVEN THE LINKING OF THE ASSESSEES CASE TO THE LUNKARD GROUP WAS THERE IN THE CASE OF ACIT V/S GIR ISH KUMAR SHARDA ( SUPRA ) AND DETAILED FINDING HAS BEEN GIVEN BY THE TRIBUNAL IN ITS ORDER DATED 30.1.2014. IT IS A LSO EVIDENT FROM THE PERUSAL OF THE RECORD THAT ALL THE FOUR CO MPANIES ARE REGULARLY ASSESSED TO TAX AND THEIR ASSESSMENT U/S 143(3) OF THE ACT HAVE BEEN FRAMED FOR ASSESSMENT YEAR 2006-0 7 AND COPIES OF THE SAME ARE PLACED AT PAGE 66-73 OF THE PAPER BOOK. THEY CARRY REGULAR BUSINESS ACTIVITIES AND HAVE SUF FICIENT PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 23 FUNDS FOR GIVING ON CREDIT TOWARDS INTEREST. IDENTI TY OF FOUR COMPANIES ARE WELL ESTABLISHED. GENUINENESS IS DULY PROVED BY THE TRANSACTIONS WHICH ARE MADE THROUGH ACCOUNT PAY EE CHEQUE. ALL NECESSARY DETAILS INCLUDING BANK STATE MENT/ FINANCIAL STATEMENTS, CONFIRMATION OF ACCOUNT, PAN DETAIL HAVE BEEN FILED WITH THESE FOUR COMPANIES AND ARE PLACED ON RECORD AT ALL PROCEEDINGS ARE SUFFICIENT TO PROVE THE CRED ITWORTHINESS. THE ALLEGED UNSECURED LOAN OF RS.1,02,00,000/- AND RS.1,25,00,000/- WERE ACCEPTED DURING THE YEAR AND WERE REPAID ALSO DURING THE YEAR WHICH SUPPORTS THE CONT ENTION OF THE ASSESSEE THAT THE ALLEGED LOANS WERE TAKEN FOR BUSINESS NEEDS AND WERE REPAID BACK WHEN THE FUNDS WERE AVAI LABLE. 17. WE THEREFORE IN THE GIVEN FACTS AND CIRCUMSTANC ES OF THE CASE AND RESPECTFULLY FOLLOWING THE DECISION OF HON 'BLE TRIBUNAL IN THE CASE OF ACIT V/S GIRISH KUMAR SHARDA ( SUPRA ) AS WELL AS DETAILED FINDING OF FACT BY LD.CIT(A) WHICH IS U NCONVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE AS NO MATERIAL EVIDENCE HAS BEEN PLACED TO PROVE ANYTHING CONTRARY. THEREFO RE WE FIND NO INFIRMITY IN THE FINDING OF LD.CIT(A) DELETING T HE ADDITION OF PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 24 RS.1,02,00,000/- AND RS.1,25,00,000/- FOR ALLEGED UNSECURED LOANS AND ALSO DELETION OF DISALLOWANCE OF INTERES T ON SUCH LOANS AT RS.6,14,855/- ANDRS.5,55,815/- AND ALSO DE LETING THE ADDITION FOR UNDISCLOSED EXPENDITURE OF RS.5,25,000 /- AND RS.6,25,000/-. WE ACCORDINGLY DISMISS REVENUES GR OUND NO.1, 2 &3 FOR ASSESSMENT YEAR 2006-07 AND 2007-08 RESPECTIVELY. 18. GROUND NO.4 BEING GENERAL IN NATURE NEEDS NO ADJUDICATION. 19. IN THE RESULT APPEAL OF THE REVENUE FOR ASSESSM ENT YEAR 2006-07 AND 2007-08 STANDS DISMISSED. 20. NOW WE TAKE UP ASSESSEES CASE FOR ASSESSMENT Y EAR 2006-07 BEING I.T.A.NO.392/IND/2014 RAISING FOLLOWI NG GROUNDS; 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED IN TREATING THE RENTAL INCOME EARNED FROM HOU SE PROPERTY FOR RS.26,87,635/- AS BUSINESS INCOME AND THEREBY CONFI RMING AN ADDITION OF RS.7,92,350/- CLAIMED U/S 24 AS A DEDUCTION. 21. THE SOLE GRIEVANCE RAISED IS AGAINST THE ORDER OF LD.CIT(A) DENYING THE BENEFIT OF DEDUCTION U/S 24 OF THE ACT AT PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 25 RS.7,92,350/- AGAINST THE INCOME EARNED FROM HOUSE PROPERTY AT RS.26,87,635/-. BRIEF FACTS RELEVANT TO THIS IS SUE ARE THAT THE ASSESSEE IS ENGAGED IN THE REAL ESTATE BUSINESS . SOME IMMOVEABLE PROPERTY WHICH REMAINS UNSOLD ARE PART O F THE CLOSING STOCK. AS THESE PROPERTIES COULD NOT BE SO LD THE ASSESSEE LEASED THEM FOR EARNING RENTAL INCOME TO V ARIOUS CONSULTANTS. THE RENTAL INCOME RECEIVED AT RS.26,87 ,635/-HAS BEEN SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERT Y AND DEDUCTION U/S 24 OF THE ACT @30% OF THE RENT RECEIV ED WAS CLAIMED AT RS.7,92,350/-. LD.A.O TOOK A VIEW THAT THE MAIN ACTIVITY OF THE ASSESSEE IS OF REAL ESTATE BUSINESS AND LEASED OUT PROPERTIES WERE COMMERCIAL COMPLEX, THEREFORE T HE ALLEGED RECEIPT OF RS.26,87,635/- IS A BUSINESS RECEIPT AND NO DEDUCTION IS ALLOWABLE U/S 24 OF THE ACT. APPEAL F ILED BY THE ASSESSEE BEFORE THE LD.CIT(A) FIND NO FAVOUR TO THE ASSESSEE. 22. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUN AL. 23. LD. COUNSEL FOR THE ASSESSEE HAS MADE FOLLOWING WRITTEN SUBMISSIONS IN SUPPORT OF HIS CONTENTION THAT THE R ENTAL INCOME FROM THE SAID UNSOLD IMMOVEABLE PROPERTY IS BEING REGULARLY SHOWN UNDER THE HEAD INCOME FROM HOUSE PR OPERTY PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 26 AND DEDUCTION U/S 24 OF THE ACT HAVE BEEN CLAIMED CONSISTENTLY. IN THE SUBSEQUENT YEARS ALSO THIS CL AIM HAS BEEN ALLOWED BY THE REVENUE AUTHORITIES. 1. IN THE APPELLANTS CASE FOR THE SAID AY APPELLAN T WAS ENGAGED IN THE BUSINESS OF REAL ESTATE. 2. THAT APPELLANT HAD SHOWN RENTAL INCOME OF RS.26, 87,635/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND CLAIMED STANDAR D DEDUCTION OF 30% U/S 24 OF INCOME TAX ACT, 1961 AMOUNTING TO RS. 7,92,350/- WHILE OFFERING THE RENTAL INCOME FOR INCOME TAX. 3. THAT LD.AO HAD ALLEGED THAT THE APPELLANT HAS WR ONGLY CONSIDERED THE RENTAL INCOME AS INCOME FROM HOUSE PROPERTY INSTEAD THE SAME SHOULD BE OFFERED TO TAX UNDER THE HEAD INCOME FROM BUSINESS SINCE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF REAL ESTATE DURING T HE SAID AY. 4. THAT IT IS PERTINENT TO NOTE HERE THAT ASSESSEE HAS SUBMITTED BEFORE LD.AO THAT LD.CIT (A) THAT AS A MATTER OF FACT THE ASSESSE CLAIMED THAT THE RENTED PORTION OF THE BUILDING BUILT BY HIM WAS INCLUDED IN THE CLOSING STOCK. SINCE THE SAME WAS NOT SOLD OUT, IT WAS RENTED OUT TO THE VARIOUS CONCERNS THEREFORE, THE INCOME WAS RIGHTLY SHOWN UNDER THE HEAD INCOME FROM HOUSE PROPERTY. 5. THAT LD.AO AND THEREAFTER LD.CIT(A) BOTH HAVE DI SALLOWED THE CLAIM OF APPELLANT IN THIS PARTICULAR ASSESSMENT YEAR BY CIT ING THE REASON THAT THE MAIN BUSINESS ACTIVITY OF THE ASSESSEE WAS TO L EASE OUT LAND, COMMERCIAL COMPLEX ETC AND THEREFORE THE RENTAL INC OME WOULD BE CHARGEABLE UNDER THE HEAD INCOME FROM BUSINESS AND NOT INCOME FROM HOUSE PROPERTY. 6. THAT IT IS PERTINENT TO SUBMIT BEFORE THIS HON'B LE BENCH THAT THE SIMILAR ISSUE WAS RAISED BY LD.AO WHILE DOING ASSES SMENT FOR AY 2005- 06 I.E TREATING RENTAL INCOME AS INCOME FROM BUSINE SS INSTEAD OF INCOME FROM HOUSE PROPERTY AND DISALLOWED THE STANDARD DED UCTION OF 30% U/S PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 27 24 OF INCOME TAX ACT, 1961. HOWEVER, LD.CIT(A) UPO N APPEAL OF APPELLANT AGAINST THE IMPUGNED ORDER OF LD.AO HAS A LLOWED THE APPEAL IN FAVOUR OF THE APPELLANT. ALSO, IT IS IMPORTANT TO NOTE HERE THAT DEPARTMENT HAS NOT APPEALED FURTHER IN THIS CASE AG AINST THE ORDER OF LD. CIT(A). 7. THAT WE WISH TO SUBMIT BEFORE THIS BENCH THAT EV EN IN A Y 2007-08 DEPARTMENT HAS ALLOWED THE STANDARD DEDUCTION OF 30 % ON RENTAL INCOME AND HAS NOT RAISED THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 8. LD. COUNSEL FOR THE ASSESEE RELIED ON FOLLOWING JUDGMENTS; I) EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LT D. V(1961) 42 ITR 49 (S.C) II) AZIMGANJ ESTATE PVT. LTD VS CIT (2013) 352 ITR 82(CAL) III) NEW DELHI HOTELS LTD. V(2014) 360 ITR 187 (DEL ) 24 PER CONTRA LD. DEPARTMENTAL REPRESENTATIVE VEHEM ENTLY ARGUED AND SUPPORTING THE ORDERS OF BOTH THE LOWER AUTHORITIES. 25. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US. THE SOLE GRIEVANCE OF THE ASSESS EE RELATES TO THE ELIGIBILITY OF THE DEDUCTION U/S 24 OF THE ACT @30% FROM RENTAL INCOME FROM HOUSE PROPERTY. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE AND SOME PART OF THE CONSTRUCTED AREA WHICH REMAIN UNSOLD WERE BEING RENTED OUT. THE RENTED IMMOVEABLE PROPERTIES ARE INCLUDED IN THE CLOSING S TOCK OF THE PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 28 COMPANY. NOW WHETHER THE RENTAL INCOME RECEIVED FR OM SUCH IMMOVABLE PROPERTIES WHICH ARE PART OF THE BUSINESS STOCK ARE TO BE TAKEN AS BUSINESS INCOME OR FROM HOUSE PROPER TY. THE ABOVE QUESTION NEEDS TO BE ADJUDICATED IN THE LIGHT OF JUDICIAL PRONOUNCEMENTS OF HON'BLE APEX COURT IN THE CASE OF EAST INDIA HOUSING AND LAND DEVELOPMENT TRUST LTD ( SUPRA ) WHEREIN HON'BLE APEX COURT HAS CATEGORICALLY HELD T HAT THE INCOME DERIVED BY THE COMPANY FROM SHOPS AND STALLS WAS INCOME RECEIVED FROM HOUSE PROPERTY AND FELL UNDER THE SPECIFIC HEAD DESCRIBED IN SECTION 9. THE CHARACTE R OF THAT INCOME WAS NOT ALTERED BECAUSE IT WAS RECEIVED BY T HE COMPANY FORMED WITH THE OBJECT OF DEVELOPING AND SE TTING UP MARKETS. 26. THE HON'BLE HIGH COURT OF CALCUTTA IN THE CASE OF AZIMGANJ ESTATE PVT. LTD VS CIT HELD THAT IN THE C ASE OF PROPERTY BUILDER AND DEVELOPER ASSESSEE-RENTAL INCO ME FROM UNSOLD FLATS ARE TO BE TAKEN AS INCOME FROM HOUSE P ROPERTY. 27. HON'BLE HIGH COURT OF DELHI IN THE CASE OF NEW DELHI HOTELS LTD HAS ALSO HELD THAT IN CASE OF PROPERTY BUILDER AND DEVELOPER ASSESSEE RENTAL INCOME FROM UNSOLD FLATS SHOWN AS PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 29 STOCK IN TRADE IS ASSESSABLE AS INCOME FROM HOUSE P ROPERTY. 28. WE THEREFORE RESPECTFULLY FOLLOWING ABOVE JUDGM ENT AND EXAMINING THE FACTS OF INSTANT APPEAL ARE OF THE CO NSIDERED VIEW THAT THE ALLEGED RECEIPTS OF RS.26,87,635/- AR E PURELY RENTAL INCOME FROM RENTING OUT UNSOLD PROPERTY AND MANNER OF EARNING SUCH INCOME IS PURELY TAXABLE UNDER THE HEA D INCOME FROM HOUSE PROPERTY AND BY NO CANON CAN BE TREATED AS BUSINESS INCOME AND THEREFORE THE ASSESSEE IS ELIGI BLE FOR DEDUCTION U/S 24 OF THE ACT @30% OF THE RENTAL INCO ME WHICH IN THIS CASE IS RS.7,92,350/-. THE PLEA OF THE ASS ESSEE FURTHER FINDS SUPPORT THAT IN THE SUBSEQUENT YEARS THIS CLA IM OF THE ASSESSEE OF SHOWING RENTAL INCOME OF HOUSE PROPERTY AND CLAIM OF DEDUCTION U/S 24 OF THE ACT HAS BEEN CONSISTENTL Y ALLOWED BY THE REVENUE AUTHORITIES. WE THEREFORE SET ASIDE THE FINDING OF LD.CIT(A) FOR ASSESSMENT YEAR 2006-07 AND ALLOW THE SOLE GROUND NO.1 RAISED BY THE ASSESSEE. 29. GROUND NO.2 BEING GENERAL IN NATURE WHICH NEEDS NO ADJUDICATION. PRAMOD KUMAR SETHI I.T.A. NO. 382 & 383/IND/14 30 30. IN THE RESULT APPEAL FILED BY THE REVENUE BEIN G I.T.A.NO.382 & 383/IND/2014 ARE DISMISSED AND I.T.A.NO.392/IND/20 14 FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 06.11.201 8. SD/- (KUL BHARAT) SD/- (MANISH BORAD) JUDICIAL MEMBER A CCOUNTANT MEMBER INDORE; DATED : 06 /11/2018 /DEV COPY TO: ASSESSEE/AO/PR. CIT/ CIT (A)/ITAT (DR)/GUA RD FILE. BY ORDER ASSTT. REGISTRAR,I.T.A.T.,INDORE