Shri Ashwinsinh Harendrasinh Sarvaiya, Ahmedabad V. The ITO, Ward-11(2), Ahmedabad

ITA 401/AHD/2020

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4792 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-12-2023
• Assessment Year: 2007-2008
• Appeal Filed On: 07-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MS MAHASHAKTI
• Keywords: Assessment record
• Section: 68; 69; 133(6); 264

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.401/Ahd/2020 Assessment Year :2007-08 Ashwinsinh H. Sarvaiya 32/B, Bhavna Society Gita Mandir Road Bhulabhai Char Rasta Ahmedabad. PAN : ACUPS 2434 E Vs. ITO, Ward-11(2) Ahmedabad. Assessee by : Ms.Urvashi Sodhan, AR Revenue by : Shri Ashok Kumar Suthar, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 0 4 / 1 2 / 2 0 2 3 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 0 6 / 1 2 / 2 0 2 3 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad (in short referred to as “ld.CIT(A)”), dated 5.3.2020 passed under section 250(6) of the Income Tax Act, 1961 ("the Act" for short) pertaining to Assessment Year 2007-08. 2. At the outset itself, it was pointed out to the Bench that the appeal of the assessee is time barred by 44 days while filing appeal before the Tribunal, which the ld.counsel for the assessee prayed for condoning the same. ITA No.401/Ahd/2020 2 In view of request of the ld.counsel for the assessee, considering the impugned delay being short and taking liberal approach, in the interest of substantial justice, the delay of 44 days in filing appeal before the Tribunal is condoned, and the appeal of the assessee is taken up for adjudication on merit. 3. The grounds raised in the appeal are as under: “1. Ld. CIT (A) erred in law and on facts confirming addition of Rs. 47,50,000/-out of total addition of Rs. 1,01,00000/- made by AO u/s 69 of the Act. 2. Ld. CIT (A) erred in law and on facts in observing that appellant furnished fresh list of creditors for the first time during appellate proceedings, failing to appreciate that AO made huge additions in time barring assessment without granting opportunity to appellant to submit verified list of creditors. 3. Ld. CIT (A) erred in law and on facts to hold that the appellant cannot get benefit of affidavits filed by the creditors wrongly distinguishing ratio of jurisdictional High Court judgment in GlasslineEquipment(255 ITR 454). 4. Ld. CIT (A) erred in law and on facts in confirming addition by holding that change in names of creditors was flimsy and beyond comprehension not accepting list of the creditors supported with affidavit & financial records. 5. Ld. CIT (A) erred in law and on facts confirming amount of Rs.47,50,000/-as unexplained cash credit making irrelevant observations ignoring cogent documentary evidence submitted by the appellant.” 4. At the outset, it was stated that the issue involved in the present appeal relates to the addition made on account of loans received by the assessee, found to be not genuine in terms of section 68 of the Act. The loans so found non-genuine amounting in all to Rs. 47,50,000/- relates to the following parties: i) Pradip Sangahavi ii) M/s MahashaktiCorporation iii) M/s Pavan Associates ITA No.401/Ahd/2020 3 5. Argument of the ld.counsel for the assessee before us against the confirmation of additions by the Ld.CIT(A0,was that during appellate proceedings three remand reports were taken by the ld.CIT(A) from the AO on the submissions repeatedly made by the assessee before him, and in the said remand report, loans received from M/s Pavan Associates was accepted by the AO as genuine, while with respect to other two parties they were held to be not genuine merely because their source of source was not proved by the assessee. In this regard, he first drew our attention to remand report of the AO accepting genuineness of the loans taken by the assessee from Pavan Associates placed before us at PB Page No.154 to 176 dated 9.11.2010. He drew our attention to page no.171 to 173 wherein the AO had reported on the inquiry made by him with respect to the genuineness of the loans received from Pavan Associates. He drew our attention to the conclusion of the AO at page no.173 stating that he found genuineness of the transaction and capacity of the party to be proved by the assessee. The relevant portion of the remand report containing the above remarks by the AO is reproduced hereunder at Page no171 -173: ITA No.401/Ahd/2020 4 ITA No.401/Ahd/2020 5 6. The ld.DR fairly admitted to the same. 7. In view of the above, since the AO himself has found the loans received from M/s Pavan Associates to be established as being genuine in his second remand report submitted during appellate proceedings, there lies no cause of action by the Department to make any addition by treating the said loans as not genuine interms of section 68 of the Act. The addition so made relating to the loans received from M/s Pavan Associate is therefore directed to be deleted. 8. It was common ground that the only relevant loans whose genuineness needed to be adjudicated were those relating to Sh.Pradip Sangahavi of Rs.40.00 lakhs and M/s Mahashakti Corporation of Rs.5.00 lakhs. ITA No.401/Ahd/2020 6 As stated above, the contention of the ld.counsel for the assessee with respect to both was that the assessee had filed relevant documents proving the genuineness of the same including confirmation and copy of their bank statement showing receipt by cheque, and the only reason for treating them not genuine was that their source of source was not proved. Taking up the case of M/s Mahashakti Corporation first the ld.counsel for the assessee contended that the assessee had furnished confirmation letter, and copy of the bank statement of the creditors with AXIS Bank which were verified by the AO from the bank by conducting inquiry under section 133(6) of the Act. The ld.counsel for the assessee pointed out that in the course of inquiry the AO found that prior to issue of cheque to the assessee, there was a demand draft deposited in the bank of M/s.Mahashakti Corporation which was the source of cheque issued to the assessee; that the despite summons issued to the said party, none had come present before the AO, and therefore, there was no explanation of the source of amount advanced to the assessee by M/s Mahashakti Corporation. The ld.counselfor the assessee contended that having filed all necessary evidences to prove genuineness of the transaction, the same could not have been dismissed merely because source of source of the payment made remained unexplained. It was contended that in various decisions Courts have held that simply because source of source was not explained addition under section 68 of the Act could not be made. Reliance was placed on the following case laws: ITA No.401/Ahd/2020 7 i) DCIT Vs. Rohini Builders, 256 ITR 360/127 Taxman 523 (Gujarat) SLP by Department dismissed against this judgment by the Supreme Court; ii) Murlidhar Lahorimal Vs. CIT (2006) 53 taxman 451 (Guj) iii) CIT Vs. Pragati Co-op. Bank Ltd., 278 ITR 170 (Guj) iv) Nemichand Kothari, 264 ITR 254 (Gau); v) Kanhalalal Jangid Vs. ACIT, (2008) CR (Raj) 354 9. The ld.DR on the other hand, relied on the remand report of the AO and pointed out that besides the fact that the AO noted a demand draft deposited in the bank account of Mahashakti Corporation prior to the issue of cheque to the assessee, he also noted that financials of the said party revealed in sufficient credit- worthiness to advance a loan of Rs.5.00 lakhs to the assessee. He pointed out that the balance sheet of the said entity disclosed total capital of the partners of only Rs.1.80lacs, and unsecured loan of Rs.4.50 lakhs, thus total of the balance sheet itself is only Rs.6.30 lakhs; that the P&L account also disclosed a very low level of operation of M/s.Mahashakti Corporation with turnover of Rs.6 lakhs, and net profit of Rs.1.68 lakhs and based on this information that Mahashakti Corporation was not found to be credit-worthy party, coupled with the fact that there was a demand draft deposited in its bank account from which the funds were sourced as loans to the assessee, the AO held the genuineness of the loans to be not proved. Our attention was drawn to remand report of the AO at PB Page No.159 to 160 as under: “(a) As per directions, the first summon was issued on 16/08/2010 requiring M/s. MahaShakti Corporation to attend on 20/08/2010 with information called for. This summon was handed over to Mr. Sarvaiya and his authorised representative Mr. Ashok Gupta for service as requested by him relying upon their promise of cooperation ITA No.401/Ahd/2020 8 in the remand proceedings made before your goodself. The assessee returned back the copy of summon acknowledged through one Mr. Jitendra Paid, who is an employee of Sarvaiya Exports, a limited company controlled and managed by the assesseei.e. Mr. Ashwin Singh H. Sarvaiya, Prop. Jay Mataji Trading Co. On appointed day Neither anybody from Maha Shakti Corporation attended nor papers called for vide summon under reference were filed in the office. In view of another summon was issued on 26.08.2010 requiring to attend on 31.08.2010. However, this summon was also formally not complied. (b) From the record available it was seen that M/s. Maha Shakti Corporation was maintaining its bank account with Axis Bank, Law garden Branch, Ahmedabad. Its customer No. was No.0030093952. It has opened its bank account on 02.02.2005. In the said statement there was balance of Rs. 12573.48/-on 28.03.2007. At every month there was withdrawal of Rs.392.84. On 25.04.2006, Rs.5,00,000/- were deposited vide DD No. 148111 clearing ZN.HVout/SET134 and the said amount was withdrawn on 27.04.2006 leaving nominal balance of Rs. 17119.20. (c) On going through the said account it is seen that there are very few debit & credit entries Majorities of withdrawals are by way of cash only. On 25.04.2006 and amount of Rs.5,00,00/- was deposited and said amount was withdrawal on 27.05.2006. Since the assessee was not attending and not cooperating, an inquiry was conducted with the Axis bank, Law garden Branch. It was infromaed by the Bank that an amount of Rs. 5,00,000/- has been deposited in the account through DD No. 148111 dated 25/04/2006 issued by Karnataka bank, Raipur, Chhattisgadh, issued in the favour of Maha Shakti Corporation payable at Ahmedabad. The source of DD of Rs. 5,00,000/- is not investigated at present. If need be, necessary directions to that effect may kindly be issued. (d) Maha Shakti Corporation has confirmed the account of Jay Mataji Trading Co. Prop. Shri Ashwinsinh H Sarvaiya. As per this copy of account Maha Shakti has advanced Rs.5,00,0007- on 23.04.2006 for Land purchase at Limadi and the balance carried forward to next year. (e) On verification of the assessment record it is seen that there is a copy of statement of total income for Assessment Year 2006-07 wherein the total income from business or profession is disclosed at Rs. 1,76,962/-. The PANo quoted is AALFM6722A It has reported Income tax Officer, Ward-10(4), Ahmedabad as its Assessing Officer. However, on verification it was found that the P.A.No is with Income ITA No.401/Ahd/2020 9 tax Officer, Ward-10(3) and no return of income is found to have been filed either in Ward-10(3) or 10(4), Ahmedabad. (f) As per balance sheet filed with statement of total income, Shri AshwinsinhSarvaiya, Shri Kaushik Lakhtaria and Shri Maiyuddin Saiyad are the partners of the firm The total capital of the partners as on 13.03.2006 is Rs. 1,80,274/-. The total of balance sheet is Rs.630274/-. Under the heading 'unsecured loan' assessee has disclosed Rs.4,50,000/- from Shri Brijrajsingh Gohel. The total of balance sheet as on 31.03.2007 is Rs.6,30,974/- and partners capital is Rs. 1,80,274/-. (g) As per Profit & Loss account the assessee has disclosed Receipt from transportation charges at Rs. 66,41,200/-. It has disclosed net profit at Rs. 1,68,962/-. In the Profit & Loss account for the period from 01.04.2006 to 31.03.2007 relevant to Assessment Year 2007- 08, the assessee has disclosed loss of Rs.4996/- on account of payment of Bank charges. (h) The proprietor of Maha Shakti Corporation has not attended the office along with papers called for. The record available in the form of balance sheet, Profit and Loss account, partner's capital account and statement of total income, bank statement and information collected from the Bank, suggests that at that point of time, Mahashakti Corporation was not in a position to advance Rs. 5,00,000/- to Mr. Sarvaiya or Jay Mataji Trading Co. Since the source of deposit of Rs. 5,00,000/- in Axis Bank, Law Garden branch by way of DD issued by Karnataka bank Raipur, Chhatisgadh, has not been explained, it cannot be said that the claim of receipt of deposit of Rs. 5,00,0007- from Maha Shakti Corporation by Jay Mataji Trading Co. prop. Shri AshwinsinhSarvaiya is genuine.” 10. We have heard arguments of both the parties with respect to the loans advanced by Mahashakti Corporation amounting to Rs.5.00 lakhs,and we find that it is not disputed that the confirmation had been filed by the said party of having given a loan of Rs.5.00 lakhs, as also copy of its bankstatement reflecting the fact of loans having been advanced through banking channels. The only reason for casting doubt on the genuineness of the transactions is the fact that that M/s.Mahashakti Corporation had sourced the loans to the assessee from a DD, source of which remained ITA No.401/Ahd/2020 10 unexplained and the AO noted from the financials of the Mahashakti Corporation account that it had very weak financial position. Be that so, it is not the case of the AO that the amount advanced by M/s.Mahashakti Corporation to the assessee was not reflected in its financials, however, weak they may be. Therefore, the identity of the party advancing loan to the assessee having been accepted by the Revenue, the genuineness and creditworthiness of of the transaction being established as having come through bank channels, we are in agreement with the ld.counsel for the assessee that onus cast on the assessee stood discharged, and merely because the source of source remained unexplained the impugned loans could not have been treated as ingenuine in the hands of the assessee. Non explanationof the source of the DD deposited in the bank account of M/s.Mahashakti Corporation would cast doubt of the nature of receipt in the hands of the Mahashakti Corporation. Any addition to be made treating it as not genuine has to be made in the hands of the M/s Mahashakti Corporation and not the assessee. Therefore, the addition made in the hands of the assessee on account of loans received from M/s Mahashakti Corporation to the tune of Rs.5 lakhs, we hold, having been established by the assessee as being genuine, and the same is directed to be deleted by the AO. 11. With respect to amount received from Sh. Pradip Sangahavi, it was pointed out that the assessee had received an amount of Rs.77.50 lakhs from the said party. The assessee submitted confirmation of the loan from the said party pointing out that he had advanced loan from two bank accounts; one from the ICICI Bank, and other from SBI, Indore and copy of the bank statement from ICICI Bank was furnished. The said party has also appeared on the ITA No.401/Ahd/2020 11 summons issued to him and had confirmed the transaction undertaken with the assessee. But since copy of his bank statement of SBI, Indore was not furnished therefore, the amounts advanced from the said bank were treated as in-genuine, which amounted in all to Rs.40 lakhs. The contention of the assessee was that in view of voluminous of evidence and documents submitted by it, the assessee had discharged its onus of proving the genuineness of the transactions, having filed viz. (i) confirmation of the party, and (ii) copy of its bank statement showing receipt of all amount through banking channels, and (iii) copy of bank statement of the party in ICICI bank, and (iv) party itself confirming the transaction to the AO on an independent inquiry conducted vide summons issued to it. The ld.counsel for the assessee pointed out that the only reason for holding loans to the tune of Rs.40 lacs as ingenuine was that, besides having not furnished copy of the bank statement, SBI, Indore, there was some difference incheque numbers, stated in the confirmation filed and affidavit filed by thesaid party. He drew our attention to the remand report of the AO in this regard, placed before us at PB Page No.169 to 170: ITA No.401/Ahd/2020 12 5. The ld.DR relied on the remand report of the AO. 6. We have heard both the parties. It is not denied that the loans advanced by Pradip Sangahavi of Rs.40 lakhs was confirmed by him by way of affidavit filed by him. In response to summons issued to him, he had appeared before the AO and confirmed the fact of having advanced of such sums to the assessee. Besides, all the details of cheques through which the amounts were advanced, as also copy of bank account of the assessee were furnished to the AO . 12. In the light of the above, we agree with the ld.counsel for the assessee that onus cast on the assessee to prove genuineness of the transaction stood completely discharged. Merely because copy of ITA No.401/Ahd/2020 13 bank statement of the creditor was not furnished would not cast doubt on the genuineness of the loan. It is not the case of the Revenue that these amounts were not reflected in the bank statement of the assessee. It is also not the case of the Revenue that cheque numbers through which loans were advanced, the details of which were given by the assessee, in any way did not match with that reflected in the assessee’s bank account. For that matter since complete details of cheques were also furnished by the assessee, the AO could very well have verified these facts both from the assessee bank as well as form the bank of the creditor. Merely because, the assessee did not furnish the bank statement of the creditor, it is not proved that the amount advanced was not genuine. In view of the same, we hold that Revenue authorities had erred in holding the amount of Rs.40 lakhs received from the assessee from Pradip Sangahavi in-genuine, and therefore, the addition made on account of the same is directed to be deleted. 13. In the result, the entire addition of loans u/s 68 of the Act to the tune of Rs.47.50 lacs confirmed by the Ld.CIT(A) is directed to be deleted. The appeal of the assessee is accordingly allowed. Order pronounced in the Court on 4 TH December, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad,dated 06/12/2023 vk*