ACIT NON CORPORATE CIRCLE-12(1), CHENNAI V. M.SUMATHY, CHENNAI

ITA 414/CHNY/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4419 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 17-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Additional evidence
• Section: 131; 68; 143(3); 133(6)

Judgement Text

आयकर अपीलीय अिधकरण ’सी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा01 एवं माननीय +ी मनोज कु मार अ6वाल ,लेखा सद9 के सम1। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ITA No.414/Chny/2020 (िनधाBरणवषB / Assessment Year: 2014-15) ACIT Non Corporate Circle-12(1), Chennai. बनाम/ V s. Smt. M. Sumathy, No.14, Lalithapuram Street, Royapettah, Chennai-600 014. थायीलेखासं./जीआइआरसं./P AN /GI R No. AB Y P S -2 9 0 2 - A (अ पीलाथ /Appellant) : ( थ / Respondent) अपीलाथ कीओरसे/ Appellant by : Shri P. Sajit Kumar (JCIT) – Ld. DR थ कीओरसे/Respondent by : Shri D. Anand (Advocate)-Ld. AR सुनवाईकीतारीख/ Date of Hearing : 12-04-2022 घोषणाकीतारीख / Date of Pronouncement : 19-04-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member): 1. Aforesaid appeal by Revenue for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-13, Chennai [CIT(A)] dated 31.07.2019 in the matter of assessment framed by the Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 30.12.2016. The grounds raised by the Revenue read as under: ITA No.414/Chny/2020 - 2 - 1. Order of Ld CIT(A) is erroneous both on facts and law. 2. Observation of the Ld CIT(A) that in respect of the interest free loan of Rs.1,32,50,000 taken by the assessee from Sri P. Ravi, the assessee furnished his bank account statement is not correct, as Sri P. Ravi did not enclose any such bank account statement along with his reply dated 30.11.2016 as evident from the records. As the said statement was furnished in May, 2017 only i.e., post assessment proceedings, the Ld CIT(A) ought to have provided an opportunity to the Assessing Officer before admitting such additional evidence. As Sri P. Ravi was stated to be a small time real estate broker and received the impugned loan amount in his bank account from another creditor as stated by Sri Abhishek Mundra, his creditworthiness remains unproved to the satisfaction of the Assessing Officer. Further as Sri P.Ravi sought adjournments and did not appear before the AO, it is clear that the assessee failed to prove the identity, creditworthiness of the creditor and thereby the genuineness of the transaction. 3. As Sri Abhishek Mundra representing his HUF from which the assessee received Rs.70,00,000 as interest free loan could not explain the reasons for borrowing sums from his individual and lending to the assessee without obtaining any security as evident from his statement, it cannot be said the assessee proved the creditworthiness of the loan creditor and consequently the genuineness of the transaction. Thus, the Ld CIT(A) ought to have upheld the addition made by the Assessing Officer. 4. As Sri Abhishek Mundra representing M/s Mundra Bullion Pvt Ld from which the assessee received Rs.3,69,00,000 as loan could not explain the reasons for lending such huge amount without obtaining any security and without any interest, it cannot be said that the transaction is a genuine one for it is beyond any human probability and that too, when the creditor happens to be a company. Thus, the Ld CIT(A) ought to have upheld the addition made by the Assessing Officer. 5. Observations of Ld CIT(A) that the Assessing Officer did not cause basic enquiries though empowered with statutory powers u/s 131 or u/s 133(6) is incorrect as one of the creditors did not appear to summons issued. 6. As the powers of Ld CIT(A) are co-terminous and co-extensive with that of the Assessing Officer, the Assessing Officer could have been directed to verify the additional evidence i.e., the bank account statement of Sri P. Ravi which was produced during appellate proceedings. 7. The Ld CIT(A) has failed to appreciate the circumstantial evidence that fail to prove the genuineness of the transactions. 2. The Registry has noted a delay of 140 days in filing the appeal, the condonation of which has been sought by the Revenue on the strength of condonation petition. It has been submitted that there was delay in issuing authorization which led to late filing of the appeal. Since Ld. AR did not raise any serious objection, we condone the delay and proceed for adjudication of the appeal on merits. 3. The Ld. Sr. DR submitted that the assessee could not demonstrate fulfillment of primary ingredients of Section 68 and therefore, Ld. CIT(A) erred in granting relief to the assessee. The Ld. AR, on the other hand, ITA No.414/Chny/2020 - 3 - submitted that the source of funds having been duly proved by the assessee, the additions were rightly deleted by Ld. CIT(A) in terms of various judicial pronouncements. Having heard rival submissions and after due consideration of orders of lower authorities, our adjudication would be as under. Assessment Proceedings 4.1 The assessee being resident individual is stated to be an advocate by profession. During the course of assessment proceedings, upon perusal of books of accounts, it transpired that the assessee received following credits during the year: - No. Name Amount (Rs.) 1. Maya Krishnan 15.20 Lacs 2. Parvathanandhini S 20.60 Lacs 3. P Ravi 132.50 Lacs 4. Abhishek Mundhra HUF 70 Lacs 5. Mundhra Bullion Pvt. Ltd. 369 Lacs The credit received from parties listed at serial no. 1 to 2 has been accepted by Ld. AO. However, the subject matter of dispute before us is credit received from parties listed at serial nos. 3 to 5. 4.2 During assessment proceedings, the assessee filed confirmatory letters. In response to summons issued by Ld. AO, Shri P.Ravi confirmed the transactions. However, the copy of ITR, Bank statement or Balance Sheet was not filed. The assessee maintained that the moneys were received through banking channels and the genuineness of the transactions stood explained. However, rejecting the same, Ld. AO held that the credit received from Shri P.Ravi was non-genuine. 4.3 Shri Abhishek Mundhra filed confirmatory letters along with copy of Income Tax Return, Balance Sheet, Computation of Income and Bank Statement etc. However, it was noted that the moneys were deposited in ITA No.414/Chny/2020 - 4 - the loan creditor account and on the same day, the same was given as loan to the assessee. Therefore, the amount so received was held to be unexplained cash credit. 4.4 The Managing Director of last creditor i.e., Mundhra Bullion Pvt. Ltd. appeared before Ld. AO and produced copy of ITR and Balance Sheet. In sworn statement, he confirmed to have lent Rs.369 Lacs to the assessee interest free without any security. Accordingly, Ld. AO held that advances were without any documentary evidences and without any interest and therefore, the amount was held to be not satisfactorily explained and finally added to the income of the assessee. Appellate proceedings 5.1 During appellate proceedings, the assessee submitted that the identity of the parties was established and the assessee had duly filed the confirmation letters from the lenders. All the payments were received through banking channels. It was also explained that the assessee, in a compelling situation, obtained these loans to purchase the property situated at 110/82, P.S. Sivasamy Salai, Mylapore, Chennai from Shri P. Vijaykumar. This property was a mortgaged property. However, Shri P. Vijaykumar could not pay the dues of the bank regularly and accordingly, the bank wanted to put the property under auction. The vendor through Shri P. Ravi approached the assessee to bail him out. Shri P. Ravi also promised to bring two more persons for purchase of the above said property along with the assessee so that the financial commitment is borne by four co-owners. Accordingly, Shri P. Ravi advanced money to the assessee, which in turn, was paid to the vendor towards purchase of property. However, Shri P. Ravi finally opted out of the deal and the assessee had to purchase the property individually and the credit ITA No.414/Chny/2020 - 5 - standing in the account of Shri P. Ravi was transferred to loan account in the books. To meet the balance commitment, the assessee approached Shri Abhishek Mundhra to lend further amount as a loan which was to be utilized for the purchase of the property. In the above background, the assessee drew attention to the documentary evidences furnished by the three lenders to establish the identity of the transaction, their respective creditworthiness and the genuineness of the transaction. 5.2 The Ld. CIT(A) noted that the assessee had filed following documentary evidences in support of the loan creditors: - Shri P. Ravi i. The name and address (reflected in bank statements), ii. Copy of PAN -BLGPR4255Q iii. Copy of confirmation of balance iv. Copy of his Indian bank statements (Account No.867085489, Dr. R.K. Salai Branch, Chennai-4) which reflects the transactions M/s. Abhishek Mundra, HUF i. Copy of PAN -AALHA8181K ii. Copy of confirmation of balance for the year ending 31.03.2014 and 31.03.2015 (few repayments can be seen in subsequent AY 15-16) and iii. Copy of his ITR V for the AY 14-15 and iv. Copy of his Axis Bank statement (Account No.238380, Sowcarpet Branch, Chennai-19) which reflect the transaction. M/s. Mundra Bullion Pvt. Ltd i. Copy of PAN AAFCM0519C ii. Copy of confirmation of balance for the year ending 31.03.2014 and iii. Copy of his ITR v for the AY 14-15 and iv. Copy of its Axis Bank statement (Account No.10511) which reflect an amount of Rs.80 Lakhs on 19.03.2014 and Rs.175 Lakhs on 25.03.2014 v. Copy of its IDBI bank account which reflect an amount of Rs.90 Lakhs on 19.03.2014 and vi. Copy of Standard Chartered Bank No.42580 which reflect an amount of Rs.24 lakhs on 19.03.2014. It was also noted that the moneys were advanced by these parties towards purchase of property situated at 110/82, P.S.Sivasamy Salai, Mylapore, Chennai in a joint venture arrangement with the assessee.These parties were disclosed under the head Current ITA No.414/Chny/2020 - 6 - Liabilities / Sundry Creditors. The amount received from such creditors had straightway gone towards the purchase of the property. These creditors had confirmed the transactions and also provided their respective Income tax Assessment Details. However, Ld. AO failed to appreciate that the provisions of Sec.68 had no application in the instant case in as much as the loan obtained through proper banking channels for purchase of property could not be added as unexplained cash credit and that too by not considering the above stated documentary evidences as furnished by the assessee. Therefore, the invocation of the provisions of Sec. 68 was incorrect and erroneous. Further the identity, creditworthiness and genuineness of the transactions were established by the assessee during assessment proceedings as well as during appellate proceedings and the onus as casted upon assessee in terms of Sec.68 was duly discharged by the assessee. Therefore, these amounts could not be held to be unexplained cash credit in terms of various judicial pronouncements including the decision of Hon’ble Supreme Court in the case of CIT V/s Daulat Ram Rawatmull (87 ITR 349) & Dhakeshwari Cotton Mills Ltd. V/s CIT (26 ITR 775), the decision of Hon’ble High Court of Madras in CIT V/s S. Hastimal (49 ITR 273). Finally, the impugned additions were deleted by observing as under: - In view of the above discussion and the particular signal failure on the part of the AO to conduct even basic enquiries to validate or otherwise by evidence, even circumstantial or corroborative evidence relating to the aforesaid three prerequisites relating to Sec.68, the additions made thereof could only be said to be on the basis of suspicion, conjectures and surmises and therefore, liable to be rejected. The AO is therefore directed to delete the addition made u/s 68 of Rs.5,71,50.000/- in the impugned year. Aggrieved as aforesaid, the revenue is in further appeal before us. ITA No.414/Chny/2020 - 7 - Our findings and Adjudication 6. We find that as per the provisions of Section 68 of the Income Tax Act, 1961, where any sum is found credited in the assessee’s books and assessee offers no explanation about the nature and source thereof or the explanation furnished is found to be unsatisfactory, the sum so credited may be charged to Income-Tax as the income of the assessee of that previous year. A proviso has been inserted to the said section by Finance Act, 2012 w.e.f. 01/04/2013 to provide that where the assessee is a company and the sum so credited consists of share application money, share capital, share premium etc., the explanation furnished by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded also offers an explanation about nature and source of sum so credited and such explanation is found to be satisfactory. However, this proviso is applicable only in the case of credit by way of share application money, share capital, share premium etc. In other words, in case of unsecured loans, the assessee is required to prove the source of credits only besides establishing the identity of the lender and genuineness of the transactions. In such cases, the assessee is not required to prove the source of source as held by Hon’bleBombay High Court in its decision tilted as Gaurav Triyugi Singh V/s ITO (ITA No.1750 of 207, dated 22/01/2020) which also consider its earlier decision of Pr. CIT V/s Veedhata Towers Pvt. Ltd. (2018; 403 ITR 415). It was held that there was no requirement under law to explain the source of source. Once the identity of the lender as well as their creditworthiness is established by the assessee and the transactions were genuine, the onus was discharged and the assessee was not obligated to explain the source of source. Similar is the recent decision ITA No.414/Chny/2020 - 8 - of Hon’ble Bombay High Court in Pr. CIT V/s Ami Industries (India) Pvt. Ltd. (ITA No. 1231 of 2017, dated 29/01/2020) which has been rendered after considering the principles laid down by Hon’ble Supreme Court in its decision titled as Pr.CIT Vs. NRA Iron & Steel Pvt. Ltd. [412 ITR 161]. Similar is the decision of Hon’ble High Court of Madras in CIT V/s Pranav Foundations Ltd. (51 Taxmann.com 198) which has dismissed revenue’s appeal by observing that the provisions of Sec.68 contemplates that the assessee has to give satisfactory explanation about the "nature and source" of any sum found credited in the books of account. In terms of the decision of Hon’ble Supreme Court in Lovely Exports Pvt. Ltd. (216 CTR 195), when the assessee had categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of Section 68 of the Act, the additions are not justified. When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income. Therefore, the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted. 7. In the background of aforesaid settled legal position, it could be seen that the assessee has furnished various documentary evidences before lower authorities to establish the primary requirements of Sec.68. These documents have been listed in preceding para 5.2 and the copies of these documents have been placed on record. It could be seen that the assessee has received advances from Shri P. Ravi through banking channels on various dates. The assessee has even repaid amount of Rs.5 Lacs to the lender during the year, The lender has filed copy of PAN Card, confirmation letter and its bank statements. It could be seen that there are no cash deposits in the bank account of lender before ITA No.414/Chny/2020 - 9 - advancing the amount to the assessee. The credits to assessee have been sourced by lender out of banking channels only. Similarly, the transactions with Abhishek Mundhra HUF are through banking channels. The copy of PAN and confirmation letter is on record. The loan has been partly satisfied in the subsequent year by repayment and transfer entries. The copy of Income Tax Return and bank statement is also on record. No cash transactions have been observed in the account of lender before transfer of money to the assessee. The last entity Mundhra Bullion Private Ltd. has confirmed the transactions. The transactions are through banking channels only. The copy of PAN and Income Tax return of the lender is on record. The perusal of bank statement would reveal that there are no immediate cash deposits and the payments to the assessee have been sourced out of banking channels only. On the basis of all these documents, it could be well said that the assessee had duly discharged the onus of establishing the identity of the lenders, their respective creditworthiness as well as genuineness of the transactions. So far as the allegations of Ld. AO that the loans are interest free is concerned, the circumstances under which the loans were obtained by the assessee was duly explained before lower authorities and the same has already been enumerated in preceding para 5.1. Therefore, the impugned additions, in our considered opinion, has rightly been deleted by Ld. CIT(A). Accordingly, the impugned order could not be faulted with. 8. The revenue has relied on the decision of Hon’ble Supreme Court in the case of Pr.CIT Vs. NRA Iron & Steel Pvt. Ltd. [412 ITR 161] which is completely on different facts. In that case, the assessee had ITA No.414/Chny/2020 - 10 - received share capital / premium and as per field enquiries, the investor entities were found to be non-existent entities. The primary onus as casted u/s 68 could not be discharged by the assessee and the entire transactions were held to be bogus and lacked credibility. The facts of the case before us are totally different wherein the entities have filed confirmation letters and filed requisite documents as required under law. The investor entities have appeared before Ld. AO in response to summons and confirmed the transactions. Therefore, the ratio of cited decision is not applicable here. 9. Finally, the appeal stand dismissed in terms of our above order. Order pronounced on 19 th April, 2022. Sd/- (MAHAVIR SINGH) उपा01 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद9 /ACCOUNTANT MEMBER चे+ई/ Chennai; िदनांक/ Dated : 19-04-2022 JPV आदेशकीVितिलिपअ6ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकरआयु (अपील)/CIT(A) 4. आयकरआयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF