The Income Tax Officer, Ward-1, Modasa V. Chandulal Chhaganbhai Patel, Modasa

ITA 429/AHD/2022

AI Insights

The case involves an appeal by the Income Tax Officer, Ward-1, Modasa against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which had deleted the addition of Rs.9,59,27,695 under Section 68 of the Income Tax Act. The addition was initially made by the Assessing Officer, categorizing the amounts as bogus sundry creditors. The Ld. CIT(Appeals) allowed the appeal of the assessee, Chandulal Chhaganbhai Patel, based on the evidence provided that the amounts were repaid in the succeeding assessment year, thus demonstrating the genuineness of the transactions. The Department challenged this decision, leading to the current tribunal appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125374 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 10-11-2022
• Other Referred Cases: Ayachi Chandrashekhar Narsangji vs. ITO, Rajhans Construction (P.) Ltd. vs. ITO, Shree Samruddhi Overseas Trading Co. vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68; 143(3); 143(1); 251; 143(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o . 4 2 9/ A h d /2 0 22 ( A s se ss m e nt Y e a r : 20 14- 15 ) I nc o m e Ta x O f fic er , Wa r d- 1, Mo da sa vs . C h a n d ul al C h h ag an bha i Pa te l, A m ar ga d h K a mp a , PO : D h in o l, Ta l - M od as a, D is t- A r va ll i, G uj a r at - 3 8 3 01 0 [ P A N N o . AP NP P 4 6 2 7 E ] (Appellant) .. (Respondent) Appellant by : Shri Dhinal Shah, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. DR D at e of H ea r i ng 24.08.2023 D at e of P r o no u n ce me nt 20.10.2023 O R D E R PER SIDDHARTHA NAUTIYAL, JM: This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 20.09.2022 passed for the Assessment Year 2014-15. 2. The Revenue has raised the following grounds of appeal:- “1) Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition u/s 68 of the I.T. Act being unexplained sundry creditors of Rs.9,57,27,695/- without appreciating the facts of the case that the assessee could not prove the genuineness and creditworthiness of the transactions. 2) The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3) It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” ITA No. 429/Ahd/2022 ITO vs. Chandulal Chhaganbhai Patel Asst. Year –2014-15 - 2 - 3. The assessee filed his return of income on 29.11.2014, declaring total income at Rs.3,41,300/-. The return was processed at the same income under Section 143(1) of the Act. The case was selected for scrutiny under CASS. Order under Section 143(3)/144 was passed on 26.12.2016, assessing the income at Rs.9,62,68,990/- after addition of Rs.9,59,27,695/- under Section 68 of the Act as bogus sundry creditors. In the assessment order, the AO has observed that the appellant has neither made any purchase nor made any sales. The AO has commented that the appellant has passed colourful entries on paper to show the sale/purchases and the genuineness and creditworthiness of creditors had not been established, as the appellant had failed to provide any details in support of the sums credited in its books of account. The AO made addition under Section 68 as under:- Sr. No. Name of sundry creditor Amount Remarks by AO in assessment order 1. Nisha Enterprise 5,08,61,895/- Neither the appellant nor the creditor furnished the required bills. 2. Om Enterprise 91,45,281/- The creditor has submitted bills but same is not genuine. But the appellant has failed to produce bills. 3. Uma Sales Corporation 3,57,20,518/- The creditor has submitted bills but same is not genuine. But the appellant has failed to produce bills. 4. Star Traders 2,00,000/- The creditor admitted that he had not made any sale/purchase of the appellant. Total 9,59,27,695/- ITA No. 429/Ahd/2022 ITO vs. Chandulal Chhaganbhai Patel Asst. Year –2014-15 - 3 - 4. In appeal, Ld. CIT(Appeals) allowed the appeal of the assessee primarily on the ground that the assessee has been able to demonstrate that the assessee is having a running account with the aforesaid parties and the amounts were repaid back by the assessee to these parties in the succeeding assessment year. While allowing the appeal of the assessee, Ld. CIT(Appeals) observed as under: “5.3 In this case, return of income for instant year AY 2014-15 was selected for scrutiny under CASS criteria and notice u/s 143(2) issued on 03/09/2015. The AO has commented as follows in the para 5.4 of the assessment order: “...5.4 Further on verification of ledger account, it is found that the assessee shown sundry creditors as on 31/03/2015 (A.Y. 2015-16) as per followings:- Sr. No. Name of sundry creditor Amount as on 31/03/2015 1. Nishra Enterprise 10,76,63,763/- 2. Om Enterprise 54,32,264/- 3. Uma Sales Corporation 3,16,49,207/- Total amount 14,47,46,234/- As per ledger account, the assessee shown sundry creditors tune to Rs. 14,47,46,234/-, but in ROI filed for A.Y. 2015-16, the amount of sundry creditors has been shown NIL...” The AO has noted (above) that the sundry creditors are NIL in AY 2015-16. In the rejoinder to the remand report submitted by the AO, the appellant ahs made the following remarks: Sr. No. Name of sundry creditor Amount Remarks in the rejoinder dated 20.12.2017 1. Nisha Enterprise 5,08,61,895/- The appellant has paid the amount in FY 2014-15 (AY 2015-16) 2. Om Enterprise 91,45,281/- The appellant has paid the amount in FY 2014-15 (AY 2015-16) 3. Uma Sales Corporation 3,57,20,518/- The appellant has paid the amount in FY 2014-15 (AY 2015-16) 4. Star Traders 2,00,000/- The appellant has submitted that the opening balance of Rs.2,00,000/0 and closing balance of Rs.2,00,000/-, ITA No. 429/Ahd/2022 ITO vs. Chandulal Chhaganbhai Patel Asst. Year –2014-15 - 4 - therefore, no transactions in FY 2013- 14. The balance in FY 2014-15 is Nil, therefore, the account is closed in subsequent year Total 9,59,27,695/- 5.3.1 The facts of the case, the remand report and the rejoinder of the appellant have been considered. As the amount has been paid in the case of Nisha Enterprise, Om Enterprise and Uma Sales Corporation in the subsequent year, the additions are deleted.” 5. The Department is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, the Ld. DR placed reliance on the observations made by the Assessing Officer in the assessment order. In response, the Ld. Counsel for the assessee submitted that during the course of appellate proceedings before Ld. CIT(Appeals), remand report was sought from the Assessing Officer which was considered by the Ld. CIT(Appeals) while allowing the appeal of the assessee. During the course of appellate proceedings, the assessee gave supporting evidences to prove the genuineness of the aforesaid sundry creditors and also demonstrated that the amount outstanding in the books of accounts of the assessee in the name of the sundry creditors was repaid back to those creditors in the immediately succeeding assessment year. The aforesaid facts have not been disputed by the Department at any stage the proceedings. Accordingly, it was submitted by Counsel for the assessee that looking into the instant facts, the assessee has been able to demonstrate that the sundry creditors in question are genuine, which is also duly supported by the fact that the amount which was outstanding in the books of the assessee had been repaid back to the sundry creditors in the immediately following assessment year, through banking channels. ITA No. 429/Ahd/2022 ITO vs. Chandulal Chhaganbhai Patel Asst. Year –2014-15 - 5 - 6. We have heard the rival contentions and perused the material on record. In the case of Ayachi Chandrashekhar Narsangji 42 taxmann.com 251 (Gujarat), the Assessing Officer framed assessment under Section 143(3) wherein he made addition of Rs. 1.45 crore under Section 68 on ground that loan taken from one 'IA' was not explained satisfactorily. On appeal, Commissioner (Appeals) was satisfied with respect to genuineness of transaction and creditworthiness of 'IA' and, therefore, deleted addition. It was found that total loan of Rs. 1.60 crore was advanced to assessee, out of which Rs.15 lakh was repaid. Therefore, an amount of Rs.1.45 crore remained outstanding to be paid to 'IA' balance loan amount was repaid by assessee in immediately next financial year whether when Department had accepted same, addition made by Assessing Officer was to be deleted. In the case of Rajhans Construction (P.) Ltd. 140 taxmann.com 370 (Surat-Trib.), the ITAT held that where assessee availed unsecured loan from an entity and repaid same within a short span of time, along with interest, Assessing Officer was not justified in making addition under Section 68 in respect of said loan. In the case of Shree Samruddhi Overseas Trading Co. v. DCIT in ITA Number I.T.A. Nos. 909 & 910/Ahd/2018, the Ahmedabad ITAT held that repayment of loan points towards genuineness of transaction in the following words: “The repayment of loan exists as a strong mitigating circumstance and transcends all considerations. We thus find that the documents placed by the assessee before the Revenue authorities sufficiently discharge the onus towards the identity and genuineness of the transaction and creditworthiness of the lender contemplated under s.68 of the Act.” ITA No. 429/Ahd/2022 ITO vs. Chandulal Chhaganbhai Patel Asst. Year –2014-15 - 6 - 7. Accordingly, in light of observations made by Ld. CIT(Appeals), we are of the considered view that the Ld. CIT(Appeals) has after appreciation of evidence placed on record by the assessee during the course of appeal proceedings has deleted the additions. Accordingly, looking into the instant facts, we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference. 8. In the result, appeal of the Department is dismissed. This Order pronounced in Open Court on 20/10/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 20/10/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 17.10.2023(Dictation given on Dragon software by Hon’ble Member on 15.10.2023) 2. Date on which the typed draft is placed before the Dictating Member 17.10.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr. P.S 17.10.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .10.2023 6. Date on which the fair order comes back to the Sr. P.S 20.10.2023 7. Date on which the file goes to the Bench Clerk 20.10.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................