Appeal Details
Counselvise Citation
[2020] 110 COUNSELVISE.COM (IT) 6489 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 1 month(s) 22 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-09-2020
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2007-2008
Appeal Filed On
26-07-2018
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 4602/MUM/2018 ASSESSMENT YEAR: 2007-08 SHRI HITENDRA CHUNILAL SHAH 54, GULALWADI, KIKA STREET MUMBAI 400 004 PAN NO. AADPS9581R VS. INCOME TAX OFFICER WARD 19(1)(5) MATRU MANDIR BUILDING, 2 ND FLOOR, NANA CHOWK, BHATIA HOSPITAL LANE, GRANT ROAD (W) MUMBAI 400 007 APPELLANT RESPONDENT ASSESSEE BY : SHRI NISHIT GANDHI (AR) REVENUE BY : SHRI BHOOPATHI (DR) LAST DATE OF HEARING : 16/07/2020 DATE OF PRONOUNCEMENT : 17 /09/2020 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELEVA NT ASSESSMENT YEAR IS 2007-08. THE APPEAL IS DIRECTED AGAINST THE ORDER P ASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-6, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF ASSESSMENT COMPLETED U/S. 143(3) OF T HE INCOME TAX ACT. 1961 (THE ACT). 2 ITA NO. 4602/MUM/2018 SHRI HITENDRA CHUNILAL SHAH 2. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACT AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESS ING OFFICER IN REOPENING THE CASE, WITHOUT CONSIDERING THE PROVISION OF LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN MAKING AN ADDITION U/S. 68 OF THE INCOME TAX ACT, 1961 OF RS. 5,00,000/- BY TREATING NON GENUINE UNSECURED LOAN, WITHOUT CONSIDERING THE FAC TS AND CIRCUMSTANCES OF THE CASE. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WE LL AS IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AS SESSING OFFICER IN MAKING AN ADDITION OF RS.60,000/- ON ACCOUNT OF INTEREST PAID ON NON-GENUINE UNSECURED LOAN, WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANC ES OF THE CASE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR (A.Y.) 2007-08 O N 31/10/2007 DECLARING TOTAL INCOME OF RS.1,74,700/-. THE ASSESSEE DEALS I N FERROUS AND NON-FERROUS METALS AND IRON & STEEL ALLOYS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO), ON THE BASIS OF INFORMA TION RECEIVED FROM THE DIRECTOR GENERAL OF INCOME TAX (DGIT) (INV.), MUMBA I MADE AN ADDITION OF RS.5,00,000/- TOWARDS LOAN TAKEN FROM M/S. MOHIT IN TERNATIONAL. BEFORE MAKING THE SAID ADDITION, THE AO VIDE NOTICE U/S. 142(1) ASKED THE ASSESSEE TO FURNISH DETAILS. AS MENTIONED BY THE AO, THE ASS ESSEE FILED LEDGER COPY OF LOAN STATING LOAN CONFIRMATION AND THE AMOUNT OF IN TEREST PAID THEREON. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SAID REP LY AND HELD THAT THE ASSESSEE FAILED TO DISCHARGE ITS ONUS U/S 68 OF THE ACT. THEN, REFERRING TO 3 ITA NO. 4602/MUM/2018 SHRI HITENDRA CHUNILAL SHAH VARIOUS CASE LAWS, MADE AN ADDITION OF RS.5,00,000/ -. FURTHER, HE DISALLOWED INTEREST OF THE ABOVE LOAN OF RS.60,000/-. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE F ILING AN APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) CONFIRMED THE ABOVE A DDITION MADE BY THE AO WITH FOLLOWING REASONS:- 7.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER, ORAL CONTENTION AND WRITTEN SUBMI SSION OF THE APPELLANT AND MATERIAL AVAILABLE ON RECORD. IT IS THE FACT OF THE CASE THAT IN THE BACKGROUND OF INFORMATION THAT M/S. MOHIT INTERNATIONAL WAS INDUL GING INTO PROVIDING OF UNSECURED LOAN ENTRIES TO THE PEOPLE AND AS ONE OF THE BENEFICIARY WAS THE ASSESSEE, THE CASE WAS REOPENED U/S 147 OF THE ACT. IN ORDER TO VERIFY THE BONA FIDE OF THE SAID LOAN, THE AO HAD PROVIDED OPPORTUN ITY TO THE ASSESSEE TO ESTABLISH THE CREDITWORTHINESS OF THE LOAN CREDITOR. HOWEVER, IT HAS BEEN NOTED THEREIN THAT NO VALID SUPPORTING DOCUMENTS WERE PRODUCED TO ESTA BLISH THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE AO AT PARA 4.9 OF THE ASSESSMENT ORDER, HAS ALSO MENTIONED THAT A NOTICE U/S 133(6) OF THE ACT WAS ISSUED TO THE SO-CALLED CREDITORS I.E. M/S. MOHIT INTERNAITONAL FOR CONFIRM ATION OF LOAN, HOWEVER, THE SAID LOAN OF RS.5,00,000/- WAS NOT CONFIRMED BY THE LOAN CREDITOR. IT IS FURTHER THE FACT THAT THE ASSESSEE BEYOND SUBMITTING THEIR OWN LOAN CONFIRMATION AND COPY OF BANK ACCOUNT, HAVE NOT BEEN ABLE TO FURNISH THE BAN K ACCOUNT OF M/S. MOHIT INTERNATIONAL AND THEREFORE, THE CREDITWORTHINESS A ND GENUINENESS OF THE TRANSACTION COULD NOT BE PROVED IN THE FACTS AND CI RCUMSTANCES OF THE CASE. ACCORDINGLY, THE CONTENTIONS AND SUBMISSIONS OF THE ASSESSEE THAT THE TRANSACTION IS GENUINE, IS NOT FOUND TO BE ACCEPTABLE AND IS RE JECTED. AS REGARDS THE INTEREST PAID ON SUCH UNSECURED LOAN OF RS.60,000/- IS CONCE RNED, WHEN THE LOAN ITSELF HAS BEEN HELD TO BE NON-GENUINE AND BOGUS, THERE CANNOT BE ANY CASE OF PAYMENT OF INTEREST THEREON AND THEREFORE, IT IS HELD THAT THE AO HAS RIGHTLY DISALLOWED THE SAME. MERELY FILING OF TDS CERTIFICATE WHICH IS AT BEST AN EVIDENCE WHICH MEETS THE EYE, DOES NOT PROVE THE ACTUAL PAYMENT OF INTEREST ON SUCH LOAN BONA FIDE, WHICH HAS NOT BEEN PROVED BY THE ASSESSEE. IN VIEW OF SU CH FACTS AND CIRCUMSTANCES OF THE CASE AND DISCUSSION HEREINABOVE, THE CONTENTION S AND SUBMISSIONS OF THE ASSESSEE ARE NOT FOUND TO BE ACCEPTABLE AND ARE ACC ORDINGLY REJECTED. GROUND NOS. 3 AND 4 ARE THEREFORE, DISMISSED. 5. BEFORE US, THE LD. COUNSEL FOR THE APPELLANT SUB MITS THAT THE ASSESSEE HAD FILED BEFORE THE AO, LEDGER COPY OF THE LOAN AL ONG WITH LOAN CONFIRMATION AND COPY OF BANK ACCOUNT. FURTHER, HE HAD FILED TDS CERTIFICATE TO PROVE INTEREST PAYMENT ON SUCH LOAN. THUS, IT IS STATED B Y THE LD. COUNSEL THAT THE 4 ITA NO. 4602/MUM/2018 SHRI HITENDRA CHUNILAL SHAH PRIMARY ONUS WAS DISCHARGED BY THE ASSESSEE, WHEREA S THE AO MADE ADDITIONS WITHOUT ANY ENQUIRY OR VERIFICATION. AS T HE ADDITION HAS BEEN MADE ON THE BASIS OF PRESUMPTIONS, IT IS THE CONTENTION OF THE LD. COUNSEL THAT THE ADDITION OF DISALLOWANCE OF RS.5,60,000/- BE DELETE D. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTA TIVE (DR) SUBMITS THAT BEYOND FILING LOAN CONFIRMATION AND COPY OF BA NK ACCOUNT ALONG WITH TDS CERTIFICATE TOWARDS INTEREST PAYMENT ON THE SAI D LOAN, THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS OF THE LENDER AND GENUINENESS OF THE TRANSACTION. THUS, IT IS STATED THAT THE ORDER PASS ED BY THE LD. CIT(A) BE AFFIRMED. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED T HE RELEVANT MATERIALS AVAILABLE ON RECORD. THE REASONS FOR OUR DECISION ARE GIVEN BELOW. THE FIRST GROUND RELATES TO REOPENING OF ASSESSMEN T. IN THE INSTANT CASE, THE ASSESSEE FILED ITS RETURN OF INCOME FOR T HE IMPUGNED ASSESSMENT YEAR ON 31/10/2007, DECLARING TOTAL INCOME OF RS.1, 74,700/-. THE SAID RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE AC T. THEREAFTER, ON THE BASIS OF INFORMATION FROM THE DGIT (INV.) THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN ENTRIES OF RS.5,00,000/- FROM M/S. M OHIT INTERNATIONAL, THE AO REOPENED THE ASSESSMENT. IN THE CASE OF ACIT VS RAJESH JHAVERI STOCK BROKERS (P.) LTD. (2007) 161 TAXMAN 316 (SC), THE HONBLE SUPREME CO URT HAS HELD THAT AS INTIMATION U/S. 143(1)(A) IS NOT ASSESSMENT, THERE IS NO QUESTION OF TREATING REASSESSMENT IN SUCH A CASE AS BASED ON CHANGE OF OPINION. 5 ITA NO. 4602/MUM/2018 SHRI HITENDRA CHUNILAL SHAH IN VIEW OF THE ABOVE POSITION OF LAW, THE AO HAS, RIGHTLY REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT. T HUS, THE FIRST GROUND OF APPEAL IS DISMISSED. 6.1 THEN, WE TURN TO THE SECOND AND THIRD GROUND OF APPEAL AND DISCUSS THEM TOGETHER, AS THEY ADDRESS A COMMON ISSUE. IT I S WELL SETTLED THAT AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH PRIMA-FACIE (I) THE IDENTITY OF THE CREDITOR, (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY AND (III) THE GENUINENESS OF THE TRANSACTION, THE ONUS SHIFTS TO THE DEPARTMENT. IN THE INSTANT CASE AS MENTIONED EARLIER, THE ASSESSEE FIL ED BEFORE THE AO COPY OF LEDGER ACCOUNT ALONG WITH LOAN CONFIRMATION AND BAN K ACCOUNT. THE AO COULD HAVE MADE ENQUIRIES TO VERIFY THE TRANSACTION S CONTAINED THEREIN. HOWEVER, A PERUSAL OF THE ASSESSMENT ORDER CLEARLY INDICATES THAT THE AO HAS NOT MADE EVEN ELEMENTARY ENQUIRY TO VERIFY THE CLA IM OF THE ASSESSEE. AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLIS H PRIMA-FACIE THE ABOVE, THE ONUS SHIFTS TO THE DEPARTMENT IS AMPLY C LARIFIED BY THE DECISION IN SHANKAR IND V CIT 114 ITR 689; PRAKASH TEXTILE V CIT 121 ITR 890; CIT V UNITED 187 ITR 596; RAJSHREE V CIT 256 ITR 331; ASHOKPAL V CIT 220 ITR 452; 454; CIT V METACHEM 245 ITR 160; CIT V SHREE GOPAL 204 ITR 285. IN THE INSTANT CASE, THE ASSESSEE HAS ADDUCED EVI DENCE TO ESTABLISH PRIMA-FACIE THE LOAN OF RS.5,00,000/-. THE ONUS SHIFTED TO THE DEPARTMENT. THE AO, INSTEAD OF MAKING ENQUIRY / VERIFICATION HA S MADE THE ABOVE ADDITIONS. 6 ITA NO. 4602/MUM/2018 SHRI HITENDRA CHUNILAL SHAH IN VIEW OF THE ABOVE FACTUAL SCENARIO AND POSITION OF LAW, WE DELETE THE ADDITION OF RS.5,60,000/- MADE BY THE AO. THUS, THE SECOND AND THIRD GROUND OF APPEAL ARE ALLOWED. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED THROUGH NOTICE BOARD UNDER RULE 34 (4) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963. SD/- SD/- ( C.N.PRASAD ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: DATED: 17/09/2020 THIRUMALESH SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI
Other Referred Cases
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Laws Referred To
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Expert Summary
In the given case, the Assessing Officer observed that the assessee had taken an unsecured loan of Rs. 5,00,000/-. The assessee filed a ledger copy of the loan, stating loan confirmation and the amount of interest paid thereon. However, the AO was not convinced with the said reply and held that the assessee failed to discharge its onus under section 68 of the Act and made an addition of Rs. 5,00,000/- and further disallowed the interest expense of Rs. 60,000/-.
The Ld. CIT(A) confirmed the addition made by the Assessing Officer, stating that the assessee, beyond submitting its own loan confirmation and copy of bank account, had not been able to furnish the bank account of the unsecured creditor and therefore, the creditworthiness and genuineness of the transaction could not be proved in the facts and circumstances of the case. Further, merely filing a TDS certificate, which is at best an evidence that meets the eye, does not prove the actual bona fide payment of interest on such loan, which has not been proved by the assessee.
Relying on the judgment of Shankar Industries v. CIT [114 ITR 689], the Tribunal held that after the assessee has adduced evidence to establish the prima facie case, the onus shifts to the department. In the instant case, as mentioned earlier, the assessee filed before the AO a copy of the ledger account along with the loan confirmation and bank account. The AO could have made enquiries to verify the transactions contained therein. However, a perusal of the assessment order clearly indicates that the AO had not made even elementary enquiry to verify the claim of the assessee.
Therefore, the appeal of the assessee was allowed.
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