Pawan Kumar Gupta, Kolkata V. ITO, Wd. 45(4) , Kolkata

ITA 465/KOL/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3435 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 30-07-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

1 ITA No.465/Kol/2020 Pawan Kumar Gupta, AY: 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL “A(SMC)” BENCH, KOLKATA [Before Shri A. T. Varkey, JM] I.T.A. No. 465/Kol/2020 Assessment Year: 2012-13 Pawan Kumar Gupta (PAN: ADLPG7042P) Vs. Income-tax Officer, Wd-45(4), , Kolkata. Appellant Respondent Date of Hearing (virtual) 09.02.2022 Date of Pronouncement 18.02.2022 For the Appellant Shri Somnath Ghosh, Advocate For the Respondent Smt. Archana Gupta, Sr. DR ORDER This is an appeal preferred by the assessee against the order of Ld. CIT(A)-13, Kolkata dated 21.07.2020 for AY 2012-13. 2. At the outset, the Ld. AR of the assessee Shri Somnath Ghosh did not press ground no. 5 which is against the action of the Ld. CIT(A) in confirming the ad-hoc disallowance of Rs.23,143/-, therefore, this ground of appeal of assessee stands dismissed and the order of the lower authorities stands confirmed. 3. Coming to the next ground of appeal of the assessee is against the action of the Ld. CIT(A) upholding the action of the AO wherein the AO added Rs.12,38,000/- u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) and Rs. 53,661/-. 4. Brief facts of the case as noted by the Ld. CIT(A) are as under: “The issue raised in these grounds pertains to the addition of Rs.12,38,000/- made by the Assessing Officer on account of loan received from seven individuals and disallowance of Rs.53,661/- made on account of interest paid in lieu of as follows: 2 ITA No.465/Kol/2020 Pawan Kumar Gupta, AY: 2012-13 The Assessing officer observed that on perusal of the bank statements of such loan creditors that there were no major transactions made by these loan creditors through banking channel apart from the loan transaction. It was also found by the Assessing Officer that the loan creditors had deposited lumpsum amount of cash in their bank accounts alleged by the appellant to be cash in hand held by them. It was further found by the Assessing officer that the said deposits in the bank accounts of the loan creditors were made in order to facilitate the loan transaction with the appellant. In other words, it is the case of the Assessing Officer that the financials of loan creditors were artificially created to justify the cash in hand held by them and to authenticate the loan transaction with the appellant. Therefore, the Assessing Officer observed that the source of fund in form of loans received from the seven individuals were not satisfactory explained and therefore, he added the sum of Rs.12,38,000/- to the total income of the appellant, as unexplained credit under section 68 of the Income Tax Act, 1961. As a corollary, the interest paid in the sum of rs.53,661/- on this account was also disallowed.” 5. Aggrieved by the aforesaid order of the Ld. CIT(A) confirming the action of AO, the assessee has preferred this appeal before this Tribunal. 6. Having heard rival submissions and after having carefully gone through the facts and circumstances of the case, it is noted that the assessee had received loan from seven individuals to the tune of Rs.12,38,000/- and has claimed to have paid an interest of Rs.53,661/- (supra). According to AO, these loan creditors are all family members of the assessee and that just before the loan was paid by cheque to the assessee, there was cash deposit to facilitate the issue of cheque to the assessee. According to AO, when confronted with this fact, the assessee brought to the notice of the AO that the assessee has taken unsecured loan from these seven (7) parties and that he would be able to prove the nature and source of the credit entry to the tune of Rs. 12,38,000/- i.e. the identity, creditworthiness and genuineness of the transaction as contemplated u/s 68 of the Act. According to the assessee, as per section 68 of the Act as applicable for AY 2012-13 the assessee has to prove the nature and source of the credit. Accordingly, before the AO, the assessee was able to place evidence to substantiate the identity, creditworthiness and genuineness of the loan transacted with all the seven individuals from whom the assessee has received the loan amount and to whom the assessee has paid interest. It was pointed out to me that all the loan creditors (seven) were all (i) income tax assessees as well as the fact that (ii) they all had filed confirmation of giving loan to the assessee and that the (iii) entire transaction has happened through the banking channel. Further in this regard, the Ld. A.R. drew our attention to the AO’s finding of fact that “on going through the reply and documents as submitted it revealed that all the loan creditors are family members of the assessee and from the Balance Sheet of all the loan creditors it is found that all of them 3 ITA No.465/Kol/2020 Pawan Kumar Gupta, AY: 2012-13 have cash in hand as on 31.03.2012 (emphasis given)”. Therefore, according to the assessee as per the law as it stood in AY 2012-13, the assessee had to demonstrate before the AO to his satisfaction the nature and source of the credit entry. And according to him, the assessee has discharged this burden by proving the identity, creditworthiness and genuineness of the loan transaction from the seven (7) persons, so the AO ought not to have added the same u/s 68 of the Act. It is noted that the assessee in this case has filed the following documents to prove the identity, creditworthiness and genuineness of the loan transaction. In such a back ground, unless the material placed by the assessee to prove the nature and source of the credit entry is rebutted by the AO, no addition can be made u/s 68 of the Act: (i) Confirmation of Account, (ii) ITR filed for AY 2012-13 of all seven (7) loan creditors, (iii) Balance Sheet of each loan creditor as on 31.03.2012, (iv) Copy of the Bank statement 7. From a perusal of the aforesaid documents, I find that all the seven individuals who have lent money to the assessee to the tune of Rs. 12,38,000/- has filed the aforesaid documents to prove the identity, creditworthiness and genuineness of the loan transaction (refer page 16 to 47 of Paper Book). In the light of the aforesaid documents, I am of the opinion that the assessee has discharged the burden on him to prove the identity, creditworthiness and genuineness of the loan transaction. And it is noted that the AO has not been able to controvert the material placed before him by finding any infirmity in it. Thus it is noted that the AO has drawn adverse inference against the assessee without any basis and it was only on the basis of surmises and conjectures. Other than alleging that there was deposit of cash before the cheque was given to the assessee as loan, it is noted that the AO has not taken one step ahead from that observation. According to me, when the AO noticed that there was deposit of cash just before the cheque was given to the assessee as loan, then that should have been the triggering point to enquire into the genuinety of the claim; and he should have enquired from these lenders about the purported deposit of cash in their accounts before lending money to assessee. However, no such enquiry has been made by the AO to draw adverse inference against this loan transaction. Moreover, it is noted that the AO on same breath has given a finding of fact that these seven creditors had 4 ITA No.465/Kol/2020 Pawan Kumar Gupta, AY: 2012-13 enough cash in hand as on 31.03.2012 (supra), therefore, in the facts and circumstances of the case as discussed, I am of the opinion that no addition u/s. 68 of the Act was warranted . Therefore, the addition of Rs. 12,38,000/- and the interest payment of Rs. 53,661/- is directed to be deleted. 7. In the result, the appeal of the assessee is partly allowed. Order is pronounced in the open court on 18 th February, 2022 Sd/- (A. T. Varkey) Judicial Member Date 18 th February, 2022 JD(Sr.P.S.) Copy of the order forwarded to: 1. Appellant – Shri pawan Kumar Gupta, C/O, S. N. Ghosh & Associates, Advocates, ‘Seben Brothers Lodge’, P.O. Buroshibtala, P. S. Chinsurah, dist. Hooghly, West Bengal-712 105. 2 Respondent – ITO, Ward-45(4), Kolkata.. 3. 4. 5. CIT(A)-13, Kolkata. CIT Kolkata. DR, ITAT, Kolkata. (sent through e-mal) /True Copy, By order, Assistant Registrar