Shri Dineshchandra Laxmandas Dalal, Ahmedabad V. The ITO, Ward-5(3)(4), Ahmedabad

ITA 481/AHD/2020

AI Insights

The case revolves around an appeal by Shri Dineshchandra Laxmandas Dalal against the order of the Commissioner of Income-tax (Appeals), which confirmed the addition of Rs.77,93,151/- as unexplained credits under section 68 of the Income-tax Act, 1961. The primary contention was the misclassification of unsecured loans as sundry creditors in the income tax return. The assessee argued that the substantial amount recorded as sundry creditors was actually unsecured loans, a claim supported by various documents including a hand-written balance sheet and confirmations from the lenders. However, both the Assessing Officer and the CIT(A) rejected this explanation due to the lack of an audited balance sheet and the failure to file a revised return. The Tribunal, after reviewing the evidence, concluded that the assessee had adequately substantiated the nature of the credits and that the rejection of his explanation by the lower authorities was unjustified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132737 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-11-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 29-09-2020
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Corroborative evidences; Revised return
• Section: 44AB

Judgement Text

आयकर य कर , हमदाबाद याय ‘‘स ’’ हमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE MRS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MRS. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 481/Ahd/2020 /Assessment Year: 2015-16 Shri Dineshchandra Laxmandas Dalal, B-113, Shree Ghantakaran Mahavir Market, Raipur, Ahmedabad PAN : ABCPD 8859 M Vs. Income Tax Officer, Ward 5(3)(4), Ahmedabad ा / (Appellant) य / (Respondent) Assessee by : Shri Chetan Agrawal, CA Revenue by : Shri Atul Pandey, Sr DR /Date of Hearing : 15.11.2022 /Date of Pronouncement: 25.01.2023 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order of learned Commissioner of Income-tax (Appeals), Ahmedabad-5 (hereinafter referred to as “CIT(A)”) dated 10.09.2018 passed u/s 250(6) of the Income-tax Act, 1961, (hereinafter referred to as “the Act”) for Assessment Year (AY) 2015-16. 2. At the outset itself, it was stated that the sole issue in the present appeal is related to the addition made of unexplained credits amounting to Rs.77,93,151/-. The grounds raised by the assessee in this regard read as under:- “1. Ld. CIT(A) erred in law as well as in fact in confirming addition of Rs.77,93,150/- made u/s 68 by AO though name, address, PAN and confirmation filed before Ld. AO and Ld. CIT(A) discharging initial onus cast upon appellant, without making further inquiries. 2. Ld. CIT(A) erred in law as well as in fact in disposing off appeal without providing reasonable and sufficient opportunity of hearing.” 2 ITA No. 481/Ahd/2020 Shri DineshchandraLaxmandasDalalVs. ITO AY :2015-16 3. We have heard the contentions of both the parties. As transpires from the orders of the authorities below, the assessee is in the cloth business. His turnover during the year was Rs.25,68,125/-; at the same time his return of income reflected sundry creditors to the tune of Rs.77,93,151/-. On being asked to explain the huge balance of sundry creditors as opposed to the turnover of the assessee, the assessee contended that the balance in the return of income inadvertently reflected as pertaining to sundry creditors while the fact of the matter was that it primarily related to the unsecured loan of Rs.73,30,287/- and the outstanding balance of creditors was only Rs.2,43,991/-. A hand written balance-sheet of the assessee was filed along with the confirmations from the unsecured loans, but the same was all rejected both by the Assessing Officer and by the Ld. CIT(A) for the reason that the assessee had failed to correct this anomaly by way of filing a revised return and the hand written balance-sheet was not audited and hence unreliable. 4. Before us, the Ld. Counsel for the assessee has reiterated the contentions made before the lower authorities. 5. The Ld. DR, on the other hand, has relied on the order of the Ld. CIT(A) whose findings at paragraph No.4.3 of his order are as under:- “4.3 During the course of assessment proceedings, the AO noticed that the assessee had shown sundry creditors of Rs.77,93,151/- and Nil unsecured loans. The AO asked the assessee to explain the abnormal rise in the creditors with supporting evidences. The assessee had submitted the balance-sheet of the firm wherein the assessee has shown unsecured loan of Rs.73,30,287/- and creditors of Rs.2,43,991/-. This balance sheet is not an audited balance sheet by an authorized Chartered Accountant nor is signed by assessee himself. Therefore, the authenticity and veracity of this balance sheet is unreliable. Considering all these facts, the AO held that the creditors of Rs.77,93,151/- are considered to be cash credits and accordingly the same is added to the total income of the assessee. During the course of appellate proceedings the appellant has not submitted any new details/evidences regarding his claim. Appellant’s contentions in the written submission, as reproduced above, are general, vague and unsubstantiated. AO’s observations remain uncontroverted. From the perusal of assessment order, it is noticed that the assessee has failed to furnish evidences 3 ITA No. 481/Ahd/2020 Shri DineshchandraLaxmandasDalalVs. ITO AY :2015-16 of making the claim. Considering the above discussion, no interference is called for. Accordingly the addition made by the AO is confirmed and ground of appeal is dismissed.” 6. Having heard the contentions of both the parties and perused the documents filed before us, we are convinced with the explanation of the Ld. Counsel for the assessee regarding the nature of the balance outstanding as sundry creditors of Rs. 77,93,151 /- as pertaining majorly to unsecured loans of Rs.73,30,287/-,inadvertently reflected as sundry creditors in the return of income filed. That the balance relating to sundry creditors was only Rs.2,43,991/-. The assessee had filed a balance-sheet reflecting the said fact for the impugned year. Further, he had filed evidence of the genuineness of the unsecured loans giving entire break-up of the balance along with the evidences by way of confirmation, ledger account from the books of accounts, Income-tax returns of the unsecured loans and copy of bank statement of the depositors also. It is clearly evident that the assessee had established the fact that the entire amount of Rs.77,93,151/- did not pertain to creditors but was on account of unsecured loans. None of the evidence by way of confirmation and genuineness of these unsecured loans has been controverted by the Revenue either before the Ld. CIT(A) or even before us. The infirmity noted by the revenue authorities of the balance-sheet being unaudited, we find, is of no relevance. Under law, as per Section 44AB of the Act, the books of accounts of the assessee are necessarily required to be audited only if the turnover exceeds Rs.60 lakhs. In the present case, since the assessee’s turnover was only Rs.25 lakhs odd, there was no requirement to get its books audited. As for the non- reflection of the correct balance of sundry creditors by way of revised return of income, the same also we find is not pertinent to the issue. It is not a revised claim of income or expense but only a revision of the credit balances of the assessee, which were to be reflected in the return of income. The same need not be corrected only by way of filing revised return of income nor does the fact of not doing so in any way change the character of the balances as long as it is 4 ITA No. 481/Ahd/2020 Shri DineshchandraLaxmandasDalalVs. ITO AY :2015-16 established on record by way of Balance sheet of the assessee reflecting the correct balances evidenced with documents establishing their genuineness. 7. The fact that the assessee’s balance-sheet reflected the balance of Rs.77,93,151/- as pertaining to majorly unsecured loans whose confirmations and genuineness was also filed by the assessee which evidences were not controverted by the Revenue; it is but obvious that the assessee had demonstrated and established with evidences that the sundry creditors shown as outstanding in its return of income of Rs.77,93,151/- was not on account of creditors alone. The rejection of the explanation so offered by the assessee is, therefore, we find, unjustifiable. The addition made on account of unexplained credit of Rs.77,93,151/- is , therefore, directed to be deleted. 8. In effect, the appeal of the assessee is allowed. Order pronounced in the open Court on 25 th January, 2023 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad; Dated 25/01/2023 **bt आदेश क ! " #े"$ /Copy of the Order forwarded to : 1. ा / The Appellant 2. य / The Respondent. 3. स%ब% आयकर आय & ' / Concerned CIT 4. आयकर आय & ' ) (/ The CIT(A)- 5. "*+ा, य - ,आयकर य कर ,राजोकट/DR,ITAT, Ahmedabad, 6. ,ा23 4ा5 /Guard file. आदेशा- & सार/ BY ORDER, TRUE COPY सहायक %ज कार (Asstt. Registrar) आयकर य कर ITAT, Ahmedabad