M/S N. G. GROUP , MUMBAI V. ITO, WARD-28(2)(, NAVI MUMBAI

ITA 503/MUM/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9232 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 01-08-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Reasonable cause
• Section: 131; 68; 271(1)(c); 144; 11; 143(3); 250; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM AND SHRI PRASHANT MAHARISHI, AM ITA No. 503/Mum/2022 (Assessment Year 2009–10) M/s N.G. G roup Plot no.8, Secto r 1 1 Off Juinaga r Ra i lw ay Station, Sanpada, Navi Mum bai –400 709 Vs. The Income Tax Officer 3rd Floor, 6th Tower, VSRCCL, Vashi Navi Mumbai–400703 (Appellant) (Respondent) PAN No. AAFFN9159E Assessee by : Ms. Ritika Agarwal, AR Revenue by : Shri Chetan M. Kacha, SR. AR Date of hearing: 02.08.2022 Date of pronouncement: 01-11-2022 O R D E R PER PRASHANT MAHARISHI, AM: 01. ITA No.503/Mum/2022 for A.Y. 2009-10, is filed by M/s NG Group (assessee/ appellant) against Appellate order passed by the learned Commissioner of Income-tax (Appeals)-26, Mumbai [the learned CIT (A)] dated 28th February 2019. 02. Assessee has raised the solitary issue in appeal against confirmation of addition of ₹14 lacs from four different parties as unexplained cash credit under Section 68 of the Income-tax Act, 1961 (the Act). 03. Assessee has raised the following grounds of appeal: - Page | 2 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 “1. BECAUSE, the CIT(A) has erred in law and on facts in treating unsecured loans aggregating to Rs. 14,00,000/- from 4 parties as unexplained cash credits u/s. 68 of the Income Tax Act, 1961. 2. BECAUSE, the appellant had sufficiently discharged its onus u/s. 68 of the Act by submitting various details such as name, address, PAN, confirmation and return of income of lenders, repayment details and bank statement of appellant highlighting loan entries. 3. BECAUSE, the unsecured loans stood repaid in subsequent years along with interest thereon and hence deeming fiction of section 68 could not have been applied to the facts of the case. 4. BECAUSE, the ld. CIT(A) has erred in law and on facts in disallowing interest amounting to Rs. 1,34,597/- paid to unsecured loans from these four parties.” 04. Firstly, the registry has noted that this appeal is filed on 21st March 2022, whereas the date of service of commutation of the order of the learned CIT (A) is 28th February 2019 and therefore, the impugned appeal is delayed by 1,057 days. 05. Assessee has filed the petition dated 17th March 2022 for condonation of delay. The petition is as under: - Page | 3 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 “The Appellant-firm is engaged in the business of building and construction activities. For AY 2009-10, the Appellant filed return of income on 30/09/2009 declaring total income at Rs. Nil. The case was reopened by Issuance of notice dated 08/02/2016 u/s. 148 of the Act. The said reassessment proceedings were completed by passing an order dated 21/12/2016 u/s. 144 r.w.s. 147 of the Income Tax Act, 1961 thereby disallowing unsecured loans amounting to Rs.40,00,000/- and interest thereon amounting to Rs.408,116/- although the same stood examined and accepted in original assessment. 2. That the Appellant filed an appeal before the CIT(A)-26, Mumbai. The CIT(A) vide his order dated 28/02/2019 passed u/s. 250 of the Act thereby deleted addition of unsecured loans except to the extent of 4 lenders amounting to Rs.14,00,000/- and interest thereon Rs.1,34,597/- on the ground that the appellant failed to submit bank statement of these 4 lenders. 3. That the CIT(A)'s order was received by the Appellant on 28/02/2019. The last date for filing appeal before the hon'ble ITAT was 30/04/2019. However, the Appellant did not file the appeal before ITAT after considering the amount of addition and advice from its CA that no penalty can be levied on mere insufficiency in furnishing some additional documents as the evidences submitted by the Appellant have not been rebutted by the Department nor have been found false. Accordingly, to buy peace Page | 4 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 with the department we did not agitate the matter further in appeal before ITAT. 4. That now, the Appellant is in receipt of penalty order dated 03/03/2022 u/s. 271(1)(c) of the Act levying penalty on such disallowance amounting to Rs.474,190/- annexed as "Exhibit A". Accordingly, the Appellant approached Adv. Ritika Agarwal (AR) for next course of action. She advised to file an appeal before the hon'ble ITAT, Mumbai against the impugned quantum order passed by and also appeal against the penalty order before CIT(A). 5. That accordingly, the Appellant is now filing an appeal before your goodself after a period of 1,051 days. Out of the total dates of delay, 567 days stands condoned due to COVID 19 pandemic by Supreme Court vide its order dated 23/09/2021 in Miscellaneous Application no. 665 of 2021 in SMW(C) no. 3 of 2020 held that in computing the period of limitation for any suit, appeal, application or proceeding, the period from 15/03/2020 till 02/10/2021 shall stand excluded. A copy of said order is annexed as "Exhibit B". Thus, the actual delay in filing the appeal is 485 days. 6. That your honours are kindly requested to condone the delay since there was "sufficient cause" for the same. The true determination of the issue on hand will only advance the cause of justice. To refuse condonation of delay on ground of technicalities Page | 5 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 would only subvert the cause of justice and prevent the correct facts from being brought to judicial notice. Affidavit of partner, Shri Vijay Ravji Gajra is enclosed herewith and marked as "Exhibit C". 7. Reliance in this regard is placed on the following judgments: (1) The Supreme Court in the case of Collector Land Acquisition v. Mst. Katiji & Ors. (1987) 167 ITR 471 (SC) held that refusing to condone delay can result In a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. (ii) In O.P. Kathpaliaa v. Lakhmir Singh (dead) & Ors. [(1984) 4 SCC 66], a Bench of three Judges had held that if the refusal to condone the delay results in grave miscarriage of justice, it would be a ground to condone the delay. Delay was accordingly condoned. (iii) In Shakuntala Devi Jain v. Kuntal Kumari & Ors. [(1969) 1 SCR 1006], a Bench of three Judges had held that unless want of bona fides of such inaction or negligence as would deprive a party of the protection of Section 5 is proved, the application must not be thrown out or any delay cannot be refused to be condoned. (iv) In Smt. Prabha v. Ram Parkash Kalra [(1987) Supp. SCC 338], Supreme Court had held that the court should not adopt an injustice- oriented Page | 6 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 approach in rejecting the application for condonation of delay. The appeal was allowed, the delay was condoned and the matter was remitted for expeditious disposal in accordance with law. (v) In M/s. Shakti Developers v. DCIT bearing ITA no. 6658 and 6659/Mum/2016, the hon'ble ITAT, Mumbai has directed the CIT(A) to condone the delay in filing of appeal before him on the ground that the assessee was indeed ill advised by his previous counsel by not suggesting to prefer an appeal against the quantum order before the Id. CIT(A) in time. Hence, this becomes a clear case of assessee getting fastened with huge taxes and penal liability due to the mistake committed by the Income Tax Practitioner. In the light of above facts, it is submitted that the delay in filling the appeal may kindly be condoned and the matter be decided on merits.” 06. The assessee has also submitted an affidavit of Mr. vijay Ravji Gajra supporting the delay for reasonable cause. 07. The learned Authorized Representative vehemently reiterated the reasons stated in the application for condonation of delay. 08. The learned Departmental Representative vehemently objected stating that the above delay is not properly explained and cannot be condoned. Page | 7 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 09. We have carefully considered the rival. We have also perused the application for condonation of delay. We find that the order of the learned CIT (A) was passed on 28th February 2019. Assessee forwarded the same to the counsel of the Assessee wherein it was advised that the addition is small therefore, same may not be contested. It was also advised that perhaps looking to the smallness of the amount the penalty would also not be levied. Subsequently, on 3rd March 2022, a penalty order under Section 271(1)(c) of the Act was passed and therefore, assessee filed the appeal. If the covid period is excluded, the delay is only of 485 days and that too because of the advice of the counsel about the smallness of the amount and presumption that no penalty would be levied. We find that when substantial justice and technicalities are pitted against each other, then the cause of substantial justice should prevail. We find that when assessee was visited with penalty , it was advised to contest the quantum of addition, that is a sufficient cause , looking to the facts and circumstances of this case. Therefore, we condone the delay in filing of the appeal of 485 days. 010. Coming the facts of the case, assessee is a partnership firm engaged in the business of developing and building of residential and commercial premises. It filed its return of income on 30th September 2009 declaring nil income. Thereafter, assessment order under Section 143(3) of the Act was passed on 30th December 2011, determining the total income of ₹2,63,63,340/-. On appeal before the learned CIT (A), assessee got part success and thereafter Page | 8 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 the appellate order was passed on 23rd July 2012, revising the total income at ₹35,34,840/-. 011. Subsequently, a survey under Section 133 of the Act was conducted on one Mr. Sailesh M Shah on 5th October, 2010, and his statement was recorded, wherein he stated that he has arranged unsecured loan in lieu of cash given by NG group during the various period and further interest was paid to the lenders through him which was withdrawn in cash and after deducting commission balance cash was handed over to NG Group. Subsequently, on 11th September 2014, Shri Sailesh Shah once again confirmed the statement originally recorded on 15th October, 2010. The learned Assessing Officer noted that there are 12 parties whose Permanent Account Number is available and through whom unsecured loan of ₹40 lacs was provided on 22nd April 2008 to the assessee. Therefore, reasons were recorded and notice under Section 148 of the Act was issued on 8th February 2016. In response to that notice on 20th February 2016, assessee requested for the reason and material for reopening. On 21st March 2016, reasons were provided. Further on 30th March 2016, Assessee requested a copy of statement of Mr. Sailesh Shah and also asked an opportunity to cross-examine him. The statement was provided on 13th October 2016. Assessee was once again asked to comply with the notice under Section 148 of the Act and an opportunity to cross-examine Mr. Sailesh Shah was provided when a summon under Section 131 of the Act was issued to assessee as well as Mr. Sailesh Shah. Assessee did not attend on that Page | 9 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 date. The Assessing Officer issued summons under Section 131 of the Act to all the 12 parties on 5th December 2016 fixed date of hearing on 9th December, 2016. The summons was served to 3 parties and 9 parties were not found at the place of residence as stated. Thereafter, a final opportunity was granted by notice dated 1st December 2016. Assessee did not comply and therefore, the learned Assessing Officer made an addition of ₹40 lacs treating that assessee has failed to prove identity and creditworthiness of the lenders as well as the genuineness of the transaction by failing to establish the onus under Section 68 of the Act. He further disallowed the interest paid to these parties of ₹4,08,116/-. Accordingly, assessment order under Section 144 read with section 147 of the Act was passed on 21st December 2016, determining the total income of ₹79,49,960/-. 012. Assessee aggrieved with assessment order preferred the appeal before the learned CIT (A). The assessee challenged the reopening of assessment, which was dismissed. The assessee has also challenged the addition of ₹40 lacs of unsecured loans. The learned CIT (A) deleted the addition to the extent of ₹21.50 lacs with respect to seven parties as genuine holding that assessee furnished copy of confirmation, return of income and bank statement of the lender. With respect to Mr. Sandeep C. Shah, he also found that assessee furnished bank statement. Accordingly, addition to the extent of the above sum was also deleted. Thus, he deleted the addition to the extent of ₹26 lacs. With respect to other parties as Page | 10 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 assessee did not furnish the bank account of the lender, the addition was confirmed. Accordingly, addition of ₹14 lacs was confirmed with respect to four parties. Assessee is aggrieved with that appellate order and is in appeal before us. 013. The learned Authorized Representative submitted a paper book containing 132 pages. She referred to page no. 90 of the Paper Book where the complete details of the lenders are submitted. It was also stated that in all the cases assessee has furnished the name of the parties from whom loans are taken, their Permanent Account Number, Their address, the manner of repayment, their confirmation, and the return of income. She submitted that merely non furnishing of bank statement of some of the lenders resulted into the confirmation of addition. 014. The learned Departmental Representative vehemently supported the order of the learned CIT (A). 015. We have carefully considered the rival contentions and perused the orders of the lower authorities. The only issue before us is the addition under Section 68 of the Act with respect to four different parties amounting to ₹14 lacs. We deal each of them as under: - i. The assessee has taken a loan of ₹ 1 lacs from Mr. Rahul Amrutalal Chedda, who is residing at 4/18, Balram Niwas, Patharu Gograswadi, Dombivali East, Thane, having permanent account number of AFGPC9780C who deposited Page | 11 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 a sum of ₹ 1 lacs on 23rd April 2008. He is also assessed by ITO ward 3(1), Kalyan. The copy of the return of income filed on 10th February 2010 for A.Y. 2009-10 was also furnished where assessee has shown total income of ₹1,47,848/-. The assessee did not submit bank statement. The amount of repayment is made by assessee showing that on 31st March 2017, one partner Mr. vijay Ravji Gajra has taken over the above loan. The assessee also showed that in the ledger account of the partner the amount is repaid. The partner has also accepted the above liability. The learned Assessing Officer on this evidence did not make any enquiry. In view of this, we find that the initial onus discharged by the assessee by submitting of these documents was not at all questioned. The notice was also served to the above assessee and therefore, the identity of the above assessee was proved. The assessee was asked to produce these persons only on 9th December 2016 whereas, the learned Assessing Officer passed the order on 21st December, 2016. Looking at the details furnished by the assessee, we find that assessee has discharged its initial onus and therefore, the addition of ₹1 lac deserved to be deleted. ii. Coming to the second addition of ₹ 4 lacs to Mr. Virendra M Shah, the assessee has submitted Page | 12 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 the identical details but could not submit the bank account of the assessee. The details submitted at page number shows that he is assessed with the Income Tax Officer, Ward 23(3)(4), Mumbai. Copy of his return of income was also furnished. The identical issue is That Mr. Narendra M Shah who also deposited of ₹4,50,000/- and also assessed with ITO Ward 23(2)(1), Mumbai. Both these sums were also identically taken over as liability by the partner. The partner has taken over the total liability of ₹6,91,14,854/- as per ledger copy submitted on page number 132 of the Paper Book. As the identity, creditworthiness and genuineness of the parties given the loan are discharged by the assessee where the learned Assessing Officer did not make any specific enquiry from the learned Assessing Officer of those parties. We find that these loans are taken over by the partner as a liability, addition deserves to be deleted. iii. With respect to the loan of Mr. Sandeep C Shah, the learned CIT (A) confirmed the addition for the reason that conformation of account was signed by Mr. Sandeep C. Shah instead of Sandeep C Shah, HUF. We find that Mr. Sandeep C Shah is the ‘Karta’ of the HUF. Therefore, confirmation is required to be signed by the ‘karta’ only. Even otherwise, in this case Page | 13 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 with respect to these lenders there is no dispute about the identity and creditworthiness and genuineness of the transaction. 01. In view of the above facts, we direct the learned Assessing Officer to delete the addition of ₹14 lacs confirmed by the learned CIT (A) with respect to unsecured loan of four different parties. We find that assessee has discharged its initial onus of proving the identity, creditworthiness of the parties and genuineness of the transaction. Therefore, the addition under Section 68 of the Act of ₹ 14 lacs is deleted. Consequentially, the disallowance of interest on these loans is also deleted. 02. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 01-11-2022. Sd/- Sd/- (AMIT SHUKLA) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 01-11-2022 Sudip Sarkar, 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// Page | 14 ITA no.503/Mum/2022 N.G. Group; A.Y. 09–10 Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai