L B Saree Emporium, Kolkata V. ACIT, Cir. 43, Kolkata

ITA 531/KOL/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 1288 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-06-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 12-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Set aside
• Section: 68; 133(6); 251; 143(2); 64; 113; 22

Judgement Text

ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 1 THE INCOME TAX APPELLATE TRIBUNAL, ‘B’ BENCH, KOLKATA Dr. Manish Borad, Accountant Member & Shri Pradip Kumar Choubey, Judicial Member I.T.A. No. 531/KOL/2024 Assessment Year: 2018-2019 L B Saree Emporium,....................................Appellant 58, Sir Hariram Goenka Street, Burra Bazar, Kolkata-700007 [PAN:AACFL4670K] -Vs.- Assistant Commissioner of Income Tax,....Respondent Circle-43, Kolkata, 3, Government Place (West), Kolkata-700001 Appearances by: Shri Sunil Surana, A.R., appeared on behalf of the assessee Shri P.P. Barman, Addl. CIT, Sr. D.R. appeared on behalf of the Revenue Date of concluding the hearing : June 06, 2024 Date of pronouncing the order : July 2 nd , 2024 O R D E R Per Dr. Manish Borad, Accountant Member:- The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 17 th January, 2024 passed for assessment year 2018-19. ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 2 2. The assessee has raised the following grounds of appeal:- “1. For that on the facts and in the circumstances of the case, the ld. CIT(A) erred in confirming the addition to the extent of Rs.1,26,50,000/- from eight parties when such addition was not justified on merits as well as in law. 2. For that on the facts and in the circumstances of the case, the ld. CIT(A) erred in directing the AO to sustain addition of interest payable in respect of the loan from eight parties which was genuine and the disallowance was not called for. 3. Brief facts of the case are that the assessee is a partnership firm engaged in saree business. E-return for assessment year 2018-19 filed on 30.10.2018 declaring a loss of Rs.12,64,310/-. Case of the assessee selected for scrutiny assessment under CASS for two issues, namely (i) unsecured loans and (ii) transactions with Company, whose registration has been cancelled by the Ministry of Corporate Affairs. Notices under section 143(2) and 142(1) were issued and duly served upon the assessee. Various information was called for in the questionnaire to which necessary reply was made. The ld. Assessing Officer observed that the assessee has shown unsecured loans amounting to Rs.7,32,58,026/-. To verify the said unsecured loan, the assessee was asked to furnish the details along with details of loans and advances taken. The assessee filed a list which contains 60 (sixty) names. The ld. Assessing Officer after examining the list noticed that in few cases either no PAN or wrong PANs were mentioned. The ld. Assessing Officer thereafter issued notice under section 133(6) of the Act to all the alleged cash creditors. However, in few cases, reply was not received. The ld. Assessing Officer thus ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 3 concluded that in case of 31 (thirty-one) parties, since no proper reply was received under section 133(6) of the Act, the total amount of unsecured loan received therefrom at Rs.3,23,00,000/- deserves to be added as unexplained cash credit under section 68 of the Act. Similarly interest expenditure claimed in respect of alleged 28 parties amounting to Rs.42,19,262/- was also disallowed. Income assessed at Rs.3,77,83,570/-. 4. Aggrieved, the assessee filed appeal before the ld. CIT(Appeals) and again furnished various details to explain the nature and source of the alleged cash credits and ld. CIT(Appeals) was partly satisfied and except for alleged eight cash creditors from which unsecured loan of Rs.1,26,50,000/- was received (referred at page 27 of the impugned order), the remaining amount of addition made under section 68 of the Act and interest expenditure claimed thereon was deleted. Now the assessee is in appeal before the Tribunal challenging the additions and disallowances confirmed by the ld. CIT(Appeals). 5. Ld. Counsel for the assessee took us through various documents placed in the paper book containing 101 pages and made submissions for each of the alleged cash creditors and stated that the assessee has submitted complete details to explain the identity and creditworthiness of the cash creditors and genuineness of the transactions. He supported his argument by placing copy of ledger accounts, income tax return, financial statement and copy of bank statement highlighting the transactions. Further reliance was placed on the decision of this ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 4 Tribunal dated 26 th July, 2023 in the case of ACIT, Circle-43- Kolkata-vs.- M/s. Parwati Lakh Udyog in ITA No. 44/KOL/2021 and the decision of Coordinate Bench Delhi in the case of ITO, Ward- 1(3), Gurgaon -vs.- Shri Balwan Singh in ITA No. 2869/DEL/2019 dated 7 th August, 2023. 6. On the other hand, ld. D.R. vehemently argued supporting the order of ld. CIT(Appeals). 7. We have heard the rival contentions and gone through the material placed before us. The addition under section 68 of the Act for the alleged unexplained unsecured loans and disallowance of interest paid on such alleged unsecured loans is in dispute before us at the end of assessee. The ld. CIT(Appeals) has confirmed the addition under section 68 of the Act amounting to Rs.1,26,50,000/- on account of three reasons, firstly some on the basis of A.O’s analysis, some on the basis of wrong PAN and some for no PAN. The details of the same is listed below:- Sr. No. Name Amount of loan 1. Mukund Chhaparia Rs.20,00,000/- 2. Anju Chowdhury Rs.20,00,000/- 3. Murari Lal Bharatiya Rs.10,00,000/- 4. Premchand Gupta HUF Rs.10,00,000/- 5. Sharda devi Sarawgi Rs. 5,00,000/- 6. Bansal Traders Rs.11,50,000/- 7. Zori Varieties Rs.25,00,000/- 8. Ganpati Developers Pvt. Ltd. Rs.25,00,000/- ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 5 Interest expenditure claimed on above stated unsecured loan has also been disallowed. 8. After going through the details filed by the assessee and the disallowance made by the lower authorities, we will first examine the applicability of section 68 of the Act for each party separately. Section 68 of the Act has direct bearing and the same provides that “when any sum is found credited in an assessee’s books for a previous year, and the assessee provides no satisfactory explanation about its nature and source, the sum may be charged to income tax as the assessee’s income for that year. In other words, if there’s an unexplained credit in the books, Section 68 allows the tax authorities to treat it as taxable income................”. 9. Now in order to examine the nature and source of the alleged cash creditors and also to verify whether the asseessee has placed sufficient material to prove the identity and creditworthiness of the cash creditors and genuineness of the transactions, we need to examine each of the documents filed in relation to each of the alleged cash creditors. 9(a). Mukund Chhaparia- Rs.20,00,000/- On going through pages from 41 to 51 of the paper book, we find that Mukund Chhaparia is a regular income tax assessee and income of Rs.4,44,200/- declared in the income tax return for A.Y. 2018-19. Bank account placed at pages 46 of the paper book indicates that there is no immediate cash deposit and regular bank balance is maintained. Financial statements are also provided. ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 6 Confirmation of accounts is placed at page 41 of the paper book. Thus, all details clearly prove that Mukund Chhaparia is an income tax assessee filing income tax returns regularly and showing sufficient income and having sufficient creditworthiness to give the alleged loan to the assessee. Thus, we do not find any merit in the finding of ld. CIT(Appeals) confirming the invocation of the provisions of section 68 of the Act in the case of this cash creditor. 9(b). Anju Chowdhury- Rs.20,00,000/- While going through the pages from 64 to 76 of the paper book, we find that along with the loan confirmation, copy of reply under section 133(6) has been filed. Copy of ITR for A.Y. 2018-19 disclosing total income of Rs.8,07,350/- is placed along with the computation of income and financial statement. Smt. Anju Chowdhury has capital balance of approximately Rs.1.86 crores and regular banking transactions are taken place. All these details are sufficient enough to explain the nature and source of unsecured loan taken by Anju Chowdhury. Thus, finding of ld. CIT(Appeals) confirming the addition under section 68 of the Act in the case of this cash creditor is set aside.. 9(c). Murari Lal Bharatiya- Rs.10,00,000/- From the record, we find that details are placed at pages 37 & 38 of the paper book. He is regularly assessed to tax and considerable income of Rs.14,53,140/- is declared. Loan confirmation letter is filed along with the copy of bank statement. Considering the income declared by the cash creditor, we do not ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 7 find any reason to doubt the nature and source of unsecured loan of Rs.10,00,000/- taken by him. Thus section 68 of the Act has been wrongly invoked. 9(d). Premchand Gupta HUF- Rs.10,00,000/- Details placed at pages no. 16 to 22 of the paper book, wherein loan confirmation is filed and copy of ITR for A.Y. 2017- 18 is placed along with financial statement and bank statement. All these details along with the fact that cash creditor is regularly assessed to tax leaves no doubt regarding identity, creditworthiness and genuineness of the transaction with this cash creditor and thus no addition u/s 68 of the Act is called for. 9(e). Sharda Devi Sarawgi- Rs.5,00,000/- We note that details have been filed at pages 23 to 36 of the paper book. Reply to notice under section 133(6) of the Act has been filed directly by the ld. Assessing Officer. Income of Rs.20,98,300/- declared in the income tax return furnished on 18.07.2018. Bank account shows sufficient balance for giving loan to the assessee. The loan has subsequently been repaid also. We are thus satisfied that there is no ground to invoke section 68 of the Act as alleged unsecured loan taken has been explained to our satisfaction. 9(f). Bansal Trades- Rs.11,50,000/- Details placed at pages 77 to 101 of the paper book. Mr. Raj Kumar Bansal is the proprietor of M/s. Bansal Traders. Loan confirmation letter alongwith copy of income tax return indicate that income of Rs.3,51,550/- has been declared. Financial ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 8 statement of M/s. Bansal Trades shows that turnover of the concern is approx. Rs.5.31 Cr. Since neither the identity is in dispute nor genuineness of transaction is doubtful and creditworthiness of the cash creditor is proved beyond doubt, addition u/s 68 of the Act is uncalled for. 9(g). Zori Varieties -Rs.25,00,000/- We observe that the details filed at pages 1 to 50 of the paper book. Sole proprietor of this concern is Sk. Jiyaur Rahaman. Income tax returns has been regularly filed. Financial statement for 2016-17 indicates that regular business activities were carried out and turnover is Rs.4.32 cr. (approx.). Bank statement is also placed. All these details are sufficient enough to prove that M/s. Zori Varieties is a genuine business concern and out of its regular funds, loan has been given to the assessee. Thus, we do not find any justification in the action of lower authorities invoking the provision of section 68 of the Act. 9(h). Ganpati Developers Pvt. Ltd.- Rs.25,00,000/- The addition was confirmed by the ld. CIT(Appeals) on the ground that no PAN was given. However, pages 52 to 63 of the paper book prove that this cash creditor is regularly assessed to tax and income tax return for A.Y. 2018-19 furnished on 13.10.2018. This being a Private Limited Company is regularly furnishing audited financial statement. Balance-sheet shows the share capital of Rs.90,00,000/- and it carries regular business activities. Copies of bank account also highlights the payment of loan to assessee and repayment subsequently. Thus, we do not ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 9 find any justification in the action of lower authorities invoking the provision of section 68 of the Act. 10. To summarize, we find that ld. CIT(Appeals) has confirmed the addition under section 68 of the Act either on account of wrong PAN or no PAN or just confirmed on the basis of analysis of ld. Assessing Officer. After going through the details, we are satisfied that the assessee has successfully explained the identity and creditworthiness of the cash creditors and genuineness of the transactions with sufficient evidences and that nature source of the alleged cash credit is explained to our satisfaction and therefore, provisions of section 68 of the Act are not attracted. Similar type of issue had come up before this Tribunal in the case of M/s. Parwati Lakh Udyog (supra), wherein also loans from individual/other persons were taken but since complete details regarding PAN, Bank statement, financial statement and income tax returns details were filed, addition under section 68 of the Act was deleted. Para 9 of this order reads as under:- “9. Apropos Ground Nos. 1 & 2, raised by the revenue against the addition made under section 68 of the Act and disallowance of interest expenditure paid thereon, we notice that the assessee has placed complete details including PAN Nos., bank account statements, financial statements and income tax details of each of the cash creditors. The ld. Assessing Officer has not indicated any discrepancy in any of these details. The ld. CIT(A) has also examined each of the cash creditors in detail including the fact that in some of the cases there are cash creditors who had already advanced funds for the assessee in the preceding year and some fresh loans have been taken. Interest has been paid through banking channels and tax has been deducted at source. The Assessing Officer failed to bring any adverse material against the assessee and the loan borrowed. Most of the unsecured loans have been repaid in the subsequent period. We, thus are of the considered view that the ld. CIT(A) after examining the facts of the case and giving finding of fact that the ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 10 assessee has explained the nature and source of alleged sum and has proved the identity and creditworthiness of the cash creditors and genuineness of the transactions and further placing reliance on the judgement of the Hon’ble Calcutta High Court in the case of CIT vs. Dataware Pvt. Ltd. (ITA No. 263 of 2011 dated 21.09.2011), Hon’ble Delhi High Court in the case of CIT vs. Sophia Finance Ltd. (1993) 113 CTR (Del.) FB 472 and Hon’ble Gujarat High Court in the case of CIT vs. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujara), has rightly deleted the addition made by the Assessing Officer under I.T.A. No. 44/Kol/2021 Assessment Year: 2013- 14 M/s. Parwati Lakh Udyog 7 section 68 of the Act and also allowed the interest expenditure. Thus, no interference is called for in the finding of the ld. CIT(A). Thus, Ground Nos. 1 & 2 of the revenue are dismissed. 11. Respectfully following the above decision as well as the other decisions referred herein above, we after thoroughly examining the details filed by the assessee are satisfied with nature and source of alleged cash credit and the same having been explained to our satisfaction and thus set aside the filing of ld. CIT(Appeals) and delete the impugned addition made under section 68 of the Act at Rs.1,26,50,000/- and also delete the disallowance of interest of Rs.9,45,564/- confirmed by the ld. CIT(Appeals), which was paid by the assessee to the alleged cash creditors. Thus Grounds No. 1 & 2 raised by the assessee are allowed. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 02/07/2024. Sd/- Sd/- (Pradip Kumar Choubey) (Manish Borad) Judicial Member Accountant Member Kolkata, the 2 nd day of July, 2024 ITA No. 531/KOL/2023 (A.Y. 2018-2019) L B Saree Emporium 11 Copies to :(1 L B Saree Emporium, 58, Sir Hariram Goenka Street, Burra Bazar, Kolkata-700007 (2) Assistant Commissioner of Income Tax, Circle-43, Kolkata, 3, Government Place (West), Kolkata-700001 (3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi; (4) CIT- , Kolkata (5) The Departmental Representative; (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S.