NITIN A. SHAH, MUMBAI V. ITO, 19(2)(4), MUMBAI

ITA 666/MUM/2023

AI Insights

The case involves Nitin A. Shah, an assessee engaged in share trading, who appealed against the order of the CIT(A)-47 Mumbai, which confirmed the additions made by the Assessing Officer under sections 68 and 153C of the Income Tax Act. The additions pertained to an unsecured loan of Rs.35,72,000 and interest income of Rs.1,18,845, which the Assessing Officer treated as unexplained cash credits and accommodation entries. The Tribunal examined the evidences provided by the assessee, including bank statements, loan confirmations, and financial statements, and found them sufficient to establish the genuineness of the transactions. Consequently, the Tribunal set aside the CIT(A)'s order and allowed the appeal in favor of the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299900 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 12-06-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 05-03-2023
• Other Referred Cases: ACIT Vs Shri Sumit J Jain, Naresh Hiran Mumbai Vs ITO, DCIT 25(1) Vs M/s YRV International, ITO Vs Vikram Muktilal Vora, DCIT Vs M/s Jainam Investments, DCIT Vs Manish Flour Mills Pvt Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TUSHAR
• Keywords: Principle of natural justice; Validity of assessment; Accommodation entries; Onus to prove; TDS; Set aside
• Section: 131; 68; 143(3); 133A; 250; 143(2); 13; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No. 666/Mum/2023 (Assessment Year: 2009-10) Nitin A. Shah 31/32, 8 th Floor, Giriraj Apartment, Teen Batti, Walkeshwar, Mumbai-400006 बनाम/ Vs. ITO,19(2)(4) 217, Matru Mandir, Tardeo, Grant Road, Mumbai –400007. ा लेखा सं./ज आइआर सं./PAN/ GIR No. : AAHPS3 826K ( /Appellant) ( / Respondent) / Appellant by : Mr. Suchek Anchaliya & Mr.Tushar Nagori.AR /Respondent by : Ms.Kavita Kaushik.DR ुनव ई त ख / D a t e o f H e a r i n g 13/06/2023 घोषण त ख /D a t e o f P r o n o u n c e m e n t 10/07/2023 आद श / ORDER PER PAVAN KUMAR GADALE - JM: The appeal is filed by the assessee against the order of the CIT(A)-47 Mumbai passed u/s 250 of the Act. 2. At the time of hearing, the Ld.AR of the assessee submitted that there is a delay in filing the appeal before the Hon’ble Tribunal and filed an affidavit for condonation of delay. Whereas, the facts mentioned in the affidavit are reasonable and the Ld.DR has no specific objections. Accordingly, condone the delay and admit the appeal. The assessee has raised the following grounds of appeal: 2 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai 1. On the facts and circumstances of the case and in laws the Ld. CIT(A) erred in confirming the assessed income at Rs44,75,330/- as against the returned income of Rs. 7,84,384/- 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not holding the assumption of jurisdiction by the Ld. Assessing Officer as bad in law as the conditions laid down for initiating assessment proceedings u/s 153C of the Act have not been fulfilled. 3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in removing the protective addition of Rs. 35,72,000/- made by the Ld. A.O. and treating it as a substantive addition, resulting in double addition of the same income. 4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in not holding that the Learned Assessing Officer erred in not providing an opportunity to cross examine to the appellant while relying on a third party statement as the same was also in violation of the principles of natural justice. 5. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition made by the Ld. A.Oof Rs 35,72,000/- by treating a genuine loan as accommodation entry without appreciating the fact that the appellant had fulfilled all conditions required u/s 68 of the Act. 6. On the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in confirming the addition of interest of Rs. 1,18,845/- on account of interest allegedly received in cash by the appellant, without providing any corroborative evidence to substantiate the same and without appreciating the fact that the appellant has not earned any interest income, other than mentioned in the return of income. 7. The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another 3 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai The Ld.AR submitted that the assessee is not pressing the ground of appeal no.2 on the validity of assessment U/sec153C of the Act. Accordingly, the ground of appeal no.2 of the assessee is withdrawn and is dismissed. 3. The brief facts of the case are that the assessee is engaged in the business as trader in shares. The assessee has filed the return of income for the A.Y 2009-10 on 25.07.2009 disclosing a total income of Rs.7,84,384/-.There was a search u/sec132 of the Act on Bhanwarlal Jain Group entities and the survey u/sec133A of the Act was conducted on 4-10-2013 at the assessee premises. Whereas, the Assessing Officer (AO) has issued notice u/s 153C of the Act as the assessee is a beneficiary of accommodation entries provided by the group entities of Bhanwarlal jain. In compliance to the notice u/s 153C of the Act, the assessee has filed the return of income disclosing a total income of Rs.7,84,384/- and the AO has issued notice u/s 143(2) &142(1) of the Act. The assessee has filed the computation of total income, balance sheet, income and expenditure account and capital account etc. The AO has dealt on the facts, during the survey operations find that the assessee has received a cover from the person by the name Mahendra Kumar R Patel in respect of Meenakshi N Shah where the envelope containing a cheque of Rs. 55,200/- which is the interest on the loan amount of Rs. 20,00,000/- for 92 days @ 12 pm and after deduction TDS and cash of Rs.30,666/- 4 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai towards interest payment. Whereas the assessee was confronted with the evidence and the facts with respect to loan transactions from M/s Millennium star of Rs.35,72,000/- and a show cause notice was issued. 4. In response to showcase notice, the assessee has filed detailed explanations with supporting material evidences referred at Page 3 Para 4 of the Assessment order as under: In response to the said show-cause notice, the assessee's AR filed submissions dated 21.03.2016. The Relevant extract of the submissions is reproduced below for the sake of ready reference :- "At the outset, I would like to state that the allegations made by your Goodself are baseless and are not borne from the material on record. As far as specific allegations are concerned, my reply to the above show cause notice is as under:- 1. Yourgoodself has stated in the show cause notice that I have taken the accommodation entry from Millenium Star. 2 You have reopened the assessment on the ground that Shri Bhanwarlal Jain is engaged in providing accommodation entries of bogus unsecured loans and advances to various beneficiaries. Shri Bhanwarlal Jain is father in law of the assessee and whatever transaction held with the father in law is genuine. 3. The assessee has taken the unsecured loan from Bajrang Singh Jain through his proprietorship concerns M/s Millenium StarThe loan was genuine and obtained from legitimate sources. 4. The loan was taken through banking channel without any cash involvement 5. Further the concern M/s Millenium Star is assessed to Income Tax and regular in filling the IT return with 6. In the present case, the assumption of jurisdiction by the assessing officer in the ongoing assessment proceedings is bad in law as the condition laid down under the Act for initiating assessment have not been fulfilled. 7. There is no corroborative evidence to prove that the assessee has taken accommodation entry from abovementioned concern. 5 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai 8. You have not provided any material in support of your claim that the assessee has taken the accommodation entry, therefore the assessee request you to provide such material/document in which the assessee's name is appearing as beneficiaries. 9. The assessee request you to provide the copy of statement on whose statement you are relying and also provide the opportunity of cross examination of all person on whose statement you are relying as a principal of natural justice. 10. The loan amount is reflected in the books of M/s Millenium Star as well as in the assessee's books and books of accounts are audited without any qualification by auditors. 11. The assessee also request to provide the material in support of your claim that the assessee has taken non genuine loan from M/s Millenium Star, as the loan from above concern is genuine and from legitimate sources. 12. The above parties are not indulged in the business of providing accommodation entries. The said party has given the genuine loan to the assessee. 13. Even if you want me to produce the sai party than the said party is ready to appear before you at any pinty of time, date for which you can give as per your convenience. 14. You are relying purely on the statement of Bhanwarlal Jain and disowning the other material available on records and intend to add the whole amount of loan in the hands of the assessee on the basis of statement of Bhanwarlal Jain and finding of Wing, which is incorrect and injustice to the assessee. The assesse request you to allow the cross examination of Shri Bhanwarlal Jain or other party whose statement you have relied as natural justice to bring the truth on record. 15. Further the prop. of firm Shri Bajrang jain has not given any statement before the Investigation Wing in respect to Search Action on Bhanwarlal Jain 16. I have already submitted the following documents in support of our claim of genuineness of loan from above Party. A Copy of account confirmation of M/s Millenium Star bBank statement duly marked showing the payment received and repaid c ITR Ack of M/s Millenium Star d Financial Statement of M/s Millenium Star 6 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai 17. Therefore considering the facts of the case and details submitted by us, it is clear that the loan taken from M/s Millenium Star is genuine. 18. Regarding the allegation that I have not disclosed the interest income to the extent of 6% l.e. difference of (18% -12%) as stated in my statement as per your good self view, I say that I have disclosed all the income in my return of incomeThe statement taken by investigation wing of mine was forcefully and without my consent. I have not earned any interest income, which I have not shown in my return of income. I am not aware what is written in the statement, because till date I have not received the copy of my statement. Upon receipt of copy of statement I will be able to comment on that However the fact remain same that whatever interest I have earned in reflected in my books of accounts." 5. Whereas the AO has dealt on the facts with respect to searched party, statements, the loan transactions and interest payments were the assessee has obtained the unsecured loan from M/s Millennium Star through banking channel. Further the A.O. has issued notice to treat the loan transactions credited in the books of accounts in the name of the group concern/entity as unexplained cash credit and required the assessee to produce the parties. Finally the AO was not satisfied with the evidences and information that the asssessee has not established the ingredients required U/sec68 of the Act in respect of the loan transactions and made an addition of unsecured loan of Rs.35,72,000/- and the interest income of Rs.1,18,845/-and assessed the total income of Rs.44,75,229/- and passed the order u/s 153C r.w.s 143(3) of the Act dated 30.03.2016. 6. Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the 7 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai grounds of appeal, submissions and findings of the AO and sustained the additions and dismissed the assessee appeal. Aggrieved by the order of the CIT(A), the assessee has filed appeal before the Hon’ble Tribunal. 7. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the addition u/s 68 of the Act irrespective of the fact that the assessee has filed the details in respect of the loan and submitted the confirmation of the loan creditor along with other details. Further, the Ld. AR submitted that the assessee maintains the regular books of accounts and has obtained unsecured loan from genuine loan creditor. Whereas, the asssesee has furnished before the CIT(A), the confirmation of loan, bank statement of both the assessee and loan creditor, audited financial statements to substantiate the genuineness, identity and creditworthiness of the loan creditors and the assessee has paid interest on loan and claimed in the financial statements. Further the Ld. AR submitted that the assessee has not received the interest from other parties as alleged by the revenue. The Ld.AR supported the submissions on the disputed issues with the evidences in the factual paper book and judicial decisions on the similar cases and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A). 8 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai 8. Heard the rival submissions and perused the material on record. The Ld. AR submitted that the CIT(A) has erred in sustaining the addition u/s 68 of the Act of unsecured loan though the assesses has filed the requisite details before the lower authorities. On perusal of the assessment order, the assessee has submitted the documentary evidences but the A.O has over looked the vital documents in respect of the sources filed by the assessee. The assessee has submitted the written submissions before the CIT(A) and the confirmation of loan creditor, PAN, Bank account details and the Income Tax returns. The assessee has to satisfy the 3 ingredients with respect to identity, creditworthiness and genuineness of the loan transaction. The CIT(A) has discussed on the provisions of the Act but has confirmed the action of the A.O. Whereas the assessee has discharged the burden of proof in filling the documents but the A.O and the CIT(A) has taken a different view and over looked the explanations of the assessee. The judicial decisions relied by the Ld.AR are as under: 1. ACIT Vs Shri Sumit J Jain in ITA.No.145/Mum/2017. 2. Naresh Hiran Mumbai Vs ITO in ITA no 1236/Mum/2017. 3.DCIT 25(1) Vs M/s YRV International in ITA,No.1414/Mum/2017. 4.ITO Vs Vikram Muktilal Vora in ITA.no.842/Mum/2017. 5. DCIT Vs M/s Jainam Inestments in ITA.NO.6999/Mum/2016. 6. DCIT Vs Manish Flour Mills Pvt Ltd. ITA.No.6729/Mum/2016. 9 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai 9. Further the assessee has cooperated in submitting the information in the assessment proceedings, whereas the A.O has ignored the information, evidences and audited financial statements and unilaterally made addition u/sec68 of the Act. The Ld. AR emphasized that the assessee has discharged the burden by submitting the financial statements of the lender where the payment is made through banking channel and identity, creditworthiness and genuineness of the lender was proved in the assessment proceedings. Further the assessee has submitted the audited financial statements, confirmations, Bank statements, copy of the income tax returns and the repayment details to substantiate the genuineness and credit worthiness of loan creditors, which are placed at page 7 to 38 of paper book and chart. The Ld.AR demonstrated the copy of bank statements reflecting the repayment of unsecured loans in the paper book which is not disputed by the revenue. Further, the A.O has failed to make further enquiries and relied on the statement recorded which was subsequently retracted and further the A.O has overlooked the factual aspects that the assessee has discharged the initial burden placed by furnishing the details. The information submitted by the assessee satisfied the three ingredients of provisions of Sec. 68 of the Act and the unsecured loan was repaid through account payee cheque / banking channels in the current financial year and subsequent year which is not disputed. The Ld.AR submitted 10 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai that the assessee has substantiated the stand by submitting the details before the A.O. and CIT(A) and discharged the burden. Hence considering the facts, circumstances and judicial decisions set-aside the order of the CIT(A) on this disputed issue and direct the assessing officer to delete the addition of unsecured loan and allow this ground of appeal in favour of the assessee. 10. On The second disputed issue with respect to addition of interest, The Hon’ble Tribunal on the similar/ identical issue in the assessee’s own case In ITA.No.1200 &1201/Mum/2021 for the A.Y. 2013-14 and A.Y. 2014-15 has granted relief and observed at Page 7 Para 5.1 to 5.4 of the order read as under: 5.1 On further appeal the finding of the Assessing Officer assessee during survey proceedings. The relevant finding of the Ld. CIT(A) is reproduced as under: “14. I have considered the arguments of the assessee and facts of the case. It is relevant to mention over here that in his statement on oath u/s.133A on 3/10/13, when the assessee was asked about interest charged on loan given, the very clearly and categorically mentioned that he was receiving quarterly interest @ 18%; 12% by cheque and 6 by cash. After that statement, there was left no doubts as to the assessee was receiving interest @GX in cash over and above interest @ 12% through cheque. Further, cash portion of interest was no where disclosed by the assessee in the books of accounts Therefore, the Assessing Officer was justified in adding a sum of Rs.62,000/- additional interest income in the hands of the assessee being cash component of interest @ 6% on loan amount. 15. During the appellate proceedings, the assessee h evidence or explanation as to why the addition made by the Assessing Officer was unfair or unreasonable. I am therefore, not in a position to deviate from the 11 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai position taken by the Assessing Officer and therefore, addition taken by the Asses upheld”. 5.2 In our opinion, the only basis for making addition for cash component of interest is the statement of Patel’, which was not in respect of loan given by the assessee. The said envelope was in respect of the loan given by Shah’. On the basis of said st statement of the assessee under section 133A of the Officer that said statement was recorded under section 131 of the Act is incorrect. On perusal of the copy of statement shah i.e. the assessee on 06/10/2013, it is clear that said was recorded under section 133A proceedings. The Hon’ble Supreme Court in the case of CIT Vs S Khader Khan Son reported in (2012) 25v taxmann.com 413 (SC) 15. During the appellate proceedings, the assessee has produced no evidence or explanation as to why the addition made by the Assessing Officer was unfair or unreasonable. I am therefore, not in a position to deviate from the position taken by the Assessing Officer and therefore, addition taken by the Assessing Officer as undisclosed interest is , the only basis for making addition for cash component of interest is the statement of ‘Sh Mahendra Kumar R , which was not in respect of loan given by the assessee. The e was in respect of the loan given by ‘Ms. . On the basis of said statement of ‘Sri Mahen statement of the assessee was recorded in survey proceedings of the Act. The contention of the that said statement was recorded under section 131 of the is incorrect. On perusal of the copy of statement shah i.e. the assessee on 06/10/2013, it is clear that said was recorded under section 133A proceedings. The Hon’ble Supreme CIT Vs S Khader Khan Son reported in (2012) 25v taxmann.com 413 (SC) has held that section 133A does not empower any ITO to examine any person on oath and so statement recorded under section 133A does not have any evidencing admission made during such a statement cannot be made basis for addition. The relevant part of the decision of the Hon’ble Supreme Court is reproduced as under: In the instant case, there was a survey operation conducted under of the Act in the assessee's premises and a statement was recorded from one of the partner. Assuming there were discrepancies and irregularities in the books of accounts maintained by the assessee, an offer of additional income for the respective assessment years was made by the parnter of the firm. 12 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai But, such statement, in view of the scope and ambit of the materials collected during the course of survey action under Section 133A shall not have any evidentiary value, as rightly held by the Commissioner and the Tribunal, since such statement was not attached to the provisions of Section 133A of the Act. It could said solely on the basis of the statement given by one of the partner of the assessee-firm that the disclosed income was assessable as lawful income of the assessee. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee.” 5.3 We find that there is no other evidence on record except the statement of the assessee recorded during which has already been 5.4 In view of above facts and circumstances, the action of the Ld. CIT(A) in sustaining the addition made by the not justified and we accordingly CIT(A). The ground No. 4 of the appeal is accordingly allowed. Whereas the facts in the present case on the disputed issue of addition of interest income are similar and identical as discussed in the above judicial decision. And respectfully fallow the judicial precedence and set aside the order of the CIT(A) on this issue and allow the grounds of appeal in favour of the assessee. 11. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 10.07.2023. Sd/- (PAVAN KUMAR GADALE) JUDICIAL MEMBER Mumbai, Dated 10/07/2023 KRK, PS 13 ITA No. 666/Mum/2023 Nitin A. Shah, Mumbai आदेश की ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. / The Appellant 2. / The Respondent. 3. ! ! " / The CIT(A) 4. ! ! "( ) / Concerned CIT 5. # $ ! , ! ! ण, मु瀓बई / DR, ITAT, Mumbai 6. $ %& ' / Guard file. आदेशानुसार/ BY ORDER, //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु瀓बई मु瀓बईमु瀓बई मु瀓बई / ITAT, Mumbai