NIKHIL VIJENDRA JAIN, PUNE V. NFAC, DELHI/ JURISDICTIONAL AO, ITO WARD 7(1), PUNE, PUNE

ITA 684/PUN/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5338 (ITAT-PUNE)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 03-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONAL LAXMIDAS SONKAVDE
• Assessee Lawyers: SANKHYA LAKADE
• Keywords: Business expenditure; Opportunity of being heard; Bogus
• Section: 68; 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI R. K. PANDA, VICE PRESIDENT AND SHRI VINAY BHAMORE, JUDICIAL MEMBER ITA No.684/PUN/2024 Assessment Year : 2018-19 Nikhil Vijendra Jain 319, East Wing, Arrora Towers, 3 rd Floor, M G Road, Pune Camp, Pune – 411001 Vs. ITO, Ward 7(1), Pune PAN: AFLPJ9744G (Appellant) (Respondent) Assessee by : Shri Suhas P Bora & Adv. Sankhya Lakade Department by : Ms. Sonal Laxmidas Sonkavde Date of hearing : 25-07-2024 Date of pronouncement : 05-08-2024 O R D E R PER R. K. PANDA, VP : This appeal filed by the assessee is directed against the order dated 14.02.2024 of the CIT(A) / NFAC, Delhi relating to assessment year 2018-19. 2. Facts of the case, in brief, are that the assessee is the proprietor of Riddhi Siddhi real estate agency carrying on the business of commission agent and property broker for several years. He also earns interest income from bank and unsecured loans given to various parties. He filed his return of income on 23.08.2018 declaring total income of Rs.8,16,220/-. The case of the assessee was selected for complete scrutiny under the E-assessment Scheme on the following issues: 2 ITA No.684/PUN/2024 “S. No. Issues i. Business Expenses” 3. During the assessment proceedings the Assessing Officer noticed from the Balance Sheet that the assessee has received unsecured loan of Rs.54,27,957/- from the following persons: “Name of lender Amount Arti Jain 1765000 Chetan Jain 1090000 Pinky Jain 1505425 Vimla Jain 1067532 Total 5427957” 4. He, therefore, asked the assessee to provide complete details including loan confirmation, ITR, Balance Sheet and Profit and Loss Account of last three years, Capital account of last two years, bank statement highlighting the receipt / re- payment of loan, etc. in respect of the above parties. After considering the scanty details submitted by the assessee, the Assessing Officer made addition of Rs.37,54,170/- u/s 68 r.w.s. 115BBE of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in respect of the following parties: S.No. Name of lender Unsecured loan received during the year Relation with assessee 1 Arti Jain Rs.3,50,000/- Sister 2 Chetan Jain Rs.4,00,000/- Brother 3 Nikhil Jain HUF Rs.8,20,000/- Own HUF 4 Pinky Jain Rs.10,99,170/- Spouse 5 Vijendra Jain Rs.4,15,000/- Father 6 Vimla Jain Rs.6,70,000/- Mother Total Rs.37,54,170/- 3 ITA No.684/PUN/2024 5. Similarly, the Assessing Officer not being satisfied with the submissions made by the assessee regarding commission expenses debited at Rs.46,26,130/-, disallowed 30% of the same totaling to Rs.13,87,839/-. The Assessing Officer also disallowed salary and wages expenses amounting to Rs.6,18,678/- being 30% of the total amount debited at Rs.20,62,261/-. The Assessing Officer further made addition of Rs.10,60,126/- as unexplained expenditure u/s 69C of the Act on the ground that the assessee did not make any submission in response to the notice issued to him in respect of large payment of credit card bills. 6. In appeal, the CIT(A) / NFAC deleted the addition of Rs.10,60,126/- made by the Assessing Officer u/s 69C but sustained the remaining additions. 7. Aggrieved with such order of CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: On facts and in law, 1. The learned CIT (Appeals), NFAC, Delhi erred in law and on facts in confirming the addition made by the A.O. U/Sec.143(3) of The Income Tax Act, 1961. 2. The learned CIT (Appeals), NFAC, Delhi has erred in confirming the addition of Rs.37,54,170/- U/s. 68 of The Income Tax Act, on the ground that Appellant has not fully furnished the supporting evidences, in respect of identity, credit worthiness and genuineness of transactions. 3. The learned CIT (Appeals), NFAC, Delhi has failed to appreciate that loans borrowed are from immediate relatives and are by account payee cheques, all the parties are assessed to tax, have filed confirmation letters and also copies of ITR are filed by them and therefore addition of Rs.37,54,170/- is uncalled for. 4. The learned CIT (Appeals), NFAC, Delhi failed to appreciate that the Appellant has proved the identity, capacity, creditworthiness and genuineness of the transaction before the A.O. and therefore addition of Rs.37,54,170/- is uncalled for. 4 ITA No.684/PUN/2024 5. The learned CIT (Appeals), NFAC, Delhi has erred in confirming the addition of Rs.13,87,839/- made by the A.O., in respect of commission expenses on the ground that commission payment made on the sales are without any supporting bills and vouchers. 6. The learned CIT (Appeals), NFAC, Delhi has failed to appreciate that the Appellant has submitted full details about the recipient of the commission viz. Name, Address, PAN of the parties to whom commission was paid, amount and mode of payments, Ledger account of commission expenses and nexus between Commission Income & Expenses. 7. The learned CIT (Appeals), NFAC, Delhi has while confirming the adhoc addition made by the A.O. to the extent of 30% of expenses has erred in not appreciating following important facts :- a. It is not the case of the A.O. that these expenses are sham or bogus. b. It is not the case of the A.O. that these expenses are not through proper banking channel. c. The expenses have clear nexus commensurate with the sales. 8. The learned CIT (Appeals), NFAC, Delhi has erred in confirming the ad- hoc addition of Rs.6,18,678/- which is 30% of total expenditure of Rs.20,62,261/- on account of salary and wages on the ground that appellant has not furnished evidence of payment and therefore correctness of the claim was not verifiable. 9. The learned CIT (Appeals), NFAC, Delhi has while confirming the adhoc addition made by the A.O. failed to appreciate the following. a. Details , viz. Name, Address, PAN of the employees/labour to whom salary & wages were paid, amount and mode of payment. b. Ledger account of salary & wages expenses. c. The Appellant has also submitted details of the expenses incurred under the head 'Salary and Wages‟ as under: - Particulars Amount (Rs) Documentary Evidences Produced Total Amount debited to P & L during the year 20,62,261/- Party-wise details of amount paid and modes of payment Total Amount paid during the year 19,29,600/- Ledger Account of Salary Expenses, Party-wise details of Amount paid and mode of payment. Total Amount Payable at the end of the year 1,32,661/- Salary payable for the Month of March 2018 paid in FY 2019-20 Hence, the addition confirmed by the CIT(Appeals) is uncalled for.” 5 ITA No.684/PUN/2024 8. The Ld. Counsel for the assessee submitted that the assessment order was passed on 22.05.2021 which was during Covid period and therefore the assessee was not in a position to make proper submissions before the Assessing Officer. He submitted that despite full details given before the CIT(A) / NFAC, the Ld. CIT(A) / NFAC without considering the same and without applying his mind has upheld the action of the Assessing Officer in a cryptic order which is not proper. He accordingly submitted that he has no objection if the matter is restored to the file of the Assessing Officer with a direction to adjudicate the same afresh. 9. The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and Ld. CIT(A) / NFAC. 10. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us. So far as the first issue is concerned in the grounds as per grounds of appeal Nos.2 to 4, we find the same relates to the order of the CIT(A) / NFAC in confirming the addition of Rs.37,54,170/- made by the Assessing Officer. A perusal of the order of the CIT(A) / NFAC shows that the assessee has filed full details including the bank statements, ITR, Balance Sheet and Profit and Loss Account, etc. It is the submission of the Ld. Counsel for the assessee that the CIT(A) / NFAC without understanding the journal entries through which certain amounts were paid, has confirmed the addition on the ground that the assessee did not fully furnish with 6 ITA No.684/PUN/2024 supporting evidence. We find the relevant observations of the CIT(A) / NFAC reads as under: “4.3. The issues were considered. The assessment order, written submission and relevant provisions of the law were carefully perused. The appellant submitted some details of creditors in the written submission. The appellant furnished the bank statement, confirmation and copy of the books of the creditors in support of his claim. The paper/ documents attached were carefully perused and it was found that the amounts mentioned in the bank statement and confirmation/balance sheet of the creditors are not commensurate with the amount of unsecured loan claimed. Even in the cases where the return of income is available, it does not reflect the income supporting the creditworthiness, of the creditors. It is a trite law that once the appellant fails to discharge the onus cast on it to explain the nature and source of any sum of money and does not prove the identity and creditworthiness of the person along with the genuineness of the transactions, the amount is deemed to be the income of the appellant as per the deeming provisions of sections 68 of the I T Act. The deeming provisions of the law are attracted in the facts and circumstances of the case whereby the AO is justified to make an addition to the total income of the amount of cash deposits, as the same was not explained by the appellant. The identity, creditworthiness of the persons giving the sum of money and genuineness of transactions could not be proved to the satisfaction of the AO during the assessment proceedings. Even during the appellate proceedings before the undersigned, the details are not fully furnished along with supporting evidence. Hence, I do not find infirmity in the assessment order and accordingly I am not inclined to interfere with the decision of the AO. The above Ground No. 1 of appeal is hereby dismissed.” 11. Since the CIT(A) / NFAC in the instant case has not considered the various details furnished by the assessee in the paper book despite recording the same and since there are journal entries through which the assessee has accepted the loans, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the first issue raised by the assessee in the grounds of appeal to the file of the Assessing Officer for fresh adjudication. Needless to say the Assessing Officer shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. The first issue is accordingly allowed for statistical purposes. 7 ITA No.684/PUN/2024 12. So far as the second issue is concerned, the same relates to the addition of Rs.13,87,839/- on account of disallowance of commission by the Assessing Officer (as per ground Nos.5, 6 & 7). A perusal of the assessment order shows that the assessee has debited a sum of Rs.46,26,130/- as commission expenses and in absence of any satisfactory explanation, the Assessing Officer disallowed 30% of such commission. We find the CIT(A) / NFAC in appeal sustained the addition made by the Assessing Officer by observing as under: “6.2. The issues were considered. The relevant portion of the assessment order, written submission and relevant provisions of the law were carefully perused. In the written submission the appellant stated that due to covid pandemic, the explanation could not be furnished. The appellant furnished the ledger account of commission expenses and summarized the commission detailed table. In the commission table the appellant showed 'Bank' as the mode of payment. However, in the submission of the appellant there is a difference in the amount of commission debited and paid. The debited amounts reflected as Rs.46,26,130/- and the Paid amount is Rs.34,76,130/-. Moreover the commission is found to be made on the sales invoice, which is found to be without any supporting bills and vouchers. As a result, the correctness of the claim was not found to be verifiable. Hence, I am not inclined to interfere with the decision of the AO. Accordingly, the disallowance of Rs.13,87,839/- is confirmed and Ground No.3 is hereby dismissed.” 13. Since as per the order of the CIT(A) / NFAC, the commission payable has been disallowed on the ground that no complete details were furnished and since it is the submission of the Ld. Counsel for the assessee that full details were given and given an opportunity, the assessee is in a position to substantiate with evidence to the satisfaction of the Assessing Officer regarding such discrepancies, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to adjudicate the same afresh. Needless to say, the Assessing Officer shall provide an opportunity of being heard to the assessee and decide the issue as per fact and law. 8 ITA No.684/PUN/2024 14. The last issue that remains for adjudication is the adhoc disallowance of Rs.6,18,678/- being 30% of Rs.20,62,261/- on account of salary and wages. A perusal of the assessment order shows that the Assessing Officer, in absence of any satisfactory explanation, disallowed 30% of the salary expenses debited to the Profit and Loss Account at Rs.20,62,261/-. We find the CIT(A) / NFAC has sustained the addition by observing as under: “7.2 The issues were considered. The relevant portion of the assessment order, written submission and relevant provisions of the law were carefully perused. In the written submission the appellant stated that due to covid pandemic, the explanation could not be furnished. The appellant furnished the ledger account of Salary and Wage expenses along with his written submission. The ledger account was perused and found that these expenses were recorded as „payable'. Any proof of actual payment and receipt from the receiver was not furnished. As a result, the correctness of the claim was not found to be verifiable. Hence, I am not inclined to interfere with the decision of the AO. Accordingly, the disallowance of Rs.6,18,678/- is confirmed and Ground No.3 is hereby dismissed.” 15. It is the submission of the Ld. Counsel for the assessee that merely because the amount is shown as payable, there is no justification in making the disallowance especially when the actual payment has been made after the Balance Sheet date. Since the Ld. Counsel for the assessee submitted that everything was given before the CIT(A) / NFAC and still he sustained the addition, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue also to the file of the Assessing Officer for adjudication afresh after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The grounds of appeal raised by the assessee are accordingly allowed for statistical purposes. 9 ITA No.684/PUN/2024 16. In the result, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open Court on 5 th August, 2024. Sd/- Sd/- (VINAY BHAMORE) (R. K. PANDA) JUDICIAL MEMBER VICE PRESIDENT प ु णे Pune; दिन ांक Dated : 5 th August, 2024 GCVSR आदेश की प्रतितिति अग्रेतिि/Copy of the Order is forwarded to: 1. अपीलार्थी / The Appellant; 2. प्रत्यर्थी / The Respondent 3. 4. The concerned Pr.CIT, Pune DR, ITAT, ‘A’ Bench, Pune 5. गार्ड फाईल / Guard file. आदेशानुसार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण ,पुणे / ITAT, Pune S.No. Details Date Initials Designation 1 Draft dictated on 26.07.2024 Sr. PS/PS 2 Draft placed before author 29.07.2024 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr. PS/PS 7 Date of uploading of Order Sr. PS/PS 8 File sent to Bench Clerk Sr. PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order