Kuruvilla P Keru, Navsari V. DCIT, Navsari

ITA 719/SRT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8572 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 10-12-2023
• Assessment Year: 2020-2021
• Appeal Filed On: 18-10-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSING OFFICER WAS NOT CONSIDERED
• Keywords: Bogus purchase; Source of fund; TDS; Bogus
• Section: 133(6); 37(1); 251; 143(2); 264; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 719/Srt/2023 (Assessment Year 2020-21) (Physical hearing) Kuruvilla P Keru, M/s Suhagan Jewellers, Shop No. 107, Krishna Complex, Samroli, Chikhli, Gujarat-396521. PAN No. AAHPK0722C Vs. D.C.I.T., Navsari Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri Rajesh. C. Shah, C.A. Department represented by Shri S.M. Keshkamat, CIT-DR Date of hearing 11/12/2023 Date of pronouncement 22/02/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC)/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A) dated 06/10/2023 for the Assessment Year (AY) 2020-21. The assessee has raised following grounds of appeal: “1. The Ld. CIT(A) has erred in confirming the addition made by Ld. AO u/s 68 of the Act for Rs.7,83,00,173/-. 2. The Ld. CIT(A) has erred in confirming the addition made by Ld. AO for Rs.7,83,00,173/- for creditworthiness of depositors, particularly when the assessee has submitted all the required details as per section 68 of the Act such as confirmation of accounts, bank statement, ITR and not only source of loan but source of sources of loan. ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 2 3. The Ld. CIT(A) has further, erred in confirming the addition of Rs.7,83,00,173/- whereas the assessee has received just total loan of Rs.2,16,29,000/- during the year under consideration from 11 parties mentioned the assessment order. The Ld. CIT has ignored the submission of the assessee on this issue. 4. The Ld. CIT (A) has erred in confirming the addition of Rs.7,83,00,173/- for which 11 parties has been mentioned in the assessment order and there are no transaction worth of Rs.7,83,00,173/-. The assessee has submitted that how the figure of addition is work out but not considered by the Ld. CIT(A). The total transaction with all the 11 parties are as under: Opening Balance 1,76,54,037/- Add: received during the year 2,16,29,000/- Add: Interest 38,38,044/- ---------------------- Total 4,31,21,081/- Less: Amount return 9,55,821 TDS 3,79,424 ---------------------------- 13,25,245/- --------------------------------- Closing Balance 4,17,85,836/- =================== How, the figure of Rs.7,83,00,173/- is arrived by the Ld. AO and how the Ld. CIT(A) has arrived the figure of Rs,7,83,00,173/- to confirm the addition. 5. The Ld. CIT(A) has erred in confirming the addition u/s 68 of the Act, which includes the opening balance and not considered the submission of the assessee in this regard. 6. The Ld. CIT(A) and the Ld. AO has erred in mentioning in the order that the assessee has made part submission however failed to mentioned which submission asked in the notice and not submitted by the assessee. 7. The Ld. CIT(A) has erred in confirming the addition of Rs. 1,01,84,012/- being non genuine purchase. 8. The Ld. CIT(A) has erred in confirming the addition of Rs.1,01,84,012/- as non-genuine whereas the assessee has submitted copy of all bills, payments details, GST returns, stock details and confirmation of accounts from concerned parties and Ld. CIT(A) as well as the Ld. AO has not pointed any mistake in such details. ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 3 9. The Ld. CIT(A) has erred in confirming the addition of Rs, 1,01,84,012/-, whereas there is no allegations or findings against all the three parties in income-tax or GST that the parties are not genuine. 10. The appellant reserves the right to add, alter, amend or withdraw any grounds of appeal.” 2. Brief facts of the case are that the assessee is an individual and proprietor of Suhagan Jewelers, engaged in the business of jewellery, filed his return of income for the A.Y. 2020-21 on 31/10/2020 showing net taxable income of Rs. 22,95,910/-. The case was selected for scrutiny on the issues of business purchases, high creditors’ liability and unsecured loans. The Assessing Officer after serving notice under Section 143(2) of the Income Tax Act, 1961 (in short, the Act), proceeded for assessment. During the assessment, on verification of assessee’s account, the Assessing Officer found that the assessee has shown huge unsecured loans. The Assessing Officer further recorded that he made attempts to verify the identity and creditworthiness of lenders and genuineness of transactions from whom the assessee has shown unsecured loans. The assessee was asked to provide details of lenders. In response, the assessee furnished information. On the basis of such information, the Assessing Officer prepared tabulated report about unsecured loans of Rs. 7.83 crores at page No. 4 and 5 of his order in the following manner: Sl No . Name of the party Address PAN Opening balance as on 1/4/2019 Fresh loan taken during the year Repay ment during the year Rate of Inter est Interest paid Tax Deducted with proof Closing balance as on 31.3.2020 ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 4 1 Suresh Chaudhri H. No. 11, Abhishek park, OId Valsad Rd. Samroli, Chikli ADNPC8624J 3351772 350000 320000 12.00 % 414558 41456 3754874 2 T John (Thresiamma John) Amrutkunj, Rinchhed Tal, Charbhuja, Rajsamand, ABMPJ8775 C 4884565 165000 0 0 12.00 % 758071 75807 7207809 3 Vimal P.K. Kuruvilla 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli AJSPK9083A 1229191 995500 0 370000 12.00 % 1181329 118133 11877387 4 Hitesh Corporation (H.C. Jain HUF) 303, Kishan Apartment, Desai Vad, Vapi AAEHH1471 G 0 100000 0 90000 1200 % 1000000 10000 1000000 5 Lehrulal Jat Junda Railmagra, Rajsamand, Rajasthan ACDPJ0183G 0 250000 0 250000 12.00 % 281096 28110 2502986 6 Babita Vimal Kuruvilla 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli ANSPK4145R 2806090 322900 0 0 12.00 % 521859 52186 6504763 7 Jagdish Candra M Jat Krishna Complex High School Rd. Simroli, Chikli BDSPJ9650H 238924 260000 0 12.00 % 43814 4381 538357 8 Johnson PK 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli AGFPJ6247F 2443495 235000 0 12.00 % 637317 63732 7799660 9 Fiona T Vimal 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli BTVPV1497 G 250000 110000 0 0 0 0 360000 10 Aksa Vima 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli Minor 50000 70000 0 0 0 0 120000 11 Eva Annu Vimal PK 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli Minor 50000 70000 0 0 0 0 120000 3. The Assessing Officer analyzed of details furnished by the assessee. Such detailed analysis is recorded by Assessing Officer in para 1.2.1 to 1.2.11 of the assessment order. On the basis of such detailed analysis, the Assessing Officer doubted the creditworthiness of all the creditors and their closing balance as on 31/03/2020 was added under Section 68 of the Act and taxed the same under amended provisions of Section 115BBE of the Act. 4. The Assessing Officer further noted that the assessee has shown purchases of Rs. 1.01 crores. The Assessing Officer on perusal of details of purchased party, noted that three parties from whom the assessee has shown purchases i.e. Bhavinbhai Bharatbhai Soni, Bharatbhai Bhagwandas Soni and Swarnsiddhi Jewelers Pvt. Ltd. The Assessing Officer in order to verify the genuineness of purchases, issued notice under Section 133(6) of the Act to ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 5 all three parties. No response was made in response to such notice by the said parties. The Assessing Officer treated the aggregate of purchases from three parties of Rs. 1.01 crore as non-genuine purchases which was made to inflate the purchase transaction. The Assessing Officer disallowed such purchases under Section 37(1) of the Act. 5. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions. The ld. CIT(A) in para 6 of his order recorded that the assessee furnished reply to the notice of hearing on 05/08/2023. However, the contents of submission filed by assessee is not recorded/discussed in the impugned order. The assessee has filed copy of such submission on record. In the written submission, the assessee apart from giving the details of submission filed in response to the show cause notice before the Assessing Officer also submitted that it was not clear from the contents of assessment order and from the show cause notice, as to how the amount of Rs. 7.83 crores has been worked out by the Assessing Officer for making addition under Section 68 of the Act. The Assessing Officer in the show cause notice dated 17/03/2022 has mentioned the following figure against all 11 lenders: Particulars Opening balance Interest Amount recd. during the year Amount paid during the year TDS Closing balance Suresh R Chaudhari 3351772 414558 350000 320000 41456 3754874 T John 4884565 758071 1650000 9020 75807 7207809 Vimal P.K. Kuruvilla 1229191 1181329 9955000 370000 118133 11877387 ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 6 Hitesh Corporation (H.C. Jain HUF) 0 1000000 1000000 Lehrulal Jat Junda 0 281096 2500000 250000 28110 2502986 Babita Vimal Kuruvilla 2806090 521859 3229000 52186 6504763 Jagdish Candra M Jat 238924 43814 260000 4381 538357 Johnson PK 4793495 637317 2435000 2420 63732 7799660 Fiona T Vimal 250000 110000 360000 Akssa Vima 50000 70000 120000 Eva Annu Vimal PK 50000 70000 120000 Total 17654037 3838044 21629000 955821 379424 41785836 6. For lender namely Johnson P K, the Assessing Officer has wrongly mentioned the figure of loan as Rs.23.45 lacs, though the assessee has received loan of Rs.24.35 lacs. Further, there was a difference in opening balance, otherwise the total amount of Rs.7,99,660/- is tallied. Copy of show cause notice was also furnished. The assessee explained that certain part of loan except from lender No. 4 and 5 was shown as opening balance as it was received in earlier years, the assessee paid interest thereon, the assessee has received only Rs. 2.16 crores of loan during the currency of this year. The assessee further submitted that confirmation of amounts were furnished before the Assessing Officer in respect of 11 parties. The assessee by reiterating the tabulated details prepared by Assessing Officer, contended that the loan amount of Rs.1.12 crore was received during the year and the assessee has paid total interest of Rs.39.38 lacs. The assessee was maintaining separate loan account from F.Y. 2018-19. With regard to loan received separately form lender-1 and lender-2 which were duly reflected in ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 7 the financial statement. The assessee by furnishing such details, submitted that actual opening balance of all the loan amounts were of Rs.2.80 crores, new loans during the year from 11 parties was only of Rs.1.12 crore. The assessee made payment of interest after making TDS to 11 parties. The assessee has deducted tax of Rs.3.93 lacs during the year. The assessee on the basis of such submission, submitted that no addition under Section 68 of the Act can be made in respect of opening balance of the depositors/lender. To support such contention, the assessee relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Usha Stud Agricultural Farms Ltd. (2008) 301 ITR 384 (Delhi), Allahabad High Court in CIT Vs Raghurai Argo Industries (P) Ltd. (2012) 349 ITR 260, Mumbai Tribunal in ITO Vs Shri Nasir Khan J. Mahadik ITA No.153/Mum/2010, Sooraj Leathers ITA No. 305/Mum/2016 and Delhi Tribunal in Surajbhan Bajaj Vs ITO (2008) 21 SOT 22. For the loan received during the year from 11 parties, the assessee furnished detailed particulars of all lenders. For lender No. 1 Suresh R. Choudhary, the assessee submitted to have received loan of Rs.3.50 lacs. The assessee filed confirmation of account, bank statement, financial statement of Suresh Choudhary, confirmation of Rekha S Choudhary about the source of source. The Assessing Officer doubted that Suresh Choudhary has hardly any creditworthiness to the extent of loan amount without verification of document. The assessee submitted that the said creditor furnished reply in response to notice under Section 133(6) of the ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 8 Act. The said lender was having sufficient balance in his bank account. The assessee is not only proved the source but source of source. For lender/creditor No.2 T. John, wife of assessee, the assessee received Rs.3.00 lacs, filed confirmation, bank statement, financial statement and confirmation of Vimap P Kuruvilla about the source of source. The Assessing Officer without making verification of documents made a general remark of creditworthiness. Such party has paid tax of Rs.82,187/- during the year under consideration. The assessee has received a loan of Rs.3.00 lacs only. The loan was received through banking channel, bank statement was furnished. The assessee prayed that the party’s creditworthiness and addition against the loan is unjustified. For lender/creditor No. 3 Vimal P K Kuruvilla, the assessee received loan of Rs.19.00 lacs. The assessee filed confirmation, bank statement, financial statement and confirmation of T John and Johnson P K to prove the source of source. The Assessing Officer made a general remark without verifying the creditworthiness of the parties. The said party has paid tax of Rs.1.73 lacs during the year. He has also shown rental income of Rs.2.88 lacs and Rs.11.91 lacs as income from other sources. The assessee has proved the creditworthiness of such creditors. Out of total loan, the assessee has paid Rs.3.70 lacs during the year itself on various dates, confirmation was filed by the party. The assessee has received loan in various transactions. The ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 9 assessee has not only proved the source but source of source and the addition made by the Assessing Officer is unjustified. For lender/creditor No.4 Hitesh Corporation (HC Jain HUF) from whom the assessee has received Rs.10.00 lacs, the assessee filed confirmation, bank statement and financial statement. The assessee submitted that the Assessing Officer commented the total income of Hitesh Corporation is of Rs.1.71 lacs and creditworthiness was doubted. The assessee submitted that his creditworthiness was doubted without verification of document furnished by the lender party. The said party was having opening balance as on 01/04/2019 of Rs.7,43,880/- and balance as on 04/04/2019 was Rs.30,53,880/, thus was having sufficient credit and out of which only Rs.10.00 lacs was given to the assessee on 03/06/2019. The said party has interest income of Rs.9,61,321/- on which the assessee paid TDS of Rs.69,132/-. On the basis of such assertion, the assessee claimed that the said lender was creditworthiness. From lender No. 5 Lehrulal Jat, the assessee has received Rs.25.00 lacs. The assessee filed confirmation, bank statement, financial statement, copy of which was also furnished. The assessee submitted that the Assessing Officer commented that income of Lehrulal Jat is Rs.5,91,910/-. The said lender is Principal of Secondary school, Government of Rajasthan and was retired on 30/06/2016. Copy of letter issued by School was also furnished. The said depositor has confirmed that he has received Rs.40.00 lacs on his retirement ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 10 on account of provident fund, gratuity and commuted pension which was lying in his bank account. The balance in his account as on 24/04/2019 was Rs.18,07,505/-. The lender stated that he deposited amount of Rs.1.50 lacs and Rs.5.06 lacs on 24/04/2019 from various banks which is evident on account of own cheque clearance. On the basis of such contention, the assessee submitted that the said lender has creditworthiness. From lender No. 6, Babita Vimal Kuruvilla, the assessee received loan of Rs.22.24 lacs, filed her confirmation and financial statement. The assessee also filed confirmation of T. John and Vimal P Kuruvilla to prove the source of source. Copy of which was furnished. The Assessing Officer commented that Babita Vimal Kuruvilla has hardly any creditworthiness and objected against her creditworthiness. The assessee explained that he has taken loan of Rs.22.24 lacs on seven occasions on different dates as mentioned on different occasions. Out of which Rs.3.5 lacs on 13/12/2019, the source of source was loan from mother-in-law T. John, second loan of Rs.5.00 lacs on 17/12/2019, the source of source from loan from husband, third loan of Rs.1.50 lacs on 18/12/2019 and source of source was loan from mother-in-law T. John, fourth deposit/loan of Rs.1.19 lacs on 26/12/2019 which was received from husband and fifth loan/deposit of Rs.50,000/- on 01/01/2020, source of source was mother-in-law, sixth and seventh entry of loan/deposit of Rs.5.00 lacs and Rs.4.84 lacs on24/01/2020 and 27/01/2020 given out of gold loan from IDBI bank of Rs.9.84 lacs on 24/01/2020. Copy of gold loan reimbursement was ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 11 furnished. The assessee submitted that the assessee proved the source of source and creditworthiness of such deposits and submitted that addition was unjustified. From lender No.7 Jagdishchandra M Jat from whom, the assessee received Rs.2.60 lacs. The assessee filed confirmation, copy of bank accounts and financial statement. The Assessing Officer drawn inference on the basis of his view that he has shown total income of Rs.3.43 lacs only and doubted the creditworthiness. The assessee further stated that loan of Rs.2.60 lacs was taken on three different occasions. The lender was having sufficient cash balance in his account as on 08/03/2019 of Rs.1.36 lacs, out of which the lender has taken Rs.1.10 lacs on 04/04/2019. There is continuous deposits in his bank account from April onwards which remains deposited for more than 10 months in savings bank account on which interest was also accrued. The person/lender who has average balance in his bank account of more than Rs.1.25 lacs is sufficiently creditworthy for lending loan of Rs.2.60 lacs and the addition is unjustified. For lender No.8 Johnson P K, who has given loan of Rs.24.35 lacs. The assessee filed confirmation, bank statement and confirmation of T. John and Vimal P. Kuruvilla who has given loan to the lender to substantiate source of source. The Assessing Officer doubted the creditworthiness of said lender. The said lender given loan in eight entries/transactions. The assessee explained the date and source of all such transactions alongwith confirmation ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 12 about source of source. On the basis of such contention, the assessee contended that the lender has creditworthiness and he has proved source of source and that addition is unjustified. For lender No.9 Fiona Vimal, the assessee received a loan of Rs.1.10 lacs, the assessee filed confirmation of account, bank statement and confirmation of T. John in favour of that lender to prove the source of source. The assessee claimed that addition against his loan is unjustified. For lender No.10 Akssa Vimal from whom the assessee received Rs.70,000/-, filed confirmation of account, bank statement and confirmation of Babita Vimal Kuruvilla who has given loan to lender to prove the source of source. The Assessing Officer doubted the creditworthiness of lender by taking a view that Aksa Vimal during the year has proved the source of source from his mother Babita Vimal Kuruvilla of Rs.75,000/-. The assessee stated that when source of source is from genuine source which is available on record, nothing adverse can be found and no addition be made under Section 68 of the Act. The assessee again filed confirmation of Babita Vimal Kuruvilla and submitted that the addition is unjustified. For lender No.11 Eva Annu Vimal P K from whom the assessee received loan of Rs.70,000/- and filed confirmation of account, bank statement and confirmation of Babita Vimal Kuruvilla to prove the source of source. The Assessing Officer doubted his creditworthiness. The assessee contended that ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 13 the lender has received Rs.75,000/- from his mother. His source of source is genuine and no addition could be made being unjustified. 7. On the addition of disallowance of purchases under Section 37(1) of the Act of Rs.1.01 crore, the assessee submitted that the Assessing Officer disallowed the expenses of purchases under Section 37(1) of the Act by taking a view that the seller party has not filed return of income and/or no response was received in respect of notice under Section 133(6) of the Act. The assessee submitted that filing of return of income and response of notice of Assessing Officer is not under the control of assessee, which cannot be a basis for making disallowance. The assessee purchased the material for selling in market and confirmation of account was already furnished. The assessee accounted the purchases in his books of account. Purchases were shown in the stock register. The assessee included all sales in GST return for the relevant period. Account of assessee was subject to tax audit. Audit reports were filed in due course. The assessee is in trading activities, stock moment was also certified in tax audit report. Payment to all parties were made by RTGS. Though the Assessing Officer mentioned in the show cause notice that no response was given by the seller party against the notice under Section 133(6) of the Act. On the contrary, Director of Swarn Siddhi Jewelers has informed the assessee that they have not received any notice under Section 133(6) of the Act, so there is no question of response and such fact was brought to the notice of Assessing Officer. The assessee filed confirmation of ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 14 account, copy of all the bills with GST, bank statement highlighting payment of transaction and entries in the stock register for all the three parties. On the basis of such contention, the assessee claimed that all the purchases are genuine and cannot be doubted and disallowed. 8. The ld. CIT(A) after considering the submission of assessee on the issue of addition under Section 68 of the Act held that on perusal of account, statement of lenders, it is evident that the assessee himself arranged the loan via multilayer deposits through his own family members and others which buttress the view taken by Assessing Officer on the ground of creditworthiness of lenders. The submission of assessee cannot be treated as sacrosanct. The creditworthiness of lender about the transaction cannot be proved merely on filing bank statement. The assessee has not produced the income tax return of the lender or confirmation. Purported confirmation is only the copy of unsigned account of creditor. Source of fund has also not been explained. The decisions relied by the assessee is distinguishable on facts. The assessee has failed to produce the tax return of the creditors or any other material to show the creditworthiness. The creditworthiness and genuineness of transaction cannot be said to have been proved to shift the onus on revenue. The stand of assessee that transaction was made through banking channel is not sufficient to prove the genuineness of transactions and creditworthiness of creditors. Identity as well as creditworthiness of creditors must be proved. The ld. CIT(A) quoted the name of Ms. Jasmine Kocher ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 15 Kapoor and recorded that credit in her bank account is not explained. On the basis of such observation, the ld. CIT(A) confirmed the action of Assessing Officer. 9. On the addition of purchases/non-genuine purchases, the ld. CIT(A) also upheld the addition by referring the decision of Hon'ble Allahabad High Court in the case of Pr.CIT Vs. Meerut Roller Flour Mills (P) Ltd. in Income Tax Appeal No. 284 of 2017. The ld. CIT(A) also held that the assessee failed to substantiate the claim, mere payment is made through banking channel is not sufficient. Further aggrieved, the assessee filed present appeal before this Tribunal. 10. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue and have also perused the orders of the lower authorities carefully. Ground No. 1 to 6 of the appeal relates to the additions of unsecured loan. The ld AR for the assessee submits that the assessing officer made addition of Rs.7.83 crores on the basis of his summary as recorded on page No. 4 and 5 of assessment order. The Assessing Officer added the entire figure which includes the opening balance of loan from eleven parties as well as new loans received from eleven parties and interest paid to them. There is no basis of making addition without segregating the figure. The assessee explained before Assessing Officer that outstanding balance at the year-end of eleven parties only Rs.4.17 crores. ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 16 The figure of new loan of Rs.2.16 crore is also not correct. The correct figure of new loans is Rs.1.12 crore which has been explained before Assessing Officer as well as ld. CIT(A). The Assessing Officer issued a vague show cause notice. Reply of assessee by Assessing Officer was not considered and made addition of Rs.7.83 crores. The chart prepaid by Assessing Officer is itself not correct. Before ld. CIT(A), the assessee furnished correct chart and confirmation filed during assessment proceedings. The assessee also filed confirmation before ld. CIT(A). 11. The ld. AR of the assessee further submits that actual opening balance of eleven parties were only Rs.2.80 crores. The assessee availed loan of Rs.1.12 crore from eleven parties during the year. The assessee has paid interest of Rs.39,38,044/-. The amount repaid to eleven parties during the year is Rs.10,41,440/-. The assessee made TDS of Rs.3,93,805/-. On the basis of aforesaid actual figure, the outstanding balance at the year-end of eleven parties were only Rs. 4.17 crores. Before Assessing Officer and ld. CIT(A), the assessee were required to file details of loan received from eleven lenders of Rs.1.12 crore and to prove their identity, genuineness of transactions and creditworthiness. Out of eleven lenders, eight are family members. The assessee furnished confirmation of accounts, address, PAN, copy of bank statement, acknowledgment of ITR, source of loan with lender with copy of account confirmation to prove the source of source. The ld. AR of the assessee submits that the complete details are furnished as per page No. 19 to 35 of ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 17 paper book. Neither the Assessing Officer nor the ld. CIT(A) made any comment on the evidence furnished by the assessee. The CBDT vide its letter dated 10/01/2018 directed all their Pr. CCIT, CCIT and DGIT (Inv) that if the assessee furnished explanation, the Assessing Officer should examine and if the explanation offered by assessee is not acceptable then order passed by Assessing Officer should be speaking one, bringing all the facts, explanation furnished by assessee in respect of nature and source of credit in the books of account and reason not accepting of such explanation. The ld. AR of the assessee submits that the assessee has discharged his onus by furnishing identity of creditors, creditworthiness and genuineness of transactions. To support his submission, the ld. AR of the assessee relied upon the following decisions:  CIT Vs Ranchhod Jivabhai Nakhwa 21 taxmann.com 159 (Guj)  DCIT Vs. Rohini Builder (2002) 256 ITR 360 (Guj)  Aravali Trading Company Vs ITO (2008) 220 CTR 622 (Raj)  Orient Trading Company Vs CIT (1963) 49 ITR 723 (Bom)  Hindden Forge P Ltd. Vs DCIT ITA No. 3800/Del dated 03/12/2020  Tota Ram Daga Vs CIT 59 ITR 632 (Assam)  Nemi Chand Kothari Vs CIT 264 ITR 254 (Gau)  Jalan Timber Vs CIT 223 ITR 11 (Gau)  Sona Electric Co. Vs CIT 152 ITR 507 (Delhi)  Kale Khan Md. Hanif Vs CIT (1963) 50 ITR 1 (SC) and ITO Vs. Suresh Kalmadi (1988) 32 TTJ (Pune) TM 300 12. With regard to ground No. 7 to 9 of the appeal, the ld. AR of the assessee submits that the Assessing Officer as well as ld. CIT(A) disallowed ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 18 the entire / 100% purchases shown from three parties, on the ground that they have not filed return of income or not responded in response to notice under Section 133(6) of the Act. The ld. AR of the assessee submits that neither the sale of assessee was disputed nor books of account was rejected. The sale is not possible in absence of purchase. 100% of disallowance of purchase is not at all justified when the assessee has shown all bills, vouchers and payment made through banking channel. Evidences furnished by the assessee was not discussed or discarded by the lower authorities, therefore, no addition is warranted. In alternative submission, the ld. AR of the assessee submits that to avoid the long drawn litigation, a symbolic disallowance may be sustained, which may bring peace to the parties. 13. On the other hand, the ld. CIT-DR for the revenue on the grounds Nos. 1 to 6 of the appeal, supported the orders of the lower authorities. The ld. CIT-DR for the revenue submits that the assessee failed to discharge the onus as required under Section 68 of the Act. None of the lender was sufficient credit in their bank account, the transaction was made via multilayer transaction through family members. The ld. CIT(A) while confirming the action of Assessing Officer has considered all the objections of assessee. On the addition of bogus purchases, which is subject matter of grounds Nos. 7 to 9 of the appeal, the ld. CIT-DR for the revenue submits that the assessee has miserably failed to prove the genuineness of purchases. Thus, the order passed by ld CIT(A) is justified and required no interference by the Tribunal. ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 19 14. We have considered the submissions of both the parties and perused the record carefully. Ground Nos. 1 to 6 relates to addition of Rs.7.83 crores. The Assessing Officer made addition of Rs.7.83 crores by taking a view that on verification of assessee’s account, it was revealed that the assessee has disclosed amount of unsecured loan of Rs.7.95 crores. The Assessing Officer tried to verify the identity, creditworthiness and genuineness of transactions of the parties from whom the assessee claimed to have received such unsecured loan. The Assessing Officer prepared a summary of lender in the form of a chart showing names, address, PAN, opening balance as on 01/04/2019, loan taken during this year, repayment during the year, rate of interest, interest paid, TDS made and closing balance. The Assessing Officer by referring each and every lender and the alleged discrepancy with regard to creditworthiness and genuineness of transaction and concluded that all the eleven parties failed the test of creditworthiness and added Rs.7.83 crores under section 68 of the Act and brought the same under taxation in amended provision of Section 115BBE of the Act. Before the ld. CIT(A), the assessee tried to explain about the creditworthiness of all the lenders. The details of submissions are recorded in para 6 of this order. The ld. CIT(A) on considering the submission with regard to identity, creditworthiness and genuineness of transactions held that creditworthiness of lenders and genuineness of transaction cannot be said to have been proved merely on filing bank statement or identity of creditor. ITR of lender and confirmation of lenders ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 20 were not filed. Purported confirmation is only copy of unsigned account. Source of fund has not been explained. The case laws relied by assessee is distinguishable on facts and circumstances. Once the creditworthiness and genuineness of transaction is not proved so the onus was not shifted on the revenue. The credit reflected in the bank account of Jasmin Kochar Kapoor is not explained so her creditworthiness is not proved. The ld. CIT(A) also relied on various case laws. 15. We find that the Assessing Officer while preparing summary of loan of various lenders accepted that there was opening balance of loan and fresh loan was availed by assessee. The Assessing Officer also accepted repayment of part of loan of four lenders i.e. lender Nos. 1, 3, 4 and 5. Once the opening balance i.e. loan received in earlier year is accepted, the same cannot be added in the year under consideration. Similarly, the amount repaid can also not be added in the current assessment year. Thus, we find merit in the submission of ld. AR of the assessee that addition is made without any basis. We further find that the assessee claimed that out of eleven lenders, eight are family members, so their identity is not in dispute. Identity of only three lenders is to be proved by assessee. We also prima facie find merit in the submission of ld. AR of the assessee that fresh loan during the year is only Rs. 1.12 crore. 16. We note that Assessing Officer made addition of Rs.7,83,00,173/- which is based on his imagination and hence it is not a correct figure. The ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 21 total transaction with eleven parties were submitted by assessee before Assessing Officer and Ld.CIT(A) stating opening balance, fresh loan received during the year, amount repaid, interest paid and TDS deducted, and therefore closing balance was at Rs.4,17,85,836/- which is the correct amount. We note that Hon’ble jurisdictional High Court in the case of DCIT vs. Rohini Builders 256 ITR 230 (Guj), held that where assessee established identity of creditors/lenders by furnishing their complete address, PAN as well as confirmation with copies of assessment order, the assessee discharged its onus. The same ratio was upheld by the Hon’ble jurisdictional High Court in the case of CIT vs. Ranchhod Jivabhai Nakhava in Tax Appeal No.50 of 2011 dated 20.03.2012. We note that Hon’ble Apex Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78(SC) held that when assessee furnished their complete address, PAN as well as confirmation and bank details of creditors/lender, the addition should not made in the hands of the assessee. We note that opening balance of the Lenders are not subject to disallowance in the current assessment year under consideration, if the Assessing Officer wanted to disallow the same, he could disallow in the previous assessment year. During the assessment year under consideration, the assessee took fresh loan and to substantiate the genuineness of fresh loan, the assessee submitted confirmation, bank statement, name, address and PAN number, moreover the transactions were through banking channel. On such fresh loan interest has been paid to the lenders, and TDS on interest ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 22 has been paid hence genuineness of the fresh loan cannot be doubted. We also note that some of the Lenders have been fully repaid during the year under consideration. Once, the repayment is made and accepted by the department no addition for such loan is to be made in the hands of the assessee. For that reliance can be placed on the following judgments of Jurisdictional High Court of Gujarat: (i) Murlidhar Lahorimal Vs CIT (280 ITR 512 Guj), (ii) CIT Vs Ayachi Chandrashekhar 42 taxmann.com 251 Guj. Based on the above facts and circumstances, we allow Ground Nos.1 to 6 raised by the assessee. 17. In the result, Grounds Nos. 1 and 6 of appeal are allowed statistical purposes. 18. So far as grounds Nos. 7 to 9 of the appeal are concerned, we find that the Assessing Officer made the addition of entire/aggregate of purchases shown from three parties by treating as inflated purchases. The ld.CIT(A) upheld the action of Assessing Officer with similar observation. We find that the assessee has furnished copy of purchase bill with detail of GST, stock register, confirmation of account and payment of sale consideration through banking channel. The Assessing Officer has not given any finding on all such evidences. The Assessing Officer proposed to make disallowance on the ground that the parties have not filed return of income and the notice under Section 133(6) were not responded. We find that the sale of assessee was ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 23 not disputed. The sale is not possible in absence of purchases. The assessee furnished the details of purchases in the form of purchase bill, GST detail and bank details, no adverse remark was made on such evidences by Assessing Officer. The Assessing Officer treated the purchases as non-genuine. Under the Income tax proceedings, the disallowance of entire purchases is not justified when the assessee has furnished the details of purchases and payments made through banking channel. It is settled law under the income tax proceedings that only profit element embedded in such transaction, may be disallowed and not the substantial part of transaction. Keeping in view the nature of business activities of the assessee and profit margin in trading activities, 6% of impugned disallowance would be reasonable and justified to avoid the possibility of revenue leakage. Thus, the Assessing Officer is directed to restrict the addition to the extent of 6% of Rs.1.01 crore. In the result, Grounds Nos. 7 to 9 of the appeal are partly allowed. 19. In the result, this appeal of assessee is partly allowed. Order announced in open court on 22 February, 2024. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 22/02/2024 *Ranjan / Dkp (outsourcing Sr.Ps) ITA No. 719/Srt/2023 A.Y 20-21 Kuruvilla P Keru Vs DCIT 24 Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR 5. Guard File By order // True Copy // Sr. Private Secretary, ITAT, Surat