Giriraj Developers, Surat V. Income Tax Officer, Ward 1, Bardoli, Bardoli

ITA 812/SRT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 5328 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-07-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 27-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Opportunity of being heard; Period of limitation; Proportionate interest; Time period of passing order; TDS; Set aside
• Section: 68; 144; 40(b); 142(1); 40(a)(ia); 133(6); 250; 143(2); 48

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.812/SRT/2023 AY: (2017-18) (Physical Court Hearing) Giriraj Developers Block No.565,566, Survey No.377,378/1,Moje, Surat- 394305 Vs. Income Tax Officer Ward-1, Bardoli, Income Tax Office, 2 nd Floor, BSNL Building, Opp. Jalaram Temple, Station Road, Bardoli-394601 èथायीलेखासं./जीआइआरसं./PAN/GIR No: AAKFG 5807 D (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by Shri Sapnesh R Sheth, CA राजˢ की ओर से /Revenue by Shri Vinod Kumar, Sr-DR सुनवाई की तारीख/Date of Hearing 04.07.2024 उद्घोषणा की तारीख/Date of Pronouncement 05.08.2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the orders passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) by the Learned Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’], vide order dated 16.10.2023 for assessment year (AY) 2017-18. Grounds of appeal raised by the assessee are as under: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer in asking addition of Rs.16,99,100/- as unexplained cash credit u/s 68 of the I.T. Act, 1961 on the basis of baseless allegation that assessee has failed to prove the identity, creditworthiness and genuineness of certain parties from booking advance against the sale of plot has been received in earlier years. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer in 2 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers disallowing expenses of Rs.3,81,092/- (being 30% of Rs.12,70,307/-) u/s 40(a)((ia) of the I.T. Act on account of alleged non-deduction of TDS. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer in making disallowance of Rs.12,83.333/- on account of interest on partner’s capital on proportionate basis u/s 40(b) of the I.T. Act. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer in making addition of Rs.13,00,000/- regarding carried forward unsecured loans of certain parties u/s 41(1) of the I.T. Act. 5. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer in invoking provisions of Section 115BBE of the Act and in thereby taxing the addition at 60% & levying surcharge at 25% which is not applicable on addition made u/s 68 of the I.T. Act. 6. It is therefore prayed that above addition made by Assessing Officer and confirmed by Commissioner of Income-tax (Appeals) may please be deleted. 7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of appeal.” 2. The facts of the case in brief are that assessee is a partnership firm engaged in development of lands. It filed its return of income (ROI) on 31.03.2018 declaring Nil Income. Subsequently, case was selected for complete scrutiny under CASS and notices u/s 143(2) and 142(1) of the Act were issued by AO requiring the assessee to submit details. The assessee has made partial compliance on 08.10.2019, which was not satisfactory to AO. The AO again issued show cause notice as to why u/s 144 of the Act should not be invoked. The reply given by the assessee was found to be incomplete. Hence, another notice u/s 142(1) was issued, which was replied to by assessee. However, further discrepancy was found by the AO such as non-submission of 3 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers PAN, complete address of some parties, confirmation of bookings of plot, unsecured loan, interest paid to partner in contravention of the partnership deed, non-deduction of TDS etc. Hence, another show-cause notice was issued. In response, assessee filed reply which was again found not tenable. Therefore, AO added Rs.16,99,100/- by treating advance on booking of flats as unexplained credit u/s 68 of the Act. He also added previous unsecured loans from three parties amounting to Rs.13,00,000/- by treating them as cessation of liability u/s 41(1) of the Act. The AO also disallowed 30% of interest of Rs.12,70,307/- amounting to Rs.3,18,092/- for failure to deduct tax u/s 40(a)(ia) of the Act. He also disallowed interest of Rs.12,83,333/- being interest paid to partners because the original partnership deed did not provide for payment of interest on capital contributed by the partners. He also disallowed penalty expenses on TDS of Rs.47,000/-. Thus, total addition of Rs.47,10,525/- was made to the returned income of Rs.Nil. Aggrieved, assessee preferred appeal before CIT(A). 3. Before CIT(A), assessee made written submission which has been reproduced at para-5.2 of the order. The CIT(A) has reproduced observation of the AO and submission of assessee. The CIT(A) noted that out of the total bookings deposit of Rs.1,33,56,739/-, AO added Rs.16,99,100/- as unexplained cash credit u/s 68 due to lack of details. The CIT(A) was also not satisfied with the reply of the assessee because no other evidences such as bank statements, confirmation letters etc., were given by the appellant. The CIT(A) referred to 4 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers the decision of Hon’ble Supreme Court in case of NRA Iron and Steel 103 taxmann.com 48 (SC) and observed that onus lies on the appellant to prove the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. There is no burden on Revenue to prove otherwise when the said onus is not discharged by the appellant. Since the appellant has not discharged the onus, addition made by AO was upheld. Aggrieved by the order of CIT(A), assessee has filed present appeal before the Tribunal. 4. First ground of appeal pertains to addition of Rs.16,99,100/- u/s 68 of the Act. The Ld.AR of the assessee has submitted paper book containing 41 pages and stated that apart from the written submission before CIT(A), the other details were before both lower authorities. He submitted that in the course of assessment and appellate proceedings, assessee had provided the details in respect of plot booking advances received during the subject assessment year. Such details are at pages 10 to 19 of the paper book. It includes name of the parties, complete postal address, PAN, date of allotment and amount received. Assessee had also submitted its bank statement to prove that plot bookings advance was received through banking channel. The assessee also submitted ledger account of the parties. Hence, assessee had provided complete details and it was duty of AO to make further enquiry if he was not satisfied with the above details. Ld.AR of the assessee relied Hon’ble jurisdictional High Court in the case of CIT vs. Ranchhod Jivabhai Nakhava 5 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers [2012] 21 taxmann.com 159 (Guj) and Hon’ble Supreme Court in the cases of CIT vs. Orissa Corporation (P.) Ltd. (1986) 1986 taxmann.com 1163 (SC) and Sreelekha Banerjee & Ors. vs. CIT (1963) 49 ITR 112 (SC). 5. On the other hand, Ld.Sr-DR for the Revenue relied on the orders of lower authorities. He submitted that AO and CIT(A) have rightly made the addition because assessee had not submitted the requisite details to discharge the onus cast on it. 6. We have heard both the parties and perused the materials available on record. We have deliberated the decisions relied upon by both the parties. We have also gone through the paper book submitted by the Ld. AR of the assessee. The assessee had filed two letters along with various details on 16.12.2019 and 24.12.2019 to the AO. In the first letter, copies of ledger of individual booking of plots from the beginning, details of persons who made the booking of plots, unsecured loan along with copy of ledgers, detail of each plot in the prescribed format of AO and other details were submitted. In the second letter dated 24.12.2019, the assessee again provided details of various parties mentioned in the show-cause notice comprising name of the parties, address, PAN etc. It was submitted by assessee that genuineness of the transaction is established because all advances were received from the parties through banking channels. The assessee submitted that notice u/s 133(6) may be issued to the parties to further substantiate claim of the assessee. The AO has not accepted the reply of the assessee by stating that identity, 6 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers creditworthiness and genuineness of transactions remained unverifiable and hence, booking amounts of Rs.16,99,100/- from three parties in respect of plot Nos.67, 125 and 126 remained unexplained, which was added u/s 68 of the Act. The CIT(A) has upheld the addition made by AO and further stated that the onus was not duly discharged by the appellant. 6.1 We have again gone through the orders of the lower authorities and the details filed by the assessee before them. We find the assessee had given primary details such as, name and address of the parties, PAN, copy of ledger and bank statement of the assessee showing receipt of payment to prove the identity of the parties and genuineness of the transactions. It is apparent that assessee had discharged the primary onus in respect of the bookings amounts received from the three parties amounting to Rs.16,99,100/- out of the total bookings amount of Rs.1,33,56,739/-. The Ld.AR of the assessee has relied on the decision of Hon’ble jurisdictional High Court in case of Ranchhod Jivabhai Nakhava (supra) and Hon’ble Supreme Court in the cases of Sreelekha Banerjee & Ors (supra) and Orissa Corporation (P.) Ltd. (supra). In case of Ranchhod Jivabhai Nakhava (supra), the Hon’ble High Court held that where lenders of the assessee are income-tax assessees whose PAN have been disclosed, Assessing Officer cannot ask to assessee to further prove the genuineness of transaction without first verifying such fact from income-tax return of lenders. In case of Sreelekha Banerjee (supra), the Hon’ble Supreme Court held that where the assessee discharged the initial onus cast on him by 7 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers submitting prima facie reasonable evidence before the department and department rejects such evidence, it must either point out an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in possession. In Orissa Corporation (P.) Ltd. (supra) the Hon’ble Supreme Court held that where assessee received loan from three individuals under hundis, since assessee had given names and addresses of alleged creditors and it was in knowledge of revenue that said creditors were income-tax assessees, their index number was in file of revenue, impugned addition under section 68 treating said loan amount as unexplained cash credit was unjustified. We find that in the present case the assessee had submitted various details as discussed above before the AO and CIT(A) to discharge the initial onus cast on it. However, the authorities dismissed such prima facie reasonable evidence without rebutting the same with evidence in their possession or without making further verification to come to a logical conclusion that the explanation of assessee is not enough to rescue the assessee from the mischief of Section 68 of the Act. We also find that the details were submitted by assessee on 16.12.2019 and 24.12.2019 and the assessment order was passed on 25.12.2019. Therefore, the contention of Ld.AR that the submission of assessee was not duly considered by AO appears to be plausible. We also find that assessee made compliance to queries of AO at the fa-end of the limitation period. In view of the above, we consider it proper to set aside the matter back to the file of AO for de novo consideration 8 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers by making verification and further enquiry as deemed necessary in view of the facts and circumstances of the case discussed above. The appellant is directed to furnish all the explanation which have been submitted before us and to submit further details as required by the AO. Assessee should be given adequate opportunity of hearing by AO. The ground is allowed for statistical purposes. 7. Next ground pertains to addition of Rs.13,00,000/- u/s 41(1) of the Act. The AO found that assessee had taken unsecured loan from three parties namely, Shri A.M. Modi, Shri Rameshbhai Bhagat and Shri Biresh Kantilal Shah of Rs.5,00,000/-, Rs.3,00,000/- and Rs.5,00,000/- respectively). These balances were appearing in the balance-sheet of the assessee as on 01.04.2015 and 01.04.2016. The AO asked assessee to file requisite documents of the above parties to prove identity, creditworthiness and genuineness of transactions. The assessee provided name and complete postal address of the parties, PAN and amount received. He stated that these loans were taken in earlier year and were carried forward in the current year. The AO was not satisfied with reply of the assessee and for want of confirmation, he held that nature of credit remained unexplained. He treated that the impugned sum of Rs.13,00,000/- as cessation of liability u/s 41(1) of the Act. Before CIT(A) the assessee made the same submission that these are earlier year loans which were carried forward to the current year. The loans are genuine loans received through banking channel and are payable by the assessee. It was submitted that notices u/s 9 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers 133(6) may be issued to these parties to substantiate assessee’s claim. It was also submitted that AO passed assessment order at the fag-end of the year and therefore, completely ignored the submission made by the assessee. The Ld.AR relied on the decision of Hon’ble Bombay High Court in the case of CIT vs. Chase Bright Steel Ltd. 177 ITR 128 (Bom) and CIT Vs. Silver Cotton Mills Co. Ltd. 125 Taxman 741 (Bom). 7.1 Before us Ld. AR of the assessee stated that all the details had been given to AO regarding the unsecured loans which were taken in the earlier years and were carried forward to current year. The loans were payable and liability had not ceased. He stated that provisions of Section 41(1) are not applicable because these were not trade receipts of assessee. The unsecured loans are not in respect of any loss, expenditure or trading liability incurred by assessee in any earlier assessment year. Thus, it cannot be taxed u/s 41(1) of the Act. He also relied on the decisions which were submitted before CIT(A). 7.2 On the other hand, Ld.Sr-DR for the Revenue supported the order of lower authorities. 8. We have heard both the parties and perused the materials available on record. We have deliberated the decisions relied upon by the Ld.AR of the assessee. We find that the impugned sum was unsecured loans of earlier years which were carried forward in the books of account of the assessee for current year. The assessee had given replies on the issue by its letters dated 16.12.2019 and 24.12.2019. However, the assessment order has been passed 10 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers on 25.12.2019. Therefore, it appears that the submission of the assessee has not been properly considered in the light of the statutory provisions and decisions on the impugned issue. A reading of Section 41(1) makes it clear that where an allowance or deduction has been made in the assessment for any year in respect of the loss, expenditure or trading liability incurred by the assessee and subsequently the assessee has obtained whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by such person or value of the benefit accruing to him shall be deemed to be the profit and gains of the business. In the present case, the amount was in respect of unsecured loans which would not come under the category of loss, expenditure or trading liability covered in Section 41(1) of the Act. The resort to Section 41(1) could arise only if liability of assessee can be said to have ceased finally without the possibility of reviving it. The burden lies upon the Department to prove that an allowance or deduction has been allowed for this amount to the assess in earlier AYs. Neither AO nor the CIT(A) has examined the issue in the light of above provisions. Therefore, the issue is set aside to the file of AO for fresh adjudication after examining the details submitted by appellant and further details as may be required during the fresh assessment proceedings. The assessee is also directed to furnish relevant details called for by AO. The AO 11 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers should give reasonable opportunity of being heard to assessee. The ground is allowed for statistical purposes. 9. Next ground pertains to disallowance of Rs.3,81,092/- being 30% of interest of Rs.12,70,30/- u/s 40(a)(ia) of the Act for non-deduction of TDS. The Ld.AR of the assessee submitted that details of income-tax return and computation of income filed by these parties were submitted to the AO during assessment proceedings. Since these parties have shown interest income in their respective returns and already paid tax on their income, tax cannot again be recovered from the assessee. 9.1 On the other hand, Ld.Sr-DR for the Revenue supported the order of lower authorities. 10. We find that the AO simply disallowed the impugned amount by observing that no TDS on the interest amount was found to have been deducted. The CIT(A) has confirmed the disallowance made by AO by stating that no evidence of deduction of TDS was filed during appellate proceedings. We have duly considered the fact again. We find that Hon’ble Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. vs. CIT (2007) 293 ITR 226 (SC) held that department cannot realize tax twice on the same income and if the payee has paid tax on the income by including it in his ITR then that expense cannot be disallowed if assessee has not deducted TDS on the expense. Since the claim of the assessee that the recipients have included the interest in their returns and paid taxes thereon has not been verified by the 12 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers AO, we deem it proper to set aside to the file of AO for fresh adjudication after examining the details submitted by appellant and after obtaining further details as may be required during the fresh assessment proceedings. The assessee is also directed to furnish relevant details called for by AO. The ground is allowed for statistical purposes. 11. Next ground pertains to addition of Rs.12,83,333/- on account of interest on partner’s capital u/s 40(b) of the Act. The addition was made because the original partnership deed did not provide for payment of interest for the period till 06.11.2016. Hence, AO disallowed proportionate interest to the extent of Rs.12,83,333/-. The action of the AO has been upheld by the CIT(A). The AR of the assessee submitted that these two disallowances will not give rise to any taxable income because during the year under consideration, no income was earned and the entire expenditure incurred towards construction of the project was transferred to work-in-progress in closing stock. The assessee is a real estate developer and no sales have been effected during the year. 11.1 On the other hand, Ld.Sr-DR for the Revenue relied on the order of lower authorities. He, however, agreed that the matter may be restored back to the file of AO for verification and necessary action. 12. We have heard both the parties and perused the materials available on record. We find that assessee is a real estate developer and has not disclosed any sale during the year. The entire expenditure incurred towards construction 13 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers of the project was transferred to work-in-progress in closing stock. The appellant has enclosed balance-sheets of two years, which clearly indicates that the expenditures incurred during the year has been transferred to closing work-in-progress. In view of the above facts and since the disallowance would not have any impact on the profit and loss account, therefore, the issue is set aside to the file of AO for fresh consideration after examining the details submitted by appellant and by obtaining further details as may be required during the fresh assessment proceedings. The assessee is also directed to furnish relevant details as and when called for by AO. The ground is allowed for statistical purposes. 13. Next ground pertains to invoking provisions of section 115BBE of the Act. We have already set aside the grounds relating to various additions to the file of the AO for fresh assessment after hearing the assessee. Hence, this issue is academic in nature and does not require any adjudication at this stage. 14. In the result, appeal filed by the assessee is allowed for statistical purposes in above terms. Order is pronounced on 05/08/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत /Surat Ǒदनांक/ Date: 05/08/2024 Dkp Outsourcing Sr.PS 14 ITA No. 812/SRT/2023 /AY 17-18 Giriraj Developers Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy / Assistant Registrar/Sr. PS/PS ITAT, Surat