Daxaben Ashokkumar Dattani, Ahmedabad V. The ITO, Ward-5(3)(3), Ahmedabad

ITA 820/AHD/2019

AI Insights

The case revolves around an appeal by Daxaben Ashokkumar Dattani against the order of the Commissioner of Income Tax (Appeals)-5, Ahmedabad, which confirmed the addition of Rs. 58,85,190 as non-genuine unsecured loan under Section 68 of the Income Tax Act, 1961. The assessee, engaged in wholesale trading of groceries, had taken an unsecured loan from Hariom Enterprise, which was questioned by the Assessing Officer due to lack of a lender's confirmation. The Tribunal, after examining the submissions and evidence provided by the assessee, including the partial acceptance of the loan by the Assessing Officer in a previous assessment, ruled in favor of the assessee, highlighting the principles of law regarding the burden of proof and the treatment of loan repayments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125669 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-05-2019
• Other Referred Cases: Pavankumar M. Sanghavi v/s ITO, Ayachi Chandrashekhar Narsangji v/s ITO, Ambe Tradecorp (P.) Ltd. v/s ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Additional evidence
• Section: 68; 251

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o . 8 2 0/ A h d /2 0 1 9 ( A s s e s s me nt Y ea r s : 2 0 14 -1 5) Da xa b en A s h o k ku m a r Da tt an i , A/ 3 5, J ag a t na ga r V ibh ag -2 , In d ia C o l on y R o ad , B a p u na ga r, Ah me da b ad -3 80 0 1 4 V s .In c o me Ta x Of f ic e r , War d- 5( 3 ) ( 3 ), Ah me da b ad [P AN N o. A I UP D 9 8 98 H ] (Appellant) .. (Respondent) Appellant by : Shri Parimalsinh B. Parmar, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. D.R. D a t e of H ea r i ng 31.08.2023 D a t e of P r o no u n ce me nt 05.09.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, (in short “Ld. CIT(A)”), Ahmedabad Appeal No. CIT(A)-5/ITO. Wd.5(3)(3)/238/2017-18 vide order dated 28.02.2019 passed for Assessment Year 2014-15. 2. The assessee has taken the following grounds of appeal:- “1. The learned CIT(A) has erred both in law and on facts of the case in confirming the addition of Rs. 58,85,190/- made in respect of non-genuine unsecured loan u/s.68. 2. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 2 - by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. The Appellant prays that the addition/ disallowance of Rs.58,85,190/- made in respect of non-genuine unsecured loan u/s. 68 of deleted. 3. The learned CIT(A) has erred in law and on facts of the case in confirming the action of the learned AO in charging interest under Sections 234A, 234B, 234C and 234D of the I. T. Act, 1961. 4. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s.271(1)(c) of the Act. 5. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. The brief facts of the case are that during the year under consideration, assessee was engaged in the business of wholesale trading of groceries in the name and style of “GG Sons”. During the course of assessment, the Assessing Officer asked the assessee to show-cause as to why addition should not be made in respect of various items including addition of Rs.65,97,943/- under Section 68 of the Act in respect of unsecured loans received by the assessee during the year under consideration. The assessee vide letter dated 26.12.2016 furnished details in response to the query raised by the Assessing Officer and submitted that the ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 3 - amount of Rs.65,97,943/- included a sum of Rs.58,85,190/- taken by way of unsecured loans from “Hariom Enterprise”. The assessee submitted that it had taken the aforesaid loan from “Hariom Enterprise” and such unsecured loan was received by the assessee through account payee cheque. During the course of assessment, the assessee furnished various details like PAN number, ledger account, postal address, bank statement of the assessee etc. in support of the aforesaid unsecured loan. However, the Assessing Officer observed that the assessee had not furnished “confirmation of the lender” and accordingly, held that the genuineness of the aforesaid loan was in doubt. Accordingly, the Assessing Officer made addition of Rs.58,85,190/- under Section 68 of the Act by treating unsecured loan taken from “Hariom Enterprise” as being non-genuine. 4. In appeal, the assessee furnished further submissions/details before the Ld. CIT(Appeals), however, he confirmed the additions made by the Assessing Officer with the following observations: “4.6. The only effective ground to addition of Rs.58,85,190/- u/s.68 of the Act. 4.7. I have carefully considered the assessment order, submission of the appellant, remand report from the AO and rejoinder of the appellant. It is seen that during the assessment proceedings the AO called for the details of unsecured loan alongwith PAN, copy of return, confirmation and documentary evidence to prove identity, creditworthiness and genuineness of the person who has given the loan, After examining the submission of the appellant, the AO held that the ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 4 - could not prove the genuineness, identity and creditworthiness of the loan from Hariom Enterprises of Rs.58,85,190/-. 4.8. In the remand report as reproduced above, the AO submitted that the genuineness of the loan taken and creditworthiness could not be as appellant did not filed any confirmation or statement of the Hariom Enterprises to confirm the and creditworthiness. The appellant in the rejoinder mainly submitted that the from Hariom Enterprises was arranged by her brother through broker and which was also paid by her brother only. Therefore, no confirmation could be filed. In view of the mentioned above, it is quite evident that the appellant has to the identity, genuineness and creditworthiness of the person from whom loan taken. The appellant has that loan was arranged through broker and confirmation and bank statement is not available is sufficient to draw adverse inference that the appellant herself is not confident about the identity, genuineness and creditworthiness of Hariom Enterprises. The issue is directly covered by the recent decision of Hon'ble Ahmedabad ITAT, Hon'ble Gujrat High Court and Hon'ble Supreme Court in the case of Pavankumar M, Sanghavi v/s ITO. The Hon'ble ITAT (81 taxmann.com 308) has held that when received unsecured loan but could not produce for verification and these lenders were found to be shell companies, said loan could not be said to be merely filed loan confirmations copies of ledger accounts and other supporting evidences. The relevant observation of the ITAT is also reproduced herein below: “8. As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 5 - is not genuine is a matter of perception based on facts of the case vis-à-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realties. It will, therefore, be useful to understand as to how the shell entities, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it colour of a normal business entity, used as a vehicle for various financial manoeuvres. A shell entity, by itself, is not an illegal entity but it is their act of abatement of, and being part of, financial manoeuvring to legitimise illicit monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or, with that predominant underlying objective, to give the colour of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the I.T.A. No.2447/Ahd/2016 Assessment years: 2007-08 financial world, ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 6 - as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities.” The Hon’ble Gujarat High Court has confirmed the decision of the ITAT and held as under:- “3. Perusal of the orders on record and in particular, the above quoted portion of the order of the Tribunal would make it clear that the entire issue is based on appreciation of evidence on record and thus factual in nature. The Tribunal has given elaborate reasons to come to the conclusion that the entire transaction was not genuine. In absence of any perversity, we do not see any reason to interfere. 4. Learned Counsel for the assessee however vehemently contended that the assessee had received loans through cheques from lenders who had confirmed the same. Their accounts are audited and filed before the Revenue authorities. Thus, the genuineness of the transactions, the capacity of the lender and the factum of lending all have been established. Addition under section 68 of the Act there could not have been made. However, as noted, the Tribunal has minutely examined the position of the lenders, the circumstances under which, the amounts were allegedly loaned to come to the conclusion that the “transactions were not genuine.” The Hon’ble apex court on 01.05.2018 also dismissed the SLP filed against the order of the Hon’ble Gujarat High Court. ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 7 - 4.9. In view of the facts mentioned in assessment order and remand report and legal position discussed above, the addition made by the AO on account of unexplained cash credit from Hariom Enterprise of Rs.58,85,190/- is confirmed. Thus the ground of appeal is dismissed.” 5. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals). Before us, the Counsel for the assessee submitted that the assessee’s husband, late Shri Ashok Kumar, passed away in the month of May 2012. Due to the sudden death of the assessee’s husband, the business was carried out by the assessee with the help of family members. Since the assessee could not recover amounts due from debtors, assessee had to borrow money from the moneylenders for meeting immediate business requirements. Shri Lalit Kumar (brother of assessee’s late husband) arranged for the aforesaid unsecured loan in question. The Counsel for the assessee submitted that the loan was accepted by cheque and was repaid during the year itself from the account of Shri Lalit Kumar (brother of assessee’s late husband). Since the funds were arranged through a broker, there was no direct contact with the lender and hence, confirmation could not be placed on record. Further, the assessee filed additional evidences like ledger of the lender in the books of AG Brothers (proprietary concern of Shri Lalit Kumar), bank statement of AG Brothers and acknowledgement of return of income of Shri Lalit Kumar. Further, it was submitted before us that in the Remand Report issued by the Assessing Officer (at pages 6-8 of Ld. CIT(Appeals) order), no adverse comment has been given by the Assessing Officer on the additional evidence furnished by ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 8 - the assessee before Ld. CIT(Appeals). The Counsel for the assessee submitted that out of the total loans of Rs.83,85,330/- received by the assessee from the very same lender i.e. Hariom Enterprise, the Assessing Officer has accepted part loan of Rs.25,00,140/- as genuine and has doubted the balance part loan of Rs.58,85,190/-. Further, the Counsel for the assessee drew our attention to ledger of Hariom Enterprise in the assessee’s books (Page 6 of the Paper Book), assessee’s bank statements (Page 17-14 of Paper Book), and loans repaid to Hariom Enterprise amounting to Rs.25,00,140/-. The fact of repayment of loan in the very same year from the account of the brother of the assessee’s late husband has been accepted by the Revenue as genuine. Accordingly, in the light of the above facts, the Counsel for the assessee submitted that in absence of any adverse comments against the definitive evidence produced by the assessee, the additions confirmed under Section 68 of the act are liable to be deleted. 6. In response, the Ld. DR placed reliance on the observations made by the Assessing Officer/Ld. CIT(Appeals) in their respective orders. 7. We have heard the rival contentions and perused the material on record. On going to the facts of the case, we observe that the assessee has filed substantial details to prove the genuineness of the transaction and circumstances in which the loans were taken/repaid by the assessee. It is noteworthy that when the Department has accepted part of the loans taken from the same party Hariom Enterprise as genuine, then it is not understandable that with respect to the balance amount of loan taken from the same party, why the loan has been held to be non-genuine, only in ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 9 - absence of confirmation from such party viz. Hariom Enterprise. Further, it is a well settled principle of law that once the revenue was accepted the repayment of loan, no addition is to be made on account of cash credit. Various judicial precedents have upheld the principle that once the repayment of loan has been established based on documentary evidences, credit entries cannot be looked into isolation after ignoring debit entries. In the case of Ayachi Chandrashekhar Narsangji 42 taxmann.com 251 (Gujarat), the Gujarat High Court held that where Department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. In the case of Ambe Tradecorp (P.) Ltd. 145 taxmann.com 27 (Gujarat), the Gujarat High Court held that where assessee took loan from two parties and assessee had furnished requisite material showing identity of loan givers and that assessee was not beneficiary as loan was repaid in subsequent year, no addition under Section 68 could be made on account of such loan. Further, in the instant facts, we also see that the assessee had furnished details regarding the lender Shri Hariom Enterprise viz. postal address, PAN number, ledger account, ledger of lender in the books of AG Brothers (proprietary concern of brother of assessee’s late husband), bank statement of AG Brothers etc. and therefore, in our view, the assessee had discharged the initial onus which was cast upon the assessee under Section 68 of the Act. Further, as observed in the preceding part of the judgement, when part of the loans taken from the same lender Shri Hariom Enterprise has been accepted by the Assessing Officer as genuine, then it is not understandable as to why the balance loan taken from the same lender Shri Hariom Enterprise should be treated as non- genuine on the ground that no “confirmation”from the said the lender has ITA No. 820/Ahd/2019 Daxaben Ashokkumar Dattani vs. ITO Asst. Years –2014-15 - 10 - been filed. Further, it has also been accepted that part of the loan has been repaid back to the aforesaid lender as well in the very same year. Accordingly, looking into the facts of the instant case, we are of the considered view that Ld. CIT(Appeals) has erred in facts and in law in confirming the addition made by the Assessing Officer under Section 68 of the Act. 8. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 05/09/2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 05/09/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 04.09.2023 (Dictation given by Hon’ble Member on his Dragon Software on 04.09.2023) 2. Date on which the typed draft is placed before the Dictating Member 05.09.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .09.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .09.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 05.09.2023 7. Date on which the file goes to the Bench Clerk 05 .09.2023 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................