Lata Gupta, New Delhi V. ITO WARD - 34(2), NEW DELHI

ITA 91/DEL/2020

AI Insights

This case involves an appeal by Lata Gupta against the order of the CIT(A)-12, New Delhi, which confirmed the addition of Rs. 2,38,50,000 as unexplained income from undisclosed sources for the Assessment Year 2011-12. The addition was initially made by the Assessing Officer (AO) based on the unsecured loans taken by the assessee and the sale proceeds from a property. The CIT(A) upheld the AO's decision, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal found that while the source of Rs. 67 lakh from the sale of a property was adequately explained, the assessee failed to prove the creditworthiness and genuineness of the transactions for the remaining amount of Rs. 1,71,50,000.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122003 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 01-08-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 02-01-2020
• Other Referred Cases: Pr. CIT-4 vs. Hi-Tech Residency (P.) Ltd [(2018) 403 (SC)], Pr. CIT vs. Himachal Fibers Ltd [2018) 173 (SC)
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Principle of natural justice; Additional evidence; Reason to believe; Reassessment proceedings; Set aside
• Section: 68; 148; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E: NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND M.BALAGANESH, ACCOUNTANT MEMBER ITA No.91/Del/2020 Assessment Year: 2011-12 Lata Gupta, 59/6, Prabhat Road, Karol Bagh, New Delhi 110005 PAN ABTPG 2901 Q vs. ITO, Ward-34(2), Delhi (Appellant) (Respondent) For Assessee: Shri Priyansh Jain, CA For Revenue: Ms. Smita Singh, Sr. DR Date of Hearing : 02.08.2023 Date of Pronouncement : 11.10.2023 ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order CIT(A)-12, New Delhi dated 29.10.2019 for A.Y. 2011-12. 2. The grounds have been raised by the assessee are as follows:- 1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld. AO in making addition Rs. 2,38,50,000/- as unexplained income from undisclosed sources without appreciating the facts of the case. 2. That in any case and in any view of the matter, Ld. CIT(A) has erred in law and in facts in confirming the action of the Ld. AO in making addition of Rs. 2,38,50,000/- is bad in law and against the facts of the case. 3. That having regard to facts and circumstances of the case, Ld. CIT(A) has erred in law and in facts in passing the appellate order without granting proper opportunity of being heard and following the principles of natural justice. 3. The brief facts giving rise to this appeal are that the Assessing Officer made addition of Rs. 2,38,50,000/- as unexplained income from undisclosed sources treating ITA No. 91/Del/2020 2 the unsecured loan taken by the assessee from seven entities/persons and sale proceed of Rs. 67 lakh from sale of property situated at AE-8 Shalimar Bagh which was used towards purchase/investment in the immovable properties. The Assessing Officer treated the amount of said unsecured loans from seven parties and sale proceed as unexplained income of assessee from undisclosed sources routed through said entities/persons not having creditworthiness to extend loan to the assessee and the Assessing Officer thus disbelieve the genuineness of the transaction and made addition. The aggrieved assessee carried the matter before the ld. CIT(A) but remained empty handed as the ld. CIT(A) uphold the addition by observing that the Assessing Officer has given specific findings with regard to the creditworthiness of all the lenders and has also expressed his dissatisfaction to the genuineness of transaction. The ld. CIT(A) also noted that the appellant has failed to rebut the observations of the Assessing Officer in the assessment order. The ld. CIT(A) also observed that the appellant has stated nothing about the source of investment made in the property at Shalimar Bagh. Now the appellant is before Tribunal in this appeal by raising above noted grounds of appeal. Application of assessee for admissions of additional evidence dated 28.11.2022. 4. The ld. counsel submitted that additional evidence at pages 81 to 173 may kindly be admitted for consideration as the same could not be filed before the Assessing Officer and ld. CIT(A) during relevant proceedings. The ld. counsel submitted that though details of said parties alongwith their confirmation were duly placed before the Assessing Officer during assessment proceedings which was available in the paper book but as abounded precautions the assessee is seeking admission of the same as an additional evidence and for consideration on merits. 5. Replying to the above, the ld. Senior DR strongly opposed to the admission of said evidence by submitting that the assessee herself in her application dated 28.11.2022 had stated that these documentary evidence were filed before the Assessing Officer along with details and confirmation of lenders therefore the same cannot be treated as additional evidence and thus the application of assessee may ITA No. 91/Del/2020 3 kindly be dismissed being devoid any merits. On being asked by the bench the ld. counsel submitted that the said evidence was placed before the authorities below but the same was filed by the assessee for consideration of bench as an additional evidence. 6. The assessee has also filed application dated 07.03.2023 seeking admission of additional grounds but during submission the ld. counsel of assessee has not placed any arguments on the said application. Therefore, we safely presume that impliedly the assessee does not want to press the same hence the said application is dismissed. 7. On careful consideration of above submissions we are of the view that when the assessee has already filed all documentary evidence before the authorities below during assessment and first appellate proceedings then the same cannot be considered as additional evidence. Therefore application for seeking admissions of additional evidence is dismissed being misconceived and devoid of merits. 8. On merits the ld. counsel submitted that the learned Commissioner of Income- Tax (Appeals) has wrongly confirmed the additions of Rs. 2,38,50,000/- made by the learned AO u/s 68 of the Income Tax Act 1961, on the grounds of unexplained income from undisclosed sources without having relevant information/ documents and without examining the facts of the case. That the learned Commissioner of Income-Tax (Appeals) failed to appreciate that the entire credits of Rs. 2,38,50,000/- are genuine loan transactions. He further contended that the identity, genuineness of transactions and creditworthiness of person has been proved by the appellant, since the appellant has submitted complete information on the nature and sources of each credit along with the lenders confirmations to the Id. AO as asked during the assessment proceedings. Moreover, appellant has identified all the lenders by giving their complete details, along with the PAN, mode of payment, transaction date and other necessary details. Hence, the assessee had discharged its onus of establishing the identity, genuineness and creditworthiness of the lenders. He further submitted that the copies of sale deed executed by the assessee reveals fact of receipt of Rs. 67 lakh by the ITA No. 91/Del/2020 4 assessee consideration against sale of property at AE & Shalimar Bagh. Therefore source of Rs. 67 lakh is also explained by the assessee. 9. The ld. counsel also submitted that the learned Commissioner of Income-Tax (Appeals) has not verified the genuineness of the transactions from any of the lenders, whose details have been submitted to the Id. AO during the assessment proceedings and has confirmed the impugned additions of entire credits of Rs. 2,38,50,000/- made by the ld AO, based on surmises and conjectures. He vehemently pointed out that the above ground of appeal has been covered in the recent judgment of the Hon'ble Supreme Court in case of Pr. CIT- 4 vs. Hi-Tech Residency (P.) Ltd [(2018) 403 (SC)] where the Apex Court held that assessee discharges its onus of establishing the identity, genuineness and creditworthiness of the lenders by providing identity of lenders by giving their complete details, PAN and also proves capacity of lenders by showing that amounts were received by account payee cheques drawn from bank accounts of lenders. The Apex Court further held that the assessee can be asked to prove source of credits in its books of account but not source of source. The same stand has been re-iterated by the Apex Court in the case of Pr. CIT vs. Himachal Fibers Ltd [2018) 173 (SC)]. The ld. counsel finally submitted that orders of the authorities below may kindly be set aside and the Assessing Officer may kindly be directed to delete the addition. 10. Replying to the above, the ld. Senior DR supported the orders of the authorities below and submitted that the onus was on the assessee to proof identity, creditworthiness of creditor/lender and genuineness of transaction but the assessee failed to establish the same therefore the Assessing Officer rightly made addition in the hands of assessee and the ld. CIT(A) was also correct and justified in upholding the same. 11. On careful consideration of above submission from the assessment order we note that the assessee did not file return of income for AY 2011-12 and thus the Assessing Officer issued notice u/s. 148 of the Act after recording reason to believe that the assessee income chargeable to tax for the relevant period has escaped assessment. ITA No. 91/Del/2020 5 In response to said notice the assessee filed return of income on 11.12.2018 declaring taxable income of Rs. 1,75,339/- .The Assessing Officer conducted assessment proceedings and allow time to the assessee to explain the source of investment in two properties situated at Karol Bagh & Shalimar Bagh totaling to Rs. 2,62,00,000/- . The assessee submitted that she has received unsecured loan of Rs. 2,38,50,000/- from eight entities/parties for said investment. The Assessing Officer not being satisfied with the explanation and documentary evidence submitted by the assessee concluded that the onus to proof identity and creditworthiness of person/lender and genuineness of transaction was on the assessee but the assessee has failed to discharge such onus and hence he made addition of said amount of unsecured loan received by the assessee. 12. The ld. Senior DR supported the orders of the authorities below precisely reiterated the observations of the Assessing Officer and ld. CIT(A) while making and upholding the disallowance. 13. The ld. CIT(A) dismissed appeal of assessee the following observations and findings:- 7. Decision 7.1 Briefly stated, the facts as discussed by the Assessing Officer are that as per NMS Information, the Assessee had purchased immovable property for Rs.2,43,00;000/- during the year under consideration and no return of income was filed. Since the ITR was not filed, the source of investment remained unverified. After recording reasons to believe that Assessee's income chargeable to tax had escaped assessment, the Assessing Officer issued notice u/s 148 of the IT Act with the sanction of the competent authority. The Assessee filed ITR for AY 2011-12 showing income of Rs.1,75,339/-. Thereafter, the Assessing Officer issued notice u/s 143(2) of the Act and duly served on the Assessee. 7.2 During the year under consideration, the Assessee had purchased a property AE-8, Shalimar Bagh, Delhi for the consideration of Rs.63 lacs and sold the property during same year at Rs.67 lacs. Another property at Karol Bagh, Delhi was purchased during the year for consideration of Rs. 1,80,00,000/- which was sold for Rs.1,95,00,000/- during same year. On these transactions, the Assessee declared short term capital gain of Rs.1,48,348/-. When the Assessing Officer asked to explain the source of investment in the properties, the Assessee submitted the details as per which Loans amounting to Rs.2,38,50,000/- was taken as under :- ITA No. 91/Del/2020 6 7.3 The Assessing Officer observed that the creditworthiness of Mr. Vijay Kumar Gupta, Ramesh Goenka, Morya Infracon Pvt. Ltd. is not proved with reference to the amounts advanced by them. The Assessing Officer has observed that the creditworthiness. of Mohan Narang HUF, Murlidhar, Usha Aggarwal and Rohini Promoters alongwith the genuineness of transaction is-not proved. The Assessing Officer further observed that the Assessee declared the sale proceeds of property at Shalimar Bagh of Rs.67 lacs. However, no details with respect to the investment in this property was filed. On the above observations, the Assessing Officer added Rs.2,38,50,000/- to the total income as unexplained income. 7.4 In the grounds of appeal and statement of facts, the Appellant has argued that the loan transactions were genuine, many of which had been repaid in subsequent years. The Assessee submitted complete information on the nature and source of cash credits alongwith the confirmation from the lenders. Details about the identity of the lenders were submitted before the Assessing Officer. Thus the Assessee has discharged its onus to explain the cash credits. The addition made by the Assessing Officer is against the decision of the Hon'ble Supreme Court in the following cases:- 1. Pr. CIT-4 vs. Hi-Tech Residency (P) Ltd. (2018) 403 (SC) 2. Pr. CIT vs. Himachal Fibers Ltd. (2018) 173 (SC) 7.5 I have considered the reasons for the addition given by the Assessing Officer and the arguments in the statement of facts and grounds of appeal put forward the, Appellant. The Assessing Officer has given specific finding with regard to the creditworthiness of all the lenders and has also expressed his dissatisfaction with regard to the genuineness of the transactions. The Appellant has failed to rebut the observations of the Assessing Officer in the assessment order. Moreover, the Appellant has stated nothing about the investment made in the property at Shalimar Bagh, Delhi. Since, the Appellant has failed to substantiate her arguments and averments in the appeal form, I am left with no option but to dismiss the same. Accordingly, the addition made by the Assessing Officer to the total income is confirmed. ITA No. 91/Del/2020 7 14. On careful consideration of the basis taken by the Assessing Officer for making addition in the hands of assessee we note that the Assessing Officer made addition u/s. 68 of the Act by observing that the lender Shri Vijay Kumar Gupta has filed return of income by declaring income of Rs. 1,55,914/- for AY 2012-13 and thus the loan amount of Rs. 1,10,50,000/- is commensurate with the returned income of assessee. The Assessing Officer in the table noted in para 6 mentioned that regarding Shri Manan Narang HUF, Shri Murlidhar, Smt Usha Aggarwal, M/s. Rohini Promoters copy of ITR and bank statement were not placed on record therefore creditworthiness of lender and genuineness of transaction could not be established. The Assessing Officer in the same table also noted that the loan amount of Rs. 6,50,000/- from Shri Ramesh Goenka and amount of Rs. 15 lakh from M/s. Maurya Infracom Pvt. Ltd. does not commensurate with the returned income of these lenders which was Rs. 1,63,130/- and Rs. 96,848/- respectively for AY 2011-12. In this regard we are in agreement with the contention of the ld. counsel of assessee that the income is not sole basis to assess creditworthiness of lender and at the same time we are also in agreement with the contention of ld. Senior DR that the assessee failed to discharge onus as per lay on her as per requirement of section 68 of the Act as the assessee has not submitted financial statements, balance sheet etc. establishing the capacity and creditworthiness of lender/creditors even in the cases of companies. 15. From the first appellate order we note that the ld. CIT(A) noted that the assessee did not file return of income therefore the assessment was reopened and reassessment proceedings were initiated u/s. 147/148 of the Act. The CIT(A) further noted that during the year under consideration the assessee had purchased two properties, as per the Assessing Officer the assessee invested Rs. 2,62,00,000/- towards said purchases and also taken unsecured loan from seven persons/entities and sale consideration amounting to Rs. 2,38,50,000/- which also includes an amount of Rs. 67 lakh which was as per assessee received as sale consideration against sale of properties by the assessee. Before the ld. CIT(A), the ld. AR, on behalf of assessee argued that the loan transaction were genuine and the assessee submitted complete information on the nature of source cash credit alongwith confirmation from the lenders ITA No. 91/Del/2020 8 thus no addition u/s. 68 or any other provision of the Act is required to be made. It was also contended by the ld. AR that the assessee has discharged onus lay on her to explain to cash credits therefore no addition should have been in the hands of assessee. 16. So far as receipt of sale consideration of Rs. 67 lakh against sale of property situated at AE-8 Shalimar Bagh is concerned the assessee has placed copy of sale deed executed on 26.08.2010 in favour of Shri Manan Narang and others which reveals that the assessee has sold said property during FY 2010-11 pertaining to AY 2011-12. Thus, source of receipt of sale consideration of Rs. 67 lakh during relevant financial period is clearly discernable from the said copy of registered sale deed executed by the assessee. Therefore, we hold that the Assessing Officer was not correct in disbelieving the source of amount of Rs. 67 lakh and thus we set aside the findings of the authorities below in this regard and hold that the assessee has successfully demonstrated and established source of Rs. 67 lakh received by her as sale consideration against sale of said property. Therefore the Assessing Officer is directed to delete the part addition to such extent. 17. Further, regarding source of remaining amount of unsecured loans from seven entities/lenders of Rs. 1,71,50,000/- the ld. counsel of assessee submits that assessee has discharged onus lay on her as per requirement of sec 68 of the Act. On evaluation of said contention of assessee and after considering the explanation and documentary evidence filed by the assessee the ld. CIT(A) observed that the Assessing Officer has given specific findings destroying the creditworthiness of lenders and has also expressed his dissatisfaction regarding genuineness of transaction. The ld. CIT(A) with said observations upheld the addition. On careful perusal of documentary evidence filed by the assessee we note that the assessee has submitted copies of confirmation from Shri Vijay Kumar Gupta, Smt. Usha Aggarwal, Shri Ramesh Goenka and M/s. Rohini Promoters P Ltd., Shri Mohan Narang HUF and Shri Murlidhar. The documentary evidence placed on record shows that the assessee has selectively selected relevant extracts or parts of bank statement of lenders and has not submitted completed copies of complete bank statements of entire financial period all the lenders establishing the genuineness of transactions. We are in agreement with the contention of ld. counsel of ITA No. 91/Del/2020 9 assessee that the returned income cannot be taken as sole basis for testing and disbelieving the creditworthiness of lenders but other financial statement has to be seen and considered but in support said contention the assessee has not filed complete books of accounts or even balance sheet of lenders to substantiate their capability to extend loan to the assessee. We also note that even in the cases of Shri Vijay Kumar Gupta, M/s. Maurya Infracom and M/s. Rohini Promoters P Ltd. which are big and corporate lenders, the balance sheet and other financial statements have not been placed on record to substantiate their capacity and creditworthiness and establishing the genuineness of transaction of unsecured loans. On being asked by the bench the ld. counsel submitted that he has no information as to whether the assessee has paid interest on the impugned unsecured loans to the creditors or the amount of loans has been prepaid to the lenders/creditors. This is not a behaviour of a man of ordinary prudent that extending loan without charging interest and without asking repayment of loan amount from the debtor/assessee till date, even after lapse of substantial time. These facts and circumstances cumulatively make it clear that the assessee has failed to substantiate capacity and creditworthiness of lenders and genuineness of transaction of unsecured loans of Rs. 1,71,50,000/- from seven entities/parties and therefore the Assessing Officer was right in making addition in the hands of assessee treating the same as undisclosed income from undisclosed sources as per mandate of provision of sec 68 of the Act. The ld. CIT(A) was also justified and correct in upholding the same. Accordingly grounds of assessee are partly allowed. 18. Accordingly, grounds of assessee are partly allowed. Order pronounced in the open court on 11.10.2023. Sd/- Sd/- (M.BALAGANESH) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 11 th October, 2023 NV/- ITA No. 91/Del/2020 10 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR // By Order // Asstt. Registrar, ITAT, New Delhi