Hardik Sureshchandra Shah, Ahmedabad V. The Pr. CIT-1, Ahmedabad

ITA 97/AHD/2022

AI Insights

The case involves an appeal by Hardik Sureshchandra Shah against the order of the Pr. Commissioner of Income-Tax, Ahmedabad, which had set aside the assessment order for the assessment year 2016-17 under section 263 of the Income Tax Act, 1961. The Pr. CIT had found the assessment order erroneous and prejudicial to the interest of the Revenue due to non-verification of the genuineness of unsecured loans taken by the assessee from Kalpana S. Shah and Monali H. Shah. The Tribunal examined the contentions and evidence presented by both parties, including bank statements and ledger accounts, and concluded that the Pr. CIT's findings were incorrect and not supported by the evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 133586 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-01-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 17-04-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: BIREN SHAH
• Keywords: Assessment record; Set aside
• Section: 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘C’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.97/Ahd/2022 Assessment Year : 2016-17 Hardik Sureshchandra Shah 201/201 Hrishkesh Nr.Navrangpura Opp: Munic9ipal School Navrangpura Ahmedabad 380 009. Gujarat. PAN : ANYPS 3392 Q Pr.CIT-1 Ahmedabad-1. (Applicant) (Responent) Assesseeby : Shri Biren Shah, AR Revenue by : Shri A.P. Singh, CIT स ु नवाई क तार ख/Date of Hearing : 18/01/2023 घोषणा क तार ख /Date of Pronouncement: 20/01/2023 आदेश/O R D E R PERANNAPURNA GUPTA, ACCOUNTANT MEMBER Present appeal has been filed by the assessee against order passed by the ld. Pr.Commissioner of Income-Tax-1, Ahmedabad [hereinafter referred to as “Ld.Pr.CIT by exercising revisionary power under section 263 of the Income Tax Act, 1961 ("the Act" for short) dated 26.2.2021 pertaining to the Asst.Year 2016-17. 2. The grounds raised in the appeal are as under: ITA No.97/Ahd/2022 2 “1) On the facts and in the circumstances of the case, the order dated 26/02/2021 passed by the learned Pr. C.I.T. u/s.263 of the IT. Act is bad in law and ab initio void. 2) On the facts and in the circumstances of the case, the learned Pr. C.I.T. erred in setting aside the assessment order dated 02/11/2018 passed by the Assessing Officer u/s. 143(3) of the IT. Act. 3) The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 3. The ld.counsel for the assessee contended that error noted by the ld.Pr.CIT in the assessment order passed in the case of the assessee related to non-verification of genuineness of unsecured loans taken by the assessee from two persons viz. Miss Kalpana S. Shah and Monali H. Shah. He contended that the ld.Pr.CIT had noted certain anomalies in the details furnished by the assessee of the said transactions in the assessment records, and therefore, had found the assessment order to be erroneous causing prejudice to the Revenue leading to initiation of revisionary proceedings under section 263 of the Act. He contended that during revisionary proceedings, the assessee had clarified the anomalies and the ld.Pr.CIT had accepted the said fact also, but thereafter he still held the assessment order to be erroneous and prejudicial to the interest of the Revenue for non-verification of the details filed by the assessee, and also since credit-worthiness of the said two lenders had not been established bythe assessee. He contended that the facts of the transaction revealed that the transaction between the assessee and the said parties was merely transfer of funds from the assessee to the said parties, and back from them; that in net effect, there was hardly any amount which was given by these two persons to the assessee, and therefore, no question of establishing credit- worthiness of the assessee. He accordingly contended that the ld.Pr.CIT had not considered the issue in right perspective, and ITA No.97/Ahd/2022 3 there was no error as such in the order of the AO accepting the genuineness of the said two unsecured loans given to the assessee. The ld.DR, however, relied on the order of the ld.Pr.CIT. 4. We have heard contentions of both the parties. 5. As pointed out by the ld.counsel for the assessee and on perusal of the contents of order of the ld.Pr.CIT, the parties giving unsecured loans to the assessee, which the ld.Pr.CIT found had not been verified by the AO for their genuineness, were Miss Kalpana S. Shah and Monali H. Shah. Para-2 of the ld.Pr.CIT’s order reveals, he had noted from the records before him that from Kalpana S. Shah, the assessee had received an amount of Rs.31,18,882/- and had paid her back Rs.29,61,194/-. But he noted that there was no income-tax return for the impugned year of Ms. Kalpana S. Shah on record to prove her credit-worthiness. He further noted from the records with respect to the transactions with Kalpana S. Shah from ledger account that Rs.22,00,000/- allegedly paid to her by the assessee on 24.6.2015 was not found credited in her bank account maintained with UCO Bank, Ahmedabad. Therefore, in the absence of her return of income, and this amount of Rs.22.00 lakhs allegedly not reflected in her bank account, ld.Pr.CIT found that genuineness of the transactions remained un-established and unverified, thus resulted in an error causing prejudice to the Revenue. 6. With respect to unsecured loans taken from Manoli H. Shah, the ld.Pr.CIT noted at para-3 of his order that the assessee had received Rs.1,36,98,845/- from her and had paid Rs.1,21,15,000/- back to her. He further noted that the assessee had received amount aggregating to Rs.35,20,000/- on various dates, but these ITA No.97/Ahd/2022 4 transactions were not reflected in the bank account of Monali H. Shah. The transactions, which he so noted were as under: Rs.5,00,000/- : On 15.05.2015 Rs.10,00,000/- : On 29.05.2015 Rs.1,70,000/- : On 01.06.2015 Rs.18,50,000/- : On 24.06.2015 Rs.35,20,000/- 7. In the absence of the aforementioned transactions being found in the bank account of Monali Shah, ld.Pr.CITnoticed that the genuineness of the transaction was not established, and the assessment order accordingly was found to be erroneous causing prejudice to the Revenue. Thus, as rightly pointed out by the ld.counsel for the assessee, the impugned unsecured loan transactions of the assessee from Kalpana Shah and Monali Shah was found to be ingenuine and unverified by the AO noting certain transactions relating to the same not reflected in their respective bank accounts, and also on account of credit-worthiness of Kalpana Shah not being established by way of income-tax return filed for the year. 8. A perusal of the order of the ld.Pr.CIT, however, reveals that the assessee had submitted bank accounts of both these persons and on going through the same, we find that, in the case of Kalpana Shah anomalies with respect to transaction of Rs.22.00 lakhs being the payment made by the assessee to her not being reflected in her bank account as noted by the ld.Pr.CIT, was noted by the Ld.PCIT himself to be an incorrect observation. At para-5 of his order, ld.Pr.CIT noted that with respect to the “contentions of the ITA No.97/Ahd/2022 5 assessee with regard to repayment of Rs.22,00,000/- made to Kalpana S. Shah, which seems prima facie correct.” 9. Similarly, with regard to anomaly noted in the case of Monali S. Shah of certain transactions relating to the amount received from Monali Shah by the assessee not being reflected in her bank statement, the ld.Pr.CIT has stated that from the narration of some of the transactions( Rs.10,00,056/- and Rs.5,00,028/-) in the bank statement of Monali Shah submitted by the assessee it was not clear that the funds had been transferred to the assessee. He therefore held that the source of receipts of the said amounts with the assessee remained unexplained. He thereafter applied this logic and reasoning to the remaining transactions also and held that the source of credits amounting to Rs.35,20,000/- had remained un explained. 10. The assessee had submitted copy of the bank statement of Monali Shah with Allahabad bank, Vasna, Pirana Overbridge, Paldi, Ahmedabad, which fact was noted at para 5.1 of the ld.Pr.CIT’s order. At para-5.1, the ld.Pr.CIT noted that with regard to payment by the Monali Shah to the assessee, the assessee has submitted copy of bank statement bearing account no.50060691834 maintained in the name of Monali Shah with Allahabad Bank, Paldi, Ahmedabad. It has been noted by theLd.PCIT that the assessee stated that “aforesaid amounts( totalling Rs.35,20,000/-) were debited from the said bank account of the assessee.”Having so stated, he thereafter went to deal with the transactions of Rs.5,00,028/- and Rs.10,00,056/- reflected therein stating that it was not clear from the narration from the bank statement that these amounts were transferred to the assessee, and after discussing ITA No.97/Ahd/2022 6 these two transactions, and holding that the assessee had been unable to conclusively prove that the funds of Rs.5,00,028/- and Rs.10,00,056/- were actually received from the assessee by Monali Shah, he held these credits to have remained unexplained. In the same breath,he dismissed the contentions of the assessee with regard to the receipts of the remaining amounts out of aggregate sum of Rs.35,20,000/- of Rs.20,20,000/-; stating that even these amounts could be properly examined by the AO. 11. The ld.counsel for the assessee during the course of hearing before us, drew our attention to the copy of the bank statement of Monali Shah submitted to the ld.Pr.CIT and copy of which placed before us in PB 59-63 filed on 02.08.2022, pointing out that the remaining transactions were clearly reflected in the name of the assessee in the respective dates in the said bank account of Monali Shah. He contended that the Ld.PCIT had completely ignored these transactions. 12. Now coming to two transactions, which the ld.Pr.CIT noted from the bank statement of Monali Shah with respect to which he had noted narrations in the bank statements did not make it clear that the amounts was transferred to the assessee and the assessee has not informed as to how narration scould be co-related with any of its bank statements, findings of the ld.Pr.CIT in this regard at para-5.1 is as under: 5.1 ...... However, on perusal of aforesaid bank account statement, it is observed that on 15.05.2015 and 29.05.2015, amounts of Rs. 5,00,028/- and Rs.10,00,056/- were transferred with narration of entry as " TO TRF TRF TO 85845001829". The name of assessee or its proprietary concern (Ms/ Shreeji Steel Traders) does not appear against the relevant entries in the bank statement which could establish that the funds were actually debited from the bank account of Monali H. Shah and credited to bank account of assessee or its proprietary concern. Also, on perusal of case ITA No.97/Ahd/2022 7 records, it is seen that during the course of assessment proceedings, assessee has furnished details of various bank accounts maintained by him during the relevant assessment year. On perusal of such details, it was found that during the relevant assessment year, assessee maintained bank accounts with HDFC Bank (Account Numbers 16802000000539 &50200002920106) and Allahabad Bank (Account Number 20117288282). If the narration 'TO TRF TRF TO 85845001829" is considered as referring to some account number, then assessee has not informed whether he is the actual owner of any bank account bearing account number 85845001829. From records, no such account has been found to be owned by the assessee. Therefore, the assessee has not been able to conclusively prove that funds to the tune of Rs.5,00,028/- and Rs. 10,00,056/- were actually received from Monali H. Shah. The nature and the source of the credits Rs. 5,00,028/- and Rs.10,00,056/- from Monali H Shah on 15.05.2015 & 29.05.2015 respectively aggregating to Rs. 15,00,084/- thus remains unexplained. 13. As is evident from the above, the ld.Pr.CIT has noted narration with respect to transfer of amounts of Rs.5,00,028/- and Rs.10,00,056/- to the assessee does not mention the name of the assessee, but the narration was absurd being “TO TRF TRF TO 85845001829” . The ld.Pr.CIT states that the assessee has not established whether this number noted in the narration pertained to any of its bank accounts, and therefore, he held that the assessee was not able to prove that these sums were actually received by the assessee from Monali Shah. On this basis, therefore, he held, the credits to the tune of Rs.5,00,028/- and Rs.10,00,056/- remained unexplained. 14. Before us, the ld.counsel for the assessee contended that during the assessment proceedings, the assessee has furnished copy of his bank statement which were very much part of the record. The copy of the same was also filed before us. He stated that his bank account reflected these transactions clearly on the impugned dates as coming from Ms.Monali Shah. He drew our attention to the relevant entries in this bank account placed before us at P.B 31-34. He therefore stated that the ld.Pr.CIT without considering records ITA No.97/Ahd/2022 8 before him had arrived at a finding that the assessee had been unable to explain the source of credits with respect to Rs.5,00,026/- and Rs.10,00,056/-. 15. The ld.DR was unable to controvert this factually contention of the assessee. Therefore, the finding of the error by the ld.Pr.CIT with respect to the transaction of Rs.5,00,026/- and Rs.10,00,056/-, we hold, is incorrect. The assessee has clearly revealed these amounts coming into the bank account of the assessee from the account of Monali Shah. The ld.Pr.CIT has made his finding solely on the basis of the bank account of Monali Shah and without looking and considering records before him, which included bank account of the assessee also. A mere comparison of bank account of Monali Shah and the bank account of the assessee could have clearly revealed to the ld.Pr.CIT that the funds transferred from Monali Shah had come to the bank account of the assessee only. Therefore, finding of the error by the ld.CIT(A) with respect to the impugned transactions, relating to Monali Shah, is also, we hold, incorrect. Thus, it is evident that anomaly with respect to the unsecured loans taken by the assessee from Monali Shah and Kalpana Shah relating to certain transactions entered into with them not reflected in their bank accounts, was demonstrated during the revisionary proceedings by the assessee, as duly reflected in the bank statements and with respect to the anomaly in the case of Kalpana Shah, the ld.Pr.CIT found the assesses contention to be correct, while in the case of Monali Shah he has not even cared to go through the bank statement and make any observation thereafter regarding the same. ITA No.97/Ahd/2022 9 16. We have also noted that the Ld.PCIT has merely asked the AO to verify the bank statement of these two persons filed by the assessee. It is settled law that for exercising revisionary jurisdiction, the ld.Pr.CIT has to categorically point out error in the order of AO, and this power cannot be exercised for a mere verification exercise. In the present case, anomalies noted by the ld.Pr.CIT with respect to the unsecured transactions being demonstrated by the ld.counsel for the assessee to be non-existent, whatever verification the ld.Pr.CIT wanted to carry out, should have been done at his end only, and only thereafter, he could have arrived at a finding, whether the order of the AO was erroneous or not. In case, verification of the bank statements revealed that these transactions were not actually reflected in the bank account of these two parties, the contentions of the ld.Pr.CIT of error in the order of the AO, would then have been correct. But, if found otherwise, then therecouldn’t be said tobe any error in the order of AO. Without carrying out the verification exercise itself, the ld.Pr.CIT clearly had no case for holding the assessment order to be erroneous on account ofnon-verification of the genuineness of these two unsecured loans. Therefore, we hold that as far as anomaly noted by the ld.Pr.CIT, with regard to these two unsecured loans taken by the assessee from Kalpana Shah and Monali Shah on certain transactions relating to the said loans, not being reflected in their bank accounts, the ld.Pr.CIT has not arrived a conclusive finding of the error and has only restored the issue to the AO for verification that too when the assessee had clearly demonstrated the anomalies to be non existent. Therefore, with respect to these anomalies noted in the said transactions, there is no error in the order of the AO. ITA No.97/Ahd/2022 10 17. Now coming to the last aspect that the credit-worthiness of the Kalpana Shah not being established, we have noted from the order of the ld.Pr.CIT himself that during the impugned year, the assessee had received Rs.31,18,882/- from her and paid back Rs.29,61,194/- to her. Thus, approximately Rs.2 lakhs has been received by the assessee from her. Copy of her ledger account filed before us which was part of the record before the AO also on page no.36. The ld.counsel for the assessee pointed out there from that entire transaction in the name of Kalapana Shah was with respect to transfer of money to her by the assessee, and received back the same from her subsequently only; that thereafter the balance was outstanding related to the opening balance in her account of Rs.22,07,140/- and balance of Rs.1,50,000/- received back from her, amounting in all to outstanding balance of Rs.23,64,828/-. Copy of her ledger account placed before us reproduced at page no.36 hereunder for clarity: 18. He has stated, therefore, that source of amounts received from her was obviously amounts transferred to her by the assessee. He ITA No.97/Ahd/2022 11 pointed out that even the ld.Pr.CIT had accepted and admitted to this fact that the amounts were transferred to Kalpana Shah, and also received back from her. He has stated that so far the outstanding balance of Rs.23,64,828/- was concerned, Rs.22,07,140/- could be attributed to the opening balance and only the difference of amount of Rs.1.5 lakhs could be attributed as received from Kalpana Shah which was a very minor amount to have warranted establishing the identity, genuineness and credit- worthiness of the transactions. 19. We find merit in the contentions of the ld.counsel for the assessee. The ledger account of the Kalpana Shah whichwas part of the books of accounts, and part of the record of the assessment also, clearly revealed that entire transaction with her related to amounts transferred to her by the assessee, and subsequently paid back by her to the assessee. Therefore, out of total amount of Rs.31,18,882/- noted by the ld.Pr.CIT to have been received by the assessee from Kalapan Shah, the source of Rs.29,61,194/- can be attributed to the amounts transferred by the assessee to her, which is evident from the copy of the ledger account also. It is only the difference of Rs.1,50,000/- which can be said to be credit given by the Kalpana Shah to the assessee, which we agree with ld.counsel for the assessee as too minor amount to invite exercise of revisionary jurisdiction by the ld.Pr.CIT for non-verification of the genuineness of unsecured loans received by the assessee from Ms. Monali Shah and Kalpana Shah, the assessee having clarified all anomalies noted by the ld.Pr.CIT in the said transaction with documentary evidences, and the ld.Pr.CIT having accepted the same, but restoring the issue to the AO only for the purpose of verification. Also with respect to the credit-worthiness of Kalpana Shah, we have noted that net ITA No.97/Ahd/2022 12 unsecured loans received from her is too minor an amount of Rs.1.5 lakhs to have invoked revisionary jurisdiction from the ld.Pr.CIT. 20. In view of the above, the order passed by the ld.Pr.CIT under section 263 of the Act is set aside, and the appeal of the assessee is allowed. 21. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 20 th January, 2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 20/01/2023