The CIT-I, Indore V. M/s Man Developments, Indore

ITA 97/Ind/2021

AI Insights

The case involves the revenue's appeal against the decision of the Commissioner of Income-Tax (Appeals) which had deleted a major portion of the addition made by the AO under section 68 of the Income-tax Act, 1961, concerning unexplained cash credits. The assessee, engaged in real estate, had taken unsecured loans from various creditors, which the AO initially added to the income as unexplained. The CIT(A) later reduced this addition significantly after the assessee provided additional evidence. The revenue challenged this reduction, leading to the current appeal. The ITAT found that while the assessee had not initially provided sufficient documentary evidence, the CIT(A)'s acceptance of some explanations without adequate documentation warranted further verification, leading to the remand of the case to the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130585 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 14-12-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 29-04-2021
• Other Referred Cases: CIT Vs. N. Tarika Properties Investment (2014) 387 (SC), PCIT Vs. NRA Iron and Steel Pvt. Ltd. (2019)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S.C. PADLIYA
• Keywords: Unexplained cash credit; Additional evidence; Corroborative evidences; TDS
• Section: 68; 143(3); 142(1); 143(2); 13; 22

Judgement Text

Page 1 of 28 आयकर अपीलीय अिधकरण, इंदौर ायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.97/Ind/2021 Assessment Year: 2017-18 ACIT-Central-2 Indore बनाम/ Vs. M/s Man Development, 304, Vishal Astra, Vijay Nagar Indore (Appellant / Revenue) (Respondent / Assessee) PAN: AAKFM 2713 N Revenue by Shri P.K. Mishra, CIT-DR Assessee by Shri S.C. Padliya, AR Date of Hearing 28.02.2023 Date of Pronouncement 26.05.2023 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by appeal-order dated 17.02.2021 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”], which in turn arises out of assessment-order dated 25.12.2019 passed by learned ACIT, Central-2, Indore [“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the revenue has filed this appeal on following solitary ground: “(1) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 10,33,73,982/- made by the Assessing Officer on account of unexplained cash credit u/s 68 of the Income-tax Act, 1961.” Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 2 of 28 2. Heard the learned Representatives of both sides at length and case- records perused. 3. Brief facts leading to present appeal are such that the assessee-firm, engaged in the business of real estate, filed return of income for the relevant AY 2017-18 on 31.10.2017 declaring a total income of Rs. 6,77,670/-. The case was subjected to scrutiny by issuing notices u/s 143(2) and 142(1) and ultimately the assessment-order was passed u/s 143(3) at a total income of Rs. 10,54,90,244/- after making certain additions, one of those additions was of Rs. 10,37,78,982/- u/s 68 in respect of unsecured loans (including interest) taken by assessee. The assessee contested the said addition in first-appeal whereupon the Ld. CIT(A) deleted major portion of addition to the extent of Rs. 10,33,73,982/- and upheld the remaining addition of Rs. 4,05,000/-. Now, the revenue is aggrieved by deletion of Rs. 10,33,73,982/- granted by CIT(A) and has come in next appeal before us. 4. The AO has discussed the impugned addition in Para No. 3 / Page No. 2 to 9 of the assessment-order and noted that during the course of assessment-proceeding the assessee was asked to establish the identity and creditworthiness of loan creditors as well as genuineness of the loan- transactions, but even after giving several opportunities the assessee submitted part-confirmation of accounts and that too without any corroborative documents. The AO further observed that the assesee failed to produce ITR and bank statements of creditors. The AO has also scanned a “List of Unsecured loans” in the assessment-order of as many as 265 creditors, which contains data such as PAN numbers, opening balance, loan taken during year, interest credited, rate of interest, amount repaid during year, TDS out of interest and closing balance. Replying upon decision of Hon’ble Supreme Court in CIT Vs. N. Tarika Properties Investment (2014) 387 (SC) and PCIT Vs. NRA Iron and Steel Pvt. Ltd. (2019), the AO held that supply of PAN data cannot be treated as sufficient disclosure. The AO also relied upon some more decisions as mentioned in assessment-order and Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 3 of 28 ultimately made addition, in Para No. 3.5 of assessment-order, u/s 68 by concluding that the unsecured loans including interest paid during the year were not verifiable and no adequate documentary evidences were furnished by assessee to establish the genuineness of loans taken and interest paid to those parties. 5. During first-appeal, the assessee invoked Rule 46A and filed additional evidences whereupon the CIT(A) called Remand-Report from AO. The AO filed Remand-Report and thereafter the assessee filed re-joinder to CIT(A). After consideration whereof, Ld. CIT(A) found that during the relevant previous year, the assessee has in fact taken total loans of Rs. 16,91,09,380/- (although the AO made an addition of Rs. 10,37,78,982/-) from 185 lenders. He further noted that in the Remand-Report, the AO has accepted evidences of 102 lenders and raised questioning only on 83 lenders. Thereafter, the CIT(A) dealt with those 83 lenders one by one in a Tabular format on Page No. 34 to 51 of his order. Ultimately, he came to conclude that an addition of Rs. 4,05,000/- only relatable to the loan taken from one Mr. Prakash Jain HUF was sustainable and rest of the addition of Rs. 10,33,73,982/- was not sustainable. Accordingly, he deleted addition to the extent of Rs. 10,33,73,982/-. The observations/findings/conclusions made by CIT(A) in this regard are extracted below for the sake of immediate reference: Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 4 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 5 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 6 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 7 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 8 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 9 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 10 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 11 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 12 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 13 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 14 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 15 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 16 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 17 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 18 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 19 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 20 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 21 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 22 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 23 of 28 Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 24 of 28 6. Before us, Ld. DR representing the revenue supported the order of AO and very strongly opposed the order of CIT(A) by raising contentions as under: (i) Firstly, he objected to assessee’s very explanation to CIT(A) that the loans were taken through finance broker and therefore it was not possible to submit documentary evidences of loan creditors. Ld. DR submitted that mere taking of loans through finance-broker does not absolve the assessee from responsibility of proving the identity and creditworthiness of creditors and genuineness of loans which is very much required by section 68 of the act. Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 25 of 28 (ii) Secondly, referring to the analysis made by CIT(A) qua 83 loan creditors, he submitted that in the remand-report, the AO has given details of each creditor and reported serious deficiencies. But the CIT(A) has accepted vague replies of assessee; his conclusions are not based on documents/evidences. For illustration purpose, Ld. DR referred to item No. 3, 4, 5, 7, 8, 9, 11, 12, 13, 20 and 21 in the list of 83 creditors wherein an identical vague explanation given by assessee has been accepted by CIT(A) without any supportive evidence as to the creditworthiness of the lenders and genuineness of transactions. Similarly, in item No. 79, 80, 81, 82, etc. another set of vague explanation without any supporting evidences had been accepted by CIT(A). Thus, Ld. DR contended that the CIT(A) has given relief to assessee on unsupported vague explanation, without having any evidence/document to justify the same. 7. Per contra, Ld. AR representing the assessee filed a Written- Submission dated 28.02.2023, one Paper-Book and also made oral submissions. The main contentions raised by Ld. AR are as under: (i) The assessee has taken loans mainly through finance broker and as such the loan creditors are not directly known to assessee. Therefore, the assessee could not submit documents in some cases. (ii) That the assessee has supplied PAN data in all cases which are also mentioned in the Tax Audit Report; the AO could very well verify the concerned lenders by taking help of PAN data. (iii) The assessee has taken loans from 184 persons, out of which the AO has raised objections in 83 cases only. Even for those 83 lenders, the assessee has given genuine submissions which are noted by CIT(A). There is nothing vague in the submissions of assessee. Therefore, the assessee has discharged his onus and the burden is upon the AO to disprove assessee’s submissions, which has not been done. Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 26 of 28 (iv) Out of 83 cases, in most of the cases, the assessee has repaid loans to the creditors during the year itself. Hence there cannot be any justification in making addition when the assessee has made repayments to very same creditors. 8. We have considered rival submissions of both sides and perused the material held on record. First of all, we would like to mention that it is an undisputed fact that during assessment-proceeding, the assessee did not file sufficient documentary evidences which led the AO to make addition. However, during first appellate proceeding, the assessee filed additional evidences under Rule 46A whereupon the CIT(A) called remand report from AO, which the AO submitted on 13.10.2020, a copy is placed at Page No. 438 to 448 of the Paper-Book. On perusal of same, it is observed that the AO objected to admission of additional evidences. However, the CIT(A) admitted additional evidences in terms of sub-rule (1)(b) of Rule 46A. Before us, the Revenue-Appellant has not raised any ground to challenge this action of CIT(A); therefore we find that the Revenue has no grievance qua the admission of additional evidences by CIT(A). 9. Going on merits of the addition, we find from the order of CIT(A) that during the relevant previous year, the assessee has taken total loans of Rs. 16,91,09,380/- from 185 persons. Ld. CIT(A) has further observed that in the Remand-Report, the AO accepted additional evidences of 102 lenders and raised questioning only on 83 lenders. Ld. AR emphasized this point during hearing before us and loudly argued that there is no quarrel with regard to 102 lenders; Ld. DR did not rebut or contradict this aspect. Therefore, we can safely conclude that there cannot be any doubt on the genuineness of loans taken from 102 lenders. Now, we are left with 83 lenders which have been dealt by CIT(A) in Tabular format on Page No. 34 to 51 of his order. On perusal of same we find, as explained by Ld. DR with some illustrations, that the CIT(A) has simple accepted the version of assessee and there is no documentary evidence to support those Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 27 of 28 explanations. In fact, many of the explanations are identical besides being vague and unsupported. Therefore, we do not find any justification in the CIT(A)’s action whereby he has granted relief to assessee based on those vague/unsupported explanations and reduce the entire addition made by AO to just Rs. 4,05,000/-. We also agree with Ld. DR that simply taking loans through finance-broker does not absolve assessee from responsibility to prove the three ingredients of section 68, namely the identity and creditworthiness of the lender and genuineness of transaction. The reasoning given by Ld. AR that PAN data is sufficient, is also not acceptable to us in view of the decisions relied upon by AO in assessment-order. On an overall consideration, we find that in relation to 83 creditors, the assessee’s explanation is weak and not substantiated adequately. However, we agree with the submission of Ld. AR that if the assessee has made repayments in the same year to some of those 83 creditors, the assessee should not be saddled with the addition. Therefore, it requires a complete working at the level of AO to ascertain/verify the data of repayment made in current year against the loans taken in current year. Hence, we think it fit to remand this case back to the file of AO for such limited verification. The AO shall give opportunity to the assessee and the assessee shall furnish a complete working about 83 creditors, specifically showing the loans taken and repayments made during the year, based upon which the AO shall take a final call for the amount of addition to be sustained. It is, however, made clear that no addition shall be made in respect of 102 creditors for which the AO has already accepted additional evidences as narrated earlier. With these directions, this appeal of revenue is allowed. Man Development ITA No.97/Ind/2021 Assessment year 2017-18 Page 28 of 28 10. Resultantly, this appeal of revenue is allowed in terms indicated above. Order pronounced in the open court on 26/05/2023. Sd/- Sd/- (VIJAY PAL RAO) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक /Dated : 26.05.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 2. Date of typing & draft order placed before the Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the approved draft is placed before other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order