Dy. Commissioner of Income Tax, Central Cir.,2, Surat V. Somani Overseas Pvt. Ltd., Surat

ITSSA 53/SRT/2021

AI Insights

The case involves the Deputy Commissioner of Income-tax, Central Circle-2, Surat as the appellant and Somani Overseas Pvt. Ltd. as the respondent. The dispute arose from an assessment order passed under Section 143(3) read with Section 153A of the Income Tax Act, 1961, following a search action under Section 132. The Assessing Officer made an addition of Rs.2,78,59,384 as unexplained cash credit under Section 68, which was later deleted by the CIT(A). The Revenue appealed against this decision, contesting that the CIT(A) erred in accepting the assessee's submissions and evidence without proper verification. The Tribunal, after reviewing the submissions and evidence, concurred with the CIT(A) and dismissed the Revenue's appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134643 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 27-12-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 30-08-2021
• Other Referred Cases: CIT vs. Lovely Exports (P) Ltd., CIT vs. Divine Leasing & Finance, CIT vs. Orissa Corporation (P.) Ltd., CIT vs. Ranchhod V Nakhava, DCIT vs. Rohini Builders, PCIT vs. M/s Ami Industries (India) Ltd., M/s Pankaj Enka Pvt. Ltd. vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: TDS; Set aside
• Section: 68; 132; 143(3); 142(1); 153A; 133(6); 195; 194A

Judgement Text

आयकर अपीलीय अिधकरण, सुरत Ɋायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./IT(SS)A No.53/SRT/2021 (AY 2013-14) (Hearing in Physical Court) Deputy Commissioner of Income-tax, Central Circle-2, Room No.505, 5 th Floor, Aayakar Bhawan, Majura Gate, Surat-395001 Vs Somani Overseas Pvt.Ltd., 703, Trividh Chambers, Opp. Fire Brigade, Ring Road, Surat-395002 PAN No. AAECS 2257 A अपीलाथŎ/Appellant ŮȑथŎ /Respondent िनधाŊįरती की ओर से /Assessee by Shri Rasesh Shah, C.A राजˢ की ओर से /Revenue by Shri Ashok B. Koli CIT-DR सुनवाई की तारीख/Date of hearing 28.12.2022 उद्घोषणा की तारीख/Date of pronouncement 27.02.2023 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income-tax (Appeals)-4 Surat [for short to as “Ld. CIT(A)”] dated 08.06.2021 for the assessment year 2013-14, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) r.w.s. 153A of Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for the sake of brevity) on 30.12.2016. The Revenue has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.2,78,59,384/- made on account of unexplained cash credit under Sec.68 of the Act. IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 2 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the submission of the ae that it has produced the copy of confirmation from the creditor viz. Blackpool Coal Pvt. Ltd., copy of the bank statement of the creditor and copy of acknowledgment of return of income filed with the Department by the said creditor before the Assessing Officer during the course of assessment proceedings, without appreciating the fact the Assessing Officer has categorically mentioned in the assessment order that the assessee has not furnished any such documents before him. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the additions on account of unexplained cash credit in respect of loans received from Shri Anumpam Bothra, Shri Vijay Kumar Daga and M/s Bansi Sarees, without appreciating the fact that the creditors have failed to comply with the notices issued under Sec.133(6) of the Act and the assessee has also failed to produce the said creditors for verification in spite of providing ample opportunities by the Assessing Officer. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the entire addition of Rs.2,78,59,384/- without providing an opportunity to the Assessing Officer for further verification or without directing the assessee to produce the so called lenders for verification either before ethe Assessing Officer or during the course of appellate proceedings before him. 5. It is, therefore, prayed that the order the LD. CIT(A)-4, Surat may be set aside and that of the AO may be restored to the above extent. 6. The appellant craves leave to add, alter, amend and/or withdraw any round(s) of appeal either before or during the course of hearing of the appeal.” 2. Brief facts of the case are that assessee engaged in the business of trading of textile goods and filed its return of income on 28.09.2013 by declaring loss of Rs.1,99,894/-. Subsequently a search action under section 132 of the Act IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 3 was carried out in the group cases of Sumeet Industries Ltd. of Surat on 19.02.2015 and assessee is also a part of said Sumeet Industries Ltd and covered under the said search. Consequent upon search action, notice under section 153A of the Act issued to the assessee on 20.12.2016 to file return of income for the subject assessment year. The assessee filed its return of income declaring loss of Rs.1,99,894/-. The Assessing Officer after serving statutory notice under section 143(2) r.w.s 142(1) of the Act proceeded for assessment. During the assessment proceedings, the Assessing Officer noted that on perusal of audited report under Form 3CA. The assessee has shown loan of Rs.2.78 crores from the following parties: Sr.No. Name of the parties Amount of unsecured loan received (Rs.) 1 Blackpool Coal Pvt. Ltd. 1,57,17,717/- 2 Anupam Bothra 42,73,334/- 3 Vijay Kumar Daga 53,45,000/- 4 M/s Bansi Sarees 25,23,333/- 3. In order to verify the transaction, the Assessing Officer issued noticed under section 133(6) of the Act to all the parties on 02.23.3026. The Assessing Officer recorded that no reply was received from the said parties. The Assessing Officer issued IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 4 show cause notice to the assessee to produce those parties and as to why unsecured loan of Rs.2.78 crores should not be treated as bogus. The Assessing Officer recorded that in response to show cause notice, the assessee filed copy of confirmations, bank statement and income tax return of the lenders but failed to appear before the Assessing Officer. Ultimately the Assessing Officer treated the entire unsecured loan as cash credits under section 68 of the Act and made the addition while passing assessment order under section 143(3) r.w.s. 153A of the Act on 30.12.2016. 4. Aggrieved by the addition made by Assessing Officer, the assessee filed appeal before the Ld. CIT(A). Before Ld. CIT(A) the assessee filed detailed written submission. The submission of assessee was recorded in para-4 of the order of Ld. CIT(A). In the written submission, the assessee explained that they are engaged in the business of textile goods and filed its return of income on 28.09.2013 declaring loss of Rs.1,99,894/-. A search action was conducted at the business premises of assessee on 19.02.2015. Consequent upon search notice under section 153A dated 30.12.2016 was issued to the assessee to file return of income. The IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 5 assessee filed return in response to the said notice declaring loss of Rs.1,99,894/-. During the assessment proceedings initiated under section 153A, the assessee furnished all necessary details in response to notice issued by Assessing Officer. The assessee further explained that during the period under consideration, the assessee received unsecured loan of Rs.2.78 crores from M/s Blackpool Coal Pvt. Limited, Anupam Bothra, Vijay Daga and M/s Bansi Sarees respectively. During the assessment, in response to show cause notice, assessee furnished detailed reply dated 28.12.2016 and furnished necessary documentary evidence to prove the identity, creditworthiness and genuineness of all lenders. The Assessing Officer was not satisfied with the submission made by assessee and passed the assessment order by treating unsecured loan as under section 68 of the Act for each and every creditor, the assessee explained that it has filed confirmation duly mentioning the PAN, income tax return with computation together with bank statement of all the parties. With regard to unsecured loan of Rs.1.57 crores from M/s Blackpool Coal Pvt. Ltd., the assessee submitted that they have received unsecured loan from the said creditor IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 6 aggregating of Rs.1.50 crores, that is Rs.50.00 lakhs each on 14.05.2012, 21.05.2012 & 29.05.2012 respectively, all the transactions were carried out through proper banking channel, account confirmation, contra-confirmation ledger and bank statement of the party was filed during the assessment. The assessee also paid quarterly interest @ 12% on such loan after deducting tax deducted at sources (TDS) @ 10%. The assessee paid interest amount of Rs.7,17,717/-. The said creditor filed its return of income declaring income of Rs.29,17,080/- for which assessee furnished the copy of Ministry of Corporate Affairs’ (MCA) master data which shows the status of creditor as active with all documents were furnished. The assessee further explained that the loan along with interest paid after deducting TDS was paid through account payee cheque during the current and subsequent financial years in the following manner: Date of repayment Amount of repayment 17.09.2012 50,00,000/- 22.09.2012 50,00,000/- 04.07.2014 50,00,000/- Total 1,50,00,000/- 5. For unsecured loan of Rs.42,73,334/- from Anupam Bothra, the assessee submitted that there is unsecured loan from said creditor of Rs.40 lakhs on 08.09.2012 paid through IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 7 cheque No.583633 through Bank of Baroda. The assessee also paid quarterly interest amount of Rs.2,73,334/- @ 12% per annum after deducting TDS @ 10% under section 194A similarly details like confirmation, ITR and ledger account of the party was also furnished. The assessee also submitted that the said party has declared income of Rs.8,84,414/- while filing his return of income and included earned interest income in his ITR. The said loan was repaid through account payee cheque on 24.08.2013 in subsequent assessment year also. For unsecured loan of Rs.53.45 lakhs from Vijay Kumar Daga, the assessee explained that it received unsecured loan of Rs.50.00 lakhs on 08.09.2012 vide cheque No.501351 drawn from Bank of Baroda. The assessee filed account confirmation and bank statement of the party and paid quarterly interest amount of Rs.3,45,000/- @ 12% per annum on such loan after deducting TDS @ 10% under section 194A of the Act. The said party included the interest so earned income in his return of income and has shown total income of Rs.26,21,011/- in computation of his income. The said loan was repaid through cheque in subsequent year also. For unsecured loan of Rs.25,23,333/- from M/s Bansi IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 8 Sarees, the assessee submitted that it received unsecured loan from the said party of Rs.25.00 lakhs on 04.03.2013 vide cheque No.804898 drawn through Bank of Baroda. The assessee furnished account confirmation and bank statement and also explained that assessee paid quarterly interest amount of Rs. 23,333/- @ 12% per annum on such loan after deducting TDS @ 10% under section 194A of the Act. The said party while filing its return of income included interest income and loan was repaid on 01.01.2018 through RTGS from IDBI bank. The assessee further submitted that said documents furnished before Assessing Officer and no deficiency in respect of any evidence was pointed out by Assessing Officer. 6. The assessee submitted that in the search action no incriminating information or adverse materials qua loan amounts were found or detected by the search party. There was no evidence that any cash was paid to the said party in consideration of cheque on account of unsecured loan, in fact, no cash has been deposited in their bank account also. The assessee successfully discharged its onus lie upon assessee. The Assessing Officer merely made the addition by IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 9 holding that assessee failed to appear those parties. The assessee furnished the entire details of unsecured loan and assessee could only request the parties to attend for personal examination before the Assessing Officer but has no control over such parties or force them to do so since the notice under section 133(6) was duly served on all the parties. The assessee reiterated that it has discharged primary onus in furnishing the identity of investor, but creditworthiness of investor and genuineness of such transactions no inquiry was done by the Assessing Officer. The Assessing Officer could have never asked any other material or evidence from the assessee and also relied various case law including the decisions of Hon'ble jurisdictional High Court in the case of M/s Pankaj Enka Pvt. Ltd. vs. DCIT (Tax Appeal No.967 of 2015), CIT vs. Ranchhod V Nakhava 21 taxmann.com 159 (Guj), DCIT vs. Rohini Builders 127 Taxman 523 (Guj), ITA No.816/AHD/2013; Hon'ble Bombay High Court in the case of PCIT vs. M/s Ami Industries (India) Ltd. Tax Appeal No.1231 of 2017; Hon'ble Apex Court in the case of CIT vs. Lovely Exports (P) Ltd. 216 CTR 195 (SC), CIT vs. Divine Leasing & Finance 299 ITR 268 (SC) etc., etc., IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 10 7. The Ld. CIT(A) after considering the contents of the assessment order and the submission of assessee noted that in case of assessee a search action was carried out on 19.022015 consequent upon noticed issued under section 153A of the Act. While passing the assessment order, the Assessing Officer made addition by holding that assessee failed to discharge its onus to prove the identity or genuineness of transactions and creditworthiness of creditors. The Ld. CIT(A) after recording the summary of submission in para-5.1 to 5.5 of his order held that amounts were repaid through banking channel. The assessee submitted that notice under section 133(6) were issued to all the parties served upon them but reply before the Assessing Officer was not filed of those creditors, for which, assessee cannot be held accountable. The assessee has no control over the creditors to file their reply though assessee took a stand that deducted TDS on the interest paid upon them and no search action in assessees group cases that no evidence was found to suggest that assessee paid cash for obtaining loan. On such observation, Ld. CIT(A) held that in all creditors amounts paid through regular banking channel and were IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 11 paid through regular banking channel repaid quarterly interest after making deduction of TDS @ 10% as per provision of Income Tax Act. The assessee filed confirmation, bank statement, copy of acknowledgement of ITR of lenders. The Ld. CIT(A) specifically recorded that in the search action carried out in assessees group concerns, assessees premises and the residence of director and no evidence in the form of any document or statement were found, which remotely indicate that assessee paid cash to those parties for obtaining impugned loan. This fact clearly proved the identity of creditors, genuineness of such transactions and creditworthiness of the creditors. Hence, addition is liable to be deleted. 8. On merits as well the Ld. CIT(A) held that Assessing Officer made the addition only stating that notice under section 133(6) issued all four creditors but no reply was filed either of them. The notice served upon the creditors itself proved that parties were existence on that date. The Ld. CIT(A) held that non-reply on the part of creditors, is beyond control on assessee, for which, the assessee cannot be held accountable. Similarly, the assessee has no control to produce the IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 12 creditors before Assessing Officer. Thus, Assessing Officer was not justified in making addition. The Ld. CIT(A) after referring the decisions of Hon'ble Apex Court in the case of CIT vs. Orissa Corporation (P.) Ltd. (1986) 159 ITR 78/25 Taxman 80F (SC) and Hon'ble jurisdictional High Court in the case of M/s Pankaj Enka Pvt limited (supra) and CIT vs. Ranchhod V. Nakhava (supra) held that in the ratio of case law it has been held that if the transaction is through regular banking channels and the assessee has filed confirmation along with PAN of the creditors, the assessee has discharged its onus as required under section 68 of the Act and on the basis of legal and factual position, the Ld. CIT(A) deleted the entire addition. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. 9. We have heard the submission of Ld. Commissioner of Income-Tax-Departmental Representative (CIT-DR) for the Revenue and Ld. Authorized Representative (Ld.AR) for the assessee and have gone through the orders of the lower authorities carefully. The Ld. CIT-DR for the Revenue supported the order of Assessing Officer. Ld. CIT-DR submits that during the assessment, assessee was asked to produce IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 13 creditors but assessee failed to produce the creditors in order to verify of genuineness of transaction. The Assessing Officer issued notice under section 133(6) to all the creditors but none of the creditors responded in response to notice issued under section 133(6). The Ld. CIT-DR for the Revenue submits that Ld. CIT(A) accepted the confirmation of assessee and deleted the entire addition by taking view that assessee has discharged its onus. The Ld. CIT-DR for the Revenue submits that fact remains same that assessee failed to prove the transaction beyond doubt before the Assessing Officer and he prayed before Bench to restore the order of Assessing Officer by reversing the findings of Ld. CIT(A). 10. On the other hand, Ld. AR for the assessee relied on the order passed by Ld. CIT(A). The Ld. AR for the assessee submits that before Assessing Officer assessee discharged its onus in filing complete details like name, address, PAN of creditors to prove identity. The assessee filed bank statement of the creditors and their ITR to prove the creditworthiness. The Ld. AR for the assessee submits that assessee has paid quarterly interest amount after deducting TDS and such parties have included the earned interest income in their respective return IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 14 of income, which prove the genuineness of such transaction. Ld. AR of the assessee submits that entire loan amount was repaid either in the financial year itself or in subsequent financial year as assessee furnished complete details except one case of M/s Bansi Sarees, wherein loan was repaid on 01.01.2018 through banking channel and Revenue authority has no disputed such repayment of loan. The Ld. AR for the assessee submits that it is settled law that once the assessee has discharged its onus in proving the identity, creditworthiness and genuineness of such transaction the onus lies upon the Assessing Officer to prove otherwise Assessing Officer has not issued any summons to the parties for their personal appearance and no adverse comments on the evidence filed by the assessee was given by the A.O. 11. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. As recorded above, the Assessing Officer made addition under section 68 by taking view that the assessee failed to produce the parties who have landed money and that the assessee failed to discharged its onus. As noted above before ld CIT(A) has filed detailed written submissions. The ld IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 15 CIT(A) after considering the submissions of the assessee delated the entire addition of unsecured loan added under section 68 by taking view that in the search action carried out in assessees group concerns, assessees premises and the residence of director and no evidence in the form of any document or statement were found, which remotely indicate that assessee paid cash to those parties for obtaining impugned loan. On the basis of such observation, the ld CIT(A) held that addition is liable to be deleted. 12. We find that on merits the Ld. CIT(A) held that Assessing Officer made the addition only stating that notice under section 133(6) issued all four creditors but no reply was filed either of them. It was observed that notice under section 133(6) were served upon the creditors itself proved that parties were existence on that date. The Ld. CIT(A) held that non-reply on the part of creditors, is beyond control on assessee, for which, the assessee cannot be held accountable. Similarly, the assessee has no control to produce the creditors before Assessing Officer. 13. We further find that the assessee while filing his reply before assessing officer has filed name of the lenders, their address, IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 16 PAN, bank statement and confirmation. No investigation was carried out by the assessing officer except issuing notice under section 133(6). No adverse comment was made on the evidence filed by the assessee on discharging its onus in furnishing identity, creditworthy and genuineness of loan transaction. We find that in absence of any comment of the evidences furnished by the assessee in discharging its primary onus, assessing officer was not justified in making addition. 14. We find that the Ld. CIT(A) after referring the decisions of Hon'ble Apex Court in the case of CIT vs. Orissa Corporation (P.) Ltd. (supra) and Hon'ble jurisdictional High Court in the case of M/s Pankaj Enka Pvt limited (supra) and CIT vs. Ranchhod V. Nakhava (supra) held that in the ratio of case law it has been held that if the transaction is through regular banking channels and the assessee has filed confirmation along with PAN of the creditors, the assessee has discharged its onus. We further find that the assessee has return the amount of entire loan either in the subsequent year or in next assessment year. Majority of the loan amount was refunded in next financial year as has been explained by the assessee. IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 17 15. We find that Hon’ble Jurisdictional High Court in CIT Vs Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251(Gujrat) held that where department has accepted repayment of loan in subsequent financial year, no addition was to be made in the current year on account of cash loan. Further, in case of CIT Vs Ranchod Jivabhai Nakhava (2012) 21 taxmann.com 159 (Gujarat), the Hon’ble jurisdictional high court held that where the lenders of the assessee are income tax assessee whose PAN have been disclosed, the assessing officer cannot not ask assessee to further prove genuineness of the transaction without first verifying such facts from income tax returns of lenders. We also find that the assessee furnished all such details of the lenders/ depositors. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. We find that before granting relief to the assessee, the ld CIT(A) cross checked all such details, including the proof of repayment and granted relief to the assessee. IT(SS)A No.53/SRT/2021 (A.Y 13-14) Somani Overseas Pvt. Ltd. 18 16. In view of the above discussion, we do not find any infirmity or illegality in the order of ld CIT(A), which we affirm with our additional observation. 17. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 27/02/2023. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद˟/ACCOUNTANT MEMBER] [Ɋाियक सद˟ JUDICIAL MEMBER] Surat, Dated: 27/02/2023 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr. Private Secretary /Private Secretary /Assistant Registrar, ITAT, Surat