ACIT, Central Circle-4, Surat V. Valencia Corporation, Surat

ITSSA 79/SRT/2022

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0051 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-11-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-11-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 31-08-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Income from undisclosed sources; Principle of natural justice; Additional evidence; Documents seized; TDS; Set aside
• Section: 68; 54; 132; 143(3); 133A; 133(6); 143(2); 139(1); 72; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER IT(SS)A No. 79/SRT/2022 (AY: 2013-14) (Hearing in Virtual Court) A.C.I.T. Central Circle-4, Surat. Vs. M/s Valencia Corporation, S. No. 400, T.P. No. 29 (Vesu- Rundh Magdalla), F.P. No. 45/2, Nr. Siddhivinayak Temple, Vesu, Surat (Gujarat) PAN : AAKFV 2329 K APPELLANT RESPONDEDNT C.O. No. 16/SRT/2023 (Arising out of IT(SS)A No. 79/SRT/2022)(AY: 2013-14) M/s Valencia Corporation, S. No. 400, T.P. No. 29 (Vesu- Rundh Magdalla), F.P. No. 45/2, Nr. Siddhivinayak Temple, Vesu, Surat (Gujarat) PAN : AAKFV 2329 K Vs. A.C.I.T. Central Circle-4, Surat. APPELLANT/OBJECTOR RESPONDEDNT Department by Shri Ritesh Mishra, CIT-DR Assessee by Shri Brijesh Ariwala, C.A. Date of hearing 06/11/2023 Date of pronouncement 09/11/2023 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. The appeal by the Revenue and Cross Objection (CO) therein by the assessee are directed against the order of learned Commissioner of Income tax (Appeals)-4, Surat [‘ld. CIT(A)’ for short] dated 14/06/2022 for the Assessment Year (AY) 2013-14. The Revenue in its appeal 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 made by the Assessing Officer of Rs. 1,70,00,000/- on account of unexplained cash credit under Sec.68 of the Act. IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 2 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in ignoring the fact that the assessee has failed to furnish even the preliminary details called for by the AO during the course of assessment proceedings in respect of the new unsecured loans of Rs. 1,70,00,000/- i.e. evidences to prove the identity of the lenders, genuineness of the transactions and their creditworthiness despite providing sufficient opportunities by the AO and the Ld. C1T(A) has also erred in admitting the additional evidences furnished by the assessee during the course of appellate proceedings without giving any cogent reason and ignoring the fact that the assessee's case was not falling under any of the criteria prescribed under Rule 46(1) of the I. T. Rules, 1962. 3. In addition and alternative to Ground No. 1 & 2, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that the questioned amount of Rs. 1,70,00,000/- was treated as unsecured loan in assessee's books of accounts despite there being no characteristics of the amount being so as no interest payment, TDS, etc. done. 4. In addition and alternative to Ground No. 1, 2 & 3, on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in giving certain findings which goes against the entries made in assessee's books of accounts and dehors underlying facts of the case. 5. In addition, and in alternate to grounds No. 1, 2, 3 & 4 on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made by the Assessing Officer ignoring the principles of "Human Probability Test" i.e. preponderance of probabilities which is applicable for Income Tax proceedings. 6. 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. 7. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 2. The assessee in its CO has raised following grounds of appeal: “1. In view of the facts and circumstances of the case and in law, the Ld. CIT(A)-4, SURAT has rightly deleted the additions made by assessing officer of Rs. 1,70,00,000/- on account of unexplained cash credit under section 68 of the Income Tax Act, 1961. 2. In view of the facts and circumstances of the case and in law, the Ld. CIT(A)-4, SURAT has rightly considered the facts of the case and IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 3 evidences produce before it, in consideration of rule 46A and powers envisage in section 250(4) and section 250(5] of the I. T. Act, upon CIT(A), after providing sufficient opportunity to AO for perusal of additional evidences furnished by the assessee during the course of appellate proceedings, with clearly stating "as per clause (iii) of Rule 46A of the IT Rules, the additional evidences stands admitted." 3. In view of the facts and circumstances of the case and in law, interpretation of rule 46A of Income-tax Rules is that it only fetters rights of assessee to produce additional evidence but it does not restrain Commissioner (Appeals) power under section 250(4) or section 250(5). 4. In addition and alternative to cross objection No. 1, 2, & 3, in view of the facts and circumstances of the case and in law, the Ld. CIT(A) has rightly appreciated the facts that amount of Rs. 1,70,00,000/- was shown as unsecured loans in books of account, but due to unavailability of PAN details of the lenders, the TDS deducted in such cases were shown as TDS excess paid on the balance sheet of the Firm. 5. In addition and alternative to cross objection No. 1, 2, 3, & 4, in view of the facts and circumstances of the case and in law, the Ld. CIT(A) has rightly pointed the finding of the case, in para 6.4, 6.5, 6.6 & 6.7 of the CIT(A) order. 6. In addition and alternative to cross objection No. 1, 2, 3, 4 & 5, in view of the facts and circumstances of the case and in law, the remand report prepared by Ld. AO after availing time of over 4 months, has not gone through any aspects of the additional evidences produce by the assesse during the course of appellate proceedings, and contentions and submission made by the assessee is partly read and partly understood, without any comment on the merits of the additional evidences produced, or without any cogent reason as to why such additional evidences should not be accepted at appellate stage in the interest of natural justice. 7. In addition and alternative to cross objection No. 1, 2, 3, 4, 5 & 6, in view of the facts and circumstances of the case and in law, the Ld. CIT(A) has rightly followed the principle of "Human Probability test", after considering the contentions of the assessee and rightly opined on the same in para 6.5, para 6.6 and para 6.7 of the CIT(A)'s order. 8. It is therefore prayed that order of the Ld. CIT(A) may be restored and appeal filed by the department may be dismissed. 9. The respondent craves leave to add, alter, amend and/or withdraw any cross objections of appeal either before or during the course of hearing of the appeal.” 3. Brief facts of the case are that the assessee is a firm, engaged in development of property. A search action under Section 132 of the IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 4 Income Tax Act, 1961 (in short, the Act) was carried out in Surat Metallics Group of Surat on 28/11/2013. In the said search, the partner of assessee firm namely Shri Sandip B. Naik and others were also covered. A survey under Section 133A of the Act was also carried out in assessee’s case on the same day. In the search action, certain incriminating evidence was found which was seized as Annexure-B1 showing unaccounted cash received for booking of flats in assessee’s project ‘Valencia’ at Vesu, Surat. On the basis of documents seized, the partner of assessee firm admitted unaccounted income of Rs. 5.00 crores. The assessee filed its return of income for A.Y. 2013-14 under Section 139(1) of the Act on 30/03/2014 declaring NIL income. On the basis of seized and incriminating material, which relates to assessee, in the search action on Surat Metallics Group, notice under Section 153C of the Act was issued to the assessee on 13/01/2015 for filing return of income. In response to notice under Section 153C of the Act, the assessee filed its return of income on 07/09/2015 declaring income at Rs. NIL. The case was selected for scrutiny. Notice under Section 143(2) of the Act was served upon the assessee. During the assessment, the Assessing Officer noted that the assessee has shown unsecured loan in its balance sheet of Rs. 1.70 crore, out of which Rs. 1.50 Crore from Manjulaben R. Patel and Rs. 20.00 lacs from Pratik Khanna. The assessee was asked to furnish name, address, PAN and confirmation regarding unsecured loan. The assessee was also asked to prove the genuineness of transaction. The IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 5 Assessing Officer noted that the assessee failed to furnish their submission despite giving opportunity to the assessee, the Assessing Officer treated the transaction of loan as unexplained income of assessee under Section 68 while passing the assessment order under Section 143(3) r.w.s. 153C of the Act on 22/03/2016. 4. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed its written submission as recorded in para 6.1 of his order. In the written submission, the assessee submitted that the assessee is a partnership firm and developing residential complex. The assessee has 14 partners. The assessee has given details of all the partners. The assessee further submitted that the construction permission was received on 10/09/2013 which was revised on 13/10/2014. One of the partner has brought unsecured loan in the partnership firm from Manjulaben R. Patel and Partik Khanna. The loan was received through banking channel. While bringing the loan, one of the partner issued a fake booking receipt in favour of lender namely Manjulaben R. Patel. The assessee firm has no knowledge about such misleading and fake booking in the name of Manjulaben R. Patel. When confirmation was sought from Manjulaben R. Patel, the lender refused to give confirmation of loan and became hostile and insisted for allotment of flat. The assessee purchased the land for project in June, 2013 itself. Manjulaben R. Patel filed a Suit in Civil Court on 19/03/2016 as well as police complaint on 23/01/2016 and pleaded IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 6 that account payee cheque was given on 22/02/2013. The lender Manjulaben R. Patel while replying the notice under Section 133(6) issued by the Assessing Officer, confirmed the payment of Rs. 1.50 crore and further confirmed that Rs. 1.96 crore was received by her from sale of one of the property and out of such sale consideration, Rs. 1.50 crore was given to assessee. Mr. Sandip Naik who brought the unsecured loan in the statement before the Senior Civil Judge, confirmed the said transaction was only unsecured money and not against the flat booking in his statement on 03/08/2016. The assessee also stated that they have sold the units to buyer at the price of Rs. 1.05 crore per unit, thus the claim of Manjulaben R. Patel that she paid Rs. 1.50 crore for sale price is not correct. On the basis of such assertion, the assessee submitted that identity of lender is proved, creditworthiness is also proved. Genuineness of lender is stated to be proved that lender accepted in his police complaint as well as in Civil Suit that the said amount was paid. 5. Against unsecured loan of Rs. 20.00 lacs, the assessee submitted that the said lender made booking in his name and his wife’s name against flat No. 402 and notarized agreement to sell was executed. Initially, amount was paid in February and March, 2013, the lender was going with some personal problem as he was facing matrimonial dispute with his wife and was not in a position to sign the contract. He was unable to furnish confirmation and his balance sheet. Though, initially he made booking of flat, as the lender was not in a IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 7 position to make payment to the assessee and there was some dispute amongst the partners. Booking amount was converted into unsecured loan with the condition that loan shall be returned through account payee cheques. The assessee furnished such details in the form of additional evidence and submitted that creditworthiness and genuineness of party is proved. To support their contention, the assessee also relied on certain case laws i.e. H.R. Mehta Vs ACIT (2016) 72 Taxman 110 (Bom) and Sarjan Corporation Vs ACIT ITA No. 3243/Ahd/2008 and the assessee also made prayer that addition should be deleted. 6. The ld. CIT(A) after considering the submission of assessee and the details furnished by the assessee, treated the said details as additional evidence under Rule 46A of the Income Tax Rules, 1962 (in short, the Rules). The details were forwarded to the Assessing officer for seeking his remand report on admission of additional evidence. The Assessing Officer filed his remand report vide his letter dated 21/04/2022. The Assessing Officer objected against admission of additional evidence on the ground that no reason is explained as to why the relevant details were not produced during the assessment. The ld. CIT(A) on considering the contention of assessee and the remand report, admitted the evidence by taking a view that there was some dispute between the parties which resulted that the said parties were not confirming the loans. The ld. CIT(A) was of the view that he IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 8 satisfied that the assessee was prevented by sufficient cause for producing the evidence during the assessment. 7. On merit of the addition, the ld. CIT(A), on the addition of loan from Manjulaben R. Patel of Rs. 1.50 crore held that the assessee has produced ledger account of Manjulaben R. Patel having entry on 22/02/2013 received through cheque. The assessee produced copy of cheque drawn from Adinath Cooperative Bank from savings bank account which is matches with the details. The assessee also furnished the bank statement of lender showing the debit entry of cheque clearance of Rs. 1.50 crore. Further in response to legal notice through Shri Jagdish K. Ramani, Advocate, the lender confirmed that she has given advance of Rs. 1.50 crore. The said party claimed exemption under Section 54 of the Act against the capital gain in her return for A.Y. 2013-14. Further in response to notice under Section 133(6) issued by the Assessing Officer, the lender confirmed that she has invested Rs. 1.50 crore. The Assessing Officer of lender disallowed the claim of lender under Section 54 of the Act. However, on appeal before the ld. CIT(A), the exemption was allowed. Further Shri Sandeep Naik, partner of assessee has given statement before the Additional Civil Judge on 03/08/2016 wherein he categorically stated that the lender has not given advance for booking but it was unsecured loan. All these details were produced by assessee in the form of complete evidence which was forwarded to the Assessing Officer. The Assessing Officer has not commented on any of these IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 9 evidences in the remand report. From the documents produced and the statement before the Court of law proved that the lender has given (advance) Rs. 1.50 crore to the assessee firm which is corroborated by bank statement. The dispute is only whether it was on account of advance or unsecured loan. Merely lender has not confirmed the loan transaction though the transaction stand explained. On the basis of such observation, the ld. CIT(A) deleted the addition of Rs. 1.50 crore. With regard to other unsecured amount of Rs. 20.00 lacs, the ld. CIT(A) noted that the said amount was paid by way of four cheques of Punjab National Bank of Rs. 5.00 lacs each. The assessee furnished PAN and Satakat executed with lender and his wife for sale of flat. Further the confirmation could not be filed because of dispute between the lender and his wife Ankita Pratik Khanna. However, subsequently, the lender confirmed the impugned advance and entered into agreement for sale with the transaction which was shown against unsecured loan as the exact flat was not decided to be allotted to lender also stand explained. On the basis of such observation, the ld. CIT(A) deleted the addition of unexplained loan. Aggrieved by the order of ld.CIT(A), the revenue has filed the present appeal before this Tribunal. On service of notice of memo of appeal, the assessee has filed its cross objection as recorded above raising the grounds of C.O. as noted above. 8. We have heard the submissions of learned Commissioner of Income Tax-Departmental Representative (CIT-DR) for the revenue and the IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 10 learned Authorised Representative (AR) of 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 and would submit that during the assessment, the assessee failed to discharge the triple test i.e. identity, creditworthiness and genuineness of lender. The Assessing Officer gave ample opportunity to the assessee to discharge his onus. When the assessee failed to discharge its onus, the Assessing Officer made addition of unsecured loan as unexplained credit. The ld. CIT(A) accepted the evidence in defiance of Rule 46A and accepted the additional evidence. The lenders themselves has disputed the nature of transaction, thus the ld. CIT-DR for the revenue submits that the order of ld. CIT(A) may be reversed by restoring the order of Assessing Officer. 9. On the other hand, the ld. AR of the assessee has supported the order of ld. CIT(A). The ld. AR of the assessee submits that due to misunderstanding, one of the partner who has no authority to make booking, has issued a fake booking in the name of lender Manjulaben R. Patel as the booking of flat instead of unsecured loan. However, the fact remains the same, the lender was having capacity to make such payment as she has sold some residential property. The amount was given through cheque. The identity is not in dispute as the assessee and the lenders were litigating in civil Court. The payment of Rs. 1.50 crore is not in fact in dispute, the dispute was with regard to nature of payment. So far as second lender is concerned, initially IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 11 he made the booking, however, due to dispute in his family, he was unable to make further payment and his booking amount was treated as unsecured loan. Later on, unsecured loan was repaid by way of cheques. The ld. AR of the assessee submits that the assessee has discharged his onus in proving the identity, creditworthiness and genuineness of transaction. The Assessing Officer was given opportunity to furnish his remand report on various evidences furnished by assessee against the loan transaction from both the lenders. If the Assessing Officer instead of making his comment on the merit of addition, only objected about the admission of additional evidence and has not made any adverse comment on the evidences furnished by assessee. 10. We have considered the rival submissions of both the parties and have gone through the orders of the authorities below carefully. We find that the Assessing officer made addition on unsecured loan by taking a view that the assessee was given opportunity to furnish the evidence of identity, creditworthiness and genuineness of transaction. The Assessing Officer held that the assessee failed to furnish required evidence, therefore, the loan transaction was treated as unexplained credit. We find that before the ld. CIT(A), the assessee has furnished the details of unsecured loan, name of the lenders with their complete address and the genuineness of transaction by furnishing the details of bank accounts of lender. We find that one of the lender namely Manjulaben R. Patel, there is no dispute that she IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 12 has paid Rs. 1.50 crore, the dispute was whether such amount was paid on account of unsecured loan or booking. The facts remained the same as the amount was credited from the account of lender to the account of assessee through banking channel. The lender has capacity to make such payment as she has sold her residential house and was having sufficient balance of Rs. 1.92 crore. Thus, the identity, creditworthiness and genuineness of transaction was proved. So far as the dispute about the nature of payment is concerned, the domain of nature of transaction is with the Civil Court. However, the fact remained the same that the receipt of amount is an admitted fact by the parties, therefore, the transaction of Rs. 1.50 crore stand proved. So far as the other transaction/loan of Rs. 20.00 lacs is concerned, we find that the said amount was received by way of banking transaction. The said transaction is duly confirmed by the lender by way of confirmation as well as executing the Satakat with the assessee, therefore, we find that identity, creditworthiness and genuineness of transaction of second lender is also proved. In view of the aforesaid discussion, we do not find any illegality or infirmity in the order passed by the ld. CIT(A) which we affirm. In the result, grounds of appeal raised by the revenue are dismissed. 11. In the result, this appeal of revenue is dismissed. 12. So far as cross objection of assessee is concerned, we find that the assessee has not raised any new claim or grounds other than IT(SS)A No. 79/SRT/2022 & CO 16/SRT/2023 ACIT Vs M/s Valencia Corporation. 13 supporting order of ld. CIT(A). Considering the fact that we have dismissed the appeal of revenue, therefore, adjudication on the grounds of cross objection of assessee have become academic and accordingly dismissed as infructuous. 13. In the final result, the appeal of revenue is dismissed and the cross objection of the assesse is also dismissed as infructuous. Order pronounced on 09/11/2023 in open court. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 09/11/2023 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT 4. DR 5. Guard File By Order Sr. Private Secretary, ITAT Surat