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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI KULDIP SINGH & SHRI OM PRAKASH KANT
ORDER PER : OM PRAKASH KANT This appeal has been preferred by the assessee against the order dated 21st September, 2020 passed by the Ld.Commissioner of Income- tax (Appeals)-15, Mumbai [in short, the Ld.CIT(A)] for Assessment Year 2012-13, raising following grounds:- “
1. On the facts and circumstances of the case, and in law, CIT (A) erred in confirming the addition of allegedly bogus loan of Rs. 85,00,000- as unexplained cash credits u/s 68 of the IT Act. The appellant prays that the additions^ of Rs. 85,00,000/- may please be deleted'.
2. On the facts and circumstances of the case, and in law, CIT(A) erred in considering the Declared and Credited to the Profit and Loss Account Income of Rs.9,90,000/- fees Received, Rs.2,62,000/- Miscellaneous Income, and Rs.95,000/- of Sale of Products, as unexplained cash credits u/s 68 of the IT Act. The appellant prays that the said income may please considered as Business income as. declared by the Assessee.
3. On the facts and circumstances of the case, the Assessing officer has erred in law and on the facts of the case in violating principle of natural justice by not giving opportunity to you petitioner to cross examine art the evidences 7 witnesses and information used against them for their rebuttal while in making additions under section 68 of the Income Tax Act. Therefore, the order is bad in law The CIT(A) ignored this ground, and did not adjudicate, without giving any justification. The appellant prays that the said ground may please be properly adjudicated.
4. On the facts and circumstances of the case the Assessing officer has erred in law and on the facts of the case in disallowing business expenses incurred for earning income and maintaining business operations during the year. The CIT(A) ignored this ground, and did not adjudicate, without giving any justification. The appellant prays that the said ground may please be properly adjudicated.
5. On the facts and circumstances of the case, and in law, CIT(A) erred in mentioning the deletion as Rs.79,530/- instead of Rs.1,79,530/- due to apparent typographical error. The appellant prays that the proper Amount of Rs.1,79,530/- may please be allowed.”
2. Before us, the assessee has also raised an additional ground which is reproduced as under:- “6. On the facts and circumstances of the case and in law^ the CIT(A) erred in confirming the action of the Id Assessing Officer in taxing loan of Rs 45 lakhs received by the sister concern of the assessee M/s Garware Synthetics Pvt Ltd u/s 6& of the Income Tax Act 1961 despite the fact that: • The said loan of Rs 45 lakhs was never received by the assessee in its bank account. • The loan of Rs 45 lakhs was received by the sister concern of the assessee M/s Garware Synthetics Pvt Ltd. • The assessee has passed journal entry in its books of accounts. • As per Section 68 of the Act, only those loans / sums of money actually received by the assessee can be taxed.”
We have heard rival submissions of the parties on the issue of admissibility of additional ground. We find that additional ground raised
being legal in nature and no investigation of fresh facts is required, therefore, same is admitted for adjudication in view of the M/s Tyson Marketing Pvt Ltd principle laid down by Hon’ble Supreme Court in the case of National Thermal Power Corporation Limited vs CIT (1998) 229 ITR 383 (SC).
4. Briefly stated, facts of the case are that for the year under consideration, the assessee filed return of income electronically on 26/09/2012 declaring total income of Rs.2,77,250/-. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Income-tax Act, 1961 (in short, ‘the Act’) were issued and complied with. In the assessment completed under section 143(3) of the Act, the Assessing Officer made certain additions / disallowances which were partly allowed by the Ld.CIT(A) vide his impugned order. Aggrieved, assessee is in appeal before the Tribunal by way of raising grounds as reproduced above.
5. At the outset, the Ld.Counsel of the assessee submitted that this appeal was filed with delay of 50 days. He submitted that the impugned order was passed by the Ld.CITA) on 21/09/2020 whereas this appeal has been filed on 18th January, 2021 and, therefore, there was a delay of 50 days in filing the current appeal. The Ld.Counsel submitted that this delay was during the pandemic period and in view of the order of the Hon’ble Supreme Court, in order dated 10/01/2022, passed in M.A. No.21 of 2022 in M.A. No.665 of 2021, in Suo Motu Writ Petition (Civil) No.3 of 2020, there is no delay as limitation has already been extended by the Supreme Court as well as by the Parliament by way of “The Taxation And Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020”.
M/s Tyson Marketing Pvt Ltd 6. We have heard rival submissions on the issue of condonation of delay in filing the appeal. The Hon’ble Parliament by way of the “The Taxation And Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020” has extended the time limit for filing of any appeal, reply or other applications, etc. which has been extended till 31st day of the March, 2021. The Hon’ble Supreme Court has also extended the limit for filing appeals, etc. during pandemic period. The relevant part of the order of the Hon’ble Supreme Court is as under:- “5. Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions: I. The order dated 23.03.2020 is restored and in continuation of the subsequent orders dated 08.03.2021, 27.04.2021 and 23.09.2021, it is directed that the period from 15.03.2020 till 28.02.2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi-judicial proceedings.
II. Consequently, the balance period of limitation remaining as on 03.10.2021, if any, shall become available with effect from 01.03.2022. III. In cases where the limitation would have expired during the period between 15.03.2020 till 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. In the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that longer period shall apply. IV. It is further clarified that the period from 15.03.2020 till 28.02.2022 shall also stand excluded in computing the periods prescribed under Sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, Section 12A of the M/s Tyson Marketing Pvt Ltd Commercial Courts Act, 2015 and provisos (b) and (c) of Section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.”
In view of the decision of the Hon’ble Supreme Court (supra) as well as “The Taxation And Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020” introduced by the Parliament, the appeal filled by the assessee is within the limitation period and, therefore, same is admitted for adjudication.
Before us, the Ld.Counsel of the assessee has filed a paper book containing pages 1 to 61. 9. The ground No.1 of the appeal relates to addition of unsecured loan of Rs.85 lakhs, which has been held by the Assessing Officer as unexplained cash credit under section 68 of the Act. 10. The facts qua the issue in dispute are that the assessee has shown receipt of loan of Rs.85 lakhs from ‘M/s Josh Trading Pvt Ltd’ in its books of account. The assessee filed documents containing Permanent Account Number (PAN), bank statements, etc in support of its claim that it is a genuine loan. The Assessing Officer, for examining the identity and creditworthiness of the loan creditor issued summons under section 131 of the Act, however, the same were returned unserved marked as “not known” and, therefore, the Assessing Officer asked the assessee to produce said party for examination and verification of the identity & creditworthiness. However, the assessee M/s Tyson Marketing Pvt Ltd failed to produce said creditor before the Assessing Officer. The Assessing Officer further noted that an information was received from the Investigation Wing of Income-tax Department, Mumbai that M/s Josh Trading Pvt Ltd was one of the group concern of Shri Pravinkumar Jain, who has engaged in providing accommodation entry in the form of loan. The Assessing Officer also referred to the statement of Shri Pravinkumar Jain, wherein he has specifically mentioned that M/s Joshi Trading Pvt Ltd was managed and controlled by him for the purpose of giving accommodation entries. During the course of the assessment proceedings, in the statement, one of the directors of the assessee company, Shri Nihal Garware confessed that he did not know M/s Joshi Trading Pvt Ltd or their promoters. In view of these facts, the Assessing Officer was of the view that giving interest free loan without knowing each other and that too, without giving any guarantee was unbelievable. Accordingly, he rejected the contention of the assessee and held that mere receiving of amount through banking channel does not prove genuineness of the transaction. He also noted that identity and creditworthiness of the creditor was also not established. Accordingly, he treated the loan amount of Rs.85 lakhs recorded by the assessee in its books of account, as unexplained cash credit under section 68 of the Act. On further appeal, the Ld.CIT(A) after referring to legal principles on the issue of onus of proof and after discussing various decisions of the Courts, held that merely furnishing of name, address, PAN or loan confirmation does not absolve the assessee from M/s Tyson Marketing Pvt Ltd its duty to prove the genuineness of the transaction. The relevant finding of the Ld.CIT(A) is reproduced as under:- “4.1.6.8 In the instant case, the appellant does not have any business activity and still has received interest free loan amounting to Rs.85,00,000 from M/s Josh Trading Pvt Ltd returned back unserved. Appellant was requested to produce that concern for examination but it did not comply to the said request. M/s Josh Trading Pvt Ltd was found to be one of the concern managed and controlled by Shri Praveen Jain who was in the business of providing accommodation entries. Shri Nihal Garware, director of the appellant company has admitted that he did not know M/s Josh Trading Pvt Ltd. Mere furnishing of details like name, address, PAN, loan confirmation does not absolve the appellant from its duty to prove the genuineness of the transaction. In view of the above discussed factual matrix in the background of legal principles laid down by various judicial reviews, it is clear that the unsecured loan shown in the books of accounts of the appellant is not a genuine transaction. In such situation, the burden is heavier and such burden cast upon the appellant company with regard to ingredients of section 68 have not been complied with and thus, the AO justifiably concluded and taxed Rs.85,00,000/- u/s 68 of the Act. Ground of Appeal filed on this issue is therefore dismissed.”
11. Before us, the Ld.Counsel of the assessee submitted that assessee has already filed confirmation of the loan creditor, bank statement of the loan creditor, income-tax return acknowledgement of the loan creditor, etc. The Ld.Counsel also referred that Shri Pravinkumar Jain has retracted from his statement and, therefore, the lower authorities are not justified in sustaining the addition for unexplained cash credit of Rs.85 lakhs.
12. On the contrary, the Ld.Departmental Representative submitted that summons under section 131 of the Act sent by the Assessing Officer at the addresss of the cash creditor return unserved and the assessee did not provide any new or current address of the said cash M/s Tyson Marketing Pvt Ltd creditor. Therefore, the Assessing Officer asked the assessee to produce the said cash creditor; however, assessee failed to do so. In the circumstances, identity of the creditor is not established. The creditworthiness of the said party was also doubtful. He further submitted that when the assessee is able to furnish affidavit of retraction from Shri Pravinkumar Jain, then assessee could very well produce the directors or promoter of the cash creditor company, M/s Josh Trading Pvt Ltd, which was controlled by Shri Pravinkumar Jain. 13. We have heard the rival submissions of the parties on the issue in dispute and perused the relevant material on record. The Ld.Counsel of the assessee has merely repeated the arguments which were advanced before the lower authorities. In this case, assessee has shown to have received interest free loan amounting to Rs.85 lakhs from M/s Josh Trading Pvt Ltd. It is undisputed that summons issued under section 131 of the Act by the Assessing Officer was returned unserved and the assessee also failed to produce said party before the Assessing Officer. It is also undisputed that director, Shri Nihal Garware of the assessee company admitted the fact that he did not know M/s Josh Trading Pvt Ltd. In the circumstances, in normal course, no creditors will extend loan to an unknown person, that too, without any guarantee or agreement. In our opinion, there is no infirmity in the finding of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground No.1 of the appeal of the assessee is accordingly dismissed. 14. In the additional ground raised, the Ld.Counsel of the assessee has submitted that out of the loan of Rs.85 lakhs shown to have been M/s Tyson Marketing Pvt Ltd received from M/s Josh Trading Pvt Ltd, loan amount of Rs. 45 lakhs was directly received by the sister concern of the assessee, M/s Garware Synthetics Pvt Ltd and the assessee has passed a journal entry in its books of account and, therefore, the loan of Rs.45 lakhs was never received by assessee and that as per section 68 of the Act, only those loans / sums of money actually received by the assessee can be taxed.
We have heard rival submissions of the partiers on the issue in dispute and perused the relevant material placed on record. It is undisputed that in the books of account of the assessee, sum of Rs.85 lakhs has been credited against the said cash creditor, M/s Josh Trading Pvt Ltd, and therefore, assessee has passed journal entry in its books of account debiting M/s Garware Synthetics Pvt Ltd. Thus, it is undisputed that credit of Rs.85 lakhs is appearing in the books of account of the assessee and, therefore, in terms of section 68 of the Act, the assessee is responsible for explaining the identity, creditworthiness and genuineness of the transaction. This claim of the assessee for limiting provisions of section 68 to the extent of loan actually received in bank account is accordingly rejected. The additional ground of appeal
of the assessee is accordingly dismissed.
16. Grounds 2 to 4 of the appeal relate to amount of Rs.9,90,000/- received as fees, amount of Rs.2,62,000/- received as miscellaneous income and amount of Rs.95,000/- for sale of products, which have been assessed by the Assessing Officer as unexplained cash credit under section 68 of the Act. The Ld.CIT(A) also has upheld the addition.
M/s Tyson Marketing Pvt Ltd However, in respect of fees of Rs.9,90,000/-, the Ld. CIT(A) has disallowed business expenses incurred for earning said income also.
The facts in brief qua the issue of commission income of Rs.9,90,000/- received by the assessee from ‘M/s Lifeline Pharma’ is concerned, the assessee has shown income of Rs.9 lakhs from providing marketing consultancy to M/s Lifeline Pharma. According to the assessee, TDS of Rs.90,000/- was deducted on the said commission income. It was submitted by the assessee that M/s Nihal Garware, director of the assessee company rendered the services corresponding to the commission income and, therefore, finding of the Assessing Officer and Ld.CIT(A) that no services have been provided by the assessee company is not justified.
Before us, the Ld.Counsel for the assessee has submitted that firstly, income has already been offered by the assessee for the purpose of income-tax and, thereafter making addition again under the provisions of section 68 of the Act amounts to double addition.
We have heard the rival submissions of the parties on the issue in dispute and perused the relevant material on record. We find that only commission income of Rs.9 lakhs was shown to have been received by the assessee and on that said income, TDS of Rs.90,000/- was deducted and, therefore, lower authorities are not justified in making addition for the amount of TDS deducted separately as in the bank account of the assessee only commission of Rs.8,10,000/- was received. Further, when the said commission has already been credited and offered for tax, then either addition under section 68 of the Act can be retained or the M/s Tyson Marketing Pvt Ltd income offered by the assessee as commission income can be retained. Both the income offered by the assessee in the return of income and addition under section 68 in respect of the same entry of Rs.9 lakhs cannot be retained. We may also note that section 115 BBE of the Act has been introduced with effect from 01/04/2013, hence, same is not applicable in the instant assessment year under consideration, therefore, even if the said amount is added under section 68 of the Act, same is subject to normal rate of taxation. Further, in our opinion, merely on the ground that services were rendered by the director of the company and not by the company, treating the said commission income as unexplained cash credit, is not justified. Further, the Ld.CIT(A) has also not identified the expenses claimed by the assessee for earning the said commission income. In the circumstances, we set aside the order of the lower authorities on the issue in dispute and direct the Assessing Officer to delete the addition made under section 68 of the Act.
Regarding the miscellaneous income of Rs.2,62,000/- and sale of product of Rs.95,000/-, the assessee failed to provide details of name and address of the parties and, therefore, the Ld.CIT(A) sustained the addition observing as under:- “4.1.4 The appellant had offered income under the head “Other income” amounting to Rs.2,62,000. No details like name and address of the persons from whom these income have been received as well as details of service provided by the appellant could be furnished. No detail has been furnished by the appellant during the appeal proceedings as well. In absence of any detail the AO has rightly added the same as unexplained cash credit u/s 68 of the I.T. Act. This ground of appeal is therefore treated as dismissed. 4.1.5 The appellant had offered income of Rs.95,000/- as sale of product. Appellant submitted that it was generated out of scrap sale. No details like name and address of the persons from whom these income have been received. The directors of the company had categorically admitted u/s 131 on oath that M/s Tyson Marketing Pvt Ltd no business activity was conducted by the company. No detail has been furnished by the appellant during the appeal proceedings as well. In absence of any detail the AO has rightly added the same as unexplained cash credit u/s 68 of the I.T. Act. This ground of appeal
is therefore, treated as dismissed.”
21. We have heard rival submissions of the parties on the issue in dispute and perused the relevant material on record. We find that in absence of any documentary evidence, the action of the Ld.CIT(A) in upholding the addition under section 68 of the Act is justified. However, the corresponding income which has already been declared in the regular return of income needs to be reduced or subtracted from the total income. Thus, the income of Rs.2,62,000/- and Rs.95,000/- will though be assessed under the provisions of section 68 of the Act, there will be no additional tax liability as the incomes assessed under section 68 of the Act are also liable to be taxed at the same rate for the year under consideration. We order accordingly. The grounds No.2 to 4 of the appeal of the assessee are accordingly partly allowed.
22. In the ground No.5, the assessee has raised the issue of a typographical error in the order of the Ld.CIT(A). The Ld.Counsel submitted that in para 4.1.8 of the order of the Ld.CIT(A), the addition of Rs.1,79,530/- has been deleted, however, by mistake, Ld.CIT(A) has only mentioned deletion of addition of Rs.79,530/-.
23. We have heard rival submissions of the parties on the issue in dispute and perused the relevant material on record. The relevant finding of the Ld.CIT(A) at para 4.1.8 is reproduced below:- “4.1.8 AO has added an amount of Rs.1,79,530 being cash deposit made in the bank account of the appellant for want of source and nature of these cash deposits. The appellant has claimed that M/s Tyson Marketing Pvt Ltd these were out of scrap sales but could not provide details like name and address of the scrap purchasers. During the appeal stage the appellant has mentioned that cash deposit of Rs.1,79,530/- was out of sale of scrap of Rs.95,000 and other income of Rs.2,62,000 and since the same was offered to tax, taxing the cash deposit would tantamount to taxing the said amount twice resulting in double taxation. Since the amount of Rs.95,000 as sale of scrap and other income of Rs.2,62,000 has already been added by the AO as unexplained cash credit I am in agreement with the appellant contention that taxing the cash deposit would amount to double taxation. The cash deposits in the bank account can be explained as application of the income on which addition has been already made by the AO. Accordingly the addition of Rs.79,530/- is hereby deleted.”