SHRI LALCHAND DHARIWAL,,SURAT vs. THE INCOME TAX OFFICER, WARD-1(2)(3),, SURAT

आदेश /O R D E R PER O. P. MEENA, AM: 1. This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-2, Surat(in short “the CIT (A)”) dated 08.08.2016 pertaining to Assessment Year 2012-13, which in turn has arisen from the assessment order passed under section 143 (3) dated 27.03.2015 of Income Tax Act, 1961 (in short ‘the Act’) by the Income Tax Officer, Ward- 1(2)(3),Surat(in short “the AO”). 2. Ground No.1 &2 related to confirming addition of Rs. 23,31,000 as unexplained unsecured loan and interest of Rs. 2,13,708 thereon.

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AO held the assessee could not prove the Identity, the genuineness

of the transaction and therefore, made the addition of Rs.23, 31, 000

under section 68 of the Act. 4. Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). Wherein it was submitted that during the assessment

proceedings, the identity, creditworthiness, and the genuineness of

the transaction was proved before the AO by furnishing the confirmation letter along with the bank statement etc. It was

contended that the amount was received of Rs.18,56,000 from

Kamlesh Dhariwal, the son of the appellant, and who was regularly assessed to tax and had sufficient surplus capital to give this amount.

It was contended that the AO has taken adverse view of not producing

Shri Paresh Kumar R Patel and Shri Ratilal V. Tank before the AO

though the appellant had made his best efforts and the details furnished before the AO along with the confirmations. However, the

Ld. CIT (A) observed that the AO issued notices to these lenders, but

the notice, could not be served, and were returned as unserved. The

AO found that Shri Kamlesh Dhariwal did not have sufficient funds to

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make said advance of Rs.18,56,000 and failed furnished the source of

cash deposits made in bank account just before the issuance of

cheque to the appellant. In view of these facts, CIT (A) held that the

assessee has failed to the established identity of the lenders interest

two cases, the creditworthiness and genuineness of transaction, in

spite of repeated opportunities and therefore, the addition made by

the AO under section 68 of the Act was confirmed with disallowance

of interest payment on these loans. 5. Being, aggrieved the assessee filed this appeal before the

Tribunal. The learned Counsel submitted that Shri Kamlesh Dhariwal

son of the assessee has filed confirmation in response to notice under

section 133(6), which is discernible from Page No. 5 of assessment

order. It was explained that Shri Kamlesh L Dhariwal was his having

capital of Rs.20, 27, 632 as on 31. 03. 2012 out of which loan of Rs.

18,56,000 was given to the assessee. It was further submitted that

profit has no relevance with loan amount as the same is given out of

capital and not from profit. Shri Kamlesh Dhariwal was having

sufficient cash out of cash, which was deposited in Bank, and cheque

amount was given out of said bank account. Therefore, relying on the

decision of Hon’ble Gujarat High Court in the case of DCIT v. Rohini

Builders [2002] 256 ITR 360 (Guj.)/[2003] 127 Taxman 523 (Guj) it

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was submitted that the High Court has laid down that when the

assessee has primarily discharged the initial onus laid on him in terms

of section 68 by providing details to establish genuineness of

transaction, identity and creditworthiness of depositors, then the

assessee is not expected to prove genuineness of cash deposited in

bank account of those creditors because under the law the assessee

can be asked to prove the source of credits in his books of accounts

but not the source of source. The loan of Rs. 2, 75,000 taken from

Paresh Kumar R Patel was repaid and he was residing abroad hence,

his PAN could not be filed his PAN but his confirmation was filed. The

learned counsel for the assessee relying on the decision in the case

of CIT v. Ayachi Chandrasekhar Narsangji [2014] 42 taxmann.com 251

(Gujarat) connected that where Department had accepted

repayment of loan in subsequent year, no addition was to be made in

current year because of cash credit. 6. With regard to loan of Rs. 2 Lakh from Shri Ratilal V. Tank, the

learned counsel for the assessee submitted that copy of confirmation

was filed of which copy is placed at Paper Book Page No. 21. The loan

was taken by cheque drawn on Bank of Rajasthan. Therefore,

identity, credit-worthiness and genuineness of transaction has been

duly proved. Hence, CIT (A) was not justified in confirming the

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addition. The learned Counsel also relied in the case of CIT v. Ranchhod Jivabhai Nakhava [2012] 81 CCH 193 Guj-HC held that Where lenders of assessee are income-tax assessees whose PAN have been disclosed, Assessing Officer cannot ask assessee to further prove genuineness of transactions without first verifying such fact from income-tax returns of lenders. 7. In view of the foregoing, it was requested that CIT (A) is not justified in confirming the addition of Rs. 23,31,00 loan and interest of Rs. 2,13,708 paid to lenders. 8. Per contra, the ld. Sr. D.R. relied on the AO /CIT (A). 9. We have heard the rival submissions and perused the relevant material on record. We find that Shri Kamlesh Dhariwal, son of the assessee, has filed confirmation in response to notice under section 133(6), which is discernible from Page No. 5 of assessment order. Shri Kamlesh L Dhariwal was having capital of Rs.20, 27, 632 as on 31. 03. 2012 out of which loan of Rs. 18,56,000 was given to the assessee. It is noticed that Shri Kamlesh Dhariwal was having sufficient cash in hand out of cash was deposited in Bank and cheque amount was given out of said bank account. Therefore, we are of the considered opinion that no addition could be sustained on this account in the light of decision in the case of DCIT v. Rohini Builders [2002] 256 ITR 360

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(Guj.)/[2003] 127 Taxman 523 (Guj) wherein the Hon`ble High Court

has laid down that when the assessee has primarily discharged the

initial onus laid on him in terms of section 68 by providing details to

establish genuineness of transaction, identity and creditworthiness of

depositors then the assessee is not expected to prove genuineness of

cash deposited in bank account of those creditors because under the

law the assessee can be asked to prove the source of credits in his

books of accounts but not the source of source. In view of these facts,

the addition of Rs. 18,56,000 is therefore, deleted. We further note

that the loan of Rs. 2,75,000 taken from Paresh Kumar R Patel was

repaid in subsequent assessment year and same stand accepted by

the Department. Further, the confirmation was filed but other details

could not be filed as he was residing abroad. The learned counsel for

the assessee relied on the decision in the case of CIT v. Ayachi

Chandrasekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat)

wherein it was held that where Department had accepted repayment

of loan in subsequent year, no addition was to be made in current

year on account of cash credit. In view of this matter, this addition

made by the AO is therefore, deleted. 10. With regard to loan of Rs. 2 Lakh from Shri Ratilal V. Tank, the

learned counsel for the assessee submitted that copy of confirmation

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was filed of which copy is placed at Paper Book Page No. 21. The loan

was taken by cheque drawn on Bank of Rajasthan. Therefore, identity, credit-worthiness and genuineness of transaction has been

duly proved. Hence, CIT (A) was not justified in confirming the

addition. The learned Counsel also relied in the case of CIT v.

Ranchhod Jivabhai Nakhava [2012] 81 CCH 193 Guj-HC whereas it was held that Where lenders of assessee are income-tax assessees whose

PAN have been disclosed, Assessing Officer cannot ask assessee to further prove genuineness of transactions without first verifying such

fact from income-tax returns of lenders. 11. In view of the foregoing, we are of the considered opinion, that

addition sustained by the CIT (A) were not justified. Hence,

considering the facts and relying on the decision of Hon’ble Gujarat High Court as referred above, these grounds of appeal of the assessee are allowed. Accordingly, addition of Rs. 23,31,00 loan and interest

of Rs. 2,13,708 paid to lenders sustained by the CIT (A) is deleted.

Accordingly, Ground No. 1 and 2 of appeal is allowed. 12. Ground No. 3: relating to interest of Rs. 47,103 being

undisclosed income interest is not pressed before us by the learned

counsel for the assessee, ex-consequenti, it is treated as dismissed

as not pressed.

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expenditure of Rs. 1,98,750 is incurred in cash, which is not been

claimed in the PLA account as being capital expenditure. Therefore, no question of making any disallowance of the expenses is arisen. The

assessee has filed corroborative evidences, which are placed at paper

Book Page No.25 to 29. The payment so made is reflected in the

cashbook and which has been incurred out of cash balances and appearing in the cashbook. The AO has not doubted the source of the

expenditure. However, he made the disallowance which cannot be made as the expenses being capital in nature nor the assessee has

claimed that such expenditure in the PLA account 17. Per contra, learned senior dear relied on the Ld. CIT(A) a 18. We have heard the rival submissions and perused the relevant material on record. We find that the assessee has filed copy of acknowledgement of return of income, contra confirmation for

Kalpesh K Gosalina incurred for compound wall, copy of bills and

proof of payment made though cash book. The payment has been

shown in balance sheet as capital expenditure. This expenditure is not claimed in Profit & Loss Account. Therefore, disallowance of it is

not justified. The assessee has filed copy of Adinath Textile, which is

placed at paper book Page No. 29. The cashbook of Adinath Textile

is appearing at paper book page number 25 to 26. Hence, source of

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expenditure is explained and expenditure being capital in nature cannot be disallowed. Accordingly, this addition is deleted. Accordingly, this ground of appeal is allowed in favour of the assessee. 19. In the result, appeal of the assessee is partly allowed. 20. The order pronounced in the open Court on 11. 02. 2020.

Sd/- Sd/- (SANDEEP GOSAIN) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat: Dated: 11th February, 2020/opm Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/ Guard file of ITAT. By order // TRUE COPY // Assistant Registrar, Surat