M/S SHUBHAM PRIME BUILDERS PPVT. LTD.,KOTA vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE, KOTA

In both the appeals, the assessee is aggrieved for the addition made U/s 68 treating part of the unsecured loans as unexplained.

2 ITA 606 & 607/JP/2018_ Shubham Prime Builders P. Ltd. Vs DCIT 3. Rival contentions have been heard and record perused. The facts in brief are that the assessee is engaged in the business of real estate. The return of income for the A.Y. 2010-11 was filed on 13.10.2010 u/s 139(1) declaring Nil income. Search and seizure operations were carried out on 03.03.2016 at various premises of Shubham Group. Kota to which assessee company belongs. In response to notice u/s 153A dt. 05.09.2016, assessee again filed the return on 03.10.2016 declaring Nil income. In the assessment framed u/s 153A, AO made addition/ disallowance u/s 40A(3)/ 68 of the Act. Before ld. CIT(A) assessee claimed that the disallowance made in the assessment framed u/s 153A is illegal & bad in law as the assessment proceedings for the year under consideration was not pending as on the date of search. However, Ld. CIT(A) held that the processing of return u/s 143(1)(a) is not an assessment and therefore, disallowance made u/s 153A is valid.

It was argued by the ld AR of the assessee that the assessee filed the original return of income on 13.10.2010. The time limit for service of notice u/s 143(2) for the relevant AY was upto 30.09.2011. No notice was issued to the assessee before this date. Thus, the assessment proceedings for the year under consideration were not pending on the date of search. In search no incriminating material indicating any undisclosed income for the year under consideration was found. Section 3 ITA 606 & 607/JP/2018_ Shubham Prime Builders P. Ltd. Vs DCIT 153A empowers the AO to issue notice to a person who is searched u/s 132 to file return in respect of 6 A.Y.'s preceding the assessment year in which search is conducted and to assess or reassess the total income of these years notwithstanding anything contained in section 139, 147 and other related sections. Thus, the assessment u/s 153A are not de novo assessments since the purpose of making the reassessments under section 153A is to subject to tax, the hitherto undisclosed income unearthed during the course of the search. It is for this reason that the second proviso to section 153A(1) provides only for the abatement of the pending assessments. This is done to ensure that the regular assessment proceedings under the normal provisions and the assessment proceedings under section 153A are not conducted simultaneously since that would result in redundancy. Therefore, the already completed assessments do not abate and they shall hold the field.

In view of the above, it was contended that since no incriminating material was found during search and the assessment was not pending as on the date of search, no addition was warranted in respect of unsecured loans taken in earlier years.

The ld AR of the assessee has relied on the decisions of the Hon’ble Bombay High court in the case of CIT Vs. SKS Ispat and Power Ltd.

With regard to merit of the addition, it was the contention of the ld AR that in assessment proceedings assessee filed confirmations from these parties, ITR and their bank statements. He further filed the details of shares allotted to them in the next year against the amount received. The ld AR has relied on the decision of Hon’ble Jurisdictional High Court in the case of Kanhaialal Jangid Vs. ACIT 217 CTR 354 (Raj) and Aravali Trading Co. Vs ITO 187 Taxman 338 (Raj).

On the other hand, the ld CIT-DR has argued that since the original assessment was completed U/s 143(1) of the Act in terms of decision of Hon’ble Supreme Court in the case of Rajesh Jhaweri, the same cannot

We have considered the rival contentions and carefully gone through the orders of the authorities below. From the record, we found that during the A.Y. 2010-11 assessee received amount of Rs.16,50,000/- by account payee cheque from the following persons: - Name Date Amount Total Amount 17.8.2009 2,50,000/- 8,50,000/- Arjun Khangar 19.08.2009 6,00,000/- Suman Khangar 16.10.2009 3,00,000/- 3,00,000/- 17.08.2009 3,00,000/- Shobhna Khangar 5,00,000/- 15.10.2009 2,00,000/- 16,50,000/- Total

By the impugned order, the ld. CIT(A) confirmed the addition of Rs.5 lacs u/s 68 of the IT Act, 1961 by treating part of the unsecured loans taken from the following persons as unexplained: -

With respect to above creditors, we found that the assessee has fully explained the loan received by it by furnishing the confirmation, ITR and bank statement of creditors. The Ld. CIT(A) confirmed the addition to the extent of immediate cash deposited in their bank account. However, while doing so he has not brought any evidence to prove that the cash amount deposited in the bank account of these persons belongs to assessee. Thus, in the absence of anything to establish that the cash amount deposited in the bank account of the creditors flew from the assessee, part of the cash credits cannot be treated as unexplained income of the assessee.

The Hon’ble Rajasthan High Court in the case of Kanhaialal Jangid Vs ACIT (supra) has held as under:

The Hon’ble Jurisdictional High Court in the case of Aravali Trading Co. vs. ITO (supra) has held as under:

Applying the proposition of law laid down by the Hon’ble Jurisdictional High Court to the facts of the instant case, we do not find any merit in the addition upheld by the ld. CIT(A). It is pertinent to mention here that the assessee has explained identity of loan creditor, genuineness of loan transaction as well as availability of funds in the creditor’s account. During the A.Y. 2010-11 and 2012-13 under consideration, the assessee is not required to prove source of the source. Accordingly, we do not find any merit in the addition so confirmed by the ld. CIT(A).

Similarly, in the A.Y. 2012-13, the ld. CIT(A) confirmed the addition of Rs. 1.00 lac U/s 68 of the Act by holding that source of giving loan to this extent is by cash deposit. However, while doing so he has not brought any evidence to prove that the cash amount deposited in the bank account of these persons belongs to assessee. Thus, in the absence of anything to establish that the cash amount deposited in the bank account of the creditors flew from the assessee, part of the cash credits cannot be treated as unexplained income of the assessee more particularly when assessee has repaid the loan in subsequent years.

In the result, both the appeals of the assessee are allowed in terms indicated hereinabove. Order pronounced in the open court on 30th May, 2019.