SHRI JAYANTILAL SANGHVI ,INDORE vs. ACIT-4(1), INDORE

This is an appeal filed by the Assessee against the order of Commissioner of Income Tax(Appeals)-II, Indore dated 08/05/2018 pertaining to assessment year 2013-14. The Assessee has raised following grounds of appeal:

At the outset, Ld. counsel for the assessee submitted that he does not wish to press the ground no.2 of the assessee’s appeal. Ld. Departmental Representative (DR) has no objection. Hence, the ground no.2 of the assessee’s appeal is dismissed as not pressed.

The only effective ground is against confirmation of addition in respect of unsecured loans made u/s 68 of the Income Tax Act 1961(hereinafter called as ‘the Act’).

The facts giving rise to present appeal are that the assessee had declared income of Rs.1,73,830/- and current year loss of Rs.(-)45,36,745/- on account of speculation business loss. The case was selected for scrutiny assessment and the assessment u/s 143(3) of the Act was framed vide order dated 29.03.2016. During the course of assessment, the assessing officer made an addition of Rs.8,00,258/- in respect of cessation of liability. Further, the assessing officer made an addition in respect of unexplained cash credit of Rs.10,00,000/-. The addition was made on the basis that the notice issued to Shri Leeladhar Gupta one of the loan creditor amounting to Rs.5,00,000/-was returned back with remarks not traceable. And the other person namely Shri Sanjay Trading P. Ltd. SMC- Jayantilal Sanghvi loan creditor amounting to Rs.5,00,000/- was served but no compliance was made.

Aggrieved by this the assessee preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) after considering submissions dismissed the appeal.

Now, the assessee is in present appeal.

Ld. counsel for the assessee vehemently argued that the authorities below were not justified in confirming the addition. He reiterated the submissions as made before the Ld. CIT(A). It is contended that the Assessing officer made addition in respect of unsecured loans even after one of the notices out of two was duly served to loan creditor which was sufficient compliance on the part of the assessee. Further, it was contended that both the loan accounts i.e. Shri Sanjay Trading Pvt. Ltd. & in Shri Leeladhar Gupta loan taken during the year was Rs.5,00,000/- each and repaid during the year is Rs.5,00,000/- each and all these transactions were duly verified by the Ld. AO. As the assessee had provided the copy of Ledger Accounts and Copy of Bank Statements to the AO and both of these were squared up loan accounts during the financial year under consideration. He further contended that the transactions were carried through banking channel. Therefore, there cannot be any reason to suspect these transactions being not genuine and where identity of the creditor is also established.

On the contrary, Ld. DR opposed the submissions and supported the order of the Authorities below. Ld. DR submitted that merely providing the confirmation and the transactions being routed through banking channel would not be sufficient to conclude that the transactions so carried out is genuine and identity and creditworthiness of the creditor is established. He submitted that the onus was on the assessee to prove these ingredients which the assessee has grossly failed.

I have heard both the parties and perused the material on record and gone through the orders of authorities below. One of the submission in the form of ground no.3 the assessee has stated that no opportunity was granted to the assessee and merely because the 3rd party could not appear before the assessee should not be a ground for making addition. The revenue has not provided opportunity to produce the creditors. Moreover, the revenue had all authority for securing the presence of the creditors. I have given thoughtful consideration to these submissions of the Ld. counsel for the assessee. Considering the totality of the facts and the material placed before me, I deem it proper to set aside this issue to the Ld. AO to decide it afresh. The assessing officer would verify the submissions of the assessee and also make inquiry from the creditors in case the amount has already been squared up and the SMC- Jayantilal Sanghvi creditors confirm this fact in that event the assessing officer would delete the addition. Ground No.1 of the assessee is allowed for statistical purposes.

In the result, the appeal of the Assessee in ITANo.740/Ind/2018 is allowed for statistical purposes.