SANJU AGARWAL,BHUBANESWAR vs. DCIT, CIRCLE-1(1), BHUBANESWAR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No.263/CTK/2018 Assessment Year : 2011-12

Sanju Agarwal, Plot No.N- Vs. DCIT, Circle 1(1), 1/93, IRC Village, Nayapalli, Bhubaneswar. Bhubaneswar. PAN/GIR No.ACEPA 5217 D (Appellant) .. ( Respondent)

ITA No.264/CTK/2018 Assessment Year : 2011-12

Subash Agarwal, Plot No.N- Vs. DCIT, Circle 1(1), 1/93, IRC Village, Nayapalli, Bhubaneswar. Bhubaneswar. PAN/GIR No.AATPA 3716 A (Appellant) .. ( Respondent)

Assessee by : Shri P.S.Panda/Kamal Agarwal, ARs Revenue by : Shri Subhendu Dutta, DR

Date of Hearing : 27 /11/ 2019 Date of Pronouncement : 23 /12/ 2019

O R D E R Per C.M.Garg,JM Both the appeals have been filed by the assessees against

the separate orders of the CIT(A),1, Bhubaneswar dated

P a g e 1 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

16.11.2016 in respect of Sanju Agarwal and dated 2.1.2017 in

respect of Subash Agarwal for the assessment year 2011-12.

532 days and appeal in the case of Subash Agarwal is time barred

by 476 days. Both the assessees viz wife and husband have filed

condonation petitions alongwith affidavits stating therein that due

to recession in infrastructure development business, the person

who was looking after their personal income tax matters left the

job and the orders received from the CIT(A) were unattended and

the second appeals could not be filed within the due date. It is

stated that the delay in filing the appeals before the Bench is

bonafide and is beyond their control. It was in this backdrop

prayed that the delay in filing the appeals may be condoned and

appeals be admitted for adjudication.

condonation petitions alongwith affidavits. We are satisfied that

the delay in filing the appeals is due to reasonable cause and,

accordingly, we condone the delay and admit the appeals for

adjudication.

ITA No.264/CTK/2018: A.Y. 2011-12-Subash Agarwal

P a g e 2 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

“ 1. On the facts and circumstances of the case, the order passed by Ld. CIT(A) Confirming the order of Ld. Assessing Officer is arbitrary and bad in law.

appeal, hence, same is dismissed as not pressed.

P a g e 3 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

assessee submitted that the ld CIT(A) has erred in considering the

amount of Rs.50 lakhs received by the assessee from his wife

Smt. Sanju Agarwal as unexplained cash credit u/s.68 of the Act.

Ld A.R. further submitted that the ld CIT(A) was not correct and

justified in ignoring the submission filed before the AO

considering the repayment of Rs.23,25,000/- to Smt. Sanju

Agarwal as unexplained cash credit u/s.68 of the Act. Ld counsel

further submitted that the authorities below erred in making the

addition u/s.68 of the Act on baseless ground considering Rs.50

lakhs received from Sanju Agarwal and Rs.23,25,000/- as

repayment to Sanju Agarwal without appreciating the

submission/explanation filed by the assessee.

the AO has made addition of Rs.50 lakhs u/s.2(22)(e) of the Act

by holding that the loan/advance given by the company to its

shareholder Smt. Sanju Agarwal as deemed dividend and taxable

in the hands of recipient assessee. Ld counsel submitted that the

assessee by way of not pressing Ground No.6 of appeal before the

Tribunal has accepted this addition made by the AO and

confirmed by the ld CIT(A). Ld A.R. further submitted that in the

balance sheet of the assessee for the assessment year 2011-12,

P a g e 4 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

the unsecured loan received from his wife Smt. Sanju Agarwal of

Rs.26,75,000/- has been shown in the balance sheet and

simultaneously, Smt. Sanju Agarwal has also shown unsecured

loan of Rs.23,25,000/- from the assessee. Ld counsel also

submitted that this confusion arose due to the fact that the AO

found that the assessee had claimed to have borrowed unsecured

loan of Rs.50 lakhs from Smt. Sanju Agarwal during financial year

2010-2011 and also claim to have repaid loan amounting to

Rs.23,25,000/- to Smt. Sanju Agarwal. While verifying the

statement of affairs in the case of Smt. Sanju Agarwal, the

Assessing Officer found that Smt. Sanju Agarwal had shown to

have borrowed unsecured loan of Rs.,23,25,000/- from the

assessee and Smt. Sanju Agarwal had not shown any loans and

advances given to the assessee during the financial year 2010-

2011 in her statement of affairs. The Assessing Officer concluded

that that the assessee had got Rs.50,00,000/- from his

undisclosed income and wrongly repaid loan of Rs.23,25,000/- to

Smt. Sanjay Agarwal. Ld A.R. reiterating the submissions of the

assessee before the AO and reproduced by ld CIT(A) in para 3 of

his order submitted that during the relevant period, Smt. Sanju

Agarwal, wife of the assessee had received a sum of Rs.50 lakhs

from ARSS Developers Ltd., as unsecured loan and the above

P a g e 5 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

amount was directly paid to the assessee by ARSS Developers

Ltd., at the request of Smt. Sanju Agarwal. However, while

preparing the statement of affairs, the said transaction was not

incorporated by Smt. Sanju Agarwal which is an inadvertent

mistake. Ld counsel submitted that this fact has not been

controverted neither by the AO nor by ld CIT(A) that amount of

Rs.50 lakhs was transferred to the account of the assessee from

M/s. ARSS Developers Ltd., which has been accepted to be added

in the hands of the assessee u/s.2(22)(e) of the Act by way of not

pressing ground No.6. Ld A.R. submitted that in this situation due

to this mistake in the statement of affairs of the assessee and his

wife, the unsecured loan of Rs.26,75,000/- was shown in the

balance sheet of the assessee received from his wife and

repayment of loan of Rs.23,25,000/- was shown in the balance

sheet of Smt. Sanju Agarwal from the assessee and if the amount

of Rs.50 lakhs has to be added in the hands of the assessee,

which was directly received by him from ARSS Developers Ltd.,

then by way of adjusting this Rs.50 lakhs, the factum of

repayment of loan of Rs.23,25,000/- by the assessee to his wife

was to be accepted. Ld counsel submitted that if the amount of

Rs.50 lakhs is added in the hands of the assessee without treating

the same as loan from his wife, then the final situation would be

P a g e 6 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

that in the beginning of the year an amount of Rs.23,25,000/- was

due against the wife of the assessee Sanju Agarwal, which was

rightly shown in the balance sheet of Sanju Agarwal as unsecured

loan from the assessee Shri Subash Agarwal and after reversing

the amount of Rs.50 lakhs from the account of the assessee, the

same amount of Rs.23,25,000/- would be due to wife of the

assessee Sanju Agarwal and same would find place in the balance

sheet of the assessee as debtor.

neither in the hands of the assessee nor in the hands of wife

Sanju Agarwal and same may kindly be deleted.

and first appellate order. However, in all fairness, he submitted

that since the assessee has conceded the amount of Rs.50 lakhs

as addition u/s.2(22)(e) of the Act, therefore, consequent effect

of this situation has to be taken care of in the respective accounts

of the assessee and his wife.

the considered view that if the assessee has accepted the amount

of Rs.50 lakhs received from the account of ARRS Developers

Ltd., to his bank account as deemed dividend u/s.2(22)(e) of the

P a g e 7 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

Act, without any other evidence, same amount cannot be added

in the hands of the assessee as received by Sanju Agarwal as

unexplained cash credit u/s.68 of the Act. Hence, Ground No.2 of

the assessee stands allowed.

without treating the same as deemed dividend in the hands of the

assessee, reverse accounting entry has to be made which would

result that the amount of Rs.23,25,000/- has to be treated as due

to the wife of the assessee and entry of unsecured loan from his

wife that the amount of Rs.23,25,000/- has to be shown due to

the assessee’s wife Smt. Sanju Agarwal and that amount would be

shown in the balance sheet of the assessee for assessment year

2011-12. On this count, no addition u/s.68 of the Act is called for.

The AO was not correct in making the addition of Rs.73,25,000/-

in the hands of the assessee treating Rs.50 lakhs received from

Sanju Agarwal and Rs.23,25,000/- as repayment of loan to Sanju

Agarwal u/s.68 of the Act. As we have noted above amount of

Rs.50 lakhs was directly received from ARSS Developers ltd., and

the amount has been routed through the banking channel and

has been taxed in the hands of the assessee as deemed dividend,

no further addition in this regard amounting to Rs.50 lakhs can be

made in the hands of the assessee as unexplained cash credit

P a g e 8 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

u/s.68 of the Act. This fact has not been disputed by ld D.R. that

before transaction of Rs.50 lakhs, amount of Rs.23,25,000/- was

due to the wife of the assessee Sanju Agarwal as debtor and when

the assessee treated the amount of Rs.50 lakhs as received from

Sanju Agarwal as loan, the situation change and that is why the

assessee has shown balance amount of Rs.26,75,000/- as

unsecured loan from his wife i.e. deducting Rs.23,25,000/- from

the notional amount of unsecured loan of Rs.50 lakhs. When the

controversy regarding amount of Rs.50 lakhs has been solved by

treating the same as dividend income in the hands of the assessee

u/s.2(22)(e) of the Act then other relevant book entry cannot be

held as sustainable and after reversing the same, no addition

u/s.68 of the Act can be held as sustainable.

the AO was not right in making addition in the hands of the

assessee of Rs.73,25,000/- u/s.68 of the Act and ld CIT(A) was

not correct in upholding the same. It is pertinent to note that the

assessee has conceded Rs.50,00,000/- as received as deemed

dividend u/s.2(22)(e) of the Act only before the Tribunal and the

authorities below had no occasion to deal with the issue while

considering this fact. Therefore, in the changing scenario, we

confirm Rs.50 lakhs in the hands of the assessee u/s.2(22)(e) of

P a g e 9 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

the Act and consequently, other additions made by the AO and

confirmed by ld CIT(A) only on the basis of ledger/book entry in

the respective accounts and balance sheet of the assessee and his

wife cannot be held as sustainable. Therefore, Ground Nos.3 & 4

of assessee are allowed.

AO was not justified in making addition u/s.68 of the Act of

Rs.1,25,000/- payable to the daughter of the assessee Smt Silpa

Agarwal against towards sale of shares of M/s. ARSS

Infrastructure Project Ltd.,. Therefore, same may kindly be

deleted.

statement of facts of Silpa Agarwal for the financial year 2010-

2011 pertaining to assessment year 2011-12, it was noticed by

the AO that no loan was paid to the assessee during the same

period by Silpa Agarwal. Therefore, the explanation offered by the

assessee was not found satisfactory and hence, the amount was

added in the hands of the assessee u/s.68 of the Act as

unexplained cash credit. Further, drawing our attention to para

4.1 of the CIT(A) order, ld D.R. submitted that even during the

course of appellate proceedings, no material was produced by the

P a g e 10 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

assessee and in absence of necessary evidence, the explanation

given before the AO by the assessee cannot be given any

credence and hence, addition in this regard may kindly be

sustained.

the findings of the ld CIT(A) that no materials were produced

before the authorities below. Before us, no valid explanation was

submitted by ld counsel for the assessee to prove that Silpa

Agarwal has paid the amount of Rs.1,25,000/- to the assessee.

Hence, Ground No.5 of the assessee is dismissed.

ITA No.263/CTK/2018: A.Y. 2011-12-Sanju Agarwal.

reads as under:

“2. On the facts and circumstances of the case, the CIT(A) has erred in confirming the addition made by the AO amounting to Rs.50 lakhs received from ARSS Developers Ltd., as unexplained cash credit u/s.68 of the Income tax Act, 1961.” 20. Ld A.R. submitted that during the assessment proceedings,

the assessee vide letter dated 23.6.2015 submitted that the

P a g e 11 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

amount of Rs.50 lakhs has been paid to the husband of the

assessee Shri Subash Agarwal directly from ARSS Developers Ltd.,

on the request of the assessee, however, while preparing the

statement of affairs, the said transaction was not incorporated

which is an inadvertent mistake. Ld A.R. further submitted that

since the husband of the assessee Shri Subash Agarwal has

conceded that amount of Rs.50 lakhs may be treated as deemed

dividend u/s.2(22)(e) of the Act, therefore, no addition is called

for in the hands of wife Sanju Agarwal i.e the assessee.

Therefore, the addition made by the AO and confirmed by the ld

CIT(A) may kindly be deleted.

authorities. However, he could not controvert the fact that the

amount of Rs.50 lakhs was directly transferred from the account

of ARRS Developers Ltd., to the bank account of the husband of

the assessee Shri Subash Agarwal and same was not routed

through the bank of the assessee. The assessee has nothing to do

with said transaction which has been accepted by her husband

before the Tribunal by not pressing Ground No.6 of appeal.

the view that when addition of Rs.50 lakhs was made in the hands

P a g e 12 | 13

ITA No.263 & 264/CTK/2018 Asse ssment Year : 20 11- 12

of the husband of the assessee u/s.2(22)(e) of the Act as the

amount was directly transferred from ARSS Developers Ltd., to

the account of the husband of the assessee, therefore, no further

addition in the hands of the assessee is called for. Consequently,

the ground of appeal of the assessee is allowed.

Order pronounced on 23/12/2019.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 23/12/2019 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Sanju Agarwal/Subash Agarwal Plot No.N-1/93, IRC Village, Nayapalli, Bhubaneswar

Sr.Pvt.secretary ITAT, Cuttack

P a g e 13 | 13