THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1),, SURAT vs. SHRI MUKESH NANUBHAI DESAI,, SURAT

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आयकर अपीलीय अिधकरण,सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI H.S.SIDHU, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A. No.1557/AHD/2016 िनधा�रण वष�/Assessment Year : 2011-12 Deputy Commissioner of Vs. Shri Mukesh Nanubhai Desai, Income Tax, 01, Shri Darshan Society, Circle-1(1)(1), Jamuna Nagar Bus Stand, Surat. Ghod Road, Surat – 395 001. [PAN: AATPD 0728 R] अपीलाथ� Appellant ��यथ�/Respondent Cross Objection No.121/AHD/20126 िनधा�रण वष�/Assessment Year : 2011-12 Shri Mukesh Nanubhai Desai, Vs. Deputy Commissioner of Income 01, Shri Darshan Society, Tax, Jamuna Nagar Bus Stand, Circle-1(1)(1), Surat. Ghod Road, Surat – 395 001. [PAN: AATPD 0728 R] अपीलाथ� Appellant ��यथ�/Respondent िनधा�रती क� ओर से /Assessee by Shri Rasesh Shah – CA राज�व क� ओर से /Revenue by Shri. O. P. Singh – Ld. CIT-Dr. सुनवाई क� तारीख/ Date of hearing: 01.05.2019 उ�ोषणा क� तारीख/Pronouncement on: 31.05.2019 आदेश /O R D E R PER O.P.MEENA, AM: This appeal filed by the Revenue and Cross Objection by the 1. assessee are directed against the order of ld. Commissioner of Income- Tax (Appeals)-II; Surat (in short “the CIT (A)”) dated 21.03.2016 pertaining to Assessment Year 2011-12. The grounds raised by the Revenue are read as under : 2. “[1] On facts and in circumstances of the case, The ld. CIT(A) is not justified in deleting the addition of Rs.22,77,84,000/- merely on

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the basis of submission filed by the assessee like copies of ITRs, Balance-Sheet and Bank Statement etc. of the loan givers without analysis of the financial acumen to advance huge loan amounts. [2] On the facts and circumstances of the case, the Ld. CIT(A) has erred by calling for the remand report and in carrying out related communication with the AO, Circle-1(2), Surat instead of with the AO, Circle-1(1)(1), Surat, who is the correct jurisdictional AO, leading to communication gap, non-submission of remand report and lack of adequate and complete verification of facts. [3] On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. [4] It is, therefore, prayed that the order of the CIT(A) may be set aside and that of Assessing Officer may be restored to the above extent.” Succinctly, facts as culled out from the orders of lower authorities 3. are that the assessee is engaged in the business of trading in land and shares and securities and has also shown income from rent, interest and other income. The AO noted that the assessee has shown unsecured loan of Rs. 49.79 Crores. The perusal of Annexure-II forming part of Form No.3CD from 18 parties as tabulated in the assessment order at Page No.2. Therefore, the assessee was asked to furnish complete details of unsecured loans taken during the year under consideration i.e. name and address, contra confirmation of accounts, copy of acknowledgement of return of income etc. In response to which, the assessee vide letter dated 07.01.2014 stated that information is under compilation. However, some details were filed later on. The AO has analyzed the submissions made during the course of assessment proceedings and found that the assessee has not cooperated in the assessment proceedings and failed to produce necessary documents in respect of following person as tabulated below:- Name Amount of Document filed for identity, loan credit-worthiness and

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genuineness of transaction Rs. Identity Genuin Creditwor eness thiness 1.Dimple Bhavsar 6,00,000 Yes No No 2. Jayesh C Shah 15,00,000 No No No 4.KK Desai No No No 5.Kishore Vrijlal Soni 1,25,00,000 No No No HUF 6.Mukeshbhai Desai 1,02,50,000 Yes No No (London) 7.N C Kelkar 20,00,000 No No No 8. P H Patel 15,00,000 Yes Yes No 9.Prabhatbhai Patel 33,94,000 No No No 10.Subhadra Shah 20,00,000 No No No 10 Vibha Satar 1,65,00,000 No No No 11. Vimal Kathiyavad 5,00,000 No No No 12.Vimal R Patel 3,10,000 No No No TOTAL 5,10,94,000 The AO observed that from material gathered, it is seen that the 4. assessee has failed to prove the genuineness of above alleged credit transactions. Further, non-submissions by the assessee, the first ingredients of name and address of the depositor is severely hampered the enquiry proceedings. Accordingly, the AO viewed that so called credits are mere bank entries as the assessee has failed to produce any material evidence to support the genuineness of transactions., hence, the AO made the addition of Rs.5,10,94,000/- under section 68 of the Act.

With reference to credit of Rs.20,00,000/- in the name of Smt. 5. Preranaben A Patel, the assessee has filed confirmation, copy of acknowledgement of return of income, balance sheet, trial balance and bank statement, which showed that the assessee has not taken any loan from Smt. Prerna A. Patel. When asked to explain, it was submitted that name of Shri N C Kelkar was wrongly written in the books of

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accounts in place of Smt. Prerna A. Patel. However, on perusal of bank statement of the assessee, it was found that the assessee has received an amount of Rs.20,00,000/- from this lady, but did not show this as unsecured loan in his audit report for the assessment year 2011-12. Accordingly, the AO made the addition of this amount also.

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Being aggrieved, the assessee filed an appeal before the ld. 7. CIT(A). Before whom, it was submitted that the assessee has filed complete details vide letter dated 24.03.2014, but the AO has failed to take into account the explanation furnished by the assessee. The assessee has further filed additional evidence under Rule 46A on which a remand report was called for from the AO. However, no remand report was furnished by the AO. Therefore, the CIT (A) observed that the AO is very careless, casual and callous in his approach and he has failed to carry out directions issued under section 250(4) of the Act. Since, the AO has failed to provide any report in spite of a very good period of time; the CIT (A) has decided the appeal on the material available on record. On perusal of details filed during the course of appellate proceedings, the CIT (A) observed that in the case of Dimple Bhavsar Rs. 6 Lakh, the unsecured loan was pertaining to assessment year 2010-11 and not for the assessment year 2011-12, hence, same was deleted. With regard to loan of Rs.15 Lakh from Jayesh C Shah, the CIT (A) found that the loan was received through RTGS and same was repaid through cheque. Therefore, identity, credit-worthiness and genuineness of transaction was established hence, addition was deleted. In the case of K. K. Desai, loan of Rs. 40,000 was given by pensioner by cheque having saving account with Bank of Baroda, hence, identity, credit-worthiness and genuineness of transaction was established hence, this addition was deleted. Similarly loan of Rs.1,25,00,000/- was received from Kishore, HUF through RTGS and

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the assessee has furnished confirmation, copy of acknowledgement of return of income, bank statement reflecting transaction hence, identity, credit-worthiness and genuineness of transaction was established therefore, this addition was also deleted. In respect of loan of Rs.1,02,50,000/- from Shri Mukesh Desai (London), the loan was taken through cheques for which confirmation, bank statement, and PAN of lenders was submitted reflecting the transactions, hence, this addition was also deleted. In respect of loan of Rs.20,00,006/- from N. C. Kelkar, the CIT(A) found the loan was actually received from Smt. Prerna A. Patel and by mistake name of N. C. Kelkar was mentioned. This mistake was rectified in the subsequent accounting year and the loan was given by cheque and same was repaid and confirmed by the lender, hence, identity, credit-worthiness and genuineness of transaction was proved therefore, this addition was deleted. With reference to loan of Rs.15,00,000/- from P. H. Patel, it was noticed that this loan was taken through RTGS and the assessee has furnished confirmation of lender, photocopy of bank slip, and balance sheet of lender hence, identity, credit-worthiness and genuineness of transaction was established hence, this addition was deleted. With reference to the loan of Rs. 33,94,000 from Shri Prabhatbhai Patel, it was noticed that the amount was actually received from Shri Hiteshbhai Patel of Rs. 16,97,000 and Shri Sanjaybhai Patel at Rs.16,97,000/- as against sale proceeds of immovable property by the assessee was by mistake shown in the name of Shri Prabhatbhai Patel. The assessee has

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furnished copy of sale deed and bank statement of above two persons. Hence, identity, credit-worthiness and genuineness of transaction in respect of this lender was established, therefore, the said addition was deleted. Similarly, with reference to loan of Rs. 20,00,000 from Shri Shubhadra C Shah, this loan was received through cheque and the amount was duly debited in the bank account of lender. This loan was repaid through NEFT on 12.10.2010. Thus, the identity, credit- worthiness and genuineness of transaction was proved hence, this addition was deleted. Further, the assessee has taken loan of Rs.1,65,00,000/- from Vibha Star Prop. Manish Kumar Agarwal through RTGS on two different dates i.e. Rs. 85 Lakh on 30.06.2010 and Rs. 80 Lakh on 02.07.2010. This loan was repaid by the assessee on two different dates is Rs. 85 lakhs on 25.09.2010 and Rs. 80 lakhs on 07.10.2010. Both the transaction are reflected in bank statement beside the assessee has furnished confirmation of the lender. Thus, identity, credit-worthiness and genuineness of transaction was established hence, this addition was deleted. With regard to loan of Rs. 5 Lakh from Shri Vimal Kathiyavad, the CIT (A) has given his finding that the loan was actually received from M/s. Shreeji Trading Company and by mistake it was shown in the name of Shri Vimal Kathiyavad. This entry was reversed on 01.04.2011 in the account of the firm. This identity, credit-worthiness and genuineness of transaction was established, hence, this addition was deleted. With regard to loan of Rs.3,10,000/- from Vimal R Patel, this addition was confirmed by the CIT (A). In the

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impugned order, the CIT (A) has restricted the addition made by the AO at Rs.5,10,94,000/- to Rs.3,10,000/-.

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The transaction of the unsecured loans from Shri Jignesh V Rabari is found to be genuine and disclosed pertaining to AY 2010-11. Hence, the addition made by the AO ofRs.8,15,00,000/- is deleted. b) Shanti Residency Pvt. Ltd. :- The appellant was directed to furnish the evidences in support of his contention regarding the unsecured loan being genuine. The appellant submitted in the case of Shanti Residency Pvt. Ltd regarding the amount of unsecured loans of Rs.8,60,00,000/-, the copy of contra account, ITR, and bank account in State Bank of India in the name of Shanti Residency Pvt. Ltd showing the transfer of the amount on 30.01.2010 and the account of the appellant showing the credit of the amount from the bank account of Shanti Residency Pvt. Ltd. The unsecured loans was squared off during the year itself. The transaction of the unsecured loans from Shanti Residency Pvt. Ltd is found to be genuine and disclosed pertaining to AY 2010-11. Hench, the addition made by the AO of Rs.8,60,00,000/- is deleted. c) Balaji Corporation :-The appellant was directed to furnish the evidences in support of his contention regarding the unsecured loans being genuine. The appellant submitted that Rs.75,00,000/- was received from Balaji Corporation through Vasantbhai Gajera on 28-12-2009 vide cheque no.399778 of IndusInd Bankand was returned to Balaji Corporation on 03-02-2010 vide Cheque No. 541652 of SBI, Bhatar Branch, Surat and hence the said amount received was squared up. But due to the mistake of the accountant, the receipt of Rs.75,00,000/- was credited to Shri Vasantbhai Gajera’s Account whereas the Payments was debited to Shri Balaji Corporation Account. The above mistake of Rs.75,00,000/- of Balaji Corporation was rectified in the Books of Account during the F.Y. 2011-12. The appellant submitted in the case of Balaji Corporation regarding the amount of unsecured loans of Rs.75,00,000/-, the copy of contra account, ITR, and bank account in Sutex Co-op Bank Ltd. in the name of Balaji Corporation showing the transfer of the amount and the account of the appellant showing the credit of the amount from the bank account of Balaji Corporation. The transaction of the unsecured loans from Balaji Corporation is found to be genuine and disclosed. Hence, the addition made by the AO of Rs. 75,00,000/- is deleted. 6.2.9. In view of the above facts and circumstances, the unsecured loans of Rs.17,50,00,000/- were taken before 31.03.2010 relevant assessment year 2010-11 and not 2011-12.The transactions have been found to be genuine as the parties were identified and the transactions have been duly reflected in the bank account and return of income. Hence, the addition made of Rs.17,50,00,000/- is deleted. Hence, the ground of appeal is partly allowed. (Relief of Rs.22,14,84,000/- and confirmed of Rs.3,10,000/-)” 10. Being aggrieved, the Revenue has filed this appeal before the Tribunal. The Ld. CIT (DR) submitted that the CIT (A) has admitted

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additional evidence filed under Rule 46A without confronting and calling remand report for the AO. The condition of Rule 46A were not satisfied as the assessee has not established that the AO has refused to admit any evidence filed before him. Further, with reference to loan of Rs. 17.50 crores , the CIT (A) has not made details analysis of such documentary evidence whether the loan giving possess such capacity or not. In view of these facts and circumstances, the Ld. CIT (DR) has vehemently supported the order of the AO.

On the other hand, the learned counsel for the assessee 11. supported the order of Ld. CIT (A) and submitted that the AO has not submitted remand report called for by the CIT (A). There was sufficient time was elapsed but the AO has failed to furnish any remand report. Therefore, the CIT (A) himself examined and written against the AO for adopting callous approach and careless attitude. The CIT (A) has verified each and every credits and details confirmation, copy of acknowledgement of return of income, PAN, bank statement. Therefore, identity, credit-worthiness and genuineness of transaction in respect of all the creditors has been established. Hence, the CIT (A) has correctly deleted the high-pitched addition made by the AO.

We have heard the rival submissions and perused the relevant 12. material on record. We find that the ld. CIT (A) has examined the details filed under Rule 46A during the course of appellate proceedings, and arrived at a conclusion. The CIT (A) observed that the assessee has

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filed complete details vide letter dated 24.03.2014 but the AO has failed to take into account the explanation furnished by the assessee. The assessee has further filed additional evidence under Rule 46A on which a remand report was called for from the AO. However, no remand report was submitted. Therefore, the CIT (A) observed that the AO is very careless, casual and callous in his approach and he has failed to carry out directions issued under section 250(4) of the Act and furnish remand report on the issue. Since the AO has failed to provide any report in spite of a very good period of time, the CIT (A) has decided the appeal on the material available on record. On perusal of details filed during the course of appellate proceedings, the CIT (A) observed that in the case of Dimple Bhavsar Rs. 6 Lakh, the unsecured loan was pertaining to assessment year 2010-11 and not for the assessment year 2011-12, hence, same was deleted. With regard to loan of Rs. 15 Lakh from Shri Jayesh C Shah, the CIT (A) found that the loan was received through RTGS and same was repaid through cheque. Therefore, identity, credit- worthiness and genuineness of transaction was established hence, addition was deleted. In the case of K. K. Desai, loan of Rs.40,000/- was given by pensioner by cheque having saving account with Bank of Baroda, hence, identity, credit-worthiness and genuineness of transaction was established hence, this addition was deleted. Similarly loan of Rs.1,25,00,000/- was received from Kishore, HUF through RTGS and the assessee has furnished confirmation, copy of acknowledgement of return of income, bank statement reflecting

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transaction hence, identity, credit-worthiness and genuineness of transaction was established therefore, this addition was also deleted. In respect of loan of Rs.1,02,50,000/- for Shri Mukesh Desai (London), the loan was taken through cheques for which confirmation, bank statement, and PAN of lenders was submitted reflecting the transactions, hence, this addition was also deleted. In respect of loan of Rs.20,000/- from N. C. Kelkar, the CIT (A) found the loan was actually received from Smt. Prerna A. Patel and by mistake name of N. C. Kelkar was mentioned. This mistake was rectified in the subsequent accounting year and the loan was given by cheque and same was repaid and confirmed by the lender, hence, identity, credit-worthiness and genuineness of transaction was proved therefore, this addition was deleted. With reference to loan of Rs.15,00,000/- for P. H. Patel, it was noticed that this loan was taken through RTGS and the assessee has furnished confirmation of lender, photocopy of bank slip, and balance sheet of lender hence, identity, credit-worthiness and genuineness of transaction was established hence, this addition was deleted. With reference to the loan of Rs.33,94,000/- from Shri Prabhatbhai Patel, it was noticed that this amount is actually received from Shri Hiteshbhai Patel of Rs.16,97,000/- and Shri Sanjaybhai Patel at Rs.16,97,000/- on account of sale proceeds of immovable property by the assessee, and the same was by mistake shown in the name of Shri Prabhatbhai Patel. The assessee has furnished copy of sale deed and bank statement of above two persons. Hence, identity, credit-worthiness and genuineness

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of transaction in respect of this lender was established, therefore, the said addition was deleted. Similarly, with reference to loan of Rs.20,00,000/- from Shri Shubhadra C Shah, this loan was received through cheque and the amount was duly debited in the bank account of lender. This loan was repaid through NEFT on 12.10.2010. Thus, the identity, credit-worthiness and genuineness of transaction was proved hence, this addition was deleted. Further, the assessee has taken loan of Rs.1,65,00,000/- from Vibha Star Prop. Manish Kumar Agarwal through RTGS on two different dates i.e. Rs. 85 Lakh on 30.06.2010 and Rs. 80 Lakh on 02.07.2010. This loan was repaid by the assessee on two different dates is Rs. 85 lakhs on 25.09.2010 and Rs. 80 lakhs on 07.10.2010. Both the transaction are reflected in bank statement beside the assessee has furnished confirmation of the lender. Thus, identity, credit-worthiness and genuineness of transaction was established hence, this addition was deleted. With regard to loan of Rs. 5 Lakh from Shri Vimal Kathiyavad, the CIT (A) has given his finding that the loan was actually received from M/s. Shreeji Trading Company and by mistake it was shown in the name of Shri Vimal Kathiyavad. This entry was reversed on 01.04.2011 in the account of the firm. This identity, credit-worthiness and genuineness of transaction was established, hence, this addition was deleted. With regard to loan of Rs.20,00,000/- in the name of Smt. Prerna A Patel, the AO found that the appellant has not shown any loan of Rs.20 Lakh in the balance sheet and he therefore, added the same. However, CIT(A) noticed that

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the assessee has took loan of Rs. 20 Lakh on 02.08.2010 from Smt. Prernaben, but the accountant of the assessee has made the entry in the name of N. C. Kelkar as written on back of bank slip. This contention of the appellant was examined by the CIT(A) and found correct. The assessee has filed copy of bank statement, bank account return of income ledger account which establish the identity, credit- worthiness and genuineness of transaction hence, this addition was deleted. In view of above facts and circumstances, we find that Ld. CIT (A) has given a factual finding after examining the relevant records and bank statement etc. Therefore, we do not find any infirmity in the order of CIT (A), accordingly, same is upheld.

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filed along with the return of income reflects these transactions in the name of the appellant. The transaction of the unsecured loans from Shri Jignesh V Rabari is found to be genuine and disclosed pertaining to AY 2010-11. Hence, the addition made by the AO ofRs.8,15,00,000/- was deleted. We concur this factual finding of Ld. CIT (A). In the case of Shanti Residency Pvt. Ltd., unsecured loans of Rs.8,60,00,000/- was taken for which copy of contra account, ITR, and bank account in State Bank of India in the name of Shanti Residency Pvt. Ltd showing the transfer of the amount on 30.01.2010 and the account of the assessee showing the credit of the amount from the bank account of Shanti Residency Pvt. Ltd. is filed. This unsecured loans was squared off during the year itself. The transaction of the unsecured loans from Shanti Residency Pvt. Ltd is found to be genuine and disclosed pertaining to AY 2010-11. Hence, the addition made by the AO of Rs.8,60,00,000/- was deleted. We do not have any reason to deviate on this account from the finding of Ld. CIT (A). In the case of Balaji Corporation, unsecured loans Rs.75,00,000/- was received through Vasantbhai Gajera on 28-12-2009 vide cheque no.399778 of IndusInd Bank and was returned to Balaji Corporation on 03-02-2010 vide Cheque No. 541652 of SBI, Bhatar Branch, Surat and hence the said amount received was squared up. But due to the mistake of the accountant, the receipt of Rs.75,00,000/- was credited to Shri Vasantbhai Gajera’s Account whereas the Payments was debited to Shri Balaji Corporation Account. The above mistake of Rs.75,00,000/- of

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Balaji Corporation was rectified in the Books of Account during the F.Y. 2011-12. The assessee has filed the copy of contra account, ITR, and bank account in Sutex Co-op Bank Ltd. in the name of Balaji Corporation showing the transfer of the amount and the account of the appellant showing the credit of the amount from the bank account of Balaji Corporation. The transaction of the unsecured loans from Balaji Corporation is found to be genuine and disclosed. Hence, the addition made by the AO of Rs.75,00,000/- was deleted. In view of the above facts and circumstances, the unsecured loans of Rs.17,50,00,000/- were taken before 31.03.2010 relevant assessment year 2010-11 and not 2011-12. The transactions have been found to be genuine as the parties were identified and the transactions have been duly reflected in the bank account and return of income. In view of above discussion, the addition made of Rs.17,50,00,000/- was deleted. On careful consideration of facts, circumstances and law, we observe that all the ingredients of section 68 of the Act are satisfied, which stands duly examined by the Ld. CIT (A). In view of these facts and circumstances and factual finding of Ld. CIT (A), we do not find any infirmity in the order of CIT (A), accordingly, same is upheld. Consequently, all the grounds of appeal of the Revenue are dismissed.

Cross Objection No. 121/AHD/2016/A.Y. 2011-12 by the Assessee: 14. The assessee has stated in the Cross Objection that he has already furnished the details of balance sheet, bank statement. The

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Ground No. 2 raised by the Revenue is wrong as there was no communication gap between the AO who did not submit remand report.

In the result, the appeal of the Revenue and Cross Objection of 16. the assessee are dismissed.

Sd/- Sd/- (H. S. SIDHU) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat: Dated: 31st May,2019/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