MAHESHBHAI NIRANJANBHAI VYAS,AHMEDABAD vs. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(3), AHMEDABAD

आदेश/ORDER PER : NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:- The present appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-11 Ahmedabad, (in short ‘the CIT(A)’) dated 29.07.2022 for the A.Y. 2012-13.

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 2 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT 2. This is the second round of appeal before us. In this case a search action u/s. 132 of the Act was conducted on 17-02-2012. In the course of the original block assessment proceedings, the assessee did not file any detail in respect of unsecured loan received during the year. Therefore, the Assessing Officer had completed the assessment u/s. 144 r.w.s. 153B(1)(b) of the Act on 24-03-2014 wherein an addition of Rs.40,30,500/- was made on account of unsecured loan which was treated as unexplained cash credit u/s. 68 of the Act. Aggrieved with the order of the Assessing Officer, the assessee has filed an appeal before the first appellate authority which was decided by the ld. CIT(A) on 28-02-2018. The appeal of the assessee was dismissed for the reason that no compliance was made before the ld. CIT(A). Thereafter, the assessee had filed an appeal before this Tribunal which was decided on 28-02-2018 and the matter was set aside to the ld. CIT(A) for fresh adjudication. The direction issued to the ld. CIT(A) in that order was as under: -

“2. Heard both parties. Case files perused. It emerges at the outset that the CIT(A) has passed all three of his lower appellate orders exparte in upholding Assessing Officer's action on both legal as well as the above stated factual issues on merits. He has drawn a tabulated chart in page 2 page 4 of his identical lower appellate order(s) stated therein to have been able to serve the assessee qua the relevant dates of hearing. All such notices served through post as well as through the authorities stood returned unserved. Case records on the other had suggest that the assessee/appellant had duly intimated the CIT(A)'s office on 05.01.2015 regarding change of his address from Ahmedabad to Amreli. Necessary official endorsement dated 06.01.2015 to this effect forms part of case record before us. Learned CIT(D.R.) fails to rebut this clinching fact proving the assessee to be very much interested in prosecuting his all three lower appeal. We thus conclude in these peculiar facts and circumstances that assessee's non appearance in lower appellate proceedings is neither intentional nor deliberate but due to the above lack of proper communication. We deem it appropriate that larger interest of justice would be met in case the CIT(A) decides all three assessee's appeals afresh as per law after adequate opportunity of hearing. The assessee is directed to appear before the CIT(A) within six weeks of obtaining certified copy of our

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 3 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT instant order. He shall also place on record his correct address for necessary correspondence therein." 3. In pursuance to the direction issued vide order dated 28-02-2018, the ld. CIT(A) has decided the matter vide the impugned order whereby the addition of Rs. 40,30,500/- on account of alleged cash credit u/s. 68 of the Act has again been confirmed. The assessee is now in appeal before us and the following grounds have been taken in this appeal:

“[1] The Hon. CIT(A) has grievously erred in confirming the addition of Rs. 40,30,500/- treating the amount of unsecured loan as alleged cash credit u/s. 68 of the OT Act, 1961 though the appellant has submitted all details and proved the identity, creditworthiness and genuineness of the transaction. [2] The Hon. CIT(A) has also grievously erred for not accepting the grievances of the appellant in respect of that the L.d. A.O. has not agreed to accept the additional evidences like any materials seized during the course of search proceedings and hence assessment made is bad in law and requires to be cancelled. The appellant further subunits that the remand report is one-sided without considering the merits of the case [3] The appellant therefore requests your Honour to kindly delete the addition of Rs. 40,30,500/- made by the Ld. A.O. which was confirmed by the Hon. CIT(A), looking to the merits of the case. [4] The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 4 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT creditors and the private limited companies from whom loan was taken had shown very meagre income or loss. Thus, the ld. CIT(A) had confirmed the additions for the reason that creditworthiness of the loan creditors was not established. The ld. A.R. submitted that the identity of all the creditors was duly established and the ld. CIT(A) was not correct in confirming the additions without making further inquiry from the loan creditors. According to the ld. AR, the assessee had discharged the initial burden to identify the creditors and the onus was on the Revenue to make further inquiry about the cash deposits appearing in the bank account of the creditors. According to the ld. A.R., the assessee cannot be called upon to explain the origin of the origin and the source of the source. He further submitted that meagre income or loss disclosed by some of the creditors also cannot be explained by the assessee. The onus was on the Department to make necessary inquiry from the creditors by issuing notice u/s. 133(6) or summon u/s. 131 of the Act. According to the ld. A.R., the assessee had submitted the primary evidences to establish the identity, creditworthiness and genuineness of the loan transactions and, therefore, the ld. CIT(A) was not correct in confirming the addition made by the Assessing Officer. It was further submitted that the ld. Assessing Officer had made addition of Rs. 40,30,500/- which was the difference between the opening and closing balance of the unsecured loans. He contended that the provision of section 68 of the Act does not contemplate the addition to be made with respect to the incremental increase in the amount of unsecured loan for the concerned year. The ld. A.R. also relied upon various judicial pronouncements for his contention that the assessee was not required to prove the source of source. 1. Ranchodbhai Nakhawa (208 Taxmann 35) 2. Rohini Builders . (256 ITR 360)

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 5 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT 3. Dahod Sahkari Bank (282 ITR 321) 4. Nemichand Kothari (264 ITR 254) 5. PCIT v Gopal heritage (P.) Ltd (133 taxmann.com 173 )(Guj) 6. Gaurav Triyugi Singh ( 423 ITR 532)(Guj) 5. The ld. CIT-D.R. on the other hand submitted that the assessee had not complied to the direction issued by the ld. ITAT in the set aside proceeding before ld. CIT(A). He has drawn our attention to the findings recorded by the ld. CIT(A) in para 6.3 of his order and submitted that the ld. CIT(A) had in fact dismissed the appeal of the assessee for not following the direction of the Hon’ble ITAT and for not furnishing the required details within the stipulated time. The ld. CIT-D.R. further submitted that even though the appeal was dismissed for the above reason, the ld. CIT(A) had examined the matter on merits and had confirmed the addition giving elaborate reason in respect of each and every loan creditor. He submitted that the onus was squarely on the assessee to establish the identity, creditworthiness and genuineness of the transactions which was not discharged. The ld. CIT(A) had examined these aspects in respect of each and every loan creditor, given his specific finding and thereafter confirmed the addition.

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 6 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT dismissed the appeal for not complying to the direction of this Tribunal, still he had examined the matter on merits and decided the issue accordingly. The assessee had filed additional evidences before the ld. CIT(A) which was forwarded to the Assessing Officer for his comments. The Assessing Officer had sent a detailed remand report in respect of each of the six creditors, which is reproduced in the order of the CIT(A). Thereafter, the assessee was allowed an opportunity to give his comments on the remand report. The ld. CIT(A) after considering the remand report of the Assessing Officer as well as the comments of the assessee had confirmed the addition. He has given his specific finding in respect of each of the loan creditors, the relevant portions thereof are reproduced below: -

“9.7 On perusal of the records, I find that the claim of the appellant regarding discharge the onus in respect of lenders is not satisfactory. On overall analysis of the records, it can be inferred that the observation of the AO in the remand report is correct in this regard, the following important points have been noticed by the undersigned, which are as under- (i) The appellant has not submitted the copy of ITR in the case of Niranjan Vyas. The appellant has claimed that Niranjan Vyas is the father of appellant and worked in the Amreli Jilla Madhyat Sahkari Bank Ltd. and loan was given from his personal saving. However, on perusal of the bank statement of Niranjan Vyas, it is clearly seen that cash amounting to Rs.35,000/- or Rs.40,000/- were deposited 19 times during the year and after deposit of cash, equivalent amount was transferred to appellant's account. Thus, the source of the huge cash deposit remained unexplained as the lender was a salaried employee. It is worthwhile to mention here that the appellant had not furnished the copy of return of income. It is also important to note that the appellant has also not furnished the reason/source with supporting evidences in respect of huge cash deposit of salaried person i.e. Niranjan Vyas. It is also seen that the appellant had not paid any interest on the said alleged loan amount to the lender. Therefore, in absence of copy of ITR, balance sheet, details regarding source of huge cash deposit by the lender Niranjan Vyas, in case when the lender was a salaried employee, the creditworthiness of the lenders remained unexplained and genuineness of the transaction remained unestablished……… (ii) The appellant has submitted only copy of final page of P&L account and balance sheet in the case of Maruti Nandan Impex Pvt. Ltd. for A.Y.2012-13. The

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 7 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT appellant had not submitted the schedules for P & L Account and Balance Sheet. On perusal of the details it is seen that the lender had shown loss of Rs.1,653/- and also was not having substantial assets in the balance sheet. it is also noticed that there are only fixed assets of Rs 9,861/- in the balance sheet. It is further noticed on perusal of bank statement of the lender, that there were credit transactions immediately before the transfer of amount. Further, it is also important to mention here that the after transfer of alleged loan amount, there was balance amount of only Rs 6,204/- in the bank account of the lender. From the copy of bank account of lender company, it is seen that before issuing cheque to the appellant, the lender company has brought funds on the same day by way of transfer in bank account and without said deposits of the cheques transfer to the appellant would not have been possible. Further, from the pattern of deposits and issuance of cheque such transactions appear to be devoid of genuineness. Thus, the assessee's case fails on the test of creditworthiness of the source of funds it is also seen that the appellant had not paid any interest on the said alleged loan amount to the lender. The appellant has also not submitted the copy of Board resolution regarding giving the unsecured loan. Thus, the creditworthiness & genuineness of the lender could not be established by the appellant. (iii) On perusal of the records, it is seen that the appellant had taken unsecured loan amounting to Rs. 10,00,000/- from the lender Jitendrasinh Udaysinh Gohil during the year under consideration. However, the appellant has not submitted the copy of ITR, Balance sheet, complete copy of bank statement for FY.2011-12 relevant to A.Y.2012-13. It is also seen that the appellant had not paid any interest on the said alleged loan amount to the lender. Therefore, the creditworthiness of the lenders remained unexplained and genuineness of the transaction remained unestablished. (iv) The appellant has not submitted the copy of ITR, PAN in the case of Jasumatiben N. Vyas. The appellant has claimed that Jasumatiben N. Vyas is the mother of the appellant and worked in the Amreli Police Jilla Seva School. However, on perusal of the bank statement of Jasumatiben N. Vyas, it is clearly seen that cash amounting to Rs.35,000/- or Rs.40,000/- were deposited 15 times during the year. Thus, the source of the huge cash deposit remained explained as the lender was salaried employee. It is worthwhile to mention here that the appellant had not furnished the copy of return of income. It is also important to note that the appellant has also not furnished the reason/source with supporting evidences in respect of huge cash deposit of salaried person i.e. Jasumabiben N. Vyas. It is also seen that the appellant had not paid any interest on the said alleged loan amount to the lender. Therefore, in absence of copy of ITR, details regarding source of huge cash deposit by the lender Jasumatiben N. Vyas, in a case when the lender was a salaried employee, the creditworthiness of the lenders remained unexplained and genuineness of the transaction remained unestablished………

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 8 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT (v) On perusal of the return of income filed of Gurukul Vinimay Pvt. Ltd. for A.Y. 2012-13, it is seen that the lender had shown meagre income of Rs.19,850/. The Financial position of the lender company is given below for better understanding

Sr. Name AY Short term Share Sale Interest Interest Other Profit No. laons and Premium received paid Income advances Sale given 1 Gurukul 11- 150370000 147980000 0 0 0 32,500 869 Vinimay Pvt. 12 Ltd., 123, Cotton Street, Kolkata, West Bengal - 700007

12- 158665000 147980000 0 0 0 97,500 13718 13

As one can see the financials are not at all pointing towards a good creditworthiness. The balance sheet is just inflated artificially to give an impression of a healthy investor, but deeper scrutiny reveals that the lender company has no real business transactions. It is very strange coincident that the lender company is not a good tax payer and it has invested in short term loans and advances that has not yielded any interest income so far to them. From the copy of bank account statement of lender company, it is seen that before issuing cheque to the assessee, the lender company has brought funds on the same day by way of transfer in bank account and without the said deposits the giving of the cheques to the appellant would not have been possible. Further, from the pattern of deposits and issuance of cheque, it stands established that not only are the alleged 'loan' devoid of any true creditworthiness, but also they are merely account lenders providing accommodation entries through their bank accounts on commission. Thus, the assessee's case fails on the test of creditworthiness of the source of funds. The appellant has not submitted the copy of ITR, Balance sheet, (vi) complete copy of bank statement for F.Y.2011-12 relevant to A.Y.2012-13 in respect of lender Shri Babubhai M. Patel. It is also seen that the appellant had not paid any interest on the said alleged loan amount to the lender. Therefore, in absence of copy of ITR, copy of complete bank statement etc. the creditworthiness of the lenders remained unexplained and genuineness of the transaction remained unestablished.”

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 9 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT 7. At the outset the basis of addition of Rs.40,30,500/- as made in the assessment order is not available. Though the assessee had not complied in the assessment proceeding, the AO too had not indicated as to how this figure of the loan amount was arrived. In the set aside proceeding the assessee had submitted additional evidence in respect of loan creditors and the AO in his remand report had commented on the following loans: (i) Niranjan Vyas – Rs.4,50,000/- (ii) Maruti Nandan Impex Pvt. Ltd. Rs.27,89,000/- (iii) Jitendrasinh Udaysinh Gohil – Rs.10,00,000/-. (iv) Jasumatiben N Vyas – Rs.4,50,000/- (v) Gurukul Vinimay Pvt. Ltd. Rs.20,00,000/- (vi) Babubhai M. Patel – Rs.1,00,000/- Total : Rs.67,89,000/- The AO had doubted the identity, creditworthiness and genuineness of all the above the loan transactions and the ld. CIT(A) too had held it so. But neither the AO had requested the CIT(A) to enhance the addition of Rs. 40,30,500/- made in the assessment order to Rs.67,89,000/- nor the ld. CIT(A) had made the enhancement of the addition on his own. As a result, though the identity, creditworthiness and genuineness of loan of Rs.67,89,000/- from six persons was doubted by the Revenue, the ld. CIT(A) has upheld the addition to the extent of Rs.40,30,500/- only.

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 10 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT (ii) Jasumatiben N Vyas – Rs.4,50,000/- (iii) Babubhai M. Patel – Rs.1,00,000/- (iv) Jitendrasinh Udaysinh Gohil – Rs.10,00,000/-. Both the AO & the ld. CIT(A) have given a categorical finding that neither the PAN of these persons were furnished nor copy of their ITR was brought on record. Even the complete copy of bank statement was not provided in the case of Babubhai M. Patel and Jitendrasinh Udaysinh Gohil. It was explained that Shri Niranjan Vyas and Smt. Jasumatiben N. Vyas were parents of the assessee and both had since expired. From their bank statements, repeated cash deposit was appearing before the transfer of loan amount to the assessee. The Revenue had rightly questioned the cash deposit in their accounts, who both were salaried employees. Being a legal heir of Shri Niranjan Vyas and Smt. Jasumatiben N. Vyas, the obligation was squarely on the assessee to explain the cash deposits in their accounts. In the absence of any explanation for the cash deposits, their creditworthiness was not established. In the case of Jitendrasinh Udaysinh Gohil also neither copy of his ITR nor his bank statement was brought on record to establish the creditworthiness and genuineness of the loan transaction. The same was the situation in the case of Babubhai M. Patel. As the assessee was unable to establish the creditworthiness and genuineness of the loan obtained from these four parties, the addition as made by the AO to the extent of Rs.20 Lakhs in respect of these creditors is upheld. The assessee has not brought on record any evidence to controvert the adverse findings recorded by the ld. CIT(A) in respect of these four creditors. Therefore, the order of the ld. CIT(A) in respect of these four creditors is confirmed.

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 11 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT 9. In the case of Gurukul Vinimay P. Ltd., the assessee has brought on record the copy of return, copy of bank statement, P&L account and balance sheet of the lender. The AO had raised doubt in respect of genuineness of this loan for the reason that the assessee had shown meagre income of Rs.19,800/- only and huge credit and debit transactions were appearing in the bank account immediately before transfer of loan amount to the assessee. On the other hand, the ld. CIT(A) has observed that the balance sheet of the assessee was inflated artificially and the lender company had no real business transactions. We fail to understand as to how such conclusion was drawn by the ld. CIT(A) without causing any enquiry and without bringing anything adverse on record. It is true that certain credit entries were appearing in the bank account a few days prior to advance of loan to the assessee, but such was the recurring feature in the bank statement. From the copy of the bank statement brought on record, it is found that credit of Rs.76,600,000/- on 25.10.2011, Rs.35,00,000/- on 31.12.2011, Rs.20,00,000/- on 31.12.2011, Rs.1,00,00,000/- on 07.01.2012 & Rs.1,00,00,000/- on 09.01.2012 is appearing in the bank statement of Gurukul Vinimay P. Ltd. The assessee was advanced loan of Rs.20,00,000/- only on 11.01.2012, which was a small amount considering the total credits appearing in the bank account. If the Revenue had any doubt about the genuineness of these transactions, the Department should have made enquiry from Gurukul Vinimay P. Ltd. in respect of the credits appearing in its account. The conclusion of the Ld. CIT(A) that this lender was providing accommodation entries through bank account on commission is without any basis. In fact, a search and seizure operation was conducted at the premises of the assessee and no evidence for any such accommodation entry was

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 12 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT found during the search. The AO as well as the CIT(A) had not brought any evidence on record regarding the accommodation entries obtained by the assessee, if any. Under the circumstances, the conclusion as drawn by the ld. CIT(A) is found to be without any basis and on mere presumption and also without bringing anything adverse on record. As the assessee had prima facie established the identity, genuineness and creditworthiness of this loan transaction, the addition as made by the AO and upheld by the ld. CIT(A) in this case, is deleted.

I.T(SS).A No. 20/Ahd/2022 A.Y. 2012-13 Page No. 13 Maheshbhai Nirajanbhai Vyas vs. Dy. CIT When the entire loan was obtained through a single transaction, the Revenue can’t treat the part of the credit that was repaid during the year as explained and the part that remained outstanding as unexplained. Therefore, the addition in respect of outstanding loan of Maruti Nandan Impex Pvt. Ltd. also can’t be upheld. 11. Since, the assessee had prima facie provided evidence for identity, creditworthiness and genuineness of the transaction in respect of loans from Gurukul Vinimay P. Ltd. and Maruti Nandan Implex Pvt. Ltd., the ld. CIT(A) was not correct in confirming the addition in respect of these two creditors. Accordingly, the addition made by the Revenue is confirmed to the extent of Rs.20,00,000/- only in respect of four creditors as discussed in para-8 above and the balance amount is deleted. 12. In the result, appeal of the assessee is allowed in part. Order pronounced in the open court on 20-06-2024 Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 20/06/2024 True Copy आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद