THE PRINCIPAL COMMISSIONER OF INCOME TAX 1 vs. GOPAL HERITAGE P. LTD.

Following are the substantial questions of law raised in the present appeal: - “(A) Whether the Appellate Tribunal has erred in law on facts in deleting the addition of Rs. 3,25,29,000/- made under Section 68 of the Act on account of unexplained cash credit in the nature of unsecured loan received from three entities, namely, Shaan Leisure Ltd., GSM Infra Projects Ltd. and Manibhadra Tradelink Pvt.Ltd.? (B) Whether the Appellate Tribunal has erred in not appreciating that mere factum of filing return of income does not ipso facto lends credence to the creditworthiness of a party? (C) Whether the Appellate Tribunal has erred in law and on facts in deleting the addition by ignoring that the lenders had filed Return of Income declaring very meagre taxable/operational income which casts aspersions on the capacity of such lenders to advance such huge amounts to the assessee?”

The brief facts leading to the present appeal are as follows: -

The Assessing Officer had made an addition of Rs.4,03,34,000/- under Section 68 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) in respect of six parties. The Revenue is aggrieved by the decision of the Appellate Tribunal only in respect of unsecured loans received from Shaan Leisure Limited, GSM Infra Projects Limited and Manibhadra Tradelink Private Limited.

According to the Assessing Officer, the assessee had not been able to prove the immediate source of cash in the hands of the party. From the audit balance sheet and profit and loss account of the previous year, it held that the company had no fund of its own and the net worth of the company was negative. Thus, Assessing Officer was of the opinion that the assessee was not in a position to establish the capacity and creditworthiness of the depositor and thus, made an addition of Rs. 1,25,64,000/- in case of Manibhadra Tradelink Private Limited. The Assessing Officer observed that the depositor had filed return of income on 18.12.2013 declaring the income of Rs. 15,426/- only and the assessee failed to file the audited balance sheet and profit and loss account of the depositor company.

In GSM Infra Projects Limited, according to the Assessing Officer, there is no explanation regarding immediate source of funds in the hands of the depositor company till the depositor had declared the income at Rs.4,334/-.

When challenged before the CIT(Appeals), it deleted the addition by making following observations: (i) the depositor was regularly assessed to tax and filing of its return of income. There is no evidence brought by the Assessing Officer on record which could support the contention that the amount received from the depositor was income of the assessee; (ii) that the loans have been granted through banking channels and, in support, copy of the bank statement was provided by the assessee; (iii) in the event of any doubts with regard to the cash deposits in the banks of the depositors, the action can be taken against them, but, no adverse view could be taken at the ends of the assessee. It held that once the assessee discharges the primary onus cast upon it by submitting the copy of supporting documents in form of confirmation, copy of bank statement and return of income, the onus would shift upon the Assessing Officer to make further inquiries through issuing summons and notices under Section 133(6).

When challenged before the Appellate Tribunal, it concurred with the view of the CIT (Appeals). The same has been challenged before this Court with the aforementioned substantial questions of law.

We have heard both the sides. At the outset, the decision of the Apex Court in case of Omar Salay Mohamed Sait vs. Commissioner Of Income-Tax, reported in (1959) 37 ITR 151 (SC) requires reference which holds that the ITAT is a fact finding tribunal and once it arrives at any conclusion after due consideration of evidence, this Court is not to interfere. What is required is to consider every fact with due care and the Tribunal is required to give its findings on the questions which arise for determination along with the evidence pro and contra in regard to each one of them. The findings reached on the evidence on record before it and the conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or prejudice and if there are any circumstances which are required to be explained by the assessee, the assessee should be given an opportunity of so doing.

We could notice that the assessee and the Revenue preferred cross appeals against the order of CIT(Appeals), Ahmedabad-II for the assessment year 2012-13. In Revenue’s appeals, the Tribunal examined the grievance of the Revenue of CIT(Appeals) having deleted the addition of Rs. 4,03,34,000/- which was added by the Assessing Officer with the aid of Section 68 of the Act. It was revealed to the Assessing Officer that assessee had taken unsecured loans of the said amount from the following persons: - (1) Mit G. Shah – Rs. 5,75,000/-, (2) Sejal Shah – Rs. 67,30,000/-, (3) Shaan Leisure Ltd. - Rs. 1,07,05,000/-, (4) GSM Infra Projects Ltd. - Rs. 92,60,000/-, (5) Yuva Sports Academy Pvt. Ltd. - Rs. 5,00,000/-, and (6) Manibhadra Tradelink Pvt. Ltd. - Rs. 1,25,64,000/-. The Assessing Officer directed to submit the identity of the creditors, their creditworthiness and genuineness of the transactions and since when he disbelieved the creditworthiness of the creditors, he made the additions.

The CIT(Appeals), as could be noticed, threadbare examined the entire material in case of each of these persons and entities and eventually held that the identity of the depositors had been proved as they had filed the return of income along with the PAN. Moreover, loans have been granted through banking channels and in respect of the same copy of the bank statement also has been provided and hence, genuineness also has been believed by the CIT(Appeals) and further the return of income had been filed by the said depositors and hence, the creditworthiness also has been proved. The appellant provided a copy of audited balance sheet and profit and loss account for the year under consideration in respect of depositors to the Assessing Officer and after verification, the Assessing Officer has the only objection that the company was not having fresh funds in its books of accounts and negligible operational income was derived.

The CIT(Appeals) has rightly opined that since the depositor company had duly recorded the deposits/loans given thus: - “11. A perusal of the finding of the ld. CIT(A) extracted (supra) it would reveal that the ld. CIT(A) has examined each transaction in detail in the light of conditions enumerated in section 68. For example, in the case of Shri Mit Gopalbhai is concerned a sum of Rs. 5,75,000/- was taken by the assessee as unsecured loan during this year. The ld. CIT(A) as a matter fact found that there was an opening balance as on 1.4.2011 at Rs. 1,77,24,000/-. Source of this opening balance was not doubted in the earlier assessment year. He has confirmed the transaction. He has given his identity and other details. The ld. CIT(A) was of the view that when such a huge amount received from this person in the last year can be treated as genuine, then why to doubt a small amount of Rs. 5,75,000/- in this year. It is also pertinent to note that the assessment order of Shri Mit G. Shah for the Asstt. Year 2012-13 passed under section 143(3) r.w.s. 147 of the Act has been placed on record by the ld. DR. This order has been passed on 3.10.2019 i.e. after decision of the ld. CIT(A) and nothing adverse could be collected by the AO. Similarly, the ld. CIT(A) has examined the facts with regard to Sejal G. Shah and observed that the assessee has fulfilled all necessary conditions contemplated in section 68 of the Act. We also find that the ld. CIT(A) has examined these details in light of decisions of the Hon’ble Gujarat High Court as well as of Hon’ble Supreme Court. The ld. CIT(A) has made reference to the ratio of law laid down in all these decisions from pages no. 22 to 27 of the impugned order, and we have gone through the proposition in these decisions and examined as to how the ld. CIT(A) has appreciated the facts of the assessee’s case in the light of these propositions. After looking to the well reasoned finding of the ld. CIT(A) coupled with absence of any incriminating evidence in the subsequent assessment orders of the creditors, we are of the view that no interference is called for in the finding of the ld. CIT(A). This ground of Revenue is dismissed.”

We could notice the concurrent findings of both the authorities on facts which deserve no interference from this Court. The ITAT as a final fact finding body, in absence of any material under Section 133(6) with the AO, has chosen to uphold the version of CIT(Appeals) which also elaborately treated the material evidence and concluded with sound reasoning. We do not see any reason for us to interfere as addition contemplation was under Section 68 of the IT Act which provides that any sum found credited in the books of account of an assessee maintained for any previous year and if the assessee does not offer any explanation about the nature and source thereof or even when explanation is given and the Assessing Officer (AO) is dissatisfied, the sum shown credited in the accounts can be questioned by him. All the ingredients contemplated under Section 68 have been duly satisfied on the aspect of identity of the creditors, genuineness of the transactions and their creditworthiness.

We see no reason to entertain this Tax Appeal which is in limini dismissed. (SONIA GOKANI, J) (RAJENDRA M. SAREEN,J) Bhoomi