THE COMMISSIONER OF INCOME TAX BHOPAL vs. SHRI SUBODH VARSHNEY

HIGH COURT OF MADHYA PRADESH : JABALPUR I.T.A. No.50/2015 The Commissioner of Income Tax, Bhopal -Versus- Subodh Varshney CORAM : Hon’ble Shri Justice Rajendra Menon & Hon’ble Shri Justice K.K. Trivedi, JJ. Shri Sanjay Lal, Advocate for the appellant. O R D E R ( 03.12.2015) PER

: RAJENDRA MENON, J. : This appeal preferred by the revenue under Section 260-A of the Income Tax Act, 1961 [hereinafter referred to as `the Act'], calls in question the legality of an order dated 24-11-2014 passed by the Income Tax Appellate Tribunal, Indore (for brevity `the Tribunal') in IT(SS)A No.236/IND/2014. 2. A search and seizure operation was conducted in the residential and business premises of one Arun Lila, who was carrying out certain business activities in the name and style of M/s Lilasons Infrastructure Pvt. Ltd., Bhopal. In the said search and seizure operation, certain papers and documents belonging to the present appellant/assessee, namely, Subodh Varshsney were found. 3. On the basis of the seized materials the Assessing Officer proceeded for issuance of a notice under Section 153-C read with Section 153-A of the Act, recording the reasons that the assessee is Non -Executive Director and had received an sum of Rs.2,18,15,000/- interest free unsecured loan from Juned Qazi for the Assessment Year 2009- 2010. Finding the aforesaid amount to be unexplained by the assessee, it was added to his income with the finding, that the assessee failed to establish the identity and creditworthiness of the lender. 2 4. It is the case of the appellant that on an appeal being filed before the Commissioner Income Tax (Appeals) this amount was enhanced to Rs.2,30,15,000/-. However, on a further appeal having been preferred before the Income Tax Appellate Tribunal the amount in question, has not been been deleted as prayed. Hence, the present appeal under Section 260-A of the Act is filed by the Revenue before this Court, on the following substantial question of law for consideration: “Whether, considering in totality the facts as recorded by CIT(A), ITAT was justified in law in deleting the addition of Rs.2,18,15,000/- under Section 68 of the Act, further enhanced to Rs.2,30,15,000/- on account of loan taken from Juned Quazi.” 5. Shri Sanjay Lal, learned counsel for the appellant took us to the findings recorded by the Commissioner (Appeal) and the Assessing Officer and tried to indicate the shifting burden of proof and total disregard of requirement of Section 68 of the Act is unsustainable. The learned counsel for the Revenue further argued that the assessee has not produced any cogent material in order to prove creditworthiness and identity of the lender and to establish the transaction, as envisaged under the Act. Therefore, interference should be made in the findings recorded by the Tribunal, as the same are perverse. 6. We have considered the contentions raised. We have gone through all the three orders impugned. The question involved in this appeal, is a pure question of fact in the matter of addition of the amount in question, after due appreciation of the materials available, viz. Account book, bank statement and other financial transaction documents. The learned Tribunal taking into account the requirement under Section 3 68 of the Act and the detailed submissions duly supported by relevant documents, decided the appeal in paragraph 15 and proceeded to analyse the creditworthiness and genuineness of the loan said to have been paid by the lender Shri Juned Qazi, based on the material available, as under: “15. We have carefully considered the rival submissions along with the order of the tax authorities below. We noted that in this case the assessee has received unsecured loans of Rs.2,30,15,000/- during the impugned year from Shri Juned Qazi in the following manner: Sr.No. Cheque Date Cheque Bank Name Amount 1 12/08/08 820710 ICICI Bank 1,12,00,000 2 19/8/08 7184 ICICI Bank 12,00,000 3 29/9/08 828993 ICICI Bank 27,50,000 4 29/9/2008 828992 ICICI Bank 16,50,000 5 29/9/2008 828991 ICICI Bank 11,00,000 6 04/11/08 829000 ICICI Bank 11,00,000 7 04/22/08 828998 ICICI Bank 30,15,000 8 22/11/2008 828999 ICICI Bank 2,30,15,000 TOTAL 2,30,15,000 We also noted out of these loans the assessee has refunded the following loan upto 22-10-2012 through cheque: Sr.No. Cheque Date Cheque Bank Name Amount 1 16/3/11 904641 20,00,000 2 16/9/11 904657 3,00,000 3 17/3/12 940754 15,00.000 4 19/3/12 940755 10,00,000 5 03/04/12 940756 29,00,000 6 12/04/12 940758 10,00,000 7 17/4/12 9098923 16,50,000 8 18/4/12 909824 5,00,000 9 25/4/12 940760 5,00,000 10 19/9/12 909831 10,00,000 11 09/10/12 909838 10,00,000 12 22/10/12 909839 10,00,000 TOTAL 1,43,50,000 4 These facts have not been denied by the ld. A.R. The assessee has submitted following documents during the course of assessment proceedings: i) Copy of PAN Card and passport of the lender Shri Juned Qazi. ii) Copy of letter of loan agreement between Shri Juned Qazi and Dr. Subodh Varshney. iii)Copy of agreement dated 4-3-2011 between Shri Juned Qazi and Dr. Subodh Varshney. iv) Copy of affidavit dated 19-03-2011 executed by Shri Juned Qazi affirming tht  He is resident of HA 57, NRI Colony, Koheriza, Bhopal and presently residing at Vancouver Road, Morganville, New Jersey, USA.  That he is NRI and has no source of income in India. Hence, he is not liable to submit the return of income in India (PB page No.140). Copy of Bank statement of Shri Juned Quazi in ICICI Bank A/c No.005501075973) for the period 02 August 2008 to 21 September 2009 and No.005501075779 for the period 02/04/2008 to 04/11/2011 (PB page No.141-146) 15. The assessee before the CIT(A) submitted that following additional evidence: a) Copy of confirmation from Shri Juned Quazi dated 15-10- 2013 duly notarized, confirming the advancement of loan and source of loan,(PB Page No.147-148). b) Copy of Bank statement of Shri Juned Qazi in Citi Bank, New York, USA. (PB page No.149-154). c) Copy of income tax return of Shri Juned Qazi submitted by him in U.S. For the year 2005-06, 2006-07 to prove the creditworthiness of Shri Juned Qazi.” 5 7. Thereafter the Tribunal in paragraph 25 of the order recorded the finding as under: “25. In the case before us we have noted that the assessee has duly explained the nature and source of the unsecured loan received by him. The confirmation as well as copy of bank account of Shri Juned Qazi has duly been filed. All the loan has been received through banking channel Shri Juned Qazi is having Pan card, therefore, identity cannot be doubted. The transaction is through the banking channel genuinity of the of the transaction is also stands proved until and unless some contrary evidence are brought on record by the revenue. In the confirmation dated 15-10-2013 the copy of which is available to page 147 to 148 and 149 and 149 to 154 it is apparently clear that the assessee has explained the source of the loan advanced by Shri Juned Qazi. Even though in our opinion the assessee is not required to prove the source of sources the explanation advanced by the assessee is a plausible one and prove that the assessee has discharged his onus which is envisaged on him. We have also gone through the case laws. All these case laws realtes to the discharging of onus on the part of the assessee. It is not the case where the assessee has not offered any explanation. The explanation offered by the assessee in our opinion is reasonable and has to be accepted keeping in mind all the material and other circumstances available on record. We, therefore, set aside the order of the CIT(A) and delete the addition. Thus, the ground Nos.3 to 4 stands allowed.” [Emphasis supplied] 8. In view of the aforesaid analysis made by the Tribunal, it is clear that based on the documents and the records of the revenue and other bank statements and financial transaction available, the finding of fact has been recorded by the Tribunal to say, that identity and creditworthiness of the lender and the transactions have been established. For the reasons as indicated hereinabove, and also lender Shri Juned Qazi to be an NRI, who has submitted his entire financial transaction and his creditworthiness is said to have been established. This being the finding 6 of fact by the learned Appellate Tribunal which consisted of a Judicial Member and an Accountant Member, based on due consideration of materials available. We see no substantial question of law is involved warranting consideration by this Court. 9. Accordingly, the appeal is dismissed. (Rajendra Menon) (K.K. Trivedi) Judge Judge Chaturvedi/- 7