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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B”, HYDERABAD
Before: SHRI D.KARUNAKARA RAO & SHRI V.DURGA RAO
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER I.T.A. No. 1337/HYD/2017 Assessment Year: 2012-13 Rishi Agarwal, DCIT, Circle-10(1), HYDERABAD Vs HYDERABAD [PAN: AGYPA3123G] (Appellant) (Respondent) For Assessee : Shri P.Murali Mohana Rao, AR For Revenue : Shri Nilanjan Dey, DR Date of Hearing : 27-11-2019 Date of Pronouncement : 04-12-2019 O R D E R PER D.KARUNAKARA RAO, A.M. : This appeal of assessee is directed against the order of the Commissioner of Income Tax (Appeals)-6, Hyderabad, dated 10-04-2017, for the AY.2012-13.
At the outset, referring to the Grounds of Appeal, Ld.Counsel for the assessee submitted that Ground No.2 constitutes the core ground and the remaining Grounds are basically argumentative in nature. Accordingly, Ground No.2 reads as under:
“2. The Ld.CIT(A) erred in upholding the addition of Rs.78,20,000/- towards unexplained income u/s.68 of the Act”.
Briefly stated relevant facts include that, assessee is the proprietor of M/s.Global Steel Company doing business of trading in Iron and Steel, Fabrication of Steel Structures and Job Works. He filed his return of income for the AY.2012-13 on 30-09-2012,
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admitting the total income at Rs.77,35,570/-. During the assessment proceedings, the Assessing Officer (AO) assessed the income at Rs.1,62,55,570/- against the returned income of Rs.77,35,570/-. The AO made an addition of Rs.85,20,000/- u/s.68 of the Income Tax Act [Act].
3.1. Brief facts relating to this addition includes that the assessee received loans from 15 creditors. The details are given in para 3 of the assessment order. In the said paragraph, the AO discussed the details relating to source of credits and the nature of evidences furnished by the AO etc. The AO discussed various decisions before the said addition, made u/s.68 of the Act. In any case, the creditor- wise discussion is not elaborately discussed in the order.
During the First Appellate Proceedings, various details relating to identity, creditworthiness and genuineness of the transaction were submitted. PAN details were given in some cases and confirmation letters were also furnished. The CIT(A) sustained the addition to the extent of Rs.75,20,000/-, relying on certain case laws. The details of the creditors confirmed by the CIT(A) are as under: S.No. Name of the Creditor Amount of loan (S/Shri/Smt) taken Rs. 1. Basant Kumar 8,00,000 2. Kamlesh Kumar 5,00,000 3. K.Sumitra 7,00,000 4. Manoj Bansal 6,00,000 5. Premlata Bansal 8,00,000 6. Sita Ram Raju 5,00,000 7. Ratna Babu 5,20,000 8. Sushma Agarwal 8,00,000 9. Champa Devi 3,00,000 10. Shankardevi 10,00,000 11. Benet Ibrahim 5,00,000 12. Jigna Mehta 5,00,000 13. Rajiv Ratna 3,00,000
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Accordingly, CIT(A) granted part relief to the assessee.
Aggrieved with the said order of the CIT(A), the assessee filed this appeal before the Tribunal with the Ground mentioned above.
Ld.Counsel for the assessee submitted that it is the case where the loans are repaid in subsequent period. Based on this fact, Ld.Counsel mentioned that these repayment details were not placed before the lower authorities. Therefore, this additional information if considered, assessee is likely to get relief substantially. Further, Ld.Counsel furnished a Written Submission in this regard. Relevant lines from the Written Submissions are extracted as under:
“In this regard, it is humbly submitted that all the creditors have been paid back as on date through cheques. Some of these amounts had already been repaid even before the date of the order of the CIT(A). Most of the creditors are assessed to tax. The details of the loan amounts, dates of repayments etc.., are submitted as under:
Sl. Name of the Creditor Amount of Amount Date of No Loan (Rs) repaid (Rs) repayment 1 Basant Kumar L.R. 8,00,000 8,00,000 25.09.2019 by Smt.Shakuntaladevi 2 Kamlesh Kumar 5,00,000 5,00,000 31.01.2015 3 K Sumitra 7,00,000 7,00,000 30.01.2015 4 Manoj Bansal 6,00,000 6,00,000 08.12.2014 5 Premalata Bansal 8,00,000 8,00,000 08.12.2014 6 Sita Ram Raju 5,00,000 5,00,000 08.12.2016 07.01.2017 27.01.2017 7 Ratna Babu L.R. by 5,20,000 5,20,000 25.09.2019 Sri V.Malleshwar Rao 8 Sushma Agarwal 8,00,000 8,00,000 13.12.2014 9 Champa Devi 3,00,000 3,00,000 24.09.2019 10 Shankar Devi 4,00,000 10,00,000 15.04.2017 6,00,000 11 Benet Ibrahim 5,00,000 5,00,000 24.09.2019 12 Jigna Mehta 5,00,000 5,00,000 28.09.2019 13 Rajiv Ratna 3,00,000 3,00,000 27.09.2019
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It is to submit that in all the above cases, affidavits/confirmations are filed from the creditors acknowledging the transactions and the sources. In order to establish the identity of the creditors, copies of PAN Cards were also submitted. Apart from that, copy of bank statements were also submitted. Further, copies of Income Tax Returns of the lenders, except in respect of those mentioned at Sl.nos.6,7& 11 above for the assessment year under consideration have also been supplied to the Assessing Officer and the amounts lent by them to the assessee are also reflected in the statement of affairs filed by the lenders before the Income Tax Department for the assessment year under consideration. However, without considering all these details, the Assessing Officer made the addition. During the appellate proceedings, the Ld. CIT(A) remanded the issue to the Assessing Officer for examination of the creditors. In the remand report dated 15.02.2018, the Assessing Officer after examining the creditors has stated that in the case of the creditors of Sri. U. Vijay Kumar and Smt.Seema Bucha, the assessee has proved their identity, genuineness of the transactions and their creditworthiness. The Ld.CIT(A) deleted the addition in respect of the creditors, Sri.U. Vijay Kumar and Smt.Seema Bucha Though most of the confirmations in respect of the above amounts were submitted before the Ld. CIT(A), she has confirmed the addition for the reasons mentioned in para no.06.0 to 06.2 of her order. The details of the loan received and their repayment made such as confirmation letters and copy of bank statement have already been submitted before the Hon'ble ITAT vide Paper Books filed on 06.07.2018 & 29.10.2019. The order of the Ld. CIT (A) is not acceptable for the following reasons: In all the cases, the creditors are identified who have given sworn statement saying that they have lent the amounts to the assessee during the year of account. All the creditors except those mentioned at SI.No.6, 7 & 11 above are income tax assessees. Further, the creditor Sri Kamalesh Kumar is a Chartered Accountant where as Sri Rajiv Ratna is an Advocate. The creditor Sri Majoj Bansal is a salaried employee whereas the creditors Smt. Premalata Bansal and Smt. Sushma Agarwal are doing Business. All the transactions i.e., receipt of the impugned loans as well as the repayment of the loans are routed through banking channels. Hence, the assessee has already proved the genuineness of creditors, further as per law, assessee can be asked to prove the sources of credits in its books of account but not source of source. Hence the creditors to whom the amount is repaid shall not be eligible to be added to the return of income of the assesseess. Without disputing all these facts, upholding the addition made u/s 68 of the Act is not warranted. Both the Assessing Officer and the Ld. CIT(A) failed to unearth any wrong or illegal dealings in the impugned loan transactions. It is to submit that all the decisions relied on by the Assessing Officer are distinguishable on facts. Since the initial burden on the assessee stands discharged, the onus is on the Department to prove otherwise of the
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facts mentioned by the creditors in their affidavits and sworn statements. There being no further enquiries by the Assessing Officer in respect of the loan transactions, the addition has been sustained by the Ld. CIT(A) which is not correct. Therefore, the addition sustained of Rs.78.20 lakhs requires to be deleted in the hands of the assessee”.
6.1. Further, Ld.Counsel submitted that the assessee discharged initially the onus, which is required u/s.68 of the Act. If accepted, the fact of repayment of the loans to the creditors should help the AO to decide in favour of the assessee. Further, Ld.Counsel explained the provisions of Section 68 of the Act. Eventually, Ld.Counsel argued that the entire addition is required to be deleted. Without prejudice, Ld.Counsel also submitted that since the facts of repayment are not placed before the lower authorities, the issue can be remanded to the file of AO for fresh adjudication, after considering the fact of repayment of the loans to the creditors.
Per contra, Ld.DR for the Revenue relied heavily on the order of AO and the CIT(A). Ld.DR further submitted that this is the case where creditors do not have creditworthiness to lend so much of loans to the assessee. The facts relating to the depositing of cash before the cheques are issued in their hands and also the fact relating to withdrawal of action, after repayment is made would also go against the assessee. Referring to the additional evidences placed at Pgs.81 to 83, Ld.DR submitted that the said evidence should not be entertained at this stage and relied on the decision of Hon'ble Jurisdictional High Court in the case of A.K.Babu Khan Vs. Commissioner of Wealth Tax (1976) [102 ITR 757] (Andhra Pradesh). Finally, Ld.DR prayed for confirming the order of CIT(A).
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We heard both the counsels and perused Paper Book placed before us. We have also examined the details of repayments i.e., date of repayment etc., and the case law placed before us.
Additional Evidences: The additional evidences were examined and found that they are basically copies of the affidavits, confirmations given by certain creditors and the bank statements of those creditors. In principle, they relate to the issue under consideration and they go to the root of the matter and shall definitely be of some use for adjudication of the issue judiciously. In our opinion, it is in the interest of administrational justice to admit the same. Accordingly, we direct the AO to consider the contents available on these papers and use them for adjudication of the issue, after granting a reasonable opportunity of being heard to the assessee. The AO is free to conduct requisite enquiries into the correctness of these papers, as per law.
Repayments: The contention of the Ld.Counsel for the assessee relating to the repayment transactions of the loans received by the assessee is considered and found that the date of payments are obviously in subsequent in period i.e., in the year of 2014-2019. We find that these facts of repayment are certainly relevant as they go to the identity and the genuineness of the transaction and creditworthiness of the creditors. AO was directed to consider these additional facts in a right perspective and make use of the same for adjudication of the issue. Repayment means, assessee paid the dues to the person, who is existing. That person received the funds and to that extent, the genuineness of the transaction assumes credibility. So long as there is no evidence with the AO to
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demonstrate such repayments were routed back to the payer, the transaction becomes genuine and therefore, there is no need for suspecting the same. The transaction becomes so genuine more so when the payments and repayments are done through the banking channels. AO is directed to examine whether the repayments are properly appropriated by the creditors, if not routed back into the accounts of assessee. Reasonable opportunity of being heard to the creditors is to be given in case such enquiries are undertaken. Thus, keeping all the issues open relating to the addition of Rs.78,20,000/- (raised in Ground No.2), the issue raised in Ground No.2 along with other argumentative Grounds i.e., Ground Nos.1 to 8 are remanded back to the file of AO.
In the result, the appeal of assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 4th December, 2019
Sd/- Sd/- (V. DURGA RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated 4th December, 2019 TNMM
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Copy to : 1. Shri Rishi Agarwal, Hyderabad. C/o. P.Murali & Co., Chartered Accountants, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad.
The DCIT, Circle-10(1), Hyderabad.
CIT(Appeals)-6, Hyderabad.
Pr.CIT-6, Hyderabad. 5. D.R. ITAT, Hyderabad.
Guard File.