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स िवाईकीिारीख/ Date of Hearing 14.05.2025 घोर्णाकीिारीख/Date of Pronouncement 16.01.2025 आदेश /O R D E R PERSANDEEP GOSAIN [J.M.]:- This appeal is filed by the revenue against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for Assessment Year [A.Y.] 2014-15.
A.Y. 2014-15 Pratap Uttam Purohit 2. Brief of the case are that the assessee is an individual and engaged in the business of civil work in the name of Dev Engineering. The assessee filed return of income on 28.11.2014, declaring total income of Rs. 5,82,18,710/-. The said return was processed u/s 143(1) of the Act, and thereafter, the case was selected for scrutiny under CASS, and subsequently, after serving statutory notices and seeking reply of the assessee, the order of assessment was passed, thereby making additions on different heads.
3. Aggrieved by the order of the AO, the appeal was filed before CIT(A) and consequently Ld. CIT(A) allowed relief on various grounds.
4. Aggrieved by the order of CIT (A), the revenue has filed the present appeal before us and raised the following grounds of appeal: “1.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in deleting the addition of Rs. 22,85,200/-made on account of inflated agriculture income claimed without appreciating the fact that the assessee has shown unrealistic exorbitant gross receipt from agriculture by obtaining of cash sale bills from the Mandi 2.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in deleting the addition of Rs. 99.63,000/-made on account of bogus subcontract expenses without appreciating that FZ Khan and BG Corporation did not render their services to the assessee. 3.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in deleting the addition of Rs. 1,78,500/- made in respect of car hiring charges. 4.On the facts and circumstances of the case and in law, the L.d. CIT (A) is erred in deleting the addition of Rs. 24,64,661/- made u/s 41(1)(a) of the Act. while ignoring that the sundry creditors were outstanding for more than four years and there were no transaction with these parties in last so many years. 5.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in restriction the addition to Rs. 10,00,000/- and deleting the addition of Rs. 2,46,00,000/- in respect of unsecured loan without appreciating that creditworthiness of the lenders and genuineness of transactions remained unproved. 6.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in deleting the disallowance of interest of Rs. 27,87,396/-without A.Y. 2014-15 Pratap Uttam Purohit appreciating that creditworthiness of the lenders and genuineness of transactions remained unproved. 7.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in deleting the addition of Rs. 5,30,47,379/-made u/s 68 of 1.T. Act without appreciating that the Assessing Officer has proved this alleged transaction and LTCG in the penny stock of M/s Moryo Industries Ltd. and M/s Kailash Auto Finance Ltd, as nothing but an accommodation entry 8.On the facts and circumstances of the case and in law, the Ld. CIT (A) is erred in deleting the addition of Rs. 26,52,368/ made u/s.69C of the LT.Act, 1961 in respect of commission paid for obtaining the accommodation entry in the penny stock of M/ Moryo Industries Ltd. and M/s Kailash Auto Finance Ltd.” Ground No. 1
5. This ground relates to challenging the order of CIT(A) in deleting the additions made on account of inflated agricultural income claimed by the assessee.
We have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities.
From the records, we notice that the assessee's agricultural land is located in the District of Jalor, Rajasthan. As such, in order to ascertain the correctness of the assessee's contention, the Commission u/s 131(1)(d) of the Act was issued to the ITO, Jalore to get conducted necessary field enquiries with regard to the land holding, details of the agricultural activities carried out by the assessee on the land owned by him, verification of facts from the land revenue records and to record evidence of the field officers of the land revenue department and to submit factual report so that necessary verification of the assessee's contention can be made.
A.Y. 2014-15 Pratap Uttam Purohit 8. The report of the ITO Ward-2 Jalore was received. The assessee had agricultural income and the assessee had not carried out any agricultural activities at his own, but labour employed by him was doing agricultural activities. It has come on record that the main crop grown are Raida, Guwar, Bajara, Wheat, Groundnut and mustard seed. The assessee's agricultural activities are supervised by his brother Shri Chhaganlal U. Purohit with the help of local labourers. The assessee visits very rarely only once or twice in a year. Statement of Shri Chhagan Purohit brother of the assessee was recorded and he has stated that no record has been maintained in respect of the quantity of the agricultural produce.
On the above facts, the AO had recorded its finding on page 4 and para 3.10 of the Assessment order which is reproduced as under: “I have considered the entire gamut of facts and it is found that in the assessee's case the gross receipts have been shown of Rs. 42.64.321/- and the expenses have been shown of Rs. 8.59,036/ only which comes to 20% of the gross receipts. From this factual position it is noticed that the assessee has shown exorbitant gross receipts by way of obtaining cash sale bills from the Mandi and has suppressed the actual expenses incurred. In view of these facts of the case it is held that the assessee has shown unrealistic exorbitant gross receipts from agriculture produce which is not realistic. Keeping in view of the assessee's past agricultural income shown, the report of the field verificationand the entries of the crops grown in revenue records the gross value of the agricultural produce for the year under consideration is estimated @ Rs. 1.50,000/- per hectare which comes to Rs. 24.00,000 and the expenses incurred are estimated at 50% of the gross receipts as such the agricultural income of the assessee comes to Rs. 12,00,000/- as against the assessee's claim of Rs. 34.85,200/- and the remaining income of Rs. 22,85,200/- (Rs. 34.85.200/--12.00.000/-) is assessed as income from undisclosed sources”
10. However, considering a fact that the activities carried out by the assessee in respect of agriculture are not doubted and Ld. A.O. made addition A.Y. 2014-15 Pratap Uttam Purohit only on the basis of estimation. Therefore, Ld. CIT(A), considering all the facts, held that as under: 6.1.1 I have gone through the submission of the appellant and facts narrated by AO in his assessment order. The AO has based his finding on following observations:
1. 1. Agriculture operation was not conducted by appellant himself. rather, it was done by his brother through labourers.
2. Appellant has not produced any evidence with relation to entry of goods in APMC compound.
3. Expenses shown by appellant is on extremely low side. I have noted that AO has issued commission u/s. 131 (1) (d) to conduct field enquiries on spot. There is no dispute in terms of land holding in the name of appellant and crops grown on such land for the relevant year. The only contention is with relation to receipt shown by appeliant and expenses claimed thereupon. It is also a recorded fact that appellant has sold crops in grain mandi of Dhanera, Banas Khantha, district Gujarat and filed copies of sale bills. The only reason for which AO has not accepted these receipts is non-filing of any evidence related to entry of goods in grain mandi compound. Since the sales have incurred though mandi which is undisputed, then the receipts as such cannot be doubted. AO has relied upon common practice prevailing in Rajasthan in case of absentee cultivation where 50 per cent goes to owner of the land and balance to the tiller. However, it is an admitted fact that appellant was cultivating his land through his brother and labourers. therefore, this is not a case of absentee cultivation, rather, this is also a common practice that the family member who is residing in village itself looksafter the agriculture operations for entire joint family. In absence of any other cogent reason or evidence on record, the agriculture receipts of appellant cannot be doubted. 6.1.2 Now coming to the expenditure side of agriculture operation. I have noted that appellant has claimed expenses of Rs. 8,59.036/- only, which comes to 20 per cent of gross receipts. It is noted that his holding is approximately 16 hectares and he was cultivating crops like Raida, Guwar. Groundnut and Mustard Seeds. These crops are commercial in nature and therefore, require expenses like seed procurement, pesticide, chemical/bio-fertilizers, electricity & irrigation cost, etc. Further, the requirement of labourers in such crops are also high. Therefore, the expenses claimed by appellant appears to be on lower side. The conclusion drawn by AO for lower claim for expenses further gets credence as appellant has not maintained separate log of expenses. Looking to the nature of crops grown, size of land holding and documents/bills produced before AO during assessment proceedings. I hold that expenses should be at least 40 per cent of gross receipt, i.e. 17,18,072/-. In nutshell, the addition made by AO is sustained to the extent of Rs. 8,59,036/- and ground of appeal is partly allowed.”
A.Y. 2014-15 Pratap Uttam Purohit 11. As far as the factual position in the present case is concerned, the same is not disputed. It is an admitted fact that in order to ascertain the agricultural income, commission u/s 131(1)(d) was issued to conduct fielding inquires, and it was found the land exists in the name of the assessee and agricultural activities are being carried out by labourers and required documents have already been filed by the assessee. Since the sales have been incurred through mandi therefore, the receipts cannot be doubted. Ld. CIT(A) after taking into consideration the entire facts and also the area of the land owned by the assessee had partly allowed this ground. Now before us, no new facts have been brought to controvert or rebut the findings of the Ld. CIT(A). Therefore, we upheld the findings of the Ld. CIT(A) on this ground and dismiss the ground raised by the revenue. Ground No. 2
12. This ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the additions made on account of bogus sub-contract expenses.
13. We have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities.
14. From the records, we notice that the in respect of Sub Contract Expenses, it was submitted that the assessee had claimed sub contract A.Y. 2014-15 Pratap Uttam Purohit expenses of Rs. 25,35,53,860/-. In order to verify the assessee's claim of sub- contract expenses, notices u/s 133(6) and summons u/s 131 were issued in a few cases on sample basis. In some of the cases the notices issued were received back unserved and in some of the cases the replies were received. After considering the details available on record a show cause was issued on 26.12.2016 wherein the assessee was provided an opportunity to justify the sub-contract expenses. The individual cases are discussed herein below:
Name of the party Amount of payment Smt. F. Z. Khan Rs. 54,90,000/- M/s B G Corporation Rs. 44, 73,000/- Total 15. In respect of Smt. F. Z. Khan, the assessee furnished the following documents in support of the claim: a) Copy of Ledger Account FY 2012-13-Page 181-182 b) Copy of Ledger Account FY 2013-14 Mumbai- Page 183-184 c) Copy of Ledger Account FY 2013-14-Ajmer Page 185-187 d) Copy of Bank Statement reflecting payment to F.Z. Khan- Page 188-196 e) Copy of TDS Certificate Page 197-205 16. Smt. F. Z. Khan submitted a reply u/s 133(6) of the Act to AO which is duly noted by AO at page 14 and para 6.1.2 (ii) of the assessment order.
Ld. Assessing officer surprisingly accepted contact charges paid in Mumbai site and same time made addition on Ajmer Site Contract Charges.
In case of M/s. B.G. Corporation, assessee submitted following documents as under. a) Copy of Ledger Confirmation Account- Page 206 b) Copy of Bank Statement reflecting payment to B G Corporation Page 207-212 A.Y. 2014-15 Pratap Uttam Purohit c) Ledger Account FY 2014-15- Page 213 d) Copy of TDS Certificate- Page 214-216 19. M/s. B.G. Corporation submitted reply u/s 133(6) of the Income tax Act and furnished the copy of Ledger confirmation, Bank statement. Income Tax return and computation of Income and Balance sheet and profit and loss account. 20. After considering the overall factual position Ld. CIT(A) held as under:.
6.2.1 Further, Smt. F.Z. Khan submitted a reply under section 133(6) of the Income Tax Act to the Assessing Officer, which is duly noted at Page 14 and Para 6.1.2(ii) of the assessment order. I have also noted that AO has accepted the sub-contracting expenses given to Mis. F. Z. Khan for Mumbai site. whereas same has been denied for Ajmer site expenses. The only reason mentioned by AO is the nature of services/job conducted by the sub-contractor. It is noted that appellant has replied to the query of AO vide letterdated 19.12.2016 wherein he has categorically mentioned that this particular subcontractor has supplied labour for Ajmer Project. It is also clear from assessment order that appellant's work was under progress at Ajmer site because AO has made addition us. 40A(3) for expenses incurred through bearer cheque in para 4 of assessment order. Considering all documentary evidences submitted before AO during assessment proceedings, reply submitted by subcontractor us. 133(6) and nature and place of work undertaken, the conclusion drawn by AO appears to be untenable. Hon'ble Apex Court in case of Umacharan Shaw and Bros, v/s CIT in 37 ITR 271 has has held that the suspicion however strong could not partake the character of legal evidence. 6.2.3 Additionally, M/s. B.G. Corporation submitted a reply under section 133(6) of the Income Tax Act. providing the Ledger Confirmation, Bank Statement, Income Tax Return. Computation of Income, Balance Sheet, and Profit & Loss Account. The only reason mentioned by AO is the nature of services job conducted by the sub- contractor. It is noted that appellant has replied to the query of AO vide letter dated 19.12.2016 wherein he has categorically mentioned that this particular subcontractor has been paid against labour charges for making chambers. Considering all documentary evidences submitted before AO during assessment proceedings, reply submitted by subcontractor u/s. 133(6) and nature of work undertaken, the conclusion drawn by AO appears to be untenable. In this particular sub-contractor also, the addition made by AO is deserved to be deleted. Therefore, this ground of appeal is allowed.
21. It is an undisputed fact that the assessee is in the business of civil contractor and had engaged sub-contractors. The AO had accepted the sub- A.Y. 2014-15 Pratap Uttam Purohit contracting expenses given to F. Z. Khan for Mumbai side, whereas the same denied for Ajmer side. However, it was proved on record that the particular sub-contractor had supplied labours for Ajmer project as the assessee’s work under progress and Ajmer side. Therefore, Ld. CIT(A) after considering entire factual position has rightly concluded that the additions made by the AO were on the basis suspicion. Moreover, after evaluating the documents submitted by M/s. B. G. Corporation, the additions were rightly deleted. Now before us, no new facts have been brought to controvert or rebut the findings of the Ld. CIT(A). Therefore, we upheld the findings of the Ld. CIT(A) on this ground and dismiss the ground raised by the revenue.
Ground No. 3 22. This ground raised by the revenue relates to challenging the order of Ld. CIT(A) in deleting the additions made in respect Car Hiring charges.
23. We have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities.
24. From the records, we notice that the assessee had claimed car hiring expenses of Rs. 1.78.500/-. In this regard, notice u/s 133(6) was issued and in response thereto Shri Vikram Patel, husband of Smt. Hetal Patel attended on 26.12.2016. The details filed by him were put to verification, and the following discrepancies were noticed in the name of Smt. Hetal Patel.
A.Y. 2014-15 Pratap Uttam Purohit “i)Shri Vikram Patel husband of Smt. Hetel Patel is working as Supervisor with the assessee. (ii) There is no car in the name of Smt. Hetel Patel to whom car hiring charges have been claimed. (iii)The car mentioned in the name of Smt. Hetel Patel bearing No. MH02 BM 3355 is Ritz and which is not registered as Taxi Car as such it cannot be put on hire.”
The hiring of cars was not disputed, and the said payment was made by the assessee through the banking channel. It has come on record that Vikram Patel was also working as an employee of the assessee. Hence, it was business expenditure. In this regard, the assessee had submitted the following documents in support of its claim. a) Income tax return and Computation of Income b) Ledger Account of Hetel Patel – Page 235 c) Ledger Account of Vikram Patel- Page 236 d) TDS Certificate for payment on Car hiring charges- Page 237 26. Apart from above, the said Vikram Patel appeared before Assessing office in response to notice u/s 133(6) of the Act and the said facts mentioned in assessment order at page 18.
The CIT(A) righty consider the submission of assessee and allowed the appeal of assessee and held as under. “6.3 Decision on Ground No. 3: In this ground of appeal, appellant has challenged addition of Rs. 1,78,500/- made on account of disallowance of car hiring charges. AO has disallowed the car hiring expenses of Rs. 1.78,500/-paid to Smt. Hetal Patel, as she was not having car in her name. I have noted that AO has issued notice u/s. 133(6) of the Act wherein Shri. Vikram Patel. husband of Smt. Hetal Patel, attended the proceedings on 26.12.2016 and submitted the requisite details. It is noted that AO has disallowed the amount as vehicle was not registered in her name. As a matter of fact, the genuineness of expenses is established and AO has not disputed that the car hiring expenses were not incurred. The payments were made through banks and TDS was also deducted. In view of such detail, the action of A O is unwarranted and hence addition made is deleted herewith.”
A.Y. 2014-15 Pratap Uttam Purohit 28. Since, as per the facts of the present case, although the car in question was not in the name of Smt. Hetal Patel. However, Shri Vikram Patel, the husband of Smt. Hetal Patel had attended the proceedings before the AO and furnished the requisite details. The genuineness of the car expenses have not been disputed by the AO but the same were denied only on account of the fact that the vehicle is not in the name of Smt. Hetal Patel. But the fact remains that the payments were made to banks and TDS was also deducted. Therefore, Ld. CIT(A) rightly allowed the said ground. Hence, this ground raised by the revenue is dismissed.
Ground No. 04:
This ground raised
by the revenue relates to challenging the order of CIT(A) in deleting the additions made u/s 41(1)(a) of the Act. In this regard, we have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities.
30. From the records, we notice that on scrutiny of sundry creditors shown by the assessee, it is noticed that in a number of cases the sundry creditors have been shown for the same amount for years together without making any payment. The details filed were examined and in respect of the sundry creditors continuing from last 4 years a show cause was issued vide letter A.Y. 2014-15 Pratap Uttam Purohit dated 1312.2016 whereby the assessee was asked to furnish details of payments made to the respective parties up to date and if these are still outstanding then reasons thereof. In reply thereof, the assessee submitted that part of the sundry creditors as per show cause has been written off in F.Y. 2015-16 and in this regard had also filed copy of final accounts.
The details of unsecured creditors shown in books of account were mentioned as under:
Sr. No. Name of the party Amount as 31.03.2011 1. C Mony (R.M) 67,500 2. D Palani Cowandar (R.M.) 11,482 3. G. Mayakrishnan Arjun (RM) 9,435 4. Mohammed Nazmul Huda (R.M) 28,466 5. Mohammed Kurban Ali (RM) 47,004 6. M/s S. J. Corporation 1,445 7. Mohaneshwar Enterprises 3,42,011 9. Shubh Enterprise 17,73,395 10. M/s Jain Spun Pipe 2,550 11. S.K. Aziz 64,510 12. Shri Suresh Chavan 88,046 24,64,661 32. Ld. Assessing officer had given finding on the above issue which is reproduced as under: “I have considered the assessee's submission and after considering the same it is noticed that in respect of the above cases the assessee has no reason to show the sundry creditors as these are outstanding for more than four years and there is no transaction with these parties in last so many years as such whatever was to be paid has already been paid. Even if for the sake of argument the assessee's contention is accepted then also payment will be made only in a few case and the assessee can claim deduction in the year of payment, therefore in view of the above facts of the case the liability has ceased to exist and as per provisions of sec. 41(1)(a) of the I.T. Act, 1961 the aforementioned sundry creditors are added to the total income of the assessee. In the assessee's case a sum of Rs. 24,64,661/- is added.”
A.Y. 2014-15 Pratap Uttam Purohit 33. We notice that the Assessing Officer had simply invoked section 41(1) because the amounts were outstanding for three years but there were no evidences brought by him that the liability has really ceased to exist. In our view, it is now a settled judicial view that the time-factor is not relevant for the purpose of section 41(1) of the Act. The revenue has to either demonstrate that the liability has really ceased to exist or the assessee has written off the liability in its books of account 34. We place reliance upon the decision of the Hon'ble jurisdictional high court in case of Principal Commissioner of Income-tax v/s. Batliboi Environmental Engineering Ltd. reported in [2022] 141 taxmann.com 245 (Bombay), wherein it was held as under: 11. Section 41(1) of the Income-tax Act. 1961 Remission or cessation of trading liability (General) - Assessment year 2011-12-Assessee had many creditors whose payments were outstanding for more than three years and some transactions were eight to nine years old Assessing Officer treated amount due to creditors as assessee's income and added under section 41(1)-Commissioner (Appeals) deleted addition Tribunal upheld view of Commissioner (Appeals) - Revenue submitted before High Court that because liability was barred by period of limitation, same would be treated as income and added under section 41(1) to income of assessee Whether merely because liability was barred by time, it did not cease to be debt and, thus, Tribunal was right in upholding view of Commissioner (Appeals) - Held. yes [Para 6] [In favour of assessee] 35. We also reply upon the decision of in the case of Commissioner of Income Tax v. G.K. Patel& Co. (212Taxman 384). High Court of Gujarat and in the case of Commissioner of Income Tax v. Jain Exports Put. Ltd. (89 DTR 265), High Court of Delhi wherein it is held as under:
A.Y. 2014-15 Pratap Uttam Purohit "Remission or cassation of trading liability During the course of assessment proceeding AO called upon the assessee to furnish ageing analysis of the creditors AO found that assessee had not paid money to many of such creditors for years together-Assessee failed to furnish any evidence except that the amounts were still payable by the assessee, AO made addition under sec. 41(1) CITA) restricted addition Tribunal held that s. 41(1) could not have been invoked in the year under consideration as the event had to be triggered either on the side of the creditor or the debtor or by law Held cessation of liability has to be either by reason of operation of law, ie., on liability becoming unenforceable at law by the creditor and debtor declaring unequivocally his intention not to honour his liability when payment is demanded by creditor, or a contract between parties, or by discharge of debt -Rs. the debtor making payment thereof to his creditor In the instant case there was no declaration by assessee that it does not intend to honour its liabilities nor was there any discharge of debt - As no event had taken place in the year under, consideration to indicate remission or cession of the liabilities in question, S. 41(1) could not have been invoked -Reasoning adopted by Tribunal while holding that S. 41(1) would not be applicable to the facts of the present case was in line with the principles enunciated in the decision of Apex Court in CIT v. Sugauli Sugar Works (P.) Ltd. Tribunal, therefore. committed no legal error - Appeal filed by revenue dismissed."
We also noticed that the assessee had paid liability in few creditors and in respect of remaining creditors, written off in subsequent years and shown as its income. Therefore, once an income tax is paid on the said written off then the said income cannot be taxed twice. Reliance in this regard is being placed on the decision of the Hon'ble Supreme Court in Laxmipat Singhania Vs. Commissioner of Income Tax, U.P. 72 ITR 291, wherein the Hon'ble Supreme Court has observed that "It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice. Similar view was taken by the Hon'ble Apex Court in Jain Brothers and Others Vs. Union of India and Other 77 ITR 107 and Mahaveer Kumar Jain Vs. Commissioner of income Tax. Jaipur in Civil Appeal No. 4166 of 2006.
A.Y. 2014-15 Pratap Uttam Purohit 37. Further, it has also come on record that the assessee had paid payments to the following parties: a. C. Mony (R.M.) Rs. 67,500/- b. Mohammed Kurban Ali (RM.) Rs. 47,004/- c. Subh Enterprise Rs. 17,73,395/- 38. Therefore, after considering overall facts and circumstances of the case. Ld. CIT (A) deleted the addition and held as under. 6.5.1 I have noted that these liabilities were outstanding as on 31.03.2014 in the books of appellant. It is submitted by appellant that in some cases. payments were made in later years, whereas in some cases, income was offered later years as soon as liability extinguished. The evidence related to these two conditions were produced during assessment proceedings. I have noted that in case of C. Mony, G. Maya Krishnan Ganeshan Arjun, SJ Corporation and HPCL, payments were made later on whereas ledger of sundry balances written off for F.Y. 2016-17 and 2017-18 were submitted vide paper book pg. 171 to 173. This makes things very clear that the assumption of AO was purely based on outstanding of sundry creditors beyond three years on the basis of extinguishment of liability, was not appropriate. Even on principle basis also, Hon'ble Bombay High Court in a recent decision has upheld the views taken by various other courts on this issue. In PCIT Vs Batliboi Environmental Engineering Ltd. 141 taxmann.com 245. Hon'ble Court has held that:.........
Now before us, no new facts have been brought to controvert or rebut the findings of the Ld. CIT(A). Therefore, we upheld the findings of the Ld. CIT(A) on this ground and dismiss the ground raised
by the revenue. Ground No. 05
40. This ground raised by the revenue relates to challenging the orders of CIT(A) in restricting the additions to Rs. 10,00,000/- in respect of unsecured loans.
A.Y. 2014-15 Pratap Uttam Purohit 41. In this regard, we have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities. 42. From the records, we notice that in respect of Unexplained Cash Credit, it was submitted that during the year under consideration, the assessee had shown unsecured loans of Rs.. 68,21,04,815/- Ld. AO made addition in respect of the following loan parties:
Sr. No. Name of the party Amount 1. Saumya Menon 5,00,000/- 2. Marudhan Roadways 2,00,000/- 3. Suresh Sharma 16,50,000/- 4. Sukidevi B. Zala 15,00,000/- 5. Rajesh Kumar Purohit 15,00,000/- 6. Ratudevi Chaudhry 20,00,000/- 7. Amit J. Purohit 3,00,000/- 8. Mewa B. Purohit 14,00,000/- 9. Chandulal Soni 12,00,000/- 10. Sangeeta Sharma 15,00,000/- 11. Rukmani Devi Chaudhary 18,50,000/- 12. Bodhi Corporation 50,00,000/- 13. Marine Gems 15,00,000/- 14. Drasti Gems 55,00,000/- 2,56,00,000/- 43. However, in this regard, the assessee had submitted all the required documents in respect of each party in the details of which are given herein below: “35. Mr. Suresh Sharma Rs. 16,50,000/- Assessee submitted following documents in respect of loan transaction: a. Copy of Pan Card b. Adhar Card c. Income tax return d. Loan confirmation A.Y. 2014-15 Pratap Uttam Purohit e. Copy of Bank statement of Suresh Sharma showing payment made to dev engineer. f. Copy Of Bank Statement of Suresh Sharma showing interest received. g. Copy Of Bank Statement of Suresh Sharma Showing reversal of loan. h. Copy of Bank statement of Dev Engineering showing loan received. i. It is also replied in response of notice u/s 133(6) which is mentioned in A.O. order at page 21. j. Copy of reply furnished us 131 on dated 07.12.2018 k. Copy of justification filed for source of source by Suresh Sharma on 13.12.2016 to Assessing officer Atul and Arkade Associates of Rs. 10.48.526/- Bhupendra J Purohit of Rs. 5,00,000/- J.P. Tax of Rs. 1,02,000/- Total 16,50,526/- 1. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 29.03.2014 99,000/- 15.09.2013 16,50,000/- 31.03.2014 11,000/- 31.03.2014 1,10,000/- AY 2015-16 26.03.2015 1,80,675/- 31.03.2015 44550 Interest claimed AO accepted under scrutiny AY 2016-17 26.03.2016 1,81,170/- 31.03.2016 181170 Interest claimed AO accepted under scrutiny AY 2017-18 25.03.2017 1,80,675/- 31.03.2017 180675 Interest claimed AO accepted under scrutiny AY 2018-19 06.06.2017 16,50,000/- 31.03.2018 32670/- Interest claimed AO accepted under scrutiny 31.03.2018 32670
36. Sukhi Devi B Zala Rs. 15,00,000/-:- Assessee submitted Following documents in respect of loan transaction. a. Copy of PAN Card b. Copy of Adhar card c. Ledger confirmation.
A.Y. 2014-15 Pratap Uttam Purohit d. Copy of Bank statement of Sukhi Devi B Zala showing loan given to Dev Engineer e. Copy of bank Statement showing interest received from Dev Engineer f. Copy of bank Statement showing loan received back from Dev Engineer g. TDS Certificate h. Copy of Bank statement of repayment of Loan by Assessee. i. Assessee also filed Balance Sheet before A.O. same is reported at page 24 of A.O. Order. j. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 27.03.2014 12,150/- 05.03.2014 15,00,000/- 31.03.2014 1,350/- 31.03.2014 13,500/- AY 2015-16 28.08.2014 15,00,000/- 37. Mr. Rakesh Kumar Rajpurohit Rs. 15,00,000/-:- Assessee submitted Following documents in respect of loan transaction. a. Ledger confirmation b. TDS Certificate e. Ledger Account for repayment of Loan. d. Reply filed to Income Tax office on 07.12.2018- Page 277A e. Ledger Confirmation with Assessee- Page 277-B to 277D f. Bank statement with other papers of Rajesh Rajpurohit Page 277E-2770 g. Copy of Income Tax Return with Income Tax Acknowledgement - Page 277P to 277W h. Copy of Bank statement of Assessee showing loan received and loan payment with other papers - Page 277X-277ZB Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 29.03.2024 92,550/- 06.09.2013 5,00,000/- 31.03.2024 10,283 06.09.2013 5,00,000/- 10.09.2013 5,00,000/- 31.03.2014 1,02,833/- AY 2015-16 31.12.2014 1,23,750/- AY 2016-17 26.03.2015 1,64,250/- 31.03.2015 40,500/- AY 2017-18 26.03.2016 1,64,700/- 31.03.2016 1,64,700/- AY 2018-19 A.Y. 2014-15 Pratap Uttam Purohit 15.06.2017 15,00,000/- 31.03.2018 33,750/- 31.03.2018 33,750/-
Ms Ratudevi Choudhary Rs. 20,00,000/-:- Assessee submitted Following documents a. Copy of Pan Card b. Adhar Card c. Income tax return d. Loan confirmation e. Copy of Bank statement of Ratudevi Choudhary showing payment made to Dev Engineer of Rs. 20,00,000- f. Copy of Bank Statement of Ratudevi Choudhary showing interest received. i. Copy Of Bank Statement Showing repayment of loan. g. Copy of Bank statement of Dev Engineering showing loan received. h. Form 15H 15G received from client and same is intimated to TDS department on 10.04.2014 i. Copy of Reply filed by Ratudevi Choudhary u/s 131 on dated 07.12.2016 to ACIT 32(3) j. Copy of justification filed for source of source by Ratudevi Choudhary on 13.12.2016 to Assessing officer Marudhar Fab 50,000- Classic Trading co 4.00.000/- Classic Trading Co 4,00,000/- Marudhar Fab 50,000/- Shanti Ramesh Choudhary 7,00,000/- Other Income 20,000- Total 20,00,000/- k. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 19.09.2013 20,00,000/- 29.03.2014 1,29,333 31.03.2014 1,29,333/- AY 2015-16 26.03.2015 2,19,000/- 31.05.2015 54,000/- AY 2016-17 26.03.2016 2,19,600/- 31.03.2016 2,19,600/- AY 2017-18 20.05.2017 20,00,000/- 31.03.2017 2,19,000/- AY 2018-19 31.03.2018 29,400/- 31.03.2018 29,400/- 39. Ms Mewa Purohit Rs. 14,00,000/-:- Assessee submitted Following documents. a. Pan Card A.Y. 2014-15 Pratap Uttam Purohit b. Adhar Card c. Income tax return d. Loan confirmation e. Bank statement of Mewa Purohit showing receipt and payment of loan and interest amount f. Form 15H/15G received from client and same is intimated to TDS department on 10.04.2014. g. It is also replied in response of notice u/s 133(6) which is mentioned in A.O. order at page 32 h. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 29.03.2014 1,00,800/- 29.08.2013 14,00,000/- 31.03.2014 1,00,800/- AY 2015-16 27.03.2015 1,53,300/- 31.03.2015 37,800/- AY 2016-17 26.03.2015 1,53,720/- 31.03.2016 1,53,720/- AY 2017-18 25.03.2017 1,53,300/- 31.03.2017 1,53,300/- AY 2018-19 20.05.2017 14,00,000/- 31.03.2018 20,580/- 31.03.2018 20,580/- 40. Mr Chandulal Soni Rs. 12.00,000/-:- Assessee submitted Following documents a. Pan Card b. Adhar Card c. Income Tax Return d. Form 16 TDS Certificate e. Loan Confirmation f. Bank Statement Of Chandulal Soni Showing Receipt of Interest. g. Copy of 26AS h. It is also replied in response of notice u's 133(6) which is mentioned in A.Ο. order at page 33 i. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 29.03.2014 70,560/- 17.09.2013 12,00,000/- 31.03.2014 7,840/- 31.03.2014 75,400/- AY 2015-16 A.Y. 2014-15 Pratap Uttam Purohit 26.03.2015 1,31,400/- 31.03.2015 32,400/- AY 2016-17 26.03.2016 1,31,400/- 31.03.2016 1,31,760/- AY 2017-18 25.03.2017 1,31,400/- 31.03.2017 1,31,400/- AY 2018-19 06.06.2017 12,00,000/- 31.03.2018 23,760/- 31.03.2018 23,760/- 41. Ms Sangeeta Sharma Rs. 12,00,000/-:- Assessee submitted Following documents. a. Pan Card b. Adhar Card c. Income Tax Return d. Loan Confirmation e. Bank Statement Of Sangeeta Sharma Showing loan debited to dev engineer. Bank Statement Of Assessee Showing Receipt And Payment Of Loan And Interest Amount, f. Form 15H/15G received from client and same is intimated to TDS department on 10.04.2014. g. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 08.08.2013 15,00,000/- 29.03.2014 1,18,000/- 31.03.2014 1,18,000/- AY 2015-16 26.03.2015 1,64,250/- 31.03.2015 40,500/- AY 2016-17 25.03.2016 1,64,700/- 31.03.2015 1,64,700/- AY 2017-18 25.03.2017 1,64,250/- 31.03.2017 1,64,250/- AY 2018-19 31.03.2018 1,64,250/- 31.03.2018 1,64,250/- AY 2019-20 16.07.2018 15,00,000/- 25.03.2019 47,700/- 31.03.2019 47,700/- 42. Ms Rukmani Choudhary Rs. 18,50,000/-;- Assesse submitted Following documents a. Copy of Pan Card b. Adhar Card c. Income tax return d. Loan confirmation.
A.Y. 2014-15 Pratap Uttam Purohit e. Bank Statement Of Rukmani Choudhary Showing loan payment to dev engineer f. Bank Statement Of Rukmani Choudhary Showing Receipt And Payment Of Loan And Interest Amount, g. Form 15H 15G received from client and same is intimated to TDS department on 10.04.2014. h. Copy of justification filed for source of source by Rukmani Choudhary on 13.12.2016 to Assessing officer Atul and arcade Associate Rs. 13.10.657- Gangaram D. Choudhary Rs. 3,88,000/- Manoj R. Choudhary Rs. 1,50,000/- Total 18.48,657/- i. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 13.09.2013 18,50,000/- 31.03.2014 22,508/- 31.03.2014 2,25,083/- AY 2015-16 27.03.2015 2,03,130/- 31.03.2015 49,950/- Interest claimed AO accepted under scrutiny AY 2016-17 23.03.2016 2,03,130/- 31.03.2016 2,03,130/- Interest claimed AO accepted under scrutiny AY 2017-18 25.03.2017 2,02,575/- 31.03.2017 2,02,575/- Interest claimed AO accepted under scrutiny AY 2018-19 20.05.2017 6,00,000/- 31.03.2018 33,570/- Interest claimed AO accepted under scrutiny 06.06.2017 12,50,000/- 31.03.2018 33,570/-
Budhi Corporation (Yatin Shah) Rs. 50,00,000/-:- Assessee submitted Following documents. a. Income Tax Return b. Computation of Income c. Balance Sheet A.Y. 2014-15 Pratap Uttam Purohit d. Loan confirmation e. Bank Statement of assessee showing loan received, Bank Statement showing loan payment, f. Bank statement of Budhi Corporation showing loan payment. g. Ledgers of Budhi Corporation, h. Form 16A. i. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 19.03.2014 50,00,000/- AY 2015-16 23.01.2015 25,00,000/- 31.03.2015 83,999/- Interest claimed AO accepted under scrutiny AY 2016-17 08.05.2015 25,00,000/- Interest claimed AO accepted under scrutiny 20.05.2015 4,96,500/- Interest claimed AO accepted under scrutiny 44. Marine Gems Private Limited Rs. 15.00,000/-:- a. Assessee submitting following documents in support of Loan. b. PAN Card copy c. Registration Certificate issued by Ministry of Corporate affairs. d. VAT registration Certificate. Import and Export license e. Income tax Return and Ledger Conformation f. Bank statement of assessee showing loan received g. Bank statement of Marine Gens showing loan payment h. Bank statement of assessee showing loan payment i. TDS Certificate, Ledger, j. Annual Accounts. k. Ld. A.O. factually made wrong observation about the ledger confirmation that there is no PAN mentioned in Ledger confirmation. Ld. A.O. himself reproduced ledger confirmation in assessment order and it is on face of ledger confirmation that PAN is duly mentioned in Ledger confirmation at page 43 of A.O. order. l. Ld. A.O. observed that there is no source of said fund, We want to draw your attention on page 377 of paper book whereas bank statement clearly reflected entry on 24.05.2013 that the assessee paid loan to Dev engineer. The source of said loan given to the assessee received from Parshav Gems P L of Rs. 41,85,000/- and same reflated in bank statement of the Marine Gems Pvt. Ltd., and there is no cash deposited in the bank statement of the Marine Gems Pvt ltd. Date of Amount Date of Receipt Amount Remark A.Y. 2014-15 Pratap Uttam Purohit payment of of loan Remark loan AY 2014-15 31.03.2014 1,40,400/- 24.05.2013 15,00,000/- 31.03.2014 15,600/- 31.03.2014 1,56,000/- AY 2015-16 27.03.2015 1,64,250/- 31.03.2015 40,500/- Interest claimed AO accepted under scrutiny AY 2016-17 15.04.2015 15,00,000/- AO no doubted loan repayment under scrutiny 45. Drashi Gems Pvt Ltd Rs.55,00,000/-:- Assessee furnished the following documents in support of loan. a. Income Tax Return Acknowledgement b. copy of Screen Shot from Ministry of Corporate affairs about status of company c. Ledger Confirmation d. Copy of Bank Statement of Dev Engineers showing loan received e. Copy of Bank Statement of DGPL showing loan payment to assesse f. Copy of Bank Statement of Dev Engineers showing loan paid g. TDS Certificate h. Ledger Accounts i. Tax Audit Report and ITR Form Annual Accounts j. Ld. A.O. failed to analysis bank statement of Drashi Gems Pvt Ltd whereas there is credit entry on 25.05.2013 of Rs. 36,00,000/- from Krishna raj Daimond and there is also credit entry on 23.05.2023 of Rs. 20,09,000/- from Sugan Exim P L on 23.05.2013. Drashi Gems Pvt Ltd advanced money from this known sources and which is clearly reflated in bank statement of Drashi Gems Pvt Ltd. there is no cash deposited in the bank statement of 48. Drashi Gems Pvt Ltd k. A summary of each transaction reproduced as under:- Date of Amount Date of Receipt Amount Remark payment of of loan Remark loan AY 2014-15 31.03.2014 5,17,500/- 22.05.2013 35,00,000/- 31.03.2014 57,500/- 23.05.2013 20,00,000/- 31.03.2014 5,75,000/- AY 2015-16 27.03.2015 6,05,250/- 27.03.2015 1,48,500/- Interest claimed AO accepted under scrutiny AY 2016-17 A.Y. 2014-15 Pratap Uttam Purohit 15.05.2015 25,00,000/- AO no doubted loan repayment under scrutiny 16.05.2015 30,00,000/- AO no doubted loan repayment under scrutiny
Now before proceedings further, we would like to refer Section – 68 of the Income Tax Act, 1961 – Finance Act, 2023 which is reproduced as under: Cash credits. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the 93[Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as theincome of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.] 45. Our attention was also drawn on Memorandum Explaining the Provisions in the Finance Bill, 2022, in respect of Section 68, which is reproduced as under: Section 68 of the Act provides that where any sum is found to be credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him A.Y. 2014-15 Pratap Uttam Purohit is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
The onus of satisfactorily explaining such credits remains on the person in whose books such sum is credited. If such person fails to offer an explanation or the explanation is not found to be satisfactory then the sum is added to the total income of the person. Certain judicial pronouncements have created doubts about the onus of proof and the requirements of this section, particularly, in cases where the sum which is credited as loan or borrowing 3. It is noticed that there is a pernicious practice of conversion of unaccounted money by crediting it to the books of assesses through a masquerade of loan or borrowing.
Vide Finance Act, 2012, it was provided that the nature and source of any sum, in the nature of share application money, share capital, share premium or any such amount by whatever name called, credited in the books of a closely held company shall be treated as explained only if the source of funds is also explained in the hands of the shareholder. However, in case of loan or borrowing, the judicial decisions have held that only identity and creditworthiness of creditor and genuineness of transactions for explaining the credit in the books of account is sufficient, and the onus does not extend to explaining the source of funds in the hands of the creditor 5. It is proposed to amend the provisions of section 68 of the Act so as to provide that the nature and source of any sum, whether in form of loan or borrowing, or any other liability credited in the books of an assessee shall be treated as explained only if the source of funds is also explained in the hands of the creditor or entry provider. However, this additional onus of proof of satisfactorily explaining the source in the hands of the creditor, would not apply if the creditor is a well- regulated entity. i.e., it is a Venture Capital Fund, Venture Capital Company registered with SEBI 6. This amendment will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.
Thus, after considering the above prepositions, the we are of the view that the requirement of explaining the source of the source of receipts came into the statute book by amendment to Section 68 of the Act on 1st April. 2023 i.e. effective from Assessment Year 2023-24 onwards. Therefore, during the subject assessment year, there was no requirement to explain the source of the source.
In this regard, the reliance is being placed on the decision of the Hon'ble Jurisdictional Bombay high Court in case Gaurav Triyugi A.Y. 2014-15 Pratap Uttam Purohit Singh Vis. Income Tax Officer 24(3)(1), Mumbai" reported in [2020] 121 taxmann.com 86 (Bombay) held as under. Section68 of the Income-tax Act. 1961 Cash credit (Unsecured loan) Assessment year 2010-11 Whether in order to establish receipt of credit in cash, as per requirement of section68, assessee has to explain three conditions. namely, identity of creditor, genuineness of transaction; and credit worthiness of creditor Held, yes Assessee individual had taken unsecured loan of certain amount from one ST Assessing Officer observed that ST had given said loan amount from its bank account and prior to which this amount wascredited to her bank account as gift from two persons, namely, RBS and SST who were her relatives He was of view that sources RBS and SST were suspected - Consequently, he treated loan amount received by assessee from ST as unexplained cash credit and made additions under section68 - It was noted that loan amount was given to assessee through cheque by ST - There was no dispute as to identity of creditor ST - There was also no dispute about genuineness of transaction - That apart, creditor had explained as to how credit was given to assessee as amount was received by it from RBS and ST-Further, revenue could not prove or bring any material to impeach source of credit Whether, on facts, assessee had discharged its onus as per requirement of section 68 and it was not required for assessee to explain sources of source i.e. genuineness of receipt of amount by ST from RBS and SST-Held, ves - Whether, therefore, impugned addition under section68 made to income of assessee was to be deleted - Held, yes [Paras 13 to 16] [In favour of assessee).
In Pr. CIT v. Veedhata Towers (P.) Ltd. [2018] 403 ITR 415 (Bom), the court has held that assessee is only required to explain the source of the credit. There is no requirement under the law to explain the source of the source.
We also place reliance upon the decision of Hon'ble Gujrat High Court in case of Deputy Commissioner of Income-tax V/s. Rohini Builders reported in [2003] 127 Taxman 523 (Gujarat) which is held as under: Section 68 of the Income-tax Act, 1961 Cash Credits Assessing Officer made addition of Rs. 12,85,000 as unexplained cash credits in respect of loans taken by assessee from 21 parties Assessee had discharged initial onus by providing identity of all creditors by giving their complete addresses. GIR numbers/permanent account numbers and copies of assessment orders wherever readily available Assessee had A.Y. 2014-15 Pratap Uttam Purohit also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors - Repayment of loans and interest thereon was also made by account payee cheques by assessee and tax also had been deducted at source on interest payments and remitted - Whether assessee was not expected to prove genuineness of cash deposited in bank accounts of creditors, because under law, assessee can be asked to prove source of credits in its books of account but not source of source Held, ves Whether merely because summons issued to some of creditors could not be served or they failed to appear before Assessing Officer, could not be ground to treat those credits as non-genuine - Held, ves - Whether considering torality of facts and circumstances of case, especially fact that Assessing Officer had not disallowed interest claimed/paid in relation to those credits in assessment year under consideration or even in subsequent assessment years, and tax at source had been deducted out of interest paid credited to creditors. Tribunal was justified in deleting addition made Held. yes Whether as there was no substance in appeal and no substantial question of law arose, appeal was liable to be dismissed-Held, yes 50. Further Hon'ble Gujrat High court in case of Principal Commissioner of Income-tax V/s. Ojas Tarmake (P.) Ltd reported in [2023] 156 taxmann.com 75 (Gujarat) held as under. Section 68 of the Income-tax Act, 1961 Cash credits (Unsecured loan) -Assessment year 2013-14 During assessment proceedings it was noted that assessee had shown particulars of unsecured loan received during relevant assessment year Assessing Officer issued letters under section 133(6) on creditors of unsecured loans Thereafter, Assessing Officer made additions with respect to unsecured loan on ground that assessee failed to discharge onus of liability as laid down under section68- On appeal. Commissioner (Appeals) upheld additions on ground that assessee failed to produce any of creditors before Assessing Officer - Whether since Tribunal found on lacts that amount of loan received by assessee was returned to loan party during year itself and all transactions were carried out through banking channels, no error of law was committed by Tribunal by deleting addition made und section 68-Held. [Paras 3 and 4] [In favour of assessee] 51. Reliance is also placed upon the decision in the case of Sahibganj Electric Cables (P.) Ltd, reported in [1975] 115 ITR 40(CAL.), Hon'ble High Court of Calcutta held as under: Section 68 of the Income-tax Act, 1961 Cash credits Assessment year 1961-62 Loans in question were received by assessee by cheques and repayments were also made by cheques Assessee had given confirmation letters of respective parties and in said letters income-tax file numbers of alleged creditors were given Cheques for repayment of loan were cleared through assessee's banker - Tribunal held that assessee had discharged onus Prima facie that laid on him and as such amount of A.Y. 2014-15 Pratap Uttam Purohit loans were not his income from undisclosed sources Whether order of Tribunal was justified - Held. Yes 52. And the decision of the Hon'ble High Court of Punjab & Haryan in case of Varinder Rawlley reported in [2014] 51 taxmann.com 524 (Punjab & Haryana) held as under. Section 68 of the Income-tax Act, 1961 Cash credit (Sale of goods) -Assessment year 2002-03 Whether where assessee received and returned amount in question by way of account payee cheques and transaction was reflected in bank accounts of assessee as well as creditor who was an income-tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated as assessee's income when department failed to prove to contrary Held. yes [Paras 9 and 10] [In favour of assessee) 53. Further we would like to rely upon decision of Hon'ble HIGH COURT OF RAJASTHAN in case of Jai Kumar Bakliwal reported in [2014] 45 taxmann.com 203 (Rajasthan) held as under: Section 68 of the Income-tax Act, 1961 Cash credit (Unsecured loan from relatives) - Assessment year 2006-07- Unsecured loan raised by assessee from relatives was added in income of assessee on ground that none of creditors were able to prove source of amount advanced to assessee and immediately before grant of loan by them cash was deposited in their accounts - However. it was admitted by Assessing Officer that all creditors were assessed to Income tax and they had provided confirmation as well as their PAN - Moreover, all payments were through account payee cheques and most of cash creditors appeared before Assessing Officer and were examined on oath - Whether since there was no clinching evidence nor Assessing Officer had been able to prove that money actually belonged to none but to assessee himself, action of Assessing Officer appeared to be based on mere suspicion and, thus, addition required to be deleted - Held, yes [Paras 9 & 10] [In favour of assessee] 54. Therefore, CIT (A), considering each and every aspect, had deleted the addition and the relevant para of CIT(A) mentioned at page no. 26-28 and para 6.6.2 of CIT(A) Order, which is reproduced herein below: “6.6.2 Now, it would be appropriate to analyse the objection of the AO in light of documents submitted by the appellant in each case:
A.Y. 2014-15 Pratap Uttam Purohit 1. Saumya Menon (Rs. 5,00,000): I have noted that in this case only document presented before AO was ledger copy and bank account of appellant reflecting the loan but confirmation and other documents were not presented before AO. In absence of these documents, the onus is not discharged by the appellant as mandated in section 68, therefore the action of AO is justified. The addition of amount u/s 68 is sustained.
2. Maradhan Roadways (Rs. 2,00,000): It is noted that in this case only document presented before AO was ledger copy and bank account of appellant reflecting the loan but confirmation and other documents were not presented before AO. In absence of these documents, the onus is not discharged by the appellant as mandated in section 68, therefore the action of AO is justified. The addition of amount u/s 68 is sustained.
Amit J. Purohit (Rs. 3,00,000): I have noted that in this case only document presented before AO was ledger copy and bank account of appellant reflecting the loan but confirmation and other documents were not presented before AO. In absence of these documents, the onus is not discharged by the appellant as mandated in section 68, therefore the action of AO is justified. The addition of amount u/s 68 is sustained.
4. Sukidevi B. Zala (Rs. 15,00,000): AO has disallowed the amount as source of source of credit was not established and party did not respond to summons. The creditworthiness of the loan party was not established. I have noted that appellant has produced documents as mentioned in table above and as per bank account there is no cash deposit in party's account before giving loan. It is also not the case which could be of entry operators etc. Further, copy of ITR for AY 2014-15 filed with AO shows that interest income earned from appellant has been offered in return.
Rajesh Kumar Purohit (Rs. 15,00,000): AO has disallowed the amount and the appellant failed to produce the loan party for verification. Moreover, appellant has filed two confirmations where amount of interest in one confirmation is nil. I have noted from the submission filed by the appellant before AO that the creditor has responded to the notice issued to him by the AO u/s 133(6) of the Act. Further, appellant has filed the Form 16A wherein amount of interest is mentioned as Rs. 1,02,830/- which is same as confirmed by the creditor.
6. Ratadevi Chaudhary (Rs. 20,00,000): Similar to previous cases, the source of the loan was not clarified, and the loan party's creditworthiness was not proved. Summons were not complied with. I have noted that creditor has replied to the notice issued to her u/s 133(6). She has also explained the source of money received by her which was ultimately advance as loan to the appellant. Suresh Sharma (Rs. 16,50,000): The appellant could not substantiate the source of the loan, and the loan party did not respond to summons. The loan party's creditworthiness was not established. I have noted that creditor responded to the notice u/s 133(6) sent by AO for verification of loan. Appellant A.Y. 2014-15 Pratap Uttam Purohit has submitted the documents as mentioned in foregoing table to establish the veracity of loan.
Mewa B. Purohit (Rs. 14,00,000): AO has mention that the immediate source of the loan was not provided, and despite multiple requests, the loan party was not produced for recording evidence. The loan party's creditworthiness and identity were not proved. I have noted that the creditor has responded to the notice issued u/s 133(6) and submitted the requisite documents. Further, bank statement reveals that creditor was having sufficient funds to advance the loan and neither any cash was deposited before loan transaction or any doubt has been raised by AO against the credit entries before the such transactions.
9. Chandulal Soni (Rs. 12,00,000): AO states that no proof was provided for the immediate source of the loan, and discrepancies in the loan party's signatures on documents raised doubts about the authenticity of the submitted documents. I have noted that creditor has responded to the letter u/s 133(6) sent by AO for confirmation of loan. Moreover, the difference of signature as mentioned by AO is with respect to signature on PAN card and that in confirmation letter. It is pointless to compare the two as PAN card is quite older and other means of identity in form of ITRs for four years have been furnished. Bank statement reflects balance available for loan advancement without any cash deposit or dubious credit entry. Apparently, creditor has also availed Form 15G/15H from the department.
Sangeeta Sharma (Rs. 15,00,000): There were inconsistencies in the documents submitted by the appellant, including a mismatch in interest figures on the confirmations. The source of the loan was not clear, and summons were not complied with. It is noted that Party has submitted loan confirmation, bank statement reflecting advance and return of loan and interest. Form 50G is also submitted.
Rukmani Devi Chaudhary (Rs. 18,50,000): AO has raised identical reasons for denying the loan as genuine. I have noted that creditor has submitted her reply in response to letter u/s 133(6). She identified the persons from whom she received money before advancing the same. She has sufficient money in bank and that too without any cash deposit or dubious credit entry before the same.
Bodhi Corporation (Rs. 50,00,000): The AO has contended that the immediate source of the loan was unclear, and the loan party's creditworthiness was questionable. The appellant failed to produce the loan party despite repeated requests. I have noted from the details filed before AO that creditor is a regular tax payer and filed copy of its ITR for AY 2014-15 wherein it has declared income of 7 Lakhs approx. It is clear from the details that it has taken loan to source its transaction with the appellant. Moreover, sufficient funds are available in bank for impugned transaction.
Marine Gems Pvt. Ltd. (Rs. 15,00,000): AO has raised doubts over source of the source and creditworthiness of the creditor. I have noted that A.Y. 2014-15 Pratap Uttam Purohit appellant has submitted confirmation letter with PAN, bank account etc. Bank account shows that money was advanced when creditor was having sufficient balance and no cash deposit or dubious entries were noted in its bank account.
Drasti Gems Pvt. Ltd. (Rs. 55,00,000): The source of the loan was not clarified. and there were issues with the documentation submitted. The loan party's creditworthiness was not supported by their financial standing, and no further clarification was provided by the appellant despite requests. I have noted that appellant has submitted confirmation letter with PAN, bank account etc. Bank account shows that money was advanced when creditor was having sufficient balance and no cash deposit or dubious entries were noted in its bank account.”
Now before us, no new facts have been brought to controvert or rebut the findings of the Ld. CIT(A). Therefore, we upheld the findings of the Ld. CIT(A) on this ground and dismiss the ground raised
by the revenue. Ground No. 06
56. This ground raised by the revenue relates to challenging the order of CIT(A) in deleting the disallowance of interest.
57. In this regard, we have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities.
58. From the records, we notice that in respect of Disallowance out of Interest Expenses, we notice that the assessee had claimed interest expenses of Rs 7,68,25,361/-, In the assessee's case a number of unsecured loans have been found bogus on which the assessee has claimed interest expenses:
Sr. No. Name of the party Amount 1. M/s Marine Gems Pvt. Ltd 1,56,000/- 2. Smt. Mewa B. Purohit 1,00,800/- 3. Smt. Ratudevi C. Choudhary 1,29,333/- A.Y. 2014-15 Pratap Uttam Purohit
4. Smt. Rukamani Pukhraj Choudhary 1,23,333/- 5. Smt. Sangeeta Sandeep Sharma 1,18,000/- 6. Smt. Suki Devi B. zala 13,500/- 7. Shri Suresh Sharma 1,10,000/- 8. M/s. Veena Gems 6,44,000/- 9. M/s Victor Diamond 7,59,533/- 10. Shri Chandulal Soni 78,400/- 11. M/s Drashti Gems Pvt. Ltd. 5,75,000/- 12. Shri Rajesh Kumar B. Rajpurohit 1,02,833/- Total 29,10,732/- 59. It was submitted that it is consequential interest to except interest on M/s Veena Gems of Rs. 6,44,000/- and Mis Victor Diamond of Rs. 7,59,533/- Lá. A.O. did factual mistake treated as non-genuine loan. It was submitted that the said loan was treated as a genuine loan in A Y 2013-14 and copy of the assessment order has already been placed on record. 60. Thus, Ld. CIT(A) has taken proportionate interest and confirmed additions in respect of Saumya menon, Marudhan Roadways and Amit J Purohit whereas no interest has been given. 61. Now before us, no new facts have been brought to controvert or rebut the findings of the Ld. CIT(A). Therefore, we upheld the findings of the Ld. CIT(A) on this ground and dismiss the ground raised
by the revenue. Ground No. 07 and 08 submission:
62. These grounds raised by the revenue relate to challenging the order of CIT(A) in deleting the additions made u/s 68 & 69C of the Act.
A.Y. 2014-15 Pratap Uttam Purohit 63. In this regard, we have heard the counsels for both the parties, perused the material on record, judgments cited before us and the orders passed by the revenue authorities.
From the records, we notice that the assessee is regular investor in shares and He has shown long term capital gain (LTCG) of Rs. 5,08,13,828/-in the return of income filed by it and claimed the same exempt under sec 10(38) of the L. T. Act 1961.
The assessee has shown Long Term Capital Gain in following scripts which is mentioned as under:-
Name of Script Purchases Sale value Long-term capital amount gain M/s Kailash Auto Finance 10,00,000/- 3,80,64,000/- 3,70,63,500/- Ltd. (KAFL), earlier known as Careful Projects Advisory Ltd. (CAPL) M/s. Moryo Industries Ltd Rs. 25,00,000/- 1,47,18,292/- 1,36,87,655/- (MIL) (1,00,000 shares @ 25 per share)
In respect of shares scripts of M/s Kailash Auto Finance Ltd., it was submitted that the assessee had purchased 100,000 shares of Careful Projects Advisory Limited (CAPL) in off market from Sanskriti Vincom Ltd. and he has paid Rs. 10,00,000/- from ING Vysya Bank vide Cheque no. 763,433 and said payment is reflecting bank statement of the assessee.
On careful Projects Advisory Limited, the shares were split in the ratio of ratio 01: 10 hence the assessee got 10,00,000 shares of CAPL. It was also A.Y. 2014-15 Pratap Uttam Purohit submitted that this arrangement was approved by the Hon'ble High Court of Judicature at Allahabad. It was further submitted that the Company had informed that, the Company Writ Petition No. 284 and 285 of 2013 before the Hon'ble High Court of Judicature at Bombay passed an order on May 10, 2013 approving the scheme of arrangement relating to M/s. Careful Projects Advisory Ltd. & M/s. Panchshul Marketing Ltd. (PML) (Transferor Companies).
Therefore, after merger of both companies 10,00.000 equity shares of M/s Kailash Auto Finance Ltd.(KAFL) was allotted to the assessee on 22.01.2013.
Thus, the assessee sold shares was dematerialized on 02.01.2013 and he has sold share in the middle of February and March 2014. All 10,00,000 shares of Mis Kailash Auto Finance Ltd. (KAFL) were sold at the average rate of Rs.38 during the period Feb to Mar 2014 70. The details of capital gain are as under:
Name Share allotted No. of Amount Date of Sale price Capital of of Kailash Shares of sales gain script Auto purchases C.P.A.L. 08/06/2013 1,50,000 1,50,000 18.02.2014 56,41,500 54,91,500 C.P.A.L. 08/06/2013 1,00,000 1,00,000 24.02.2014 37,81,000 36,81,000 C.P.A.L. 08/06/2013 2,00,000 2,00,000 26.02.2014 75,62,000 73,62,000 C.P.A.L. 08/06/2013 2,00,000 2,00,000 28.02.2014 75,62,000 73,62,000 C.P.A.L. 08/06/2013 1,50,000 1,50,000 03.03.2014 57,36,500 55,86,000 C.P.A.L. 08/06/2013 1,00,000 1,00,000 05.03.2014 38,21,000 37,21,000 C.P.A.L. 08/06/2013 1,00,000 1,00,000 12.03.2014 39,60,000 38,60,000 10,00,000 10,00,000 3,80,64,000 3,70,64,000 A.Y. 2014-15 Pratap Uttam Purohit
In this regard, out attention was drawn on the fact that the assessee is a regular investor in shares and securities as evident from past assessment records. The shares were allotted under amalgamation order of Hon'ble High Court and sold through a Registered Broker named "Sanghvi Savla Stock Brokering Limited." in the Stock Exchange. The shares were purchased and sold based on the prevailing market condition. The sale of shares is supported by contract notes issued by broker. The payments were received through proper banking channel. The sale transactions were subjected to Security Transaction Tax, Service Tax, Brokerage charges and Stamp duty. The share purchase and sale transactions are reflected in the d-mat account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed us. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange.
The Bombay stock data shown as on 01.04.2014 and 01.04.2015 on BSE website shows the Foreign Institutional Investors was shareholder in the company Kailash auto Finance Limited.
It is also facts that Kailash Auto Limited was listed in Bombay stock exchange as Group A company at the time of sale of shares.
A.Y. 2014-15 Pratap Uttam Purohit 74. We had noticed that the Turnover of Kailash auto Finance Limited was increased to 62.42 crore (FY 2014-15) from 34 Lacs (F y 2010-11). The turnover growth is 183 times.
Financial year Turnover March 2011 34,31,591/- March 2012 12,62,286/- March 2013 33,83,749/- March 2014 20,40,98,732/- March 2015 62,41,61,768/- 75. We also place reliance on SEBI order in case of Kailash Auto Finance Limited whereas SEBI has been given clean chit to assessee in its order dated SEBI/WTM/MPB/EFD-DRA-1/31/2017 dated 21.09.2017: 3. Accordingly, SEBI passed Ad interim ex-parte order dated March 29, 2016 ("interim order"), inter-alia, restraining 246 entities from accessing the securities market and buying. selling or dealing in securities, either directly or indirectly, in any manner whatsoever, till further directions. The name of the entities against whom the interim order was passed are as follows.. Ser. No. 166 Pratap Purohit - Page 6 of order.
4. Subsequently. five confirmatory orders dated June 15, 2016, September 30, 2016. October 21, 2016. October 27, 2016 and July 13, 2017 were passed, inter-alia, confirming the directions passed in the interim order against 241 entities. "5. Pursuant to the interim order, SEBI conducted a detailed investigation into the role of various entities in price manipulation in the scrip of Kailash Auto so as to ascertain the violation of securities laws. Upon completion of investigation by SEBI, investigation did not find any adverse evidence/adverse findings in respect of violation of provisions of the PFUTP Regulations inrespect of the following 244 entities (against whom directions were issued vide the interim order and/or confirmatory orders) warranting continuation of action under Section 11B r/w 11(4) of the Act. The details of the 244 entities are as follows:- Ser. No. 164 Pratap Purohit - Page 6 of order.
6. Considering the fact that there are no adverse findings against the aforementioned 244 entities with respect to their role in the manipulation of the scrip of Kailash Auto, I am of the considered view that the directions issued against them vide interim order dated March 29, 2016 and confirmatory orders dated June A.Y. 2014-15 Pratap Uttam Purohit 15, 2016, September 30, 2016. October 21, 2016, October 27, 2016 and July 13. 2017 are liable to be revoked.”
Further, reliance is also placed upon the decision of Hon'ble ITAT wherein the same script, the additions were deleted by the Hon'ble ITAT: a. ITA 390 M 2020 in case of M/s Anusmriti sarkar b. 2018 in case of Shri Udit Goyal c. ITA No. 219. 222 & 224/GAU/2019 In case of Agrim Infraproject Private Limited 77. As far as M/s. Moryo Industries Ltd. (MIL) is concerned. In this regard, with regard to the additions on account of long term capital gain on script M/s. Moryo Industries Ltd. (MIL) it was submitted that the assessee had purchased the 1,00,000 shares @25 per share through preferential allotment scheme from the company and he had paid Rs. 25.00,000- from its bank account on 16.10.2012 maintaining in ING Vysya bank by RTGS and said share allotted to assessee on 09.11.2012.
M/s. Moryo Industries Ltd. share was split into 1:2 hence the assessee got 2.00.000/-shares of M/s. Moryo Industries Ltd. (MIL).
During the year under consideration, the assessee sold 82,451 shares out of total of 2,00,000/-shares allotted to him. It is also facts that the assessee sold 82,451 shares at the average rate of Rs. 178.50 of M/s. Moryo Industries Ltd. (MIL) during the months of Dec 2013 to Jan 2014:
Name Date of No. of Amount of Date of Sale price Capital gain of the purchases share purchase sales script Moryo 09.12.2012 4580 27,250/- 11.12.2013 7,42,784/- 6,85,534/- Moryo 09.12.2012 5020 72,750/- 12.12.2013 8,09,173/- 7,46,423/- A.Y. 2014-15 Pratap Uttam Purohit Moryo 09.12.2012 5000 62,500/- 13.12.2013 8,17,029/- 7,54,529/- Moryo 09.12.2012 6000 75,000/- 20.12.2013 10,02,960/- 9,27,960/- Moryo 09.12.2012 9851 1,23,138/- 03.01.2014 16,66,296/- 15,43,159/- Moryo 09.12.2012 20000 2,50,000/- 21.01.2014 33,83,000/- 31,33,000/- Moryo 09.12.2012 5000 62,500/- 07.02.2014 9,90,500/- 9,28,000/- Moryo 09.12.2012 8000 1,00,000/- 10.02.2014 15,56,160/- 14,56,160/- Moryo 09.12.2012 9000 1,12,500/- 17.02.2014 17,70,390/- 16,56,890/- Moryo 09.12.2012 10000 1,26,000/- 20.02.2014 19,80,000/- 18,55,000/- 82451 10,30,638/- 1,46,18,292/- 1,36,87,655/-
Our attention was also drawn upon the fact that the assessee was a regular investor in shares and securities as evident from past assessment records. Assessee purchased share under preferential allotment and made payment through banking channels. The Share sold based on the prevailing market condition through registered broker "Sanghvi Savla Stock Brokering Limited. The sale of shares is supported by contract notes issued by broker. The payments were received through proper banking channel. The sale transactions were subjected to Security Transaction Tax. Service Tax, Brokerage charges and Stamp duty. The share purchase and sale transactions are reflected in the d-mat account. The purchase of shares (Investments) was not disputed in earlier year, where assessment is completed u/s. 143(3) of the Income Tax Act. These facts are verifiable from the regular books of accounts. The transactions can also be verified from the Stock Exchange.
The Bombay Stock Exchange reported that assessee's share were under lock in period for one years and status was also showing in shareholding 09 November 2012. December 2012, March 2013, June 2013, Sep 2013 and A.Y. 2014-15 Pratap Uttam Purohit assessee had enclosed copy of shareholding status for ready reference and records.
It is a fact on record that the said company's shares were traded up to 20 June 2022 and the said information was also available on the Bombay Stock Exchange website.
Further our attention was draw upon the facts that in case of Moryo Industries SEBI have been passed order on and given following finding as under: “Upon completion of the investigation by SEBI, it is noted that the investigation did not find any adverse evidence/findings against 85 entities in respect of their role in price manipulation in the scrip of Moryo, warranting the continuation of action under Sections 11B and 11(4) of the SEBI Act. Hence, violation ofprovisions of SEBI Act and PFUTP Regulations, etc., were not observed in respect of the following entities, including assessee Sr. No. Name of the entity PAN 42. Pratap Uttam Purohit AFZPP9994A Considering the fact that there are no adverse findings against the aforementioned entities with respect to their role in the price manipulation in the scrip of Moryo warranting continuation of action under Sections 11B and 11(4) of the SEBI Act, I am of the considered view that the directions issued against them vide interim order dated December 04, 2014 which were confirmed vide Orders dated March 18, 2016 and August 22, 2016, are liable to be revoked.”
It was also submitted that the Hon'ble Mumbai Income Tax Appellant Tribunal already deal with same script in case of Jagdish B. Prajapati (HUF) No.548/Mum 2019 for the A Y 2014-15. wide/I.T.A.
We noticed that the Assessing officer used the statement of Shri Sunil Dekania. Shri Alok Harlalka and Sanajy Vora. However, the assessee had no connection with the said persons. In this regard objections were also filed by A.Y. 2014-15 Pratap Uttam Purohit the assessee during its reply of show cause notice mentioned at page 84 of assessment order.
Whereas, the A.O. referred the survey action u/s 133 in the case of Anand Rathi Shares and brokers limited, whereas the said M/s Anand Rathi Shares are not brokers of the assessee.
No statement was provided to the assessee, and none of the persons whose statements were relied upon were produced for cross-examination. Even the extract of the statement mentioned in the assessment order does not indicate the name of the assessee.
We noticed that the statement recorded on 22.08.2016 during the survey proceedings was retracted, and no evidentiary value is attached to said statement. However, later Search action was also conducted in the assessee’s own case and but no admission was derived by the Search team. In this regard, the instruction issued by the Central Board of Direct Taxes (CBDT in short) in F.No.286/2/2003-IT(Inv) dated 10.3.2003 would be relevant to be looked into wherein it is mentioned that while recording statement during the course of search and seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. For the sake of convenience and clarity, the relevant instructions dated 10.3.2003 issued by CBDT is reproduced hereunder:- To All Chief Commissioners of Income tax (Cadre Contra) & All Directors General of Income Tax Inv. Sir. Sub:- Confession of A.Y. 2014-15 Pratap Uttam Purohit additional Income during the course of search & seizure and survey operation regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search& seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on' collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.