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Facts
The assessee disclosed unsecured loans of Rs. 1,44,67,000 from Dhyaneshwari Multistate Urban Cooperative Credit Society Ltd. (DMUCCSL). The Assessing Officer (AO) questioned the genuineness of the loan, relying on the statement of the society's manager and denying the assessee the opportunity to cross-examine him. The AO made an addition of Rs. 1,44,67,000 under Section 68 of the Act.
Held
The Tribunal held that the assessee had successfully discharged the onus under Section 68 of the Act. It noted that the AO denied the assessee the opportunity to cross-examine a key witness, which was crucial for establishing the genuineness of the transaction. The Tribunal directed the AO to delete the impugned addition.
Key Issues
Whether the addition made under Section 68 was justified without providing the assessee an opportunity to cross-examine the witness whose statement was relied upon by the AO.
Sections Cited
68, 131
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI ANIKESH BANERJEE, HON’BLE
O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the ld. CIT(A)-52, Mumbai [hereinafter ‘the CIT(A)’], dt. 05/06/2024, pertaining to AY 2017-18.
The grievance of the assessee reads as under:- “1. The Ld. CIT (A) erred in confirming addition of Rs.1,44,67,000 u/s 68 of loan received from M/s Dyaneshwari Multi-State Urban Co-operative Credit Society Ltd. (DMSUCCSL). 2. a. The Ld. CIT (A) erred in confirming addition by relying on overwhelming evidence which point that the entire transaction is sham and make believe, but which was never provided to the appellant. b. The Ld. CIT (A) erred in confirming addition by placing reliance on statements, whose cross examination was never provided to the Appellant. c. The Ld. CIT (A) erred in holding that Right to Cross Examine is not absolute in nature and is discretionary. d. The Ld. CIT (A) erred in holding that when Statements are relied on by the Department as secondary evidence, then the denial of right to cross examine is justifiable and cannot be taken as a plea.
2 3. The Ld. CIT (A) failed to consider that if the loan was given by a credit society i.e. a bank and has also accepted the repayment, it tantamounts to acceptance of loan given by the bank and thus satisfies the condition of genuineness of the loan u/s 68.
The Ld. CIT (A) failed to consider that the loan sanction letters found during survey were issued on 21.10.2016 and 06.11.2016 which was prior to the disbursement of loan on 10.11.2016 and 15.11.2016, thus establishing the fact that the bank had agreed in principle to lend to the Appellant, prior to demonetization.
5. The Ld. CIT (A) erred in dismissing the appeal of the Appellant on the ground that identical additions were also made in the hands of M/s DMSUCCSL and which were set aside by the ITAT to the files of the CIT (A).The Ld. CIT (A) failed to consider that it was a case of double addition in the hands of the Appellant.
The Ld. CIT (A) failed to consider the material evidence available with him in the case of DMSUCCSL and thus could have considered the same material in that file and pass a reasoned order.
7. The Appellant craves to leave to add, alter, amend or delete any of the above grounds of appeal
at or before the hearing of the appeal.”
3. Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered in the light of Rule 18(6) of the ITAT Rules.
4. Briefly stated the facts of the case are that the assessee filed its return of income on 14/03/2019 declaring total income at Rs.65,15,970/-. The return was selected for scrutiny assessment and accordingly statutory notices were issued and served upon the assessee.
5. During the course of scrutiny assessment proceedings, the AO noticed that the assessee has disclosed unsecured loans of Rs.1,44,67,000/- which comprises of principal amount of loan of Rs.1,40,00,000/- and interest of Rs.4,67,000/-. This amount was shown as loan from Dhyaneshwari Multistate Urban Cooperative Credit Society Ltd. (DMUCCSL). The following queries were raised relating to the aforementioned loans:-
25. In connection with your contention that you have taken a loan from Dyaneshwa Multistate Urban Cooperative Credit Society Ltd. please submit the following documents/clarifications- • Please submit copy of loan application made to Dyaneshwari Multistate Urba Cooperative Credit Society Ltd. (DMSUCCSL) alongwith copy of all other document. submitted by you. • Explain how did you come to know about DMSUCCSL and how long has been you association with the said Society. • Whether you applied for and became admitted as member, please provide documentary evidence in this regard. • Give details of loans taken by you previously from Banks / Body Corporates / Credit Societies. • Please submit security given by for availing loan with documentary evidence, If no security was given kindly submit the reasons for the same. • Please explain the purpose for which you have taken the loan from DMSUCCSL. • Please furnish details of utilization of loans with supporting evidence. • Please explain as to how you decided the amount of loan to be availed by you from DMSUCCSL. • Please explain as to how DMSUCCSL decided on the amount of loan to be granted to you. • Please explain how the loan was disbursed on 10.11.206 when loan agreement admittedly was entered on 15.11.2016 (read para 6 of your letter dated 11.05.2017. • Please explain how you were granted loan at such a low interest rate of 8% compared to the then prevailing market rate. • It is seen from your submission that interest was paid by you on 06/04/2017 and on 28/04/2017 alongwith repayment of principal. Please explain why interest was neither charged by the Society nor paid by you periodically, i.e. monthly, quarterly, etc. basis. • If you have any contention regarding genuineness of your loan transaction with DMSUCCSL which you have not submitted before you may do so now
The assessee replied to the queries raised by the AO which did not find favour with the AO, who heavily relied upon the statement of Shri Nilesh Kamble, manager of the society. Drawing support from the statement of Shri Nilesh Kamble, the AO came to the conclusion that the impugned transaction was non-genuine. According to the AO DMUCCSL, was admittedly into in/out transactions of cash and funds in form of RTGS/NEFT inwards and outwards of the accounts of the clients. The AO observed that as per the admission of Shri Nilesh Kamble, the main activity of DMSUCCSL is receipt of cash and RTGS from various people and giving of cash and RTGS to various persons.
4 6. The AO denied the opportunity of cross-examining Shri Nilesh Kamble and came to the conclusion that the genuineness of the transactions can be rejected in case the assessee leads evidence which is not trustworthy and made the addition of Rs. 1,44,67,000/- u/s 68 of the Act.
Assessee carried the matter before the ld. CIT(A) but without any success.
We have given a thoughtful consideration to the orders of the authorities below and have perused the documentary evidence brought to our notice.
The approval of loan granted by DMUCCSL reads as under:-