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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
आदेश / O R D E R
PER AMARJIT SINGH, AM:
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-3, Thane, which in turn arises from the assessment order passed by the A.O u/s 143(3) of the Income Tax Act, 1961, dated 30.03.2015 for A.Y. 2012-13. The assessee has assailed the impugned order on the following grounds before us:
Shri Shambhubhai Patel Vs. ITO, Ward 4(5)
“1. The Ld. CIT(A)-3 Thane had erred in passing the order dated 10.08.2020 without appreciating the facts that during the course of appellate proceedings, the AR had submitted additional evidences under Rule 46A.Subsequently such evidences were remanded back to the file of the AO for verification. However, without the receipt of remand report, the Ld CIT(A) had chosen to completely ignore the evidences produce in order to substantiate the appellant's case. This is nothing but gross contravention of the principles of natural justice.
2. The Ld. CIT (A) further erred in confirming the additions made by the Ld. AO amounting to Rs. 91,27,000/-on the alleged ground that the appellant had taken bogus loans without appreciating the fact that the A.R. of the appellant had submitted all the relevant documentary evidences before the AO such as loan confirmations, ITR and bank statements to prove identity, credit worthiness as well as genuineness of the transactions. However disregarding the same, the learned CIT (A) chose to confirm the addition of loans as unaccounted cash credits.
3. The learned CIT (A) further erred in confirming the additions of the Ld. AO for an amount of Rs. 4,50,000/- u/s 68 of The Income Tax Act,1961 on the alleged ground that the appellant has accepted cash in the form of unsecured loans without appreciating the facts that the source of cash deposit was from withdrawals made from the appellant's own Overdraft Account maintained with Model Co-Operative Bank.
4. The learned CIT (A) erred in confirming the disallowance made by the Ld. AO for interest on loan to the tune of Rs.2,69,750/- paid to Mr. Kiran A Lund, on the ground that the said interest is inflated and the interest rate charged is higher than the rest of the loan creditors, without considering the circumstances and business mindset under which such loan was taken and neglecting the genuineness of the transaction. 5. The learned CIT (A) further erred in confirming the disallowance made by the Ld. AO for interest amounting to Rs. 2,00,221/- on the ground that the same was incurred on a loan taken for personal use without appreciating the fact that the said loan was taken in the proprietor's name and was used for the business of the proprietorship firm. The learned CIT (A) erred in inferring that the loan taken under "Personal Name" does not mean loan taken for "Personal Use". 6. The learned CIT (A) further erred in confirming the interest imposed u/s. 234B and 234C by the Ld. AO. The Appellant craves leave to add to and/or amend and/or delete and/or modify and/or alter the aforesaid grounds of appeal as and when the occasion demands.”
Fact in brief is that return of income declaring total income of Rs.7,51,155/- was filed on 29.09.2012. The case was subject to scrutiny
Shri Shambhubhai Patel Vs. ITO, Ward 4(5) assessment and notice u/s 143(2) of the Act was issued on 06.08.2013. The assessment u/s 143(3) of the Act was finalized on 30.03.2015 determining total income at Rs.1,07,99,130/-. The remaining fact of the case pertaining to the ground of appeal filed by the assessee are discussed while adjudicating these ground of appeal as follows:
1st & 2nd Ground of appeal:
Addition on account of unsecured loan:
3. During the course of assessment proceedings the assessing officer noticed that assessee has received unsecured loan of Rs.3,72,46,887/-. The A.O has asked the assessee to produce the documentary evidences to prove the genuineness of these loan. On perusal of the detail filed the A.O observed that assessee has not submitted complete detail in respect of the part of the loan obtained from the following parties:
Sr. No. Name of the party Amount (in Rs.) 1 F.B. Lobo 10,00,000/- 2. Harvinder Singh Sehgal 15,00,000/- 3. Jayesh Shah 11,00,000/- 4. Mandar Ashok Naik 14,51,000/- 5. Sarodar Gonsalves 15,76,000/- 6. Vinayak Developers 25,00,000/- Total 91,27,000/- Consequently, the assessing officer stated that assessee has failed to prove the genuineness of the transaction and creditworthiness of the loan creditors, therefore, the unsecured loan of Rs.91,27,000/- was treated as unsecured cash credit within the meaning of Sec. 68 of the Act and added to the total income of the assessee.
The assessee has filed appeal before the ld. CIT(A). The assessee explained that required document in respect of the aforesaid parties could not be furnished before the assessing officer during the course of assessment proceeding due to paucity of time, therefore, the required
Shri Shambhubhai Patel Vs. ITO, Ward 4(5) document i.e copies of ITR and confirmation loan etc. were filed before the ld. CIT(A) as additional evidences. However, the ld. CIT(A) has dismissed the appeal of the assessee stating that assessee failed to establish the genuineness of unsecured loan during the assessment as well as appellate proceedings.
During the course of appellate proceedings before us the ld. Counsel has filed paper book comprising copies of document and information furnished before the A.O and ld. CIT(A) during the course of assessment and appellate proceedings. The ld. Counsel has referred page No. 40-70 of the paper book pertaining to additional evidences filed before the ld. CIT(A) for proving creditworthiness, identity and genuineness of loan creditors of Rs.91,27,000/-. The ld. Counsel has vehemently contended that additional evidences filed before the ld. CIT(A) were forwarded to the assessing officer for furnishing remand report, however, no response was received from the assessing officer and ld. CIT(A) has erroneously dismissed the appeal of the assessee without taking into consideration the additional evidences.
On the other hand, the ld. D.R has relied on the order of the lower authorities.
Heard both the side and perused the material on record. During the course of assessment the A.O has made addition of Rs.91,27,000/- u/s 68 of the Act of unsecured loan from 6 parties as mentioned above in this order for want of complete information to be furnished by the assessee. The assessee has furnished the required detail as placed in the paper book at Page No. 40-60 before the ld. CIT(A) as additional evidences to prove genuineness of loan obtained from the aforesaid parties and the ld.
Shri Shambhubhai Patel Vs. ITO, Ward 4(5)
CIT(A) vide letter dated 18.07.2016 had directed the assessing officer to furnish the remand report. However, the appeal of the assessee was dismissed without considering the said additional evidences on the default of the assessing officer for not submitting the remand report. In the light of above facts we are of the considered view that decision of ld. CIT(A) is not justified. Therefore, normally, any irregularity crept in the proceeding then after removing irregularity proceedings is to be initiated from that stage but by remitting the issue to the learned first appellate authority we would be multiplying the litigation, because the ld. CIT(A) would call for a remand report from the assessing officer and proceedings to be commenced on two stages, in order to avoid that situation we would deem it proper to set aside this issue to the file of the A.O for deciding afresh after taking into consideration the additional evidences filed during the course of appellate proceedings before the ld. CIT(A). It is needless to say that observation made by us will not ensure or impair the case of A.O and will not cause any prejudice to the defense explanation of the assessee. Accordingly, this ground of appeal of the assessee is allowed for statistical purposes.
3rd Ground: Addition of Rs.4,50,000/- u/s 68 of the Act:
During the course of assessment on the perusal of bank statement the A.O noticed that there was a cash deposit of Rs.4,50,000/- in the bank account of the assessee maintained with the Federal Bank Ltd. Vasai Road Branch and subsequently, the same amount was transferred to Bhavna Patel on the same day. Bhavna Patel was one of the creditors of the assessee, therefore, the assessing officer was of the view that the assessee had accepted cash in the form of unsecured loan, and the same was added to the total income of the assessee.
Shri Shambhubhai Patel Vs. ITO, Ward 4(5)
The assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee.
Heard both the side and perused the material on record. Without retreating the fact as elaborated supra in this order, the assessee specifically submitted before the ld. CIT(A) that the source of cash deposit was out of cash withdrawal made from the overdraft account maintained with Modal Cooperative Bank Ltd. However, the ld. CIT(A) has dismissed the appeal of the assessee without contrary disproving the facts reported by the assessee. With the assistance of the ld. Representative we have perused the copy of the overdraft account placed in the paper book showing that assessee has made cash withdrawal of Rs.5,50,000/- on 21.09.2011. However, it is noticed that ld. CIT(A) has simply dismissed the ground of appeal of the assessee holding that assessee has not submitted anything to support his claim. After taking into consideration the aforesaid facts and material on record we observe that ld. CIT(A) has not disproved the supporting evidences furnished by the assessee in support of his claim that aforesaid amount of Rs.4,50,000/- was withdrawn from overdraft bank account maintained with Modal Cooperative Bank ltd. before depositing the same in the bank account maintained with the Federal Bank ltd. Therefore, this ground of appeal of the assessee is allowed.
4th Ground: Disallowance of interest of Rs.2,69,750/-:
During the course of assessment the A.O noticed that assessee has claimed interest expenses to the amount of Rs.14,45,000/-. On the perusal of the detail filed the A.O observed that assessee obtained loan from 4 parties and the maximum interest paid to the three parties was between 10% to 13%, however, in the case of one party namely Kiran A.
Shri Shambhubhai Patel Vs. ITO, Ward 4(5)
Lund the assessee has paid interest @ 24%. The assessee has not proved the genuineness of such higher rate of interest paid to the aforesaid party, therefore, the assessing officer has restricted the interest payment @ 13.21% and added the remaining interest amount of Rs.2,69,750/- to the total income of the assessee.
The assessee has filed the appeal before the ld. CIT(A). Before the ld. CIT(A) the assessee has simply stated that he was in need of money therefore he had no option but to take loan from M/s Kiran A. Lund at a higher rate of 24%. The ld. CIT(A) has dismissed the appeal of the assessee stating that assessee has failed to substantiate his claim with documentary evidences.
Heard both the side and perused the material on record. It is noticed that during the course of assessment proceedings assessee has paid interest of Rs.14,45,000/- to 4 parties from whom the loan were obtained as under:
Sr. No. Name Loan Interest paid Rate of Amount interest 1. Kiran A Lund 25,00,000/- 6,00,000/- 24% 2. Naitik Enterprises 50,00,000 5,00,000/- 10% 3. Prabhakar Vijay Kelji 2,27,000/- 30,000/- 13.21% 4. Praful Vadilal Ajmera 30,00,000/- 3,15,000/- 10.5% The assessing officer noticed that comparatively the assessee has paid interest to the one party M/s Kiran A Lund at abnormally higher rate of 24% whereas to the order parties the rate of interest was almost ½ of the said rate of interest. The ld. CIT(A) has dismissed the appeal of the assessee stating that no documentary evidences has been furnished by the assessee to justify the payment of interest at higher rate of 24%. Even, during the course of appellate proceedings before us the assessee has simply filed copy of acknowledgment of return of income filed by M/s
Shri Shambhubhai Patel Vs. ITO, Ward 4(5)
Kiran A Lund without filing any documentary evidence to substantiate the genuineness of paying interest @ 24%, therefore, we don’t find any infirmity in the decision of the ld. CIT(A). Accordingly, this ground of appeal of the assessee stand dismissed.
5th Ground: Disallowance of interest of personal loan:
During the course of assessment the A.O noticed that assessee has debited interest amounting to Rs.20,01,221/- under the head of personal loan. The A.O has added the same to the total income of the assessee stating that assessee could not justify that the loan was used for any business purposes of the assessee.
The assessee has filed the appeal before the ld. CIT(A). Before the ld. CIT(A) the assessee has failed to produce any documentary evidence to prove that personal loan obtained was used for business purposes, therefore, appeal of the assessee was dismissed by the ld. CIT(A).
Even, during the course of appellate proceedings before us the assesee failed to demonstrate that the personal loan was used for the business purpose of the assessee, therefore, we don’t find any need to interfere in the decision of ld. CIT(A). Accordingly, this ground of appeal of the assessee is dismissed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 28.03.2022.