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Income Tax Appellate Tribunal, E BENCH, MUMBAI
order : 31.03.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Department has challenged the order, dated 14.02.2019, passed by the Ld. Commissioner of Income Tax (Appeals)-8, Mumbai [hereinafter referred to as „the CIT(A)‟] under Section 250 of the Income Tax Act, 1961 in appeal [CIT-8/IT-536/15-16] for the Assessment Year 2005-06, whereby the CIT(A) had allowed the appeal filed by the Assessee against the Assessment Order, dated 29.01.2016, passed under section 143(3) read with section 263 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟.)
The Revenue has raised the following grounds of appeal:
Assessment Year: 2005-06 “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in holding that the AO has erred in making addition of Rs.41,49,500/- to the returned income in terms of section 68 of the Act not being satisfied with the genuineness of credit? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of Rs.41,49,500/- holding that the appellant had discharged initial onus to establish identity, creditworthiness and genuineness of the transactions and since the AO had not faulted the confirmations filed before him, the entire addition was merely based on suspicion regarding Basant Marketing Pvt. Ltd. (BMPL) and Satya Securities Ltd. (SSL), which does not stand? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of Rs.41,49,500/- without appreciating that specific information was received from the Investigation Wing, Mumbai stating that as per specific information received from the CBI, ACB, Mumbai, the assessee was involved in entering into bogus transaction with M/s Basant Marketing Private Limited and Satya Securities Ltd ?
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in deleting the addition of Rs.41,49,500/- relying on the decision of the Hon'ble ITAT in the case of Shri Harsh Dalmia for AY 2008-09 without appreciating that the decision of the Hon‟ble ITAT was not accepted by the Revenue, but appeal was not filed following CBDT Instructions applicable at that time due to low tax effect? 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in directing the AO to allow set off of earlier years brought forward business loss against addition u/s 68 of the I.T Act which is assessable under the head „ Income from other sources‟?
Assessment Year: 2005-06 6. The appellant prays that the order of CIT(A) on the above grounds be set aside and that of Assessing Officer be restored.”
Brief facts of the case are that the Assessee, a private limited company, filed its return of income for the Assessment Year 2005-06 on 28.10.2005 declaring loss of INR 98,737/-. The return was processed under Section 143(1) of the Act. Thereafter, re- assessment proceedings were initiated and vide order dated 31.01.2013 assessment was framed on the Assessee under Section 143(3) read with Section 147 of the Act at the total income of INR 2,05,888/- after making disallowance of expenses claimed and treating income from property as income from house property as against business income. Subsequently, order under Section 263 of the Act, dated 19.03.2015 was passed setting aside the aforesaid order passed under Section 143(3) read with Section 147 of the Act.
In the set aside the proceedings under Section 143(3) read with section 263 of the Act, notice under Section 142(1) to the Assessee, inter alia, seeking details/documents pertaining to outstanding loan/liability of INR 13,91,000/- pertaining to BMPL and INR 27,58,500/- pertaining to SSL recorded in the books of accounts of the Assessee. Simultaneously notice under Section 133(6) was issued to BMPL, one of the group companies belonging to Dalmia Group suspected to be indulging in providing accommodation entries. Further, the Assessee was asked to show cause why transactions with SSL, another company belonging to the Dalmia Group, should be treated as genuine. In response to the same, the Assessee fled reply vide letter dated 29.09.2015, 29.12.2015 and 22.01.2016. BMPL also filed response along with copy of ledger and account confirmation. However, the Assessing Officer, not being satisfied with the replies/submissions and documents received during the assessment proceedings, concluded that the Assessee has failed to discharge onus under Section 68 of the Act and Assessment Year: 2005-06 therefore made an addition of INR 41,49,500/- (INR 13,91,000/- + INR 27,58,500/-) under Section 68 of the Act. The relevant findings of the Assessing Officer in the assessment order, dated 29.01.2016, passed under Section 143(3) read with Section 263 of the Act are as under:
“6.1 Loans though obtained from banking channels need not necessarily the genuine in nature. The exact purport of such loans, though obtained through authorised channels cannot be determined to be genuine on the fact of it. The assessee has merely stated that it had obtained unsecured loans from time to time and repaid the same. Despite requesting the assessee, it has chosen not to explain the purpose for which the loans were accepted. The nature and purpose of loan from BMPL and SSL, both Dalmia Group concerns, is hence not known neither sought to be clarified by the assessee despite allowing sufficient time. It is also pertinent to mention that similar assessment proceedings are undertaken in the case of the assessee from AY 2005-06 to AY 2010-11 and that the loan liability claimed to have been brought forward from earlier unknown periods has remained static in the case of SSL and more or less has remained the same in the case for BMPL as claimed from earlier unknown periods till atleast AY 2010-11, unpaid inexplicably claimed as live. The assessee has maintained that the loan were old balances from group concerns prior to the FY 2002 and were availed as per requirements. However no agewise analysis is given nor evidenced as to since when these amounts have arisen in the books of the assessee. Hence the period since when these amounts came into existence as credits in the books of assessee is not verified by the assessee otherwise then by only approximate claims. xx xx
Mere filing of confirmatory letters also does not discharge the onus that lies on the assessee. The following decision are relevant to this issue……
When a question arises as to whether a cash credit appearing in the books of accounts has to be accepted or to be rejected and addition to be made in accordance with section 68, the assessee is required to establish the identity of his creditor, the capacity of the creditor to advance the money and the genuineness of the transaction. If the assessee establishes the above said three conditions, it would be for the Department to disprove the same {CIT v/s Baishnab Charan Mohanty (1995) 212 IFR 199} {Yalan Timbers v/s CAT (1997) 223 ITR 11 [Cal]}. In the present context the assessee has not discharge its onus u/s 68.
In view of the same the loan entries from BMPL and SSL totaling to Rs.41,49,500/- are treated as unexplained Cash Credits u/s 68 of the-Income Tax Act, 1961 and aggregated to the income of the assessee. No set off on account of brought forward loss is allowable.”
Being aggrieved, the Assessee filed appeal before the CIT(A) challenging the addition of INR 41,49,500/- made by the Assessing Officer under Section 68 of the Act, and subsequently raised an additional ground seeking set-off of the brought forward losses against the aforesaid additions made under Section 68 of the Act. The CIT(A) allowed the appeal of the Assessee and deleted the addition of INR 41,49,500/- made under Section 68 of the Act. Further, the CIT(A) also allowed the additional ground raised by the Assessee and directed the Assessing Officer to grant benefit of set- off of the brought forward losses after verification. The relevant extract of the order, dated 14.02.2019, passed by CIT(A) read as under: “3.1.3 Since, the facts and circumstances are the same for this assessment year, except for the amount involved and the addition in instant case is also w.r.t BMPL, following the decision of Hon‟ble ITAT, Mumbai for assessment year 2008-09 in the case of Harsh Dalmia for the same Creditor and that of the CIT(A)-20, Kolkata again in the case of same
Assessment Year: 2005-06 creditor as reproduced above, the addition made u/s 68 in respect of unexplained/unapproved credit in the name of M/s BMPL, is hereby deleted. This ground of appeal in respect of BMPL is allowed.
3.1.4 In respect of cash credit of Rs.27,58,000/- of M/s Satya Securities Ltd, I find that similar additions were made of “unproved” credits by the assessing officer in case of M/s Venktesh Securities Ltd i.e. the sister concerns of this assessee, in earlier years and have been considered and decided in favour of assessee by my Ld. Predecessor in appellant's appeals against order u/s 143(3) for AYs 2006-07 to 2009-10.
3.1.5 Since the facts and circumstances are the same for this assessment year, except for the amount involved, considering the reasoning of my Ld. Predecessor‟s earlier decisions on similar grounds, and after looking into the submissions of the appellant in the instant appeal. I am of the opinion that additions in respect of M/s Satya Securities Ltd. also deserve to be deleted. As if these facts were not enough, it is also found that the amount added by the AO in the name of Satya Securities Ltd. as unexplained credit is actually an opening balance which even otherwise cannot be added in this year, even if, for argument‟s sake, it is accepted that they are indeed unexplained credit.. So on this plea alone, this ground is allowable without much ado. In view of the above, addition made u/s 68 in respect of both unexplained/unapproved credit is hereby deleted.”
The Revenue is now in appeal before us challenging the relief granted by the CIT(A).
Ground No. 1 to 4 7. Ground No. 1 to Ground No. 4 challenge deletion by the CIT(A) of the addition of INR.41,49,500/- made by the Assessing Officer under Section 68 of the Act and are therefore, are being taken up together.
Assessment Year: 2005-06 8. The Ld. Departmental Representative contended that the CIT(A) had grossly erred in deleting the addition made under Section 68 of the Act as the Assessee had failed to discharge onus to establish identity, creditworthiness and genuineness of transaction undertaken by the Assessee with BMPL and SSL. The CIT(A) had relied upon the decision of the Tribunal in the case of Harsh Dalmia for the Assessment Year 2008-09 in dated 17.10.2017 without appreciating that the said decision has not been accepted by Revenue. Further, specific information has been received from CBI/ACB, Mumbai that BMPL and SSL were engaged in bogus transaction. The Ld. Departmental Representative relied upon the assessment order to support his contentions. Per contra, the Ld. Authorised Representative appearing on behalf of Assessee submitted that all the relevant documents including ledger account, confirmation received from BMPL and SSL were filed in the assessment proceedings. Further, BMPL, in response to the notice issued under Section 133(6) of the Act, had also filed reply and provided copy of ledger and confirmation. The Assessee had discharge the onus under Section 68 of the Act by placing all the relevant information/document before the Assessing Officer. The Ld. Authorized Representative, without prejudice to the aforesaid, further submitted that, in any case, the additions made under Section 68 of the Act were not sustainable in the hands of the Assessee as Assessing Officer had added the opening balance of the outstanding loan/liability as on 01.04.2004. The outstanding loan/liability of INR.13,91,000/- pertaining to BMPL and INR.27,58,000/- pertaining to SSL were not credits made during the previous year relevant to the Assessment Year 2005-06 but pertained to the earlier assessment years, and therefore, could not have been brought to tax during relevant Assessment Year 2005-06 under Section 68 of the Act.
Assessment Year: 2005-06 9. We have considered the rival submission and perused the material on record. As contended by Revenue, placing reliance on the information received that BMPL and SSL were engaged in bogus transactions order, dated 19.03.2015, was passed under Section 263 of the Act setting aside the assessment order under Section 143(3) read with Section 147 of the Act. In the proceedings under Section 143(3) read with Section 263, the additions made by the Assessing Officer were based upon the information and material gathered by the Assessing Officer during the proceedings. The CIT(A), having considered the factual matrix, granted relief to the Assessee by placing reliance on the decision, dated 17.10.2017, passed by the Tribunal in the case of Harsh Dalmia, one of the directors of Assessee-Company, for the Assessment Year 2008-09 in as well as orders passed by his predecessors wherein similar transactions with BMPL and/or SSL were involved. No infirmity, whether legal or factual, has been pointed out either in the approach adopted by the CIT(A), and/or the applicability of the aforesaid decisions to the facts of the present case. The contention of the Revenue that the decision of the Tribunal in the case of Harsh Dalmia was not accepted by the Revenue also does not advance the case of the Revenue. Be that as it may, the CIT(A) has returned correct factual finding that the “unexplained credit is actually an opening balance” and for that reason alone the additions made under Section 68 of the Act were not sustainable. During the assessment proceedings under Section 143(3) read with 263 of the Act, the Assessee had filed replies and documents to show that the loan/liability of INR.13,91,000/- pertaining to BMPL and INR.27,58,000/- pertaining to SSL was carried forward from earlier years. Ledger Accounts of BMPL and SSL maintained by the Assessee were filed to show that the aforesaid amounts were outstanding at the beginning of the year and constituted opening balance as on 01.04.2004. Confirmations supporting this factual position were also given by BMPL and SSL. These documents have Assessment Year: 2005-06 been placed before us as part of the paper-book filed by the Assessee. Perusal of Paragraph 6.1 of the Assessment Order (relevant extract reproduced in paragraphs 4 above) would show that it is admitted position, as noted by the Assessing Officer, that the loan/liability pertaining to BMPL and SSL were brought forward from earlier years and had remained static for many years. The concern of the Assessing Officer was that the since the agewise analysis was not provided, the year in which these credits were made in the books was not clear. Therefore, it was never the case of the Revenue that the credits pertain to the previous year relevant to the Assessment Year 2005-06. The provisions of Section 68 of the Act are attracted in case of unexplained credits during the relevant previous year. Since the outstanding loan/liability of INR.13,91,000/- pertaining to BMPL and INR.27,58,000/- pertaining to SSL represent credits of earlier years, provisions of Section 68 would not be attracted in the facts and circumstances of the present case. Therefore, in our view, the CIT(A) has arrive at the correct conclusion that additions made under Section 68 cannot be sustained.
In view of the above, we do not see any infirmity in the order passed by the CIT(A) deleting addition of INR 41,49,500/- made by the Assessing Officer under Section 68 of the Act. Order of CIT(A), to this extent, is confirmed. Ground No. 1 to 4 raised by the Revenue are dismissed.
Ground No. 5
Ground No. 5 challenges the directions issued by the CIT(A) to the Assessing Officer for allowing benefit of set-off of the brought forward losses after verification.
The facts relevant to the issue are that the Assessee had, on 30.01.2018, raised additional ground seeking directions to allow set- off of the brought forward losses against the additions made by the Assessment Year: 2005-06 Assessing Officer under Section 68 of the Act. This ground was allowed by the CIT(A) while deleting the additions made by the Assessing Officer under Section 68 of the Act.
Having considered by factual background and the legal position, we are of the view that the additional ground raised by the Assessee before CIT(A) seeking set-off of brought forward losses against the additions made under Section 68 of the Act had become infructuous as the CIT(A) had deleted the additions made under Section 68 of the Act. We have confirmed the order of the CIT(A) deleting the addition made under Section 68 of the Act. The adjudication of Ground No. 5 raised by the Revenue has become academic in the facts of the present case. Accordingly, Ground No. 5, raised by the Revenue is disposed-off as being infructuous.
Appeal filed by the Revenue is partly allowed for statistical purposes.
Order pronounced on 31.03.2022.