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Income Tax Appellate Tribunal, “SMC” Bench, Mumbai
Before: Shri Shamim Yahya
Per Shri Shamim Yahya (AM) :-
This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-26 dated 29.10.2019 and pertains to assessment year 2012-13.
Grounds of appeal read as under:- 1. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming disallowance of Rs. 1,43,376/- made by Assessing officer on account of provision for Income tax without appreciating fact that such provision was already added back to Net Gains from Profession by the appellant while computing Total Income at the time of filling Return of Income for the year under consideration.
In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming addition of Rs.36,13,299/- made by Assessing officer on account of new unsecured loans raised by the appellant during the year under consideration.
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In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in sustaining disallowance of expenses of Rs.1,11,794/-made by Assessing officer. 4. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal. All the above grounds are without prejudice to each other.
At the outset, ld. Counsel of the assessee submitted that, he shall not be pressing ground No.1. Hence, ground No.1 is dismissed as not pressed.
Brief facts of the case are that assessee firm was engaged in the business of trading and processing of goods grains, spices, gums, commission agent and consignment broker. On the issue of unsecured loans, the AO made following addition by observing as under:- “(i) Unsecured loans of Rs. 36,13,299/-. On perusal of balance sheet, it was revealed that the assessee has shown unsecured loans amounting to Rs. 1,95,71,309/-, of which new unsecured loans of Rs. 36,13,299/- are obtained during the previous relevant to the A.Y.2012-13. Vide notice u/s.142(1) dtd. 30.01.2015, the assessee was specifically asked to prove the genuineness of these loans by furnishing confirmations in proper manner. The assessee vide its letter dtd. 25.03.2015 furnished the confirmations as regards to the new unsecured loans raised during the year. On verification of confirmations furnished, following discrepancies were found, which are narrated below:
Sr. Name of the loan creditor Amount (Rs.) Remarks No 1 S. Ganesh Babu 10,000 No PAN
2 Heena Amrish Shah 7,00,000 No signature & Address
3 Banumati P.Dattani 2,50,000 No signature
4 Hemal International 10,00,000 No signature & address
5 Jay Deepak Kapadia 10,00,000 No signature
6 Lila Polymer 2,50,000 No signature
7 Jyoti V. Aiya 4,03,299 No confirmation filed.
Total 36,13,299
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From the above confirmations, it is revealed that the assessee's submission in this regard is not giving fair and correct picture of the loans obtained by the assessee in as much as the genuineness of these loans is not at all proved, which the assessee is required to. Under these circumstances, AO treated the unsecured loans to the tune of Rs. 36,13,299/- as non-genuine and added back to the total income of the assessee.”
Upon assessees appeal, ld.CIT(A) held as under:-
“During the appellate proceedings copies of confirmation were filed. Though it was stated that bank statement of respective parties are being filed but only copy of bank statement of the appellant was filed. Copies of ITR, bank statement of respective parties, proof of repayment of these loans were not filed. There was no submission with regard to TDS made on the interest credited to respective parties. In view of above facts, the identity genuineness and capacity of the parties were not proved. Case laws -only confirmation is not sufficient. In the case of PCIT Vs. Bikram Singh 85 taxmann.com 104(2017) Hon'ble Delhi High Court has held that mere submission of PAN card of creditor does not establish the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of the transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian Economy. In view of these facts of the case and respectfully following the decision of Delhi High Court in the case of Bikram Singh(Supra), I am of the opinion that appellant has failed to prove the unsecured loans as genuine. Accordingly the addition of Rs. 36,13,299/- made by AO is confirmed and the ground of appeal is 'Dismissed.”
Against the above order, assessee is in appeal before the ld.CIT(A)
I have heard both the parties and perused the records. I note that assessee has filed the details of the party from whom loans has been received. AO has not made any enquiry, he has only perused the confirmation and finding defect therein has made disallowance. Ld.CIT(A) also noted that copies of ITR, bank statement of respective parties, proof of repayment of loans were not filed. It is also not the case that any enquiry was made by the AO and ld.CIT(A) himself. Hence, in my considered
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opinion, the interest of justice mandates that issue is remitted to the file of AO. AO is directed to make proper enquiry and pass an order as per law.
Another issue on which AO has made disallowance is adhoc disallowance on account of expenditure, without specifying a specific defect, AO has made adhoc disallowance as under:-
“It is further revealed that the assessee has debited an amount of Rs.3,50,255/- under the head conveyance and travelling Rs. 74,871/- under the head motor car expenses, Rs. 72,679/- under the head telephone charges and Rs. 61,166/- under the head motor car depreciation. During the course of hearing, assessee was asked to justify the expenses incurred for motor car and telephone by providing log book maintained for this purpose. As regards to other expenses, assessee was asked to furnish full details with supporting evidences to justify the expenses. The assessee has shown his inability to furnish the log book maintained for motor car and telephone expenses as it is not maintained by the assessee firm. As regards to other expenses, assessee could only furnish the voucher files for verification. On verification of voucher file, it is found that most of the payments are made in cash and or by preparing self-made vouchers, where there is no third party signature. Under the circumstances, and to avoid any dilution of income, 1 proceed to disallow 20% of these expenses which works out to Rs. 1,11,794/- and the same is added back to the total income of the assessee”.
Ld.CIT(A) upheld the disallowance by observing as under:- “Ground No.4 is against disallowance of expenses amounting to Rs. 1,11,794/-. In written submission dated 15.07.2019 it was stated that 3 - 4 days time may be given to collect the receipts details. But on subsequent date of hearing on 28.08.2019, on request of the appellant the case was adjourned to 04.10.2019. On 04.10.2019 also the case was adjourned to 25.10.2019 on appellant's request and there was no compliance on 25.10.2019. Thus it is clear that either appellant has no proof in respect of these expenses or does not want to say anything on this ground of appeal. In view of these facts of the case, the disallowance of 20% of the expenses amounting to Rs. 1,11,7947-made by AO is confirmed and ground of appeal is 'Dismissed.”
Against the above order, assessee is in appeal before the ITAT. 11. I have heard both the parties and perused the records. I note that AO has made the disallowance on adhoc basis without specifying a specific defect. However, he
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has noted that receipts and details are lacking, ld.CIT(A) has noted that assessee has agreed for the omission and has submitted to give the details. But, the same was not submitted before the ld.CIT(A). In the interest of the justice, I remit this issue also to the file of AO. AO is directed to consider the issue afresh and pass an order as per law.
In the result, appeal by the assessee stands allowed for statistical purposes.
Pronounced in the open court on 22.03.2022 Sd/- (SHAMIM YAHYA) ACCOUNTANT MEMBER Mumbai; Dated : 22.03.2022 Thirumalesh, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai