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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & DR. MITHA LAL MEENA
आयकर अपीलीय अधधकरण न्यायपीठ रायपुर में । IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 217/RPR/2018 धनधाारण वषा / Assessment Year : 2013-14 M/s. Fashion House, Malviya Road, Raipur (C.G.) Pin-492 001 PAN : AACFF3323M .......अपीलाथी / Appellant बनाम / V/s. The Income Tax Officer-4(3), Raipur (C.G.) ……प्रत्यथी / Respondent Assessee by : Shri R.B. Doshi Revenue by : Smt. Anubhaa T. Goel
सुनवाई की तारीख / Date of Hearing : 13.05.2019 घोषणा की तारीख / Date of Pronouncement : 14.05.2019 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-II, Raipur dated 15.11.2018 for the assessment year 2013-14 as per the following grounds of appeal on record:
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“1. In the facts and circumstances of the case and in law, Ld. C1T (A) erred in confirming addition of Rs.58,50,000/- made by the AO u/s 68 on account of unsecured loans. The addition made by AO and sustained by CIT (A) is arbitrary, baseless, contrary to provisions of law and is not justified. 2. Ld. CIT (A) erred in not appreciating that the assessment order passed by the AO is contrary to the rules of natural justice and fair play inasmuch as addition was made disregarding the request made by appellant for conducting direct enquiry. The orders passed by AO & CIT (A) deserve to be quashed being passed in violation of natural justice. 3. The order passed by the Ld. CIT(A) is illegal, arbitrary, violative of principles of natural justice and is liable to be quashed being not sustainable. 4. The appellant reserves the right to add, amend or modify any of the ground/s of appeal.”
The crux of the grievance of the assessee is the addition of Rs.58,50,000/- made by the Assessing Officer u/s.68 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) on account of unsecured loans and confirmed by the Ld. CIT(Appeals). Other ground of the assessee is that the assessment order whether contrary to the rules natural justice and fair play inasmuch as addition was made disregarding the request made by the assessee for conducting direct enquiry.
The brief facts in this case are that the Assessing Officer observed that unsecured loans have been taken by the assessee from various parties and the Assessing Officer asked the assessee to furnish details of unsecured loans along with supporting documentary evidences i.e. return of income, bank statement and confirmation of accounts of the parties
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from whom unsecured loan was taken. The assessee had submitted part details of the unsecured loans along with documentary evidences. The Assessing Officer further noticed that the assessee has not submitted the copy of the return of income and bank statement of the following parties:
S. No. Name of the Party Amount outstanding as on 31.03.2013 ( In Rs.) 1 Disha Varu 2,50,000/- 2 Ganga Devi Agrawal 5,00,000/- 3 Harinder Kumar Chawla 15,00,000/- 4 Prakash Trading Co. 5,00,000/- 5 Shantilal Meghraj Parekh (HUF) 6,00,000/- 6 Sugamchand Inderchand 15,00,000/- Dhariwal 7 Swastik Printers Pvt. Ltd. 10,00,000/- Total 58,50,000/-
The assessee did not submit the copy of return of income and bank statement of the above mentioned lenders, therefore , the Assessing Officer show caused the assessee as to why in absence of supporting documentary evidences, the amount of Rs.58,50,000/- should not be treated as unexplained as establishment of the identity, creditworthiness of the creditor and genuineness of the transaction, is not established and
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therefore, why the same amount may not be added to the total income on account of unexplained investment u/s.68 of the Act.
In response, the assessee submitted the confirmation of all the parties which contains their names, address and PAN. Further, the assessee has also requested that the necessary details may be called for u/s.133(6) of the Act. Though the assessee has filed confirmation from the creditors but could not obtain and file the bank statements and copy of return of income of the parties. However, the Assessing Officer did not resort to section 133(6) of the Act and did not call for any further information. The Assessing Officer was of the view that requirement of section 68 was not complied with and he added the entire amount of Rs.58,50,000/- in the hands of the assessee.
The Ld. CIT(Appeals) as per details reasons and observations as appearing in his order was of the opinion that it is always the onus of the assessee to establish the identity , creditworthiness of the creditors and genuineness of the transactions u/s.68 of the Act. It was onus on the assessee to provide and furnish all the details as and when called for or asked by the Assessing Officer. With these observations, the Ld. CIT(Appeals) upheld the addition made by the Assessing Officer.
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At the time of hearing, the Ld. AR of the assessee invites our attention to paper book at page Nos. 11 to 17 where all the loans confirmations have been filed which was also there in front of Revenue Authorities. Thereafter, the Ld. AR of the assessee demonstrates through page Nos. 7, 8 , 9 and 10 that all throughout, the assessee had made request to the Department calling for further evidences u/s.133(6) of the Act. These pages i.e. 7, 8, 9 and 10 are made part of this order:
ANNEXURE-1
“From Dt. 18.02.2016 M/s. Fashion House, Raipur (C.G.) To: Income Tax Officer-4(3) Raipur (C.G.) Re. : Assessment Year 2013-14 PAN : AACFF3323M Sub : Assessment proceedings u/s 143(3) With reference to queries raised vide your notice u/s.142(1) dt. 07.10.2015 and further to our earlier reply 12015, 02.11.2015, 06.11.2015, 18.12.2015, 29.12.2015 and 18.01.2016, we are furnishing the following information / details:- 1. We are enclosing herewith comparative chart of expenses for year under consideration and preceding two years for your reference (page no 01). In this regard, please note that expenses like rank interest and interest to others have increased due to increase in secured as well as unsecured loans during the year under consideration. Salary expense has increased due to increase in number of employees. The same is verifiable from salary sheet submitted vide our earlier reply dt.1.12.2015 at page no. 18 to 20. Shop rent has been paid as per the rent agreement which has also been submitted vide our reply dt. 01.12.2015 at page no. 1 to 15. Apart from above, some other
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expenses have increased having regard to the inflationary trend in the market. The assessee is maintaining regular books of accounts which are audited also. All the items of profit and loss are fully vouched and verifiable. The auditors have not expressed any qualification. In view of this, it is requested that the book results may kindly be accepted.
We are enclosing herewith list of debtors having closing balances exceeding Rs.1,00,000/- along with complete postal address (page no. 02). 3. With regard to confirmation of accounts of creditors, we are enclosing herewith confirmation of accounts of the following parties ( Page No. 03 to 06) a) Ishan Designing Studio Pvt. Ltd. b) Khetarpar Kreation c) Armoury International d) Jinaam Fashion World e) Aeon Fashions (India) Pvt. Ltd. f) Fashion Houser Retail Trade Pvt. Ltd. g) S.V. Agency h) Aditya Birla Nuvo Ltd. i) N.M. Fashion Designs Pvt. Ltd. 4. During the year under consideration, we have made payments to related parties mentioned u/s.40A(2)(b) of the Income Tax Act, 1961. With regard to genuineness of the transactions, we submit below the necessary explanation:- a) Purchase of goods. With regard to purchase of cloth from M/s Fashion Fabric, please note that this related party is a distributor of cloth products of Jayashree Textile, Unit of Aditya Birla Nuvo Ltd.. Kolkata. The cloth of above mentioned brand is not sold by any other cloth merchant in Raipur. Therefore, whatever goods have been purchased from M/s Fashion Fabric are purchased at prevailing market rates during the year under consideration. We are enclosing herewith copy of account of M/s Fashion Fabric for your reference (page no 67 to 73). Further, as regards the purchases from Fashion House Retail Trade Pvt. Ltd., please note that the assessee has actually sold goods to them during the year under consideration. However, we have also purchased some goods from them. The assessee firm and the abovementioned company, both deal in readymade cloth products like shirt, pants, blazers, t-shirts, etc. of various brands and of both the genders. Therefore, comparison of goods purchased
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from them by the assessee with those purchased from unrelated parties is not possible having regard to numerous types of products, brands, sizes, colour, etc. b) Interest & Remuneration to Partners During the year under consideration, interest to partners was paid at 12% p.a. which is in accordance with the provisions of section 40(b) of the Income Tax Act, 1961. The remuneration to working partner has been paid as mentioned in the partnership deed. The said remuneration is paid within the limit specified under section 40(b) of I.T. Act, 1961. c) Rent. During the year under consideration, the assessee had paid shop rent of Rs. 48,000/- to Arvind Agrawal (HUF). The assessee occupies approx 500 sq.ft, of area from the aforesaid related party for which the rent comes to Rs. 4,000/- per month. It is hardly Rs. 8/- per month per sq.ft. The shop is located at a prime location of Malviya Road, Raipur (C.G.). Having regard to the location and the area, the above rent is most reasonable, adequate and the same is much less than the market rate. We are enclosing herewith copy of account of Arvind Agrawal HUF), wherein the rent expense is reflecting (page no.74)). 5. We are producing herewith statements of all bank accounts for your verification. We enclosing herewith bank reconciliation statements of following banks (page no. 75 to 77): a. Canara Bank b. H.D.F.C. Bank c. I.C.I.C.I Bank 6. With regard to your query relating to unsecured loans, we are enclosing herewith confirmation of accounts of following unsecured loan creditors (Page No. 78 to 80). a) Amit Kuma Daga (HUF) b) Smt. Chitra Gulani (Along with copy of acknowledgement) In respect of confirmation of account form Money Resources Pvt. Ltd., please note that in spite of efforts made by the assessee, it could not be obtained from them. Further, supporting documents of some of the creditors have been submitted vide our earlier replies dt. 02.11.2015, 15.12.2015, 29.12.2015 & 18.01.2016. With regard to documents of other unsecured loan creditors, please note that in spite of efforts made by the assessee, it could not be obtained from them. Therefore, it is requested that if considered necessary, direct enquiry may kindly be conducted & confirmation of account and other supporting documents may kindly be called u/s.133(6) We are enclosing
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herewith copy of account of Money Resources Pvt. Ltd. having complete postal address (page no.81) 7. We are enclosing herewith copy of stock statement in which details of stock and debtors pledged for obtaining loan is evident. We are also enclosing reconciliation statement of difference between value of Closing Stock as per books and stock statement enclosed above (page no.82 to 166) 8. All the books of accounts and bills/vouchers are produced herewith for your verification. Thanking you, Yours faithfully, M/s. Fashion House Sd/- Auth. Signatory/Partner Enclo. As stated.” ANNEXTURE-2
From Dt. 07.03.2016 M/s. Fashion House, Raipur (C.G.) To: Income Tax Officer-4(3) Raipur (C.G.) Respected sir,
Re. : Assessment Year 2013-14 PAN : AACFF3323M Sub : Assessment proceedings u/s 143(3) 1. As regards your show cause notice of the proposed addition of unsecured loans, please note that the assessee has filed confirmation of all the parties, which contains their address and PAN. All the loan creditors are assessed to tax and they have shown the interest and TDS in their returns. 2. All the parties are unrelated parties and are outsiders. The assessee made sincere efforts to obtain copy of their returns but the parties have not provided the same to the assessee, claiming it to be personal documents. For this reason, the assessee made request to you vide letter dt. 18.02.2016 for calling for the supporting u/s. 133(6).
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All the loan creditors are on the roll of the Department and it is once again requested that necessary details may kindly be called u/s.133(6) or the particulars may kindly be verified from the departmental records. Please note that, the copy of return of M/s Sugamchand Inderchand Dhariwal has been filed by us vide para no.3 of our letter dt. 18.01.2016. All the loans were received through account payee cheques and the money has flown from their bank account to the rank account of assessee. Since the assessee has discharged the burden cast u/s. 68, it is requested that addition may kindly not be made.
Thanking you, Yours faithfully, M/s. Fashion House Sd/- Auth. Signatory/Partner Enclo. As stated.”
That even before the Ld. CIT(Appeals), at Page 8, Para-(Viii) of the submissions before the Ld. CIT(Appeals) enclosed copies in the paper book, it is stated by the assessee that “ in view of all the above facts, it is requested that the appellant may kindly be assisted by directing the AO to now call for income tax returns and bank statements of the 7 parties named above invoking section 133(6) and to submit his report along with evidences to your honour. This request is being made as the appellant has been unable to get these documents and for no fault of appellant, addition has resulted. Per need of justice, it is requested to direct the AO for conducting direct inquiry as above.
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7.1 Further, the Ld. AR of the assessee emphasized that irrespective of their written submissions before the Ld. CIT(Appeals), this ground was not at all adjudicated and the Ld. CIT(Appeals) dismissed the appeal by upholding the addition made by the Assessing Officer stating that at all time of the proceedings, the onus is on the assessee. The Ld. AR of the assessee fairly argued that machinery of the Income Tax Department is available with the Assessing Officer and also before the Ld. CIT(Appeals) and Ld. CIT(Appeals)‟s power is coterminous with that of the Assessing Officer. Repeatedly the assessee requested the Department to issue notice u/s.133(6) of the Act asking for bank statements and income tax return of all these parties and the assessee has also bona fide explained its inability to collect these information in spite of several efforts and therefore, the Revenue Authority was requested by the assessee in the interest of justice. Moreover, all the loan confirmations from whom the money as loan was taken by the assessee was submitted along with PAN, their names and addresses. The assessee has discharged his onus to prove the genuineness. Further, the Ld. AR of the assessee has placed reliance on the following decisions:
i) Commissioner of Income Tax Vs. Orissa Corporation (P). Ltd. (1986) 159 ITR 0078 (SC) ii) Commissioner of Income Tax Vs. Metachem Industries (2000) 245 ITR 145 (MP)
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We have perused the case records and heard the rival contentions and analyzed the facts and circumstances of this case. We have also given thoughtful consideration to the judicial pronouncements placed before us. The basic addition is with regard to section 68 of the Act on account of unsecured loans. The facts demonstrates that the assessee has shown unsecured loans of Rs.2,32,40,000/- from 27 parties. Out of these 27 parties, the Assessing Officer found dispute with regard to 7 parties and thus, disputed amount being Rs.58,50,000/- was added on the ground that the assessee was unable to furnish the copy of return of income and bank statements of these 7 parties. It is not disputed as appearing in the assessment order that loans confirmation with respect to all these parties have been filed by the assessee and it has been acknowledged by the Department. The loan confirmations have been filed along with names, addresses and PAN of all these parties. Regarding remaining evidences, the assessee bona-fidely expressed his inability and requested to the Department to issue notices u/s.133(6) of the Act calling for these documents from the concerned parties. It is evident as placed before us in the paper book as herein above discussed calling for documents, several requests have been made by the assessee for such issuance of notice u/s.133(6) of the Act which was addressed to the Department and even submitted that power of the Ld. CIT(Appeals) is coterminous with that of the Assessing Officer. This submission by the assessee of issuance of
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notice u/s.133(6) of the Act which was raised before the Ld. CIT(Appeals) was not adjudicated by him. The Ld. CIT(Appeals) dismissed the appeal of the assessee by stating in his order that whatever may be the case, but the onus is on the assessee to provide witnesses/documents in respect of its claim. We observe here that the power of issuance of notice u/s.133(6) of the Act calling for relevant documents, it is the power of the Assessing Officer and they have entire machinery to conduct necessary inquiry to reach out to each area of adjudication and investigation and arrive at logical end to meet the ends of justice. In this case, the assessee has provided most of the documents such as loan confirmations, name, addresses and PAN of the parties and therefore, it can be safely said that the assessee discharged his onus for providing necessary documents regarding unsecured loans which they have provided before the Revenue Authorities from all the parties from whom such loan was taken. Now, on further information by the Department required, the assessee bona-fide has requested to the Department to issue notice u/s.133(6) of the Act and then the onus shifts to the Revenue as custodian of natural justice in Income Tax Laws and as a Quasi-Judicial Authority to undertake necessary exercise to bring the matter to justice.
We take guidance from the decision of the Hon‟ble Apex Court in the case of Commissioner of Income Tax Vs. Orissa Corporation (P). Ltd.
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(supra.) wherein it has been held that “the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices u/s.131 at the instance of the assessee, did not pursue the matter further. There was no effort made to pursue the so called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence.”
The Ld. DR relied on the certain decisions which are substantially distinguishable from the facts of the instant case. The Ld. DR did not bring any evidences to show that efforts were undertaken to issue notice u/s.133(6) of the Act to arrive at a logical conclusion. Further, the Ld. DR could not bring any other decision contrary to the decision on which the Ld. AR has placed reliance.
In case of section 68 of the Act, there is also shifting of burden to prove. The assessee prima facie in this case has established his part of burden by providing loan confirmations, names & addresses and PAN of the parties from whom unsecured loan was taken. However, Income Tax Department having necessary machinery did not make any effort to reach
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out to all these parties from whom unsecured loan was taken. No exercise was done irrespective of repeated request made by the assessee to the Revenue Authority.
Thus, in view of the matter and in compliance with the ruling of the Hon‟ble Apex Court as hereinabove referred, we set aside the order of the Ld. CIT(Appeals) and allow the appeal of the assessee.
In the result, appeal of the assessee is allowed.
Order pronounced on 14th day of May, 2019. Sd/- Sd/- MITHA LAL MEENA PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER रायपुर/ RAIPUR ; ददनांक / Dated : 14th May, 2019. SB आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : 1. अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The CIT(Appeals)-II, Raipur. 4. The Pr. CIT-II, Raipur. 5. धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, रायपुर बेंच, रायपुर / DR, ITAT, Raipur Bench, Raipur. गार्ा फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
धनजी सधचव / Private Secretary आयकर अपीलीय अधधकरण, रायपुर / ITAT, Raipur.