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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: SHRI MAHAVIR PRASAD & SHRI WASEEM AHMED
PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. This appeal by the Assessee is directed against the order of the Ld. CIT(A)-2, Vadodara dated 18.04.2016 pertaining to A.Y. 2012-13 and following grounds have been taken:
ITA No. 1496/Ahd/2016 2 . A.Y. 2012-13 1. The learned CIT(A) has erred in law and on facts in confirming the addition u/s 68 of the Act of unsecured loan of Rs. 10,75,000/- of four different accounts as undisclosed income. It is submitted that all the documents and explanation required to justify identity, creditworthiness and genuineness of all the depositors were submitted before the Ld. A.O. as well as before the Ld. CIT(A). It is submitted that the lower authorities have failed in appreciating the complete details filed before them clearly justifying the contention of the Appellant. Thus the disallowance made by A.O. and confirmed by Ld. CIT(A) invoking the provisions of section 68 of the Act of Rs. 10,75,000/- in case of your appellant is totally incorrect , illegal and unjustifiable. Therefore impugned disallowance made by Ld. A.O. and confirmed by Ld. CIT(A) of Rs. 10,75,000/- be deleted.
The facts of the case are that the assessee is a government approved contractor and is engaged in contract business of road construction activities. Assessment u/s 143 (3) was done determining total income at Rs. 37,99,550/- after making addition u/s 68 of the Act of unsecured loan of Rs. 10,75,000/-.
In order to complete its business activities, the firm has taken unsecured loan in F.Y. 2011-12 of 26 persons as per tax audit report including the following depositors, which are considered by the A.O. :
Before the A.O., assessee stated that he has taken loan for business activities and he has submitted all the documents supporting (i) The identity of the creditor (ii) The capacity of the creditor to advance money, and (iii) The genuineness of the transaction.
But lower authorities were not agreed with the contention of the assessee.
Now appellant is before us.
ITA No. 1496/Ahd/2016 3 . A.Y. 2012-13
In support of its contention, all the four persons who advanced the loan appeared before the lower authorities and submitted detail pertaining to their income which they earned from selling of agricultural produce and submitted land holding details and agricultural produce sales bill.
The assessee received the amount through account payee cheque and filed confirmation of loan duly confirmed by the creditors. The amount received by the assessee. The assessee has paid interest to these creditors and credited in their respective account. The credit introduced in the books of accounts of the assessee and in support of its contention, assessee submitted complete information such as complete address, PAN number, Bank account etc. and also given the details of the cheque.
And in support of its contention, assessee cited several judgments including DCIT vs. Rohini Builders [2003] 127 taxmann.com 523 (Guj.) wherein it is held: “Section 68 of the Income-tax Act, 1961 - Cash credits - Assessing Officer made addition of Rs. 12,85,000 as unexplained cash credits in respect of loans taken by assessee from 21 parties - Assessee had discharged initial onus by providing identity of all creditors by giving their complete addresses, GIR numbers/permanent account numbers and copies of assessment orders wherever readily available - Assessee had also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors - Repayment of loans and interest thereon was also made by account payee cheques by assessee and tax also had been deducted at source on interest payments and remitted - Whether assessee was not expected to prove genuineness of cash deposited in bank accounts of creditors, because under law, assessee can be asked to prove source of credits in its books of account but not source of source - Held, yes - Whether merely because summons issued to some of creditors could not be served or they failed to
ITA No. 1496/Ahd/2016 4 . A.Y. 2012-13 appear before Assessing Officer, could not be ground to treat those credits as non-genuine - Held, yes - Whether considering totality of facts and circumstances of case, especially fact that Assessing Officer had not disallowed interest claimed/paid in relation to those credits in assessment year under consideration or even in subsequent assessment years, and tax at source had been deducted out of interest paid/credited to creditors, Tribunal was justified in deleting addition made - Held, yes - Whether as there was no substance in appeal and no substantial question of law arose, appeal was liable to be dismissed.”
Then also cited a case of Jurisdictional High Court in the matter of CIT vs. Ranchhod Jivabhai Nakhava wh[2012] 21 taxmann.com 159 (Guj.) wherein it is held:
“Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2006- 07 -Whether once assessee has established that he has taken money by way of account payee cheques from lenders who are all income tax assessees whose PAN have been disclosed, initial burden under section 68 is discharged and then, it is Assessing Officer's duty to ascertain from Assessing Officer of those lenders, whether in their respective returns they have shown existence of such amount of money and have further shown that those amount of money had been lent to assessee - Held, yes - Whether if Assessing Officers of those creditors are satisfied with explanation given by creditors as regards those transactions, Assessing Officer in question has no justification to disbelive transactions reflected in account of creditors - Held, yes - Whether if before verifying such fact from Assessing Officer of lenders of assessee, Assessing Officer decides to examine lenders and asks assessee to further prove genuineness and creditworthiness of transactions, it would be against principles laid down under section 68 - Held, yes [In favour of assessee]”
On the other hand, ld. D.R. cited a judgment of Jurisdictional High Court in the matter of Blessing Construction vs. ITO wherein it has been held:
“Section 68 of the Income-tax Act, 1961 - Cash credits [Burden of proof] - Assessment year 2005-06 - In case of all depositors, their bank accounts
ITA No. 1496/Ahd/2016 5 . A.Y. 2012-13 contained meager balance - Sizeable amount of Rs. 1 lakh or above were deposited in cash in accounts of depositors and immediately entire amounts were withdrawn through issuance of cheques in favour of assessee - Further, depositors, capacity to raise such cash amount was also not established - Whether this was a case where Revenue made addition on assessee failing to establish source of source and, therefore, addition was justified - Held, yes [Para 7] [In favour of revenue]”
But same is not applicable to the facts and circumstances of the case, therefore, we are reluctant to rely the same.
As assessee has submitted all the details pertaining to amount of Rs. 10,70,000/- and respectfully following the aforesaid judgment, we delete the addition made by the lower authorities.
In the result, appeal filed by the Assessee is allowed.
Order pronounced in Open Court on 29 - 11- 2018
Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad: Dated 29 /11/2018 Rajesh Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) – 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER
Deputy/Asstt.Registrar ITAT,Ahmedabad