DCIT, RANCHI vs. M/S C.K. CONSTRUCTION, RANCHI

1 ITA No.85/Ran/2016 IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA No.85/Ran/2016 Assessment Year : 2010-2011 DCIT, Circle-1, Ranchi vs M/s C.K. Construction, H-112, Harmu Housing Colony, Harmu, Ranchi PAN No. : AAGFC 4503 Q .. Respondent (Appellant) Revenue by Shri A.K.Mohanty,JCIT(Jr. DR) Assessee by Shri Devesh Poddar, Adv. Date of Hearing : 26.11.2018 Date of Pronouncement : 27.11.2018

O R D E R Per Pavan Kumar Gadale, JM:

The Revenue has filed this appeal against the order of CIT(A),

Ranchi, dated 10.12.2015 for the assessment year 2010-2011 on the

following grounds of appeal :-

“1 Whether the Ld CIT(A) has erred on fact and in law in deciding that the identity, genuineness and the creditworthiness of the cash credit amounting to Rs.1,02,00,000/- has been proved by the assessee. 2. Whether the Ld. CIT(A) erred on fact and in law in reducing the disallowance on account of Contract Expenditure from 10% to 2%.”

engaged in the construction business. The assessee filed return of

income on 10.12.2012 declaring total income of Rs.7,51,760/-.

Subsequently vide order u/s.263 of the Act, the CIT, Ranchi set aside

2 ITA No.85/Ran/2016 the order directing the AO to make a fresh assessment. During the

proceedings u/s.143(3) r.w.s.263 of the Act. Accordingly, the AO

issued notices u/s.143(2)/142(1) of the Act to the assessee. On

examination of books of accounts ad bank details filed by the assessee

the AO made addition of Rs.1,02,00,000/- u/s.68 as unexplained cash

credits. The AO also disallowed 10% of the contract expenses and

made an addition of Rs.25,88,576/-. The AO further made an addition

of Rs.67,500/- by disallowing expenses claimed under the head salary

and wages @10% and assessed the total income of the assessee at

Rs.1,34,34,400/- and passed order u/s.143(3) r.w.s.263 of the Act,

dated 28.03.2014.

before the CIT(A). In the appellate proceedings, the AR of the assessee

appeared and argued the grounds and reiterated the submissions

made before the AO. The CIT(A) after considering the submissions of

the assessee and the findings of AO, partly allowed the appeal of the

assessee.

appeal before the Tribunal.

ground of appeal only and prayed for allowing the appeal of Revenue.

3 ITA No.85/Ran/2016 7. We have heard the rival submissions and perused the material on

record. Ld. DR before us submitted that the AO after perusal of bank

accounts found that the unsecured loan is actually diversion of fund and

therefore, the AO has rightly added the same to the income of the

assessee, whereas the CIT(A) deleted the addition overlooking the fact

that the unsecured loan receipts and payments were actually bogus with

an intention to deliberately reduce the taxable income. We find that the

CIT(A) while dealing on the disputed issue has observed that the AO has

not been able to prove that the loan was unexplained cash credit. On the

other hand the identity of the creditor, genuineness of the transaction and

creditworthiness of the creditor stand proved. The observations of the

CIT(A) in this regard are as under :-

“[6.6] I have considered the submissions made by the appellant and have also gone through the assessment order. It is not clear as to why has the Ld.AO treated the amount, as unexplained cash credit. The reply of the appellant extracted by the Ld.AO in the assessment order itself proves the source of the loan. This also demonstrates that the money was returned back in the subsequent year. Appellant's balance sheet also shows that it had shown the amount as outstanding loan from the creditor M/s C.K.Construction Co. All these details were available with the Ld.AO and have been duly noted [6.7] The Ld.AO goes on record in the assessment order slating that "The assessee himself admitted vide letter dated 19,02,2014 that he is one of Authorized signatory for operation of bank account no. 490120110000132 at Bank of India, Ratu Road, Ranchi. lt implies that the unsecured loan amount Rs.1,02,00,000/- which the assessee has shown in the Books of Accounts that it was obtained from M/s. C. K. Construction & Co. Samastipur, Bihar was not at all taken. The assessee himself diverted the fund from the bank account of M/s. C. K. Construction & Co., Samastipur, Bihar to the bank account of his own firm. The assessee has not been provided any unsecured loan by M/s. C. K. Construction & Co. Thus, it was

4 ITA No.85/Ran/2016 its own Cash Credit and hence has to be added back to its total income as deemed income u/s.68 of the Income Tax Act, 1961." [6.8] The Ld.AO has made the addition on account of unexplained cash credit but seems to have been influenced by the letter of the creditor and has gone on the assumption of a fraud / committed by the appellant on the creditor. Be that: as it may, he did not bother to investigate as to how was the fund transferred from one bank to the other. On investigation he would have found that the cheque had been signed by an authorised signatory and therefore honoured by the bank. Element of fraud, that the Ld.AO implies is evident when he writes "he assessee himself diverted the fund from the bank account of M/s. C. K.Construction & Co., Samastipur, Bihar to the bank account of his own firm. The assessee has not been provided any unseated loan by M/s. C. K. Construction & Co.'', doe; not get proved on the face of record. Any presumed dispute that the two concerns may have had is not the concern of the Income tax Department unless it impacts the income chargeable to tax. It is a civil dispute which would have to be sorted out in the appropriate forum. [6.9] On the facts and circumstances of the case I hold that the Ld.AO has not been able to prove that the loan was unexplained cash credit. On the other hand the identity of the creditor, genuineness of the transaction and creditworthiness of the creditor stand proved. Ground of appeal is allowed.” 8. During the course of hearing the ld. DR has only supported the order

of Assessing Officer and could not bring any new cogent evidence to

controvert the above findings of the CIT(A). Accordingly, we are of the

opinion that the CIT(A) has passed a reasoned order, which we uphold the

same and dismiss the grounds of appeal of Revenue.

Order pronounced in the open court on 27/11 /2018 Sd/- Sd/- (N.S.SAINI) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Ranchi, Dated 27/11/2018 Prakash Kumar Mishra , Sr. Ps

5 ITA No.85/Ran/2016

Copy of the Order forwarded to : 1. The Appellant – DCIT, Circle-1, Ranchi 2. The Respondent – M/s C.K. Construction, H-112, Harmu Housing Colony, Harmu, Ranchi 3. The CIT(A) concerned 4. CIT , concerned 5. DR, ITAT, Ranchi 6. Guard file. BY ORDER, //True Copy// SR.PS, ITAT, RANCHI