MAHESH VISHINDAS CHANDWANI,MUMBAI vs. DY CIT, CIRCLE 29(2), MUMBAI

3. The NFAC failed to appreciate that the loan received from shriDipakBhatija amounting to Rs.41,00,000/- is duly recorded in the books of accounts of the Appellant and out of which a sum of Rs.50,000/- was repaid back during the year under consideration. Thus, the addition ofRs.41,00,000/-made by the AO and confirmed by the NFAC is not justified and the same may be deleted 4. The NFAC failed to appreciate that the addition of Rs.41,00,000/-has been made merely relying on the statement of Shri DipakBhatija recorded in the back of the Appellant. The Appellant has never been provided the complete copy of the statement and cross examination of Shri Bhatija. Thus, the addition made by the AO and confirmed by the NFAC is in breach of the principles of natural justice. The same may be deleted. The Addition of Rs.100,000/- on account of advance made to SudhakarJagtap is not justified.

5. The NFAC is not justified to confirm the addition of Rs. 100,000/- being advance given to SudhakarJagtap without appreciating the facts and circumstances of the case. The said addition made by the Ld.A.O. and confirmed by the NFAC is not justified and the same may be deleted.

3. The brief facts the case is that the assessee filed the return by declaring total income Rs.5,89,04,970/-. Subsequently the assessee filed revised return and declared the total income Rs.5,88,92,030/-. The assessee’s case was selected for scrutiny under CASS and notice u/sec. 143(2) was issued on 10.09.2014. During the assessment the Ld. AO made the number of additions related to the unsecured loan received by the assessee from Shri Dipak Bhatija amount to Rs.41,00,000/-, the addition of Rs.1,00,000/- on account of advance made to Shri Sudhakar Jagtap and the addition amount to Rs.70,366/- related to interest received at advance which was not offered in return of income. Being aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) uphold the impugned assessment order and confirmed the additions. Being aggrieved assessee filed an appeal before us.

Mahesh Vishindas Chandwani was added back during the assessment proceedings for A.Y. 2009–10. Aggrieved by the addition, the matter was carried in appeal before the ITAT, Mumbai Bench, which passed an order in the assessee’s case for A.Y. 2009–10 in dated 07.04.2017. In the said order, the Coordinate Bench of the Tribunal set aside the matter to the file of the AO for the purpose of verification of the loan creditors, including examination of their PAN, Income Tax Returns, and other relevant details. Pursuant to the directions of the Tribunal, the Ld. AO passed a set-aside assessment order under section 143(3) read with section 254 of the Act dated 31.10.2018, which is placed at APB pages 109 to 116. In the said set-aside assessment proceedings, the Ld. AO examined the loan creditors, and one of the creditors, Mr. Dipak Bhatija, was accepted as genuine. Consequently, no addition was made in respect of the loan received from him. The relevant portion of the assessment order reflecting the acceptance of the creditor is placed at APB page 111. The Ld. AR contended that the impugned loan of Rs.41,00,000/- also pertains to the same creditor, Mr. Dipak Bhatija. Therefore, in view of the findings recorded in the set-aside assessment order for A.Y. 2009– 10, the identity and genuineness of the said creditor already stand accepted by the Department. The Ld. AR further submitted that the transaction in question was carried out through proper banking channels, and once the creditor has been accepted as genuine in earlier proceedings, the same cannot be rejected again with respect to the identity and genuineness of the transaction. Accordingly, the Ld. AR prayed that the addition be deleted.

Mahesh Vishindas Chandwani 6. On the other hand, the Ld. DR argued that the Ld. AO had categorically examined the transaction with the loan creditor and rejected the genuineness of the loan transaction in the present assessment proceedings. The Ld. DR invited our attention to paragraph 5.9 of the impugned assessment order, wherein the Ld. AO has discussed the transaction relating to Mr. Dipak Bhatija. The relevant extract of the said paragraph from the impugned assessment order is reproduced as under: “5.9 It is not out of context here to mention that the amount of unsecured loans of Rs.19,00,000/- from Deepak Bhajita for A.Y. 2009-10 has been added by the then Assessing Officer treating the same as unexplained. The then Assessing Officer fhad issued letter u/s 133(6) to Shri Deepak Bhatija to which there was no response. The then Assessing Officer recorded statements of the loanees and while passing order for A.Y. 2009-10 has also recorded vide Para no.22 as under "He did not have any knowledge obout the credit/deposit and his CA knows about the same. Similar answers were given by AnithaAmarnani, Deepak Bhaatija and Shankar Amarnani. All these persons stated that their cheque books/pass book/pay-in-slips etc were with their CA and not with them. Further, it was also seen that all these loan creditors had got amount credited/ deposited in their bank account prior to giving loan to the assessee and nobody was in a position to furnish the details of these credits/deposits..." The then assessing offices concluded that the tourd on finance capacity to advance any loan to the assessee the loan creditor that the cheques books/pass book/ pay-in-slips etc were with their CAs and these loan creditors had credits/deposits in their bank account prior to giving loan to the assessee. The Ld.CIT(A) has confirmed the addition made regarding unexplained cash credit of Shri Deepak Bhatija vide order no CIT(A)-33/IT/592/11-12 dated 08/03/2013 stating that Shri Deepak Bhatija is unaware of the transaction done in his name. The Ld CIT (A) in his order Para no.6 pg no.26 has mentioned as under "... Coming to addition made of Rs.19,00,000/- in the hands of appellant for the unsecured loan amount shown in the name of Shri Deepak Bhatija, besides the fact found that he is practically unaware of transaction in his name as some is done by only and exclusively by Mahesh Vishindas Chandwani his CA. He has not negated his earlier statement that he was paid money for signing blank cheques by him and which along with bank pass book is kept In custody of the same, who only is in knowledge of the transaction. I am in agreement with the A.O. that amount shown as unsecured loan on his name of Rs.19,00,000/-remains unexplained cash credit u/s.68 and hence addition made is upheld....."

Mahesh Vishindas Chandwani 2009–10, we find no justification to sustain the addition in the present assessment year on identical facts. Accordingly, we set aside the impugned appellate order on this issue and direct the deletion of the addition of Rs. 41,00,000/-. Ground No. 2 to 4 of the assessee’s appeal is therefore allowed.

Ground No.5 8. The Ground No.5 related to addition amount of Rs.1,00,000/- related to advance given to Mr. Sudhakar Jagtap, the Ld. AR stated that the revenue has not able to find the identity of this person though the assessee submitted the confirmation before the Ld. AO. The observations of the Ld. AO in assessment order paragraph no.3.4 is reproduced as below: “3.4 The contention of the assessee has been perused. The assessee is not able to submit even the address, PAN or any confirmation for the same. The assessee himself agrees that the he is not able to give any whereabouts of Shri SudhakarJagtap The assessee vide order sheet entry dated 23/11/2015 has submitted that no evidences can be furnished. As such an amount of Rs.1,00,000/-is added to the total income of the assessee treating it as unexplained advances. Penalty proceedings u/s 271(1)(c) of the I.T. Act is initiated for concealment of income”.

Ground No.6 12. During the impugned assessment year, the assessee received interest income amounting to Rs. 70,366/- in respect of advances given to a party. The Ld. AO observed in the assessment order that the said interest income had not been declared in the return of income filed by the assessee. Accordingly, the Ld. CIT(A) upheld the view taken by the Ld. AO. During the course of hearing before us, the Ld. AR submitted a confirmation evidencing receipt of interest amounting to Rs. 70,356/-, from which TDS of Rs. 7,036/- had been deducted, and the assessee received a net amount of Rs. 63,320/-. The confirmation along with the relevant details is placed at APB page 22. Upon perusal of the material on record, we find that this aspect was not duly examined by the Ld. AO during the assessment proceedings, and the addition was made without proper verification. The Ld. DR relied upon the orders of the revenue authorities.

Mahesh Vishindas Chandwani has claimed that the said interest was duly received and offered to tax in the relevant year. In the interest of justice, we deem it appropriate to restore the matter to the file of the Ld. AO for the limited purpose of verifying whether the interest income has been duly declared in the assessee’s return of income. Needless to state, the same income cannot be subjected to tax twice. The Ld. AO shall afford a reasonable opportunity of being heard to the assessee during the set-aside proceedings.