USHA J. SHAH,,KOLHAPUR vs. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 2,, KOLHAPUR
IN THE INCOME TAX APPELLATE TRIBUNAL
“B” BENCH, PUNE
BEFORE SHRI R.K. PANDA, VICE PRESIDENT
AND MS. ASTHA CHANDRA, JUDICIAL MEMBER
आयकर अपील सं. / ITA No.239/PUN/2018
Assessment Year : 2010-11
Usha Jitendar Shah,
329, E-Ward, Amatya Tower,
Dabolkar Corner,
Kolhapur
PAN : AEJPS9860D
बनाम /
V/s.
ACIT, (Circle-2),
Kolhapur
.......अपीलाथ / Appellant
…… यथ /Respondent
Assessee by :
Shri Kishor B. Phadke
Revenue by :
Shri Arvind Desai
सुनवाई क तारख / Date of Hearing
: 18.02.2025
घोषणा क तारख / Date of Pronouncement: 03.03.2025
आदेश / ORDER
PER R.K. PANDA, VICE PRESIDENT :
This appeal filed by the assessee is directed against the order dated 28.11.2017 of the CIT(A)-2, Kolhapur relating to the Assessment Year 2010-11. 2. This appeal was earlier dismissed by the Tribunal.
However, subsequently the Tribunal vide
M.A.No.291
/PUN/2023 order dated 07.01.2025 recalled its earlier order.
Hence, this is a recalled matter.
Facts of the case, in brief, are that the assessee is an individual and is engaged in the business of Trading in sugar. She filed her return of income on 21.09.2010 declaring total
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Ushal J. Shah income of Rs.22,39,500/-. The return was processed u/s.143(1) of the Act on 21.06.2011 accepting the returned income. Thereafter, it was noticed that the assessee has squared off opening balance of unsecured loans outstanding as on 01.04.2011 amounting to Rs.60,28,000/-. Notices u/s.133(6) were issued to the concerned parties/persons which were returned unserved by the postal authorities. The Assessing Officer (AO) thereafter reopened the assessment u/s.147 of the Act and issued notice u/s.148 on 13.10.2015
which was duly served on the assessee on the same day.
However, the assessee did not file any return in response to the same. Subsequently, another notice was issued in response to which the assessee filed a letter enclosing the copy of Tax Audit Report u/s.44AB along with return, computation of income, balance sheet and profit and loss account etc. The AO, on verification of the submission, found that assessee has not filed copy of original return of income or return of income in response to notice us/.148 of the Act. He, therefore, issued a show cause notice asking the assessee to explain as to why the assessment should not be completed u/s.144 of the I.T.
Act.
Subsequently, the assessee filed certain details in respect of various loan creditors. After considering the various details furnished by the assessee, the AO made addition of Rs.60,28,000/- in respect of 14 parties by observing as under :
“From the above Table it is seen that the notice u/s. 133(6) issued to parties have been returned unserved and the assessee also could not prove the identity, genuineness and creditworthiness of above loans.
In view of the above, during the course of assessment proceedings, as discussed above, proper opportunity was given to the assessee to prove the genuineness and creditworthiness of the parties. However,
3
Ushal J. Shah the assessessee has failed to comply the same. Therefore, it can be inferred that no efforts whatsoever in nature was taken by the assessee in respect of the above said unsecured loans of Rs.60,28,000/- as reflected in the name of the aforesaid persons. It was a unilateral decision of the assessee and the unsecured loans were squared off unilaterally by the assessee in its Books. No such evidences could be furnished by the assessee that before treating the said amount as bad debts, the assessee tried to recover the debt from the debtors and further that the debt was bonafide.
Accordingly, the unsecured loans squared up claimed by the assessee of Rs.60,28,000/- is being disallowed and added to the same to the total income of the assessee. As the assessee has made wrong claim of deduction by filing inaccurate particulars of income which resulted under-assessment of taxable profit to the extent of Rs.60,28,000/-, penalty proceedings u/s 271(1)(c) of the I.T. Act,
1961 are initiated separately.”
In appeal, the ld.CIT(A) gave part relief to the assessee by sustaining the addition of Rs.16,80,000/- in respect of three parties by holding as under :
“5.2.2
In respect of the other creditors, it could be seen from the table in para above that the juri ictional AOs have been able to locate and serve summons on these creditors and the same has been substantially complied with by the creditors. In such a situation, it is evident that these creditors exist at the stated addresses, and have confirmed the transactions with the appellant.
In addition to this, the appellant himself has submitted the confirmation, bank statements of the creditors, their ITR copies and in some cases the computation of incomes of these creditors. I am therefore of the view that the appellant has been able to prove the identity, creditworthiness and genuineness of the transactions.
Going further in most of these cases, the juri ictional AOs have also verified their bank statements etc. In the light of the various judicial decisions cited supra, I am of the view that except for the 3 loan creditors listed above, all other loan creditors are proved and therefore cannot be assessed as unexplained cash credit u/s.68. To sum up, out of the total addition of Rs.60,28,000 made by the AO u/s.68, I uphold the addition to the extent of Rs.16,80,000. Ground
2 is partly allowed.”
Aggrieved with such order of the ld.CIT(A), the assessee is in appeal before the Tribunal challenging the addition of Rs.16,80,000/- sustained by the CIT(A) in respect of the 3 loan creditors.
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Ushal J. Shah
Ld. Counsel for the assessee submitted that in respect of the 03 loan creditors assessee has filed copies of income-tax returns, bank statements etc. and therefore merely non- service of notices u/s.133(6) cannot be a ground for sustaining the addition especially when the ld.CIT(A) in the remaining 11 cases has deleted the addition on the basis of same documents. Further, the amounts have been repaid in subsequent years, the AO has not disallowed the interest paid to them, therefore, under these circumstances, the addition made by the AO and sustained by the ld.CIT(A) is not warranted.
Referring to the decision of Hon’ble Bombay High Court in the case of Principal Commissioner of Income-tax Vs. 1893/PUN/2017 and 1945/PUN/2017, dated 16.06.2022 he submitted that under somewhat identical circumstances the Tribunal has deleted the addition made by the AO on account of cessation of liability u/s.41(1) of the Act. He accordingly submitted that the order of ld.CIT(A) be set aside and the addition sustained by him to be deleted.
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Ushal J. Shah
Ld. Departmental Representative on the other hand heavily relied on the orders of the AO and the CIT(A).
We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case made addition of Rs.60,28,000/- in respect of 14 parties being unsecured loans which were squared off during the year on the ground that the notices u/s.133(6) to the parties were returned unserved and the assessee could not prove the identity, genuineness and creditworthiness of the above loan creditors. We find the ld.CIT(A) deleted the addition of Rs.43,48,000/- in respect of 11 parties but sustained the addition of Rs.16,80,000/- in respect of 03 parties, the details of which according to the AO are given below :
Jigar H. Vadecha
Returned income
Rs.1,63,680/-
Unsecured loan given
Rs.5,60,000/-
560000
First notice dt.7.11.2014
returned unserved.
Another notice dt.08.01.2015 sent on new address given by assessee also returned unserved by post with remark 'left'. Again a notice dt.
18.02.2015 on another address provided, remains non complied.
The assessee Usha Shah has furnished copy of ITR and bank account statement of Jigar
Vadecha from the same it is seen that he has given loan of Rs. 5
lakhs on 11.03.2010 by cheque to J.K.Enterprises.
The transaction is related to Α.Υ.
2010-11. Amrutlal R. Sadani
Returned income
Rs.1,68,540/-
Unsecured loan given
Rs.5,60,000/-
560000
First notice dt.7.11.2014
returned unserved.
Another notice dt.08.01.2015 sent on new address given by assessee also returned unserved by post with remark 'left'. Again a notice dt.
18.02.2015 on another address
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Ushal J. Shah provided, also returned unserved. The assessee Usha
Shah has furnished copy of ITR and bank account statement of Amrutlal Sadani from the same it is seen that he has given loan of Rs. 5 lakhs on 26.02.2010 by cheque to J.K.Enterprises. The transaction is related to Α.Υ.
2010-11. Sureshkumar
D.
Mehta
Returned income
Rs.2,09,690/-
Unsecured loan given
Rs.5,60,000/-
560000
A notice dt.7.11.2014 was issued but no reply filed. Assessee vide this office letter dt.29.12.2014
was apprised of this fact. A further notice u/s 133(6) was issued on 08.01.2015 at the new address provided by the assessee but the same also returned unserved. Thus, the unsecured loan of Rs.5,60,000/- remains not proved.
The assessee
Usha
Shah has furnished copy of ITR and bank account statement of Sureshkumar D. Mehta from the same it is seen that he has given loan of Rs.
5
lakhs on 26.02.2010
by cheque and received an amount of Rs.5,57,205/- from J.
K.
Enterprises through RTGS on 14.03.2012. The transaction is related to A.Y. 2010-11. 12. It is the submission of the ld. Counsel for the assessee that the assessee has filed the details of bank statements, copies of income-tax returns and confirmation letters etc., in respect of the 14 parties. Although the ld.CIT(A) deleted the addition in respect of 11 parties, however, he sustained the addition in respect of the above 03 parties merely on the ground that the notices u/s.133(6) were returned unserved.
He submitted that the loan amounts were received through banking channels, these loans were repaid in subsequent years, the interest paid to the three loan creditors were allowed by the AO and no disallowance has been made. It is his
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Ushal J. Shah submission that the ld.CIT(A) was not justified in sustaining the addition in respect of the three parties where such unsecured loans were repaid in subsequent years.
We find some force in the above arguments of the ld. Counsel for the assessee. A perusal of the assessment order shows that the AO has made addition of Rs.60,28,000/- in respect of 14 parties by giving his reasons that the notices u/s.133(6) were returned unserved and the assessee failed to prove the identity, genuineness and creditworthiness of the loan creditors. We find although the ld.CIT(A) deleted the addition in respect of 11 loan creditors, however, he sustained the addition in respect of 03 loan creditors, the reasons of which have already been reproduced in the above paragraphs. A perusal of the details filed by the assessee in respect of the 14 parties show that in all those cases the assessee has furnished identical details as called for, such as, copy of the return of the loan creditors, their bank statements, confirmations etc. Therefore, merely on account of non-service of notices u/s.133(6) in the instant case should not have been the basis for disallowing the amount received from the 3 loan creditors especially when such loans were taken and repaid through banking channels and interest expenditure in respect of the 3 loan amounts has been allowed.
We find identical issue had come before the Hon’ble (P) Ltd. (supra). In that case, the AO had made the addition on account unsecured loan taken by the assessee from two companies and had submitted all evidences to substantiate the loan including confirmation from creditors and loan was taken and repaid through banking channels. The Hon’ble
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Ushal J. Shah
High Court held that since the assessee has taken unsecured loans and submitted all evidences to substantiate loan including confirmation from creditors and loan was taken and repaid through banking channels the AO was not justified in treating such unsecured loan as unexplained cash credit.
Accordingly, the order of the Tribunal deleting the addition was upheld. The relevant observation of the Hon’ble High
Court reads as under :
“4. The record shows that the disallowance of the unsecured loans of Rs.40 Lakhs was based on search and seizure action conducted on one Mr. Praveen Kumar Jain during which he is said to have recorded a statement that he had provided accommodation entries to a few beneficiaries, one of which is the Respondent. The said statement was retracted after the search and seizure was completed. The statement recorded during the search and seizure, ignoring the retraction and other documentary evidence brought to bear in the assessment, is the basis of the assessing officer treating the unsecured loans as fake.
The two companies that lent the unsecured loans namely, Javda India Impex Ltd. and Lexus Infotech Ltd. were said to be companies controlled by the said Mr. Jain. The assessing officer added the sum of Rs.40 Lakhs as unproven cash credit and correspondingly disallowed the interest amount on the said loan.
The CIT-Appeals, upon a review of the documentary evidence on the record, which included supporting bank statements, the identities of the directors of the two companies, the tax returns filed by those companies and the confirmation of loans given by the Respondent concluded that the disallowance of the loan as being fake ought to be reversed.
The ITAT too agreed with the CIT-Appeals. Distinguishing the case law cited by the Department, the ITAT agreed with the CIT-Appeals and held that the Respondent has discharged the onus of explaining the transactions. The ITAT has also examined another decision of the ITAT in respect of another assessee, which also had a valid loan from Javda India Impex Ltd. The ITAT agreed with the findings in that case to hold that the addition to the income had been raised merely on conjecture and surmise.
Having heard the Learned Counsels for the parties and having reviewed the record, we do not find this to be a fit case for an appeal, that raises any substantial question of law a prerequisite for this Appeal to be entertained. This is not a case of accounting entries masquerading as purchase of goods or services. The evidence on 9 Ushal J. Shah record, has led to the questions of fact being answered concurrently in two rounds of review, in favour of the Respondent. Therefore, no substantial question of law arises in the matter, and therefore, the Appeal is dismissed.”
Since admittedly in the instant case also, the loans were taken and repaid through proper banking channels, the AO has not disallowed the interest expenditure and the assessee has filed the copies of income-tax returns, bank statements etc., to the effect of accepting and repayment of such loans through banking channels and the CIT(A) under identical circumstances has deleted the addition in respect of 11 parties, therefore, merely on account of non-service of notices u/s.133(6) the addition sustained by the CIT(A) in respect of the 3 loan creditors, in our opinion, is not justified. Accordingly, we set aside the order of CIT(A) and direct the AO to delete the addition. Grounds raised by the assessee are accordingly allowed.
In the result, the appeal filed by the assessee is allowed. Pronounced in the open court on 03.03.2025. ASTHA CHANDRA R.K. PANDA JUDICIAL MEMBER
VICE PRESIDENT
पुणे / Pune; दनांक / Dated : 03rd March, 2025
Satish
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Ushal J. Shah
आदेश क तलप अेषत/Copy of the Order is forwarded to :
1. अपीलाथ / The Appellant;
2. यथ / The Respondent;
3. 4. The concerned Pr.CIT
वभागीय !त!न"ध, आयकर अपीलय अ"धकरण, पुणे “B” /
DR ‘B’, ITAT, Pune;
5. गाड& फाईल / Guard file.
आदेशानुसार / BY ORDER,
//स या पत !त////
व)र*ठ !नजी स"चव / Sr. Private Secretary
आयकर अपीलय अ"धकरण, पुणे / ITAT, Pune