INCOMETAX OFFICER WARD-3(3)(2), AHMEDABAD, AHMEDABAD vs. JAYSHREE ARVIND SHAH, AHMEDABAD

The present appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 23.12.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2018-19.

The grievance of the Revenue raised in the above ground relates to its deletion of addition made by the AO u/s.68 of the Act on account of unsecured loans amounting to Rs.2,23,10,021/-, the genuineness of which, remained to be established by the assessee.

The facts of the case are that the assessee is running a proprietorship concern dealing in scrap business. The AO noted that there was a difference of Rs.2,23,10,021/- between the opening and closing balance of unsecured loan, the closing balance being higher by the said amount. The assessee was asked to prove the genuineness of the unsecured loan. The AO noted the assessee to have submitted a few ledger confirmations and found that such documents only established the identity of the persons who had given the loans. The genuineness and the capacity of the persons to give such loans, he held, remained unestablished. Accordingly, he held the source of unsecured loans of Rs.2.23 Crores as remaining suspect and added the same to the income of the assessee u/s.68 of the Act.

The ld. CIT(A), however, noted that the assesse had submitted all evidences and discharged its onus of proving the [ITO vs. Jayshree Arvind Shah] A.Y. 2018-19 - 3 – genuineness of the unsecured loans. He noted that the AO had accepted the assessee to have established identity of the cash creditors. He further noted the assessee to have submitted the return of income (ROI) of the cash creditors. The Ld. CIT(A) found, therefrom, that the AO was in possession of all details of the cash creditors i.e. PAN, postal address and the details of loans received and repaid. The Ld. CIT(A) further found that the assessee had also submitted the bank statement of the creditors. He further noted that the assessee, in the course of his business had to take part in various auctions and for which unsecured loans were needed. In the preceding year also, he noted, the assessee had huge balance of unsecured loans to the tune of Rs.2.78 Crores as against total turnover of his business of Rs.9.50 Crores. Whereas, in the impugned year he noted the total turnover of the business had increased to Rs.21.62 Crores and the unsecured loans, accordingly, increased by 2.23 Crores. Finding, thus, the assessee to have submitted all documents evidencing the genuineness of the transactions of unsecured loan and also finding the purpose for taking loans to have been explained by the assesse, the Ld. CIT(A) deleted the addition made in the hands of the assessee.

Before us, the Ld. DR was unable to controvert the finding of the Ld. CIT(A) that the assessee had submitted copy of confirmation, return of income and bank statement of all the creditors of unsecured loans. He was also unable to controvert the findings of the Ld. CIT(A) that the loans were taken in the course [ITO vs. Jayshree Arvind Shah] A.Y. 2018-19 - 4 – of business of the assessee, wherein the assessee took part in various auctions for which it required huge funds which it regularly took in the form of unsecured loans in the past also. The only argument of the Ld. DR was that the Ld. CIT(A) had, while deleting the addition, repeatedly emphasized on the AO having failed to make enquiries about the genuineness of the loan creditors despite all information in his possession. His contention was that the Ld. CIT(A) had co-terminus powers with the AO and he, therefore, could not have deleted the addition merely on the basis that the AO did not make sufficient enquiries. He contended that the Ld. CIT(A) ought to have got made the necessary enquiries himself in exercise of his co-terminus powers. His deletion of addition, therefore, for lack of enquiries by the AO, the Ld. DR contended was not in accordance with law.

We do not find any merit in the contention of the Ld. DR, since, we have noted that the Ld. CIT(A) has not deleted the addition merely because the AO did not make necessary enquiries which he was required to make. The Ld.CIT(A) found as a matter of fact the assessee to have filed confirmation of the loan creditors, their return of income and also their bank statements. This fact has remained uncontroverted by the Ld. DR. The Ld.CIT(A) has also noted that the AO did not find anything adverse in the documents filed by the assessee and, therefore, deleted the addition made in the hands of the assessee. We see no reason to disagree with the Ld.CIT(A). In view of uncontroverted fact that the assessee filed all documentary evidences proving the [ITO vs. Jayshree Arvind Shah] A.Y. 2018-19 - 5 – identity, genuineness and also the creditworthiness of the cash creditors and the AO found no infirmity in the same, we agree with the Ld.CIT(A) that the assessee had sufficiently discharged its onus of proving the genuineness of the loan creditors. With nothing adverse found in the said documents by the AO, there was no reason to make any further inquiries regarding the genuineness of the transaction. The contention of the Ld.DR therefore that the Ld.CIT(A) ought to have made inquiries in exercise of his co- terminus powers, we hold, is without any merits and reject the same.

In the light of the above, we uphold the order of the Ld.CIT(A) deleting the addition made in the hands of the assessee u/s 68 of the Act amounting not Rs. 2.23 Crores.

Ground No.1 raised by the Revenue is accordingly dismissed.

Ground of appeal No.2 raised by the Revenue reads as under:

The Ld. CIT(A), however, noted that the assessee did submit documentary evidences regarding housing loan re-payment and which, he noted, the AO ignored completely. He, therefore, directed the AO to delete the addition made u/s.24 of the Act of Rs.2 Lakhs.

The order of the Ld. CIT(A) reveals the assessee to have submitted that she had taken loan from Reliance Home Finance Ltd. of Rs.1.28 Crores and paid interest on the same. The said loan was stated to have been activated on 27.02.2017. The assessee had furnished the sanction letter of Reliance Home Finance Ltd. which contained the loan re-payment schedule therein, bifurcation of interest and capital re-payment.

The fact that the assessee had furnished documents evidencing the re-payment of loan alongwith the interest remained uncontroverted before us. The only plea of the Ld. DR was that the house property in relation to which the loan had been taken was co-owned by the assessee along with her spouse and, therefore, the issue needed to be restored back to the AO to examine and verify whether the spouse of the assessee had also claimed deduction of [ITO vs. Jayshree Arvind Shah] A.Y. 2018-19 - 7 – the interest paid on housing loan and only thereafter benefit of the same be allowed, if not claimed by the spouse.

We do not find any merit in the plea raised by the Ld. DR before us. The documents evidencing payments of interest on housing loan undoubtedly was there before the AO. This aspect of the matter needed to be examined by him and the AO having failed to do so, there is no case for giving him a second chance to verify assessee’s claim of expense.

In the light of the same, the order of the Ld. CIT(A) deleting the addition made on account of disallowance of interest paid on housing loan amounting to Rs.2 Lakhs is confirmed. Ground of appeal no.2 raised by the Revenue is, therefore, dismissed.

In the result, appeal filed by the Revenue is dismissed.