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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member ITA No.267/Hyd/2022 Assessment Year: 2019-20 Asst. Commissioner of Vs. M/s. Raichandani Pahal Income Tax, Developers LLP. Central Circle – 1(3), Hyderabad. Hyderabad. PAN : AAXFR6285M. (Appellant) (Respondent) C.O.No.16/Hyd/2022 (in ITA 267/Hyd/2022) M/s. Raichandani Pahal Vs. Asst. Commissioner of Developers LLP. Income Tax, Hyderabad. Central Circle – 1(3), PAN : AAXFR6285M. Hyderabad. (Cross Objector / (Respondent) Appellant) Assessee by: Shri H. Srinivasulu Revenue by: Shri Kumar Adithya Date of hearing: 21.10.2022 Date of pronouncement: 02.11.2022 O R D E R Per Laliet Kumar, J.M. This appeal by the Revenue and cross-objection by the assessee are directed against the order of Commissioner of Income Tax (Appeals) – 11, Hyderabad dated 26.04.2022 for the assessment year 2019-20.
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The Revenue has raised the following grounds :
“1. The Ld. CIT(Appeals) erred both in law and on facts of the case in granting relief to the assessee. 2. The Ld. CIT(Appeals) erred in deleting addition of Rs. 3 crores made towards unexplained cash credits u/s 68 of the Act. 3. The Ld. CIT(Appeals) erred in relying upon the Balance Sheet of the lender M/s S.B. Metals Pvt. Ltd. for the year ending 31.03.2016 for holding that the lender was having sufficient reserves and surplus and credit worthiness to advance loan to the assessee in the previous year 2018-19. 4. The Ld. CIT(Appeals) erred in relying upon the balance sheet of the lender M/s S.B. Metals Pvt. Ltd. for the year ending 31.03.2016 for holding that the loan stated to have been advanced by M/s S.B. Metals Pvt. Ltd. to the assessee is a genuine transaction. 5. The Ld. CIT(Appeals) erred in holding that the lender Smt. Kirti Gurubani has credit worthiness to advance the loan to the assessee relying upon the bank account jointly held by her along with Sri. Girish Gurubani. 6. The Ld. CIT(Appeals) erred in not appreciating the fact that the pattern of transactions reflected in the joint bank account held by Smt. Kirti Gurubani and Sri. Girish Gurubani showed that there was synchronized activity to route funds to the assessee through the joint account by infusing funds into the joint account from various banks, just before the date of loan. 7. The Ld. CIT(Appeals) erred in not appreciating the fact that the pattern of transactions reflected in the bank account held by Sri. Girish Gurubani showed that there was synchronized activity to route funds to the assessee through the said account by infusing, funds into the said account from various banks, just before the date of loan. 8. The Ld. CIT(Appeals) erred in not appreciating the fact that Smt. Kirti Gurubani and Sri. Girish Gurubani did not have commensurate sources of income to advance huge amount of loan to the assessee and that they did not even file their ITR for the year under consideration 9. The Ld. CIT(Appeals) erred in holding that lending can be made out of surplus of earlier years and therefore income criteria of the lender for the year under consideration is not a sufficient ground to disbelief the loan transaction, when the assessee failed to produce any evidence showing the availability of such surplus from earlier years was available with the lenders Smt. Kirti Gurubani and Sri. Girish Gurubani.”
3 ITA No.267/Hyd/2022 & CO 16/Hyd/2022
First we take up the appeal of Revenue i.e. ITA 267/Hyd/2022 for adjudication.
3.1. Facts of the case, in brief, are that assessee is a firm deriving income from construction work, had filed its return of income for A.Y. 2019-20 on 04.10.2019 admitting total income of Rs,8,55,950/-. Subsequently, the case was selected for scrutiny under CASS. Thereafter, notice u/s 143(2) of the Act was issued on 16.03.2020 and was duly served. Statutory notices u/s 142(1) of the Act were issued on various dates calling information. In response to the notices issued, the assessee furnished the information. Based on the information given by the assessee and on the information available on record, Assessing Officer completed the assessment interalia by making an addition of Rs.3,00,00,000/- as unexplained credit u/s 68 of the Act and added to the total income of the assessee.
Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who allowed the appeal in favour of the assessee.
Feeling aggrieved with the order of ld.CIT(A), Revenue is now before us. 6. Before us, ld. DR for the Revenue had submitted that Assessing Officer had made an addition of Rs.3,00,00,000/- u/s 68 of the Act on account of non-submission of I.T. returns in respect
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of unsecured loans obtained from S.B.Metals Pvt Ltd, Girish Gurbani and Kirti Gurbani by the assessee firm. Ld. DR further submitted that in the case of M/s. SB Metals Pvt. Ltd., ld.CIT(A) held that M/s. S.B. Metals has sufficient reserves and surplus of Rs.19,27,68,763/- but in fact, the ld.CIT(A) has quoted the balance sheet pertaining to F.Y. 01.04.2015 to 31.03.2016, whereas the assessment year under consideration is 2019-20 and hence, ld.CIT(A) erred in relying upon the balance sheet of the lender i.e., M/s. S.B. Metals. Further, M/s. S.B. Metals Pvt. Ltd. had long term and short-term borrowings to an extent of Rs.49.97 crores, and hence, the creditworthiness of the said lender is not proven.
Ld. DR for the Revenue further submitted that ld.CIT(A) also erred in holding that the lender Smt. Kirti Gurubani has the creditworthiness to advance the loan to assessee relying upon bank account jointly held by her along with Shri Girish Gurubani. Ld. DR further submitted that even the assessee did not file the income tax returns. In the present case, the creditworthiness of Girish Gurbani and Kriti Gurbani, who were stated to have advanced Rs.1,25,00,000/- each, was not proved and hence, the order of ld.CIT(A) in deleting the addition is not acceptable and the order passed by ld.CIT(A) is not in accordance with law. In support of his case, he filed written submissions which are placed at page 1 and 2 of the paper book.
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“The decision of the Ld. CIT (A) in deleting the additions made u/s. 68 of the I T Act isnot acceptable on the following grounds.
3.1 SB Metals P Ltd. In the case of M/s. SB Metals P Ltd ., the Ld. CIT(A) held that M/s. S B Metals has sufficient reserves and surplus of Rs. 19,27,68,763/ -, In this regard, the Ld. CIT(A) has quoted the balance sheet pertains to FY 1.4.2015 to 31.3.2016 whereas the assessment year under consideration is 2019- 20. Therefore, the Ld. CIT(A) has verified the irrelevant Balance-Sheet while deleting the addition. Further, M/s. S B Metals P Ltd. was having long term borrowings and short term borrowings to the extent of Rs.49.7 crores. Therefore, the creditworthiness of M/s. S.B. metals P. Ltd. Is not proved. Further, the assessee has also not proved the genuines of the transaction. Therefore, the decision of the ld.CIT(A) deleting the addition of Rs.50,00,000/- stated to have been genuine is not acceptable and futher appeal is suggested on this issue. Sri Girish Gurbani and Kirti Gurbani With regard to Sri Girish Gurbani and Kriti Gurbani who were stated to have been advanced Rs.1,25,00,000/- each, it is submitted that the transaction made through bank is not sufficient to prove the creditworthiness of the money lenders. The ledger extract affixed in the appellate order reveals the mode of receipt but not the creditworthiness of the money lenders. The assessee has neither filed the copy of the Returns of Income filed by the money lenders to prove the identity of the persons, which is main ingredient as per Sec. 68 of the IT Act. Further, payment of interest after deducting the TDS is not the criteria for proving the genuineness of the loan taken. It will prove only the identity but not the creditworthiness of the money lenders. Therefore, the decision of the Ld. CIT (A) deleting the addition is not acceptable and hence the Hon'ble ITAT is prayed to consider quashing the CIT (A) order and confirming the addition made by the A.O.”
Simultaneously, assessee also filed cross-objections in support of the order of the ld.CIT(A). It was submitted that if once the appeal of Revenue is decided, the C.O. of the assessee would become academic and infructuous. We are not reproducing the cross-objections for the sake of brevity.
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Before us, ld. AR for the assessee submitted that assessee had furnished the following details in respect three lenders, namely, S.B.Metals Pvt. Ltd., Girish Gurbani and Kirti Gurbani (Pages 74 and 75 of the Paper Book).
S.B Metals (P) Ltd (loan received on 29.05.2018)— PAN, ledger A. balances, TDS, TDS on interest and payment of interest through bank [page-86] B. Girish Gurbani, PAN, Interest paid, TDS on Interest etc. Date of loan — 12.04.2018 — 75,00,000 — Banking channel. Date of loan — 28.02.2019 - 50,00,000, totaling to Rs. 1,25,00,000 (page 87 of PB) C. Kirti Gurbani — PAN, Interest paid, TDS on Interest etc. Date of loan — 12.04.2018 75,00,000 Banking channel. Date of loan — 28.02.2019 - 50,00,000/- totaling to Rs. 1,25,00,000 (page -88)
9.1. Ld. AR further submitted that assessee also filed the following documents as per Rule 46A of the Act and that with the information submitted by it, the department can easily verify in the database to know the creditworthiness of the lenders. Ld. AR further submitted that the order passed by ld.CIT(A) is in accordance with law. He drew the attention of the Bench to the following details filed before ld.CIT(A). i. PAN numbers of three lenders & copies thereof. ii. Addresses of three lenders. iii. Confirmation letters from three lenders. iv. Copies of Income tax returns and 26AS of three lenders. v. Bank statements wherein the loans from three lenders were credited vi. Interest was paid after making TDS u/s 194A & proof thereof in the form of 26AS vii. Bank Statement of M/s. Raichandani Pahal Developers LLP, where the unsecured Loans are reflected. viii. Three lenders are men of means.
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9.2. Ld. AR further submitted that the assessee had discharged the burden of proof by proving the ingredients of section 68 of the Act i.e., identity, creditworthiness and genuineness of transactions in respect of S.B. Metals Pvt. Ltd. In this connection, assessee submitted that by filing confirmation of letter, confirmation of ledger account, copies of tax returns for A.Ys.2018- 19 to 2020-21 and also bank account of S.B. Metals Pvt. Ltd. in Axis Bank (pages 11 to 13 and 33, 42 and 45 of the paper book), assessee proved the identity. Further submitted that the deletion made by the ld.CIT(A) was not based on the balance-sheet alone. Regarding creditworthiness, assessee submitted that there were no cash deposits in the bank account of S.B. Metals (supra) before issue of cheque to it and provisions to section 68 of the Act were not applicable to it. Further, the burden of proving source of source was not on the assessee. Regarding genuineness of transactions, assessee submitted that the Assessing Officer admitted in his remand report stating that genuineness was proved to some extent and he did not make proper enquiry before invoking section 68 of the Act and relied on decisions CIT Vs. Orissa Corporation Pvt.Ltd reported in ITD 1591 ITR 78, CIT Vs. Manoj Kumar Vipin Kumar 441 ITR 632 (Raj) etc.
9.3. Ld. AR further submitted that the assessee had discharged the burden of proof by proving the ingredients of section 68 in respect of Girish Gurbani and Kirti Gurbani also. To prove
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identity, he drew the attention of Bench to pages 9 to 11, 14 to 17 and 38 to 41 of the paper book. In respect of creditworthiness, assessee submitted that it had filed the copies of computation of total income of A.Y. 2021-22 (pages 22 to 32 of the paper book), a copy of net worth report (pages 55 to 59 of PB) and relied on the decisions in the case of Shree Ganesh Trading co reported in 413 ITR 61, Sidhi Vinayaka Metcom Ltd reported in 414 ITR 402 etc. In respect of genuineness of transactions, assessee submitted that it had received loans through banking channels and that it filed bank accounts of lenders vide page 34 to 37 of the paper book. Ld. AR for the assessee finally submitted that the action of ld.CIT(A) deleting the additions is in accordance with law as the assessee had discharged the burden cast upon it u/s 68 of the Act.
9.4. In rebuttal, the ld.DR for the Revenue had submitted that though the Assessing Officer in the remand report has only mentioned “genuineness of transactions were proved only to some extent” however, it is incumbent upon the Assessing Officer to state specifically to what extent the assessee was able to prove the genuineness of the transactions. Hence, it was prayed that the matter may kindly be remanded back to the file of Assessing Officer for quantifying to what extent the genuineness of impugned transactions were proved.
9 ITA No.267/Hyd/2022 & CO 16/Hyd/2022
We have heard the rival submissions of the parties and also perused the material on record along with written submissions filed on either side. In the present case, ld.CIT(A), after accepting the additional documents / evidence filed by the assessee has called for a remand report from the Assessing Officer. The Assessing Officer has furnished a remand report in respect of all three creditors. The remand report (Page 53 of the paper book) filed by the Assessing Officer reads as under :
“M/s. S.B. Metals Pvt. Ltd. As per the additional evidence furnished by the assessee, it is seen that the assessee has furnished copies of ITR-V for the A.Ys. 2018-19, 2019-20 and 2020-21, along-with the confirmation letter, Form 16A for AY 2019-20. bank account statement etc. in respect of assessee M/s. S.B. Metals Pvt. Ltd. On perusal of the additional evidences furnished, it is observed that the incomes returned by M/s. S.B. Metals Pvt. Ltd. for A.Ys. 2018-19 to 2020-21 are as under:
Sl.No. A.Y. Total income (Rs.) 1 2018-19 20,66,280 2 2019-20 Nil 3 2020-21 Nil
In view of the above, the creditworthiness of Mis. S.B. Metals Pvt. Ltd. cannot he ascertained. Only evidences pertaining to the identity of the entity M/s. S.B. Metals Pvt. Ltd. could be ascertained. On perusal of the bank statement furnished, the genuinity of the unsecured loan is proved only to some extent. The economic rationale, the commercial substance involved in the said transaction and the correspondence between the two entities for negotiating the unsecured loan are not known or proven to certainty. Further, on perusal of the incomes returned by the lender for the A.Ys. • 2018-19. 2019-20 and 2020-21. the creditworthiness cannot be ascertained.
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(ii) Sri Girish Gurbani: As per the additional evidence furnished by the assessee, it is seen that the assessee has not furnished any ITR-V of Sri Girish Gurbani. The assessee has furnished only Computation of Total Income for the A.Y. 2021-22, confirmation letter; Form-26AS for the A.Y. 2019-20, bank account statement etc. On perusal of the bank statement furnished, the genuinity of the unsecured loan is proved only to some extent. The economic rationale. the commercial substance involved in the said transaction and the correspondence between the two entities for negotiating the unsecured loan are not known or proven to certainty. Further, on perusal of the computation of total income for the A.Y. 2021-22, the creditworthiness cannot be ascertained. (i) Snit. Kriti Gurbani: As per the additional evidence furnished by the assessee, it is seen that the assessee has not furnished any ITR-V of Smt. Kriti Gurubani. The assessee has furnished only Computation of Total Income for the A.Y. 2021-22, confirmation letter, Form-26AS for the A.Y. 2019-20, bank account statement etc. On perusal of the bank statement furnished, the genuinity of the unsecured loan is proved only to some extent. The economic rationale. the commercial substance involved in the said transaction and the correspondence between the two entities for negotiating the unsecured loan are not known or proven to certainty. Further, on perusal of the computation of total income for the A.Y. 2021-22 the creditworthiness cannot be ascertained.”
From the perusal of the above-said remand report, it is clear that the Assessing Officer had accepted “the genuineness of the unsecured loan was proved only to some extent”. However, he had failed to quantify to what extent the assessee had proved the genuineness of the transactions. Further, we notice that in the case of S.B. Metals, the assessee had only provided bank statements for one day i.e. 29.05.2018 to 30.05.2018. In our opinion, complete bank statements for one year prior to the impugned transfer of amount to the assessee by the lender is
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essential as on that basis, the Assessing Officer will be able to find out the creditworthiness and genuineness of the transactions.
In light of the above, we find force in the argument of the ld.DR for the Revenue whereby he sought remanding the matter to the file of Assessing Officer for quantifying the genuineness of the transactions after going through the financial / bank transactions etc of all the three lenders. Hence, we remand the matter back to the file of Assessing Officer with a direction to record denovo finding about the genuineness and creditworthiness of all the three alleged lenders, after affording sufficient opportunity of hearing to the assessee in accordance with law. Needless to say the assessee may file any documents / evidence in support of its claim to prove the genuineness and creditworthiness of the subject transactions.
In the result, the appeal of Revenue is allowed for statistical purposes.
Now, we take up the Cross Objection filed by the assessee. 15. Since the appeal of Revenue is allowed for statistical purposes, therefore, the Cross Objection filed by the assessee rendered academic. However, the assessee can take all the legal objections as may be permissible in law before the Assessing Officer against the subject matter of the assessment. Thus, the C.O. filed by the assessee is dismissed in the above terms.
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To sum up, the appeal filed by the Revenue is allowed for statistical purposes and the Cross Objection filed by the assessee is dismissed.
Order pronounced in the Open Court on 2nd November, 2022.
Sd/- Sd/- (RAMA KANTA PANDA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, dated 2nd November, 2022. TYNM/sps
Copy to: S.No Addresses 1 M/s. Raichandani Pahal Developers Ltd. 6-3-3554, 3rd Floor, Flat No.302, S.B. Towers, Road No.1, Banjara Hills, Hyderabad. 2 Asst.Commissioner of Income Tax, Central Circle – 1(3), Hyderabad. 3 Commissioner of Income Tax (Appeals) – 11, Hyderabad. 4 PCIT (Central), Hyderabad. 5 DR, ITAT Hyderabad Benches 6 Guard File By Order