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Facts
The assessee's case was reopened under Section 148, and the Assessing Officer made additions of ₹14,81,68,666/- under Section 68 for unsecured loans, citing failure to prove identity, creditworthiness, and genuineness of lenders. The Ld. CIT(Appeals) granted substantial relief, deleting additions of ₹11,54,94,016/-, finding that the assessee had discharged its onus by providing necessary documents like PAN, ITR, and confirmations.
Held
The Tribunal partly allowed the Department's appeal, noting that for numerous creditors, the assessee failed to prove creditworthiness, despite the CIT(Appeals)'s relief. For the assessee's appeal, a small confirmed addition of ₹11.31 lakhs was accepted, and additions of ₹31.02 lakhs were upheld. However, for additions of ₹2.84 crores, the matter was remanded to the Assessing Officer for de-novo consideration as the assessee furnished new evidence before the Tribunal.
Key Issues
The key legal issue was the assessee's burden of proving the identity, creditworthiness, and genuineness of unsecured loan transactions under Section 68 of the Income Tax Act.
Sections Cited
148, 68, 133(6)
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Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD
Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:
These cross appeals have been filed by the Department and the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-10, (in short “Ld. CIT(A)”), Ahmedabad vide orders dated 13.11.2019 passed for A.Y. 2011-12. &1805/Ahd/2019 ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 2– 2. The Department has taken the following grounds of appeal:-
“1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.11,54,94,016/- out of total addition of Rs. 14,81,68,666/- made u/s 68 of the Act by the Assessing Officer.
On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating the facts brought on record by the Assessing Officer in the assessment order as well as in remand report.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.
It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”
The Assessee has taken the following grounds of appeal:-
“1. The Ld. AO has erred in law and on facts by making addition on account of non-submission of PAN No. by the appellant amounting to Rs. 2,95,71,691/-. The appellant had submitted complete details of PAN nos. and in some major cases appellant had also submitted return of income of those persona from whom PAN nos. were not available. It be so held the addition of Rs.2,95,71,691/- be deleted.
2. The Ld. AO has erred in law and on facts by making addition of Rs.31,02,959/- on account of non-clearance of cross examination of other parties by the Ld. AO u/s 12 of the Act. It be so held the addition of Rs.31,02,959/- be deleted.
3. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” We shall first take up the Department’s appeal (in )
4. The brief facts of the case are that the case of the assessee was reopened under section 148 of the Act and the assessee was asked to submit details of creditors during the course of assessment. The assessing officer observed that during the year under consideration, the assessee had received a total unsecured loans amounting to ₹14,94,29,083/-. The assessee submitted a total list of 164 persons from whom unsecured loans had allegedly been ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 3– borrowed by the assessee during the year. On consideration of the details of creditors supplied by the assessee, the assessing officer divided the same into 3 categories: firstly with respect to 30 creditors (from whom unsecured loan amounting to ₹2,84,40,691/- was taken), the assessing Officer observed that the assessee had failed to furnish even the basic documents like the PAN of the assessee. Secondly, with respect 51 creditors (from whom an amount of ₹2,99,01,457/- was taken as unsecured loans), the assessee failed to submit the ITR of these parties. Thirdly, the assessing officer took out the list of balance creditors of whom the PAN along with ITR was provided by the assessee, but the creditworthiness of the lenders could not be proved since most of the lenders had given loans more than 5 times of the returned income and were filing the return of income around the “nil” tax rates. Further respect to the third category, the assessing Officer observed that the bank statement of these creditors were also not provided and therefore their creditworthiness could also not be proved by the assessee. Accordingly, the assessing officer was of the view that the assessee had failed to discharge the onus under section 68 of the Act in proving the identity, creditworthiness and genuineness of the lenders. Further, the assessing officer initiated independent enquiries by issuance of notice under section 133 (6) of the Act and in case of 2 lenders, who had given amounts totalling to ₹31,02,959/- the persons refused giving any loans to the assessee and also alleged misuse of their identity to operate the fraudulent bank accounts. However, later the assessee produced confirmation and ITR from these very creditors, thereby indicating that the assessee had fabricated the confirmations and misused the documents in respect of these creditors. Accordingly, in light of these ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 4– observations, the assessing Officer observed that except the loan amount of ₹12,60,417/- which was accepted by the creditor in response to notice under section 133 (6) of the Act, for the rest of the unsecured loans amounting to ₹14,81,68,666/- credited in the books of accounts of the assessee had failed to pass the test of genuineness and creditworthiness within the meaning of section 68 of the Act. Accordingly, the assessing officer added a sum of ₹14,81,68,666/- as unexplained cash credits under section 68 of the Act.
5. In appeal before Ld. CIT(Appeals), he gave substantial relief to the assessee and deleted the additions of ₹11,54,94,016/-. Ld. CIT(Appeals) observed that the assessing officer had notices issued to 9 parties which were returned unserved, but the assessment order is silent about the status of notices issued to balance creditors under section 133 (6) of the Act. Ld. CIT(Appeals) observed that credits have been received in the bank accounts of the assessee through normal banking channels, and once the assessee has furnished necessary information like PAN and copy of ITR, the onus of the assessee stands discharged. Ld. CIT(Appeals) was of the view that the assessee had submitted satisfactory explanation about these credits and also the confirmations from the parties and such evidence placed by the assessee cannot be ignored. Accordingly, Ld. CIT(Appeals) held that since the assessee has submitted names, address, PAN, copy of bank statement, copy of acknowledgement of ITR and confirmation of ledger accounts, the onus of the assessee stands discharged with respect to these creditors. Accordingly, Ld. CIT(Appeals) gave relief to the assessee for a sum of ₹11,54,94,016/-.
ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 5– 6. The Department is in appeal before us against the aforesaid additions deleted by Ld. CIT(Appeals).
During the course of arguments before us, Ld. DR submitted that no fresh evidence has been placed on record by the assessee during the course of appellate proceedings before Ld. CIT(Appeals) so as to justify the relief which was was given to the assessee in respect of these creditors. The Ld. DR argued that Ld. CIT(Appeals) has not given any basis as to why such substantial amount of relief was given to the creditors, when the assessee has not been able to bring any additional iota of evidence during the course of appellate proceedings so as to justify granting of such relief to the assessee. The Ld. DR submitted that the assessee, in the instant facts has not been able to prove the genuineness or creditworthiness of these creditors and therefore in light of these facts, Ld. CIT(Appeals) erred in facts and in law in granting relief to the assessee.
In response, the Counsel for the assessee submitted that Ld. CIT(Appeals) has discussed the matter in length and after having satisfied himself about the genuineness of the transaction and the creditworthiness of the parties, he gave appropriate relief to the assessee. The counsel for the assessee also placed before us details of evidence which were placed before Ld. CIT(Appeals) for his consideration and submitted that onus has been shifted upon the Department and the assessee has given all possible evidences in support of the genuineness of transaction and creditworthiness of the parties. The counsel for the assessee placed reliance on the observations made by Ld. CIT(Appeals) in the appellate order.
ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 6– 9. We have heard the rival contentions and perused the material on record. Before proceeding into the matter, it would be useful to examine in detail the evidence which was placed before the tax authorities in support of the aforesaid transaction and which have also been placed before us for our consideration, to ascertain whether Ld. CIT(Appeals) has appropriately granted relief to the assessee on this matter. We shall first analyse the details submitted as “Annexure-B” giving details of ₹2,90,91,057/- deleted by Ld. CIT(Appeals). With respect to Sirsa Enterprises (Rs. 30,00,000/-), we observe that the assessee has only provided a copy of PAN, ledger confirmation and ITR, but it is seen that the assessee has filed a return of ₹2.64 lakhs and claimed the refund of taxes. From the facts placed on record, we see no reason as to on what basis Ld. CIT(Appeals) has held that the creditworthiness of party has been proved and accordingly, in our view there is no basis for giving relief to the assessee. Similarly, for Suman trading Company (₹25 lakhs), only ledger confirmation has been provided and ITR of one Shashi Sharma has been submitted showing income of ₹8.62 lakhs, which again does not prove the identity and creditworthiness of the said party. With respect to R.K. Enterprises (₹12.5 lakhs), only ledger confirmation has been placed on record and apparently the creditworthiness of the said party has clearly not been proved. Again the case of Vastram (₹10.19 lakhs) only ledger confirmation has been provided and hence there is no basis of giving relief for this amount. The same goes for Hitesh Babulal Shah (₹10.13 lakhs) where only confirmation of account has provided and hence creditworthiness has not been proved. Similarly, for Devraj Jain (₹10 lakhs), the assessee has only furnished confirmation of account and PAN number and hence, there is &1805/Ahd/2019 ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 7– no basis for allowing relief to the assessee for this lender. In case of Mayaben (₹8.10lakhs), the assessee has only furnished confirmation of account and accordingly, the creditworthiness of the said party has not been proved. Similarly for Ratnakar (₹6.57 lakhs), the assessee has only furnished confirmation of account and therefore in our view, there is no basis of giving relief to the assessee for this lender. For Arvindbhai Kothari (₹5.67 lakhs), Jignesh Shah (₹5.09 lakhs), Hetalbhai Kothari (₹5.09 lakhs), Prakashchandra Jain HUF (₹5.08 lakhs) Sanjeet Jain (₹ 5.06 lakhs), Nitaben Shah (₹5.05 lakhs), Dhanraj Sajnani (₹5.05 lakhs) HK Traders (₹5.05 lakhs), Pareshkumar Shah HUF (₹5.05 lakhs), Muktilal Shah (₹5.04 lakhs), Shital Traders (₹5.04 lakhs), B.B Textiles (₹5.04 lakhs) Vipul S. Jani (₹5.04 lakhs), Kevin Hareshkumar Shah (₹3.02 lakhs), Jignesh Shah (₹2.52 lakhs) and Umang Shah (₹2.52 lakhs) similar facts emerge wherein either no details have been provided or only confirmation of account has been provided, which is clearly insufficient to show the genuineness of transaction or the creditworthiness of the parties. In our considered view, with respect to the above parties, there is no basis for Ld. CIT(Appeals) to grant relief to the assessee since the creditworthiness of parties have not been proved by the assessee and therefore, it is incorrect to state that the onus has shifted to the Department. It is a well settled law that judicial precedents are applicable to the particular facts of each case and cannot have general applicability. It is also a well- settled principle of law the fact that amount has been received through banking channels does not show the genuineness of the transaction and the complete facts of the case need to be analysed. In respect of the parties, in our considered view, the assessee has not been able to show the creditworthiness ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 8– of the parties and once it is seen that the assessee has taken substantial amounts of loan from these parties, the primary onus is on the assessee to prove the genuineness of the transaction and creditworthiness of the parties. Therefore, for these parties in our considered view, Ld. CIT(Appeals) erred in facts and in law in allowing relief to the assessee.
Now we shall proceed to analyse the details of parties amounting to loan of ₹7,36,02,959/- deleted by Ld. CIT(Appeals) and the details of which have been furnished before us as Annexure “C”. With respect to M. K. Infrastructure (₹1 crore), the assessee has only submitted those details before Ld. CIT(Appeals) which had been earlier submitted before the assessing officer. As noted by the assessing officer, the above party had shown a meagre income of 4.5 lakhs and hence the creditworthiness of the said party had not been proved by the assessee. We observe that the assessee has not submitted any additional details before Ld. CIT(Appeals) in support of the creditworthiness of the aforesaid party, including the basic details like bank statement of the said party. Accordingly, we see no basis on which the relief has been afforded by Ld. CIT(Appeals) for the above party. Similarly, for Shyam Corporation (₹25 lakhs), the assessee has only provided confirmation of account and showing of a meagre income, which does not justify as to how the said land that had given this amount to the assessee. In our view, Ld. CIT(Appeals) erred in giving relief to the assessee since the assessee has clearly not prove the creditworthiness of the said party. At the moment, we are not even looking into cases, where the parties have filed responses in response to notices issued by the assessing officer under section 133 (6) of the Act and we are only restricting the observations to some glearing cases ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 9– where clearly and apparently, the assessee has not been able to prove the genuineness of parties and the creditworthiness of the transactions. Similarly, for Devesh synthetics (₹12.5lakhs), the assessee has only furnished confirmation of account and ITR, in which a meagre income of ₹1.75 lakhs was declared and hence, again in our considered view, the assessee has not been able to prove the creditworthiness of the said party. Similarly, for Dharmadev (₹10 lakhs), the assessee has only furnished confirmation of account and ITR, in which a meagre income of ₹1.82 lakhs was declared and hence, again in our considered view, the assessee has not been able to prove the creditworthiness of the said party. Similarly, for Schin Textiles (₹10 lakhs), the assessee has only furnished confirmation of account and ITR, in which a meagre income of ₹1.63 lakhs was declared and hence, again in our considered view, the assessee has not been able to prove the creditworthiness of the said party. With respect to Rekha Patel (₹9 lakhs), the assessee has only furnished confirmation of account and no further details to prove the genuineness of the transaction and creditworthiness of the party has been furnished before the tax authorities are either before us. Accordingly, we are of the considered view that there is no basis for giving relief to the assessee with respect to the above parties. As stated above, we have only taken note of few apparent cases, where the assessee has not been able to clearly prove the creditworthiness of the parties or the genuineness of the transaction, in our considered view. In other cases, where the assessee has responded to notice issued under section 133 (6) of the Act or has furnished ITR declaring a reasonable amount of income or furnished further evidences of genuineness ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 10– of transactions, we are of the considered view that Ld. CIT(Appeals) has correctly allowed relief to the assessee.
In the result, in light of the above observations, the appeal of the Department is partly allowed.
Now we shall take up the assessee’s appeal, in respect of amounts confirmed by Ld. CIT(Appeals) in the appellate order. With respect to a sum of ₹11.31 lakhs, in respect of which the addition has been confirmed on the ground that the assessee has not been able to reconcile this amount, the counsel for the assessee submitted that this amount may be added and the assessee shall not be pressing addition with respect to this ground and accordingly, this amount is hereby confirmed. With respect to addition of ₹31.02 lakhs for Alpaben Shah and Prakash Parmar, we find no infirmity in the order of Ld. CIT(Appeals) wherein he has held that looking into the assessee’s set of facts, the assessee has not been able to prove the genuineness and creditworthiness of these parties. Accordingly, we find no infirmity in the order of Ld. CIT(Appeals) so as to call for any interference. However, so far as addition of ₹2.84 crores is concerned wherein the addition has been confirmed on the ground that PAN has not been furnished by the assessee, Ld. CIT(A) observed that during the course of remand proceedings, PAN of such parties was not available and was not handed over to the assessing officer and accordingly, the additions with respect to this amount was liable to be confirmed. However, before us the counsel for the assessee submitted PAN/ITR of all the aforesaid parties and also in some cases confirmation of the parties and reply to notices under section 133 (6) of the Act were also ACIT vs. Jayantilal Babulal Shah and Jayantilal Babulal Shah vs. ACIT Asst. Year –2011-12 - 11– furnished before us. Accordingly, the counsel for the assessee submitted that it is a fit case where no addition is liable to be confirmed in the hands of the assessee. On going through the records of the case, we are of the considered view that in cases where assessee has specifically filed reply in response to notice under Section 133(6) of the Act i.e. in cases of Hanuman Prasad P. Jain, Ketan V. Tembhurkar, J.P. & Co. P.J. Patel, Varsha Mohanlal Nagar, Nitinbhai K. Shah, Sarveshdevi Sureshkumar Chauhan and Ashok as given in Annexure “A” filed before us, we are of the view that relief may be granted to the assessee and additions confirmed by Ld. CIT(A) may be deleted. However, with respect to other unsecured loans taken by the assessee, with respect to other parties as provided in Annexure “A” referred to above, in the interest of justice, the matter may be restored to the file of Assessing Officer for de-novo consideration, after giving due opportunity of hearing to the assessee
In the result, the appeal of the assessee is partly allowed for statistical purposes.