JCIT (OSD), PANVEL CIRCLA,, PANVEL vs. M/S. GANGA ASSOCIATES,, RAIGAD

This appeal preferred by the Revenue emanates from order of the ld. Commissioner of Income Tax (Appeals)-2, Pune dated 02-04-2019 for A.Y. 2014-15 as per the grounds of appeal on record.

Parties heard and the case is adjudicated on merits.

The relevant facts are that the assessee is a partnership firm engaged in the business as builders and developers. During the year under consideration, the assessee constructed a project called as “Ganga Regency”. The return of income declaring income of Rs.1,43,50,470/- was filed by the assessee on 30- 09-2014. The assessee had earned profit at Rs. 1,43,50,470/- against closing stock at Rs. 7,50,64,715. The case was selected for scrutiny through CASS. During the assessment proceedings, it was observed that the assessee had raised unsecured loans amounting to Rs. 2,13,62,500/- and interest paid on the said loans at Rs. 8,41,376/- as under:

M/s. Siddeshwar Infra Pvt.Ltd. 30,00,000 2,06,137 6. M/s. Rohit Diagem Pvt. Ltd. 20,00,000 43,397 7. Ganga Homes (loan a/c) 16,58,000 - 8. M/s. Kamdhenu Dimantarie & 10,00,000 56,548 Jewellers 9. Tararam Choudhary (Loan a/c) 10,00,000 10,000 10. Tejaram V. Choudhary HUF 10,04,500 32,123

During the assessment proceedings, the ld. A.O issued notices u/s 133(6) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) calling for confirmations along with supporting evidences to the said unsecured lenders. Though the confirmations were received from local parties (Sr. No. 7 to 10), but the notices sent to the lenders from Surat at Sr. No. 1 to 6 were returned unserved. The ld. A.O then issued Commission to the ADIT (Inv.) Surat to examine the identity, credit worthiness and genuineness of these lenders. In response to this Commission the ADIT (Inv.) Surat replied that notices issued were unserved as the Offices were either closed or addressed were false. Hence the assessment u/s 143(3) of the Act was completed on 26- 12-2016 assessing total income at Rs. 3,17,93,175/- by making an addition of Rs. 1,67,00,000/- on account of unexplained cash credits from the parties at Sr. No. 1 to 6 above by disallowing interest paid thereon.

We have heard the parties, considered the facts and circumstances in this case and perused the relevant materials on record. That, from the order of the ld. A.O., it is clearly evident that notices issued u/s 133(6) of the Act were issued calling for confirmations along with supporting evidences to the loan creditors. It is also evident that the lenders from Surat i.e. Sr. No. 1 to 6 in the list mentioned in the preceding para of this order were returned unserved. Thereafter, the A.O had issued Commission to the ADIT (Inv.) Surat to examine the identity, credit worthiness and genuineness of these loan creditors. There is a categorical finding given by the ADIT (Inv.) Surat saying that notices issued remained unserved on these loan creditors as the Offices were either closed or addresses were false. The ld. CIT(A) has not dealt with these facts in his order. He has simply relied on the remand report where some documents were submitted such as PAN, address proof, copies of assessment orders, etc.,but the fact remains with regard to the loan creditors at Sr. No. 1 to 6 appearing in the above mentioned list, whatever addresses were provided, those addresses were reported to be false addresses and the identity of these loan creditors has not been ascertained by the ld. CIT(A) before giving relief to the assessee. We have perused the findings of the ld. CIT(A) and he has not given a finding on an independent application of mind, his power being co-terminus with that of the ld. A.O., the ld. CIT(A) has failed to carry on an independent examination of facts and verification of the said loan creditors regarding whose whereabouts were not found even by the ADIT (Inv.) Surat. We are of the considered view that the ld. CIT(A) has given a mechanical finding which is not appropriate in administration of justice. Even the ld. A.R could not establish the identity, creditworthiness and genuineness of these loan creditors through any evidences or materials at the time of hearing before this Bench. We therefore, set aside the order of the ld. CIT(A) and remand the matter back to his file for detailed factual verification as to those loan creditors appearing at Sr. No. 1 to 6 of the list from Surat and other factual matters and then decide the issue as per law complying with principles of natural justice. The grounds of appeal raised by the Revenue are allowed for statistical purposes.

In the result, appeal of the Revenue is allowed for statistical purposes.