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Income Tax Appellate Tribunal, “B” BENCH, PUNE
Before: SHRI S.S.GODARA, JM & SHRI G.D. PADMAHSHALI, AM
सुनवाई की तारीख / Date of Hearing : 26.09.2022 घोषणा की तारीख / Date of Pronouncement : 18.10.2022 आदेश / ORDER PER S. S. GODARA, JM :
1. This assessee’s appeal for AY 2013-14 arises against the CIT-5, Pune’s order dated 08/05/2022 passed in PN/CIT(A)-5/ITO.Wd-12(4), Pune/66/ /2016-17, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short "the Act”.
Heard both the parties. Case file perused.
Sarika Ashok Satav,
2. It emerges during the course of haring that the assessee’s sole substantive grievance challenges correctness of both the lower authorities action adding unexplained cash credits /unsecured loans of Rs.1,42,61,756/- during the course of assessment dated 18.03.2016 as upheld in the CIT(A)’ s order as follows. “ 4.6. The A.O. vide his Remand Report dt. 09.01.2017 submitted as under :-
“In this connection, detailed report on the subject is submitted as under: a) Assessee is an individual stated to be running the business of beauty parlor (actually such business is not at all conducted during the previous year on personal visit of Inspector) has filed belated I.T.Return declaring total income of Rs. 196890/- on 25/07/2014 (which is below the taxable limit). The case was selected for scrutiny in CASS on the reasons that large investment in property as compared to total income. b) Accordingly notice u/s 143(2) of the I.T.Act, has been issued and assessment u/s 143(3) of the Act, was completed on 18/03/2016 assessing total income of Rs. 14458650/- after making disallowances of Rs. 14261756/- towards investments made in immovable properties treating as unexplained cash credits/unsecured loan. c) During the course of entire assessment proceedings, the AR who attended on behalf of the Assessee has never stated that assesee's share in the said property is proportionate and no such Sarika Ashok Satav, confirmations have also filed. Further he stated that in order to purchase the property, Assessee has taken unsecured loans from these persons whose names were included in the agreement for safer side. Further he also stated that as and when these properties are sold in subsequent years their proportionate share of contributions will be returned back as per the agreement executed in subsequent years. In order to verify the transactions and investments made in the property, a copy of agreements were obtained and on verification the property purchased by the Assessee and jointly held with others is as under:
Description of Agreement S.No property Date of Reg. Value Jointly held with Gat No. 279, Wagholi 08/05/2012 * Rs. 6500000/- Mr. Namev Shivaji 1 28.5 Are Khandve 2 Gat No. 279,Wagholi 08/05/2012 Rs. 3262000/- 7 others 19.75 Are No. 4139/2012 3 Gat No. 279, Wagholi 08/05/2012 RS. 3262000/- No Joint Owners. 19.75 Are No.4150/2012 In order to verify the investments made by others with the Assessee , letters were issued to these parties calling the information u/s 133(6) of the I.T.Act, 1961 and to confirm the amount of loan advanced to the Assessee for purchase of above mentioned properties. As regards to party appearing at serial number one viz. Mr. Namdev Shivaji Khandve, he categorically denied to furnish the confirmation for advancement of unsecured loan and he never filed confirmation. Further it is also seen that Mr. Khandve has advanced loan of Rs. 7175000/- to the Assessee for purchase of above mentioned properties (almost 50% of total investments). However, during the entire course of assessment proceedings he never filed such confirmation stating as loan has been advanced to Sarika Satav. Necessary intimation for taking action as Sarika Ashok Satav, deemed fit as per I.T.Act, has been given to concerned A.O. vide this office letter dated 06/01/2016. As regards to parties appearing at serial number 2 above, following persons have attended and given their statement voluntarily: a) Ramchnandra Kisan Satav. b) Santosh Baban Satav c) Yogesh Gangadhar Satgav d) Balu Jaiinder Temgire e) Bhausaheb Baban Kate.
It is seen from their recorded statement, they have stated as loan is advanced to Mr. Ashok satav and Sarika Satav by cash/cheque. A copy of bank account statement is also furnished for verification. It is seen from their bank account statement, these persons do not have credit worthiness of lending the money. Similarly before issue of cheques, huge amount is credited by cash/cheque in their bank accounts. When details were asked they have stated that these amounts are credited on sale of land/agricultural products which they could not substantiate their claim by producing sufficient evidence. Further these parties have stated in their statement that in subsequent years Assessee has repaid their loans. However, Assessee is non filer for AY 14-15 and onwards and has never- filed further years I.T. returns. Further the above mentioned parties who have advanced the loans to the Assessee, is also non filers and have never filed their IT Returns for relevant assessment year. Necessary intimation has already given to the respective jurisdictional assessing officers for taking action as deemed fit as per I.T.Act. Further following two parties were never attended nor filed their confirmations stating loan is advanced to the assessee: i) Rajendra Ganpat Jangam ii) Ganesh Gulab Potle
Sarika Ashok Satav, In view of the above facts and circumstances, disallowances have been made in the hands of the Assessee towards the loan advanced by these parties treating as unexplained cash credits/unsecured loan in the hands of the Assessee. The reasons for making such additions in the hands of the Assessee is that as Assessee has made investments in the immovable properties as sources are not properly explained.
3. Now Assessee in its Appeal memo contended that Assessee had share only in the all three (land) properties and her husband had taken loans and amount is wrongly added in the hands of the Assessee.
In this connection, it is submitted that as already stated above in earlier paragraphs Assessee is a housewife and stated to be running the business of beauty parlor and in real facts she never,carried such business activities. Further on verification, all these transactions have been made by Mr. Ashok Satav (Husband of the Assessee). He has opened several bank accounts in the name of M/s Poonamraj Associates and M/s Chanakya Enterprises in ICICI Bank at Hadapsar and Kharadi Byepass, Pune, Mahanagar Co-Op Bank, Chandannagar Branch, Pune and credited the amounts by way of cash/cheque in these accounts. When details were asked to the above parties from whom unsecured loan has been taken, they have stated that as loan is advanced to both Mr. Ashok Satav/Sarika Satav. The purpose of taking loans is not explained. Further, during the course of entire assessment proceedings, AR has never stated who is the proprietors of the said firms in whose name bank accounts have been opened. For the sake of convenience he opened the bank accounts and credited the amounts in these bank accounts disclosing as loan is taken from the above parties. Even during the course of assessment proceedings Mr. Ashok Satav (husband of Assessee) has been called and asked the details such as whether the said assets (lands) are still in the possession of the Assessee. He stated that these lands were sold in future years and amounts have been Sarika Ashok Satav, returned back to these parties from whom unsecured loans have taken. In order to verify such transctions, Assessee did not file further years I.T.Returns. It clearly proves that Assessee has made colorable devices showing immovable transactions have been made by taking unsecured loan from these parties and the amount has been returned to them as and when profit derived from the sale of these lands which is not disclosed by the Assessee in the subsequent years.
During the course of assessment proceedings, AR vide letter dated 21/12/2015 stated that for making payments to landowners at the time of purchase of property, Mr. Ashok Satav has issued the cheques to Mrs. Poumima Tathwade and Mrs. Sunita Kharade who are stated to be the sisters of Mr. Satav and they made the payments to the land owners. Reasons for routing the money through third party are not properly explained. Further Mr. Ashok Satav is also one of the Ex- employee of ICICI Bank, he should have been taken proper care at the time of issue of cheques. Hence this contention is not acceptable. Further AR in his letter stated as under:
In my reply dated 26/10/2015 and 08/12/2015, I have provided the information regarding details of investments in immovable properties and true source of cash deposit in ICICI Bank that 1 had taken the money on loan from people to invest in immovable property. This information is a original source of funds i.e. how my husband had raised the funds
There was no need to provide information regarding original source of fund, I have to provide information regarding how I did become owner of immovable property.
I have received these property and money without consideration from my husband. This is my exempted income u/s 56(2)(vii) of the Income Tax Act, 1961.
Sarika Ashok Satav,
6. Referring to the above paragraphs, it proves that Assessee is a sole owner of all the three immovable properties purchased on 08/05/2012 and proportionate share of the Appellant (Assessee) in these transactions does not arise. She also accepts that the funds have been raised by her husband to acquire these immovable properties and no need to provide the original source of funds and how I become the owner of the said immovable properties further stating as it is an exempt income u/s 56(2)(vii) of the i.T.Act,1961. This contention cannot be accepted in principle as these properties have not been gifted by her husband by making will/gift deed or by any other means of transfer. Hence this contentions is beyond the imaginary within the purview of section 56(2)(vii) of the l.T. Act. It may also be added over here that neither Mr. Ashok Satav nor Mrs. Sarika Satav has disclosed these transactions in their I.T.Returns. When this information is appeared in ITS data, then only Assessee produced the information along with name of parties from whom money had been taken on loan for making investment in the said properties. Also provisions of section 64(1) of the I.T.Act are not applicable in the instant case. Therefore, transactions made by the asessee and in this context it can be said to be as under:
"When 98% returns are not scrutinized by the Department, there are probability of 98% tax evasion done by the Assessee is buried with the file and therefore, clever Assessee will always take a chance to evade the tax in the impression that if by chance, the return is picked up for scrutiny, can make an excuse by providing false statements and that too ignorance of law. This fact is not legally acceptable defense. Further, if such excuses are accepted, then it will become a practice among the asessees at large and then the situation will be out of control. Only after the case was selected for scrutiny, the claim of personal interest was disallowed and brought to tax".
Sarika Ashok Satav,
7. Considering the above facts and circumstances, and in Law, the amount is rightly taxed in the hands of the Assessee treating as "UNSECURED LOANS" for making investments in immovable properties done by Mr. Ashok Satav on behalf of the Assessee without the knowledge of the Assessee.
8. In view of the above facts, the Appeal may kindly be decided accordingly."
4.7 in the Counter Comments dt 18.01.2017 the Appellant states as under:-
"We thank you for giving the opportunity to provide the comments on above referred remand report received from ITO Ward 12(4), Pune through The Additional Commissioner of Income Tax, Pune.
Our comments Para No. of Remand Report 02. a) The relevant Assessment year is 2013-14 i.e. F.Y. 2012-13. The Assessee was pregnant during the visit on 25/7/2014, Hence due to medical reason the Assessee was not attending the business. Particulars of inspector visit is never confronted to the Assessee during the course of scrutiny proceeding. 02.b) No Comments 02. c) Incase of specification of shares in the agreement we want to state that all the registered agreement were produced before the Income Tax Officer and the Assessing Officer was duty bound to assess legally correct income in the hands of the Assessee. The Assessing Officer should not take the advantage of assesse's ignorance. For this purpose the CBDT Circular is enclosed in Annexure No.
Other explanation is given in the Ground wise Written submission before Your Honor.
Already Explained in the Ground wise Written submission before 04. Your Honor. Already Explained in the Ground wise Written submission before 05. Your Honor. Already Explained in the Ground wise Written submission before 06. Your Honor. Already Explained in the Ground wise Written submission before Your Honor.
Already Explained in the Ground wise Written submission before 08. Your Honor. No Comments
Sarika Ashok Satav,
Besides this we are submitting the affidavit made by the sister in law of the Assessee for acceptance and payment of cheques to the Assessee. The affidavit is attached in Annexure No. II.
3. The Assessee has made a request on 28/11/2016 for making certain documents as per the letter but the Income Tax Officer, Ward 12(4), Pune has denied to give the respective documents and information. The copy of letter of request is attached in Annexure No. III.
If any documents, clarification and information is required it will be provided as soon as possible."
5. I have perused the material on record and the contention of the Appellant carefully. I tend to agree with the A.O. The Appellant has been unable to prove the creditworthiness and genuineness of the creditors either during the course of Assessments Proceedings or during the course of Remand Proceedings. The A.O. clearly states in the Remand Report, that one creditor Mr. Namdev Shivaji Khandve did not furnish the confirmation of the loan advanced to the Assessee of Rs.71,75,000/- during Assessments Proceedings or during the course of Remand Proceedings. In light of this, this addition of Rs.71,75,000/- as unexplained cash credit added by the A.O. u/s.68 is sustained. The A.O. also notes in the Remand Report, that two parties namely Shri. R. G. Jangam and Shri. Ganesh G. Potle never attended the Remand Proceeding nor filed any confirmations. Five of the creditors Shri. R. K. Satav, Shri. S. B. Satav, Shri. Yogesh G. Satav, Shri. Balu J. Temgire and Shri. Bhausaheb B. Kate attended and stated that the loan was advanced to Ashok Satav and Sarika Satav by cash/cheque. The A.O. found, from a perusal of the Bank Accounts that a huge amount was credited to the creditors Bank Accounts by cash or by cheque just before the cheques were issued to the Assessee. The A.O. also found the claim
Sarika Ashok Satav, that the amounts were credited on account of sale of land/agricultural products, to be unsubstantiated. The claim that, the loans had been repaid by the Assessee in the subsequent year was unsubstantiated as well as unverifiable as the Assessee and the above mentioned creditors were non filers for the relevant Assessment Years and A.Y. 2014-15 onwards. The A.O. therefore, held in the Remand that the Assessee was again unable to prove the creditworthiness and the genuineness of the creditors.
5.1 The contention of the Appellant regarding her share of land and the loan being wrongly taken in her hands by the Assessing Officer, is completely devoid of merit. It is clear from the record that the Appellant herself had, during the course of Assessment Proceedings, furnished a list of parties from whom money had been taken on loan in response to a query on the source of investments made for purchase of land. The Appellant cannot now claim that, the loans were not given to her and were that of her spouse. Similarly, I agree with the A.O. that the pleading of the Appellant of the property and the money being received from her husband without consideration, was exempt income u/s 56(2) (vii) of the I.T. Act cannot be accepted in principle, as these properties had not been gifted by her husband by making a will/gift deed or any other means of transfer. This contention of the Appellant lacks merit.
5.2 It is thus very clear that, the Appellant was unable to prove the creditworthiness and genuineness of the creditors despite opportunities given. During the course of Appellate Proceedings on a query as to what the Appellant and her husband were engaged in, in the past years, it was stated that they had sold agricultural land in Wagholi by making plots of the land which were bought by the Appellant's husband in her name also. There is also a disparity between the business income shown by the Appellant and the amount required for the purchase of the lands. It is against this query of the source of funds for the purchase of the land,
Sarika Ashok Satav, that the Appellant had given a list of creditors to the A.O. The fact, that the unaccounted portion of the earlier sale of plots being brought in as creditors to purchase these lands cannot be brushed aside lightly in the given circumstances. The Appellant has contended that, the payments were by account payee cheques and that the creditors were not willing to part with confidential information. I find this contention of the Appellant to lack merit. The onus placed on the Appellant does not get discharged merely by filing confirmatory letters as has been held in the case of C!T vs. United Commercial and Industrial Co. (P) Ltd. (1991) 187 ITR 596 (Calcutta). In the case of CIT vs. Precision Finance Pvt. Ltd (1994) 208 ITR 465 (Cal), it has been held that, the fact that the amount is received by account payee cheque does not make it sacrosanct. It has also been held in CIT vs. Ruby Traders and Exporters Ltd. (2003) 263 ITR 300 (Cal), that if only list is given of creditors but identity and creditworthiness not proved by the Assessee, Section 68 is attracted, even if payment is made by cheque. In CIT vs. Korlay Trading Co. Ltd (1998) 232 ITR 820 (Cal), it has been held that, even the IT particulars where creditor is assessed may not be sufficient. Thus, in case of the Appellant, it is seen that, she was unable to prove the creditworthiness of the creditors and genuineness of the credit either before the A.0. or during Appellate Proceedings.
5.3 The addition made by the A.O. on account of unexplained cash credit u/s. 68 is sustained. The Appellant fails in these Grounds of Appeal. Therefore, these Ground of Appeals are dismissed.”
3. Learned counsel vehemently argued in support of assessee’s pleadings and in light of her detailed paper book (forming part of the case records before us) that the impugned addition is not sustainable in law and on facts. He sought to buttress the point that it is not the assessee but her husband Shri
Sarika Ashok Satav, Ashok Satav who had availed loans from seven parties, which in turn, came to be credited in her bank account forming subject matter of investments made in various lands in issued on 08.05.2012. Mr. Sasar further clarified that even if it is taken as an instance section 69 unexplained investment, both the lower authorities have wrongly invoked section 68 addition unexplained cash credits addition that the said seven parties had given loans to her husband not in the impugned assessment year but in preceding assessment year only. Mr. Sasar referred to section 68 of the Act that it is only the amount credited in the “relevant previous year” which should form subject matter of section 68 addition as per Ivan Sing V/s. ACIT (2020) 422 ITR 128 (Bom.) Learned counsel further argued that the assessee had paid the impugned alleged unsecured loans to the creditor parties through her sisters-in-law in subsequent assessment year. He lastly argued that the by lower authorities have not restricted impugned additions to the extent of her share in the three sale deeds executed in the relevant assessment year.
4. The Revenue has placed strong reliance on the CIT(A) and lower appellate discussion upholding the impugned addition.
5. We have given our thoughtful consideration to the forgoing vehement rival contentions and find no merit in the assessee’s stand in principle. We make it clear that this she has not been able to explain the source of this unsecured loans from seven parties (supra) despite the fact that the CIT(A) has called for the Assessing Officer’s remand report is came to be duly filed in Sarika Ashok Satav, the lower appeal proceedings. Case law Smruti Dayal V/s CIT (1995) 214 ITR 801(SC) and CIT V/s. Durga Prasad More 1971 82 ITR 540 (SC) have settled the law long back with any evidence submitted in the course of income-tax proceeding has to be considered in the light of human probabilities after all blinkers.
We keep in mind that the forgoing settled principle and note that the assessee’s seven parties claimed as source of the unsecured loans had routed that respective loans through her husband which do not satisfy the test of genuineness and creditworthiness all along. Hon’ble jurisdictional high court in Shri Arunkumar J. Muchhala v. CIT : [2017] 399 ITR 256 (Bom.) holds that an assessee has to reasonably explain the source of such sums leaving aside all technical aspects; including non- maintenance of books. The fact also remains that the impugned addition has been made u/s.68 only which goes against Ivan Sing (supra) ration. Faced with this situation, we deem it appropriate to uphold the impugned unexplained investment additions only to the extent of assessee’s share and sum; stated as the forgoing three sale deeds subject to the Assessing Officer’s factual verification. We make it clear that whatever sum the assessee was invested in her three sale deeds hereinabove shall stand confirmed as unexplained investment. Ordered accordingly.
Sarika Ashok Satav,
This assessee’s appeal is partly allowed for statistical purposes in above terms. Order pronounced in the Open Court on this 18th day of October, 2022.
Sd/- Sd/- (G.D. PADMAHSHALI) (S.S. GODARA) लेखा सदस्य/ ACCOUNTANT MEMBER न्याधयक सदस्य/JUDICIAL MEMBER पुणे / Pune; ददनांक / Dated : 18th October, 2022. Ashwini आदेश की प्रधतधलधप अग्रेधषत / Copy of the Order forwarded to : अपीलाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2.
3. The CIT-5, Pune.
4. The Pr.CIT,-4 Pune धवभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, “बी” बेंच, 5. पुणे / DR, ITAT, “B” Bench, Pune. गार्ा फ़ाइल / Guard File. आदेशानुसार / BY ORDER, 6. // True Copy // Senior Private Secretary आयकर अपीलीय अधधकरण, पुणे / ITAT, Pune.
Sarika Ashok Satav, S.No. Details Date Initials 1 Draft dictated on 04.10.2022 2 Draft placed before author 17.10.2022 Draft proposed & placed before the Second 3 Member 4 Draft discussed/approved by Second Member 5 Approved Draft comes to the Sr. PS/PS 6 Kept for pronouncement on 7 Date of uploading of Order 8 File sent to Bench Clerk 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R. 11 Date of Dispatch of order