SARNATH FINANCE LTD.,BAREILLY vs. INCOME TAX OFFICER-2(2), BAREILLY

{
"clean_text": "I.T.A. No.39/Lkw/2025\nAssessment Year: 2017-18\n\nIN THE INCOME TAX APPELLATE TRIBUNAL\nLUCKNOW BENCH 'SMC', LUCKNOW\nBEFORE SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER\n\nI.T.A. No.39/Lkw/2025\nAssessment Year:2017-18\n\nM/s Sarnath Finance Ltd.,\n35-I/1A, Rampur Garden,\nBareilly.\nPAN:AADCS1820N\n(Appellant)\nVs.\nIncome Tax Officer-2(2),\nBareilly.\n(Respondent)\n\nAppellant by\nNone\n\nRespondent by\nShri Sunil Kumar Rajwanshi,\nAddl. CIT (D.R.)\n\nORDER\n\n(A) This appeal vide I.T.A. No.39/Lkw/2025 has been filed by the\nassessee for assessment year 2017-18 against impugned appellate order\ndated 31/08/2024 (DIN & Order No.ITBA/NFAC/S/250/2024-\n25/1068228393(1) of Commissioner of Income Tax (Appeals) [“CIT(A)" for\nshort]. Grounds of appeal are as under:\n\n1. BECAUSE, on the facts and in the circumstances of the case,\nthe impugned order passed by the Ld. Commissioner of Income\nTax (Appeals) is bad in law as the Order of Assessment is itself\nbad in Law as it has been issued without juri iction. The order\nof assessment deserves to be set-aside and quashed.\n\n2. BECAUSE, on the facts and in the circumstances of the case,\nthe Ld. Commissioner of Income Tax (Appeals) has erred in law\nand on facts in confirming the order passed by Assessing\nOfficer u/s 144 without appreciating that the condition\nprecedent for invoking the provisions of Section 144 of the Act\nhave not been satisfied in the instant case and thus the\nassessment order, itself is bad in law.\n\n3. BECAUSE, on the facts and in the circumstances of the case,\nthe Ld. Commissioner of Income Tax (Appeals) has erred in law\nand on facts in confirming the Order of Assessment and in\ndisbelieving the stand of the appellant that the loan advanced\nby it to borrowers, in the normal course of business, was\nrecovered by the assessee and in doing so has erroneously\nignored positive evidence available on record and purely rested\nits decision on conjecture and suspicion, which is illegal. The\nAssessing Officer as also the Commissioner of Income Tax\n(Appeals) has not lawfully appreciated the submissions made by\nassessee and evidence available on record concerning the\nrepayment of the loan; the additions are not legal, particularly\nas the appellant is a NBFC, the parties were examined on oath\nby the Assessing Officer, confirmation was received as also\ndocumentary evidence in the shape of loan agreements, books\nof accounts, transaction performed through banking channel,\naudit of Books etc; irrespective of such overwhelming evidence,\nthe repayment of the loan has been treated as unexplained\ncash credit by the Assessing Officer, most unjustifiably.\n\n4. BECAUSE, on the facts and in the circumstances of the case,\nthe Ld. Commissioner of Income Tax (Appeals) has erred in law\nand on facts while confirming the addition made by the\nAssessing Officer for Rs.4,50,000/- as unexplained Cash Credit\nu/s 68, which sum of money represents repayment of Loan\ngiven to Mr. Vivek Tandon by the appellant.\nADDITION OF RS. 4,50,000/-\n\n5. BECAUSE, on the facts and in the circumstances of the case,\nthe Ld. Commissioner of Income Tax (Appeals) has erred in law\nand on facts in confirming an addition Rs.42,00,000/- as\nunexplained Cash Credit u/s 68 which sum of money represents\nrepayment of loan taken by Ahuja Goods Carrier (P) Ltd. The\nappellant being a NBFC has advanced loan and the disputed\naddition represents its recovery, there is absolutely no\njuri iction vesting in the authorities to cause the impugned\naddition. The addition is further unsustainable as the person\nconcerned has appeared before Assessing Officer and admitted.\nTherefore the addition made by Assessing Officer deserves to\nbe deleted.\nADDITION OF RS.42,00,000/-\n\n6. BECAUSE, on the facts and in the circumstances of the case,\nthe Ld. Commissioner of Income Tax (Appeals) has failed to\nconsider that appellant is a registered NBFC Company and\nmakes provision for Non-Performing Assets (NPA), Mr. Vivek\nTandon and Ahuja Goods Carrier (P) Ltd. were NPA accounts in\nits Books. These debtors were regularly shown as NPA in the\nReturns filed by appellant before Reserve Bank of India and\nthat the Assessing Officer has not rejected the Books of\nAccount nor has there been ever any dispute concerning the\nRBI filings.\n\n7. BECAUSE, wholly without prejudice and in the alternative, if the\nAssessing Officer is of the opinion that debtors appearing in the\nBooks of Account and reflected against the names i.e. Mr. Vivek\nTandon and Ahuja Goods Carrier (P) Ltd. have become\nbankrupt and/or are not the persons who have the means to\nrepay the loaned amount, then the assessee deserves to be\npermitted a deduction towards bad debts from its taxable\nincome.\n\n8. BECAUSE, on the facts and in the circumstances of the case,\nthe additions sustained by the Assessing Officer cannot be\nmade under Section 68 of the Act as the assessee is a duly\nregistered NBFC and the recovery of loan appearing as credits\nin its Books of Account is a genuine business transaction and\naccordingly, the provisions of Section 68 have no application.\n\n9. BECAUSE, on the facts and in the circumstances of the case,\nthe Ld. Commissioner of Income Tax (Appeals) has erred in law\nin failing to appreciate that the impugned order of assessment\nwas itself illegal and bad in law as the order has not been\npassed by competent juri ictional Assessing officer.\n\n10. BECAUSE, the Ld. Commissioner of Income Tax (Appeals) has\ngrossly erred in rejecting the appeal of the assessee without\nproviding the assessee with a due and proper opportunity of\nhearing and has also ignored material available on record\nincluding the submissions made by assessee therefore the\nimpugned order deserves to be set-aside and quashed.”\n\n(B) The facts of the case, in brief, are that the assessee filed its\nreturn of income for the year under consideration on 11/09/2017,\ndeclaring a total income of Rs.1,39,110/-. The Assessing Officer\ncompleted the assessment and assessed the total income of the\nassessee at Rs.43,39,110/- by making addition of Rs.4,50,000/- under\nsection 68 of the Act, and Rs.42,00,000/- as unexplained cash credit.\nAggrieved, the assessee carried the matter in appeal before the\nlearned CIT(A). The learned CIT(A) dismissed the appeal of the\nassessee observing as under:\n\n5. Observations, Findings and Decisions\n\n5.1. I have carefully considered the case's facts, the Assessing Officer's order\n(hereinafter referred to as the 'AO'), and the appellant's submissions. To be concise,\nI won't elaborate on the AO's observations and the appellant's submissions as\nthey've already been discussed. The appellant has submitted seven appeal grounds\nto challenge the AO's order under section u/s 144 of the Income Tax Act, 1961(in\nshort, 'the Act').\n\n5.2 The appellant's first ground of appeal is that the case is barred by limitation\nwithout demonstrating with details explanation of the case of how it got barred by\nlimitation. On the contrary it is it observed from the assessment order that the return\n\n5.5 Regarding the addition of Rs. 42,00,000/- the Id AO relied on the third\npart verification u/s 133(6) of the I.T. Act, 1961 to M/s Ahuja Goods Carrier\nwho denied to have made any transaction with the assessee company.\nMoreover, the assessee company failed to furnish the PAN of M/s Ahuja\nGoods Carrier (P) Ltd. Further, notice u/s 133(6) of the I.T. Act, 1961 was\nissued to the M/s Ahuja Goods Carrier (P) Ltd., Rampur but no reply received\ntill passing of the assessment order on 23.12.2019. He also found that there is\nmismatch of signature of the barrower. The appellant on the other hand\nsubmitted that the Ld. AO has failed to consider the fact that as per Science,\n\"hand written signature can't be replicated perfectly by the same person even\nif it is affixed simultaneously, there is slight difference between the signature &\nit is ok as it happens with all of us\". They further submitted that the signature\non the loan agreement was done long time back i.e. almost 13 years and\nhence, the signatures done now can have some differences. So, the same\ncannot be an appropriate basis to deny the fact that the transaction is not\ngenuine. However, the appellant has failed to satisfaction three primary\nconditions of establishing (i) existence of the parties, (ii) genuinity of the\ntransaction and (iii) their credit worthiness. Thus, considering the discussion\nmade above, I am of the considerate view that the appellant has failed to\nestablish with cogent evidence that it had cash-in-hand of Rs.42,00,000/- as\non 8.11.2016. Thus, the addition of Rs.42,00,000/- r.w.s 115BBE is hereby\nupheld. The grounds of appeal taken on the issue are, thus, dismissed.\n\n5.6 The appellant's has raised the issue that the AO did not reject the books of\naccounts under section 145(3) of the Act before making addition u/s 68 of the Act.\nThe said objection of the appellant does not have any validity in the eyes of law. For\nthe shake of clarity Section 68 is reproduced below:-\n\nCash credit-\n\"Where any sum is found credited in the books of an assessee maintained for any\nprevious year, and the assessee offers no explanation about the nature and source\nthereof or the explanation offered by him is not, in the opinion of the [Assessing]\nOfficer, satisfactory, the sum so credited may be charged to income-tax as the\nincome of the assessee of that previous year:\n[Provided that where the assessee is a company, (not being a company in which the\npublic are substantially interested) and the sum so credited consists of share\napplication money, share capital, share premium or any such amount by whatever\nname called, any explanation offered by such assessee-company shall be deemed to\nbe not satisfactory, unless-\n\n1. The person, being a resident in whose name such credit is recorded in the books of\nsuch company also offers an explanation about the nature and source of such sum so\ncredited; and\n\n2. Such explanation in the opinion of the Assessing Officer aforesaid has been found to\nbe satisfactory:\nProvided further that nothing contained in the first proviso shall apply if the person, in\nwhose name the sum referred to therein is recorded, is a venture capital fund or a\nventure capital company as referred to in clause (23FB) of section 10.]\"\n\n5.6 It Is evident from this provision that section 68 can only be applied if there\nare any 'sum' found credited in the assessee's books of accounts that the assessee\ncannot provide satisfactory explanations for the same or the explanation so offered is\nnot found satisfactory by the AO. The money that is referred to as 'Sum' is the\namount that is entered into the account books through cash, cheque or draft. Thus,\nwithout the books of account no addition could be made u/s 68 of the Act. Therefore,\nin my considerate view the Id AO was correct in rejecting the books of account.\n\n7. In the final result, the appeal fled by the appellant is treated as dismissed.\n\n(C) During the course of hearing, none was present on behalf of the\nassessee. In the absence of any representation from the side of the\nassessee, learned Departmental Representative for Revenue was heard,\nwho relied on the orders of the authorities below. On careful perusal of the\nimpugned order of the learned CIT(A), and other materials on record, no\ninfirmity is found in it. No material has been presented from either side to\njustify any interference with or modification of the impugned order of\nlearned CIT(A). Therefore, the impugned order of learned CIT(A) is upheld\nand the appeal is dismissed.\n\n(D) In the result, the appeal of the assessee is dismissed.\n\n(Order pronounced in the open court on 16/05/2025)\n\n .\n(ANADEE NATH MISSHRA)\nAccountant Member\n\nDated:16/05/2025\n*Singh\n\nCopy of the order forwarded to :\n1.\nThe Appellant\n2. The Respondent.\n3. Concerned CIT\n4. D.R., Ι.Τ.Α.Τ.,\n5. CIT(A)",
"summary": {
"facts": "The assessee, a Non-Banking Financial Company (NBFC), filed its return declaring Rs. 1,39,110. The Assessing Officer (AO) assessed total income at Rs. 43,39,110, making additions of Rs. 4,50,000 and Rs. 42,00,000 as unexplained cash credit. The Commissioner of Income Tax (Appeals) dismissed the assessee's appeal.",
"held": "The Tribunal held that the addition of Rs. 42,00,000 for repayment of a loan to Ahuja Goods Carrier (P) Ltd. was upheld because the assessee failed to establish the genuineness of the transaction and the creditworthiness of the parties. The Tribunal also upheld the AO's rejection of the books of account as a basis for Section 68 additions.",
"result": "Dismissed",
"sections": [
"144",
"68",
"145(3)",
"133(6)",
"115BBE",
"10"
],
"issues": "Whether additions made under Section 68 for cash credits representing loan repayments are justified when the assessee is an NBFC and the transactions are claimed to be genuine business dealings. Whether the AO was justified in rejecting the books of account."
}
}