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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Ms. Annapurna Gupta & Shri Siddhartha Nautiyal
Appellant by : Shri S. N. Divatia, Advocate Respondent by : Shri S.H. Solanki, Sr.D.R. Date of hearing : 02-03-2022 Date of pronouncement : 01-06-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-3, Vadodara, (in short referred to as CIT(A)), dated 07-06-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2012-13.
The solitary issue in the present appeal relates to addition made to the income of the assessee on account of the failure of the assessee Page No 2 J S Enterprise vs. DCIT to prove the genuineness of unsecured loan taken by it during the year amounting to Rs. 31,75,000/- from the following parties. (i) M/s. Makhija Infrastructure Pvt. Ltd. Rs. 21,00,000/- (ii) Shri Ramesh K Parmar Rs. 10,75,000/- Total Rs. 31,75,000/-
The ground raised
by the assessee in this regard are as under: 1.1 The order passed u/s.250 on 28.09.2016 for A.Y.2012-13 by CIT(A)-3, Baroda upholding the addition aggregating to Rs.33.75 lakhs as unexplained cash credit u/s.68 by AO is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the submissions made and evidence produced by the appellant with regard to the impugned additions. 2.1 The Ld.CIT(A) has grievously erred in law and on facts in confirming that the addition of Rs.10.75 lakhs as unexplained cash credit towards the loans received from Ramesh K Parmar. 2.2 That in the facts and circumstances of the case as well as in law, the Ld.CIT(A) ought not to have upheld the loans of Rs.10.75 lakhs received from Shri Ramesh Parmar as unexplained cash credit u/s.68. Even though the burden to prove the credit worthiness of the lender is not on the appellant/Assessee, the appellant has provided maximum information, including lender's source of receipt and bank his pass book. 3.1 The Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.21 lakhs as unexplained cash credit. The appellant had explained that Rs.21 lakhs were not received directly from the bank account of Makhija Infrastructure Pvt. Ltd. but the members of the said company had deposited. As the lender company was sister concern and Page No 3. J S Enterprise vs. DCIT the formation of company was in progress, pending opening of bank accounts, the appellant could not afford to lose the business. Therefore, the amount towards new bookings was received in the account of appellant for temporary parking of funds. Moreover, both, the appellant and the Lender company, have filed ITR showing mirror effect of the entry. It is just and accounting entry.
Ground no. 1 and 1.2 it was stated was general in nature.
Ground no. 2.1 and 2.2 relates to the addition made on account of unsecured loan pertaining to Shri Ramesh Parmar of Rs. 10.75 lakhs. while ground no. 3.1 pertains to the unsecured loan of Rs. 21 lakhs taken from M/s. Makhija Infrastructure Pvt. Ltd.
Taking up first ground no. 3.1 relating to the addition made on account of unsecured loan of Rs. 21,00,000/- taken from M/s. Makhija Infrastructure Pvt. Ltd, We have noted from the orders of the authorities below that the A.O. found the genuineness of the said unsecured loan as having not been established on account of the fact that the bank statement of M/s. Makhija Infrastructure Pvt. Ltd. was not provided by the assessee. We have noted from Para 4 of the assessment order that the A.O assessee had submitted confirmation of the party at the first instance and on being asked specifically by the AO to submit bank statement and Return of Income ,the assessee failed to submit the bank statement of the said party . The AO therefore held the impugned unsecured loan as not having been Page No 4 J S Enterprise vs. DCIT satisfactorily proved to be genuine and added the same to the income of the assessee u/s 68 of the Act.
Before the ld. CIT(A) the assessee had explained that the amount had not come directly from the bank account of M/s. Makhija Infrastructure Pvt. Ltd. but in fact was cheques from the members of the said company against bookings made which was deposited directly in the bank account of the assessee. Necessary documentary evidences substantiating its explanation was also filed by way of entries to this effect in the books of the company, M/s. Makhija Infrastructure Pvt. Ltd., as also in the books of the assessee and it was also contended that the said amount had been repaid by the assesse also. The Ld. CIT(A) however was not convinced with the explanation of the assesse who noted that the explanation was not tenable for the reason that it was not explained as to on what account these amounts were to be received by M/s. Makhija Infrastructure Pvt. Ltd., that the nature of membership of the depositors was also not explained and nor any details vis-à-vis their name and complete address and creditworthiness furnished by the assessee. The ld. CIT(A) also noted that no confirmation from the depositors had also been field by the assessee. For the aforementioned reasons he rejected the explanation of the assessee and held the unsecured loan of Rs. 21,00,000/- to be not satisfactorily explained. The relevant findings of the ld. CIT(A) in this regard at para 5.1 of the order is as under:
Page No 5 J S Enterprise vs. DCIT 5.1 But the submission of the appellant as discussed in just preceding paragraph of this appeal order is not found to be tenable. The fact is that the amounts of loan of Rs. 21,00,000/- has not been received by the appellant directly from the bank account of Makhija Infrastructure Pvt. Ltd. The argument of the appellant is that these amounts of Rs. 21,00,000/- were directly deposited in the bank account of the appellant which were received from the members of Makhija Infrastructure Pvt. Ltd. for booking. However, it has not been explained by the appellant that what prompted it to receive the cheques from the members of Makhija Infrastructure Pvt. Ltd. directly for depositing the same in its bank account. If Makhija Infrastructure Pvt. Ltd. being a Private Limited Company was having its own bank account then any amount received by this party from its members on account of any transaction were first required to be deposited in its own bank account and then further this party could have advanced loan of above amount of Rs. 21,00,000- to the appellant through banking channel. The appellant has not given the details of the members .of Makhija Infrastructure Pvt. Ltd. from whom the amounts of Rs. 21,00,0007- were directly received by it in its bank account. Again, it is not explained as to on account of which transactions such amounts which were to be received by Makhija Infrastructure Pvt. Ltd. from its members were directly deposited in the bank account of the appellant. The appellant has merely mentioned in its submission that Makhija Infrastructure Pvt. Ltd. had received cheques from its members against booking. However, it is not explained as to what was the nature of booking against which the above amount was received by Makhija Infrastructure Pvt. Ltd. The undisputed fact is that this amount of loan of Rs. 21,00,000/- has not come through banking channel to the appellant from the bank account of Makhija Infrastructure Pvt. Ltd. These are only the members of Makhija Infrastructure Pvt. Ltd. who have deposited these amounts to the bank account of the appellant. Nauter of membership of the depositors of Makhija Infrastructure Pvt. Ltd. is not explained and also the nature of business transaction of this party with its members is not explained, Why and how they have given the cheques to the appellant instead of Makhija Infrastructure Pvt. Ltd. is also not explained. No any details viz. name, complete addresses, and credit worthiness of these members have been made available by the appellant at the time of assessment proceedings or at the stage of appellate proceedings. No any confirmations from the depositors have been filed by Page No 6 J S Enterprise vs. DCIT the appellant though the same was required to be filed more particularly in view of the fact that these depositors have directly deposited the amounts in the bank account of the appellant. Merely on the basis that these amounts of Rs. 21,00,000/- were received through cheques by the appellant from the members directly it cannot be said that these transactions of loan were genuine. Considering these facts, it is held that genuineness of transactions and credit worthiness of the lender are not established by the appellant with regard to this loan of Rs. 21,00,000/- and therefore the addition of this amount of Rs. 21,00,0007-as made by the AO to the total income of the appellant u/s 68 of the Act is hereby confirmed.
Before us, Ld. Counsel for the assessee reiterated the contentions made before the ld. CIT(A),emphasizing the fact that these amounts pertain to cheques received from the members of M/s. Makhija Infrastructure Pvt. Ltd. directly deposited in the account of the assessee and reflected as such in the books of both the parties. Before us, Ld.counsel for the assessee contended that the assessee had adequately discharged his onus of proving the genuineness of the unsecured loan of Rs. 21,00,000/- received from M/s. Makhija Infrastructure Pvt. Ltd. by filing the confirmation of the party in this regard placed at paper book at page no. 140. Referring to the same, he pointed out that the said confirmation clearly mentioned the names of the parties from who the said cheques had been received as under: Confirmation of Accounts 1-Apr-2011 t0 31-May-2012 Date Particulars Credit Amount 21-Jul-2011 Gajendra Dhillon 1,00,000/- 4-Aug-2011 Sumit Sheoran 1,00,000/- 24-Aug-2011 Sandesh Rane 1,00,000/- Page No 7 J S Enterprise vs. DCIT 8-Sept-2011 Hitesh Panchal 5,00,000/- 8-Oct-2011 Raja Khemani 2,00,000/- 8-Oct-2011 Jagdish Injani-GF-1 11,00,000/-
He thereafter drew our attention to the financial statement of M/s. Makhija Infrastructure Pvt. Ltd. for the impugned year i.e. year ending 31.03.2012 placed at paper book at page no. 144 to 155 pointing out there from at page no. 150,the name of these very persons appearing in the list of advances from customers/booking advance as under: As on Financial Statements for the year Ended on 31st March, 2012 Other Current Liabilities As at 31/03/2012 (A) Other payables (a) Creditors for Capital Goods (b) Advances from Customers/Booking Advance (i) Amarprit Singh 1,022,962.00 (ii) Gajendra Dhillon 1,363,949.00 (iii) Hitesh Panchal 876,825.00 (iv) Khemo G Khemani 292,275.00 (v) R.K. Parmar 457,897,00 (vi) Sandesh Rane 992,760.00 (vii) Shyam Sundar Das 1,363,950.00 (viii) Sumit Sheoran 663,949.00 (ix) Sunil N. Vyas 1,851,075.00 Total 8,885,642.00
Ld. Counsel for the assessee contended that it was clear that the documents filed before the authorities below clearly substantiated the explanation of the assessee that the amounts received by the assessee from M/s. Makhija Infrastructure Pvt. Ltd. related to the Page No 8 J S Enterprise vs. DCIT amounts given by customers of M/s. Makhija Infrastructure Pvt. Ltd. as booking advance mentioning the names of the parties also from whom it was received. Ld. Counsel for the assessee therefore contended that the contention of the ld. CIT(A) that there were no details of the members of M/s. Makhija Infrastructure Pvt. from whom these amounts were received was without any basis and incorrect finding. He further contended that since these amounts had been refunded by the assessee also which fact has not been controverted by the revenue, the genuineness of the unsecured loan stands established.
Ld. D.R. on the other hand relied on the order of the ld. CIT(A).
We have heard the rival contentions and have also gone through the orders of the authorities below and after considering all the facts before us, we hold that the assessee had sufficiently discharged his onus of proving the genuineness of the unsecured loan of Rs.21 lacs received from M/s Makhija Infrastructure Pvt Ltd. The said transaction stood confirmed by the said party is a fact on record. The documents filed by the assessee establish the fact of the amount having been received by way of cheques from members of M/s Makhija Infrastructure. The confirmation of the said party reflects names of individuals, which individuals are found reflected as members/customers of Makhija enterprises in its financial statements, the accounts of the said individuals /members in the Page No 9 J S Enterprise vs. DCIT books of Makhija enterprises reflects the transaction of amounts advanced by them deposited in the bank account of the assessee.No infirmity in the above documents have been pointed out by the Revenue. Therefore for all purposes the assessee has established the fact that the amount has been received from M/s Makhija Infrastructure through banking channels though not directly through its bank account but by way of cheques of advances paid by its members, deposited in its account. The Ld.CIT(A) does not dispute these facts. The identity of the loan depositor M/s Makhija Infrastructure, its creditworthiness as being its customers /members money, as also the genuineness of the transaction stands duly and satisfactorily established. The assessee onus was only with respect to establishing the aforestated ingredients of the transaction, i.e identity, creditworthiness and genuineness of the transaction. These facts having been admittedly duly established, why the advances of members were so paid to the assessee, is not relevant for the genuineness of the transaction. There may be any number of reason for doing so. The amount advanced by members/customers of Makhija Infrastructure is primarily credited in the Books of Makhija Infrastructure. Any question regarding the genuineness of the sources should impact the nature of the credit in the hands of Makhija Infrastructure. The assessee being forwarded these amounts by Makhija Infrastructure questioning the genuineness of the customers/members tantamounts to questioning the source of the Page No 10 J S Enterprise vs. DCIT source which cannot be the basis for making additions u/s 68 of the Act.
In view of the same, the findings of the ld. CIT(A) holding the unsecured loan of Rs. 21,00,000/- to be ingenuine is set aside and we hold that the assessee had sufficiently established the genuineness of the same. The addition made therefore of Rs. 21,00,000/- is directed to be deleted.
Ground of appeal
of ground no. 3.1 is allowed.
15. As for unsecured loan of Rs. 10.75 lakhs received from one Shri Ramesh Parmar, the A.O. found the explanation of the assessee regarding the genuineness of the same to be not satisfactory for the reason that though the amount had been shown to have been received through banking channels but the creditworthiness of the said person remained unproved on account of the fact that Shri Ramesh Parmar is an agriculturist filing no return of income and the bank account reflected cash deposited immediately before the issue of cheque by the said person to the assessee. The findings of the A.O. at Para 4.2 of his order in this regard are as under: 4.2 Assessee did not provide the return of income of Mr. Ramesh K. Parmar and said that being an agriculturist, he is not filing return of income and Bank statement was provided by the assessee. On the perusal of the bank statement of Mr. Ramesh K. Parmar, it was noticed that just before issuing cheque to M/s. J. S. Enterprises, there was a cash deposit Page No 11 J S Enterprise vs. DCIT entry of similar amount in the account. Some entries are being reproduced here: Sr. No. Amount Cash Deposit Date Cheque issued date
4,00, OOO/- 27.03.2011 28.03.2011
2 3,75,000/- 31.12.2011 31.12.2011
3 4,00, OOO/- 27.03.2011 & 28.03.2011 28.03.2011
Assessee did not provide the Return of income or PAN of Mr. Ramesh K parmar and on perusal of the bank statement, it was clear that the party was not maintaining enough balance to provide the loan of Rs.lO,75,000/- . Cash was being deposited to issue cheques to M/s. J. S. Enterprise. As the assessee was already given a final opportunity to either provide the details or produce the parties vide note sheet entry dated 12.03.2015, and also informed that failing to comply will lead the assessment to be finalized on the basis on material available on record, the amount of Rs.31,75,000/-allegedly received from above mentioned parties is considered as unexplained cash credits of the assessee & the same is added to the total income of the assessee u/s 68 of the I.T. Act, 1961. Penalty proceedings u/s 274 r.w.s. 271(l)(c) of the IT Act, 1961 are also initiated for furnishing inaccurate particulars of income.
Before the ld. CIT(A), the assessee explained that the source of unsecured loan advanced by Shri Ramesh Parmar was amounts received by him from M/s. Makhija Infrastructure Pvt. Ltd. by cheques which was withdrawn in cash and thereafter redeposited in Page No 12 J S Enterprise vs. DCIT another bank account in cash and subsequently given to the assessee as unsecured loan. The assessee had also contended that the M/s. Makhija Infrastructure Pvt. Ltd. had given the amount to Shri Ramesh Parmar on account of development agreement entered into with him for the sale of his land. The ld. CIT(A) found no merit in the contention and explanation of the assessee noting that the fact that there was no nexus established between the amounts withdrawn by the assessee from that received from M/s. Makhija Infrastructure Pvt. Ltd. and further disbelieved the explanation of the assessee that Shri Ramesh Parmer had received money on account of development agreement noting that the same was not plausible as agricultural land owned by Ramesh Parmer could not have been legally sold to M/s. Makhija Infrastructure Pvt. Ltd. and further noting that even otherwise no capital gains had been returned by the assessee. The relevant findings of the ld. CIT(A) in this regard at Para 5.2 of the order is as under: 5.2 With regard to another loan of Rs. 10,75,000/-, it is submitted by the appellant that this loan was taken from Ramesh K. Parrnar and confirmation and bank passbook of this party were submitted to the AO. As per the appellant it was submitted to the AO that this party was an agriculturist and was not assessed to tax and therefore it was unable to furnish the return of income of the said party. As per the appellant Shri Ramesh K. Parmar had received Rs. 5,27,000/- from Makhija Infrastructure Pvt. Ltd. on 23/12/2011 by cheque and the said amount was withdrawn by him on the same date i.e. on 23/12/2011. As per the appellant Shri Ramesh K. Parmar had deposited Rs. 6,25,000/- in cash in his another bank account with Bank of India on 31.12.2011 and out of which an amount of Rs. 2,75,000 and another amount of Rs. 4,00,000/- were given to it on 28.03.2012. As per the appellant further an amount of Page No 13 J S Enterprise vs. DCIT Rs. 4,00,000/- was given by Makhija Infrastructure Pvt. Ltd. to Shri Ramesh K. Parmar on 10/03/2012 which was deposited by Shri Ramesh K. Parmar in his saving bank account with Union Bank of India on 27/03/2012. As per the appellant out: of the said deposit, Shri Ramesh K. Parmar had further given Rs. 4,00,000/- to it, But this submission of the appellant is found to be unusual and untenable. It has not been explained by the appellant as to for what purposes the above various amounts were received by Shri Ramesh K. Parmar from Makhija Infrastructure Pvt. Ltd. If Shri Ramesh K, Parmar had received an amount of Rs. 5,27,000/- through cheque from Makhija Infrastructure Pvt. Ltd, on 23/12/2011 in its bank account then such amount or any part of this amount could have been advanced as loan to the appellant by Shri Ramesh K, Parmar from this bank account only. However, Shri Ramesh K. Parmar is stated to have received amount of Rs. 5,27,000/-from M/s. Makhija Infrastructure Pvt. Ltd. on 23/12/2011 and is stated to have withdrawn this amount of Rs. 5,27,000/~ on the same date i.e. on 23/12/2011, Shri Ramesh K. Parmar is further stated to have deposited this amount of Rs. 5,27,OOO/- along with some other amount (i.e. total amount of Rs. 6,25,000/-) in cash in his another bank account with Bank of India on 31/12/2011 and from there he is stated to have advanced the loan of Rs. 2,75,OOO/- and another loan of Rs. 4,00,OOO/- to the appellant on 28/03/2012, But the exact co- relation between the cash withdrawn by Shri Ramesh K. Parmar from his bank account on 23/12/2011 and cash amounts deposited in his another bank are not established, In other words, no nexus is found to be established between the amount of Rs. 5,27,OOO/- as withdrawn by Shri Ramesh K. Parmar from his bank account after receiving the same through cheque from Makhija Infrastructure Pvt, Ltd. and the amount of Rs. 6,25,000/- as deposited by Shri Ramesh K, Parmar in cash in his another bank account, It is not established by the appellant that the advances have been made by Shri Ramesh K. Parmar only out of amounts received from Makhia Infrastructure Pvt. Ltd. as there is no nexus between the amount received by Shri Ramesh K. Parmar from Makhija Infrastructure Pvt. Ltd, and the amount given as loan to the appellant. It may be mentioned that the AO on page no, 3 (i.e. as per para no, 4.3) of his assessment order has mentioned that on perusal of bank statement of Shri Ramesh K. Parmar it was noticed that just before issuing cheque to the appellant, there was a cash deposit entry of similar amount in such Page No 14 J S Enterprise vs. DCIT bank account. Some entries as reproduced by the AO on page no, 3 of his assessment order are reproduced hereunder for the sake of reference: Sr. Amount Cash Deposit Date Cheque issued date No.
1 4,00,000/- 27.03.2011 28.03.2011 2 3,75,000/- 31.12.2011 31. 12.2O11 3 4,00, OOO/- 27.03.2011 & 28.03.2011 28.03.2011
Before us, Ld.counsel for the assessee reiterated the contention made before the ld.CIT(A) pointing out that the fact of receipt of cheques by Ramesh Parmer from M/s. Makhija Infrastructure Pvt. Ltd. to Rs. 5,27,000/- on 23.12.2011 and 4,00,000/- on 28.03.2011 and the withdrawal of Rs. 5,27,000/- on the same date i.e. 23.12.2011. He also contended that it had been established to the revenue authorities that out of the impugned amount, Rs. 6,25,000/- had been returned, which was evident from the copy of the bank account of the assessee reflecting the said transaction on 05.04.2012.
Ld. D.R. on the other hand relied on the order of the Ld. CIT(A).
We have considered the contention of both the parties. The reason for holding the unsecured loan received from Shri Ramesh Parmar as ingenuine, we find is on account of the fact that the creditworthiness of Shri Ramesh Parmar was not established by the assessee. But we Page No 15 J S Enterprise vs. DCIT have noted from the explanation and documents filed by the assessee to the lower authorities that it had been established by Shri Ramesh Parmar that it had received certain amount from M/s. Makhija Infrastructure Pvt. Ltd. which was withdrawn in cash, that subsequently cash was deposited in another bank account of Shri Ramesh Parmar which was advanced as unsecured loan to the assessee. All these transactions happened within a span of few days. The cheques Of Rs. 5,27,000/- and Rs. 4,00,000/-were received by Mr. Parmar on 23/12/11 and 10/03/12 respectively and the amounts rotated in cash and thereafter advanced to the assessee by by 28/03/12,i.e within a span of four months. The Revenue authorities have not disputed the fact of cheque received by Ramesh Parmar from Makhija Infrastructure and withdrawn subsequently by him in cash but has doubted the cash withdrawn as being redeposited and advanced as loan to the assessee in the absence of nexus being established between the amount withdrawn in cash and subsequently redeposited. As long as the transactions have happened within a very short span of time and the Revenue has been unable to establish the usage/application of the amounts withdrawn in cash for any other purposes, we see no reason to hold the explanation of the assessee as totally unbelievable. Further the fact that out of the total loan of Rs. 10,75,000/- received from Shri Ramesh Parmar, an amount of Rs. 6,25,000/- stands returned by the assessee as is clearly reflected in the bank account of Shri Ramesh Parmar filed before us, the explanation of the assessee is further Page No 16 J S Enterprise vs. DCIT strengthened from the same. Therefore we are not in agreement with the ld. CIT(A) that the genuineness of unsecured loan received from Shri Ramesh Parmar was not satisfactorily explained by the assessee.
In view of the same, the addition made of Rs. 10,75,000/- is directed to be deleted. Ground of appeal No. 2.1 and 2.2 is allowed.