M/S. SMART OPTIONS,AHMEDABAD vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-6(1), AHMEDABAD

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ITA 325/AHD/2017Status: DisposedITAT Ahmedabad22 April 2022AY 2013-146 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the appeal for statistical purposes, granting the assessee one more opportunity to present crucial details to the Assessing Officer for a fresh decision.

What were the facts?

The assessee, a partnership firm, received unsecured loans from friends and relatives and lent the funds to a third party who later became insolvent. The Assessing Officer made additions for unexplained cash credit, which were upheld by the CIT(A).

What were the issues?

Whether the unsecured loans were genuine and whether the assessee had discharged its onus to prove the identity and creditworthiness of the lenders.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR & SHRI WASEEM AHMED, ACCOUNTANT MEMEBR

For Appellant: Shri S. N. Divatia, A.R, Shri Mohd. Usman, CIT. D.R

The appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-6, Ahmedabad (‘CIT(A)’ in short) vide Appeal No. CIT(A)-6/308/15-16 dated 26.12.2016 arising in [M/s. Smart Options Vs. DCIT] A.Y. 2013-14 - 2 - the assessment order dated 22.03.2016 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY. 2013-14.

2.

The grounds of appeal raised by assessee read as under:

“1.1 The order passed u/s.l.43(3) on 26.12.2016 for A.Y.2013-14 by CIT(A)-6/ Abad, upholding the additions/disallowances aggregating to Rs.12,36,12,545/- 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 explanations furnished and the evidence produced by the appellant.

1.3 The Ld. CIT(A) has grievously erred in law and or on facts in denying the additional evidence to be admitted under Rule-46A.

1.4 That in the facts and circumstances of the case as well as in law, the Id. AO has grievously erred in not admitting the additional evidence in appeal.

2.1 Ld. CIT(A) has grievously erred in law and or on facts in confirming chat the unsecured loan of Rs.11,74,20,000/- were not be explained by the appellant and thereby upholding the same as unexplained cash credit u/s.68 of the Act. The appellant had fully discharged the burden cast upon to prove genuineness of the unsecured loans.

2.2 That in the facts and circumstances of the case as well as in law, the Id. CIT(A) has grievously erred in upholding the unsecured loan to the extent of Rs.11,74,20,000/- as unexplained cash credit u/s.68 ignoring the evidence produce before him, failing to make inquiry and obtain bank statements etc.

3.1 The Id. CIT(A) has grievously erred in confirming the disallowance of Rs.61,92,545/- being 50% of commission expenses.

[M/s. Smart Options Vs. DCIT] A.Y. 2013-14 - 3 -

3.2 That in the facts and circumstances of the case as well as in law, the ld.CIT(A) has grievously erred in confirming the disallowance of Rs.61,92,545/- being 50% of commission expenses.

4.1 Without prejudice to above, the impugned additions made by CIT(A) are highly excessive and the benefit of telescoping should have been allowed. The Ld. CIT(A) has erred in not disposing off ground No.4.1 in this regard.

It is therefore prayed that the disallowance/additions aggregating to Rs.12,36,12,545/- made by the AO should be deleted.”

3.

The facts of the case are that assessee is a partnership firm and carried out the business of accepting and lending of loans/advances taken from friends, relatives and outsiders in the name and style of ‘Smart Options’. It had filed its return of income for A.Y. 2013-14 declaring total income of Rs.25,82,984/-.

3.1 In this case, learned AO noticed that assessee had unsecured loans of Rs.28,34,59,639/-. Learned AO issued show cause notice to give complete details of these unsecured loans. In reply, assessee stated that they are doing business in the name of ‘Smart Options’ from 11.07.2011 as a partnership firm and they are receiving loans from their relatives and friends by account payee cheques only and the said cheques have been deposited in Bank account and they are giving interest regularly as under:

A. From 1 lac to 3 lacs 1.5% per month B. From 3jacs to 5 lacs 1.75% per month C. From 5 lacs to 25 lacs 2% per month D. From 25 lac & more 2.25% per month After receiving loans from different persons, they were giving the said fund to Rashesh M Shah. Rashesh M Shah HUF & Khushboo R Shah for doing [M/s. Smart Options Vs. DCIT] A.Y. 2013-14 - 4 - business relating to stock market. There was mutual understanding between them that every month he will give them 3 to 3.5% from the total profit as profit of their business. After receiving the amount from Rashesh M Shah, Rashesh M Shah HUF & Khushboo R. Shah, they will make payment of interest to the person from which they had received loans as per agreement if necessary they will deduct TDS regularly and also the said amount of TDS had been deposited in Banks and also they had submitted TDS returns regularly as per I.T. Act. 1961. Also the person who have asked not to make TDS from the interest amount we have received form No. 15G & 25H and also the same form have been submitted to the TDS Department, Ahmedabad.

3.2 But, the assessee could not give complete details of the lenders and could not file details of creditworthiness and genuineness and identity of the lender. Finally, considering the details filed by the assessee, learned AO made addition of Rs.12,36,12,545/-.

4.

Against the order of A.O., assessee preferred first statutory appeal before the ld. CIT(A). The learned CIT(A) confirmed the action of the AO on the ground that assessee has not discharged its primary onus and could not established the genuineness of the transaction and identity and creditworthiness of the lenders. Despite of the fact that The CIT(A) gave several opportunities to him.

5.

Now, assessee is before us.

6.

Learned AO contented that assessee partnership firm used to collect money from their relatives and use to pay interest at 1.5%, 1.75%, 2% & 2.25% per month. They used to give money to one person, namely, [M/s. Smart Options Vs. DCIT] A.Y. 2013-14 - 5 - Rashesh Shah who also remained behind the bar and recently has been declared insolvent. Since, loan amount has been siphoned of by Shri Rashesh Shah who remained behind the bar for a long time and lenders have also filed cases under S.138 of the Act of Negotiable Instrument Act at different Court and assessee has also a victim of Rashesh Shah. So far genuineness and creditworthiness is concerned assessee contended that it has filed the details of names alongwith addresses and cheque details as well as in some cases proceedings under s.138 of the Negotiable Instrument Act are also pending. Since, assessee failed to pay interest on time to the lenders, therefore, lenders/creditors were not cooperating with him before the lower authorities. The assessee requested learned AO that a lender may be summoned but learned AO did not pay any heed to the request of the assessee on the ground of paucity of time.

7.

Now, assessee has filed certain details before us and argued that detail is filed before the lower authorities were not considered properly and requested that set aside this matter back to the lower authorities.

8.

On the other hand, learned CIT.D.R. vehemently opposed the setting aside this matter to lower authorities by saying that it will be a bad precedent, if cases are like this setting aside to the file of the AO.

9.

We have heard both the parties. After considering the arguments of both sides, undisputedly, assessee amount has been accepted by way of cheques only and said amount had been given by the assessee and interest payment and details have also been submitted by the assessee. Now assessee has filed certain details which are crucial and important for deciding the matter. Therefore, in the interest of justice, we give one more chance to the assessee. Thus, learned AO will decide the matter after [M/s. Smart Options Vs. DCIT] A.Y. 2013-14 - 6 - considering the details, submissions/explanation of the assessee as held in the case of Orissa Cement Corporation 159 ITR (SC) and thereafter, will decide the matter as per law.

10.

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

This Order pronounced in Open Court on 22/04/2022

Sd/- Sd/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 22/04/2022 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

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