SMT. POOJABEN P. SHAH,JAMNAGAR vs. THE DY. CIT, CIRCLE-2(1), JAMNAGAR, JAMNAGAR

Succinct facts qua the issue are that the assessee has filed her return of income for AY.2011-12 on 31.08.2012, declaring total income of Rs.23,64,945/-. The assessee is derived income from salary and interest income during the year under consideration. As per information received from the DDIT(Inv.) Jamnagar, vide letter dated 21.03.2018 that the assessee has taken unsecured loan from the shell company amounting to Rs.25,00,000/-, namely Chancellor Commodeal Pvt. Ltd, during F.Y. 2010-11 relevant to A.Y. 2011-12. On that basis, the case of the assessee, has been reopened u/s.147 of the Act. Thereafter notice u/s148 of the Act was issued on 29.03.2018 and served to the assessee on 29.03.2018.In response to this, the assessee has filed the written submission before the assessing officer on 13.04.2018. It was stated in the written submission, that she has filed her return of income for assessment year(A.Y.) 2011-12 on 31.08.2018, vide acknowledgement No. 478076010310812, the same may be treated return of income filed in response to notice u/s 148 of the Act. The assessee also stated that she would like to know the reason recorded for reopening u/s148 of theAct. Reasons recorded for reopening has been communicated to the assessee, vide letter dated 17.05.2018. Thereafter the notice u/s 143(2) of the Act was issued on 12.09.2018 and served to the assessee. The notice u/s 142(1) of the Act, along with the questions was issued on 3.10.2018 and served to the assessee.

However, the assessing officer rejected the contention of the assessee and stated that while recording the reasons for reopening, there was a typographical error, and there is no mistake in the reasons recorded. During the assessment proceedings, the assessee also submitted further reply before the assessing officer, dated 18.12.2018. However, the assessing officer rejected the contention of the assessee and held that the assessee has taken loan amounting to Rs.25,00,000/- from the Chancellor /AY.2011-12 Poojaben Pankajbhai Shah Commodeal Pvt. Ltd. on 31.03.2011, and the Chancellor Commodeal Pvt. Ltd is a shell company declared by the Government of India. Therefore, the assessing officeradded Rs.25,00,000/-, as cash credit in the hands of assessee, u/s 68 of the Act.

Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. The ld CIT(A) noticed that claim of the assessee is not supported with any documentary evidences. Even a perusal of the assessment order reveals that no confirmation letter is submitted from the respective party substantiating the genuineness of the transactions claimed. Therefore, it was concluded by ld CIT(A)that assessee failed to establish the genuineness of transactions claimed, and hence, the ld CIT(A) confirmed the addition made by the assessing officer.

Learned Counsel for the assessee, vehemently argued that the said loan taken by the assessee, has been repaid in the subsequent year, therefore, genuineness of this loan should not be doubted. The Ld. Counsel for the assessee also took us through paper book page no.12 and 13, wherein the confirmation of accounts was submitted by assessee, before the assessing officer. The transaction was confirmed by the party, by submitting confirmation also, however, neither the assessing officer nor the ld. CIT(A) considered the same. Apart from this, Ld. Counsel also took us through the assessment order of the assessing officer, in the subsequent year, in the assessee’s own case and stated that the same nature of transaction is there in the assessment year 2012-13 and the assessing officer, after having examined the accounts of the assessee and /AY.2011-12 Poojaben Pankajbhai Shah documents of the assessee, did not make any addition. Therefore, Ld. Counsel contended that addition made by the assessing officer may be deleted.

On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue submitted that each year is a separate and distinct assessment year, therefore res judicata does not apply to the income tax proceedings, as each assessment year is treated separately, therefore order passed by the assessing officer in the subsequent year, should not be taken, as a base to delete the addition. The Ld. Sr. DR also stated that assessee has failed to prove the genuineness of the transactions, therefore Ld. CIT(A) rightly confirmed the addition made by the assessing officer.

We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that assessee is an individual and has filed her return of income for the assessment year(AY).2011-12, on 31.08.2012, declaring total income of Rs.23,64,945/-.Subsequently case was re-opened for the reason of loan amount taken of Rs.25,00,000/- from shell company namely, Chancellor Commodeal Pvt. Ltd, declared as shell company by the Government of India in list of 16,793/- (other shell companies). When the assessee, took the loan from Chancellor Commodeal Pvt. Ltd, the said company was not declared, as shell company, by the Government of India. We find that assessee's genuine loan, taken during the F Y 2010-11, from Chancellor Commodeal Pvt. Ltd, was suspected, as bogus merely because the said company was declared as shell company, subsequently by the Government. Consequently, assessment was also framed u/s. 143(3) r.w.s. 147 of the Act dated 26.12.2018, by making an addition of

We find that the genuine loan taken by the assessee, and duly repaid by her through banking channel, is also to be doubted by the assessing officer, merely because she has taken loan from shell company, as she didnot know at the time of taking loan that the said company will be declared as shell company, later on. Thus, at the time of taking the loan, the company was not shell company. We find that the loan was repaid by the assessee through banking channel on or before 31.03.2013 and assessee also furnished affidavits from Directors of lender companies that they have received back their money from the assessee by cheque and it was also confirmed by directors of the company that they have not charged interest on unsecured loan from the assessee due to long term business dealings and relations.Hon`ble Jurisdictional High Court of Gujarat, in the case of Ayachi Chandrashekhar Narsangji, [2014] 42 taxmann.com 251 (Gujarat), held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit.

We also find that the assessing officer had not specifically identified any specific defects in the purported evidences and documents submitted before him by the assessee. Therefore, considering the facts and circumstances, as narrated above, and the fact that the company, namely, Chancellor Commodeal Pvt. Ltd, was suspected, as bogus merely because the said company was declared as shell company, subsequently by the Government. Therefore, while the case of the assessee, under consideration, merits some relief, as the assessee repaid the amount in subsequent years, through banking channel, however, at the same time, entire relief cannot be permitted to the assessee, as the said company was declared as shell company, subsequently by the Government. Considering these facts, in ourview, the ends of justice would be met, if a net profit rate of 15% is adopted on such loan transaction, since the same would take care of the inconsistencies in the documents and evidences filed by the assessee, before /AY.2011-12 Poojaben Pankajbhai Shah the assessing officer. Therefore, we direct the assessing officer to tax the income of Rs.3,75,000/- ( 15% of Rs.25,00,000) in the hands of the assessee, by applying the normal rate of income tax.

In the result, the appeal filed by the assessee, is allowed partly in above terms.