ANIL BASUDEVO BERIWAL,MUMBAI vs. ACIT 30(1), MUMBAI

In this appeal, assessee has raised the following Grounds of appeal :-

In this appeal, the first issue is with regard to the addition of Rs.45,00,000/- made by the income-tax authorities u/s 68 of the Act by treating the loans received by the assessee from three concerns, namely, M/s. Akhil Steels – Rs.5,00,000/-, M/s. S.K. Steels – Rs. 15,00,000/- and M/s. Vama Sarup Corporation – Rs.25,00,000/- as ‘unexplained’. In this regard, the relevant facts are that the appellant-individual is engaged in the business of wholesale dealing in iron and steel and allied products. It was noticed that during the year under consideration, assessee had received fresh loans from M/s. Akhil Steels – Rs.5,00,000/-, M/s. S.K. Steels – Rs. 15,00,000/- and M/s. Vama Sarup Corporation – Rs.25,00,000/-. On being asked to explain, assessee furnished the requisite details alongwith the confirmation of the parties as well as their addresses and PAN. Thereafter, the Assessing Officer issued notices to the creditors u/s 133(6) of the Act calling for certain details and documents requiring the assessee to serve the notices on the parties. After considering the response, the Assessing Officer treated the amount of Rs.45,00,000/- as ‘unexplained’ and added it to the returned income u/s 68 of the Act.

Before the CIT(A), assessee, inter-alia, canvassed that the burden was put on the assessee to serve the notices on the parties and the time allowed was insufficient. It was pointed out that notices u/s 133(6) of the Act were issued on the assessee on 26.03.2015, whereas notice to M/s. Akhil Steels was delivered on 27.03.2015, that to M/s. S.K. Steels on 29.03.2015 and to M/s. Vama Sarup Corporation it was delivered on 30.03.2015. As the assessment was getting time-barred, effectively assessee was given only one day to comply with the requirement and, therefore, no proper opportunity was given. Assessee also pointed out that, even otherwise enough material was furnished to the Assessing Officer to prove the identity, genuineness and creditworthiness of the three parties. As per the assessee, the addition has been made by the Assessing Officer merely on doubts and suspicion. The CIT(A) disagreed with the assessee and noted that out of the three parties, only one, i.e., M/s. Akhil Steels had filed return of income for Assessment Year 2012-13, whereas the other two concerns had not submitted their returns of income. In the case of M/s. Akhil Steels, it was noted that a cash of Rs.5,00,000/- was deposited on 31.03.2012 and the same was given as loan to the assessee, therefore, the source of cash deposited was not explained. Even with regard to M/s. S.K. Steels, the CIT(A) noticed deposits in the bank account on various dates, but in the absence of any explanation regarding source of funds in the bank account of the creditor, he upheld the addition. Even with regard to M/s. Vama Sarup Corporation, the CIT(A) upheld the addition on the plea that confirmation of the party was signed by the assessee himself. In this background, assessee is in appeal before us.

Before us, the learned representative for the assessee has vehemently pointed out that so far as the burden cast on the assessee is concerned, the same was fully discharged and referred to page 11 of the Paper Book wherein is placed the details of the evidences filed before the Assessing Officer and/or CIT(A) in respect of the three parties in question, which reads as under :-

In any case, it is pointed out that the notices to the three parties u/s 133(6) of the Act were dated 26.03.2015, copies of which have been placed in the Paper Book, thus leaving hardly any time to respond effectively as the assessment was getting time-barred on 31.03.2015. Though the assessee pointed out that the details furnished by the assessee sufficiently discharged the onus cast on him u/s 68 of the Act and referred to the judgment of the Hon'ble Gujarat High Court in the case of DCIT vs. Rohini Builders, 256 ITR 360 (Guj.) in this regard, but a preliminary submission was made that since adequate time was not allowed for the assessee to produce relevant explanation, assessee would be satisfied if the matter is restored back to the file of the Assessing Officer for a decision afresh, and this would enable the assessee to furnish the requisite material and evidences.

The ld. DR appearing for the Revenue has not seriously opposed the plea of the assessee for remanding the matter to the file of the Assessing Officer.

Having considered the rival stands, we find that so far as the primary details of the parties including the confirmation and PAN particulars are concerned, the same were furnished by the assessee before the Assessing Officer. It is also evident that the Assessing Officer started the verification exercise with the parties at the fag end of the assessment proceedings by issuing notices u/s 133(6) of the Act on 26.03.2015. A perusal of the said notices shows that various details/documents were called for by the Assessing Officer from the three parties. It also reveals that the compliance was to be made within three days. The assessment order has been passed on 31.03.2015. Considering the entirety of circumstances, in our view, there is considerable weight in assessee’s submissions that time given to the assessee to meet with the result of the verification exercise carried out u/s 133(6) of the Act was insufficient, especially when the entire addition by the Assessing Officer is based on verification exercise u/s 133(6) of the Act. Therefore, without going into the merits of the rival stands, we deem it fit and proper to set-aside the order of CIT(A) and restore the matter back to the file of the Assessing Officer, who shall consider the applicability of Sec. 68 of the Act qua the three creditors in question afresh, in accordance with law after allowing the assessee reasonable opportunity of being heard. Thus, on this aspect, assessee succeeds for statistical purposes.

The only other issue in this appeal is with regard to disallowance u/s 14A of the Act of Rs.41,282/-. On this, the only plea of the assessee is that the total exempt income earned during the year is Rs.3,048/- and that the addition be restricted to the amount of exempt income. We find that the plea of the assessee is in line with the judgment of the Hon'ble Delhi High Court in the case of Joint Investments Pvt. Ltd. vs. CIT, 372 ITR 694 (Delhi) and accordingly, the Assessing Officer is directed to restrict the disallowance u/s 14A of the Act to the extent of the tax exempt income. Thus, on this aspect, assessee succeeds.

In the result, appeal of the assessee is partly allowed.