SHWET DEVELOPERS PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER CIRCLE-8(2)(1), MUMBAI

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ITA 5461/MUM/2017Status: DisposedITAT Mumbai09 May 2018AY 2012-136 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the addition was based on the statement of a director of the lending company, whose cross-examination was not allowed. The Tribunal allowed the assessee an opportunity to cross-examine this director.

What were the facts?

The assessee received an unsecured loan of ₹25 lacs from M/s Fastline Multitrade Pvt. Ltd. The Assessing Officer (AO) treated this as an unexplained cash credit and added it to the assessee's income. The CIT(A) confirmed the AO's action.

What were the issues?

Whether the addition made under Section 68 based on an un-cross-examined statement is valid and whether the assessee should be allowed to cross-examine the lender's director.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SRI MAHAVIR SINGH

This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals)-14, Mumbai [in short CIT(A)], in appeal No. CIT(A)-14/IT-59/15-16 dated 27.06.2017. The Assessment was framed by the Income Tax Officer, Ward 8(2)(1), Mumbai (in short ‘ITO’) for the A.Y. 2012-13 vide order dated 25.02.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).

2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in making the addition of 25 lacs as unexplained loan/ Hawala Entry/ Accommodation entry as undisclosed cash credit. For this assessee has raised the following 4 grounds: -

“1. The Hon. CIT(A) has erred in confirming the Genuine Loan of Rs.25,00,000/- received from M/s. Fastline Multi-trade Pvt. Ltd. as non-genuine.

2.

The Id. AO as well as the Hon. CIT(A) were not justified in merely relying on the statement of the said Party given before the Sales Tax Authorities without appreciating the fact that the said Party had given the said statement to save its own skin and avoid the Sales Tax Liability.

3. The Hon. CIT(A) has Failed to appreciate the fact that the Bank Statements of MIs. Fastline Multitrade Pvt. Ltd., tiled before him and the Id. A.O. which clearly proved the Creditworthiness of the said Party.

4. The Hon. CIT(A) was not justified in confirming the addition without allowing the cross- examination of the said person and without directing the Id. A.O. to make further inquiry in the matter.”

3.

Briefly stated facts are that the AO noted that the assessee has taken accommodation entry of unsecured loan of ₹ 25 lacs from Fastline Multitrade Pvt. Ltd. in the FY 2011-12 as per information received from director general of Income Tax (Inv.) Mumbai. As the assessee could not produce the evidences to prove his claim, the AO added this amount as unexplained cash credit under section 68 of the Act being hawala entry/ accommodation entry of unsecured loan. Aggrieved assessee preferred the appeal before CIT(A) who confirmed the addition by observing Para 4, 4.1 and 4.2 as under: -

“4. All the grounds are interlinked and therefore taken together. The facts of the case is that the assessee has shown loan of Rs 25 lacs received from M/s Fasthne Multitrade Pvt Ltd. The AO in para 4.1 of the order contends that M/s Fastline Multitrade Pvt Ltd is a havala dealer as per information received from Sales Tax department. The AO further contended that the assessee has supplied sales bills, delivery challans, lorry receipts etc. regarding sales. It has also furnished copies of bills, details of bank account reflecting the respective parties, the details of item supplied to the parties. However, the AC further contended that merely receiving the money through banking channel does not show that the unsecured loans are genuine and that it has not furnished evidence of creditworthiness of the lenders. The AC added the entire amount as income of the appellant.

4.1 During the appellate proceedings, it is submitted that this loan was taken by A/c payee cheque and thereafter out of the funds, Rs 25 lacs is used for repayment to one Ms. Shashikala Mishra who has cancelled her booking of flat. It is submitted that Investigation Wing has recorded the statement of Mr. Pranjal I3apna, Director of M/s Fastline Multitrade Pvt Ltd on 1/10/2013. It is further submitted that Mr. I3apna was not the director when the loan was received from the said company and therefore his statement cannot be relied upon. Mr. Bapna was not allowed to cross examined despite specific request and further Mr. Bapna has submitted the Sworn Affidavit retracting is statement given before investigation Wing which was submitted during the course of assessment proceedings. It is submitted that at the time of transaction, Mr. Yatin Bagrecha and Mr. Dinesh Hiren were the directors of the company.

4.2 I have considered the submissions. Going through the details submitted, it is noted that the appellant has submitted the copy of retracted statement of Mr. Bapna. In this case, the addition has been made u/s 68 of the Act. There are 3 parameters to be seen while making addition u/s 68 namely the identity of the persons, genuineness of transaction and creditworthiness of the persons. In this case NI/s Fastline Multitrade Pvt Ltd has been declared as an entry provider by Sales Tax department. In the background of the facts as discussed above, the identity of this party is known and the genuineness of the transaction can be said to have been established as the transactions is through A/c payee cheque. However as regards creditworthiness of the party, no submission appears to have been made during the course of assessment proceedings and neither during appellate proceedings. The appellant has only contended that the money received through loan has been further utilized for repayment to one person but the issue here is creditworthiness of the party in advancing the loan particularly in the background of the facts wherein the said party is declared as a havala dealer. Therefore, considering the facts of the case., the addition is hereby confirmed.”

Aggrieved, now assessee is in second appeal before Tribunal.

4.

I have heard the learned Sr. Departmental Representative and gone through the facts and circumstances of the case. I find that the assessee’s contention is that the entire addition based on the statement of one Mr. Pranjal Bapna, Director of M/s Fastline Multitrade Pvt. Ltd. recorded on 01.10.2013 by the departments, which was never confronted or no cross examination was allowed of the said person by the AO and CIT(A). Even how before me, the learned Sr. Departmental Representative could not controvert the facts mentioned in the order of CIT(A) and Assessing Officer. As such, I am of the view that let the assessee should be allowed one more opportunity to cross examine one Mr. Pranjal Bapna, Director of Fastline Multitrade Pvt. Ltd., the addition based on whose statement recorded on 01.10.2013 by the department. Allow to the assessee to substantiate its claim and cross examination of the above said party. AO is directed accordingly. The appeal of the assessee is allowed for statistical purposes.

5.

In the result, the appeal Assessee is allowed for statistical purposes.

Order pronounced in the open court on 09-05-2018. AadoSa kI GaaoYaNaa Kulao mao idnaMk 09.05.2018 kao kI ga[- .

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