DCIT, CIR-2, JALPAIGURI, JALPAIGURI vs. SHRI JITENDRA KUMAR GOLCHA, COOCHBIHAR

- This Revenue’s appeal for assessment year 2012-13 arises against the order of Commissioner of Income Tax (Appeals)-Jalpaiguri’s order dated 27.04.2016 passed in case No.03/Jal/CIT(A)/Jal/2015-16 reversing the Assessing Officer’s action adding the taxpayer’s unsecured loans of ₹62 lac followed by disallowance of interest paid thereupon of ₹7,80,609’ respectively involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused. A.Y. 2012-13 DCIT, Cir-2 Jal. Vs. Sh Jitendra kr. Golcha Page 2 2. Both the learned Representatives take us to CIT(A)’s detailed discussion deleting the impugned(s) of unsecured loans and interest thereupon as follows:- “4. I have duly considered the submission of the Ld. AR and the details filed in the form of a paper book. During the F.Y 2011-12, assessee had taken loans from nine family members and relatives, out of which four loans were taken for the first time. From the loan it appears that- (i) Aggregate opening balance of loans i.e b/f loans) was Rs.42,96,252/- (ii) Aggregate ado of loans was Rs.6322,00,000/- (iii) Aggregate interest liability was Rs.7,80,609/- and TDS made was Rs.70,160/-. (iv) Aggregate ;loan repayments was Rs.54,76,409/- and (v) Aggregate closing balance of loan was Rs.57,30,292/- It prima-facie appears that the AO made additions on account of some such loans which were repaid during the year. For example, excepting Ms. Rehmi Golcha, other three new loans were repaid with interest. The AO also disallowed some such interests which were attributable to brought forward loans, without assigning any reason. From the assessment order it also appears that the AO pointed out some alleged discrepancies in the accounts of five cases, but disallowed entire fresh loans [four new loans and five addition to loans] aggregating to Rs.62,00,000/-.,For example, in the case of Shri Mahendra Kumar Golcha, M/s Mahendra Kumar Golcha & Sons (HF), M/s Mahendra Kumar Surendra Kumar and M/s Rajendra Kumar Golcha & Sons (HUF), AO has not pointed out any discrepancy.

Learned. AR has contended that all the loans were received by the assessee form his close family members and family concerns; all loans were received and repayments were made through account payee cheques; interest were also paid by account payee cheques after deduction of tax at source as and where applicable; all the lenders were assessed to tax and duly confirmed the transactions. The AO has not disputed these facts and the Ld. AR has filed all the documents again alongwith his submission. Thus the assessee explicitly discharged the requirements U/s 68 of the Act and that onus, i.e. initial burden of proof shirted upon the AO as the onus to prove that the apparent is not real is on the party who claims it to be so. Since the AO alleged that the loans were bogus, burden lies upon the AO to prove the same by laying evidence. Let us see what discrepancy AO found out in the accounts of five loan creditors. 6.1 Shri Anuvhav Golcha: Shri Anubhav had given fresh loan of Rs.11,60,00/- as mentioned by the AO. Ld AR ha stated that fresh loans of Rs.6,80,00/- were given [there were one returned cheque of Rs.4,80,000/-), which appears to be correct from the details filed. The A.Y. 2012-13 DCIT, Cir-2 Jal. Vs. Sh Jitendra kr. Golcha Page 3 doubts raised by the AO that a person having total income of Rs.3,45,494/- and having capital balance of Rs.8.79 lakhs could not provide loans is preposterous. Loans also can be given by taking loans from others. The AO though pointed out about some suspicious transaction in his bank account, but no specific discussions has been made. On the other hand, assessee has given explanation for each and every credit amounts (in the books of lender) used for providing loans with supporting evidences. Thus, the addition made in this regard is not maintainable. 6.2 Shri Rajendra Kumar Golcha: Sri Golcha had given fresh loan of Rs.7,43,000/- as mentioned by the AO Ld AR has stated that fresh loans of Rs.5,08,000/- were given [three were two returned cheques totaling to Rs.2,35,000/), which appears to be correct from the details filed. Here also AO raised doubt that a person having total income of Rs.5,23,986/- could not provide loans. Loans also can be given by taking loans from others and from accumulated capital. The AO though pointed out about some suspicious transaction in his bank account, but no specific discussion has been made. On the other hand, assessee has given explanation for each and every credit amounts (in the books of lender) used for providing loans with supporting evidences. Thus, the addition made in this regard is also not maintainable. 6.3 Shri Mohan Lal Golcha (Prop. of Chunilal Bhawarlal): From Shri Mohan Lal, assessee had received loans of Rs.26.00 lakhs, which were also repaid during the year. In this case, AO found that assessee himself had given loan of Rs.5,00,000/- to the lender on 04/04/2011 and also received back the same on 03/06/2011. The AO, therefore, of the opinion that a person who had earlier provided loans to another person could not take loans from that person subsequently and accordingly, disallowed the loans of Rs.26.00 lakhs. This is absurd. Addition cannot be made on mere suspicions and surmises. Ld AR has filed explanation for each and every credit amounts (in the books of lender) used for providing loans with supporting evidences. Thus, the addition made in this regard is also not maintainable. 6.4 Shri Surendra Kumar Golcha and Sons (HUF): This HUF had given fresh loan of Rs.50,000/-. Here also AO raised doubt that a person having total income of Rs.51,030/- could not provide loans. Loans also can be given by taking loans from others and from accountable capital. The AO though pointed out about some suspicious transaction in his bank account, but no specific discussion has been made. On the other hand, assessee has given explanation for each and every credit amounts (in the books of lender) used for providing loans with supporting evidences. Thus, the addition made in this regard is also not maintainable. 6.5 Smt. Reshmsi Golcha: The assessee had taken new loan of Rs.3,35,000/- from Smt. Reshmi Golcha. Source was explained as accumulated cash gifts received in her marriage ceremony. The AO A.Y. 2012-13 DCIT, Cir-2 Jal. Vs. Sh Jitendra kr. Golcha Page 4 doubted that a person having annual income of R.42,412/- was not in a position of providing loan of Rs.3,35,000/-., The AO also doubted that when the marriage of the lender was celebrated on 31.05.2010, why the cash gift was deposited in her bank account on 14-15/11/2011 and accordingly disallowed the same. ld AR inferred that it is a common practice in the Mawari Society to celebrate marriage throughout the year, when the bride gets various gifts, including cash gifts from family member and relatives. Ld AR has filed copy of balance sheets of the family members evidencing that among others gifts totaling to Rs.1.11 lakhs were received from her family members. Those accumulated cash gifts were deposited in her bank account in the marriage anniversary year. In this case also, assessee explicitly discharged the requirements U/s 68 of the Act by filing loan confirmation, acknowledgement of income tax return and bank statement of the lenders, who is otherwise his close family member. When the AO doubted about cash deposits in lenders bank account, action lied in the case of the lender. The lender could have been summoned and interrogated to establish that source of said cash was assessee’s own. In absence of tat addition made on mere suspicion, cannot be sustained. The ordinary presumption of law is that the apparent state of affairs is real unless the contrary is proved. The AO had not brought any positive material or evidence which would indicate that the addition/disallowance as made were all correct. Law is settled that the fate of the assessee cannot be decided by the revenue on the basis of surmises, suspicion or possibilities. 6.6 In the light of above discussion, entire addition of Rs.62,00,000/- made U/s 68 of the Act is not maintainable hence deleted. Consequently, addition of Rs.7,80,609/- made by disallowing interest on such loans is also deleted.”

We have given our thoughtful consideration to rival contentions. Mr. Choudhury vehemently contends during the course of hearing that the assessee’s creditors in issue have megure source of income and there are many factual inconsistencies as well as so far as 10 families members / creditors including three HUFs are concerned. We find no merit in Revenue’s instant arguments. It has come on record that the assessee has obtained its unsecured loans of ₹62 lac from ten family members including three related HUFs. We find from the corresponding tabulation in the case file that six of the said parties involved opening balances as well. This means that the assessee has carried forward preceding years closing balance of loans in this impugned assessment year. The very loans had attained finality therefore as the