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Income Tax Appellate Tribunal, “F” Bench, Mumbai
Before: Shri B.R. Baskaran (AM) & Shri Ravish Sood(JM)
O R D E R Per B.R. Baskaran (AM) :-
The revenue has filed this appeal challenging the order dated 10-03- 2016 passed by Ld CIT(A)-32, Mumbai and it relates to the assessment year 2010-11. The revenue has raised following grounds:- 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in admitting additional evidence in contravention of Rule 46A notwithstanding the fact that the assessee had failed to submit the relevant details at the time of assessment proceedings.
2. The appellant prays that the learned CIT(A) on the above grounds be reversed and that of the Assessing Officer be restored.
2. We heard the parties and perused the record. The main ground raised by the revenue is that the Ld CIT(A) has admitted additional evidence in contravention of Rule 46A of the I.T Rules.
3. The AO has made the addition u/s 68 of the Act in respect of loans taken from following two parties:- M/s Dev Diamonds - Rs.3,95,00,000/- M/s Pacific Diamonds - Rs.1,50,00,000/-
2 Smt. Anita Pravinkumar Bhansali During the course of assessment proceedings, the AO asked the assessee to furnish copies of return of income filed by the above said parties along with acknowledgement and their bank accounts. The assessee did not furnish the same. Hence the AO issued notices to the above said parties u/s 133(6) of the Act calling for the above said details. However no reply came from the above said parties till the date fixed by the AO, i.e, till 14.03.2013. Hence the AO asked the assessee to furnish the details and produce the parties on 22.03.2013. In response thereto, the assessee sought some more time, but could not produce the parties. In the mean time, the assessing officer received letters from both the parties enclosing therein copies of income tax returns, copies of part of bank statements. The AO noticed that Shri Debangsu N Bose is the proprietor of M/s Dev Diamonds and Shri Kamlesh Dhammani is the proprietor of M/s Pacific Diamonds. The first person had declared a total income of Rs.3,90,970/- and the second person had declared a total income of Rs.8,09,830/-. On perusal of the bank accounts, the AO noticed that there were money transfers from other accounts before issuing cheques to the assessee. Under these set of facts, the AO took the view that the assessee has failed to prove the genuineness of loans and credit worthiness of the parties. The AO also took the view that the identity of the parties was also not established. The AO also placed reliance on the decisions rendered by Hon’ble Supreme Court in the case of Sumati Dayal (214 ITR 801) and Durga Prasad More (82 ITR 540). Accordingly he assessed both the loans aggregating to Rs.5,45,00,000/- as income of the assessee u/s 68 of the Act.
Before Ld CIT(A), the assessee furnished additional evidences, which consisted of financial statements of the two parties, bank statements, copy of bank accounts, their IT returns and confirmation obtained from those parties. The Ld CIT(A) forwarded them to the AO for his comments, vide his officer letter dated 15-04-2014. In response thereto, the AO submitted his detailed report on 13.11.2015 to Ld CIT(A). Before Ld CIT(A), the assessee had submitted that the addition of Rs.5.45 crores made by the AO included
3 Smt. Anita Pravinkumar Bhansali two cheques of Rs.47.00 lakhs and Rs.43.00 lakhs aggregating to Rs.90.00 lakhs received by the assessee, but they have been dishonoured. Accordingly it was submitted that the above said sum of Rs.90.00 lakhs is not liable to be assessed u/s 68 of the Act. In the remand report, the AO submitted that the assessee did not make any such claim of dishonor of cheques before him during the course of assessment proceedings. The AO also reported that he could not comment on documents, since they were not available with the letter dated 24.03.2015 issued by Ld CIT(A). Thereafter, the Ld CIT(A) deleted the additions upon examining various documents furnished by the assessee. Aggrieved, the revenue has filed this appeal contending that there is violation of Rule 46A of the Act.
The Ld D.R supported the grounds urged by the revenue. The Ld A.R, on the contrary, submitted that the assessee has relevant documents and also other documents obtained from the assessing officer of the respective creditors by filing application under RTI Act. He submitted that the Ld CIT(A) forwarded the documents initially furnished by him along with his letter dated 15-04-2014. Thereafter, it appears that the ld CIT(A) has issued another letter on 24.03.2015. He submitted that the respective loan creditors have also forwarded the details called for by the AO during the course of assessment proceedings. In the remand report, the Assessing Officer has expressed his views on the submissions made by the assessee in respect of dishonoured cheques but stated that the documents were not attached in the letter dated 24.3.2015, while the documents were duly forwarded by Ld CIT(A), vide his letter dated 15.04.2014 as mentioned in the order of Ld CIT(A). He submitted that all these facts would show that the documents were forwarded by Ld CIT(A) and were examined by the AO. Accordingly he submitted that there is no violation of provisions of Rule 46A of the I T Rules. The Ld A.R further submitted that the assessing officer of the respective creditors has also confirmed that the loan given to the assessee is reflected in the Balance sheet of the lenders. He submitted that the assessee has received the loans through banking channels and has 4 Smt. Anita Pravinkumar Bhansali repaid them along with interest in the next year. He submitted that the Ld CIT(A) has examined the contentions of the assessee as well as the documents thoroughly and accordingly concluded that the addition made by the AO was not warranted. Accordingly he contended that the order passed by Ld CIT(A) does not call for any interference.
We heard the parties and perused the record. We notice that the ld CIT(A) has recorded in paragraph 4 of his order that he has forwarded the additional evidences furnished by the assessee to the assessing officer through his office letter dated 15-04-2014. We notice that the AO has furnished his report on 13.11.2015, wherein the AO is referring to letter dated 24.03.2015 issued by Ld CIT(A). The AO has stated that the documents were not enclosed in the letter dated 24.03.2015. However, we notice that the Ld CIT(A) has forwarded the additional evidences on 15.4.2014 itself. The observations so made by Ld CIT(A) have not been proved to be incorrect by the revenue. These facts, in our view, show that the Ld CIT(A) has duly confronted the additional evidences with the assessing officer. In fact, as rightly pointed out by Ld A.R, the assessing officer has offered his comments about the claim of the assessee on dishonoured cheques, but did not comment on the evidences by stating that they were not enclosed in the subsequent letter. Since the Ld CIT(A) has forwarded the additional evidences through his letter dated 15.4.2014 to the AO, we are of the view that there is no violation of Rule 46A as alleged by the revenue.
7. On merits, we notice that the Ld CIT(A) has granted relief to the assessee by duly examining the details that were furnished by the assessing officer. For the sake of convenience, we extract below the decision rendered by Ld CIT(A):- “6. DECISION: I have carefully considered the matter. Ground 1& 3 are general in nature requiring no specific adjudication on my part. The only effective ground is against the action of the AO in adding the loans availed by the appellant as unexplained cash credits. I find that the AO has done so holding that the identity, creditworthiness and genuineness of the transaction have not been proved. However from the evidence part
5 Smt. Anita Pravinkumar Bhansali filed before the AO as well as the additional evidence filed before me, the facts indicate otherwise. The appellant has filed the financials of the loan creditors, their IT returns, PAN Nos, bank account statements and also confirmations from these two parties. All these documents indicate that the loans have been advanced to the appellant by these two parties. The loans are through banking channels, interest has been provided for by the appellant and also accounted for as income by these parties. The identity is proved beyond doubt as the loan creditors have valid PAN Nos, and have filed their returns also. The genuineness of transaction is linked to the creditworthiness of these two parties. The AO has a grievance about the credit worthiness of these two parties on the grounds that the income returned by them is a few lakhs while the loans advanced is a few crores. More specifically, I see from the balance sheet of Pacific Diamonds Prop Kamlesh Dhammani that the appellant appears on the asset side under the head Loans & Advances for the amount of principal loan and outstanding interest. Mr Kamlesh Dhammani has also given a signed loan confirmation showing the details of the transactions. The AO has a grievance on the income returned by Pacific Diamond. The AO has examined only the' net profit of Pacific Diamond. I find from the P&L A/c filed that Pacific Diamond has declared a gross interest received of Rs 89.31 lakhs. It cannot therefore be said that the creditworthiness of Pacific Diamonds is not proved.
6.1 Similarly, with regard to the other loan creditor, Dev Diamond Prop Debangsu N Bose, it is seen that the transaction is through banking channel, he has filed his return as well as submitted a confirmation of transactions including return of cheques for want of insufficient funds. In any case, these cheques returned are not relevant to the controversy at hand. Going further in this matter I find that the appellant made an RTI Application to the AO of Dev Diamond, requesting for the following information:- i) Is the above mentioned person assessee to tax? ii) If yes, kindly let me know whether he has shown interest income of Rs. 25,24,750/- in his computation on loan granted to me in the F. Y. 2009-10 iii) The closing Balance of my loan account in his Balance Sheet on March, 31,2010. iv) The Current address as per records, v) Copy of Return of Income, Computation and copy of Profit and Loss A/c and Balance Sheet & Schedule of Loan given as per the Balance Sheet
6 Smt. Anita Pravinkumar Bhansali The AO initially denied the same however the appeal under RTI was partly allowed furnishing the information as under:- i) Yes, he is assessed to tax with ITO Ward2(3)(7), Surat. ii) Yes, the has shown interest income of Rs, 1,24,19,027/-. However, as there are no break up of interest income submitted by the assessee to the department, the same is not available with the department. iii) The confirmation of loan signed by the applicant Smt. Anita Pravinkumar Bhansali and same submitted by the assessee during the course of assessment proceedings is mentioned below:
Interest amount of Rs. 25,24,750/- & outstanding loan amount of Rs. 3,30,24,750/-were also shown in the Profit & Loss A/c. and annexure forming part of balance sheet under the head of loan & advances. iv) The current address of the assesses as per records is 210, Suparshava Building, Thoda Sheri, Mahidharpura, Surat. v) The details called by the applicant like copy of Return of Income, Computation and Copy of Profit & Loss A/c. Balance Sheet & Schedule of Loan given as per the Balance sheet cannot be provided as the said information is the third party information and not in larger public interest as defined u/s. 8(l)(l) of the RTI Act, 2005.
From the above it could be seen that the prop of Dev Diamonds is declaring gross income of Rs 1,24,19,027 which includes the interest from the appellant of Rs 25,24,750. The grievance of the AO that Debgansu N Bose is a man of no means is therefore negated. On an analysis of the facts as above, it is clear that all ingredients of sec 68 have been satisfied. The existence of the two persons giving loans is proved, their creditworthiness is proved and so is the genuineness of the transaction in light of their emphatic confirmations. I also find that the AO in his remand report has not commented on these issues which are germane to the additions made. Instead the AO has focused on some cheques which were returned from Dev Diamonds which in any case is not relevant to the controversy at hand. In the light of the facts and discussion above, I hold that the loans availed by the appellant are genuine and therefore cannot be added u/s 68. 1 therefore delete the addition of Rs 5,45.00,000.
In the result, the appeal is allowed.”
7 Smt. Anita Pravinkumar Bhansali
On a careful perusal of the order passed by Ld CIT(A), we are of the view that the Ld CIT(A) has passed a reasoned order by duly considering the evidences furnished by the assessee. The impugned loans have also been confirmed by the respective assessing officer of the lenders. Under these set of facts, we are of the view that the order passed by Ld CIT(A) does not call for any interference. In view of the discussions made in the foregoing paragraphs, we are of the view that there is no violation of Rule 46A as alleged by the revenue. Accordingly we reject the grounds urged by the revenue in this regard.
In the result, the appeal filed by the revenue is dismissed. Order has been pronounced in the Court on 16.3.2018.