ITO, WD -2(2), SILIGURI, DARJEELING vs. SRI SUBRATA DAS, DARJEELING

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ITA 1366/KOL/2016Status: DisposedITAT Kolkata14 August 2018AY 2012-133 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged the onus of proving the identity, creditworthiness, and genuineness of the lenders by providing necessary documents and that the loans were repaid. The AO's action of doubting the lenders' creditworthiness without further inquiry from the lenders' AO was deemed flawed.

What were the facts?

The assessee, proprietor of a rice mill, took unsecured loans of Rs. 5 lakh and Rs. 45 lakh from two companies. The Assessing Officer (AO) added these amounts to the assessee's income under Section 68, doubting the creditworthiness of the lenders despite the assessee providing confirmations, PAN details, and bank accounts.

What were the issues?

Whether the AO was justified in doubting the creditworthiness of the loan creditors when the assessee provided all necessary documentation and whether the onus under Section 68 was discharged.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH: KOLKATA

Before: Shri P.M. Jagtap, AM & Shri A. T. Varkey, JM]

Hearing: 06.06.2018Pronounced: 14.08.2018

ORDER Per Shri A.T.Varkey, JM

This is an appeal preferred by the revenue against the order of the Commissioner of Income Tax (Appeals), Siliguri, dated 11.04.2016 for Assessment Year 2012-13.

2.

The only grievance of the revenue is against the action of the Ld. CIT(A) in deleting an addition of Rs.50 lakhs.

3.

Briefly stated facts of the case are that the assessee is the proprietor of M/s. Ganapati Mini Rice Mills and had taken unsecured loan of Rs. 5 lakh from M/s. Ganapati Mini Rice Mills and Rs.45 lakhs from M/s. Build Ware Infrasteel Pvt. Ltd. Though confirmation and PAN details of lenders were filed before the AO, he was not satisfied with the creditworthiness of the lender companies and made the addition u/s. 68 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”). Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to delete the same. Aggrieved, the revenue is before us.

4.

We have heard rival submissions and gone through the facts and circumstances of the case. We note that the assessee is a proprietor of a rice mill and has taken unsecured loan of Rs. 50 lacs from two legal entities (Rs. 5 lacs and Rs.45 lacs) i.e. from M/s. Ganapati Mini

Subrata Das, AY- 2012-13 Rice Mills and M/s. Build Ware Infrasteel Pvt. Ltd. respectively. We note that the assessee during the assessment proceedings has filed the following documents to prove the identity, creditworthiness and genuineness of the transactions: i) Confirmation letter duly signed by the Creditors, ii) Audit Report of the Loan Creditors for FY 2011-12, (AY 2012-13) iii) Acknowledgment of I. T. Return filed for FY 2011-12 (AY 2012-13) of the Loan Creditors, iv) Copy of Bank Accounts of the Loan Creditors

5.

We note that the aforesaid companies were issued letters seeking information u/s. 133(6) of the Act by the AO on 19.01.2015 and that these letters were duly received by the companies at their offices and were also duly replied within the time frame provided by the AO.

6.

Further, it was also pointed out before us that the loans in question were refunded by the assessee much before the receipt of the notice u/s. 142(1) of the Act which mean that loans were in fact repaid even much before assessment proceeding were initiated by the AO. We note that the advances were for a short term and the loan had been repaid as per the details given below: Date Cheque Number Amount BUILDWARE INFRASTEEL PRIVATE LIMITED 04/05/2012 039387 15,00,000/- 22/06/2012 039388 15,00,000/- 22/06/2012 039389 15,00,000/- 24/05/2013 013057 1,74,859/- TOTAL 46,74,859/- GANESH TRADELINK PRIVATE LIMITED 22/06/2012 039390 5,00,000/- 24/05/2013 013058 19,216/- TOTAL 5,19,216/-

7. We note that the AO after examination of creditors’ financial status came to the conclusion that the lenders were not creditworthy. This action of AO is flawed as held by Hon’ble jurisdictional High Court in the case of Dataware Pvt. Ltd. Vs. CIT (ITAT No.263/2011, GA No. 2856/2011, dated 21.09.2011), wherein their Lordship held as under:

“Both the CIT(A) and the Tribunal below have in details considered the fact that the share application money was paid by account payee cheque, the creditor appeared before AO, disclosed its PAN and also other details of the accounts but in spite of that the AO didn't

Subrata Das, AY- 2012-13 enquire further from the AO of the Creditor but instead, himself proceeded to consider the P/L A/C of the creditor and opined that he had some doubt about the genuineness of such account. In our opinion, in such circumstances, the AO of the assessee can't take the burden of assessing the P/L A/C of the creditor when admittedly the creditor himself is an IT Assessee. After getting the PAN and getting the Information that the creditor is assessed under the Act, the AO should enquire from the AO of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the AO of the creditor, but instead of adopting such course, the AO himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by its AO, the AO of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of the transaction through account payee cheque has been established. We find that both the CIT(A) and the Tribunal below followed the well accepted principle which are required to be followed in considering the effect of Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities. The appeal is thus devoid of any substance and is summarily dismissed.” (emphasis given by us)

8.

In the light of the aforesaid order of the Hon’ble High Court the action of the AO cannot be countenanced. We note that the assessee has discharged the onus casted upon him to prove the identity, creditworthiness and genuineness of the lenders. We note that assessee has returned the loan through account payee cheque before 24.05.2013 to both lenders which facts could not be controverted by the revenue. In such a scenario, the factual finding of Ld. CIT(A) cannot be disturbed and so we confirm the same. Appeal of revenue is, therefore, dismissed.

7.

In the result, the appeal of the revenue is dismissed.

Order is pronounced in the open court on 14th August, 2018 Sd/- Sd/- (P. M. Jagtap) (Aby. T. Varkey) Accountant Member Judicial Member Dated :14th August, 2018 Jd.(Sr.P.S.) Copy of the order forwarded to:

1. 1. Appellant – ITO, Ward-2(2), Siliguri 2 Respondent – Shri Subrata Das, prop. of M/s. Ganapati Mini Rice Mill, Naksalbari, Dist. Darjeeling, Pin-734429.

3. The CIT(A), Siliguri. (sent through e-mail)

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