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Income Tax Appellate Tribunal, SMC BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-2, Nashik, dated 18-08-2016 for the Assessment Year 2011-12.
The solitary raised by the assessee is extracted as under :
“1. In the facts, circumstances & position of law, Ld. CIT(A)-2, Nashik erred in confirming the addition of Rs.10,00,000/- u/s.68 of the I.T. Act, 1961 in respect of unsecured loan obtained from Shri Pramod Pndharinath Chaudhari.”
Briefly stated relevant facts are that the assessee is an individual and is engaged in the business of retail trading in fertilizers, pesticides and seeds. Assessee filed the return of income on 17-09-2012 declaring total income of Rs.9,32,174/-. During the course of assessment, on perusing the balance sheet, AO noticed that loan entry of Rs.10 lakhs
from Mr. Pramod Pandharinath Chaudhari, a senior clerk with J.D.C.C.
Bank, Sangvi and his annual salary is around Rs.2,90,000/-. The said
Chaudhari claims earning of additional income of around Rs.2 lakhs
from agricultural income by HUF. AO undertook the scrutiny of this
loan transaction of Rs.10 lakhs and summoned Mr. Pramod
Pandharinath Chaudhari u/s.131 of the Act. Mr. Pramod Pandharinath
Chaudhari confirmed the issuance of Rs.10 lakhs in two instalments
(Rs. 5 lakhs each) through Cheque Nos. 761313 and 761314 on
common date, i.e. 04-01-2011. On perusal of the bank statement & Mr.
Chaudhari, AO noticed the cash deposit of Rs.10 lakhs in the account
of Mr. Pramod Pandharinath Chaudhari on 05-01-2011 to facilitate
encashment of the cheques issued by Mr. Pramod Pandharinath
Chaudhari to the assessee. Further, it is also submitted that the
assessee repaid the said loan amount of Rs.10 lakhs to Mr. Pramod
Pandharinath Chaudhari on 07-07-2011 vide Cheque Nos. 138171 and
138173 of Rs.5 lakhs each. Further, during the proceedings u/s.131 of
the Act, the AO dug out the fact of Mr. Pramod Pandharinath
Chaudhari having taken other loans too. Eventually, AO held that
depositing the cash of Rs.10 lakhs in the bank account on 05-01-2011
is not a normal event. Therefore, the AO suspected the genuineness of
the transaction and also the credit worthiness of Mr. Pramod
Pandharinath Chaudhari, whose salary is not even enough to meet his
household requirements. Accordingly, the addition of Rs.10 lakhs is
made u/s.68 of the Act. CIT(A) confirmed the same after considering
the submissions of the assessee. Para No.5.2 constitute an operational
para on this issue. As per the CIT(A), the frequent lender cannot be the
giver of loan of Rs.10 lakhs. Thus, the CIT(A) did not approve the
assessee’s explanation and considered the fact that creditor has
otherwise many loans to repay. CIT(A) also is of the opinion that HUF
income cannot be claimed as his income. Thus, the CIT(A) confirmed
the AO’s finding of the credit worthlessness of the lender. Aggrieved
with the same, assessee filed the present appeal with the
aforementioned solitary grounds.
Before me, Ld. Counsel for the assessee submitted that the
provisions of section 68 of the Act are wrongly invoked in this case.
Assessee discharged the onus and has successfully given the identity of
the lender, the details of creditworthiness of the lender and also the fact
of transacting the payments through the banking channels, which
evidences the genuineness of the transaction. Ld. Counsel for the
assessee submitted that the loan is taken by the assessee through
banking channels and the same is repaid again through the same
channels. This fact of repayment by assessee to Mr. Pramod
Pandharinath Chaudhari was also not appreciated by the revenue
authorities. If there is any problem with regard to the depositing of
cash by Mr. Pramod Pandharinath Chaudhari into his bank account at
the time of giving loan to the assessee, it is for the Department to take
any action against Mr. Pramod Pandharinath Chaudhari. Thus, the
assessee cannot be held as a defaulter of the provisions of section 68 of
the Act. On these facts, Ld. Counsel submitted that the provisions of
section 68 of the Act has no application. Considering the fact that the
loan is transacted through banking channels, no doubts can be raised
about the genuineness of the transaction.
On the other hand, Ld. DR for the Revenue relied heavily on the
orders of the AO/CIT(A) and harped on the fact of cash depositing in the
bank account of Mr. Pramod Pandharinath Chaudhari on 05-01-2011
for facilitating the encashment of the cheques issued by Mr. Chaudhari
to the assessee.
I heard both the parties on the issue of addition of Rs.10 lakhs
invoking the provisions of section 68 of the Act. The provisions of
section 68 are deeming ones and they have to be interpreted strictly.
The fact of Mr. Chaudhari attending to the notices issued u/s.131 of
the Act and deposing before the AO suggests that no questions can be
raised about the identity of the creditor. Regarding the credit
worthiness also, I find Mr. Chaudhari confirmed granting of loan from
his bank account and there are no two views on this issue. I have also
noticed that the AO did not bring our any evidence to demonstrate that
the cash of Rs.10 lakhs deposited on 05-01-2011 belongs to the
assessee. Mr. Chaudhari is categorical in stating that the cash does
belong to him and not to the assessee. AO also did not disprove the
assessee’s contention that the agricultural land of HUF generates the
Agricultural income of Rs.2 lakhs per annum. Further, on the issue of
genuineness of the transaction perse, I find the transaction is effected
through banking channels. It is an undisputed fact that the loan of
Rs.10 lakhs was subsequently cleared by the assessee. I cannot
appreciate that how the transaction cannot be genuine when the loan is
taken through account payee cheques and also it is already repaid to
the creditor through the same mode. Therefore, I am of the opinion that
this is not a fit case for invoking the provisions of section 68 of the Act
on this assessee.
Before parting, I may mention that there is some implied
suspicion about the ownership of cash deposited by Mr. Chaudhari in
his bank account on 05-01-2011 if the same is supplied by the
assessee. AO has no evidence in his possession to derive such an
inference. Thus, this is a case where the primary onus is discharged by
the assessee and therefore, the provision of section 68 of the Act is
wrongly invoked. Mr. Chaudhari owns up the said cash of Rs.10 lakhs
and hence, it is for the Revenue to initiate any proceedings against the
lender as per the law. There are many decisions to support this line of
adjudication.
Therefore, I am of the opinion that the ground raised by the
assessee is required to be allowed in his favour.
In the result, the appeal of the assessee is allowed.
Order pronounced on this 01st day of June, 2018.
Sd/- (D.KARUNAKARA RAO) लेखा सद� / ACCOUNTANT MEMBER पुणे / Pune; �दनांक Dated : 01st June, 2018. Satish
आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to : अ�ेिषत
अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. आयकर आयु�(अपील) / The CIT(A)-2, Nashik 3. आयकर आयु� / The CIT-2, Nashik 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे “SMC” / 5. DR ‘SMC’, ITAT, Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार/ BY ORDER,स आदेशानुसार आदेशानुसार
स�यािपत �ित //True Copy// //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune