PREMJI BHURALAL GALA,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 24(1), MUMBAI
Facts
The assessee's cases for Assessment Years 2013-14, 2016-17, and 2017-18 were reopened under section 148 based on information from a search and survey action at M/s Evergreen Enterprises. Statements from partners and employees indicated the assessee received a cash loan of Rs. 66,00,000/-. The Assessing Officer (AO) made additions under section 68 and 69A, which were upheld by the CIT(A).
Held
The Tribunal noted that the reasons for reopening were found to be erroneous and there was a disparity between the 'reason to believe' and the actual addition made under Section 68. Relying on previous orders in the assessee's own case and a High Court judgment, the Tribunal held that the reassessment and addition were bad in law.
Key Issues
Whether the reopening of assessment under Section 147/148 was valid and whether the addition of Rs. 66,00,000/- as cash loan was justified under Section 68.
Sections Cited
147, 148, 144B, 68, 69A, 269SS, 271D, 234A, 234B, 234C, 132, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “C”, MUMBAI
Before: SHRI ANIKESH BANERJEEAND SHRI GAGAN GOYAL
PER BENCH:
Instant appeals of the Assesseeare preferred against the order of the National Faceless Appeal Centre, Delhi [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Years2013-14, 2016-17 and 2017-18, all dated 21/12/2023.The impugned order is emanated from the orders of the Ld. National Faceless Assessment Centre(NFAC) Delhi (in short, ‘the A.O.’) passed under section 147 read with section 144B of the
2 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala Act, dates of order24/03/2022, 22/03/2022 and 23/03/2022 for A.Ys 2013-14, 2016-17 and 2017-18, respectively.
In the outset, all the appeals are having same nature of facts and have common issue, therefore, all the appeals are taken together, heard together and disposed of together. With the consent of both the parties, ITA No.440/Mum/2024 is taken as lead case: -
“Following grounds of appeal are without prejudice to each other: 1. The learned CIT (A) has erred in law and on facts in upholding the order passed by the Assessing Officer u/s. 147 r.w.s. 144B of the Income-tax Act, 1961, which is illegal and bad in law and in violation of the principles of natural justice. 2. The learned CIT (A) ought to have held that the reopening of the assessment by issuing of notice u/s. 148 of the Act was illegal and bad in law. 3. The learned CIT (A) has erred in law and on facts in upholding the addition of Rs. 66,00,000/- on account of alleged cash loan received by the assessee. 4. The learned CIT (A) has erred in law and on facts in sustaining the levy of interest u/s. 234A, 234Band234CoftheAct.
The appellant craves leave to add to, amend, alter or delete all or any of the foregoing grounds of appeal.”
Brief facts of the case is that the assessee’s case was reopened under section 148 and assessment was completed under section 143(3) / 147 with the addition of Rs.66 lakhs.The search was conducted U/s 132 of the Act in the premises of M/s Evergreen Enterprises. One of the partners of M/s Evergreen Enterprises recorded a statement that the assessee is a beneficiary of cash loan amount to Rs. 66,00,000/-. The re-assessment proceeding was initiated relying on
3 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala the statement recorded from the partners of M/s Evergreen Enterprises that the assessee has taken cash loan from this party. The addition is confirmed amount to Rs. 66 lakhs under section 68 of the Act and section 69A for the assessment years 2017-18 and 2016-17. Being aggrieved, assessee filed an appeal before the ld. CIT(A). The Ld.CIT(A) upheld the assessment order. Being aggrieved, the assessee filed an appeal before us.
The Ld.AR vehemently argued and first invited our attention in assessment order para 4 which is reproduced as below:-
“4. In the course of reassessment proceedings, it came to light that the assessee has received the cash loan of Rs. 66,00,000/- from M/s. Evergreen Enterprises which was confirmed by Mr. Nilesh Bharani, one of the partners of M/s. Evergreen Enterprises as well as two of the employees of the same firm. However, the assessee has not mentioned the amount of loan received in the return of income filed by the assessee which is in violation to section 269SS of the I T Act. Also, the assessee failed to furnish full details asked for in the notices served to the assessee and the response submitted by the assessee is not acceptable with regards to the amount of loan taken by the assessee. Hence, the amount mentioned above is to be added in the return of income of the assessee for the relevant assessment year. The penalty u/s 271(1)(c) is to be initiated for .concealment of income. The penalty u/s 271D is to be initiated.”
The Ld.AR first argued the legal ground i.e., in ground 2 and placed that the assessment is reopened on the basis of the reasons recorded. The reason to believe for reopening U/s 148 is reproduced as below: -
4 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala “Sir/ Madam/ M/s
Subject: Reasons for re-opening u/s 147
REASONS FOR REOPENING ASSESSMENT u/s 147 OF THE INCOME-TAX ACT, 1961
A Search & Survey action u/s. 132 of the Income tax-act, 1961 was carried out in the case of M/s. Evergreen Enterprises (AADFE8617J). Mr, Nilesh Bharani is one of the partners in M/s, Evergreen Enterprises. The documentary evidence found in the search as well as statement on oath of Mr. Nilesh Bharani recorded u/s. 132(4) of the Income Tax Act, 1961 unearthed an undisclosed activity of money lending and borrowing in unaccounted cash being operated at the premises of M/s. Evergreen Enterprises by Mr. Nilesh Bharani.
Two of the employees of M/s. Evergreen Enterprises viz. Mr. Ashwin Rathod and Mrs.. Vibha Sachin Rawate admitted in their statement on oath recorded u/s. 132(4) of the Income Tax Act, 1961 that they maintain the cash loan ledgers/documents maintained at the premise of M/s. Evergreen Enterprises. Further, Mr. Jagdish T Ramani and Mr. Shankar Jadhav, two other employees of M/s. Evergreen Enterprises have also admitted in their statement on oath recorded u/s, 132(4) of the Income Tax Act, 1961, that ail the cash transactions are handled by them and they are involved in the collection and disbursement of cash loan and interest to both lenders and borrowers.
On the basis of documents found and seized at the premise M/s. Evergreen Enterprises during the course of search action u/s, 132 of the Income Tax Act, 1961 and statements recorded on oath u/s. 132(4) of the Income Tax Act, 1961 of Mr. Nilesh Bharni, one of the partners of M/s. Evergreen Enterprises and Mr.
5 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala Jagdish T Ramani. Ashwin Rathod, Vibha Sachin Rawate & Shankar Jadhav, it is established that Mr, Nilesh Bharani has given cash loans to several individuals and business concerns.
The parties to whom cash loan was given by Shri Nilesh Bharani have been identified by the Investigation Wing. As per the information available, best efforts have been made to identify the PAN of these parties The list of the parties that have received the cash loan along with the amount of cash loan and financial year of such Joan from Sh. Nilesh Bharani are attached. The assessee has received amount of Rs.66,00,000/- as cash loan from the alleged party which is in violation to section 269SS and the same needs to be taxed.
In view of I have reason to believe that income chargeable to tax of Rs.66,00,000/- has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year i.e. for the subject A.Y. within the meaning of section 147 of the Income-tax Act, 1961.” (Emphasis supplied) 5. The ld. ARstated that the entire cash loan was added back U/s. 68 of the Act in assessment proceedings. The said addition is on the basis of the statement of the parties. The statement was recorded from the assessee during the proceeding. The observation of the ld. AO in ‘recorded reason’is cash loan which is contravening Section 269SS of the Act. But in the assessment the cash loan is not accepted by the ld. AO & added back for contravening Section 68 of the Act. There is clear disparity in ‘reason to believe’ and addition U/s 68 of the Act. The same issue was agitated by the assessee before the ITAT, Mumbai Bench and the
6 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala observation of the bench is in favour of the assessee. The Ld.AR respectfully relied on the order ofITA No.3081 /Mum/2022, date of pronouncement 28/02/2024 in assessee’s own case for A.Y. 2012-13. The relevant paragraph is reproduced as below:- “10. Thus, respectfully following the judgment of the Hon'ble Bombay High Court, we hold that once the Id. AO has accepted cash loans, which is not been considered as income, there can be escapement of income. Accordingly, the reasons recorded by the Id. AO are quashed. Consequently, the entire addition made by the Id. AO is also quashed. In so far as observations made by the Hon'ble High Court in para 4 & 5, the same has not been contended before us and accordingly, the same is left open. 11. In the result, appeal of the assessee is allowed on the validity of the re- opening u/s 147 / 148.”
The assesseeargued that considering the same ‘recorded reason’, the Coordinate Bench of ITAT-Mumbai has allowed the appeal of the assesse. The Ld.AR further placed that the issue was agitated by the Revenue before the Hon’ble Jurisdictional High Court and in the Writ Petition No.3620 of 2019 in the case of Sanjiv Amritlal Cheda vs ITO, the Hon’ble Jurisdictional High Court is in favour of the assessee. The relevant para No.3 is reproduced as below:-
“3. Moreover, even in the Assessment Order dated 4'hDecember 2019 respondents accept the total income as per the return of income declared by petitioner of Rs.7,87,370/- and the whole basis in the assessment order is only to justify respondents' allegations that petitioner had contravened the provisions of Section 259SS of the Act. Since the notice under section 148 of the Act is issued only where there is income that has escaped assessment, notice as impugned in
7 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala the petition could not have been issued. If respondents felt that they have information that petitioner had taken cash loan of Rs.16,30,000/- and there has been contravention of the provisions under Section 269SS of the Act and petitioner was liable to penalty under Section 271D of the Act for failure to comply, then respondents could have commenced action or proceedings towards imposition of penalty under Section 271D of the Act. Once respondent proceeds on the basis that petitioner had accepted cash loan of Rs. 16,30,000/- that loan could never be considered as income and therefore there cannot be any escapement of income of the loan amount of Rs. 16,30,000/-. '
In the circumstances, without making any observations as to whether respondents could take any action under Section 271 D of the Act or whether respondents are right in the allegations against petitioner of borrowing cash loan in the sum of Rs. 16,30,000/-, only on the jurisdictional issue under Section 148 of the Act, we are allowing the petition in terms of prayer clause - (a) which read as under :
(a) That this Hon'ble Court may be pleased to issue under Article 226 of the Constitution of India an appropriate direction,order or a writ, including a writ in the nature of 'Certiorari', calling for the records of the case and, after satisfying itself as to the legality thereof, quash and set aside the Notice u/s 148 dated 28.03.2019, Ex. "B" herein, the order disposing objections dated 05.11.2019, Ex. "H" herein and the ex-parte assessment order dated 04.12.2019 Ex. "I" herein passed by the Respondent:
Mr. Waive states that respondent should be permitted to take action under Section 271D of the Act. It is open to respondent to take such action as advised in accordance with law. We are not making any observations on the merits of the case.”
8 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala
The Ld.DR vehemently argued and relied on the orders of revenue authorities.
We heard the rival submission and considered the documents available on record. The assessment was initiated against notice U/s 148. The observation in ‘recorded reason’ is itself erroneous. The addition of un-explained cash loan is contradicting the violation of Section 269SS r.w.s. 271D related penalty. The entire assessment & addition is based on the statement of the partners of M/s Evergreen Enterprises. No other evidence is brought to record by the ld. AO. The issue is squarely covered by the order of assessee’s own case for AY 2012-13 bearing ITA No.3081 /Mum/2022(supra).We respectfully relied on the order of the Sanjiv Amritlal Cheda (supra)&the order of Coordinate Bench of ITAT Mumbai. The ld. DR unable to bring any contrary fact against the submission of the ld. AR. In our considered view we set aside the impugned appeal order. The addition U/s 68 of the Act amounts to Rs. 66 lakh is quashed. So, the appeal of the assessee is succeeded.
The bench has noticed that the issues raised by the assessee in the above appeals are equally similar on set of facts and grounds. Therefore, it is not imperative to repeat the facts and various grounds raised by the assessee. Hence, the bench feels that the decision taken by us in ITA 440/Mum/2024for the Assessment Year 2013-14 shall apply mutatis mutandis in the above listed appeals.
9 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala 11. In the result, the appeals of the assessee bearing ITA 440/Mum/2024, ITA 442/Mum/2024, and ITA 443/Mum/2024 are allowed.
Order pronounced in the open court on 12th day of June, 2024. Sd/- sd/- (GAGAN GOYAL) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 12/06/2024 Pavanan Copy of the Order forwarded to: अपील र्थी/The Appellant , 1. प्रदिव िी/ The Respondent. 2. आयकरआयुक्त CIT 3. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, 4. Mumbai ग र्डफ इल/Guard file. 5.
BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai
10 ITA Nos.440,442 & 443/Mum/2024 Premji Bhuralal Gala
Details Date Initials Designation 1 Draft dictated on PC on 11.06.2024 Sr.PS/PS 2 Draft Placed before author 12.06.2024 Sr.PS/PS 3 Draft proposed & placed before the JM/AM Second Member 4 Draft discussed/approved by JM/AM Second Member 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8 Date on which the file goes to the Head clerk 9 Date of Dispatch of order
