ITO, NEW DELHI vs. M/S. GROSS HOLDINGS PVT. LTD., NEW DELHI

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is appeal filed by the revenue against the order of the ld CIT (A)-X, New Delhi dated 20.11.2012 for the Assessment Year 2005-06. 2. The revenue has raised the following grounds of appeal:- “1. Ld. Commissioner of Income Tax {Appeals} erred, in law and on the facts and circumstances of the case, in deleting the addition of Rs. 26,23.037/-made by the AO u/s 68 of the I. T Act being unexplained credits. In fact, the amount of addition should be enhanced by Rs.2,60,000/-.

2. Ld. Commissioner of Income Tax (Appeals) erred, in law and on the facts and circumstances of the case in deleting the addition of Rs.10.52,558/-made by the A.O. u/s 68 being unexplained cash credits.”

3. The first ground of appeal is against the deletion of addition of Rs. 26,23.037/- u/s 68 on account of unexplained cash credit. And further ITO V Gross Holdings Pvt Ltd No. 2 was against the deletion of addition of Rs. 1052558/- on account unexplained cash credit.

7. We have carefully considered the rival contentions. As per page No. 61 and 62 of the paper book of the assessee the order 03.02.2011 passed by the ld CIT(A) being order under Rule 46A of the IT Rules, he has admitted the additional evidence which he has stated that the assessment orders were called for during the course of appellant proceedings and wherein in the original assessment proceedings all this confirmation have been found to be submitted. However, the Assessing Officer has mentioned that it has not been produced. Since those evidences were not examined and taken into consideration by the Assessing Officer then in the interest of justice he directed the Assessing Officer for submission of remand report. This fact has not been controverted by the ld DR before us. In view of this and on perusal of the order of the ld CIT(A) 03.02.2011 it is an admitted fact that there is no new evidence but the evidence by the assessee before the Assessing Officer were not considered by him while passing the order. In view of this the decision cited by the ld DR of the Hon’ble Delhi High Court in case of CIT Vs. Manish Buildwell Pvt. Ltd. dated 15.11.2011 is misplaced as the facts does not apply to the facts of this case. On deletion of the above addition ld CIT(A) has dealt with this issue as under:- 2.6. I have gone through the facts and circumstances of the case, observations of the A.O., submissions of the A.R. of the appellant, 2 remand reports dated 05-08-2011 and 13-10-2011 as well as the rejoinder letters of the A.R. of the appellant dated 05-09-2011 and 25-11-2011. This ground related to addition of Rs.26,23,0377- is being disposed off after making the following observations:

ITO V Gross Holdings Pvt Ltd (a) On going through the assessment order, it is observed that the A.O. has mentioned on page 3 of the order that the addition of Rs.26,23,037/-has been made on account of amounts received from the following persons: Sh. O.P. Banga (20,20,199-14,93,414) Rs. 5,26,785/- Mrs Geeta Banga Rs. 2,46,000/- M/s Fresco Appliances P. Ltd Rs. 8,00,000/- Others ' Rs.10.50.2527- Rs.26.23.037/- The A.O. has mentioned that the source of these amounts have not been properly explained by the assessee and, therefore, the amounts were treated as undisclosed u/s 68 of the I.T. Act. However, during the course of appellate proceedings, the additional evidences were admitted under rule 46A by my predecessor CIT(A) vide letter dated 03-02-2011 and the A.O. was directed to consider all the details with fresh evidences filed in the paper book. These documents included confirmation letters from Sh. O.P. Banga , confirmation letter from Mrs Raj Banga and confirmation letters from Mrs. Ruchika Baweja. It was further contended that no fresh loan had been taken from Mrs.Geeta Banga and M/s Presco Appliances P. Ltd. The appellant also produced copy of audit report and accounts showing that no fresh loan had been taken from Mrs. Geeta Banga and M/s Presco Appliances P. Ltd. (b) On going through the assessment order it is also seen that the A.O. had made the additions by treating the amounts received from Mrs. Geeta Banga of Rs.2.46 lakhs and M/s Presco Appliances P. Ltd. of Rs.8 lakhs as fresh loans during the year. However, these were not fresh loans taken and had been carried forward from earlier years. The PAN Number, address and confirmation letters of Mrs. Ruchika Baweja from whom fresh amount of Rs.10,50,252/- was taken was also provided to the assessing officer during remand proceedings, but no adverse findings were reported by the AO in the remand report. From the assessment order, specific details regarding the exact amounts added against various persons was not fully explained. However, during the remand report, the A.O. has reported that statements of Sh. O.P. Banga and Smt. Raj Banga were also taken since fresh loans had been taken from these two persons during the year. In his report dated 13-10-2011, the assessing officer has mentioned that Sh. O.P. Banga and Smt. Raj Banga attended in compliance to notices u/s 131 on 12-10-2011, and also gave statement confirming the amounts given to the appellant company. The A.O. has, however, observed that Sh. O.P. Banga was also having salary of Rs.3,20,400/- and substantial amount has been received by him from M/s P.R. Chits P. Ltd. which was subsequently given to the appellant company. Similarly, in the case of Smt Raj Banga, there was only salary of Rs.2,60,400/- and the amounts given to the appellant company was out of a salary and past and present savings. With regard to Ms. Ruchika Baweja, no further investigation or ITO V Gross Holdings Pvt Ltd enquiry was done by the assessing officer to arrive at any adverse information regarding this amount. (c) The A.R. of the appellant vide his letter dated 05-09-2011 has proceeded that with regard to the amounts received from Sh. O.P. Banga and Smt Raj Banga, the following documents had been provided to the assessing officer to establish the identity, creditworthiness and genuineness of the transaction. I) Copy of Income Tax Return for A. Y. 2005-06 ii) Copies of Bank Statement of SB a/c maintained with Indian Bank, Karol Bagh, N. Delhi and Punjab National Bank, Minto Road, N. Delhi with explanation as to source of deposit of cash therein. iii) Date wise details of Cash deposits / withdrawals in both the above bank accounts. '" iv) Statement of Affairs as on 31.03.2005. v) Copy of salary Certificate in Form No.

ITO V Gross Holdings Pvt Ltd Q.7. At Q,No.2 you have disclosed only source of income i.e. salary where as now you are explaining that about the money from M/s P.R. Chits, pi. explain. A.

ITO V Gross Holdings Pvt Ltd During the remand proceedings, the assessing officer also took statements of Sh. O.P. Banga and Smt Raj Banga on the basis of which their identities were established and though the assessing officer made certain observations regarding cash transactions in their bank accounts, the assessing officer was not able to establish that Sh. O.P. Banga and Mrs Raj Banga were not persons of means. The A.R. strongly argued that they were income tax assessees for several decades and their creditworthiness could not be doubted. Sh. O.P. Banga explained through his bank account that he had received substantial amounts from M/s P.R. Chits P. Ltd. The A.R. further submitted through his letter dated 05-11-2012 that Sh. O.P. Banga had a salary income of around Rs.12 lakhs per year in earlier years. It was submitted by the A.R. of the appellant that an amount of Rs. 17,27,5007- had been received from M/s P.R. Chits P. Ltd. and these amounts had been reflected in his SB A/c No.56916 of Indian Bank, Karol Bagh, New Delhi. Keeping in view the submissions of the A.R. of the appellant regarding Sh. O.P. Banga (PAN AAGPB 5045 C) and in view of his income and tax past history as well as statement taken by the assessing officer, it could not be disputed by the assessing officer that the amounts claimed to have been received from M/s P.R. Chits P. Ltd. were not genuine or Sh. O.P. Banga was not a man of means. Accordingly, from the facts which have emerged it is clear that identity of Sh. O.P. Banga cannot be disputed and at the same time the source of advancing the unsecured loans or the creditworthiness of Sh. O.P. Banga could also not be disputed. On the other hand, the assessing officer in the assessment order and the statement taken u/s 131 has not taken the correct figures and has also not specifically pointed out as to why the unsecured loans were not genuine. With regard to Mrs. Raj Banga (PAN AAGPB 5046 B), the assessing officer has not made any addition but at the same time has also taken a statement u/s 131 of the I.T. Act on the basis of which the identity, creditworthiness and genuineness could not be disputed. With regard to Ms. Ruchika Baweja (PAN AAMPB 1892 K), the A.R. of the appellant has submitted confirmation letter as well as address and PAN details. It has been contended by the A.R. that this was a transfer entry received from M/s S.B. Packaging which was a sister concern. However, in this regard also the assessing officer has not made any further investigations or has got anything on record to dispute the contention of the A.R. of the appellant. (f) After considering the various judicial pronouncements on this issue as well as the facts of the case, I would like to highlight that it is trite law that with regard to unsecured loans the identity, creditworthiness and genuineness of the transaction has to be established. In this case, the A.R. of the appellant has provided ample evidence and documents to establish these transactions. In 2 of the 3 cases where fresh unsecured loans had been taken the persons had been examined u/s 131 of the I.T. Act and their bank accounts and statement of affairs provided to the A.O. With regard to Ms. Ruchika Baweja the assessing officer has not made any further enquiry or disputed the details submitted by A.R. of the appellant.

ITO V Gross Holdings Pvt Ltd After also considering the various judicial pronouncements relied upon by the A.R. of the appellant it is clear that since the A.O. has not fully appreciated the facts of the case and has also not been able to establish anything adverse with regard to submission and evidences of the A.R. of the appellant, there is no justification for sustaining this addition of Rs.26,23,037/-. Accordingly, this addition is deleted.”