NEHA WADHWA,KOTA vs. INCOME TAX OFFICER, WARD 6(1), JAIPUR

Succinctly, the fact as culled out from the records is that the assessee filed his ROI for the A.Y 2016-17 on 20.10.2016 declaring total income of Rs. 9,15,720/- after claiming deduction of Rs. 82,542/- under chapter VI A of the IT Act, 1961. The case of the assessee was selected for ‘Complete Scrutiny’ under CASS to primarily examine the claim of ‘large exempt income.” Notice u/s 143(2) of the IT Act, 1961 was issued to the assessee on 17.07.2017. Further notice u/s 142(1) of the IT Act, 1961 was issued to the assessee on 09.07.2018 & 8/10/2018 online through e- proceeding on ITBA calling for evidence in support of her returned income.

Assessee furnished details vide letter dated 10.10.2018.

3.1 From perusal of the computation of income, ld. AO noted that assessee declared income of Rs. 1,62,060/- under the profit from business and profession and Rs. 8,36,201 as income from other sources. It is seen from the financial statements furnished by the assessee that the assessee credited gross receipts of Rs. 4,05,000/- from car plying business also. On 142(1) was issued along with detailed questionnaire on 27.10.2018 asking the assessee to justify the interest receipts from sundry debtors amounting to Rs. 4,45,200 and in the balance sheet pawning debtors of Rs. 8,73,500/- have been shown as in the ROI for AY 2016-17 interest receipts from sundry debtors came down to Rs. 10,300/- and Balance Sheet does not contain any receivable from pawning debtors in the year under consideration.

Therefore, the assessee asked to explain and furnish the ledger accounts of all the pawning debtors dully confirmed and signed by the debtors and explain how the amount due from them received. In response to the same assessee furnished her reply dated 31.10.2018 along with various documents contending that “pawn debtors interest is charged when loan is given. As in period related to Assessment year 2015-16 loan was given or regiven interest was charged. As in Assessment year 2016-17 it is repaid by parties is it is not charged.”

3.2 As the assessee has shown debtors of Rs. 8,73,500/- as on 31.03.2015 which became ‘Nil’ as on 31.03.2016. Assessee, at point no. 1 of reply dated 31.10.2018 stated that all those loans were advanced to labourers and no confirmation could be furnished. Assessee further claimed that all those loans were less than Rs. 40,000/-. The claim of the reasons by the ld. AO: i. Assessee did not even furnish the break-up of the loans given. Neither the names nor the PANs of the debtors were furnished. ii. No confirmation was filed by assessee. Not even single debtors name, address or confirmation produced. iii. All of these loans were claimed to have given via cash. Not a single amount was advanced or received through banking channel. It is also important here that any loan given and received of the amount above Rs 20,000/- attracts penalty u/s 269SS or 269TT of the IT Act, 1961 as the case may be. Since assessee did not even furnish the party-wise break- up, it is not possible to verify. iv. Though, assessee claimed that on the next date of hearing books of accounts will be produced. However, the same were never furnished. Even if assessee could have brought the books, it would not have substantiated the claim of the debtors as the books of accounts are not audited and she failed to produce any single evidence to establish her claim.

In view of the above discussion the claim of the assessee regarding any receipt from the debtor was rejected and added to the income of the assessee.

4. Aggrieved from the order of Assessing Officer making addition, the assessee has along with other issues challenged the order of assessment before ld. CIT(A). Apropos to the various grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below:

“3. Analysis and Decision:

Neha Wadhwa vs. ITO 3.1 In the assessment order passed u/s. 143(3) on 26.11.2018, the Assessing Officer made an addition of Rs. 12,88,800/- u/s.68 and made such addition taxable u/s 115BBE

3.2 The facts of the case are that the assessee is engaged in money lending business where she claimed to have given loan to various individuals of low- income group. During the year, she purchased a motor car from her Father-in- Law for a sum of Rs. 10.19,600/- She claimed that such car was used for hiring and she claimed that out of such letting of the vehicle, she earned Rs 4,05,000/- as car plying receipts. She disclosed of having a net income out of car plying receipt for Rs. 1,62,060/- after deducting depreciation of vehicle of Rs. 1,52,940/- and vehicle running expenses for Rs.90,000/-. She also disclosed income from other sources for Rs.8,36.201/-

3.3 While explaining the source of the purchase of the car, the assessee claimed that there was a repayment from pawn debtors for Rs.8,37,500/-

3.4 The Assessing Officer asked for the details of such debtors from whom the such sum of Rs.8,73,500/- was received. The assessee claimed that such fund was the repayment of loan given earlier to the borrowers and she claimed to have received such sum in cash. During the assessment, the assessee could not submit any loan confirmation and stated that since the loans were advanced mostly to labourers it is not possible to submit any confirmation. She also claimed that each of the loan was less than Rs.40,000/-

3.5 The Assessing Officer also asked for the details of records in respect of the receipts disclosed as car plying receipt and the corresponding expenditure for the running of the vehicle. The Assessing Officer also asked for a confirmation or receipt or the RC Book of the vehicle as was claimed to have been purchased from the Father-in-Law of the assessee. The assessee failed to submit any of such document stating that her turnover was much less then the stipulated amount for which regular books of accounts are to be maintained as per Income Tax Act. She claimed that out of the receipt of Rs.4,05.000/-, the income disclosed for Rs. 1,62.060/- was much more than the stipulated amount as per section 44E of the Act.

3.6 The Assessing Officer, in absence of any documentary evidence in support of the claims made by the assessee, had no other alternative than to treat the entire amount of Rs. 12.88.800/- as claimed as the source of purchase of the car and car running expense and other personal expenses claimed by the assessee. I have perused the assessment order and submissions made by the assessee during the appeal proceedings. On analysis of such evidences, it is found that the assessee received a substantial sum under will of her demised Mother-in-Law, which was forwarded to his Father-in-Law from which she received substantial interest income which was disclosed for Rs.8.36.200/- as income from other sources.

Neha Wadhwa vs. ITO 3.7 Regarding the repayment of loans received in cash for Rs.8.73,500/-, a list of 21 debtors were presented during the appeal stage. It is seen that the lowest of such loan was for Rs 25,000/- and the highest was for Rs.48.000/-. The provisions of section 269SS or 269T debars an assessee to take cash loan or repay such loan in cash. However, in assessee's case, the provisions do not apply as she has received back loans advanced by her earlier. In absence of detailed address etc. whether the assessee's submission can be accepted is a subjective issue. In the list of 21 individuals, certain prefixes like driver, sweeper, etc, are made. However, such claim is not established without any proper documentary evidence or in absence of any receipt issued by the assessee. Under the circumstance, I do not want to interfere with the conclusion drawn by the Assessing Officer where he has treated such receipt of Rs.8.73,500/- as unexplained credit u/s 68.

3.8 With regard to the car running income and corresponding expenses, the assessee has submitted a ledger of day-wise receipts and payments for plying of such vehicle. The entire income and expenses were in cash. In absence of any other documentary evidence since the assessee has disclosed a profit of around 40% of the receipt as income, such disclosure is acceptable. Moreover, the assessee claimed that the car was given to one Hotel Rockland run by her husband and Father-in-Law on partnership basis. She claimed to have purchased vehicle from her Father-in-Law and have given it on hire to the hotel run by her Father-in-Law may seem to be a colourable device to show certain income in the hand of the lady assessee. However, since substantial income has been shown in the hand of the assessee, no adverse view may be taken in this regard.

3.9 Therefore, as discussed, addition of Rs.8.73.500/- is sustained as unexplained cash credit u/s.68 and the balance of the addition is directed for deletion. Having said so, it may be stated that that provisions of taxing income u/s.68 under a higher tax rate as per section 115BBE has come into effect w.e.f. 01.04.2013. Therefore, to that extent, the charging of higher rate of tax, as mentioned in the assessment order, is sustained. 4.1 Regarding the issue of deduction under Chapter VIA (section 80C of the Act), the Assessing Officer categorically stated the assessee could submit documentary evidence of payment of premium with LIC for Rs.40,704/- only against the claim of deduction of Rs.82,542/-. I find no reason to interfere with the denial of deduction for Rs.41,838/-, as mentioned in the assessment order.

5. Feeling aggrieved from the finding on the addition of sustained by the ld. CIT(A) on account of pawning debtors realised in the year under the present appeal on the ground as reproduced hereinabove.

To support the various grounds so raised by the ld. AR of the assessee, he has filed the written submissions in respect of the various grounds raised by the assessee and the same is reproduced herein below:

“May it please your honour, 1. That appellant is assessed to tax since AY 2012-13.

Neha Wadhwa vs. ITO (it is reproduced on page 3 of Assessment Order also) 6. After this there was no further hearing. The ld. AO did not ask for any further information/details. The ld. AO made addition of Rs.873500/-and interest received on it Rs.10300/-.

I may add that Rs.873500/- is my opening balance meaning thereby it was taxed in earlier years. As held by Hon’ble Rajasthan High Court in C.I.T. VsParmeshwarBohra 301 ITR 404 (Raj.) earlier years carry forward balance can not be taxed in current year. As amount of Rs.873500 credited in current years books relates to earlier years outstanding being well explained does not attract provisions of section 68 and can not be taxed as unexplained cash credit in view of Hon’ble Rajasthan High Court decision.”

8. There was no next hearing before CIT(A) 2, Jaipur. Meanwhile files were transferred to NFAC, Delhi. In reply to hearing notice dated 02.05.2024 appellant submitted reply through mail dated 04.05.2024. In relation to addition of Rs.883800/- (873500+10300) the same old facts were repeated and in view of decision of Hon’ble Rajasthan High Court in CIT vs Parmeshwar Bohra (Supra) request was made to delete addition of Rs.873500/- and Rs.10300/-. (PB 15 to 18)

9. However, video conferencing hearing was not provided. Addition of Rs.10300/- were deleted but addition of Rs.873500/- was sustained.

10. (i) Being aggrieved we are before your honour GOA 1 reads as under: - “That under the facts and circumstances of the case and in law the learned CIT(A) erred in confirming addition of Rs.873500/- u/s 68 ignoring that this amount was receivable from sundry debtors as on 31.03.2015 (AY 2015-16) which is received in FY 2015-16 (AY 2016-17).” In this regard we submit as under: - (ii) Sundry Debtors of Rs.873500/- are appearing in Balance Sheet as at 31.03.2015. Rs.445200/- out of Rs.873500/- were taxed in AY 2015-16 and rests in earlier years. Income once taxed cannot be taxed again. (iii) Rs.873500/- are opening balance in AY 2016-17 which is not disputed by the ld. AO. Opening Balance cannot be taxed in current Assessment Year. Reliance is made on jurisdictional High Court decision in CIT vs Parmeshwar Bohra 301 ITR 404 (Raj.) (iv) Addition u/s 68 are made when either assessee offers no explanation about the nature and source of credit or explanation offered by him is not satisfactory. In our case explanation is offered right from assessment stage to first appeal stage which is supported by Balance Sheet attached to ROI for AY 2015-16. Balance of Rs.873500/- is not disputed by the ld. AO. (v) Interest received Rs.10300/- from Sundry Debtors of Rs.873500/- is accepted by Hon’ble CIT(A) NFAC. (vi) In views of all these facts additions of Rs.873500/- is uncalled for and same be deleted.

7. The ld. AR of the assessee in addition to the written submission, vehemently argued that ld. CIT(A) sustained that he has sustained the addition of Rs. 8,73,500/- being the receipt of money from pawning debtors.

He has not appreciated the fact that the same was outstanding as on 31.03.2015. That money was received back in the year under consideration for an amount of Rs. 8,73,500/- as unexplained cash credit u/s 68 of the Act. In the year under consideration is not correct finding to drive home. To drive home to this contention, the ld. AR of the assessee relied upon the The same is extracted herein below.

The ld. AR of the assessee thus stated that the addition cannot be considered u/s 68 of the Act as cash credit receipt of this advances in the year under consideration since it was appearing balance-sheet as receivable. In support of this contention the ld. AR of the assessee relied upon the decision of our Hon’ble High Court in the case of CIT vs.

Parmeshwar Bohra [2004] 267 ITR 698 (Raj.).

9. Per contra, the ld. DR heavily relied upon the order of lower authorities. The ld. DR strongly objected to the contentions raised she submitted that the assessee did not give any details as to pawning debtors not consider it fit to give all details related to those advances realised by the assessee. Based on these arguments she prayed to sustain the order of ld. CIT(A). Thus, she submitted that had the assessee submitted details of pawning debtors along with name, address and amount given the ld. Assessing Officer could have made verification as per provision of section 133(6) of the Act.

10. In the rejoinder, the ld. AR of the assessee submitted that the assessee submitted the details of the advances given. He also submitted that the advances were given in the earlier year and the same has been received back in the year under consideration. Since, the debtors were having no proper means and were pawning debtor’s assessee submitted list of all the persons from whom advances were realised which were given against the security. That list was placed on record at page No. 4 of paper book so filed. The ld. CIT(A) did not consider this factual aspect even though he acknowledged that the assessee submitted that list. That finding is recorded at para 3.7 of the ld. CIT(A)’s order. on record. The bench noted that the apple of discord in this case is that whether amount outstanding as on 31.03.2015 can be considered as unexplained credit in the year under consideration i.e. F.Y 2015-16 relevant to assessment year 2016-17, being the year of realisation of those outstanding pawning debtors.

The bench noted that the ld. AO through ld. DR did not object to the contentions of the assessee that the amount was given on or before 31.03.2015 and the same were outstanding as at 31.03.2015.

The money was advanced against the pawning security and the same was realised in the year under consideration. The assessee has already offered the interest arising out of those advances in the year when the advances were given. Even that aspect of the matter has not been disputed before us by either party.

Thus, when the assessee has demonstrated that she has given advances against the security in the earlier year that source is not disputed even the interest earned on that is not disputed. Now when these money received back the same cannot be considered as unexplained money within the meaning of section 68 of the Act. As the money so received in the year under consideration is on account of opening balance of the advances of current year merely on the reasons that the assessee failed to give the complete details of the pawning debtors outstanding as on 31.03.2015.

We get support of our view from our Hon’ble High Court Rajasthan in the case of CIT vs. Parmeshwar Bohra [2004] 267 ITR 698 (Raj.), wherein High Court held as under:-

“7. It appears that the Tribunal has considered the issue regarding accessibility of the capital while considering the assessee's appeal ITA 71(Jdpr)/1999 for the asst. yr. 1993-94 by order dt. 6th Dec., 2001, whereby the Tribunal held that it is not a case of introduction of cash credit but it is a case of unexplained investment under Section 69 of the Act of 1961 and the appropriate previous year for inclusion is the relevant financial year and, therefore, the opening capital account cannot be added as an unexplained investment under Section 69 of the Act of 1961 for the asst. yr. 1993-94. The Tribunal also held that the genuineness of the capital introduction has already been adjudicated upon by the assessing authority for the appropriate financial year relevant to asst. yr. 1992-93. The Tribunal also took note of the fact that the order passed by the assessing authority for the asst. yr. 1993-94 on the basis of notice under Section 148 dt. 17th June, 1997, has already been quashed by the order dt. 6th Dec., 2001, in the same ITA No. 71(Jdpr)/1999. Therefore, on the basis of the above decision dt. 6th Dec., 2001, the appeal of the assessee was allowed by the Tribunal. Nothing has come on record what happened to the order dt. 6th Dec., 2001, and whether the said order of the Tribunal was ever challenged by the Revenue or not. When the Revenue itself has accepted the order dt. 6th Dec,, 2001 wherein it has been held by the Tribunal that it is a case of unexplained investment under Section 69 of the Act of 1961 and the appropriate previous year for inclusion is the relevant financial year and its genuineness has already been adjudicated upon by the assessing authority for the appropriate financial year, i.e., 1992-93 (sic) then how the order of the assessing authority can be said to be erroneous or prejudicial to the interest of the Revenue. Since the Tribunal has decided the appeal on the basis of the decision dt. 6th Dec., 2001, therefore, there appears to be no illegality in the order passed by the Tribunal.

Neha Wadhwa vs. ITO 8. The judgment relied upon by the learned counsel for the appellant delivered in the case of CIT v. Ashok Timber Industries (supra) has no application to the facts of this case because of the reason that the genuineness of the capital introduction in this case has already been adjudicated by the assessing authority for appropriate financial year i.e., 1992-93, therefore, it cannot be said to be unexplained investment after order passed by the assessing authority holding genuine capital introduction for the asst. yr. 1992-93.

Respectfully following the finding of Jurisdictional High Court as referred and relied upon by the ld. AR of the assessee as ld. DR did not produce any other contrary view on the issue having same strength. Thus, we do not find any single reason to sustain the addition in the hands of the assessee and we direct the ld. AO to delete that addition. Based on these observations, ground No. 1 raised by the assessee is allowed.

Ground no. 2 being general and there is no specific grievance raised by the assessee therefore, the same is not required to be adjudicated.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 27/09/2024.

Sd/- Sd/- ¼ jkBkSM deys’k t;arHkkbZ ½ ¼ lanhi xkslkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 27/09/2024 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Neha Wadhwa, Jaipur izR;FkhZ@ The Respondent- Income Tax Officer, Ward 6(1), Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 950/JP/2024) 6. vkns'kkuqlkj@ By order,

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