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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 12.10.2023 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT (A)-2, Mumbai [“CIT(A)”] which in turn arises out of assessment-order dated 29.12.2019 passed by learned ITO-1, Ratlam [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on following grounds:
Page 1 of 7 “1. On facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition u/s 68 of the Act as against section 69A of the Act was made by the ld. AO. Thus, the action of the Ld. CIT(A) in changing the section 68 is wrong and contrary to the facts of the case and the provisions of the Act. Thus, the order of the Ld. CIT(A) and the order of the AO is liable to be quashed.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of Rs. 6,30,000/- made by the ld. AO, needs to be deleted.”
The background facts leading to present appeal are such that the assessee-HUF filed return of income of relevant AY 2017-18 declaring a total income of Rs. 3,40,090/- which was subjected to scrutiny through notices u/s 143(2)/142(1). During assessment-proceeding, the AO noted that the assessee deposited cash of Rs. 15,00,000/- in bank a/c during demonetization period (09.11.2016 to 30.12.2016). On examination of books of account produced by assessee, the AO found that the assessee had shown cash loans of Rs. 13,50,000/- having been taken from different persons through two brokers, namely Shri Ajay Madan Lal (Rs. 6,48,000/-) and Shri Vimal Chand Agarwal (Rs. 7,02,000/-) on 04.04.2016, 10.05.2016 and 05.04.2016. The AO has extracted details of such loans in Para 9 of assessment-order. Thereafter, in Para 10 of assessment-order, the AO has made another details of certain persons (out of the persons noted in the details in Para 9) for which the assessee failed to furnish Addresses, PANs, contract details, A/c Confirmations to establish genuineness of loans pertaining to broker Shri Ajay Madan Lal (Rs. 3,78,000/-) and Shri Vimal Chand Agarwal (Rs. 2,52,000/-) aggregating to Rs. 6,30,000/- and for this Page 2 of 7 amount of Rs. 6,30,000/-, the AO made addition u/s 69A by passing following order:
The assessee had taken loan in cash thereafter he provided loan to various persons and received back on 31/10/2016 which he deposited in his bank account on 11/11/2016 in SBN during demonetization period. From the above concluded that loan taken has been deposited in bank during demonetization period and out of which Rs. 6,30,000/- is remained unverified as discussed above and added to the total income of the assessee u/s 69A of the Income- tax Act.
Aggrieved by AO’s order, the assessee carried matter in first-appeal before CIT(A). The assessee made two-fold claims before CIT(A), namely (i) the merit of the addition was challenged and (ii) it was also claimed that the books of account were maintained by assessee, therefore the AO cannot make addition u/s 69A. The CIT(A) rejected assessee’s first claim of merit for the reason that no documentary evidences had been filed by assessee to prove the source of deposits in bank a/c or to establish the genuineness of loans taken. So far as second claim of assessee is concerned, the CIT(A) changed the applicable section from 69A to 68 placing reliance on decision of Hon’ble Supreme Court in Civil Appeal No. 2099 arising out of SLP (Civil) No. 2308 of 2009 in P.K. Palanisamy Vs. N Arunugham and another holding that the mentioning of wrong provision or non-mentioning of provision does not invalidate an order.
Still aggrieved by CIT(A)’s order, the assessee has come in next appeal before us.
During hearing before us, Ld. AR for assessee submitted that the case of assessee was selected for limited scrutiny to examine “cash deposited during demonetization period”. Then, Ld. AR drew our attention to the bank- statement of assessee filed at Page No. 14 of Paper-Book to show that the assessee has made cash withdrawals of Rs. 8,00,000/- on 27.09.2016, Rs. 5,00,000/- on 04.11.2016 and Rs. 3,00,000/- on 08.11.2016 which were the immediate sources for making deposit of Rs. 15,00,000/- in bank a/c on 11.11.2016. Ld. AR submitted that the assessee took loans of Rs. 13,50,000/- from different persons in early months of financial year 2015- 16 and those funds were rotated by way of giving loans to various debtors, recoveries made from those debtors, deposits made in bank a/c, withdrawals made from bank and ultimately re-deposited in bank a/c on 11.11.2016 in specified bank notes. Thus, the assessee had explainable source of making deposits in bank a/c during demonetization period which was the precise issue of limited scrutiny. But the AO has made addition qua the loans taken by assessee in earlier part of financial year which was not an issue of limited scrutiny. Therefore, the addition made by AO is bad and not sustainable, the same must be deleted. Alternatively, the case of assessee may be remanded to AO for a deeper examination of facts.
Per contra, Ld. DR for revenue submitted that the AO has noted in assessment-order that the assessee explained that loans were given to various persons and received back on 31.10.2016 which was deposited on Page 4 of 7 11.11.2016. The AO has further noted that the loans taken by assessee had remained unexplained to the extent of Rs. 6,30,000/-. Hence, the AO is very much justified in making addition of Rs. 6,30,000/-. While arguing, Ld. DR submitted that the assessee is now claiming that the deposit was made out cash withdrawals made from bank a/c, this claim is against AO’s noting that the recoveries made by assessee from debtors on 31.10.2016 were deposited in bank a/c. Therefore, the assessee’s explanation deserves to be rejected.
We have considered rival submission of both sides and perused the orders of lower authorities as well as the documents held in Paper-Book to which our attention has been drawn. Admittedly, the case of assessee was selected for limited scrutiny to verify cash deposits made in bank a/c during demonetization period. In Para 7 of assessment-order, the AO has noted that the assessee deposited cash of Rs. 15,00,000/- in bank a/c during demonetisation period, this figure is also evident from bank statement filed by assessee at Page No. 14 of Paper-Book where a cash deposit of Rs. 15,00,000/- is appearing on 11.11.2016. From the very same bank a/c, it is also verifiable that the cash withdrawals of Rs. 8,00,000/- on 27.09.2016, Rs. 5,00,000/- on 04.11.2016 and Rs. 3,00,000/- on 08.11.2016 were in fact made by assessee. The assessee is claiming that these cash withdrawals were the immediate source of re-deposit in bank a/c on 11.11.2016. At the same time, it is also a fact that the assessee claimed to have taken loans of Page 5 of 7 Rs. 13,50,000/- from different persons in earlier part of the same financial year (the AO has noted dates of taking loans as 04.04.2016, 10.05.2016, 05.04.2016 in Para 9 & 10 of assessment-order). The funds taken by assessee by way of loans have rotated by way of giving loans to debtors and then making deposits/withdrawals from bank a/c. The AO has ultimately made addition of Rs. 6,30,000/- in respect of loans taken by assessee u/s 69A. The CIT(A) has changed section 69A to section 68 and upheld addition by accepting that the loans taken by assessee remained unverified. Therefore, in the situation, we feel it appropriate to remand this matter back to the file of AO for a proper adjudication of the issue of limited scrutiny as well as complete facts after giving necessary opportunity to assessee. Needless to mention that the AO shall pass an appropriate order without being influenced by his previous order and the assessee shall also make adequate representation before AO.
Resultantly, this appeal is allowed for statistical purpose.