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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.:
1. Feeling aggrieved by appeal-order dated 27.11.2023 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 30.03.2022 passed by learned NFAC, Delhi [“AO”] u/s 147 r.w.s. 144B of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2015-16, the assessee has filed this appeal on following grounds:
1. On the facts and the circumstances of the case and applicable law, the CIT(A) has erred in confirming that LAO has not applied mind and initiated proceedings u/s 147 of the Act. The notice u/s 148 is itself bad in law. The whole process of reopening i.e. reasons,
Page 1 of 8 – AY 2015-16 approval and issuance of notice done was mechanical and there was totally non-application of mind making addition on wrong facts.
2. On the facts and the circumstances of the case and applicable law, the CIT(A) has erred in confirming that LAO’s action of reopening the case u/s 148 and further initiating assessment proceeding u/s 147 of the act which is bad in law.
3. On the facts and the circumstances of the case and applicable law, the CIT(A) has erred in confirming that LAO’s action of rejecting the objection raised.
4. The CIA(A) has erred in confirming that LAO has not provided proper opportunity to represent myself. The copy of reason recorded was made available on 02.12.2021. I submitted my detailed reply and made objection on 13.01.2022 for which objection was rejected by LAO on 22.03.2022. The show cause notice was issued on 28.03.2022 and was to reply on 29.03.2022 itself. The order was made on 30.03.2022 without giving proper opportunity.
The notice u/s 148 was issued before 01.04.2021 and from 01.04.2021 the new assessment proceeding was introduced. The amended law has no saving clause that after 01.04.2021 old assessment proceeding shall continue. Accordingly, the assessment procedure should be as per new amended law. Hence the whole proceeding made by LAO is bad in law.
6. The CIA(A) has erred in confirming the additions made by LAO on account of unsecured loan of Rs. 5.50 lakh from M/s. Jay Jyoti India Private Limited. Hence, I pray before your Honour to delete the addition made.
The background facts leading to present appeal are such that the assessee-individual filed original return of income of AY 2015-16 on 18.10.2015 which was assessed. Subsequently, based on an information received from DDIT(Inv.), Unit-2(1), Kolkata [“Investigation Wing”], the AO re-opened assessment u/s 147 by issuing notice dated 26.03.2021 u/s 148.
In response to such notice, the assessee re-filed return declaring a total
Page 2 of 8 – AY 2015-16 income of Rs. 4,05,590/-. Thereafter, the AO issued notices u/s 143(2)/142(1) which were complied with by assessee. Ultimately, the AO completed re-opened assessment vide order dated 30.03.2022 after making an addition of Rs. 5,50,000/- on account of unexplained cash credit u/s 68 in respect of a loan of Rs. 5,50,000/- taken by assessee from ‘M/s Jay Jyoti India Pvt. Ltd.’ renamed as ‘M/s Jay Ganga Exim Pvt. Ltd.’ [“J”] in financial year 2014-15 relevant to AY 2015-16 under consideration. Aggrieved, the assessee carried matter in first-appeal before CIT(A) but did not get any success. Still aggrieved, the assessee has come in next appeal before us.
3. We first take up Ground No. 6 which challenges the merit of addition for unexplained cash credit u/s 68 of the Act at Rs. 5,50,000/- made by AO for the loan received by assessee from “J”.
We have heard learned Representatives of both sides peacefully and perused the documents held in case record including the orders of lower- authorities. We have considered rival submissions of both sides.
5. Ld. AR made oral arguments which are on the same line as made by him in following ‘Written-Submission’ filed on record:
Following addition u/s 68 in respect of unsecured loan received during year is under appeal:
Name of lender Addition based on alleged loan Jay Jyoti India P Ltd. 5,50,000
Page 3 of 8 – AY 2015-16 2. At the outset it is submitted that the reopening is made based on incorrect information and without carrying out proper verification based on conjectures and surmises. Reliance is placed on decision of ITAT Delhi in case of Kunwar Ayub Ali,Ghaziabad v. ITO.
Primary onus u/s 68 of Act discharged by Appellant as follows:
Name of lender PAN Amount Confi Bank Audited 6. Repayment received rmati stateme Financi status during on nt of als the year lender Jay Jyoti India AAACJ8822E 5.50 Y Y Y 10. Repaid on P. Lakhs 29.04.15
4. Creditworthiness of lenders (Rs. in Lakhs) Lender Share Net Share Total Loan Capacity to capital Reserves application Investible advanced advance [A] & Surplus money and surplus to loan [B] loans [C] [A+B+C] Appellant (Investible surplus/ Loan) approx. 11. Jay Jyoti 633.50 8363.81 - 8997.32 5.50 1635 times
5. That the lender company is ‘active’ companies in ROC records till date.
6. Only reason for making the addition is borrowed satisfaction of AO relying on findings of investigation in different cases related to Shri Sharad Darak.
7. Copy of statement of Shri Sharad Darak which is foundation of the reopening and additions has not been confronted to Appellant therefore the addition based thereon is not permissible in law. Reliance is placed on decision of SC in C. Vasantlal [1962] 45 ITR 206 (SC).
Further inspite of specific request no opportunity to cross examine has been provided. In absence of such cross examination the addition made by AO based on statement is not tenable in law. Reliance is placed on decision of SC in Andaman Timber Industries vs. CCE [2015] 62 taxmann.com 3 (SC)[02-09-2015].
The Appellant has discharged its primary onus by proving identity, credit worthiness and genuineness of the loans however learned AO has merely relied on the investigation wing report without any application of mind and conducting any enquiry in assessment on borrowed satisfaction which is not permissible. See. PCIT v. Shodiman Investments (P.) Ltd.
Page 4 of 8 – AY 2015-16
10. In following cases the loans from all the three above companies has been held to be genuine by Hon’ble ITAT in case of Global Realcon Pvt. Ltd. v. ACIT and ACIT v. Shri Krishna Devcon. There are plethora of decisions holding that the lender companies have advanced genuine loans.
Further the major loans have been repaid which establishes the genuineness.
Without prejudice to above the jurisdiction existed in Section 153C of the Act and not under S.148 since the reopening is based on search as stated in AO order. See. Flexituff International Ltd v. DCIT at pg 1 of PB.
In view of above it is submitted that the reopening be held as without jurisdiction, based on incorrect information, made on borrowed satisfaction in violation to principles of natural justice. It be further held that the loans are genuine and proved and the consequent addition be deleted.”
Per contra, Ld. DR for revenue vehemently argued supporting the orders of lower authorities. He submitted that the AO has noted that the company “J” from whom the assessee took loan was one of the shell companies controlled by an accommodation entry provider ‘Shri Sharad Dark’ as accepted by ‘Shri Sharad Dark’ in statements before Investigation Wing. He submitted that the assessee seems to have not made any request before AO to provide cross-examination of ‘Shri Sharad Darak’. Therefore, the claim of assessee that cross-examination was not provided is not valid.
He prayed to uphold the addition made/upheld by lower authorities.
We have considered rival submissions of both sides and perused the documents held on record including the orders of lower-authorities. After a careful consideration, we find as under:
(i) The assessee has filed PAN, A/c Confirmation, ITR, Audited Financial Statements and Bank Statement of “J” to lower-authorities and also Page 5 of 8 – AY 2015-16 placed at Page 29, 31, 32-33 and 36-38 of Paper-Book. The A/c confirmation shows opening balance of Rs. 5,00,000/- and a new loan of Rs. 5,50,000/- taken during the year. The new loan has been taken as 3,50,000/- on 15.07.2014 and Rs. 2,00,000/- on 28.07.2014. A perusal of bank statement of “J” reveals that these loans have been given to assessee through banker cheques and “J” was having sufficient balance for giving loans to assessee. The bank statement of “J” further shows that there are no cash deposits prior to issuing cheques to assessee and that there are numerous other transactions of regular deposits and withdrawals in bank a/c. The financial statements of “J” shows that its share-capital was Rs. 633.50 lacs, Reserve & Surplus were Rs. 8,363.81 lacs, thus total available funds were Rs. 8,997.32 lacs which is as high as 1653 times of the loan of Rs. 5.50 lacs given to assessee. The creditor “J” is also an active company on the portal of Ministry of Corporate Affairs and regularly filing income-tax returns. In the income-tax return of AY 2014-15 filed to Income-tax Department, “J” has claimed credit of TDS as high as Rs. 100.68 lacs. All these details were before lower-authorities but they have not been controverted except giving a general remark that “J” is a shell company operated by Shri Sharad Darak. The assessee has discharged primary onus cast upon it to satisfy the requirement of section 68. The revenue authorities are unable to negate the documentary evidences relating to “J” filed by assessee. Thus, the Page 6 of 8 – AY 2015-16 assessee has filed sufficient documents to prove all three ingredients of section 68 i.e. the identity and creditworthiness of “J” and genuineness of loan transaction.
(ii) The ITAT, Indore has already deleted additions made by AO based on statements of Shri Sharad Dark, in the hands of various other assessees in respect of loans taken from very same creditor “J”. Two such decisions are M/s Global Realcon Pvt. Ltd. Vs. ACIT (Central)- 1, Indore, IT(SS)A No. 170 to 174/Ind/2020 and ACIT Vs. Krishna Devcon Ltd. IT(SS)A No. 3 to 11/Ind/2022.
(iii) The assessee has already repaid loan on 29.04.2015 immediately after close of financial year 2014-15. Therefore, the assessee deserves benefit of decision of Hon'ble Gujarat High Court in the case of Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj HC) holding as under:
It has also come on record that the said loan amount has been repaid by the assessee to Shri Ishwar Adwani in the immediate next financial year and the Department has accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, we see no reason to interfere with the impugned order passed by ITAT.
8. Therefore, taking into account the discussions in foregoing para, we do not find any merit in the addition made by AO. Accordingly, we delete the addition made/upheld by lower-authorities and Ground No. 6 is thus allowed.
Page 7 of 8 – AY 2015-16 9. Ground No. 5 is not pressed by Ld. AR by asserting in open court that the said ground is incorrectly taken by assessee, hence the same is not taken for adjudication. So far Ground No. 1 to 4 are concerned, they challenge the validity of proceeding undertaken by AO but since we have already deleted addition on merit, there is no necessity to go into those Grounds.
Resultantly, this appeal is allowed.