KESHAV SHROFF,KOLKATA vs. ITO, WARD-50(1), KOLKATA

This appeal filed by the assessee pertaining to the Assessment Year (in short ‘AY’) 2016-17 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the ‘Act’) by ld. Commissioner of Income-tax (Appeals)- NFAC, Delhi [in short ld. ‘CIT(A)’] dated 04.12.2023 arising out of the assessment order framed u/s 147 read with Section 144B of the Act dated 29.03.2022.

The brief facts of the case are that the assessee being an individual filed his return of income for the relevant assessment year on 30.03.2017 at a returned income of Rs. 2,40,896/-. Return was processed, case was reopened I.T.A. No.: 136/KOL/2024 Assessment Year: 2016-17 Keshav Shroff. u/s 147 of the Act and a notice u/s 148 of the Act was issued to the assessee. The case was reopened on the allegation that unsecured loan received from the loan creditor M/s. Fast Speed Realcon Pvt. Ltd. having PAN No. AABCF9388E by the assessee was the bogus on the basis of the statement given by one Mukesh Banka. The case of the assessee is that the assessee filed submission before the AO by submitting the copy of the loan confirmation, audited balance sheet, ITR acknowledgement, source of funds and the bank statement for the loan creditors, the AO has not considered the submission and simply on the basis of information from the Investigation Wing and statement of Mukesh Banka added the entire loan as unexplained cash credit u/s 68 of the Act. Being aggrieved and dissatisfied with the assessment order, the assessee preferred appeal before ld. CIT(A) wherein also the assessee failed as a result of which the present appeal has been preferred. 3. Ld. Counsel for the assessee challenges the impugned order of the ld. CIT(A) and the order of the AO on various grounds but his main contention is that ld. CIT(A) has erred in confirming the reopening of the assessment only on the basis of the statement of third party, ignoring the entire material filed by the assessee to substantiate his case. Ld. Counsel for the assessee further submits that it is the definite case of the assessee that amount of Rs. 15 Lakh comes by way of loan taken from M/s. Fast Speed Realcon Pvt. Ltd. which was repaid subsequently by an account payee cheque through proper banking channel, but this fact has been ignored by the ld. CIT(A) and the AO and made an addition of Rs. 15 Lakh i.e. wrong and liable to be quashed. Ld. Counsel for the assessee has also taken a plea and challenged the very jurisdiction of the AO with regard to the issuance of notice u/s 148 of the Act. 4. Ld. D/R has supported the impugned order. 5. Upon going over the records and the rival submissions of the Counsels of the respective parties, the only points for determination in this appeal are that whether the assessee could be able to disclose the source of fund I.T.A. No.: 136/KOL/2024 Assessment Year: 2016-17 Keshav Shroff. amounting to Rs. 15 Lakh which is declared by the AO and ld. CIT(A) as unexplained. The case of the appellant as it also reveals from the order of the ld. CIT(A) is that for the AY 2016-17 the appellant filed income tax return showing the total income of Rs. 2,36,640/-. The assessment was reopened for the reasons that information received from the Investigation Wing, Kolkata that the appellant has received Rs. 15,00,063/- as the beneficiary during FY 2015- 16 from the companies managed and controlled by Sh. Mukesh Banka. It is a definite case of the assessee and he has repeatedly submitted before the AO and the ld. CIT(A) that he does not know any Mukesh Banka. The assessee in support of his case filed the following papers before the AO which are as follows:

Statement of bank account of assessee maintained with Oriental bank of Commerce (F.Y. 2015-16, 2017-18) reflecting loan taken, Interest paid and showing loan repayment.

Documentary evidence of utilization of loan. 5.1. We have gone through the order of the ld. CIT(A) and find that ld. CIT(A) has also held thus- prima facie the appellant has submitted copies of all those documents including the bank statement of the alleged loan provided/accommodation entry provider in support of transaction related to alleged loan claimed by the appellant. But he discarded the same by mere assumption and surmises thereby saying that these documents are mere masks to hide the real nature of the transaction. It is surprising to note that what was the basis of ld. CIT(A) to discard those documents without verification and genuineness of the documents and he doubted the same. 5.2. We further notice that the ld. CIT(A) has rejected the above documents by saying that finding of the AO was based on strong surrounding circumstances and preponderance of the probability and human conduct. It is important to mention here that above findings cannot be basis of rejection of a document which was filed by the assessee. The documents clearly go to show that the transaction made being a genuine one and we do not find any transaction made by and with any Mukesh Banka. It is also a fact that all transactions made through banking channels. Our attention has been drawn by the assessee by referring the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Dataware Pvt Ltd., ITA 263 of 2011 dated 21.09.2011 wherein the Court has observed as follows: “So long it is not established that the return submitted by the creditor has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established." Referring to various other decisions, the Id. Counsel for the assessee submitted that when the assessee has fulfilled all the three ingredients i.e., identity and creditworthiness of the loan creditors and the genuineness of the transaction by producing documentary evidence on record such as Copy of A/c of the lender for the succeeding financial year I.T.A. No.: 136/KOL/2024 Assessment Year: 2016-17 Keshav Shroff. showing repayment of loan through banking channel thus the unsecured loan stands explained” 5.3. On perusal of the bank statement of M/s. Fast Speed Realcon Pvt. Ltd., it is noticed that amount of Rs. 15 Lakh has been transferred to the assessee on 16.12.2015 and on the same date all amount of Rs. 15 Lakh has also been credited in the account of M/s. Fast Speed Realcon Pvt. Ltd. Section 68 of the Act casts initial onus on the assessee to establish the identity and creditworthiness of the investor and to prove the genuineness of the transaction. The present case in hand reveals that the assessee has discharged initial onus by furnishing the name, address, copy of PAN, copy of ITR, copy of bank statement and confirmation of the creditor. 5.4. It is further noticed that loan taken was duly repaid by account payee cheque. No transaction was entered with Sh. Mukesh Banka and Banka Group. Genuine loan was taken from M/s. Fast Speed Realcon Pvt. Ltd. and loan confirmation of M/s. Fast Speed Realcon Pvt. Ltd. has also been enclosed in the balance sheet, profit and loss account filed by the assessee. Keeping in view the above facts, the answers come in favour of the assessee that the assessee could be able to disclose the amount and the finding of the AO and the ld. CIT(A) that the assessee could not be able to disclose the source of income of Rs. 15 Lakh is hereby set aside. 5.5. Moreover, while we perused the entire facts of the case, we find that before issuance of notice u/s 148 of the Act there must be a belief in the mind of the AO that the assessee has escaped assessment of income and there must be some basis for forming such a belief. Mere suspicion cannot be a ground for issuance of notice. The judgment of the Hon'ble Calcutta High Court in the case of CIT vs. Lakshmangarh Estate & Trading Co. Ltd. reported in [2014] 220 Taxman 122 (Calcutta) (Mag.) which read as follows: “basis of suspicion, howsoever strong, it is not possible to record any finding of fact. As a matter of fact, suspicion can never take the place of proof. The finding arrived at by the Tribunal that both the sale and purchase were genuine transactions was not even alleged by the revenue to have not been based on evidence. Since the finding of the Tribunal was factually correct, the Tribunal had no option but to direct the AO to give the benefit of the I.T.A. No.: 136/KOL/2024 Assessment Year: 2016-17 Keshav Shroff. losses suffered by the assessee, which he had disallowed. The appeal did not raise any question of law and was therefore not to be admitted.”

In the present case as we have discussed above that there is nothing in the record brought by the AO to establish any connection of the assessee with Mukesh Banka, there is no transaction made by and with Mukesh Banka as the statement of bank account details reveals. Keeping in view the above facts also the case of the assessee is succeeded that issuance of notice is also bad in law. Accordingly, the grounds raised