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Income Tax Appellate Tribunal, “SMC” BENCH, SURAT
Before: Smt. Annapurna Gupta
O R D E R The present appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeal), (ld. CIT(A))/National Faceless Appeal Centre (NFAC), Delhi under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as “Act”).
2. Grounds raised
by the assessee read as under:
1. The Learned Assessing officer has grossly erred in taw and in facts on account of disallowance/addition in respect of following: Learned Assessing Officer has made the addition of Rs. 26,62,287/- as unexplained fund in assessment order. Gopi Creation Vs. ITO Asst. Year:2016-17 2
(2) The appellant craves leave to add, alter, amend or delete any another ground or grounds during the pendency of the appeal.”
We have heard both the parties. The solitary issue in the present appeal relates to addition made to the income of the assessee on account of loans amounting to Rs. 26,62,287/- taken by it during the impugned year, the source of which remained unexplained. The assessment order reveals that while inquiring the source of investment of Rs. 1,12,88,263/- made by the assessee in plant and machinery it was revealed that investment of Rs.26,62,287/- in the same was made from loans taken by the following parties:
Sr. No. Date Amount Person 1 02.04.2015 7,50,000/- Sanjay B Diyora 2 02.04.2015 11,50,000/- Sanjay K Gabani 3 08.04.2015 1,35,000/- Siddh Shree Saree 4 11.04.2015 2,26,000/- Nimantran Saree Pvt Ltd 5 14.04.2015 2,00,000/- Dulichand Champalal 6 15.04.2018 2,00,000/- Nimantran Saree Pvt Ltd Total 26,62,287/-
In the absence of the genuineness of the said loans being proved by the assessee, the said amount was added to the income of the assessee as unexplained credit. Before the Ld. CIT(A), the appellate order reveals, the assesse furnished evidences after appreciating which the CIT(A) noted that the assessee failed even before him to explain the Gopi Creation Vs. ITO Asst. Year:2016-17 3 genuineness of the alleged unsecured loans taken by the assesee. His findings in this regard are contained at page 3 Para 4.4 and 4.5 of the order as under:
4.4 During the appeal, the appellant has submitted the following evidences:
Sanjay B Diyor, ITR of 2016-17 showing total income of Rs. 2,83,670/- Sanjay K Gabani, ITR of 2016-17 showing total income of Rs. 2,50,410/- Siddh Shree Saree, No evidence of any amount given to appellant in AY 2016-17 submitted Nimantran Saree Pvt Ltd., No evidence of any amount given to appellant in AY 2016- 17 submitted Dulichand Champalal, No evidence of any amount given to appellant in AY 2016-17 submitted 4.2 From the above, it is clear that Sanjay B Diyor and Sanjay K Gabani do not have creditworthiness to advance money of Rs. 7,50,000/- and 11,50,000/-. The circular loans explained by appellant are not supported by any evidence. Regarding Siddh Shree Saree, Nimantran Saree Pvt Ltd. and Dulichand Champalal evidence of any amount given to appellant in AY 2016-17 has been submitted which shows that transaction is not genuine. The source of purchase of machinery remained unexplained. Hence, the disallowance made by AO is justified and is confirmed.
5. During the course of hearing before us, Ld. Counsel for the assessee contended that the Ld. CIT(A)’s findings are based on incorrect and incomplete appreciation of facts before him. He pointed out that the assessee had submitted a detailed explanation to the Ld. CIT(A) explaining the genuineness of each loan taken by him. Our attention was draw to the submissions filed by the assessee to the Ld. CIT(A) placed before us at paper book pg. 1-7 more particularly to Pg. no. 2-4 contaning his submissions on the genuineness of the unsecured loans as under: Gopi Creation Vs. ITO Asst. Year:2016-17 4 1. Assessee has purchased the machinery of Rs.1,12,88,263/- during the F.Y. 2015- 16. Assessee has taken secured loan of Rs. 84 lacs from Oriental bank of commerce and remaining amount is being received from various sources. The following amount is received in Prime Co-Operative bank which is being stated in assessment order:
"it is noticed from the bank book of Prime Co-op Bank that you have taken following fund just before payment towards purchase of machinery:
Sr. No. Date Amount Person 1 02.04.2015 7,50,000/- Sanjay B Diyora 2 02.04.2015 11,50,000/- Sanjay K Gabani 3 08.04.2015 1,35,000/- Siddh Shree Saree 4 11.04.2015 2,26,000/- Nimantran Saree Pvt Ltd 5 14.04.2015 2,00,000/- Dulichand Champalal 6 15.04.2018 2,00,000/- Nimantran Saree Pvt Ltd Total 26,62,287/- Ld. AO has made addition of the following receipt into bank as the sources of fund is unexplained and added into total income of the assessee for the A.Y. 2016-17. We explain below in detail for each amount received during the F.Y. 2015-16 along with documentary evidences in this support.
Receipt from Sanjaybhai Diyora: Sanjaybhai Diyora is partner in firm and has introduced the capital during the F.Y. 2015-16 of Rs. 7,50,000/- on Dt. 02.04.2015. Sanjaybhai Diyora has taken gold loan of Rs. 7,70,000/- From IDBI Bank which is credited into bank account of Sanjaybhai Diyora on Dt. 26.03.2015 for an amount of Rs. 7,69,138/- i.e. after deducting charges. We have attached herewith the copy of bank statement of Sanjaybhai Diyora along with the loan statement highlighting the transaction for your verification. Gopi Creation Vs. ITO Asst. Year:2016-17 5 In nutshell, Sanjaybhai diyora has availed Gold Loan of Rs. 7,70,000/- which credited into his bank account on Dt. 25.03.2015 with amount of Rs. 7,69,138/-. Afterwards, Sanjaybhai has introduced capital into firm for Rs. 7,50,000/ on dt. 02.04.2015 through RTGS. Further, we also attach herewith the audited financial statement of Assessee for the A.Y. 2016-17 which shows the capital ledgers of the firms. We are also submitting herewith the scanned copy of ITR filed along with computation of income, Profit and Loss a/c and Balance sheet of Sanjaybhai Diyora for the A.Y. 2016-17. As it is capital receipt for the assessee firm, it cannot be treated as unexplained credit for the A.Y. 2016-17 and addition should be deleted.
3. Receipt from Sanjaybhai Gabani: Sanjaybhai Gabani is partner in firm and has introduced the capital during the F.Y. 2015-16 of Rs. 11,50,000/- on Dt. 02.04.2015. Sanjaybhai Diyora has taken gold loan of Rs. 6,15,000/- and Rs. 5,85,000/- From IDBI Bank which is credited into bank account of Sanjaybhai Diyora on Dt. 26.03.2015 for an amount of Rs. 6,14,138/- and Rs. 5,84,138/- i.e. after deducting charges. We have attached herewith the copy of bank statement of Sanjaybhai Diyora along with the loan statement highlighting the transaction for your verification. In nutshell, Sanjaybhai Gabani has availed Gold Loan of Rs. 6,15,000/- and Rs. 5,85,000/- which credited into his bank account on Dt. 25.03.2015 with amount of Rs. Rs. 6,14,138/- and Rs. 5,84,138/-. Afterwards, Sanjaybhai Gabani has introduced capital into firm for Rs. 11,50,000/- on dt. 02.04.2015 through RTGS. Further, we also attach herewith the audited financial statement of Assessee for the A.Y. 2016-17 which shows the capital ledgers of the firms. We are also submitting herewith the scanned copy of ITR filed along with computation of income, Profit and Loss a/c and Balance sheet of Sanjaybhal Gabani for the A.Y. 2016-17. As it is capital receipt for the assessee firm, it cannot be treated as unexplained credit for the A.Y. 2016-17 and addition should be deleted.
3. Receipt from Siddh Shree Saree: Siddh Shree Saree, proprietary concern of Sonidevi Agrawal is debtor for the assessee firm. Assessee firm is into job work activity during the year under scrutiny. Assessee firm has issued bill for Job Work income to Siddh Shree Saree for the month of March, 2015 for an amount of Rs. 1.38661/-on which TDS of s 2774/- has been deducted. Therefore, the balance of its 1.35.887/- (Rs. 136661/-less Rs. 2774/) was outstanding ndt. 31.03.2015. The Gopi Creation Vs. ITO Asst. Year:2016-17 6 amount of Rs. 1,35,887/ was received from Siddh Shree Saree on dt. 08.04.2015 vide cheque no. 928461. Assessee firm has already shown the income in A.Y. 2015-16 in this regard. Attachments in support of the above is as under:
We attach herewith the ledger confirmation received from the Siddh Shree Sarees for the F.Y. 2015-16 for your verification. Form 26AS for the A.Y. 2015-16 which shows the entry of Soni devi Agrawal at serial no 18 on page no. 3 for the month of march. Therefore, it is business receipt of the assessee firm and also offered for taxation. In view of the above, it cannot be said as unexplained credit.
Receipt from Nimantran Saree Pvt. Ltd: For this party also, assessee has received the cheque against the labour income. However, Due to long time period, assessee is facing issue in getting ledger confirmation from the party. Assessee has tried best to get confirmation from the party but not found party. Therefore, we are submitting herewith the ledger account from our book which shows that assessee has done job work for the party against which assessee firm has received payment. Therefore, it is business receipt of the assessee firm and also offered for taxation. In view of the above, it cannot be said as unexplained credit.
Receipt from Dulichand Champalal: For this party also, assessee has received the cheque against the labour income. However, Due to long time period, assessee is facing issue in getting ledger confirmation from the party. Assessee has tried best to get confirmation from the party but not found party. Therefore, we are submitting herewith the ledger account from our book which shows that assessee has done job work for the party against which assessee firm has received payment.Therefore, it is business receipt of the assessee and also offered for taxation. In view of the above, it cannot be said as unexplained credit.
We have submitted the necessary information in respect of transaction for Rs. 26,62,287/-which were credited into bank account of the assessee. Further, we have submitted supporting evidence as well to justify our explanation. We humbly request your goodself to accept our submission and oblige us. Gopi Creation Vs. ITO Asst. Year:2016-17 7
6. Referring to the above, he pointed out that with respect to each party, the assessee had submitted the source of funds available with them as in the case of Sanjay B Diyora and Sanjay B Gabani the same having given loan to the assessee from gold loan taken by them from their respective banks. He pointed out that both these persons were partners of the assessee firm and had contributed to their capital in the firm from gold loan taken. Ld. Counsel for the assessee pointed out that evidence by way of bank statements of the said two parties was filed along with the ITR, computation of income, profit and loss account and balance sheet of the said parties. With respect to the loans received from the remaining parties, he pointed out that the assessee had submitted that the amounts had been received by them by way of income of the assessee on account of work carried out from them by the assessee. Copies of ledger accounts reflecting the said transactions with these parties were also filed. Ld. Counsel for the assessee contended, therefore, that the assessee, therefore, had explained the source of all amounts received from the said parties to the Ld. CIT(A) who, however, had given a finding to the contrary stating that the assessee had not filed evidences or had filed insufficient evidences to prove the genuineness of the amounts received from the said parties.
At this juncture, it was asked at Bar whether these evidences were additional evidences filed to the Ld. CIT(A) or were filed by the assesee during the assessment proceedings also. To this, the Ld. Counsel for the assessee fairly admitted that the evidences had been filed for the first time before the Ld. CIT(A) alone. He pointed out that during assessment proceedings, the assessee had not availed the services of any consultant Gopi Creation Vs. ITO Asst. Year:2016-17 8 but had participated in the same himself and, therefore, not being fully aware of the procedures of law had failed to comply with the show cause notice issued by the AO and he was unable to submit these evidences during assessment proceedings.
The Ld. DR fairly conceded that the order passed y the Ld. CIT(A) was without appreciating the facts and evidences filed by the assessee before him. He agreed that the issue needed reconsideration.
Having noted the facts of the case as above and finding that the appellate order impugned before me has been admittedly passed without appreciating the pleadings and evidences filed by the assessee while confirming the addition made on account of amounts received by the assessee from various parties amouting to Rs.26,62,287/- and also noting the fact that these evidences filed by the assessee during appellate proceedings were not confronted to the AO for verification and his comments on the same, I consider it fit to restore the matter back to the file of the AO to consider the issue afresh, after considering all the evidences and explanation filed by the assessee and verifying the same. The AO is directed to adjudicate the issue after giving due opportunity and hearing to the assessee.