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Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
PER SANDEEP GOSAIN, (JUDICIAL MEMBER): The present appeal filed by the Revenue is directed against the order of the learned CIT (A)-35, Mumbai dated 15-04-2011 passed in appeal No.CIT(A)-35/ACIT-25(3)/10-11 for assessment year 2005-06.
Grounds No.(ii) and (iii) raised by the Revenue in this appeal are general in nature requiring no specific adjudication and the sole effective ground No.(i) of the Revenue’s appeal reads as under:-
“(i) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has grossly erred in concluding that there was no valid ground for reopening of assessment without considering that the assessee failed to file loan confirmation for an amount of Rs.1,05,00,000/- credited during the A. Y. 2005-06.”
The brief facts of the case are that the return declaring total income of the assessee at Rs.18,74,087/- was filed on 31-10-2005 by the assessee individual being proprietor of M/s. Royal Country Bar engaged in the business of running a country liquor Bar. Subsequently the return was processed and thereafter the case of the assessee was selected for scrutiny. Assessment Order u/s 143(3) of the Act was passed by the AO on 16-12-2010 assessing the total income of the assessee at Rs.20,92,670/-. It was found by the AO that during the course of assessment proceedings for assessment year 2007-08, the assessee was not able to file loan confirmation of one of the parties namely Mr. M. R.
Tandon for an amount of Rs.1,05,00,000/-. As this amount was credited during the assessment year 2005-06, the assessment for assessment year 2005-06 was reopened. In the balance sheet filed by the assessee total unsecured loan was shown at Rs.2,05,77,066.50. Out of this amount, Rs.1,05,00,000/- has been received by Mr. M. R. Tandon. In this regard, the AO has given opportunity to the learned AR of the assessee to file the details vide order sheet entry dated 25-11-2010 and after receipt of the reply from the learned AR, the AO found the same as not acceptable and consequently he held that he has reason to believe that a sum of Rs.1,05,00,000/- was credited in the assessment year 2005-06 and the assessee did not offer any explanation regarding source of the said amount. Therefore, the AO added back Rs.1,05,00,000/- to the total income of the assessee. In addition, the assessee also claimed interest amounting to Rs.1,40,569/- as deduction u/s 24 of the Act on the ground that the loan repayment is borne by the assessee alone; but this claim of house property loss of Rs.1,40,569/- was found to be incorrect by the AO on the ground that the assessee’s wife was co-owner and co-borrower of 50% of the loan amount as is evident from the bank certificate. In view of the same, the AO held that the assessee was liable only for half of the liabilities and therefore, he disallowed the same and added back to the total income of the assessee. Aggrieved by the order of the AO, the assessee carried the matter in appeal before the learned CIT (A) and the learned CIT (A) after hearing the parties and considering the facts of the case has allowed the appeal of the assessee vide order dated 15th April, 2011. Aggrieved by this order of the learned CIT (A), the Revenue is now in appeal before us on the above grounds.
Further, the Revenue has also vide letter darted 10-09-2014 filed by the learned DR stated that on verification of record it was seen that one of the grounds was not mentioned in the appeal memo and hence he requested to admit the same as additional ground for due justification.
The additional ground raised by the Revenue as under:-
“(i) On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has grossly erred in concluding that there was no valid ground for reopening of assessment without considering that the assessee failed to file loan confirmation for an amount of Rs.1,05,00,000/- credited during the A. Y. 2005-06.”
We have heard both the parties on this ground and we are of the considered view that the additional ground now raised by the Revenue vide letter dated 10-09-2014 is purely of legal nature and no new facts are involved and this issue can be decided on the basis of the materials already available on record and therefore, keeping in view the principles laid down in the decision rendered by the Hon’ble Apex Court in the case of National Thermal Power Corporation Ltd. reported in (1998) 229 ITR 383, the additional ground raised by the Revenue is admitted for adjudication.
The learned DR appearing on behalf of the Revenue submitted that the learned CIT (A) has grossly erred in concluding that there was no valid ground for reopening of the assessment without considering the fact that the assessee failed to file loan confirmation for a sum of Rs.1,05,00,000/- and relied upon the order of the AO.
On the other hand, the learned AR relied upon the order of the learned CIT (A) and submitted that the AO erred in reopening the assessment without any valid ground and further submitted that the assessee’s representative’s objections to the reopening of the assessment which was refused to be accepted by the AO and subsequently the same was sent by speed post. It was contended that while completing the original assessment on 26-12-2007, the AO recorded in the assessment order that the assessee furnished the loan confirmation. The learned AR further submitted that the AO while completing the original assessment examined the source of new loans based on the explanation of the assessee and the same was also accepted as no new loan was taken. It was further submitted by him that the assessment u/s 143(3) of the Act was already completed on 26-12- 2007 and it is seen from the record that during the assessment proceedings the AO raised queries with regard to (i) loan confirmation from Shri M. R. Tandon, (ii) Channel (Banking or otherwise) through which the loan was received, (iii) purpose of the loan taken and (iv) present status of outstanding amount with repayment schedule. Therefore, while considering all those facts the learned CIT (A) has rightly held that there was no valid ground for reopening of the assessment.
Before we come to decide the merits of the case, it is necessary to analyze the order of the learned CIT (A) while dealing with the said ground. The learned CIT (A) has dealt with the ground of validity of reopening vide Para 4.2 of his order. The same are reproduced herein below:-
“4.2 I have considered the submissions of the representative and the stand taken by the A. O. Admittedly, in this case assessment u/s 143(3) was already completed on 26.12.2007. It is seen from the records that the A. O. has specifically raised the query in the notice u/s 142(1) dt. 15.2.2007 during the course of original assessment proceedings.
“8. Loan confirmations in respect of new, additional and squared up loan and address of brought forward loans. In case of persons who do not have PAN, please furnish copy of bank passbook highlighting the relevant entries for loans taken during the year”.
From the above, it could be seen that the A.O. specifically raised the issue of nature and source of all new loans taken by the appellant during this year. Further as seen from the assessment order, the A. O. has recorded as under:-
“The assessee’s representative has furnished details of long term capital gains, details of purchases sales expenses, loan confirmations and other details called from time to time and the same are placed on record.”
From the above, it could be seen that the A. O. while completing the original assessment examined all the new loans and obtained loan confirmations. However, the successor A. O., while scrutinizing the return for A. Y. 2007-08 recorded a finding that the appellant could not prove the identity, creditworthiness and genuineness of loan of Rs.1,05,00,000/- taken from M. R. Tandon during this assessment year and based on the above finding, the assessment for this assessment year was reopened. The reasons recorded do not indicate how the finding recorded by the A. O. in the assessment order u/s 143(3) dt. 26.12.2007 was not correct. It is quite natural that the appellant explained all the loan transactions during the course of original proceedings as seen from the query raised and the finding in the assessment order that the loan confirmations were filed. As such the successor officer cannot reopen the assessment stating that the appellant could not file confirmation for loan received during this year when he scrutinized the assessment for A. Y. 2007-08 which would amount to change of opinion. In the circumstances, I accept the plea of the representative that there was no valid ground for reopening of assessment.
4.2.1 Regarding the contention of the representative that the notice u/s 148 dt. 31.3.2010 was served on the appellant only on 07.4.2010 which is after expiry of 4 years from the end of the relevant assessment year, I find that the A. O. issued and dispatched the notice u/s. 148 on 31.3.2010. The A. O. submitted a copy of dispatch register from which it is seen that the notice u/s. 148 dt. 31.3.2010 was dispatched on the same date. This means that the notice u/s 148 was issued within 4 years from the end of the relevant assessment year and thereby the condition of failure of the appellant to disclose the material facts fully and truly as per proviso to section 147 need not be fulfilled. The representative raised this issue on the reasoning that the assessment was reopened after 4 years as the notice u/s. 148 was served on the appellant on 07.4.2010. However, when the notice u/s. 148 is handed over to the post office on 31.3.2010, the post office became the agent of the appellant and thereby the notice is deemed to have been served on the appellant on 31.3.2010 itself. Accordingly, I doo not find merit in the contention of the representative that the notice u/s. 148 was issued after 4 years from the end of the relevant assessment year without taking approval from CIT and without pointing out the material particulars which the appellant failed to disclose either in the return of income or during the course of assessment proceedings. However, I have already held that even though the assessment was reopened within the period of 4 years from the end of the relevant assessment year, the same was on account of change of opinion and, therefore, the reopening of assessment was not valid. 4.2.1 Without prejudice to the above, it is further seen from the ledger account of M. R. Tandon in the books of accounts of the appellant that the following journal entry was passed on 31.3.2005:-
Date Particulars Vch Type Debit Credit 31.3.2005 By M/s. JVD Journal 80,00,000/- Developers Pvt. Ltd. – Being adv. Received from M. R. Tandon on behalf of VASANT A/c JVD Dev. Pvt. Ltd.
Similarly, as seen from the ledger account of M/s. J.V.P. Developers Pvt. Ltd. in the books of accounts of the appellant the following journal entry was passed on 31.3.2005:-
Date Particulars Vch Veh Debit Credit Type No. 31.3.2005 To M. R. Tandon Journal 18 80,00,000 on being amount transferred to VASANT SHETTY.
From the above ledger accounts which were forming part of the regular books of account maintained by the appellant, it is clear that journal entry was passed on 31.3.2005 by the appellant by crediting M. R. Tandon and by debiting M/s. J. V. P. Developers Pvt. Ltd. Thus it is clear that it is only a journal entry for Rs.80,00,000/- on 31.3.2005 and when the same was explained by the appellant before the A. O. he rejected the same holding that the appellant failed to file the confirmation from M. R. Tandon and if the accountant wrongly passed the journal entry, the balance sheet would not tally to the extent of Rs.1,05,00,000/-. The above observation of the A. O. is incorrect in as much as when the journal entry was passed by crediting M. R. Tandon and debiting M/s. J. V. P. Developers Pvt. Ltd., the balance sheet would tally as both sides of the balance sheet are increased by equal amount which the A. O. could not appreciate correctly. The A. O. further insisted on confirmation from M. R. Tandon from the beginning as per his order sheet noting on 25.11.2010 and arrived at his conclusion only based on the fact that the appellant did not file confirmation from M. R. Tandon, even though the appellant explained that the loan was received by account payee cheques by M/s.J. V. P. Developers Pvt.
Ltd. from M/s. Maina Dealers Pvt. Ltd., who was assessed to income tax in PAN (AAFCM3129A) and even filed a bank account copy of M/s. J.V.P. Developers Pvt. Ltd. from which it is seen that the above amount of Rs.80,00,000/- is appearing on various dates as shown below:-
Date Particular Debit Credit (Rs.) 17.5.2004 OCLG 25,00,000/- 20.7.2004 OCLG 5,00,000/- 20.7.2004 OCLG 5,00,000/- 26.7.2004 OCLG 5,00,000/- 26.7.2004 OCLG 5,00,000/- 29.7.2004 OCLG 5,00,000/- 29.7.2004 OCLG 5,00,000/- 30.7.2004 Inward return 5,00,000/- 5,00,000/- 31.7.2004 OCLG 5,00,000/- 31.7.2004 OCLG 5,00,000/- 06.8.2004 OCLG 5,00,000/- 10.8.2004 OCLG 5,00,000/- 10.8.2004 OCLG 5,00,000/- 13.8.2004 OCLG 5,00,000/- 5,00,000/- 85,00,000/- Net amount 80,00,000/-
From the above, it could been seen that the loan amounts were directly received by M/s. J. V. P. Developers Pvt. Ltd. in the months of May, July and August, 2004 whereas the journal entry was passed on 31.3.2005 by the appellant in his books of account. Further the appellant’s representative filed confirmation from M/s. Maina Dealers Pvt. Ltd. in support of the contention raised before the A. O. The above confirmation letter reads as under:-
“Sub: Confirmation of Loan
We hereby confirm that we have subscribed towards the share capital of JVD Developers Pvt. Ltd., Mumbai a sum of Rs.80,00,000/- paid vide various cheques detailed as below:-
Date Cheque No. Amount (Rs.) 07.8.2004 092747 5,00,000/- 19.7.2004 092732 5,00,000/- 19.7.2004 092730 5,00,000/- 23.7.2004 092736 5,00,000/- 23.7.2004 092734 5,00,000/- 27.7.2004 092737 5,00,000/- 28.7.2004 092742 5,00,000/- 30.7.2004 092743 5,00,000/- 05.8.2004 092740 5,00,000/- 06.8.2004 092746 5,00,000/-
07.8.2004 092744 5,00,000/- 16.5.2004 214413 25,00,000 Total 80,00,000/- That the company is assessed to tax at PAN No.AAMFM6674Q. The above amount was invested for purchase of shares and havs been duly reflected in accounts”.
In the above circumstances, there is no case for addition of Rs.80,00,000/- as the appellant did not receive any loan either from M. R. Tandon or from M/s. Maina Dealers Pvt. Ltd. but passed only journal entry on 31.3.2005.
4.2.2 Regarding the balance Rs.25,00,000/-, it is seen from the ledger account of M. R. Tandon in the books of account of the appellant that on 20.4.2004 cheque No.241013 was received for Rs.25,00,000/- and further as seen from the bank account of t he appellant which is forming part of the regular books of account that a sum of Rs.25,00,000/- was cleared on 29.4.2004 by cheque No.241013. From the above, it is clear that the amount was received by account payee cheque but as the A. O. insisted on confirmation from M. R. Tandon, the appellant explained before the A. O. that the loan was received from M/s. Maina Dealers Pvt. Ltd. The appellant filed a letter from M/s. Maina Dealers Pvt. Ltd. which reads as under:-
“Sub: Confirmation of loan given to Mr. Vasant Shetty
We hereby confirm to have given a loan to Mr. Vasant Shetty having PAN No.AACPS5929C. The amount of Rs.25,00,000/- was paid vide account payee cheque bearing No.241013 dated 20.4.2004. The amount was given for purchase of shares of JVD Developers Pvt. Ltd., Mumbai. However, as informed the amount was wrongly taken by Vasant Shetty as loan account of one M. R. Tandon. M. R. Tandon was the employee of the company who has left the company long back.
MAINA DEALERS PVT. LTD. Sd/- Director”
From the above, it is clear that M/s. Maina Dealers pvt. Ltd. intended to pay Rs.25,00,000/- to M/s. J. V. P. Developers Pvt. Ltd. towards share application money but the same was accounted in the books of accounts of the appellant by the accountant. In any case M/s. Maina Dealers Pvt. Ltd. is assessed to Income tax and further given Rs.80,00,000/- to M/s. J. V. P. Developers Pvt. Ltd. and the same was paid by account payee cheques. In the circumstances, there is no case for addition u/s. 68 on the ground that the nature and source of credit of Rs.25,00,000/- is not proved. The A. O. is directed to delete the addition. 4.3 In view of the above discussion, the A. O. is directed to delete the entire addition of Rs.1,05,00,000/-.”
We have heard both the parties and have considered the materials placed on record. On careful perusal of the order of the learned CIT (A), we find that while dealing with the issue in question the learned CIT (A) has considered the submissions of the parties and after discussions he has rightly come to the conclusion that once the assessee had explained the details of all loan transactions during the course of original assessment proceedings and had filed loan confirmations, therefore, the successor Assessing Officer cannot reopen the assessment merely stating that the assessee could not file the confirmations of loans received during this year when he scrutinized the assessment for assessment year 2007-08 which would obviously amount to change of opinion. The learned CIT (A) has also considered the fact that loans given to Mr. Shetty was confirmed by M/s. Maina Dealers Pvt. Ltd. and found that from the confirmation it is clear that M/s. Maina Dealers Pvt. Ltd. intended to pay Rs.25,00,000/- to M/s. J. V. P. Developers Pvt. Ltd. towards share application money but the same was accounted in the books of account of the assessee by his Accountant and it was further noted by the learned CIT (A) that in any case M/s. Maina Dealers Pvt. Ltd. was assessed to income tax and further paid Rs.80,00,000/- by account payee cheques.
Therefore, after considering the said facts the learned CIT (A) has rightly come to the conclusion that there was no reason for addition of the amount u/s 68 of the Act. In view of the above facts and circumstances brought on record, we find no reason to deviate from and/or to interfere with the findings of the learned CIT (A) and we uphold the same.
Resultantly, the additional ground of the Revenue stands dismissed.
Through the main effective ground being ground No. (i) the revenue has challenged the action of the learned CIT (A) in concluding the reopening of the assessment as invalid and thereby deleting the addition of Rs.1,05,00,000/- made by the AO on account of unexplained credit.
Since, this issue has already been discussed and decided by us hereinabove while dealing with the additional ground No.(i) raised by the Revenue by upholding the findings of the learned CIT (A), therefore, the findings recorded by us hereinabove in this regard would apply with equal force in respect of the main ground No.(i) of the Revenue. Resultantly, Revenue’s main ground No.(i) would also stand dismissed.
The main ground No.(ii) of the Revenue’s appeal relates to deletion of addition of Rs.70,284/- made by the AO on account of house property loss.
We have heard both the parties and carefully perused the materials placed on record as well as the orders of the Revenue authorities. The learned CIT (A) has dealt with this issue in Para 5.2 of his order. The same is reproduced herein below:-
“5.2 I have considered the submissions of the representative and the stand taken by the A.O. A perusal of the assessment order shows that the A. O. did not require the appellant or his representative to submit any explanation on this issue. It is apparent that the A. O. on his own made assumption that the loan was common and divided the interest amount between the appellant and his spouse and disallowed 50% of the interest. But it is seen that the appellant has taken separate loans with his spouse as co-borrower and similarly the appellant’s spouse has taken a separate loan with the appellant as co-borrower. The appellant has filed a certificate dt. 20.9.2005 from Central Bank of India, Dadar Branch certifying that the loan taken by the appellant by HL-52/16 whereas the loan taken by the appellant’s wife was HL-52/17 and they have paid Rs.140569/- towards interest by each of them. In the circumstances, I accept the plea of the representative that the A. O. made this addition on this assumption without examining the correct facts. Further as seen from the bank account of the appellant, the interest paid and loan repayment towards housing loan is appearing and, therefore, the addition made by the A. O. is not correct. Further the appellant’s wife Smt. Jyoti V. Shetty (PAN No.AAMPS8299P) has separately claimed interest of Rs.1,40,569/- in her computation of total income. In the circumstances, the A. O. is directed to delete the addition of Rs.70,284/-.”
From the conjoint reading of the above mentioned findings as well as the orders of the AO in this respect, we are of the considered view that the learned CIT (A) while dealing with this issue has taken into consideration the fact that the AO did not require the assessee or his representative to submit any explanation on this issue. In view of this, the learned CIT (A) has rightly decided that the AO on his own made assumption that the loan was common and divided the interest between the assessee and his wife, but after analyzing the record, the learned CIT (A) has rightly concluded that the assessee has taken separate loan with his spouse as co-borrower and his wife has taken loan separately which is evident from the copy of the certificate dated 20-09-2005 filed by the assessee from Central Bank of India, Dadar Branch certifying the loan account of the assessee being HL-52/16 and his wife being HL-52/17 and that they have paid the interest. Therefore, the learned CIT (A) after considering those documents has accepted the plea of the assessee that the AO made the addition on the basis of assumption without examining the correct facts. The learned CIT (A) has rightly concluded that the assessee’s wife Smt. Jyoti V. Shetty having No. PAN No.AAMPS8299P has separately claimed interest of Rs.1,40,569/- in her computation of income. Therefore, considering these facts the learned CIT (A) has rightly directed the AO to delete the addition of Rs.70,284/-. No new material was brought on record by the learned DR to rebut the above finding of the learned CIT (A). In view of the above, we find no reason to deviate from and/or to interfere with the findings of the leaned CIT (A) on this issue.
Accordingly, we confirm the same and dismiss the ground of appeal of the Revenue.
In the result, Revenue’s appeal stands dismissed. Order pronounced in the open court on 10/8/2016.