SUJATA N SHAH,MUMBAI vs. ITO 16(1)(4), MUMBAI

अपीलाथ� क� ओर से /By Appellant : Shri Beharilal, A.R. ��यथ� क� ओर से/By Respondent : Shri Vachaspati Tripathi, D.R. सुनवाई क� तार�ख/Date of Hearing : 09.06.2016 घोषणा क� तार�ख/Date of Pronouncement : 24.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by assessee against the order of Commissioner of Income-Tax (Appeals)-27, Mumbai, dated 17.02.2014 for A.Y. 2010-11 on the point of unexplained cash credit of Rs.1,19,45,000/-.

A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 2

2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised by assessee and having considered the same, CIT(A) confirmed the addition made by Assessing Officer. Same has been opposed by assessee before us inter alia submitting that Assessing Officer ignored the facts that 8 of 35 loan creditors responded to the summons. The copies of return of income, bank statements etc. of other 27 loan creditors were provided to the Assessing Officer before the completion of assessment proceedings which were ignored by Assessing Officer. Assessee has neither control nor she can force these 27 parties to respond to the notice u/s.133(6) of the Act. By providing loan confirmations, copies of financials, copies of return of income and signature of lenders on the ledger accounts of assessee, assessee has discharged his liability of existence of the parties from whom she has taken these loans. Merely because 8 parties have replied, Assessing Officer could not doubt on their identity and genuineness of the transactions. Assessee is mainly concerned with the loan amount and not with the source of income of respective parties which is simply deviation of investigation. As stated above, the identity and transaction has not been disputed by Revenue. Regarding creditworthiness of the creditors and genuineness of transaction, ld. Authorized A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 4 Representative stated that all these loans taken by assessee have been repaid back by assessee. According to CIT(A) who has confirmed the addition observing that by filing confirmation letters and giving PAN, identity of loan creditors has been established. The same cannot be said in so far as their own creditworthiness is concerned. All loan creditors were based in Surat and had advanced the alleged loans for a meager interest of 6% which is not the regular market rate of interest for an unsecured loan. CIT(A) also observed that assessee has failed to produce the creditors for proving their creditworthiness and mere filing of confirmations was not enough. However, CIT(A) ignored the fact that apart from the confirmations, assessee also produced before him the statement of financials, return of income for the year under consideration as well as two earlier years, bank statement of all loan creditors and lastly and most importantly the details of repayment of all these loans back to these loan creditors. CIT(A) has brushed aside these evidences produced by assessee which is not justified. According to Ld. Authorized Representative, the addition in question is directed to be deleted. On the other hand, ld. Departmental Representative supported the orders of authorities below.

2.2 After going through rival submissions and perused the material on record, we find that the only issue is before us regarding addition of Rs.1,19,45,000/- on account of unexplained cash credit. As stated above, assessee, Smt. Sujata Nikesh Shah, is an individual who during the previous A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 5 year relevant to A.Y. 2010-11 borrowed unsecured loan of Rs.1,19,45,000/- from 35 different parties. The details of creditors have been filed at page nos.116 to 488 of the paper book. To examine the genuineness of the assessee’s claim, Assessing Officer called information u/s.133(6) of the Act from all the loan creditors. Assessee provided the loan confirmations, copies of financials of loan creditors, copies of return of income and the copies of bank pass books of all the 35 parties before the Assessing Officer. In spite of this fact, Assessing Officer doubted the genuineness of transactions and treated the entire amount as unsecured loan of Rs.1,19,45,000/- as unexplained cash credit and added the said amount. The stand of assessee has been that she was co- owner to the extent of 50% of the ownership premises situated at Kailash, 50, Peddar Road, Mumbai -06 by virtue of sale deed dated 28.04.2006 entered into between Smt. Kalpana N. Shah and Suchitra N. Shah (Transferor) and Shri Nikesh Shah (husband of assessee) and Sujata N. Shah (assessee). During previous year relevant to A.Y. 2010-11, assessee acquired her husband’s share of 50% ownership of above said premises for consideration of Rs.1,25,00,000/- vide sale deed dated 25.05.2009. Assessee had paid Rs.1,12,95,000/- from her saving account with Bank of India and remaining Rs.12,05,000/- from her saving account with State Bank of India to her husband for purchase of his 50% ownership right to her. Out of total payment made from Bank of India aggregating to Rs.1,19,42,955/-, assessee claimed to have ITA No.4009/Mum/14 A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 6 received unsecured loan from 35 parties from banking channel (copies of assessee’s bank account are enclosed at page nos. 14 to 31 of the paper book), all of them were located in Surat, Gujarat at an interest ranging from 0% to 6%.

2.3 Assessing Officer called for information u/s.133(6) of the Act from each of the 35 parties. According to Assessing Officer, only 8 parties replied as mentioned in his order. According to him, remaining 27 parties were either not found at the addresses given by assessee nor they responded. Assessing Officer asked to produce the said 27 parties in his office for examination. Assessee could not produce the parties, however, assessee filed confirmation, copy of return of income and bank statement (copy enclosed at page no.115 to 488 of the paper book). According to Assessing Officer, replies received from 8 parties were found evasive and unsubstantiated one.

2.4 Assessee claimed that she had taken unsecured loan of Rs.1,19,45,000/- for purchase of 50% ownership right to her husband and same was rejected by Assessing Officer on various grounds as discussed above. According to Assessing Officer, assessee failed to establish the genuineness of loans from 35 parties aggregating to Rs.1,19,45,000/- and hence, she treated this amount as unexplained cash credit u/s.68 of the Act. In appeal, CIT(A) stated that assessee has submitted confirmations from all parties. According to CIT(A), assessee by filing confirmation letters and giving of their PAN, identity of loan creditors has been established, the same cannot be said A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 7 in so far as their own creditworthiness is concerned. Genuineness of transaction and creditworthiness is taken care by fact that assessee has repaid all loans which is not disputed. Other point which created doubt in the mind of Assessing Officer that this amount has not been advanced on meager interest of 6% which is not the regular market rate of interest for an unsecured loan that too for buying a residential house by assessee. It is subjective understanding between assessee and creditors which should not be interfered by Revenue Officer. They can look into the matter as per provisions of Section 68 of the Act only. CIT(A) concluded on the basis of surrounding circumstances that assessee has failed to produce the creditors for proving their creditworthiness and mere filing of confirmations was not enough. Assessee has cooperated with Revenue authorities to produce creditors but she cannot force them to attend before Assessing Officer. Rest was upto Assessing Officer to probe into the matter as per law which has not been properly done by them.

2.5 The main point for consideration in this case is whether the loan amount of Rs.1,19,45,000/- received by assessee from 35 parties was genuine or not. To establish the genuineness of the creditors, assessee provided confirmations, copy of returns of income with copies of balance sheets and statement of income and copies of bank statements of all loan creditors as stated above. Assessing Officer in order to examine the A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 8 genuineness of loans called for information u/s.133(6) of the Act from all the loan creditors, 8 of these loan creditors responded directly to the Assessing Officer. In spite of the fact that required information to prove the genuineness of the creditors was filed by assessee, Assessing Officer treated the entire amount of unsecured loans as unexplained cash credits and added to the income of assessee. According to us, assessee has established the existence of loan creditors by virtue of providing loan confirmations, copy of ledger account of assessee in the books of account of loan creditors, returns of income of loan creditors and their computation of income with balance sheet and income and expenditure account along with PAN of loan creditors. Though, these details were produced before the Assessing Officer but he ignored the said submissions. This information was also filed before the ld. CIT(A), but he did not consider this information. Assessing Officer as well as CIT(A) ignored the facts that all the loans were taken by assessee through account payee cheques and the confirmations were filed. Hence, assessee had discharged her onus of establishing the authenticity of these loan creditors. One of the main point of Assessing Officer in rejecting the claim of assessee was non attendance of 27 parties in response to notice u/s.133(6) of the Act. Assessee has no powers to force the creditors to attend before the Assessing Officer. The notices were served on these parties which itself proved the existence. The department is fully armed to force the attendance of these parties by issuing ITA No.4009/Mum/14 A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 9 summons u/s.131 of the Act. Regarding the replies given by 8 parties, ld. Authorized Representative drew our attention that actually 12 replies were given without going to that controversy, we find that Assessing Officer has not discussed in her order how their replies were evasive and unsubstantiated. Assessing Officer made addition without making complete enquiries and without giving proper opportunity to the assessee. It is not in dispute that assessee has filed confirmations, copies of return of income and bank statements. As stated above, assessee has not power to enforce the attendance of loan creditors before the Revenue authorities. Assessing Officer has doubted the creditworthiness of the creditors on the basis of their location and nature of business which is not justified. So far as charging of interest at lower rate as stated, it depends on mutual understanding between two parties. Revenue authorities cannot sit into that decision of the creditors and same cannot be the basis of rejection of claim of assessee. As stated above, assessee has provided loan confirmations, copies of return of income, signatures of lenders on the ledger account of the assessee and the copies of financials of each creditors. Thus, assessee discharged her onus for providing genuineness of the loan. In this case, identity of creditors, capability of the creditors and genuineness of the transactions have been established. In this case, interest income has been accounted for and not disputed by Revenue authorities. In these facts and circumstances of the case, Assessing Officer was not justified in making addition A.Y. 10-11 [Sujata N. Shah vs.ITO] Page 10 in question. Assessing Officer is directed to delete the same for the reason discussed above.

Pronounced in the open Court on this the 24th day of June, 2016.

Sd/- Sd/- (RAJESH KUMAR) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai: Dated 24/06/2016 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार, आयकर अपील�य अ�धकरण, मुंबई ।