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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 07/11/2024 Date of Order – 28/11/2024
O R D E R PER K.M. ROY, A.M.
The assessee has filed the captioned appeal challenging the impugned order dated 16/10/2023, passed by he learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, for the assessment year 2013-14.
The following grounds raised by the assessee:-
“1. The notice issued u/s 148 after framing of regular assessment u/s 143(3) is not based on any new tangible material brought on record subsequent to framing of regular assessment and thus notice issued u/s 148 is on mere change of opinion and is not in accordance with law. 2. The learned CIT(A) ought to have held on the facts and evidence on record that notice issued u/s 148 is bad in law and consequent reassessment framed is liable to be cancelled.
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3. Assessment framed u/s 144 r.w.s. 147 of I.T. Act 1961 is bad in law in view of no notice u/s 143(2) of I.T. Act 1961 having been issued before framing assessment even though assessee has submitted return of income on 23/10/2018 in respect to notice u/s 148 of I.T. Act 1961.
The addition made by A.O. and upheld by CIT(A) at Rs.50,00,000/- in respect to loan obtained from M/s Abhilasha Shoppers Pvt. Ltd. u/s 68 or u/s 69A of I.T. Act 1961 is illegal, invalid and bad in law.
5. The learned CIT(A) ought to have deleted the addition at Rs.50 lacs u/s68 or u/s 69A of I.T. Act 1961 in respect to unsecured loan received from M/s Abhilasha Shoppers Pvt. Ltd. 6. The addition made by A.O. and upheld by CIT(A) at Rs.1,99,520/- u/s 36(1)(iii) of I.T. Act 1961 being interest paid to M/s Abhilasha Shoppers Pvt. Ltd. is unjustified, unwarranted and bad in law. 7. The learned CIT(A) ought to have deleted the addition of Rs.1,99,520/- assessed under section 36(1)(iii) of I.T. Act 1961 in respect to interest paid to M/s Abhilasha Shoppers Pvt. Ltd. 8. The assessee denies liability to pay interest under section 234A, 234B and 234C of I.T. Act 1961. Without prejudice, levy of interest under section 234A, 234B and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive. 9. The order passed by CIT(A) is without providing reasonable opportunity of being head and is therefore illegal, invalid and bad in law. 10. Any other ground that shall be prayed at the time of hearing.”
Facts in brief:- In the case of assessee regular assessment was framed under section 143(3) of the Income Tax Act, 1961 ("the Act"), on 10/08/2015 determining total income at ` 54,51,280. Notice under section 148 of the Act was issued on 26/03/2018, in pursuance to fresh information received from the DDIT (Inv.), Unit-4, Kolkata, dated 08/03/2018. The assessee has submitted reply on 06/06/2018, stating that earlier return of income filed by the assessee on 29/09/2013, may be considered in response to the notice under section 148 of the Act. The assessee has subsequently uploaded return of income on 23/10/2018, declaring income at ` 53,38,280. The above facts
3 Chandrakumar Madhusudanji Jajodia ITA no.399/Nag./2023 are indicated in the assessment order at Para–6 and 8. The Assessing Officer concluded that the return of income submitted by the assessee is not in time and hence it is not a valid return of income and consequently the assessment was framed under section 144 of the Act. The Assessing Officer has discussed the information received from the DDIT (Inv.), Unit-4, Kolkata, and at Para– 12 of the assessment order, has reproduced the extract of the statement of certain persons recorded by Investigation Wing of Kolkata. On the basis of such statement, the Assessing Officer has concluded that the assessee has failed to discharge its onus to explain the credit in terms of provisions of section 68 of the Act. The Assessing Officer in the reassessment framed on 19/12/2018, has made addition of ` 50 lakh under section 68 of the Act by not accepting the credit in the name of M/s. Abhilasha Shoppers Pvt. Ltd., and interest paid on such loan at ` 1,99,520. The assessee being aggrieved carried the matter before the first appellate authority.
4. Before the learned CIT(A), the assessee raised various grounds of appeal being legal as well as on merits of the addition made in the re– assessment framed. The learned CIT(A), at Para–7 & 8 concluded that the Assessing Officer has made the addition after referring to the investigation report of the DDIT (Inv.), Unit-4, Kolkata, in the year 2018 and, therefore, the addition made at ` 50 lakh and ` 1,99,520, was required to be upheld in the re–assessment framed. The learned CIT(A), National Faceless Appeal Centre, vide its order dated 16/10/2023, has not accepted the grounds of appeal of the assessee by upholding the addition made at ` 50 lakh under section 68/69A of the Act and interest at ` 1,99,520.
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In grounds no.1 & 2, the assessee has challenged the validity of notice under section 148 of the Act.
In ground no.3, the assessee has challenged the validity of assessment framed without issuance of notice under section 143(2) of the Act even though the return of income was filed on 23/10/2018.
In grounds no.4 & 5, the assessee has challenged the addition of ` 50 lakh in respect to loan obtained from M/s. Abhilasha Shoppers Pvt. Ltd., under section 68 or under section 69A of the Act being illegal, invalid and bad in law.
In grounds no.6 & 7, the assessee has challenged disallowance of interest at ` 1,99,520.
Before us the learned Counsel, Shri Kishore P. Dewani, Advocate, appearing for the assessee submitted that in the first appellate order, the learned CIT(A) did not considered and/or given one single reason as to why the submissions of the assessee have not been accepted. The learned Counsel submitted that the confirmation indicating details of PAN and address were furnished and the onus to explain the credit was discharged. The learned Counsel further submitted that the identity of the company is not in dispute and corporate entity was assessed to tax. The loan transaction was through proper banking channel and the assessee has repaid the loan along with interest. The observation of the Assessing Officer indicates that he is suspecting source of source. The learned Counsel submitted that the assessee
5 Chandrakumar Madhusudanji Jajodia ITA no.399/Nag./2023 is not required to provide source of source. He further submitted that the statement of the third party, unless same has stood the test of cross examination, does not carry any evidentiary value for making the addition. A gist of submissions, as submitted by the assessee in respect to grounds no.1 to 7, is reproduced herein below for ready reference:-
"Ground No.1 & 2 : Notice issued u/s 148 of I.T. Act 1961 is not in accordance with law. A.O. Para 2 to 6 Page 1 & 2 CIT(A) Para 5 Page 5 & 6 A) Notice has been issued u/s 148 of I.T. Act 1961 on 26/03/2018 on the basis of report dated 08/03/2018 of Investigation Wing of Kolkata. No independent enquiry has been made by A.O. in respect to information received from Investigation Wing of Kolkata before issue of notice u/s 148 of I.T. Act 1961 on 26/03/2018. CIT(A) at para 5.1.3 has noted that A.O. has acted upon the information received from Investigation Unit. Notice issued u/s 148 is not in accordance with law. B) The assessee in response to show cause notice had objected on the reasons recorded for issue of notice u/s 148 by making written submission vide letter dated 10/12/2018 (p- 261). A.O. has not disposed-off objection. Reassessment framed without disposing-off objection is bad in law. Reliance on: i) Hon‟ble Bombay at Goa High Court in Tax Appeal No.63 of 2007 in the case of Fomento Resorts & Hotels Ltd. vide order dated 30/08/2019 (P- 82 – 97) (96) C) A.O. in regular assessment framed on 10/08/2015 has accepted the loan obtained from M/s Abhilasha Shoppers Pvt. Ltd. to be genuine. Identity and creditworthiness of the lender was accepted by A.O. Fresh information to initiate reassessment is general in nature and is not on specific transaction of assessee. Evidence placed on record is not found to be incorrect or false. Conclusion of escapement of income tantamount to mere change of opinion. Belief of escapement of income could not be derived on the basis of report of Investigation Wing being not specific to transaction of loan. Reliance on: (2010) 320 ITR 561 (SC) CIT vs. Kelvinator of India Ltd. (P- 98 – 102) (99)
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D) Reasons recorded indicate that A.O. has no new intangible material on record. Report of Investigation Wing as well as approval from Joint Commissioner of Income Tax was not provided to assessee. Notice issued u/s 148 is not in accordance with law. E) Reliance on: i) (2020) 422 ITR 0337 (Bom.) CIT vs. Shodiman Investments Pvt. Ltd. (60 – 67) (67) ii) (1976) 103 ITR 0437 (SC) ITO & Ors. Vs. Lakhmani Mewal Das (68 – 78) (76, 77) iii) (2003) 259 ITR 0019 (SC) GKN Driveshafts (India) Ltd. vs. ITO & Ors. ( 79 – 81) (81) F) W/s before CIT(A) (P- 1 to 9). In appellate order CIT(A) has not considered/given one single reason as to why submission of assessee are not being accepted. Dismissing of appeal is arbitrary. Ground No.3: Assessment framed u/s 144 r.w.s. 147 of I.T. Act 1961 without issue of notice u/s 143(2) is bad in law. CIT(A) Para 6 Page 6 & 7 A) A.O. at para 8 concluded that return filed by assessee is not valid return. Without issue of notice u/s 143(2) A.O. cannot assume valid jurisdiction to pass order u/s 143(3)/144 of I.T. Act 1961. Filling of return on 06/06/2018 and again by uploading on 23/10/2018 is sufficient compliance of notice u/s 148 of I.T. Act 1961. Provisions of section 143(2) are mandatory. Without issue of notice u/s 143(2) no valid assessment is framed. Reliance on: i) (2010) 321 ITR 362 (SC) ACIT & Anr. Vs. Hotel Blue Moon (P- 103 – 112) (105) ii) (2019) 108 taxmann.com 183 (SC) CIT vs. Laxman Das Khandelwal (P- 113 – 118) (114) iii) ITAT order in in the case of Shri Sudhir Menon vide order dated 03/10/2018 (P- 119 – 128) (120, 127) iv) ITAT order in in the case of Shri Ajaysingh Ganjanansingh Gour vide order dated 26/10/2018. (P- 129 – 139) (132, 138) v) ITAT order in ITA No.855/Mum/2013 in the case of M/s Oracle Financial Services Software Ltd. vide order dated 17/12/2019. (P- 140 – 148) (147)
7 Chandrakumar Madhusudanji Jajodia ITA no.399/Nag./2023 in the case of S.M. Batha Education Trust vide order dated 04/04/2019. (P- 149 – 153) (150, 152) 3. Ground No.4 & 5: Addition made by A.O. at Rs.50 lacs u/s 68 or 69A of I.T. Act 1961. A.O. Para 13 - 24 Page 20 - 22 CIT(A) Para 7 Page 7 & 8 A) In the case of assessee regular assessment was framed u/s 143(3) on 10/08/2015 determining total income at Rs.54.51 lacs. Confirmation in respect to loan obtained at Rs.50 lacs from Abhilasha Shoppers Pvt. Ltd. was submitted. A.O. had satisfied regarding identity, genuineness and creditworthiness of loan transaction. Repayment of loan is made through proper banking channel and same has been recorded in books of account. Repayment made during Asstt. Year 2015-16 is accepted by Revenue. Interest is paid to lender after deduction of TDS. The interest paid is allowed in regular assessment framed for Asstt. Year 2013-14, 2014-15 & 2015-16. B) Assessee has submitted confirmation, bank statement and audited financial statements of M/s Abhilasha Shoppers Pvt. Ltd. Confirmation for Asstt. Year 2015-16 being year of repayment is submitted. (P – 46 to 48) The lender is assessed to Income Tax. The PAN of lender is on record. Lender is not related party. Interest paid, TDS deducted and loan amount repaid. Onus to explain receipt of loan u/s 68 or u/s 69A has been satisfactorily discharged. No enquiry made by A.O. before making addition. Reliance on : i) (1963) 49 ITR 723 (Bom) Orient Trading Co. Ltd. vs. CIT (P- 154 – 163) (54) ii) (2014) 366 ITR 232 (P&H) CIT vs. Varinder Rawlley (P- 164 – 168) (167, 168) iii) (1986) 159 ITR 0078 (SC) CIT vs. Orissa Corporation Pvt. Ltd. (P- 169 – 175) (171, 175) iv) (2017) 397 ITR 0136 (Bom.) CIT vs. Orchid Industries Pvt. Ltd. (P- 176 – 178) (177, 178) C) The A.O. has discussed the modus operandi of accommodation entries on the basis of Investigation Wing report. Statements of various persons are reproduced in assessment order. No specific adverse observation is indicated in the statement of various persons reproduced in assessment order as regard to loan transaction and repayment thereof.
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Evidence submitted by assessee has not been found faulted. A.O. has brought no evidence to rebut the legal evidence submitted by assessee for explaining the transaction of loan. Addition made by A.O. is unjustified. D) At para 17 A.O. observed that unaccounted cash generated from real estate business and allied activities and same is routed with the help of entry operators. Allegation made by A.O. is without support of any shred of evidence brought on record. No deemed income can be assessed on mere presumption. A.O. has failed to bring evidence on record to show that assessee was in possession of money and same remains unexplained. Addition made by A.O. on assumption and presumption under deeming provisions of section 68 or 69A is highly arbitrary and unjustified. E) The A.O. himself is not clear as to which of the provisions is applicable in respect to loan transaction. This is demonstrative of the fact that no evidence on record to either invoke provisions of section 68 or 69A of I.T. Act 1961. Addition made by A.O. is unjustified. F) Observation of A.O. at para 40 & 41 is factually incorrect. During regular assessment proceedings loan transaction was verified and examined while accepting the same as genuine loan. Observations of A.O. thus are indicative of non-application of mind. G) In submission made before A.O. on 10/12/2018 (P- 260 – 264) it was submitted that name of assessee or lender is not mentioned in any of statement (P- 263). This fact is not disputed by A.O./CIT(A). Statements are thus no adverse evidence. Addition made is thus unjustified. H) W/s before CIT(A) (P- 23 to 41) . In appellate order CIT(A) has not considered/given one single reason as to why submission of assessee are not being accepted. Dismissal of appeal is arbitrary. I) All the statements recorded were in the course of some independent case not related to assessee. It is not the case of transaction of assessee being verified. General Statements by itself in the absence of any enquiry can be no basis for addition or to rebut the legal evidence placed on record discharging onus to explain the credit. J) Reliance on judgement of ITAT, „B‟ Bench, Mumbai in in the case of Blue Circle Infratech vide order dated 18/11/2021. (P- 36 -40) (P- 245 – 250) (248-249) K) Repayment of loan accepted by revenue authorities Para 10 & 11 Page 3 & 4 of assessment order. No addition u/s 68 can be made. Reliance on: i) (2014) 42 taxmann.com 251 (Guj.) CIT vs. Ayachi Chandrashekhar Narsangji (251 – 253) ii) (2022) 145 taxmann.com 27 (Guj.) PCIT vs. Ambe Tradecorp (P.) Ltd.
9 Chandrakumar Madhusudanji Jajodia ITA no.399/Nag./2023 iii) (2024) 164 taxmann.com 764 (Guj.) PCIT vs. Merrygold Gems (P.) Ltd. L) A.O. has not allowed opportunity to cross examine the persons. The statement relied upon by A.O. not having stood to the test of cross examination are liable to be excluded. Reliance on: i) (2015) 127 DTR 0241 (SC) Andaman Timber Industries vs. Commissioner of Central Excise (P- 179 – 183) 181 G) The identity of company is not in dispute and corporate entity is assessed to tax. Loan transaction is through proper banking channel. Observation of A.O. indicates that he is suspecting source of source. Assessee is not required to prove source of source. Reliance on: i) (2020) 423 ITR 0531 (Bom.) Gaurav Triyugi Singh vs. ITO (P- 184 – 187) ii) Hon‟ble High Court of Bombay order in of 2017 in the case of M/s Ami Industries (India) Pvt. Ltd. vide order dated 29/01/2020. (P- 188 – 202) iii) ITAT order in in the case of Smt. Prem Anand vide order dated 13/04/2017 P- 203 – 218) I) Statement of thirty party unless same has stood the test of cross examination does not carry any evidentiary value for making addition. Statement of third person without any corroborative evidence does not make the loan transaction liable to be assessed u/s 68/69A of I.T. Act 1961.
4. Ground No.6: Addition made by A.O. at Rs.1.99 lacs u/s 36(1)(iii) of I.T. Act 1961. A.O. Para 34 - 35 Page 24 CIT(A) Para 8 Page 8 A) Interest paid by assessee is through proper banking channel. TDS paid to the account of Government. Genuineness of loan transaction is beyond doubt. Assessee had satisfactorily discharged the onus to explain the cash credit. Loan obtained has been utilized for the purpose of business. Interest paid to very same party during subsequent assessment year has been allowed in the regular assessment framed. Addition made by A.O. by disallowing interest paid is unjustified.”
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Per–contra, the learned Departmental Representative (“the learned D.R.”) strongly relying upon the order passed by the Assessing Officer and the learned CIT(A), submitted that the dismissal of assessee’s appeal by the learned CIT(A) was after indicating detailed reasons, which do not call for any interference and in this view of the matter, the appeal filed by the assessee be dismissed.
We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. It is seen that the assessee, vide submission dated 10/12/2018, had submitted before the Assessing Officer, a detailed reply along with documents wherein confirmation in respect of loan taken from M/s. Abhilasha Shoppers Pvt. Ltd. for the period from 01/04/2012 to 31/03/2015 were submitted. Bank statement highlighting the receipts and repayments of loan were also placed on record. In Para-5 of letter, it was submitted that the statement of various persons does not mention name of assessee or M/s. Abhilasha Shoppers Pvt. Ltd. The reply of the assessee is placed in the Paper Book at Page–260 to 270. It is clear that the loan creditor is assessed to income tax and its address and PAN details are matter of record. The financial statements of M/s.Abhilasha Shoppers Pvt. Ltd., were also submitted and the same is placed at Page–52 to 57. The amount received and payable by the assessee as on 31/03/2013, is verifiable from the financial statements of the lender which is placed at Page–57. The TDS certificate is placed at Page–58 & 59. The assessee has discharged its onus to explain the credit by adducing proper legal evidence. The amount has been repaid through proper banking channel and same is verifiable from the 11 Chandrakumar Madhusudanji Jajodia ITA no.399/Nag./2023 bank statement of the assessee which is placed in the Paper Book at Page–50 and 51. The statements of various persons reproduced in assessment order are not with reference to the verification of loan transaction of the assessee. They are general statements recorded by Investigation Wing of Kolkata, which are reproduced in the assessment order and are not in respect to any enquiry of loan in the case of the assessee. Confirmed copy of ledger evidencing repayment to lender is furnished. The legal evidence placed on record to explain loan credit does not get discredited by general statements.
The issue of making the addition under section 68 of the Act, when the loan credit has been repaid through proper banking channel, is considered by the Co–ordinate Bench of the Tribunal, Nagpur Bench, wherein the same Bench is a party to that order, in DCIT v/s M/s. Vibrant Global Capital Ltd., ITA no.229/Nag./2022, vide order dated 25/10/2024. On a careful analysis of the judgments of the Hon’ble Gujarat High Court in PCIT (C) v/s Ambe Tradecorp Pvt. Ltd., [2023] 290 Taxman 471 (Guj.) and in PCIT v/s Merrygold Gems Pvt. Ltd. [2024] 164 taxmann.com 764 (Guj.), wherein we find that the Hon’ble Gujarat High Court has concluded that when the repayment of loan is accepted by the Department in assessee’s case, the addition made under section 68 of the Act is unjustified and unsustainable. In the present case also, the loan amount has been repaid through proper banking channel along with interest. On the above factual position, there remains no scope to make addition under section 68 of the Act. Consequently, respectfully following the decision in the case of M/s. Vibrant Global Capital Ltd. (supra) and detailed legal position discussed therein, we are of the considered opinion that the 12 Chandrakumar Madhusudanji Jajodia ITA no.399/Nag./2023 addition made in the present case of the assessee under section 68 of the Act is unjustified and unsustainable on facts and in law. In assessee’s case, the confirmation and financial statement of lender have been placed on record. The assessee has reasonably discharged his onus to explain the credit by adducing legal evidence on record. Accordingly, we set aside the impugned order passed by the learned CIT(A) and the Assessing Officer on this issue and the addition made under section 68 of the Act at ` 50 lakh is hereby directed to be deleted. Thus, the grounds no.4 & 5, raised by the assessee are allowed.
In respect to addition of ` 1.99 lakh being interest paid to M/s. Abhilasha Shoppers Pvt. Ltd., it was disallowed as addition was made in respect to loan transaction being unexplained. The interest paid by the assessee is through proper banking channel. The TDS was deducted and was deposited in the account of the Government. The genuineness of loan transaction is held by us to have been established and we have ordered deletion of the addition of ` 50 lakh. The loan obtained has been utilized for the purpose of business. The interest paid to the very same party during subsequent assessment year has been allowed. Accordingly, the addition made by the Assessing Officer by disallowing interest paid is held to be unjustified. Therefore, we set aside the impugned order passed by the learned CIT(A) on this issue and direct to delete the addition made at ` 1,99,520, on account of interest paid. Accordingly, grounds no. 6 & 7, raised by the assessee are allowed.
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Insofar as grounds no.1 to 3, are concerned, the assessee has challenged the validity of notice issued under section 148 of the Act and the assessment framed without issuance of notice under section 143(2) of the Act after the assessee having submitted the return of income.
We find substantial force in the submission made and reproduced at Para–9 of this order. Factual as well as legal submissions made in the submission are found to be correct. In terms of law laid down by Hon’ble Supreme Court in ACIT v/s Hotel Blue Moon, [2010] 321 ITR 362 (SC), and notice under section 143(2) of the Act not having been issued despite the assessee having submitted return of income on 23/10/2018, hence, we hold that no valid assessment is framed. The addition made in the re–assessment framed having been deleted on merits; rendering of the decision on legal grounds has become academic in nature. We, therefore, do not engage to give any specific findings and/or directions in respect of grounds no.1 to 3. Thus, grounds no.1 to 3, are accordingly disposed off.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 28/11/2024