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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI
आदेश / / / O R D E R / O R D E R O R D E R O R D E R
Per B.M. Biyani, A.M.:
This appeal by assessee is directed against the order dated 14.07.2021 of learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“Ld. CIT(A)”] in Appeal No. CIT(A)-3/BPL/IT-10556/2019-20 which in turn arises out of the order of assessment dated 22.11.2019 passed by the learned DCIT, Central Circle-2, Bhopal [“Ld. AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for Assessment-Year 2017-18.
The assessee is a partnership firm engaged in the business of real estate. The assessee submitted Income-tax Return [“ITR”] declaring a total
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 income of Rs. 25,42,560/- on 28.03.2018. The case was selected for scrutiny and statutory notices were issued u/s 143(2) and 142(1) of the Act which were replied by the assessee from time to time. Finally, the Ld. AO completed assessment u/s 143(3) after making certain additions and determining total income at Rs. 1,08,94,615/-. Being aggrieved by assessment-order, the assessee filed an appeal to Ld. CIT(A) who granted part-relief to the assessee. Now being aggrieved by the order of Ld. CIT(A), the revenue has filed this appeal before us.
The revenue has raised following grounds:
“1.On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.69,38,000/- made by the Assessing Officer as unexplained cash credits.
On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.12,00,000/- made by the Assessing Officer on account of unsecured loan.
On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs.1,78,753/- made by the Assessing Officer on account of unexplained expenses.”
At the outset, we would like to mention that during the course of assessment proceedings the assessee was unable to file certain details / documents called for by the Ld. AO which are relevant to the Grounds raised in this appeal. However during first appellate proceeding, the assessee filed those details and documents to Ld. CIT(A) as “additional-evidences” under Rule 46A of the Income Tax Rules, 1962 with the reasoning that either reasonable opportunity was not given by Ld. AO to file the same or the assessee was not having those details / documents in possession during the course of assessment-proceeding. The Ld. CIT(A) called for remand-report from Ld. AO and also provided an opportunity to the Ld. AO. In response thereto, the Ld. AO filed remand-report dated 07.12.2020 which is placed at page 9 & 9A of the Paper-Book. On perusal of remand-report, it is observed that the Ld. AO has not raised any objection against the admissibility of additional-evidences by Ld. CIT(A). On perusal of the order of Ld. CIT(A), it is Page 2 of 11
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 further observed that the Ld. CIT(A) has admitted those additional-evidences after considering the remand-report submitted by Ld. AO. It is also noted that neither in the grounds of appeal nor during the course of hearing before us, the revenue / Ld. DR has raised any objection against the admission of additional-evidences by Ld. CIT(A). Therefore, while disposing of various grounds of this appeal in subsequent paragraphs, the reliance is also placed on the additional-evidences with the understanding that the revenue does not have any dispute qua those additional-evidences submitted by the assessee and relied upon by Ld. CIT(A).
Ground No.1: 5. In this ground the issue involved is the addition of Rs. 69,38,000/- made by the Ld. AO in respect of cash-deposits made in bank accounts.
During the previous year relevant to assessment-year under consideration, the assessee was having two bank accounts, viz. (i) HDFC Bank, Bhopal, and (ii) Central M.P. Gramin Bank, Bhopal, in which the assessee made a total cash-deposit of Rs. 69,38,000/- on various dates. During assessment proceeding when the Ld. AO asked the assessee to explain the sources of these cash-deposits, the assessee submitted that the deposits are duly recorded in the Cash-Book regularly maintained for the purpose of business and as such the sources of deposits are adequately explained. However the Ld. AO observed that the cash-book was not furnished by the assessee. Further the Ld. AO also observed that the assessee has not reported these cash-deposits in the ITR filed for assessment year 2017-18, although there was a specific requirement in the Form of ITR prescribed by Govt. to file such details. Based on these observations, the Ld. AO concluded that the sources of cash-deposits are not explained and hence made addition.
During appellate proceeding before Ld. CIT(A), the assessee furnished a copy of complete Cash-Book as also a detailed-chart showing date-wise details of cash withdrawals and deposits. These documents are also placed in the Paper-Book filed before us. With the support of these documents, the Page 3 of 11
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 assessee demonstrated to the Ld. CIT(A) that the entire cash-deposit of Rs. 69,38,000/- is fully recorded in the accounts maintained in the regular course of business. Regarding non-submission of information of cash- deposits in the ITR, the assessee submitted that the clerical staff who prepared ITR did not understand the gravity of filing of information and treated the same as optional since the relevant fields in the Form of ITR were also not mandatory. The Ld. CIT(A) verified these submissions of assessee and being satisfied that the assessee was having sufficient sources to make cash-deposits, deleted the entire addition of Rs. 69,38,000/- made by Ld. AO.
Before us, the Ld. DR relied upon the order passed by the Ld. AO and argued that Ld. AO has rightly made addition because the cash-book was not available before him and moreover the assessee has committed a serious default by not providing the details of cash-deposits in the ITR.
Per contra, Ld. AR submitted that the cash-book filed before the Ld. CIT(A) as an additional evidence is duly admitted as per law. Ld. AR further argued that the books of account of assessee including cash-book are duly audited and a copy of the audited Balance-Sheet is also placed at page No. 9B to 9Q of the Paper-Book. Carrying our attention to page No. 9A of the Paper Book, the Ld. AR referred to the following Para 4 of the remand-report dated 07/12/2020 submitted by Ld. AO:
“Further, in regard to issue of source of cash deposits during the year under consideration, the appellant has submitted detail of cash withdrawn & deposited in bank F.Y.2016-17 and cash book for the period of 01.04.2016 to 31.03.2017. It is seen from the assessment records as well as additional evidences that no relevant bank account statements are there for cross verification of the said cash transactions made during the year under consideration. In absence of bank account statements, source of such cash deposits of Rs. 69,38,000/- (i.e. Rs.30,00,000/- + Rs.39,38,000/-) in bank accounts are not verifiable.” Assailing this para, the Ld. AR submitted that the bank details were available before the Ld. AO during assessment-proceedings, otherwise how could he come to know that the assessee has made cash-deposits in the bank accounts. Be that as it may be, Ld. AR submitted that the cash-deposits are Page 4 of 11
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 fully and properly recorded in the cash-book which is an audited document and a detailed chart showing date-wise cash-withdrawals and cash-deposits is also filed to Ld. CIT(A) which is very much extracted in the order of Ld. CIT(A) too. Ld. AR submitted that the Ld. CIT(A) has duly verified the cash- book and arrived at a satisfaction that the assessee had sufficient funds to make cash-deposits. With these submissions, the Ld. AR requested to uphold the deletion of addition made by Ld. CIT(A).
We have considered rival submissions of both sides and perused the material held on record. It is an admitted fact that the cash-book was not produced before the Ld. AO at the time of making assessment and the details of cash-deposits were also not mentioned in the Form of ITR. However, we observe that during the course of first appellate-proceeding before Ld. CIT(A), the assessee has submitted a copy of cash-book which stands admitted by Ld. CIT(A) as an additional-evidence. We also observe that the revenue has not expressed any objection or doubt against the admissibility of cash-book by the Ld. CIT(A) or on the entries of cash-withdrawals / cash-deposits incorporated in the cash-book. We further observe that the assessee is a partnership firm and it has maintained regular books of account as required u/s 44AA of the act and those books have also been subjected to audit u/s 44AB of the act. We also find that the Ld. AO has not rejected cash-book by invoking section 145 of the act. Regarding non-filing of information of cash- deposits in the Form of ITR, the assessee has given a sufficient explanation that the clerical staff did not understand the importance of filing of information and further the fields prescribed in ITR for this purpose were also not mandatory. Even otherwise giving or non-giving details in the Form of ITR may have different consequences but cannot be a basis for making addition u/s 68/69 of the act. Therefore, in such circumstances when the cash-deposits of Rs. 69,38,000/- made during the year on various dates are fully recorded in the cash-book of assessee, the sources of cash-deposits stand fully explained. Therefore, we are of the considered view that the Ld. CIT(A) has rightly deleted the addition of Rs. 69,38,000/- made by Ld. AO.
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M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 We do not find any infirmity in the order of Ld. CIT(A). Hence Ground No. 1 of the revenue is dismissed.
Ground No.2
In this ground the issue involved in the addition of Rs. 12,00,000/- made in respect of unsecured loans taken by the assessee.
During assessment-proceeding, the Ld. AO observed that the assessee has taken a loan of Rs. 6,00,000/- from Smt. Dhanlaxmi and another loan of Rs. 6,00,000/- from Shri Tulsi Das Agarwal. The Ld. AO made addition of Rs. 12,00,000/- u/s 68 in respect of these loans. We shall deal with the loans one by one.
(a) Loan taken from Smt. Dhanlaxmi - Rs.6,00,000/-
Ld. AO has made this addition for the reason that the assessee did not file the letter of confirmation and bank statement of the lender and therefore the ingredients of section 68, viz. identity of the lender, creditworthiness of lender and genuineness of transaction are not satisfied. During first appellate-proceeding, the assessee has submitted letter of confirmation and bank statement of the lender to the Ld. CIT(A) as an additional evidence which stand accepted by Ld. CIT(A). Copies of these documents are also filed in the Paper Book. The bank-statement contains the name and address of the lender which establishes the identity of the lender. The funds involved in the loan have transferred from the bank account of the lender to the bank account of assessee, which establishes the creditworthiness of the lender as well as genuineness of transaction. Ld. CIT(A) has also taken into account these facts and concluded that the ingredients of section 68 are satisfied. On a query by bench regarding non-submission of ITR of the lender, the Ld. AR pointed out that the loan has already been repaid and the lender has not provided copy of ITR to the assessee. Therefore, the assessee is unable to produce the same. Having regard to the documentary evidences placed on record, we are of the considered view that the assessee has discharged primary onus to satisfy the requirements of section 68 and therefore the Ld. Page 6 of 11
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 CIT(A) was justified in deleting the addition of Rs. 6,00,000/- made by Ld. AO. We do not find any infirmity in the order of Ld. CIT(A). Accordingly, we uphold the action of Ld. CIT(A).
(b) Loan taken from Shri Tulsi Das Agrawal – Rs. 6,00,000/-
Ld. AO has made this addition for the reason that the assessee did not file the copy of ITR of the lender. Ld. AO has also observed that the assessee has claimed to have paid an interest of Rs. 15,000/- to the lender but the interest-payment is not reflected in the copy of ledger account filed before him which raises suspicion about the loan having been taken. With these observations, the Ld. AO concluded that the ingredients of section 68, viz. identity of the lender, creditworthiness of lender and genuineness of transaction are not satisfied. During first appellate-proceeding, the assessee filed a copy of ledger account as well as bank-statement of the lender to demonstrate that the interest of Rs. 15,000/- was in fact paid on 11.05.2016 through banking channel. Copies of these documents are also filed in the Paper Book. The bank-statement of the lender contains the transaction of receipt of loan of Rs. 6,00,000/- as well as payment of interest of Rs. 15,000/-. The Ld. CIT(A) has also taken into account these documents and came to a conclusion that all ingredients of section 68 are satisfied. On a query by bench regarding non-submission of ITR of the lender, the Ld. AR pointed out that the loan has already been repaid and the lender has not provided copy of ITR to the assessee. Ld. AR expressed inability of the assessee to produce the ITR of lender. Having regard to the documentary evidences placed on record, we are of the considered view that the assessee has discharged primary onus to satisfy the requirements of section 68 and therefore the Ld. CIT(A) was justified in deleting the addition of Rs. 6,00,000/- made by Ld. AO. We do not find any infirmity in the order of Ld. CIT(A). Accordingly, we uphold the action of Ld. CIT(A).
In view of these findings, we are of the view that the Ld. CIT(A) has rightly deleted the addition of Rs. 12,00,000/- which does not require any interference. Accordingly, we dismiss the Ground No. 2 of revenue. Page 7 of 11
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 Ground No. 3:
In this ground the revenue has claimed that the Ld. CIT(A) has erred in deleting the disallowance of Rs. 1,78,753/- made by the Ld. AO on account of unexplained expenses.
During assessment-proceeding, the Ld. AO has made disallowance of following expenses:
i. Advertisement and Publicity expenses: 57,500/- ii. AMC charges 45,880/- iii. AMC charges 38,715/- iv. AMC charges 68,960/- Total 2,11,055/-
Ld. AO has made disallowance of advertisement expenses for the reason that the assessee has not submitted copy of ledger account. The disallowances of AMC charges of Rs. 45,880/-, Rs. 38,715/- and Rs. 68,960/- were made for the reason that the payments could not be verified.
During appellate proceeding, the assessee furnished copies of ledger- accounts as well as bank-accounts to Ld. CIT(A) as additional evidences. The Ld. CIT(A) has examined those documents and thereafter granted a relief of Rs. 1,78,753/- by observing as under:
“4.2.1 I have considered the facts of the case, plea raised by the appellant and findings of the AO. The additional evidences furnished by the appellant during appellate proceedings have been examined and verified by the AO. On perusal of the assessment order, it is seen that the disallowance made by the AO is on account of expenses towards advertisement / publicity and AMC. The disallowance made by the AO is on higher side and therefore, is restricted to 30%. Thus, addition made by the AO amounting to Rs. 32,302/- is Confirmed and appellant gets relief of Rs. 1,78,753/-. Therefore, appeal on this ground is Partly Allowed.” 18. Before us, the Ld. DR relied upon the order of Ld. AO and argued that the disallowance of Rs. 2,11,055/- was rightly made by the Ld. AO owing to
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M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 non-production of evidences by the assessee. Ld. DR further argued that there is no basis with the Ld. CIT(A) to restrict disallowance to 30% and grant relief of Rs. 1,78,753/-. According to Ld. DR, the fact that the Ld. CIT(A) has sustained part of the disallowance even after examining additional-evidences submitted by the assessee, is sufficient enough to indicate that the claim of assessee is not correct. Hence, according to Ld. DR, the Ld. CIT(A) ought to have confirmed the disallowance of Rs. 2,11,055/- in entirety rather than restricting it to 30%.
Per contra, the Ld. AR argued that the assessee has given the evidences as required by Ld. AO during first-appeal proceedings in terms of Rule 46A and on the basis of those evidences, the impugned expenses were fully verified and proved. Ld. AR submitted that in such circumstances, ideally the Ld. CIT(A) should have deleted the full disallowance of Rs. 2,11,055/- but however the Ld. CIT(A), for the reasons best known to him, had confirmed disallowance to the extent of 30% and granted a part-relief of Rs. 1,78,753/- only. Ld. AR submitted that the assessee in fact deserved fully relief of Rs. 2,11,055/- at the level of Ld. CIT(A) itself and part-relief of Rs. 1,78,753/- is not sufficient, but the assessee has not filed any MOC / Appeal to contest this aspect just to close the matter. Ld. AR submitted that there is nothing wrong in the relief of at least Rs. 1,78,753/- given by Ld. CIT(A) to the assessee. With these submission, Ld. AR requested to uphold the action of Ld. CIT(A).
We have considered submissions of both sides and perused the material on record. We observe that the Ld. AO made a disallowance of Rs. 2,11,055/-, out of which the Ld. CIT(A) restricted disallowance to the extent of 30% with the reasoning that the disallowance was on higher side. We observe that the amount of disallowance computed by Ld. CIT(A) is Rs. 32,302/- which is mathematically incorrect because 30% of Rs. 2,11,055/- comes to Rs. 63,316/- and not Rs. 32,302/-. This prompted us to further dig the facts and findings of lower authorities. While doing this exercise, we came to know that in Para No. 1 / Page No. 2 of the assessment-order, the Ld. AO has reported that the assessee has accepted having not deducted TDS out of Page 9 of 11
M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 the AMC charges of Rs. 1,07,675/- (Rs. 38,715/- + Rs. 68,960/-) due to oversight. Further, in Para No. 3 / Page No. 1 of the remand-report, the Ld. AO has once again reported that TDS was not deducted out of the payment of Rs. 1,07,675/-. Thus, there is a factual finding of non-deduction of TDS out of the expenditure of Rs. 1,07,675/- available at the time of deciding appeal by Ld. CIT(A) and the same is not disputed by assessee, rather the same has been accepted by the assessee. Now, if we move to section 40(a)(ia) of the act, a disallowance of 30% is prescribed in case of non-deduction of TDS. Accordingly, the disallowance due to non-deduction of TDS also comes to Rs. 32,302/- (30% of Rs. 1,07,675/-) and this exactly tallies with the disallowance of Rs. 32,302/- made by Ld. CIT(A). Thus, the rate of disallowance (30%) and amount of disallowance (Rs. 32,302/-) are perfect fit on the premise of TDS-default and therefore it appears that Ld. CIT(A) intended to make disallowance for non-deduction of TDS but inadvertently mentioned something else. If it is so, there would not be any grievance to both sides because the disallowance of Rs. 32,302/- as well as relief of Rs. 1,78,753/- is very much correct. Therefore whether the Ld. CIT(A) restricted disallowance to 30% on the ground of higher side or for TDS default, the relief of Rs. 1,78,753/- granted to the assessee does not suffer from infirmity because the relevant expenses were verifiable by the documentary evidences produced before Ld. CIT(A) as additional-evidences. Accordingly, this Ground No. 3 of revenue is also dismissed.
In the result, this appeal of revenue is dismissed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 26/07/2022.
Sd/- Sd/-
(SUCHITRA KAMBLE) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore
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M/s. Signature Builders ITA No.185/Ind/2021 Assessment year 2017-18 �दनांक /Dated : 26.07.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
Date of taking dictation 13.7.22 2. Date of typing & draft order placed before the 13.7.22 Dictating Member 3. Date on which the approved draft comes to the Sr. P.S./P.S. 4. Date on which the fair order is placed before the Dictating Member for pronouncement 5. Date on which the file goes to the Bench Clerk 6. Date on which the file goes to the Head Clerk 7. Date on which the file goes to the Assistant Registrar for signature on the order 8. Date of dispatch of the Order
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