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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
आदेश ORDER �ी अिमत शु�ला,�या.स :- PER AMIT SHUKLA, J. M.: The aforesaid appeal filed by the revenue against impugned order dated 02.05.2014, passed by CIT(Appeals) -36, Mumbai for the quantum of assessment passed under section 143(3) for the assessment year 2009-10 on the following grounds:-
“1. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was right in deleting the addition of Rs.1,55,10,000/- on account of unsecured loans under section 68 as the assessee was unable to substantiate the genuineness of the transaction and unable to prove the capacity and credit worthiness of the lenders.
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2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting addition of Rs.1,55,10,000/- under section 68 of the act without appreciating the fact that in the case of each loan creditor, there was credit entry of a corresponding amount immediately preceding the advancement of loan especially when loan obtained through banking channel does not make the transaction sacrosanct and the assessee failed to discharge the onus of burden of proof”.
The main issue involved in the appeal is addition on account of unsecured loan aggregating to Rs.2,02,50,000/- (disputed before us, Rs.1,55,10,000) received by the proprietorship entities of the assessee from 29 persons. The background of the addition as been discussed by the AO is that a search and seizure action under section 132(1) was conducted in the case of Haresh Majethia. During the course of which, it has revealed that Majethia Brothers, that is, Haresh Majethia and Liladhar Majethia (assessee) through their various proprietorship concerns, partnership firms and companies were engaged in the real estate business as broker- cum-investor and also in purchase and sales of land in Navi Mumbai. The assessee has two proprietary concerns, M/s Ekta Trading Co. and M/s K M Developers. During the search, certain loose papers were found which revealed that, several loans were taken and given by the assessee and their family concerns, the details of which had been incorporated by the AO at page 3. The AO noted that the Investigation Wing to ascertain the genuineness of the loans made field enquiries to check the identity of the some of the lenders; to verify the genuineness of the transaction and the creditworthiness of the lenders on random basis. In the statement recorded under section 131 of the of the Act from some of the lenders, it was stated by them that they have only received cheques from persons related to Majethia Group for depositing into
3 Shri Liladhar Ravji Majethia / Thakkar Majethia Group. Some of the lenders were having very meager income. Based on these enquiries, it was deduced that firstly, the lenders were men of little means; secondly, they were not aware of the amounts from whose accounts cheques were issued and deposited in their account; thirdly, none of them had any business relationships with the said persons; fourthly, they were given the cheques by the assessee-group which at times were directly credited by them into their accounts and in turn have issued the cheques in favour of the assessee group; lastly, the return of income in the name of these lenders were filed by the assessee group itself so as to create as semblance of genuineness of transaction. Based on these observations made by the Investigation Wing, AO doubted the whole of unsecured loans as appearing in the Balance sheet of the two proprietorship concerns of the assessee. In support of the genuineness of the credit, the assessee along with the confirmation of the lenders had filed copy of Income-tax return, PAN card, copy of bank statement etc. From the perusal of the bank statements of the lenders, the AO observed that the lenders do not have the regular source of income and huge funds have been credited to the bank accounts before advancing the loans. Summons were also issued to various parties on which AO observed that the responses received from such lenders were posted from the Post Office located at Vashi, i.e. near the address and locality of the assessee. Accordingly, he issued a show cause notice to prove the genuineness of the transactions and the credential of the lenders to lend the sum to the assessee. In response to AO’s querry, the assessee has filed his detailed explanation along with documents / evidences which has not been discussed in detail in the assessment order. The AO observed that, assessee has failed to produce single party for cross verification and many lenders filed their E-returns and sources of their income have been stated from ‘income from other sources’ and did not had Balance-sheet along
4 Shri Liladhar Ravji Majethia / Thakkar with the return. From the perusal of their Bank Statement, he held that there is no regular or periodical income credited to the bank accounts. Thus, he concluded these are bogus transactions taken by the assessee in the form of loan before the purchase of a property by any of the group concern. His detailed conclusion has been discussed in para 5.4 to 5.7 of the assessment order. Thereafter, he discussed the concept of law of section 68 and various case authorities. Accordingly, he confirmed the unsecured loans which has been taken at Rs.2,04,83,832/-, though the correct figure was Rs.2,02,50,000/-.
Before the CIT(A), the break-up of loan taken by the two Proprietorship concerns from various persons were as under:-
Sr.No. Name of the Party Amount(Rs.) Entities 1 M/s Ekta Trading Co. 1,22,60,000 17 2 M/s K M Deveopers 79,90,000 12 TOTAL 2,02,50,000 29 The further break up of loans taken from the 29 entities/persons was as under:- Ekta Trading Co. (ETC) S.No. Name of the Party Amount (Rs.) 1 Anish P Parab 4,00,000/- 2 Bharat Kanubhai Shah 3,50,000/- 3 Bharti Suresh Bhanushali 5,00,000/- 4 Champaben G Ruparel 3,50,000/- 5 Chunilal Premji Gosar 5,00,000/- 6 L R Shah (HUF) 4,00,000/- 7 K C Trivedi (HUF) 4,00,000/- 8 K M Developers 61,50,000/- 9 Kalpana Valji Bhanushali 5,00,000/- 10 Khushali Atul Poladiya 5,00,000/- 11 Kishor V Kawa 2,00,000/- 12 Laxmichand v. Rambhai (HUF) 3,50,000/- 13 Lilaben R Shah 3,00,000/- 14 R N Enterprises 60,000/- 15 Sakarbhai Nanji Satra 5,00,000/- 16 Vasant Morarji Karani (HUF) 5,00,000/- 17 Vinod Tukaram Patekar (HUF) 3,00,000/- TOTAL 1,22,60,000/-
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K M Developers (KMD) S.No. Name of the Party Amount (Rs.) 1 Arvind Ravji Majethia 4,75,000/- 2 Haresh Ravji Majethia 20,15,000/- 3 Hirji Shivji & Sons 2,00,000/- 4 Jalaram Enterprises 9,60,000/- 5 Jalaram Enterprises Pvt Ltd 17,20,000/- 6 K C Trivedi (HUF) 4,00,000/- 7 Kalpana Valji Bhanushali 5,00,000/- 8 Khusali Atul Poladiya 5,00,000/- 9 Kishore V Kawa 2,00,000/- 10 Mahesh Bapat 20,000/- 11 Sakarbhai Nanji Satra 5,00,000/- 12 Vasant Morarji Karani (HUF) 5,00,000/- TOTAL 79,90,000/- It was clarified by the assessee that, first of all, the unsecured loans raised was Rs.2,02,50,000/- and not Rs.2,04,83,832/- as added by the AO; Secondly, it was pointed out that M/s Ekta Trading Co has taken loan of Rs.61.50 lakhs from M/s K M Developers, (which is evident from above) both of which are proprietorship concerns of the assessee, that is, it has transferred the money from one pocket to another; Lastly, it was clarified that, some of the persons/entities are the sister concerns of the assessee and they were being assessed in the same charge and in their cases this issue of loan given to assessee has been discussed and analysed by the AO.
4. Apart from that, on merits, it was submitted that in order to prove the identity, creditworthiness of the 29 lenders and the genuineness of the transaction, following documents were placed on record before the AO:- “a. Copies of confirmation from the lenders; b. Copies of PAN card of the lenders; c. Copies of Ration Card of the lender; d. Copies of Return of Income for AY 2010-11 of the lender e. Copies of Balance Sheet for AY 2010-11 of the lender; f. Copies of Bank statement of the lender highlighting the 6 Shri Liladhar Ravji Majethia / Thakkar receipt as well as repayment entries;
g. Copies of Bank statement of M/s Ekta Trading and M/s K M Developers showing the receipt as well as repayment of loan entries.
A chart was submitted showing the evidences filed in the case of each lender in the paper book before the CIT(A). The detailed of which with regard to all the 29 entities in the summarized form are reproduced hereunder:
K M Developers Loan Confirmation Details 01/04/2009 to 31/03/2010 Sr. Name of the Parties Confi- IT Balance Bank PAN Ration Our No. rmation Return Sheet Stat. Card Card Bank State- ment 1 Arvind Ravji Majethiya YES YES YES YES YES YES YES YES YES YES YES YES YES YES 2 Haresh Ravji Majethiya YES YES YES YES YES YES YES 3 Hirji Shivji & Sons YES YES YES YES YES YES YES 4 Jalaram Enterprises YES YES YES YES YES YES YES 5 Jalaram Ent. Pvt Ltd. YES YES YES YES - YES 6 K C Trevedi (HUF) - YES YES YES YES - YES 7 Kalpana Valji Bhanushali - YES YES YES YES YES YES 8 Khushali Atul Poladiya - YES YES YES YES YES - YES 9 Kishore V Kawa YES YES YES YES YES - YES 10 Mahesh Bapat YES YES YES YES YES - YES 11 Sakarbhai Nanji Satra 12 Vasabt Morarji YES YES - YES YES - YES Karani (HUF) Ekta Trading Co. Loan Confirmation Details 01/04/2009 to 31/03/2010 Sr. Name of the Parties Confi- IT Balance Bank PAN Our Bank No. rmation Return Sheet Stat. Card Statement 1 Anish P Parab YES YES -- YES YES YES YES YES YES YES YES YES 2 Bharat Kanubhai Shah YES YES YES YES YES YES 3 Bharti Suresh Bhanushali YES YES -- YES YES YES 4 Champaben G Ruparel YES YES -- YES YES YES 5 Chunilal Premji Gosar YES YES YES YES YES 6 L R Shah (HUF) -- YES YES YES YES YES 7 K C Trevedi (HUF) -- YES YES YES YES YES 8 K M Developers YES YES YES -- YES YES YES 9 Kalpana V. Bhanushali YES YES YES YES YES YES 10 Khushali Atul Poladiya YES YES -- YES YES YES 11 Kishor V Kawa 12 Laxmichand V.Rambhia YES YES -- YES YES YES (HUF) YES YES -- YES YES YES 13 Lilaben R Shah
7 Shri Liladhar Ravji Majethia / Thakkar YES YES YES YES YES 14 R N Enterprises YES YES YES YES YES YES 15 Sakarbhai Nanji Satra -- YES YES YES YES YES 16 Vasant Morarji Karani -- (HUF) YES YES YES YES YES 17 Vinod Tukaram Patekar -- (HUF)
It was submitted that despite all these evidences and without any contrary material, AO has treated the said amount as unexplained cash credit. Regarding other observations of the AO, assessee gave point-wise rebuttal which has been discussed by the Ld. CIT(A) from pages 9 to 13 of the impugned order. It was also clarified that amount aggregating to Rs.46,95,000/- received from three entities belonging to the family group have already been added in their assessments, therefore, to this extent the amount should be deleted. This amount of Rs.46,95,000/- were from following persons /entities, which have not been disputed before us also:
Sr. Name of the Party Amount Remarks No. (Rs.) 1 M/s Jalaram Enterprises 17,20,000 Also added in Pvt Ltd. M/s Jalaram Enterprises Pvt Ltd. 2 Haresh Majethiya 20,15,000 Also added in Haresh Majethiya 3 M/s Jalaram Enterprises Also added in Haresh (Prop. Haresh Majethiya) 9,60,000 Majethiya Lastly, it was stated that, out the total loans major part of the loans aggregating to Rs.79,90,000/- have been repaid in the impugned year itself, out of which Rs.61,50,000/- has been received from one proprietorship to another proprietorship.
5. The Ld. CIT(A) after taking note of entire gamut of facts and evidences placed on record before the AO as well as during the appellate proceedings, deleted the said addition as per the discussion appearing from pages 13 to 15 of the appellate order. The sum and substance of the finding recorded by the Ld. CIT(A) are that:-
(i) So far as addition relating to unsecured loans received from M/s K M Developers is concerned, she held that, loan
8 Shri Liladhar Ravji Majethia / Thakkar Rs.79,90,000/- received from 12 parties had been repaid in the impugned year itself which is corroborated by Balance-sheet of the assessee placed in the paper books. Further, some of the parties are related to the assessee, that is, they were either brother of the assessee or partnership concern of his brother. All these entities/ persons are assessed with the same AO and in their Income- tax records and Balance-sheet each and every item of loan given has been disclosed and the assessment have been made by the AO in these cases. Thus, the genuineness and the source stands established.
(ii) From the perusal of the Bank statement, the Ld. CIT(A) noted that there is no instance of cash deposits, in the bank accounts of these persons prior to advancing of the loans to the assessee and accordingly, the genuineness of the transaction and the capacity to lend are borne out from the bank statements itself.
(iii) So far as unsecured loans received in the case of M/s Ekta Trading Co., she noted that, loan of Rs.61,50,000/- has been received from KM Developers which is a another proprietorship concern of the assessee himself and, therefore, it does not fall in the category of third party from whom unsecured loans has been received. Moreover, the said amount has been repaid during the years and does not appear in the Balance sheet on the closing date of 31st March, 2010. That apart, the documents and evidences like income-tax returns, PAN cards, Bank statements have been furnished which shows that the entire onus cast upon the assessee has been discharged.
(iv) As regards the AO’s observation that the lenders have advanced the loan to M/s Ekta Trading Co out of cash deposits in the account of its lender is not correct and the 9 Shri Liladhar Ravji Majethia / Thakkar entire charge in this regard is baseless. From the perusal of the bank statements, she concluded that, it is clearly evident that loans have been advanced with the funds available with the lenders, either of their own or through funds received of the other parties through banking channels. Hence, there is no case for raising any suspicion.
(v) As regards the five parties, which have not appeared for cross examination, ld, CIT(A) observed that when the lenders have forwarded their confirmation, PAN card, return of income, bank statement etc. and when the assessee requested the AO to make further enquiries from the respective AOs of the lenders, then AO should have enquired from the AOs of the lenders when their assessment particulars were available. Once it has not been done, then, it was not proper for the AO to draw any adverse inference without any further enquiry.
Accordingly, based on aforesaid reasons; facts and evidences, the Ld. CIT(A) held that, the assessee has discharged his obligation of identifying the loan creditors, establishing the genuineness of the transaction and creditworthiness of the lenders. Accordingly, addition made by the AO was deleted.
Before us, the Ld. DR after referring to various observations made by the AO submitted that, a clandestine modus operandi was unearthed during the course of search which revealed that, assessee was engaged in getting/procuring unsecured loans through circuitous route. In the light of these finding in the search, the unsecured loan received by the assessee in his two proprietorship concerns cannot be held to be genuine. He further submitted that, assessee failed to produce the lenders as required by the AO and thus, the creditworthiness cannot be accepted
10 Shri Liladhar Ravji Majethia / Thakkar AO has given a finding that “lenders were of men of little means”. Thus, he strongly relied upon the order of the AO.
Before us, the Ld. Counsel for the assessee, Ms. Ritika Agarwal submitted that, firstly, in the case of the assessee’s brother Haresh Majethia, the Tribunal vide order dated 10.04.2015 in and CO No.192/Mum/2011 and ITA No.1220/Mum/2011 has deleted the similar addition on account of unsecured loans and interest on the ground that if the receipts and repayment of loan is corroborated by the ledger account and bank entries, addition in respect of such credits cannot be made. Here in this case also, the repayment of loan is fully corroborated by ledger account and bank entries. She further submitted that, here in this case there is categorical finding by CIT(A) that majority of the loan has been repaid back during the year and also major chunk has come from one proprietorship concern to another proprietorship concern. There could be no addition under section 68 by treating it to be a non-genuine transaction. Regarding other aspects and ingredients of onus cast upon assessee u/s 68, she relied upon various case authorities in support of her contention qua the evidences furnished by the assessee to show that onus which lay upon the assessee has been fully discharged / complied with. The decisions relied upon and the submissions made by the Ld. Counsel have been separately filed before us.
We have considered the rival submissions, perused the relevant finding given in the impugned order as well as material placed on records. Here in this case, addition has been made under section 68 on account of unsecured loans received by the assessee in his two proprietorship concerns from various persons as mentioned above. In order to prove the nature and source of the credits, as stipulated under the law, the assessee first of all has given the copy of confirmation/ letters from the lenders; PAN card; return of income along with the Balance sheet for the relevant AY 2010-11; bank statements of the lenders as well as bank
11 Shri Liladhar Ravji Majethia / Thakkar statements of two proprietorships showing receipts as well as repayment entries. The summary of the documents/evidences furnished with regard to each and every persons/entities has been already incorporated above in the foregoing paragraphs. At the face of the law, initial burden casts upon the assessee to prove the source of the loan has been stated to be discharged. The revenue’s case has been that, the capacity of the lenders has not been proved because these lenders were ‘men of little means’ or ‘no means’ and the amount credited in the bank accounts have been routed in a clandestine manner as found during the course of search. For substantiating this assertion, nothing has been brought on record qua the assessee’s case in hand as to how the amount which has been credited in the account of the lenders has flown from the undisclosed coffers of the assessee or from some unknown sources of the assessee. If a material or information has been found in a search suggesting non-genuine transactions undertaken by the assessee, then it is incumbent upon the AO to make relevant enquiry to controvert the evidences filed by the assessee, especially from the concern AOs of the lenders who are mostly family members and concerns. Once a lender has confirmed the giving of loan to the assessee and has corroborated such giving of loan through furnishing of income-tax return for the relevant assessment year, furnishing of bank statements in which such an amount has been reflected, then prima facie it cannot be held that the lender does not have the capacity to advance the loan or the creditworthiness of the lender can be doubted. To doubt the creditworthiness of the lenders in such cases, the AO has to bring specific material rebutting the stand of the lender that his confirmation is false and if at all any adverse inference has to be drawn then case of the lenders also need to be reopened or examined. Here in this case, the AO was specifically informed that some of the persons who were family members/concerns were assessed in his range only. For the other persons also specific details in this regard were furnished. The Ld. CIT(A) has 12 Shri Liladhar Ravji Majethia / Thakkar categorically brought on record that, most of the amount has come from the family members/group entities, which are regularly assessed to tax with the same AO and these matters could have been examined and the other allegations of the AO has also been turned down by the ld. CIT(A) on cogent reasons as discussed above. Once that is so, then there is no need for making such a wild allegation that the capacity of the lenders has not been proved. Other important fact emerging from records as noted by the ld. CIT(A) that the amount of Rs.79,90,000/- received from the 12 parties consisting of the family members/group entities have been repaid back in the impugned year itself and on this aspect as pointed out by the ld. Counsel, ITAT in the case of assessee’s brother Haresh Majethia has deleted the addition on the ground that if the receipts and repayment of loan is corroborated by the ledger account and bank entries. Here also exactly the same fact is permeating, therefore, following the Tribunal order this amount of Rs.79,90,000 has to be deleted. On other amount of Rs.61.50 lakhs also, it is undisputed fact that it has been received from one proprietorship concern of the assessee to another, therefore, it cannot be added as income of the assessee. Thus, on these amounts of loans no adverse inference can be drawn and has rightly been deleted by the Ld. CIT(A). As noted above, already an amount of Rs.46,95,000/- which has been added in the hands of the lenders has already been directed to be deleted by CIT(A) for which there is no dispute by the revenue. Thus, out of Rs.1,55,10,000/-, sum of Rs.79,90,000/- and Rs.61,50,000/- (aggregating Rs. 1,41,40,000) could not have been added in wake of the aforesaid facts. Regarding other small loans also, we agree with the finding of the CIT(A) that the entire onus cast upon the assessee in wake of evidences filed have been fully discharged and accordingly, no addition could be made under the deeming provisions of section 68. Accordingly, order of the CIT(A) is affirmed and the impugned issue raised by the revenue is dismissed.
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