JINESH RAMESHCHANDRA SHETH,MUMBAI vs. ITO, WARD 2(2), BHARUCH

Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of Ld. Commissioner of Income-tax (Appeals)-1, Vadodara [for short to as “ld. CIT(A)”] dated 02.08.2019 for assessment year 2012-13, which in turn arises out assessment order passed by Income Tax Officer-Ward-2(2), Bharuch /Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 26.03.2015. The assessee has raised the following grounds of appeal:- “ (A.Y 12-13) Jinesh R Sheth “I. Addition on account of unexplained cash credit u/s 68 – Rs.21,57,500/-:

5. Your appellant craves leave to add to, alter ament or delete any of the foregoing grounds of appeal.”

2. Brief facts of the case are that assessee is individual and proprietor of “M/s Organix” engaged in trading of chemicals, solvents, fine chemicals, intermediates, pharmaceutical raw materials. The assessee filed his return of income for AY 2012-13 declaring income of Rs. 8,17,363/-. (Though the assessing officer mentioned at Rs. 709643/-). Case was selected for scrutiny. During assessment assessing officer (A.Y 12-13) Jinesh R Sheth noted that assessee has shown turnover of Rs. 2.79 Crore on which gross profit of Rs.45,96,247/- and net profit Rs.9,43,407/-, which is 16.47% and 3.38% respectively. The assessing officer also noted that assessee has shown unsecured loan from various persons of Rs. 79,78,326/-. The assessing officer asked the assessee to file confirmation and supporting evidence to substantiate the genuineness of such loan transaction. The assessee furnished copy of account confirmation of lenders. In order to verify the genuineness of such loan transaction, the assessing officer issued notice under section 133(6) to all the creditors. The reply of seven of lender was received to assessing officer. The assessing officer recorded that reply from seven lenders were received vide reply date 23.02.2015. all the lenders in their reply stated that they have not filed income tax return (ITR), but loan was given through banking channel. The assessing officer was not satisfy with the reply and issued fresh show cause notice dated 13.03.2015 and asked the assesse to prove the identity, creditworthy and genuineness of transaction and to produce the lenders. The assessing officer recorded that assessee filed his reply dated (A.Y 12-13) Jinesh R Sheth 19.03.2015, the details of such reply is recorded in para-4.4 of his order. The reply of assessee was not accepted by assessing officer. The assessing officer held that the transaction of loan from five persons is not sustainable and the assessee has not produced the lenders, and there was virtually no bank balance in their account and disallowed amount of Rs. 39,80,800/- and added under section 68 of the Act. On appeal before ld CIT(A) the assessee filed his detailed written submissions. The submissions of assessee is recorded in para-5 of his order. The submissions of the assessee were remanded to the assessing officer for his remand report. The assessing officer furnished his remand report vide his report dated 30.11.2016. the contents of remand report of assessing officer are recorded in para-6 of order of ld CIT(A). The assessing officer raised objection on the creditworthy of all the landers. The ld CIT(A) after considering the submission of the assessee, remand report and the assessment order, restricted the additions to the extent of Rs. 21,57,500/-. The ld CIT(A) upheld the addition in respect of following person*, (* all are family member or close relative of assessee).

(A.Y 12-13) Jinesh R Sheth Sr No. Name Relation Amount of loan confirmed Rs. 1 Chimanlal Sheth Grand Father 11,50,000/- 2 Utkarsh V Sheth Nephew (Minor) 25,000/- 3 Medha J Sheth Wife 3,99,500/- 4 Chintan Sheth Son (minor) 4,82,000/- 5 V R Sheth Brother 101,000/- Total 21,57,500/- 3. The ld CIT(A) confirmed the additions of above lenders by taking view that (i) Chimanlal Sheth neither filed return of income nor have shown long term or short term capital gain on the alleged sale of silver and gold. Further bills of such silver and gold is not filed before assessing officer or before him, (ii) Utkarsh is minor, he is student, moreover father and son never can be treated as separate entity, assessees own money is routed by giving colour of unsecured loan. (iii) Medha J Sheth is assessees wife and claiming salary from Organix @ Rs. 15,000/- to 20,000/- pm salary is too meagre. (iv) Chintan V Sheth is minor son of the assessee and he is studying and no source of income. (v) V R Sheth is brother, there is no withdrawal from bank account, assessee has not commented on the report of assessing officer. Further aggrieved, the assessee has filed present appeal before Tribunal by raising the grounds of appeal, which I have recorded in para-1(supra).

(A.Y 12-13) Jinesh R Sheth 4. I have heard the submission of learned authorised representative (ld. AR) for the assessee and learned senior departmental representative (ld. Sr-DR) for the Revenue and perused the materials available on record. The ld AR for the assessee submits that lower authorities have not appreciated various evidence while making / upholding the additions under section 68 of the Act. There is no dispute about the identity of the lenders, who are either relative or family members. Against the addition of loan from Chimanlal Sheth, the ld AR for the assessee submits that he was grandfather of assessee, who is passed away on 11.06.2015. Late Chimanlal Sheth had given loan of Rs. 11,82,000/-, out of which the ld CIT(A) deleted Rs. 30,000/- . Remaining addition of Rs. 11.30 lacs were upheld by ld CIT(A) by holding that source of loan of Rs. 11.30 lacs from sale of silver utensils were remained unexplained. The assessee filed confirmation, bank statement of Madhav Choksey who purchased such silver items. The assessee also filed affidavit of one of son of Chimanlal Sheth that his father was partner in Shah Kevaldas & Co and also made investment in equities, which corroborate with his bank (A.Y 12-13) Jinesh R Sheth statement, copy of bank statement is filed at page no. 129 to 137 of paper book (PB). For loan of Rs. 25,000/-from Utkarsh V Shah, the ld AR for the assessee submits that he Utkarsh is nephew of assessee, money given by him is not very big, the source of money was from gifts received on various occasion and there was no reason to doubt such loan. For loan from Medha Sheth, the ld AR for the assessee submits that ld CIT(A) failed to appreciate that entire loan of Rs. 3.99 lacs were not given in the year under consideration. She has received loan given in earlier years and she also given from the repayment of loan of earlier year so peak loan given in this year is only Rs, 46,500/- only. She has a capacity to give such loan to the assessee. Against the loan of Chintan Sheth of Rs. 4.82 lacs , the ld AR for the assessee submits that he is son of the assessee. the lender was minor during the year having age of 17 years. Entire loan was not given by him during this year, some of the loan given in earlier. Considering the peak credit loan of Rs. 1,47,000/- was given in the year was only of Rs. 1,47,000/-. Against the loan of V R Sheth of Rs. 1,01,000/- the ld AR for the assessee submits that during (A.Y 12-13) Jinesh R Sheth assessment his pass book was filed. The addition was confirmed on the comment of assessing that there was no withdrawal from his bank. The ld AR for the assessee submits that there is no such comment of assessing officer in his remand report as the assessee is unable to trace such adverse remark in the remand report. The ld AR for the assessee submits that all the transactions of the loan are genuine, the assessee has proved the creditworthy of lenders and genuineness of transaction and all the additions may be delated. To support his submissions, the ld AR for the assessee relied on the decision of Tribunal in Renukaben Parmar Vs ITO (ITA No. 2493/Ahd/ 2015.