THE ITO, WARD-2(1)(1),, AHMEDABAD vs. GUJARAT CRAFT INDUSTRIES PVT. LTD.,, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH AHMEDABAD

BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER

ITA No. 2348/Ahd/2015 (Assessment Year: 2012-13) The I.T.O., Ward- 2(1)(1), Navjivan Trust Bldg., Off. Ashram Road, 1st Floor, Room No.104, Ahmedabad-380014 Appellant Vs. Gujarat Craft Industries Pvt. Ltd., 35, Omkar House, Nr. Swastik Char Rasta, C. G. Road, Navrangpura, Ahmedabad Respondent PAN: AAACG5615N

राज�व क� ओर से/By Revenue : Nidhi Srivastava, CIT. D.R. आवेदक क� ओर से/By Assessee : G. C. Pipara, A.R. सुनवाई क� तार�ख/Date of Hearing : 04.10.2017 घोषणा क� तार�ख/Date of Pronouncement : 10.10.2017

ORDER PER S. S. GODARA, JUDICIAL MEMBER

This Revenue’s appeal for assessment year 2012-13 arises against the CIT(A)-2, Ahmedabad’s order dated 27.05.2015 in case no. CIT(A)- 4/241/ITO.6(2)/14-15, reversing Assessing Officer’s action making Section 68 addition of unexplained cash credits amounting to Rs.6,87,47,490/- in respect of unsecured loans obtained from 13 parties, in proceedings u/s. 143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both sides. Case file perused.

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“2.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The Assessing Officer in the assessment order has held that since the assessee has failed to prove the creditworthiness & capacity of the depositors to make such huge interest free advances for the year under consideration for an amount of Rs. 6,87,47,490/-, the same is treated as unexplained cash credit & addition of the said amount is made to the total income of the assessee company under section 68 of the Act.

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The appellant on the other hand has stated in its written submission that the said observations of the AO is merely on surmises and without proper consideration and appreciation of the details and comprehensive evidences were placed on record during the course of assessment proceedings. Further, the impugned addition has been made by following the assessment order for A.Y. 2010-11 on which the Ld. CIT(A) has allowed the appeal in favour of the appellant and the department has preferred second appeal before ITAT, Ahmedabad. The appellant has further stated that it is evident that the AO has made the impugned addition in respect of same parties which were there in A.Y. 2010-11 and there are same set of facts and circumstances of the case and no new material or evidences have been brought in by the AO in support of the addition made. The appellant has also stated that its case is covered by the decision given by the CIT(A) - VIII, Ahmedabad for A. Y. 2010-11 vide order dated 20/05/2014.

On a careful consideration of entire facts of the case, it is noted that most of the depositors from whom the appellant has accepted unsecured loans during the year are old and the appellant had accepted unsecured loans from them during A. Y. 2010 - 11. The appellant has accepted unsecured loans from 13 depositors out of which only four parties are new. In respect of the 9 depositors, the issue has been dealt by me in the case of the appellant for the A.Y. 2010-11 in appeal No. CIT(A)- VIII/DCIT/Cir.4/67/13-14 dated 20/05/2014. For the sake of clarity, the findings given by me in para-3.3 are reproduced here under: -

“I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made the addition under section 68 of the Act amounting to Rs. 1,89,63,000/- as the appellant could not satisfactorily prove the genuineness of the loans taken by it. The AO has observed that since the appellant company did not produce even a single party and proved the genuineness, he was treating the loans as unexplained as the appellant could not prove the credit worthiness and genuineness of the depositors.

The appellant on the other hand has submitted that it has given all the information related to the deposits accepted by it. It has been submitted by the appellant that it had given confirmation of the parties with details of their address and PAN as well as indicated that the transactions were through banking channels. It furnished and had also explained the source of the source as certified by the parties. It has also been pointed out by the appellant that the AO had, issued 133(6) notices to the depositors directly and all the depositors' have confirmed the fact of giving loans. It has been contended by the appellant that no useful purpose would be served by producing the depositors as the appellant had given sufficient information to prove the deposits. It has therefore, been submitted by the appellant that the identity, genuineness and creditworthiness of the depositors have been proved and therefore, the addition made should be directed to be deleted.

I have carefully examined all the facts related to various depositors. It is noted that the appellant has given sufficient information in respect of the deposits accepted by it. Out of the 13 depositors from home the appellant has accepted deposits it companies are group companies of the appellant company. The appellant has given a chart compiling the information related to the deposits and the evidences furnished by it during the course of assessment proceedings

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in respect of all the deposits. For the sake of convenience and clarity the chart is reproduced hereunder: -

Sr. Name Opening Received Paid Closing Evidences Pate No. Remarks No. Balance During the During Balance Furnished of year the Year submission 1 Bosco Nil 18,30,000 3,61,000 14,69,000 Name and 8 Group Chemtex address of the Company Pvt. Ltd. party Amount of PAN 8 Rs. 3,61,000/- Confirmation 14,54 repaid which also during the indicates that the year itself transactions are through banking channels and by account payee cheques

Return of income 51 to 53 along with Acknowledgement for A.Y. 2010-11

Audited Balance sheet as at 55 to 56 31.03.2010

Party’s letter giving details of 309 source of the funds from where unsecured loan was given to the appellant company 2 APA 68,76,872 9,29,000 Nil 78,05,872 Name and 8 Group address of the Company party Deposits PAN 8 have also been Confirmation 16,70 received in which also earlier indicates that the years and transactions are there is through banking opening channels and by balance account payee cheques

Return of income 67 to 69 along with Acknowledgement for A.Y. 2010-11

Audited Balance 71 to 84 sheet as at 31.03.2010

Party’s letter 310 giving details of source of the funds from where unsecured loan was given to the appellant company

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3 Decent 1,38,000 11,02,000 4,79,000 7,61,000 Name and 8 Group Fabrics Pvt. address of the Company Ltd. party Deposits PAN 8 have also been Confirmation 18,88 received in which also earlier indicates that the years and transactions are there is through banking opening channels and by balance account payee cheques Amount of Rs. Return of income 85 to 87 4,79,000/- along with repaid Acknowledgement during the for A.Y. 2010-11 year itself

Audited Balance sheet as at 31.03.2010 89 to100

Party’s letter giving details of 311 source of the funds from where unsecured loan was given to the appellant company 4 GUDOO NiL 10,00,000 Nil 10,00,000 Name and 8 Texcraft Pvt. address of the Ltd. party 8

PAN 24,132

Confirmation 312 which also indicates that the transactions are through banking channels and by account payee cheques

Acknowledgement 25 of Return of income for A.Y. 2010-11

Party’s letter 312 giving details of source of the funds from where unsecured loan was given to the appellant company 5 Komal Jyot Nil 10,00,000 Nil 10,00,000 Name and 8 Grahship address of the Pvt.Ltd. party PAN 8

Confirmation 26,133 which also indicates that the transactions are through banking channels and by

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account payee cheques

Acknowledgement 27 of Return of income for A.Y. 2010-11

Party’s letter 313 giving details of source of the funds from where unsecured loan was given to the appellant company 6 Meridian 10,00,000 10,00,000 10,00,000 10,00,000 Name and 8 Deposits Hotels Pvt. address of the have also Ltd. party been received in PAN 8 earlier years and Confirmation 28,134 there is which also opening indicates that the balance transactions are through banking Amount of channels and by Rs. account payee 10,00,000/- cheques repaid during the Acknowledgement 29 year itself of Return of income for A.Y. 2010-11

Party’s letter 314 giving details of source of the funds from where unsecured loan was given to the appellant company 7 Technomod Nil 21,90,000 6,93,600 14,96,400 Name and 8 Group Properties address of the Company Pvt. Ltd. party Deposits PAN 8 have also been Confirmation 30,138 received in which also earlier indicates that the years and transactions are there is through banking opening channels and by balance account payee cheques Amount of Rs. Return of income 135 to 137 6,93,600/- along with repaid Acknowledgement during the for A.Y. 2010-11 year itself Audited Balance 139 to 137 sheet as at 31.03.2010

Party’s letter 315 giving details of source of the funds from where

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unsecured loan was given to the appellant company 8 Typhoon 1,01,37,000 34,37,000 22,25,000 1,13,49,000 Name and 8 Group Financial address of the Company Services party Limited Deposits PAN 8 have also been Confirmation 32,138 received in which also earlier indicates that the years and transactions are there is through banking opening channels and by balance account payee cheques Amount of Rs. Return of income 149 to 151 22,25,000/- along with repaid Acknowledgement during the for A.Y. 2010-11 year itself

Audited Balance 153 to 169 sheet as at 31.03.2010

Party’s letter 316 giving details of source of the funds from where unsecured loan was given to the appellant company 9 Deepjyot Nil 40,00,000 Nil 40,00,000 Name and 8 Commodities address of the Pvt. Ltd. party

PAN 8

Confirmation 34,170 which also indicates that the transactions are through banking channels and by account payee cheques

Acknowledgement 35 of Return of income for A.Y. 2010-11

Party’s letter 317 giving details of source of the funds from where unsecured loan was given to the appellant company 10 Rishabh 21,35,000 18,88,000 15,61,000 24,62,000 Name and 8 Group Business Pvt. address of the Company Ltd. party Deposits PAN 8 have also been Confirmation 36,174 received in

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which also earlier indicates that the years and transactions are there is through banking opening channels and by balance account payee cheques Amount of Rs. Return of income 171 to 173 15,61,000/- along with repaid Acknowledgement during the for A.Y. 2010-11 year itself

Audited Balance 175 to 184 sheet as at 31.03.2010

Party’s letter giving details of 318 source of the funds from where unsecured loan was given to the appellant company 11 Woodland Nil 5,87,000 2,95,000 2,92,000 Name and 8 Group Consultancy address of the Company Services Pvt. party Ltd. Deposits PAN 8 have also been Confirmation 38,187 received in which also earlier indicates that the years and transactions are there is through banking opening channels and by balance account payee cheques Amount of Rs. Return of income 185 to 186 2,95,000/- along with repaid Acknowledgement during the for A.Y. 2010-11 year itself

Audited Balance 188 to 195 sheet as at 31.03.2010

Party’s letter 319 giving details of source of the funds from where unsecured loan was given to the appellant company Total 1,89,63,000

It is seen from the above chart that the appellant has given sufficient information about the depositors. In all the cases the appellant has given confirmation, complete postal address, PAN, return of income" for the relevant year and also the balance sheet of the depositors. It is noted that the transactions are through banking channel. The AO has made enquiries under section 133(6) from the depositors and the facts of deposits have been confirmed by the depositors. It is further noted that the appellant has also given the source of the source, i.e., the source from where the depositor has

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deposited the money with the appellant. It is further observed that in none of the cases there is any fact on record indicating that any of the depositors was in the business of giving entry or accommodation loans. The majority of the depositors were the group Company.

In view of the above discussion, it is clear that the appellant has given sufficient explanation about the identity, genuineness and the capacity of the person who has given the deposit. The AO has held that the loans were not explained merely on the ground that the appellant did not produce the depositors for examination. Considering the fact that the appellant has given every information related to the deposit no useful purpose would have been served by examining the depositors. Seven depositors out of the 13 are having the same correspondence address and therefore, it is clear that no adverse fact would have come to light on examination of these depositors. The,other depositors also are regularly assessed to tax and therefore, no purpose would have been served by further examination of these depositors. The AO is however, directed to pass the information to the concerned assessing officer, exercising jurisdiction over these depositors.

I have also carefully perused the judgements relied by AO. It is noted that the facts of the cases relied by the AO are different and are accordingly not applicable in the present case. In the case of N R Portfolio relied by the AO, the honourable Delhi High Court had upheld the disallowance as the applicant's of share did not respond to summons. In the present case the appellant has given all information and also, the notices issued by the AO under section 133(6) have been complied with by the depositors. The other cases, similarly, are clearly distinguishable on facts. In the present case, the appellant has duly discharged its onus under section 68 of the Act. Honourable Gujarat High Court in the case of Hindustan Inks and Resins Ltd, 68 DTR 18, has held that, in the case of share application money, that the Dept was free to proceed to reopen the individual assessments of shared applicant's case it is considered that source of deposit as well as credit worthiness of the depositor was not explained. The decision of honourable Supreme Court in the case of Lovely Exports Private Limited (supra) is squarely applicable on the present facts of the case.

In view of the above discussion the addition of Rs. 1,89,63,000/-, made by the AO, is directed to be deleted. The grounds of appeal are accordingly, allowed." It is further noted that in respect of this 9 parties for which the findings have been given by me in A. Y. 2010 - 11, the AO has not brought on record any new facts. In fact, the addition has been made by following the findings given in earlier assessment order. Since the facts are similar in respect of the 9 parties which were there in earlier assessment year also, the addition under section 68 in respect of those creditors is directed to be deleted. Further the following depositors are there which are new and the loans have been accepted in this year: - i) Indian Agrotech Ltd. ii) Worldwide Impex Pvt. Ltd. iii) Sigma Polyfilms Pvt. Ltd.

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iv) Sanwaria Vintrade Pvt. Ltd.

It is noted that the party at SI. No 1, 2& 3 are group companies. Two of them are situated at the same address from which the appellant company is operating and the other is operating from a different address at Gandhinagar. The directors are common. During the course of appellate proceedings, the appellant had given all necessary evidences which are required to prove the creditworthiness and the genuineness of the transaction. It had given confirmation, contra account confirmation, copy of bank statement and copy of the income tax return for the year under consideration. Therefore, in my opinion the appellant duly discharged the onus under section 68 of the Act. The addition made in respect of the above parties is directed to be deleted. In respect of the fourth company namely; Sanwaria Vintrade Private Limited, it is noted that the company is situated at Kolkata. The appellant has submitted that it has duly discharged the onus and the management of the company, are known to the directors of the appellant company as the directors of the appellant company are also from Kolkata. It is noted from the details available that the notice issued under section 133(6) by the AO has been duly complied with and the company, the depositor, has furnished the information as required by the AO. Further there is no adverse comment by the AO regarding the creditworthiness, genuineness and the identity of the company. In view of these facts, I am of the considered opinion that the appellant has duly discharged its onus in respect of this depositor. The addition made under section 68 of the Act is therefore directed to be deleted. However, the AO is directed to pass the information to the AO's having jurisdiction over the depositor for further necessary action at their end. The ground of appeal is accordingly allowed.”

This leaves the Revenue aggrieved.

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of Chanakya Developers 43 taxmann.com 91 that it is for the Assessing Officer to conduct further enquiry in such cases after an assessee files confirmation, bank statements, PAN details as well as copy of income tax returns. We notice that the Assessing Officer in the instant case has not taken into account the fact that the present assessee has discharged its initial onus. The issue is otherwise squarely covered as per the above co-ordinate bench decision. We therefore find no reason to accept Revenue’s sole substantive ground pleaded in the instant appeal.

[Pronounced in the open Court on this the 10th day of October, 2017.]

Sd/- Sd/- (MANISH BORAD) (S. S. GODARA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 10/10/2017 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, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

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