JAYANTILAL VALLABHBHAI RAMOLIYA,SURAT vs. ITO, WARD -3(3)(2), SURAT

The Assessing Officer further noted that assessee has also shown unsecured loan of Rs.11,62,720/- form three persons. The assessee has submitted that he has received loan of Rs.3,62,720/- from Deepak Desani, Rs.5.00 lakh from Meenaben V Andani and Rs.3.00 lakh from Shivabhai Rajani. The Assessing Officer recorded that no confirmation, income tax return and bank statements were filed for verification of identity, creditworthiness and genuineness of those persons. Thus, the entire loan amount aggregating to Rs.11,62,720/- was also added as income of assessee.

The Assessing Officer further noted that assessee has debited expenses of Rs.6,39,925/- in his profit and loss account. The Assessing Officer issued show cause notice to substantiate such expenses. The assessing officer noted that no bills or vouchers were produced by assessee. In response to show cause, the assessee filed photo copy of certain bills and vouchers. On perusal of such bills and vouchers, the Assessing Officer noted that name and address of the persons to whom such bills were paid are not mentioned. On certain (A.Y 12-13) Jayantilal V Ramoliya bills no addresses were mentioned and no other evidence to prove the identity of the persons to whom such expenses was filed. In absence of proper evidence, the Assessing Officer recorded that he is unable to verify the genuineness of such expenses and Assessing Officer took his view that assessee debited expenses just to reduce the taxable income and made addition of Rs.6,39,925/- as income of assessee.

Aggrieved by the additions, the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the assessee filed his detailed written submission and submission of assessee on addition of advance against the sale of property is recorded in para- 5.1.2 of order of Ld. CIT(A). In submission, the assessee stated that assessee has taken advance of Rs.4.50 lakh from Vishal Sakhiya against officeNo.7, Bhagu Estate and said property was purchased in 2001 and copy of sale deed was filed. The assessee stated that this property was not shown in the balance-sheet for the reason that the assessee just started the business and prepared the balance-sheet. As the property was purchased for a consideration of Rs.50,000/- and assessee debited Rs.50,000/- from capital account, hence, may not have been reflected. The presumption of (A.Y 12-13) Jayantilal V Ramoliya Assessing Officer that property is not reflected in the balance- sheet and having no such property is wrong and baseless. The assessee is the owner of such property and have right to enter into agreement for sale of such property. Thus, the transaction was genuineness and assessee filed copy of income tax return. The assessee produced income tax return with conformation and satakhat was given subsequently by hand. If the Assessing Officer has any doubt he could have called for the purchaser but no such action was initiated on the part by Assessing Officer. For advance of Rs.5.00 lakh from Himmat Kotadiya against plot no.113-34, Miranagar, the assessee stated that the Assessing Officer was presumed that residential property cannot be sold for an amount of Rs.5.00 lakh and there is a contradiction in the Assessing Officer. The assessee filed income tax return of purchaser and confirmation and satakhat were also filed subsequently. No investigation was carried out by Assessing Officer. For advance of Rs.6.10 lakh and Rs.6.12 lakh from Chhaganbhai Ramoliya and Shardaben Ramoliya against plot no.344, Narthan, the assessee stated that such advances are genuine for a single plot, that two purchasers are very common. From (A.Y 12-13) Jayantilal V Ramoliya the appearance of “surname Ramoliya” the Assessing Officer presumed that they are brother and Bhabhi of assessee and such presumption of Assessing Officer is wrong and may have no relation with assessee. However, they are separate from business dealing, the Assessing Officer made addition by ignoring valid evidence.

On the unsecured loan of Rs.11,62,720 from three persons, namely; Deepak Desani, Meenaben V. Andani and Shivabhai Rajani, the assessee submitted that Assessing Officer remained silent on the detailed and elaborate evidence filed by assessee on 13.03.2015. The assessee produced the audited balance-sheet, bank statements of Shivabhai Rajani where the loan was received through account payee cheque which was given from their current bank account. The creditworthiness of Shivabhai Rajani was proved beyond doubt. For Meenaben V. Andani, the assessee submitted that he filed income tax return, balance-sheet and bank statement of lander and loan was appearing in the balance-sheet. The loan was received through cheque. Thus, the assessee his onus. The assessee also discharged his onus by filing complete details of loans from Deepak Desani. The assessee (A.Y 12-13) Jayantilal V Ramoliya submitted that he is an LIC agent and filing regular return of income. The Assessing Officer remained silent on the submission of assessee and no investigation was carried out by Assessing Officer. The assessee discharged his onus in furnishing the required details in support of his submission, the assessee relied upon certain case law including in the case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC) and the judgment of Hon'ble jurisdictional High Court in the case of Rohini Builders vs. DCIT 76 TTJ 521 (Ahd) confirmed in 256 ITR 360 (Guj).

The Ld. CIT(A) after considering the submission of assessee upheld the addition of advance received against sale of property by taking view that no cogent explanation as to why all the properties were offered for sale and advances were received in cash. Further no explanation is offered as to why all the advances were not converted into sale transactions - one of the property does not appear in the balance-sheet (A.Y 12-13) Jayantilal V Ramoliya against another property the advance is received from two persons. For all such discrepancies, the assessee have not given cogent explanation. Thus, the addition made by Assessing Officer was confirmed.

On the addition of unsecured loan, from three landers the Ld. CIT(A) held that Assessing Officer made the additions of three loans for the reasons that assessee has not furnished confirmation of income tax return and bank statement. On the other hand, the assessee claimed that such evidences were furnished vide letter dated 13.03.2015 before Assessing Officer and copy of such letter is filed before the office of Income-tax, which bears the stamp of office of Income-tax and signature of person who received such document on 13.03.2015. By referring such letter, Ld.AR for the assessee shown that confirmation of income tax return and bank statement of lenders and that Assessing Officer has not refuted such document in the assessment order. The Ld. CIT(A) on perusal of such details held that before him, copy of income tax return and balance-sheet of Deepak Desani is filed, wherein the loan given to assessee is reflected in his balance-sheet. Thus, the loan taken from Deepak Desani is (A.Y 12-13) Jayantilal V Ramoliya established and Ld. CIT(A) accordingly directed the Assessing Officer to delete the addition of loan taken from Deepak Desani of Rs.3,62,720/-.

So far as two other loans are concerned, the Ld. CIT(A) held that details of such transaction are not filed before him. Thus, the addition with respect to loan from Shivabhai Rajani of Rs.3.00 lakh and from Meenaben V. Andani of Rs.5.00 lakh were confirmed.

On the addition / disallowance of expenses, Ld. CIT(A) after considering the submission of assessee held that assessee is an LIC agent and bound to incur expenses. In such business, no doubt he is required to pursue the customer as well as to hold meeting with them. The assessee is also required to maintain his office and staff for his assistance. The Ld. CIT(A) recorded that the assessee has not claimed rent and salary of employees and he has to establish that he maintains lease office and employed such staff. The Ld. CIT(A) also recorded that Assessing Officer has not made any effort for examining such expenses like depreciation, telephone bills office rent etc. Similarly, the assessee also failed to provide all details before Assessing Officer as well as before him. On such (A.Y 12-13) Jayantilal V Ramoliya observation, Ld. CIT(A) held that in absence of details and evidence he is unable to allow part of expense and confirmed the order of Assessing Officer. Further aggrieved assessee has filed present appeal before the Tribunal.

We have heard the Ld.AR for the assessee and Ld. Sr-DR for the Revenue and have gone through the orders of the lower authorities carefully. Ground No.1 relates to addition of Rs.21,72,500/- on account of advance against the properties. The Ld. counsel for the assessee submits that the Assessing Officer made addition by taking view that in the balance- sheet, the assessee has shown unsecured loans, however, assessee in response to show cause notice contended that assessee has received advance against the sale of property. The Ld. counsel for the assessee submits that assessee has received advance of Rs.4.50 lakh from Vishal Sakhiya against sale of shop No.7 Bhagu estate and assessee has field his income tax return, PAN, ledger account confirmation. The advance duly reflected in the balance-sheet against the unsecured loan and no doubt that shop does not appear in the balance-sheet, however the same was purchased vide sale deed dated 16.05.2001, copy of registered purchase deed was (A.Y 12-13) Jayantilal V Ramoliya produced before Ld. CIT(A). The Ld. CIT(A) has not considered the sale deed which clearly established the genuineness of ownership of assessee. No show cause notice was issued to assessee to explain such discrepancy. The assessee has discharged his onus by filing required documentary evidence. Similar cash loan of Rs.5.00 lakh from Himamat S. Kotadiya for sale of property No.133 Miranagar. The assessee furnished copy of satakhat / agreement with income tax return, PAN and ledger account confirmation produced before lower authorities. Similarly, assessee also received loan from Chhaganbhai Ramoliya and Shardaben Ramoliya of Rs.6.10 lakh and Rs.6.12 lakh respectively, such advances were received against sale of property at Block No.344, Narthan. Copy of satakhat / agreement with income tax return, PAN, ledger of confirmations was produced. The Ld. AR of the assessee submits that assessee also discharged his onus in proving the identity, creditworthiness and genuineness of such transactions of advance from both Chhaganbhai Ramoliya and Shardaben Ramoliya. The Assessing Officer has not investigated the same. The Ld. AR for the assessee submits that assessee repaid the deposit / loan advance in (A.Y 12-13) Jayantilal V Ramoliya subsequent assessment year i.e. in 2013-14 of Rs.4.50 lakh was repaid to Vishal Sakhiya on 28.02.2013 and Rs.5 lakh to Himmat S Kotadiya on 23.03.2013 and Rs.6.10 and Rs.6.12 to Chhaganbhai V. Ramoliya and Shardaben C. Ramoliya on 28.03.2013. Such repayments were made in cash accumulated withdrawal of Rs.10 lakh & Rs.15 lakhs from Federal Bank on 27.02.2013 and 22.03.2013 respectively, copy of bank statement, bank book along with cash book are filed on record. The Ld. AR of the assessee submits that assessment was completed on 23.03.2015 by giving defective show cause notice thereby in violation of principle of natural justice only on 09.03.2015. In absence of proper show cause, assessment is unsustainable in law. To support such submission, Ld. AR of the assessee relied on the decisions of Hon'ble jurisdictional High Court in the case of Zenith Processing Mils vs. CIT (1996) 219 ITR 721 (Guj).

The ld AR for the assessee submits that Assessing Officer has not issued any notice under section 133(6) or summons under sections 131 to the purchasers. All the advances are genuine and the additions thereof is liable to be deleted. To support such submission, Ld. AR of the assessee relied upon (A.Y 12-13) Jayantilal V Ramoliya the decisions of Hon'ble Patna High Court in the case of CIT vs. Hanuman Agarwal 151 ITR 150 (Pat), Hon'ble Apex Court in the case of Orissa Corporation Pvt. Ltd. (supra) and Hon'ble jurisdictional High Court in the case of Rohini Builders (supra) 15. On the other hand, Ld. Sr-DR for the Revenue submits that during the assessment, Assessing Officer noted that in the balance-sheet, assessee has shown unsecured loan of and no specific names were mentioned against such loans. The Assessing Officer asked the assessee to prove the identity, creditworthiness and genuineness of such lenders and no documentary evidence were also furnished by the assessee, to substantiate such unsecured loan. The Assessing Officer issued detailed show cause notice on 09.03.2015. The assessee filed his response vide reply dated 13.03.2015. In the reply, the assessee changed his stand and took a new plea that he has taken advances against the four persons. On verification such advances against sale of property from different person. The Assessing Officer noted that shop No.7 Bhagu estate was not even appearing in the balance-sheet against which assessee has shown advance of Rs.4.50 lakh.

We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. As recorded above, the Assessing Officer made addition of Rs.21,72,500/-, which was allegedly received against the sale of commercial as well as residential properties -one of the property against. The Assessing Officer while making such addition in para-8.3 of assessment order specifically recorded that assessee failed to establish whether any property was finally sold to any persons from whom the (A.Y 12-13) Jayantilal V Ramoliya advance was received or if not what was reason for cancellation. No satakhat / agreement for alleged contract of sale of all the properties as submitted till assessment was completed on 23.03.2015. Before Ld. CIT(A), the assessee made elaborate submission, which we have already recorded above. The assessee stated that Assessing Officer has not investigated the matter properly. We find that the Ld. CIT(A) after considering the submission of assessee held that claim of assessee do not inspire confidence as no explanation was given as to why all properties were offered for sale and advances were received in cash. The assessee has no explanation about such fact as to why all the properties were put on sale. Before us, besides repeating the similar stand, which was submitted before Assessing Officer, the ld AR for assessee submitted that the said advances were repaid in next/ subsequent year. We find that no such pleas were taken before assessing officer that the advances were returned either on 28.02.2013, 23.03.2013 or 28.03.2013 after withdrawals from Federal Bank that such advances were repaid in cash. As no such pleas were raised before the lower authorities, thus, assessee has improved his (A.Y 12-13) Jayantilal V Ramoliya explanation step-by-step and instead of explaining facts in a proper manner at respective stage, took a contradictory stand i.e., in the balance-sheet, they have shown unsecured, on show cause notice by Assessing Officer took the plea that advances, which was not proved the advances against all the commercial and residential properties. Before Ld. CIT(A) the assessee submitted that complete evidences were produced. Now before us, assessee went one step ahead by taking plea that such advances were refunded in next assessment year. In view of the aforesaid factual discussion, we do not find any reason to interfere with the order of Ld. CIT(A). The ratio of case laws relied by Ld. AR for the assessee are not applicable on the facts of the present case before hand as the assessee has taken different stand before different authorities and that too without discharging his onus during the assessment proceedings. Moreover, entire transactions were shown in cash. This ground No.1 of assessee is dismissed.

Ground No.3& 4 relates to additions of Rs.5.00 lakh from Meenaben V Andani and Rs.3.00 lakh from Shivabhai Rajani. The Ld. AR of the assessee submits that during the assessment, the Assessing Officer asked the assessee to (A.Y 12-13) Jayantilal V Ramoliya substantiate the transaction of loan. The assessee vide his reply dated 13.03.2015 furnished income tax return, PAN, computation of income, profit and loss account, bank statement confirmation of Meenaben V Andani. The assessee also furnished similar documents PAN, and bank statement of Shivabhai Rajani and explained that loans were received from account payee cheque. The lenders were having sufficient balance in their accounts, such unsecured loans were shown by the assessee as well as lender in their balance- sheet. The assessee has discharged his onus by furnishing all requisites details. The Assessing Officer has not verified such documents. The Ld. CIT(A) confirmed the action of Assessing Officer without proper appreciation of fact in first appellate stage. The Ld. AR of the assessee submits that loan of both the lenders were repaid on 25.03.2015, copy of ledger account highlighting the entries of repayment through cheque, is filed. The Assessing Officer has not investigated the fact either by issuing notice under section 133(6) or 131 of the Act to the lenders. Once the assessee has discharged his onus by furnishing required details, the onus shifts on the assessing officer. The assessing officer made additions (A.Y 12-13) Jayantilal V Ramoliya without investigating the facts or bringing any adverse evidence against the assessee and the additions are liable to be deleted. To support such submission, Ld. AR of the assessee relied on the following decisions:  CIT vs. Chankya developers 43 taxmann.com 91 (Guj)  ACIT vs. Hanuman Agrawal 159 ITR 150 (Pat)  CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC)  Rohini Builders vs. DCIT 76 TTJ 521 (AHD-ITAT) confirmed by Hon'ble Gujarat High Court in 256 ITR 360 (Guj) 18. On the other hand, Ld. Sr-DR for the Revenue supported the order of lower authorities. The Ld. Sr-DR for the Revenue submits that before Assessing Officer no confirmation or relevant details like income tax return and bank statement to prove the identity, creditworthiness and genuineness of the lenders were furnished. Thus, the Assessing Officer made the addition of unsecured loan. Before Ld. CIT(A) the assessee discharged his onus with respect to one lender, namely, Deepak Desani. For loan taken from Meena V. Andani and Shivabhai Rajani the assessee has not discharged his onus. The Ld. AR of the assessee submits that with regard to two lenders, which was confirmed by Ld. CIT(A) that no details were furnished even before Ld. CIT(A).

So far as other two lenders are concerned, the Ld. CIT(A) held that no details with regard to two lenders were furnished. Before us Ld. AR of the assessee vehemently submitted that loan from to lenders were received through account payee cheque and all requisites details in the form of bank statement, audited balance-sheet, of Shivabhai Rajani with confirmation was filed for Meenaben V. Andani. The assessee explained that confirmation of income tax return, balance- sheet and bank statement and discharged assessees onus properly. On perusal of detailed furnished by assessee we find that assessee has received loan from Meenaben on (A.Y 12-13) Jayantilal V Ramoliya 02.09.2011 and 08.09.2011 by way of transfer through banking channel. Similarly, loan from Shivabhai Rajani was received by assessee on 17.02.2012 and loan was repaid to Meena V Andani on 23.05.2015 and 25.03.2015 through banking channel RTGS process. The relevant entry in the bank statement of assessee of Federal Bank is available at page-110 of paper book filed by the assessee. We find that repaid of loan had been accepted by Revenue in subsequent assessment year, so no addition loan in the year under consideration can be added as has been held by Hon'ble jurisdictional High Court in the case of CIT vs. Ayachi Chandrasekhar Narsangji [2014] 42 taxmann.com 251 (Guj).

We further find that though Assessing Officer held that no details were furnished to substantiate the transaction of loan. However, before Ld. CIT(A) the assessee furnished detailed of loan transaction as has been recorded in para-5.2.2 of his order. However, no investigation of assessee carried out either by Ld. CIT(A) or through office of Assessing Officer. Therefore, in absence of any adverse evidence, the disallowance of loan when the assessee has discharged his primary onus in furnishing requisites details of lender and (A.Y 12-13) Jayantilal V Ramoliya assessee was not justified. Hence, we direct the Assessing Officer to delete the addition of Rs.5.00 lakh and Rs.3.00 lakh respectively on account of loan received from Meena V. Andani and Shivabhai Rajani. We order accordingly. These grounds No.3 & 4 of assessee is allowed.

Ground No.7 relates to disallowance of various expenses. The Ld. AR of the assessee submits that assessee claimed various expenses like salary of staff of Rs.3.60 lakh depreciation on motor car, two wheelers, electric consumption, telephone bill, software expenses, insurance expenses and other miscellaneous expenses. Bifurcation of such expenses were provided to the lower authorities. The assessee consistently submitted that motor car and other vehicle were used for the business purposes of assessee-firm and claimed depreciation on motor vehicle as well as petrol expenses. The assessee also claimed remuneration and other expenses. The assessee was a partner having 6.34% share in M/s Shree Someshwar Developers. The evidence of partnership deed and business activities were provided and assessee claimed genuine business expenses. The lower authorities have not doubted the nature of expenses rather disallowed by taking view that (A.Y 12-13) Jayantilal V Ramoliya assessee furnished self-made vouchers and incomplete details. The lower authorities disallowed the entire expenses. Similarly said expenses were allowed in earlier assessment year, though the assessment was made under section 143(1).

On the other hand, Ld. Sr-DR for the Revenue supported the order of lower authorities. The Ld. Sr-DR for the Revenue submits that before lower authorities, assessee failed to substantiate the genuineness of such expenses, no details of staff and their four cars or details of office copy or lease agreement or evidence were furnished by assessee.

We have considered the rival contention of both the parties and have gone through the order of lower authorities carefully. We find that the Assessing Officer disallowed the entire expenses by holding that copies of bills and vouchers produced by assessee are self-serving documents wherein no address of persons to whom payments were made are available on the bills and original bills were produced. The Assessing Officer held that nature of income of assessee is does not require such expenses and assessee has introduced such expenses just to reduce his taxable income. The Ld. CIT(A) upheld the action of Assessing Officer by holding that (A.Y 12-13) Jayantilal V Ramoliya he is not in a position to give definite findings regarding genuineness and allow ability of expenses, though, we find that Ld. CIT(A) himself recorded that “no doubt the commission agent of LIC and he is bound to incur expenses in soliciting business. He is no doubt required to pursue the customers on phone as well as by meeting them. He may also be held to keep an office and staff to assist the assessee”. We find that despite recording such findings, Ld. CIT(A) further noted that claim of rent and salary has to be established that details filed before the Assessing Officer are sketchy and did not convince the Assessing Officer. The Ld. CIT(A) further recorded that Assessing Officer has not made any rudimentary effort to examine such expense like depreciation, telephone bills, office rent etc. We find that finding of Ld. CIT(A) is a contradictory, once it is accepted for soliciting assessees business and required office and staff to assist him, though it may not have been fully substantiated by assessee, yet the entire disallowance of expenses was not warranted. In our constrained view, if assessee has not proved entire expenses beyond doubt, nor the Assessing Officer has investigated or examined whichever item of the (A.Y 12-13) Jayantilal V Ramoliya expenses incurred is genuine or not, 100% of disallowance of expenses is not justified. Therefore, keeping in view the nature of assessees business as has been accepted by the lower authorities, we find that disallowance @ 25% of expenses would meet to ends of justice and possibility of revenue leakage. Therefore, we deem it appropriate to restrict the disallowance @ 25% Rs.6,36,925/- with a rider that same shall not be treated as a precedent in any other assessment year as in each year the assessee has to substantiate the expense. Thus, ground No.7 of assessee is partly allowed in above terms.

In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on 03/02/2023.