SHRI RAHIM UMARBHAI RAVKARDA,RAJKOT vs. THE ACIT, CIRCLE-3(1),, RAJKOT
What did the Tribunal hold?
The Tribunal restored the matter to the Commissioner (Appeals) for de novo consideration, acknowledging the assessee's non-compliance but emphasizing the large addition and the interest of justice. The assessee was directed to pay a cost of Rs. 10,000.
What were the facts?
The assessee declared a loss from commodity/share trading. The Assessing Officer (AO) observed a significant increase in unsecured loans and, finding the assessee to be a driver of no means, added the entire amount as unexplained cash credit. The Commissioner (Appeals) confirmed the addition without a hearing.
What were the issues?
Whether the addition of unexplained cash credit was justified without proper opportunity to the assessee, and whether penalty and interest were rightly confirmed.
Which sections of the Income-tax Act were involved?
Section 68,Section 274,Section 271(1)(c),Section 234A,Section 234B,Section 234C,Section 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL, JM:
This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”) in Order No. ITBA/NFAC/S/250/2021-22/1040875100(1) vide order dated 16.03.2022 passed for Assessment Year 2015-16.
The assessee has taken the following grounds of appeals:-
“1. That, the Ld. AO as well as Ld. CIT(A) has passed the order without affording proper opportunity of being heard.
Shri Rahim Umarbhai Ravkarda vs. ACIT Asst.Year –2015-16 - 2 - 2. That, the Ld. CIT(A) has wrongly confirmed addition of Rs. 3,84,43,550/- on account of unexplained cash credit u/s 68 of the I.T. Act.
That, the Ld. CIT(A) has wrongly confirmed initiation of penalty proceedings u/s 274 r.w.s. 271(1)(c) of the I.T. Act, 1961.
That, the Ld. CIT(A) has wrongly confirmed levy of interest u/s 234A, 234B and 234C of the I.T. Act, 1961.
5. That, the findings of the Ld. AO and Ld. CIT(A) are not justified and are bad-in-law.
6. That appellant craves to add, amend, alter or delete any of the above grounds of appeals.”
3. The brief facts of the case are the assessee is shown to have been engaged in the business of trading in commodities/shares. The assessee has declared a loss from trading operations. The assessee has carried out trading through a broker namely Sunflower Broking Private Ltd. The contract receipt from the aforesaid broker shows a trading loss. During the course of assessment, the Assessing Officer observed that there is a huge increase in unsecured loans from Rs. 75.67 lakhs to Rs. 4.60 crores. Accordingly, the assessee was asked to furnish the identity of the depositors, their creditworthiness and genuineness of the transaction. However, despite repeated opportunities, the assessee did not cause any appearance before the Assessing Officer. Therefore, an Inspector was Shri Rahim Umarbhai Ravkarda vs. ACIT Asst.Year –2015-16 - 3 - deputed to verify the whereabouts of the assessee and to serve notice upon him. However, the Inspector found that the assessee is staying in a one room rented house, is hardly in possession of any assets and is a driver by profession. Accordingly, the Assessing Officer held that the aforesaid transaction of increase in unsecured loans is not genuine looking into the instant facts, since the creditworthiness of the recipient is equally important since no person would give such a huge amount of loan to the assessee who is having no creditworthiness at all. Therefore, the Assessing Officer held that the entire transaction is a sham and the assessee is only a face for real beneficiaries. Accordingly, the Assessing Officer made an addition of Rs. 3.84 crores to the income of the assessee as unexplained crash credit under Section 68 of the Act.
4. In appeal, none appeared before Ld. CIT(Appeals) and no submissions were also filed. Accordingly, Ld. CIT(Appeals) upheld the additions made by the Assessing Officer with the following observations:
“5.1.2 All the facts and circumstances of the case and position of law related to the impugned addition of Rs. 3,84,43,550 u/s 68 of the Act are duly considered. There is no occasion, I am afraid, to give any relief whatsoever as neither in the impugned assessment proceedings nor in the appeal proceedings the appellant has produced a single piece of paper what to say, any evidence (documentary or otherwise) which may have entitled the appellant to claim any relief as the Ld. AO in para no. 3.1 sub para b & c has mentioned that when the inspector of his good office was Shri Rahim Umarbhai Ravkarda vs. ACIT Asst.Year –2015-16 - 4 - deputed to make enquiry it was found that the appellant is a man of no means and in fact, he is a driver by profession. On the other hand, in the Return of Income the appellant claimed himself to be a person engaged in the business of trading in commodities/shares. As the Ld AO rightly observed that "Normally, in unexplained cash credit, the credit worthiness of the lender is being verified. But here it is important to appreciate that, the credit worthiness of the recipient is equally important. Why would somebody give huge loans to a person of no means?"
5.1.3. In the light of above discussion, the action of Ld AO in making of impugned addition of Rs. 3,84,43,550 u/s 68 of the Act, 1961 is found to be sustainable in the facts of the case and in law. Thus, the addition of Rs. 3,84,43,550 is confirmed as the appellant fails to get any relief on account of non production of any evidence both in assessment proceeding as well as in these appeal proceedings.
5.1.4. Thus, the Ground no. 3 and 4 are dismissed as the appellant fails to get any relief as he is not entitled for the same.
6.0 In the result, this appeal is dismissed, for statistical purposes.”
The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals). Before us, the Counsel for the assessee submitted that the assessee could not cause appearance before Ld. CIT(Appeals) owing to the faceless scheme of appellate hearing. The Shri Rahim Umarbhai Ravkarda vs. ACIT Asst.Year –2015-16 - 5 - Counsel for the assessee submitted that the assessee has not been given adequate opportunity to present its case on merits. It was further submitted that the assessee has maintained regular books of accounts which are also audited by a qualified chartered accountant. Further, during the year under consideration, the assessee has received unsecured loans from various parties and the loans have been received through normal banking channels. However, during the course of assessment proceedings, the Assessing Officer did not issue notices under Section 133(6) of the Act to the depositors who had given unsecured loans to the assessee. Accordingly, it was requested that in the interest of justice the matter may be restored to the file of Ld. CIT(Appeals) and if given an opportunity, the assessee would be able to prove the genuineness of the aforesaid transaction along with the creditworthiness of the parties.
In response, the Ld. DR relied upon the observations made by the Assessing Officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record. On going to the facts of the case, it is evident that the assessee has been non-compliant and non-cooperative at all stages of proceedings. However, in the interest of justice, and looking into the quantum of addition made in the assessee’s hands amounting to Rs. 3.84 crores, the matter is being restored to the file of Ld. CIT(Appeals) for de novo consideration, after giving due opportunity of hearing to the assessee. However, since the assessee has been non-compliant at all stages of the proceedings before the Department, the assessee is directed to pay a cost
Shri Rahim Umarbhai Ravkarda vs. ACIT Asst.Year –2015-16 - 6 -
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