RAJ KUMAR GUNWANT,KEONJHAR vs. ACIT, SAMBALPUR

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ITA 314/CTK/2015Status: DisposedITAT Cuttack24 January 2017AY 2010-119 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had provided sufficient evidence, including PAN numbers, income tax returns, balance sheets of creditors, and TDS details, to establish the genuineness of the loans. Simply because notices were returned or not replied to does not automatically make the loans non-genuine.

What were the facts?

The assessee received unsecured loans of Rs. 7,00,000 from an HUF and Rs. 17,00,000 from a private limited company. The Assessing Officer added these amounts to the assessee's income as unexplained, citing non-receipt of replies to notices and incorrect addresses.

What were the issues?

Whether the loans received by the assessee were genuine and adequately explained, despite issues with the service of notices to the creditors.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,

Before: SHRI N.S SAINI

For Appellant: Shri P.R.Mohanty, AR
For Respondent: Shri D.K.Pradhan, DR
Pronounced: 24/01

This is an appeal filed by the assessee against the order of CIT(A)-

Cuttack, dated 29.1.2015, for the assessment year 2010-11.

2.

The appeal filed by the assessee is barred by 61 days. The assessee has filed

condonation petition dated 24.6.2015 for condoning the delay in filing the appeal.

After going through the condonation petition, I find that the assessee had reasonable

cause for not filing the appeal within the stipulated time. Ld D.R. did not have any

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objection for condoning the delay. I, therefore, condone the delay of 61 days in filing

the appeal before the Tribunal and admit the appeal for hearing.

3.

Ground No.1 of the appeal is general in nature and hence, requires no

separate adjudication by me.

4.

In Ground No.1 of the appeal, the grievance of the assessee is that the

CIT(A) erred in sustaining the addition of loan of Rs.7,00,000/- taken from

Magaturam Agarwal (HUF).

5.

In Ground No.2 of the appeal, the grievance of the assessee is that the

CIT(A) erred in sustaining the addition of loan of Rs.17,00,000 taken from

M/s. M.D.Trading Company Pvt Ltd.

6.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. The brief facts of the case are

that during the course of assessment proceedings, the Assessing Officer found

that the assessee has received unsecured loan of Rs.7,00,000/- from Shri

Mangutram Agarwal (HUF). The Assessing Officer called for information

u/s.133(6) of the Act of the creditor and no reply was received by the

Assessing Officer. The Assessing Officer then conducted enquiry through the

Inspector of Income Tax, who submitted that Shri Mangaturam Agarwal

expired in 2004 and his son Sanjaya Agarwal stated that some loan was

advanced to the assessee from their HUF file. No information and other details

like the succession certificate or bank's order showing that the HUF existed

3 ITA No.314 /CT K/20 15 Asse ss ment Y ear :20 10- 201 1

after the death of Karta has been produced. Therefore, the Assessing Officer

added Rs.7 lakhs u/s.68 of the Act.

7.

Before the CIT(A) the assessee argued that the loan of Rs.7 lakhs has

been received through account payee cheque. The assessee also submitted

the statement of affairs of Mangutram Agarwal (HUF) for years after the year

of advance. The CIT(A) after considering the submission of the assessee

observed that the fact that the amounts have been received by the assessee

through banking channel implies through cheque or draft does not show that

the source of the loan was explained. He observed that the assessee has

given wrong address to the Assessing Officer regarding the loan creditor which

is highly improbable. To produce the confirmation etc, at this stage, does not

serve the purpose of evidence and, therefore, he confirmed the action of the

Assessing officer by following the decision of Hon’ble Supreme Court in the

case of Sumati Dayal vs CIT, 214 ITR 801 (SC) and CIT vs. D.P.More, 82 ITR

540 (SC), wherein, the Hon ‘ble Supreme Court decided that the maxim, the

apparent is real is not always sacrosanct.

8.

Similarly, the Assessing Officer found that the assessee has taken loan

of Rs.17,00,000/- from M/s. M.D.Trading Company Pvt Ltd.. The Assessing

Officer called for information u/s.133(6) of the Act, where letter to M/s.

M.D.Trading Company Pvt Ltd., returned unserved by the postal authorities.

The Assessing Officer then found from the PAN data base that the company

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is based in Kolkata whose complete postal address is 14/5, Clive Row, Kolkata,

whereas as per the confirmation, submitted by the assessee the addressee is

No.6, Bravrong Road, Room No.402A, 4th Floor, Vaishna Chamber, Kolkata-1.

Therefore, he treated the loan of Rs.17,00,000/- as unexplained and added

the same to the income of the assessee u/s.68 of the Act.

9.

Before the CIT(A), the assessee submitted confirmation from M/s.

M.D.Trading Co. Pvt Ltd., alongwith balance sheet, etc. The CIT(A) confirmed

the action of the Assessing Officer by observing that the fact that the amounts

have been received by the assessee through banking channel does not explain

that the source of the loan. He observed that the assessee has given wrong

address to the Assessing Officer regarding the loan creditor which is highly

improbable. To produce the confirmation etc, at this stage, does not serve

the purpose of evidence and, therefore, he confirmed the action of the

Assessing officer by following the decision of Hon’ble Supreme Court in the

case of Sumati Dayal vs CIT, 214 ITR 801 (SC) and CIT vs. D.P.More, 82 ITR

540 (SC), wherein, the Hon ‘ble Supreme Court decided that the maxim, the

apparent is real is not always sacrosanct.

10.

Before me, ld A.R. of the assessee referred to pages 1 & 2 of the paper

book filed before the Tribunal and submitted that the loan of Rs.7,00,000/-

was received on 18.3.2010 by cheque No.522529. He then referred to pages

3,4, & 5 of the paper book and submitted that the loan confirmation for the

5 ITA No.314 /CT K/20 15 Asse ss ment Y ear :20 10- 201 1

assessment year 2014-15, 2013-14 and 2012-13 are filed confirming the loan

advanced to the assessee by Shri Mangaturam Agarwal (HUF) on which

interest has been paid by the assessee year after year and that the said loan

was finally squared up on 4.10.2013 by making payment through cheque. He

submitted that at page 6 of the paper book, the computation of income for

A.Y. 2013-14 is filed, wherein, interest income of Rs.1,03,124/- has been

shown by Mangaturam Agarwal (HUF) as its income. Further from page 7 of

paper book, he submitted that the loan given to the assessee was shown in

balance sheet as on 31.3.2013. He submitted that at page 8 of the book ,

computation of income for assessment year 2012-13 of Mangaturam Agarwal

(HUF) is filed, wherein, interest income of Rs.93,070/- has been shown by the

said Mangaturam Agarwal (HUF). Further, page 9 of the paper book is the

balance sheet of Mangaturam Agarwal (HUF) as at 31.3.12, wherein, the loan

given to the assessee is shown. Similarly, he submitted that at page 10 of

paper book, computation of income for A.Y. 2011-12 of Mangaturam Agarwal

(HUF) is filed, wherein, interest income of Rs.84,000/- earned from the loan

advanced to the assessee is shown. He pointed out from page 11 of PB,

wherein, balance sheet as on 31.3.2011 of Mangaturam Agrawal(HUF) is filed

that loan given to the assessee is shown therein. He submitted that all these

evidences show that the loan was given to the assessee, which was disclosed

by the said Mangaturam Agrawal (HUF) in its balance sheet and also the

interest income earned from advancing the said loan was also shown as

6 ITA No.314 /CT K/20 15 Asse ss ment Y ear :20 10- 201 1

income and the due tax was paid by the said HUF. In view of these

overwhelming evidences, the lower authorities are not justified in treating the

loan as not genuine and making an addition u/s.68 of the Act.

11.

Similarly, from page 12 of PB, which is the bank statement of

M.D.Trading Company Pvt Ltd., of HDFC Bank, he pointed out that the loan of

Rs.17,00,000/- was received on 18.3.2010 by cheque from M.D.Trading

Company Pvt Ltd by the assessee. From page 13 of PB, he pointed out that

the confirmation of loan given to the assessee as on 31.3.2012 is placed and

at page 14 of PB, the confirmation of loan from M/s. M.D.Trading company

Pvt Ltd., for loan outstanding as on 31.3.2013 is placed. Further at page 15

of PB, the loan confirmation from M.D.Trading Company Pvt Ltd., for loan

outstanding as on 31.3.2014 is placed. These loan confirmations show that

the amount of loan advanced to the assessee as well as interest earned on

loan given to the assessee and the fact of deduction of TDS from interest by

M.D.Trading Company Pvt Ltd. He submitted that at page 16 of PB is the

return of income filed for assessment year 2012-13 by the said M.D.Trading

Company pvt. Ltd., which shows that the loan creditor has shown interest

income earned from the assessee. At page 28 of PB, copy of the balance

sheet of M.D.Trading Company Pvt Ltd., as on 31.3.2012 and 31.3.2011 is

placed, wherein, the loan given to the assessee of Rs.17,00,000/- is shown as

outstanding. He pointed out from page 29 of PB, which is the

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acknowledgement of return of income for A.Y. 2013-14 of M.D.Trading

Company Pvt Ltd, wherein, interest earned from the assessee was shown and

the TDS deducted was also shown. From page 42 of PB, which is the balance

sheet of M.D.Trading Company Pvt Ltd., the ld A.R. pointed out that the loan

given to the assessee of Rs.17 lakhs is shown as outstanding as on 31.3.2012

and 31.3.2013. Hence, he pointed out that in the face of such overwhelming

evidences, the lower authorities are not justified in trading the loan of Rs.17

lakhs as unexplained and making addition in the hands of the assessee u/s.68

of the Act.

12.

He further submitted that it will be observed from the decision of

Hon’ble Supreme Court in the case of Sumati Dayal (supra), that the Hon’ble

Supreme Court has held that apparent must be considered real until it is

shown that there are reasons to believe that the apparent is not the real and

that the taxing authorities are entitled to look into the surrounding

circumstances to find out the reality and the matter has to be considered by

applying the test of human probabilities. In the instant case, the evidences

filed before the department does not create an iota of doubt that the loan

taken from 2 persons is not genuine. Only for the reason that in one case the

notice u/s.133(6) was returned unserved and in another case the loan creditor

did not send his reply u/s.133(6) notice, it has been presumed that the loans

are not genuine. It was also submitted that the address of the loan creditors

where notice u/s.133(6) was sent was obtained by the department from its

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site of PAN and was not supplied by the assessee as alleged by the CIT(A).

Hence the decision in the case of Sumati Dayal (supra) is not applicable in the

case of the assessee.

13.

Ld A.R. of the assessee argued that in the case of the assessee, the

facts are quite different and the loans taken by the assessee are proved by

filing PAN No. of the loan creditors, return of income of loan creditors,

confirmation certificate of the loan creditors, copy of balance sheet of

creditors, TDS deducted from the interest payment from the loan, which facts

have not been proved by the lower authorities as not genuine and bogus.

Therefore, the loans shown by the assessee are justified and addition should

be deleted.

14.

On the other hand, ld D.R. relied on the orders of lower authorities.

15.

I find that Rs.7,00,000/- and Rs.17,00,000/- obtained from two loan

creditors have been evidenced by the assessee by filing PAN No. of the loan

creditors, return of income of loan creditors, confirmation certificate of the

loan creditors, TDS deducted from the interest payment from the loan amount.

The loan amount has been received through banking channel. Therefore,

simply because the notice sent to the loan creditors were returned back by

the postal authorities unserved or loan creditors failed to reply to the notice

9 ITA No.314 /CT K/20 15 Asse ss ment Y ear :20 10- 201 1

of the Assessing Officer, it cannot be held that loans taken by the assessee

are not genuine. Further, it is observed from the assessment order that the

address of the loan creditors was obtained by the Assessing Officer from the

PAN data of the department. The Assessing Officer after making enquiry, has

brought no material on record to show that the loans taken by the assessee

are not genuine or bogus. Hence, I set aside the orders of lower authorities

and delete the addition of Rs.7,00,000/- and Rs.17,00,000/- aggregating to

Rs.24,00,000/- made u/s.68 of the Act.

16.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court on 24/01/2017 in the presence of parties. Sd/- (N.S Saini) ACCOUNTANT MEMBER Cuttack; Dated 24/01 /2017 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Raj Kumar Gunwant, C/O. Barbil Steel Fabrication Works, PHD Road, PO: Barbil, Keonjhar 2. The respondent: ACIT,Circle-1(1), Sambalpur 3. The CIT(A) Cuttack 4. CIT, Sambalpur 5. DR, ITAT, Cuttack BY ORDER, 6. Guard file. //True Copy// ASST.REGISTRAR, ITAT, Cuttack

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