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Income Tax Appellate Tribunal, CUTTACK ‘SMC’ BENCH,
Before: SHRI N.S SAINI
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.
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.
Ground No.1 of the appeal is general in nature and hence, requires no
separate adjudication by me.
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).
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.
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
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after the death of Karta has been produced. Therefore, the Assessing Officer
added Rs.7 lakhs u/s.68 of the Act.
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.
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.
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.
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
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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
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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.
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.
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
8 ITA No.314 /CT K/20 15 Asse ss ment Y ear :20 10- 201 1
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.
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.
On the other hand, ld D.R. relied on the orders of lower authorities.
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
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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.
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