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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM
Assessee by : Ms. Shruti Shah, C.A Respondent by : Shri H.P. Meena– CIT-DR सुनवाईकीतारीख/ Date of Hearing : 17/05/2022 घोषणाकीतारीख/Date of Pronouncement : 16/08/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to assessment year 2014- 15, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-4, Surat, [for short ‘Ld.CIT(A)’] dated 26.05.2017, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’), dated 30.12.2016.
The grounds of appeal raised by the Revenue are as follows:
“1. On the facts and circumstances in the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.20,87,54,237/- made by the assessing officer on account of unsecured loan. The Ld. CIT(A) failed to appreciate the fact that during the assessment proceedings, the assessee could not discharge the onus cast upon him to establish the genuineness of the transactions and identity & creditworthiness of the depositors advancing unsecured loan to him.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the additions made by the Assessing Officer.
It is, therefore, prayed that the order of the Ld. CIT(A) may be set-aside and that of Assessing Officer may be restored to the above extent.”
A.Y. 14-15 Sh. Dharmesh P Patel 3.Succinct facts are that assessee is partner in firm and declared income from house property, income from capital gain, share of profit from partnership firm and income from other sources. During the course of assessment proceedings, on verification of the balance sheet of the assessee, as on 31.03.2014, it was observed by the assessing officer that during the year the assessee has received unsecured loan amounting to Rs.30,60,25,000/-, On the basis of examination of the returns of income, bank account statements, nature of transactions, it was found necessary to examine the real nature of the transactions apparently shown as unsecured loans. It was noted by assessing officer that all the three persons, are having no apparent business connection with the assessee but are lending substantial amounts. In order to verify the identity and creditworthiness of the parties and to ascertain the genuineness of the transactions details were called for from them by issuing notice u/s 133(6) of the Act and summons u/s 131 of the Act. As nothing was heard from, these parties a letter was issued to the assessee on 16.12.2016 requiring the assessee to show cause as to why unsecured loan, as reflected in his balance sheet, should not be treated as unexplained cash credit and should be added to the total income for the year under consideration u/s 68 of the Act. In response, the assessee submitted details and documents in respect of these parties.
It was noted by assessing officer that these companies are running from rented one room and occasionally change their addresses. Some of these parties have closed down their activities after squaring up their unsecured loan transactions. Moreover, on verification of the details filed by the assessee, it was noted by assessing officer that these parties have extended unsecured loan almost equal to their turnover. The turnover of Redeem exports Pvt. Ltd. is Rs.35,83,30,074/-, cost of raw material is Rs.36,34,27,887/- where as it has extended unsecured loan of Rs.12,04,35,153/- to the assessee. Moreover, currently this company has no business activity. Likewise, the turnover of Kashish Diam Pvt. Ltd. is Rs.72,13,76,594/-, cost of raw material is Rs.70,11,57,785/- where as it has extended unsecured loan of Rs.8,54,43,448/- to the assessee. Thus, assessing officer noted that identity, creditworthiness as well as the genuineness of the transactions stands disproved. The assessee too could not establish the identity, creditworthiness and the genuineness of the transactions with the parties mentioned below:
A.Y. 14-15 Sh. Dharmesh P Patel Name & address of the PAN Action Result Unsecured loan party taken outstanding as on 31.03.2014 Kashish Diam Pvt. Ltd. AAECK3292R Field Party not at the Rs.8,54,43,448/- 6/1621, Off. No.101, 1st enquiry address Floor, Gundi Sheri, Lai Darwaja, Surat Redeem Exports Pvt. Ltd. AAGCR1855D Field Party not at the Rs.12,04,35,153/- Sakina Manzil, Shop No.7 enquiry address 4th Floor, Plot No.324/330, Raja Rammohan Shri Bharatbhai M AVAPC9008M Summons Party not at the Rs.10,66,329/- Chauhan, Plot No.A-12, u/s 131 address; 203, Paras Society-1, unserved Katagram,Surat Shri Jagdishbhai P Summons Party not at the Harijan, B-301, Shiv AIGPH5940N u/s 131 address; Rs.10,66,329/- Pooja Residency-B, Hari unserved Om Nagar Society, Katargam, Surat Shri Arvindbhai B Summons Party not at the Rs.7,42,978/- Bhabhor, Plkto No.7, u/s 131 address; Balaji Nagar Society, Nr. unserved Pinky Gas Dabholi Road, Katargam, Surat Summons u/s.131 of the Act were issued to three parties as mentioned above for cross examination, but were returned unserved as the parties were not available in the addresses given by the assesses.
Based on these facts, assessing officer noted that creditworthiness boasted by the assessee is only temporarily created creditworthiness and not the real one. The materials available on record and the enquiries conducted reveals that these parties are not traceable. Mere the fact that these companies are registered with ROC, were filing return of income or having PAN/bank accounts does not establish the identity of the above companies. These companies are existing on papers but are specifically found to be non-existent. When sources of depositors not satisfactorily explained, deposit to be added by even if received by cheque, also held that burden is on the assessee to explain the deposit satisfactorily, mere furnishing of some particulars not enough, payment by cheque not conclusive. The Assessing Officer relied on the decision in the case of ITO Vs. Dlza Holdings (P) Ltd, 255 ITR 573 (Kerala), and in the case of Shankar Ghosh Vs. ITO 11985] 23 TTJ (Cal.) 20, Page | 3
A.Y. 14-15 Sh. Dharmesh P Patel wherein it was held that assessee had failed to prove the capacity of the person from whom he had allegedly taken loan. Loan amount was rightly held as assessee's own undisclosed income. In view of the foregoing discussion of facts, the assessing officer held that assessee failed to prove three ingredients of section 68 namely, identity, creditworthiness and genuineness and hence a sum of Rs.20,87,54,237/- being credited in the books but not being supported by explanation of the assessee, was treated as income of the assessee, as per the provisions of section 68 of the Act.
Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us.
Learned DR for the Revenue submits that assessee could not establish the identity, creditworthiness & genuineness of these transactions. Moreover, notices u/s 133(6) of the Act and summons u/s 131 of the Act was issued to ascertain the genuineness of these transactions but nothing was heard from these parties. Further, it was noted by assessing officer that these companies were running from one rented room premises and occasionally change their addresses. Some of these parties have closed down their activities after squaring up their unsecured loan. Moreover, on verification it was observed that two of the companies namely Kashish Diam Pvt. Ltd. & Redeem Exports Pvt. Ltd. have extended unsecured loan almost equal to their turnover. Summons u/s.131 of the Act issued to three parties namely, Shri Bharatbhai M Chauhan, Shri Jagdishbhai P Havijan & Shri Arvindbhai H Bhabhor to ascertain the identity & genuineness of the transactions returned unserved as the parties were not available in these addresses provided by the assessee. Thus, as regards to these transactions, it was determined that the creditworthiness boasted by the assessee is only temporarily created creditworthiness and not the real one. The material available on record and enquiries conducted revealed that these parties are not traceable. The ld DR submits that these parties are on paper and fictitious as they do not exist on the A.Y. 14-15 Sh. Dharmesh P Patel given address. Resultantly, the three ingredients of section 68 have not been satisfied by assessee. This way, ld DR reiterated the stand taken by the Assessing Officer and prayed the Bench that order passed by the assessing officer may be upheld.
Learned Counsel submitted that assessee submitted following documents Viz:(i) confirmation of accounts of transactions (ii) the copy of the bank account of the creditor showing the transactions to the appellant (iii) copy of income tax return filed for AY 2014-15 (iv) copy of audited final accounts. With help of these documents assessee has proved three ingredients of section 68 namely, identity, creditworthiness and genuineness of the transactions, therefore order passed by ld CIT(A) may be upheld.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessee has heavily relied on the judgment of Hon`ble Supreme Court in the case of Orisa Corpn. Pvt. Limited 159 ITR 78 and stated that it was the duty of assessing officer to verify the genuineness of transactions by enforcing the provisions of section 131 of the Act. We note that assessing officer conducted the field inquiry and issued notices under section 131 of the Act on the address provided by the assessee, however these notices were returned back, as the parties were not existed on the given address. In these circumstances, now burden shifts on the assessee to produce these parties before the assessing officer, however assessee failed to do so, therefore we note that identity of these parties have not been proved. Therefore, we find merit in the submission of ld DR to the effect that these parties are on paper and fictitious as they do not exist on the address supplied by the assessee, therefore identity of these parties has not been proved by the assessee.
A.Y. 14-15 Sh. Dharmesh P Patel 10. Learned Counsel argued that assessee submitted copy of the bank accounts, copy of income tax return and copy of audited accounts and also contended that in ROC records, these companies are active, despite of this, as we have noted that these documents do not prove the identity of these alleged parties, as we have mentioned in para 9 of this order. The section 68 of the Act, casts onus on the assessee that explanation should be to the satisfaction of Assessing Officer. Thus, it is clear, that if Assessing Officer is not satisfied and ask additional evidences from assessee, assessee is duty bound to produce, further details or persons for verification. The assessee cannot take plea that he has submitted some papers and his onus has been discharged. It is duty of assessee to provide further explanation and material as required by Assessing Officer. We note that Assessing Officer has conducted the field inquiry and issued notices under section 131 of the Act on the address provided by the assessee, however these notices were returned back, as the parties were not existed on the given address. In these circumstances, burden shifts on the assessee to produce these parties before the Assessing Officer or to provide new address, if address has been changed, however assessee has failed to do so. Similarly, if Assessing Officer at any stage of probe reaches to a dead end, and inform assessee about the same, it is duty of assessee to help him and provide whatever is asked. This position of shifting of onus from assessee to Assessing Officer & Assessing Officer to assessee is tricky one, which depends on the facts of the case. In this regard Hon’ble Apex Court in case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) has stated:
Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each, case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it
The ld DR also pointed out that addition can not be deleted based on the facts that loan has been repaid subsequently, as these parties are factitious and existed on paper only, therefore repayment has been made only factitious parties, hence decision relied on by ld Counsel in the case of Ayachi Chandrssekhar Narsangji 42 Taxmann.com 251 (Guj) is distinguishable on facts. In the case of Ayachi Page | 6
A.Y. 14-15 Sh. Dharmesh P Patel Chandrssekhar Narsangji(supra), the parties were not existed on paper, therefore, decision of Hon`ble Gujarat High Court in the case of Ayachi Chandrssekhar Narsangji(supra) does not assist to the assessee.
Considering these facts and circumstances, we note that assessee has proved creditworthiness and genuineness, however assessee failed to prove identity of these parties from whom unsecured loan had been received, therefore we are of the view that one more opportunity should be given to the assessee to plead his case before the Assessing Officer to prove identity of these parties. Hence, we set aside the order of the Ld. CIT(A) and remand the matter back to the file of Assessing Officer for limited purpose to examine the ‘identity’ of the parties, and to decide the matter in accordance to law after giving opportunity of being heard to the assessee.
In the result, the appeal of the Revenue is allowed for statistical purposes.