BALDEVRAJ JAMMURAM AHUJA,SURAT vs. INCOME TAX OFFICER, WARD 1(2)(1), SURAT

Grounds of appeal raised by the assessee are as follows: “1. That the CIT(A) erred in confirming addition of Rs.2,00,000/- u/s. 68. 2. That the CIT(A) erred in disallowing the Interest Expenses of Rs.1,067/- on Unsecured Loan. 3. That CIT(A) erred in confirming the reopening u/s 147 as proper & justified. 4. That CIT(A) erred in not deciding the issue of non-furnishing of statement of Praveen Jain to assessee and non-giving opportunity of cross examination of Praveen Jain which is in violation of principles of natural justice.

Brief facts qua the issue are that assessee filed Return of Income for the A.Y.2008-09 on 16.09.2008 showing total income of Rs.4,79,020/-. There was information that the assessee has obtained accommodation entries of bogus purchase from various concerns of Shri Bhanwarlal Jain. A search and seizure action was carried out in the case of Shri Bhanwarlal Jain & Shri Rajesh Bhanwarlal Jain (sons of Shri Bhanwarlal Jain) on 01.10.2013 by the DGIT(Inv.), Mumbai covered name sake, dummy directors, partners, proprietors of various concerns that were being actually managed by Shri Bhanwarlal Jain, Rajesh Bhanwarlal Jain and Manish Bhanwarlal Jain (herein after referred to as Bhanwarlal & Family). These group concerns were believed to be concerns actively involved in providing non-genuine purchase bills and also unsecured loan accommodation entries to various interested parties. As a result of the search and seizure action it was conclusively proved that these diamond concerns are only paper based with no real business activities. From the details and evidences made available on record, it was obseerved that Shri Praveen Kumar Jain has given the following accommodation entries of bogus unsecured loan during the F.Y.2007-08 to Shri Baldevraj Jannuram Ahuja, Prop of M/s Pooja Enterprise. The details of which given as under:

Learned Counsel argues before the Bench that reasons recorded by the Assessing Officer are bad in law, therefore reassessment proceedings under section 147 of the Act, as initiated by the assessing officer should be quashed.

On merits, Learned Counsel submits that loan was taken by the assessee in AY.2009-10 and has been repaid in the subsequent years along with interest to the tune of Rs.2,17,260/-. Therefore, Learned Counsel contended that since the loan has been repaid in subsequent years, therefore genuineness of the loan should not be doubted and addition so made by the assessing officer may be deleted.

On the other hand, Ld. DR for the Revenue pleads that Assessing Officer has recorded the reasons in accordance with the provisions of section 147 of the Act, therefore, reopening made by the assessing officer is valid in the eye of law.

We have gone through the facts of the case, the reasons recorded for reopening u/s 147 of the Act, the submission and the various decisions of the Courts including those relied upon by the assessee. The assessee has challenged the reopening of assessment. We note that ld CIT(A) has dealt the issue of reopening in his appellate order, vide para no. 6.3.1 to para no.6.2.10 of his order. We have gone through the order of ld CIT(A) and observed that reopening of assessment under section 147 of the Act is valid. The issue of reopening under section 147 of the Act is covered in favour of Revenue by the following judgments of the Hon'ble Gujarat High Court, which are as under:

So far merit is concerned, we note that during the reassessment stage, the assessee did not file the evidence to the effect that he had paid the loan subsequently. The ld Counsel submitted that assessee has repaid the loan along with interest to the tune of Rs.2,17,640/- ( Rs.2,00,000 + Rs.17,640). To support his contention, ld Counsel submitted before us, copy of ledger accounts ( vide paper book page 61 and 62) and also submitted bank statement vide page no.63 of assessee`s paper book. We note that during the reassessment proceedings, the assessing officer did not get opportunity to verify these documents, vide para no.9 of assessment order, hence we find merit in the submission of ld DR for the Revenue, therefore considering these facts, we are of the view that issue needs to be remitted back to the file of the assessing officer for examination of bank statement and ledger account etc. If the assessee has repaid the loan in subsequent years then genuineness of the transaction should not be doubted and the addition so made should be deleted.

We note that Hon`ble Gujarat High Court in the case of Ayachi Chandrashekhar Narsanhji [2014] 42 taxmann.com 251 (Guj) held that if the Department had accepted repayment of loan in subsequent year, no addition should be made in the hands of the assessee, in current year on account of cash credit. Therefore, we set aside the order of ld CIT(A) and remit the issue back to the file of the assessing officer with the direction to examine the ledger accounts and bank statement to ascertain the fact that whether payment has been made in subsequent years or not? On examination, if the assessing officer finds that repayment of loan has been made in subsequent years, then in that circumstances, the addition of Rs. 2,00,000/- should be deleted.

In the result, appeal filed by the assessee is allowed for statistical purposes.