Income Tax Appellate Tribunal - Ahmedabad
Shri Chirag H. Shah, Huf,, Ahmedabad vs The Ito, (Osd), Range-9, Presently ... on 29 June, 2022
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "SMC" BENCH
Before: Ms. Annapurna Gupta, Accountant Member
And Shri TR Senthil Kumar, Judicial Member
ITA No. 1256/Ahd/2019
Assessment Year 2009-10
Chirag H Shah-HUF 3, ITO (OSD), Range-9,
Sukrut Flat, Opp. Anandji Ahmedabad
Kalyanji Pedhi, Nr PNB, Vs (Respondent)
Vasantkunj, Ahmedabad
PAN: AANHS4164G
(Appellant)
Appellant by : Shri Rupesh Mehta, A.R.
Respondent by : Shri Alpesh Parmar, Sr.D.R.
Date of hearing : 07-04-2022
Date of pronouncement : 29-06-2022
आदे श/ORDER
PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad, (in short referred to as CIT(A)), dated 22-05-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the "Act") pertaining to Assessment Year (A.Y) 2009-10.
2. The solitary issue, it was common ground, related to addition made to the income of the assessee on account of unsecured loan taken from I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 2 Shri Chirag H. Shah HUF vs. ITO various friends and relatives amounting to Rs. 26,25,200/- remaining unexplained. The addition was made u/s. 68 of the Act as unexplained credits.
2.1. At the outset itself, it was pointed out that this was the second round before us. That in the first round the ld. CIT(A) had dismissed the assessee's appeal refusing to entertain the additional evidences filed by the assessee before him in support of his claim of genuineness of the unsecured loan, which matter travelled to the ITAT who restored back the issue to the Ld.CIT(A) directing him to admit the additional evidences and to decide the issue thereafter on merits. That in pursuance to the same, the impugned order has been passed by the ld. CIT(A).
3. As transpires from the orders of the authorities below, the unsecured loan pertained to the following 10 parties:
Sr.No. Name of the person Amount (In Rs.)
1. Darshanben P. Chowi 50,000
2. Gautam Shantilal Shah 4,24,000
3. Hiral A, Shah 1,01,000
4. Kanubhai Patel 10,39,000
5. Pareshbhai Dave 2,00,000
6. Samprati Enterprise 4,24,000
7. Sulochan B. Shah 1,00,000
8. Swetaben Shah 2,00,000
9. Trivedi Deven K 43,600
10. Trivedi Naren 43,600
TOTAL 26,25,200
I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 3
Shri Chirag H. Shah HUF vs. ITO
4. Additional evidences in the form of confirmation of these parties copy of the bank accounts, copy of the ITR etc. were filed which were forwarded to the A.O. for examining the evidences and giving his comments on merit. The A.O. submitted his comments, rejecting the assessee's contention of having proved the genuineness of the unsecured loan with respect to each such loan in a tabular form reproduced at page 6 & 7 of the Ld. CIT(A) order is as under:
Sr. No. Name of Party Amount Documents submitted Remarks 1 Dharshanaben 50,000 Copy of ledger, PAN On verification of bank statement, it is Chokshi Confirmation, bank noticed that immediately before lending statement the amount of Rs.50,000/- to the assessee, an amount of Rs.50,000/- had been deposited in the bank account of the individual. Copy of return of income not filed. Hence genuineness of transaction & creditworthiness of the loan depositor could not be established.
2 Gautam 4,24,000 Copy of Ledger, PAN, On verification of bank statement, it is Shantilal Shah Confirmation, noticed that immediately before lending incomplete bank the amount of Rs.4 lacs to the assessee, statement, return of an amount of Rs.4,00,000/- had been income deposited in the bank account of the individual. Moreover, bank statement also reveals that most of the time the bank balance is having minimum deposit and before transferring amount to other account immediately before that nearly same amount deposited in the bank account. Hence genuineness of transaction could not be established.
Also, the loan depositor has filed his return of income at Rs. 2,51,176/-
However advanced Rs.4,24,000/- to the assessee. Hence, creditworthiness of the loan depositor could not be established.
3 Hiral A. Shah 1,01,000 Copy of ledger, On verification of bank statement, it is PAN, noticed that immediately before lending confirmation, Bank the amount of Rs.l,00,000/- to the Statement, return of assessee, an amount of Rs.1,00,000/- income had been deposited in the bank account of the individual. Hence genuineness of transaction could not be established"
4 Kanubhai patel 10,39,000 Copy of ledger, PAN, Return of income for A.Y. 2011-12 has confirmation, Bank been filed instead of relevant period i.e. Statement, return of A.Y.2009-10. Secondly, on perusal of income A.Y. "of, 201 return for A.Y.201 1- 12, it is noticed 1-12 has been filed that the party has filed return of income at Rs.59,010/-. Looking to the quantum I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 4 Shri Chirag H. Shah HUF vs. ITO of loan advanced to the assessee of Rs.
10,39,000/-creditworthiness of the loan depositor could not be established:
5 Pareshbhai 2,00,000 Copy of ledger, PAN, Copy of return of income has not filed.
Dave confirmation, Bank Hence creditworthiness of the loan statement depositor could not be established.
6 Samprati 4,24,000 Copy of ledger, Bank statement as well as return of Enterprise PAN, income have not been filed. Hence, confirmation Genuineness of transaction & creditworthiness of the loan depositor could not be established.
7 Sulochana R 1,00,000 Copy of Ledger, PAN, Creditworthiness of the loan depositor
Shah Confirmation, could not be established as Return of
Incomplete Bank income has not been filed.
Statement
8 Swetaben Shah 2,00,000 Copy of Ledger, PAN, complete Bank Statement and return of
Confirmation, income have not been filed. Hence
Incomplete Bank genuineness of transaction &
Statement creditworthiness of the loan depositor
could not be established.
9 Trivedi Deven 43,600 Copy of Ledger, On verification of bank statement, it is
K PAN, noticed that immediately before lending
Confirmation, Bank the amount of Rs.40,000/- to the
Statement, return of assessee, an amount of Rs.40,000/- had
income been deposited in cash in the bank
account of the party. Moreover, bank
statement also reveals that most of the
time the bank balance is having
minimum deposit and before
transferring amount to other account
immediately before that nearly same
amount deposited in the bank account in
cash. Hence genuineness of the
transaction could not be established.
10 Trivedi Niren 43,600 Copy of Ledger, PAN, On verification of bank statement, it is
Confirmation, Bank noticed that immediately before lending
Statement, return of the amount of Rs.40,000/- to the
income assessee, an amount of Rs.40,000/- had
been deposited in cash in the bank
account of the party. Hence genuineness
of transaction could not be established.
5. It is evident from the above that the A.O. rejected the contention of the assessee of the genuineness of the unsecured loan, either for the reason that their creditworthiness could not be established since return of income and/ or complete bank statement of the depositors was not filed or for the reason that he found that cheque of the same amount as that advanced to the assessee as loan, deposited in the bank account of the unsecured loan depositors.
I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 5Shri Chirag H. Shah HUF vs. ITO 5.1. The Ld.CIT(A) found merit in the findings of the A.O. noting that he had examined each unsecured loan vis a vis the evidences filed by the assessee to prove their genuineness and had given specific finding for the creditworthiness and genuineness having not been established by the assessee. The findings of the CIT(A) at para 4.9 & 4.10 of the order in this regard are as under:
4.9. It is seen from the remand report dtd. 26.05.2014 submitted during the first round of appeal before the CIT(A), that the AO has given categorical finding in para 4.1 of the above remand report. The AO has examined each unsecured loan, copy of confirmation, bank statement, PAN and after examining given specific finding that the credit worthiness and genuineness of the unsecured loans lenders have not been established by the assessee during the remand report. In the rejoinder, the appellant merely submitted that he has discharged his burden of proof by submitted contra confirmation letter, copy of bank statement and IT return etc., hence the addition should be deleted. 4.10 4.10. The contention of the appellant is not tenable in view of the specific finding of the AO during the remand report there is no proper source of deposit of the lender. Hence genuineness, and credit worthiness is not proved. The reliance is also placed in the following decisions-
a. In a recent decision of Hon'ble Ahmedabad ITAT in the case of Pavankumar M. Sanghavi v/s ITO. The Hon'ble ITAT ( 81 taxmann.com 308 ) which has ben confirmed by the Hon'ble Gujrat High Court and Hon'ble Supreme Court, it has been held that when Assessee received unsecured loan but could not produce lenders for verification and these lenders were found to be shell companies, said loan transactions could not be said to be genuine merely because assessee filed loan confirmations copies of ledger accounts and other supporting evidences. The relevant observation of the ITAT is also reproduced herein below:
"8 As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis-a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realties. It will, therefore, be useful to understand as to how the shell entities, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions- to give it color of a normal business entity, used as a vehicle for various financial maneuvers. A shell entity, by itself, is not an illegal entity but it is their act of abatement of, and being part of, financial maneuverings to legitimize illicit I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 6 Shri Chirag H. Shah HUF vs. ITO monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets it apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial maneuverings for the benefit of its clients, or, with that predominant underlying objective, to give the color of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this specialized Tribunal, cannot be oblivious of these ground realities."
The Hon'ble Gujarat High court has confirmed the above decision of the ITAT and held as under:-
"3. Perusal of the orders on record and in particular, the above quoted portion of the order of the Tribunal would make it clear that the entire issue is based on appreciation of evidence on record and thus factual in nature. The Tribunal has given elaborate reasons to come to the conclusion that the entire transaction was not genuine. In absence of any perversity, we do not see any reason to interfere.
4. Learned counsel for the assessee however vehemently contended that the assesses had received loans through cheques from lenders who had confirmed the same. Their accounts are audited and filed before the Revenue authorities. Thus, the genuineness of the transactions, the capacity of the lender and the factum of lending all have been established. Addition under section 68 of the Act there could not have been made. However, as noted, the Tribunal has minutely examined the position of the lenders, the circumstances under which, the amounts were allegedly loaned to come to the conclusion that the "transactions were not genuine."
The Hon'ble Apex Court on 01.5.2018 also dismissed the SLP filed against the order of the Hon'ble Gujarat High Court .
b. In the latest decision of Hon'ble Apex court in the case of NRA Iron and Steel Pvt. Ltd. dated 05.03.2019 arising out of SLP (Civil) No. 29855 of 2018 , the Hon'ble apex court has laid down principle and ratio that genuineness of the transaction and circumstantial evidence are crucial to determined the true nature of any transaction . The Hon'ble Supreme Court has decided the issues as under-
"10. On the issue of unexplained credit entries/share capital, we have examined the following judgments:
i. in Sumati Dayal v. CIT this Court held that:
"if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, vis., the receipt of money, and if he fails to rebut I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 7 Shri Chirag H. Shah HUF vs. ITO the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably"
ii'. "A bare reading of section 68 of the Income-tax Act, 1961, suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the previous year; and (Hi) either (a) the assessee offers no explanation about the nature and source of such credits found on the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to Income-tax s the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The burden is on the assessee to take the plea that, even if the explanation is not acceptable, the material and attending circumstances available on record do not justify the sum found credited in the books being treated as a receipt of income nature."
(emphasis supplied) ii. The Delhi High Court in a recent judgment delivered in PR.CIT -6, New Delhi v. NDR Promoters Pvt. Ltd.10 upheld the additions made by the Assessing Officer on account of introducing bogus share capital into the assessee company on the facts of the case.
iv. The Courts have held that in the case of cash credit entries, it is necessary for the assessee to prove not only the identity of the creditors, but also the capacity of the creditors to advance money, and establish the genuineness of the transactions. The initial onus of proof lies on the assessee. This Court in Roshan Pi Hatti v. CIT11, held that if the assessee fails to discharge the onus by producing cogent evidence and explanation, the AO would be justified in making the additions back into the income of the assessee.
v. The Guwahati High Court in Nemi Chand Kothari v. CIT held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to provide the identity of the creditors and genuineness of the transaction.
"It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has provded the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthinss of his creditors vis-a-vis the transactions which he had with the creditors, his burden sands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself."
vi. In a recent judgment the Delhi High Court13 held that the credit-worthiness or genuineness of a transaction regarding share application money depends on whether the two parties are related or known to each other, or mode by which I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 8 Shri Chirag H. Shah HUF vs. ITO parties approached each other, whether the transaction is entered into through written documentation to protect investment, whether the investor was an angel investor, the quantum of money invested, credit-worthiness of the recipient, object and purpose for which payment/investment was made, etc. The incorporation of a company, and payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus. vii. Other cases where the issue of share application money received by an assessee was examined in the context of Section 68 are CIT v. Divine Leasing & Financing Ltd.14, and CIT v. Value Capita/ Service (P.) Ltd.15
11. The principles which emerge where sums of money are credited as Share Capital/Premium are:
i. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. ii. The Assessing Officer is duty bound to investigate the credit-worthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. iii. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be established.
In such a case, the assessee would not have discharged the primary onus contemplated by Section 68 of the Act.
12. In the present case, the A.O. had conducted detailed enquiry which revealed that: i. There was no material on record to prove, or even remotely suggest, that the share application money was received from independent legal entities. The survey revealed that some of the investor companies were non-existent, and had no office at the address mentioned by the assessee. For example:
a. The companies Hema Trading Co. Pvt. Ltd. and Eternity Multi Trade Pvt. Ltd. at Mumbai, were found to be non-existent at the address given, and the premises was owned by some other person.
b. The companies at Kolkatta did not appear before the A.O., nor did they produce their bank statements to substantiate the source of the funds from which-the alleged investments were made.
c. The two companies at Guwahati viz. Ispat Sheet Ltd. and Novelty Traders Ltd., were found to be nonexistent at the address provided. , The genuineness of the transaction was found to be completely doubtful. ii. The enquiries revealed that the investor companies had filed returns for a negligible taxable income, which would show that the investors did not have the financial capacity to invest funds ranging between Rs. 90,00,000 to Rs.I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 9
Shri Chirag H. Shah HUF vs. ITO 95,00,000 in the Assessment Year 2009-10, for purchase of shares at such a high premium. For example:
Neha Cassetes Pvt. Ltd. - Kolkatta had disclosed a taxable income of Rs. 9,744/- for A.Y. 2009-10, but had purchased Shares worth Rs, 90,00,000 in the Assessee Company.
Similarly Warner Multimedia Ltd. - Kolkatta filed a NIL return, but had purchased Shares worth Rs. 95,00,000 in the Assessee Company - Respondent. Another example is of Ganga Builders Ltd. - Kolkatta which had filed a return for Rs. 5,850 but invested in shares to the tune of Rs. 90,00,000 in the Assessee Company -Respondent, etc. Hi. There was no explanation whatsoever offered as to why the investor companies had applied for shares of the Assessee Company at a high premium of Rs.
190 per share, even though the face value of the share was Rs. 10/- per share. iv.
Furthermore, none of the so-called investor companies established the source of funds from which the high share premium was invested. v. The mere mention of the income tax file number of an investor was not sufficient to discharge the onus under Section 68 of the Act.
13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged.
The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assesse Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility.
The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be non-existent, and the onus to establish the identity of the investor companies, was not discharged by the assesses.
14. The practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the Assessee since the information is within the personal knowledge of the Assessee. The Assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the Assessee. I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 10 Shri Chirag H. Shah HUF vs. ITO
15. On the facts of the present case, clearly the Assessee Company - Respondent failed to discharge the onus required under Section 68 of the Act, the Assessing Officer was justified in adding back the amounts to the Assessee's income.
16. The Appeal filed by the Appellant - Revenue is allowed. In the aforesaid facts and circumstances, and the law laid down above, the judgment of the High Court, the IT AT, and the CIT are hereby set-aside. The Order passed by the AO is restored."
6. Aggrieved by the same, the assessee has raised the following grounds of appeal before us.
1. Your appellant has discharged the onus lies on him as required u/s 68 of the IT Act regarding unsecured loan taken from various friends and relatives. And therefore, we request the Hon'ble Court to delete the entire addition of Rs. 26,25,200/- made u/s 68 on this ground.
2. The Ld. CIT (A) failed to appreciate that your appellant has deposited the cash out of withdrawal from the same bank account only. Since the Ld. CIT(A) fails to give credit I of cash withdrawal from bank of Rs. 7,44,000/- we request the Hon'ble Court to ' delete the addition made u/s 68 on this ground.
3. The Ld. CIT (A) failed to appreciate that except one person loan of Rs. 50,000/- we have repaid all the amount with interest to our depositor through a/c payee cheque only and therefore we request the Hon'ble Court to delete the addition made u/s 68 on this ground.
7. Before us, the contention of the Ld. Counsel for the assessee was that all necessary documents evidencing the genuineness of the unsecured loans had been filed before the CIT(A) by way of their confirmations, the bank book of the assessee and the depositor proving that the transaction took place through banking channel, that even the source of the depositor was pointed out, copy of ITR's filed and also the fact that the parties had also been paid interest on the loans and the amounts of loan had been subsequently repaid in the subsequent year. A summary showing the details of various evidences submitted before the Ld. CIT(A) with respect to I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 11 Shri Chirag H. Shah HUF vs. ITO each depositor mentioning the paper book page number also where the evidences was filed was placed before us.
Chirag H Shah-HUF Asst Year -2009-10 Summary showing Details and page no. of paper book submitted on 11-3-2022 for various evidence submitted before the CIT(A) from time to time to prove genuineness of Transaction and Credit Worthiness of Depositors Copy of Copy of Copy of Letter from Bank Ledger Bankbook Statement depositor of of Repaid on from the Cross Appellant depositor mentioning Cheque Copy of Amount of Ledger Nam Amou Taken books of Confirmat reflecting .. Source of issued ITR Total Loan e of nt of on Appellant ion such reflecting depositor i.e. after submitted Interest Repaid Depo Loan submitted transcation such Source depositio on 03-03- paid sitor taken on 03-03- transactio n of 14 2014 n submitted submitted submitted of source 14-
on on
on 18-09-14 21-04-14 03-03-14 05-19
Dars 50,000 07-04- - 8 53 9-10 95 Cheque - Note - 1
hana 08
Chok
shi
Gaut 4,00,0 04-10- 69 11 54 12 Cheque 13 46,000 4,70,000
am 00 08 25-02-2010
Shant
ilal
Shah
Hiral 1,00,0 10-03- 67 14 56 15-16 99 Cheque 17 4,500 1,04,500
A 00 09 11-06-2009
Shah
Kanu 10,00, 06-08- 84 18 54 20 Note - 2 Cheque Note - 2 2,28,67 2,00,000
bhai 000 08 5 23-04-2010
Patel
10,00,000 03-11-2010
31,675
28-03-2011
Pares 2,00,0 26-12- 72 22 55 24-25 104 Cheque - 2,00,000
hbhai 00 08 06-12-2010
Dave
Bam 4,00,0 04-10- 74 26 54 - - - 27 56,900 4,56,900
prati 00 08 25-11-2009
Enter
prise
I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 12
Shri Chirag H. Shah HUF vs. ITO
3uloc 1,00,0 19-12- 78 28 55 30-33 109 Cheque Note - 3 - 1,00,000
hana 00 08 06-12-2010
B
shah
5wet 2,00,0 19-12- 76 34 55 36-37 116 Cheque Note - 4 - 2,00,000
aben 00 08 06-12-2010
Shah
Frive 40,000 27-09- 80 38 54 39-40 121 Cash 41 14,712 54,712
di 08 28-03-2011
Deva
nK
Frive 40,000 27-09- 82 42 54 43-44 126 Cash 45 14,712 54,712 28-03-2011
di 08
Nare
n
Note: -
1.. Unsecured loan Taken from Darshana Chokshi of Rs. 50,000/- is not repaid yet. Your appellant is regularly paying interest through proper ranking channel on the same on regular basis of Rs. 9,000/- per annum. Refer Appendix - I
2. Kanubhai Patel has given loan out of the sale proceeds received by him on sale of land. Your appellant has already submitted copy of Statement of Income reflecting same with CIT(A)-XX, Ahmedabad vide Annexurej3of Submission dated 18-09-2014. However, at the time of preparing 'aperbook dated 11-03-2022, through oversight, we forgot to attach that copy. PI. also find herewith the copy of the same for your reference. Refer Appendix - II
3. Sulochanaben Shah is aged about 82 Years. She has given loan to your appellant out of her own saving. Further, there might be a case that during he year under consideration, her total taxable income is less than basic exemption Limit. And therefore, she has not filed her IT Return.
4.. Swetaben Shah has given loan to your appellant out of her own saving from her salary income. Further, during the year under consideration, her total taxable income is less than basic exemption Limit, and therefore, she has not filed her IT Return.
7.1. Ld. Counsel for the assessee also submitted his rejoinder to the findings of the A.O. in the remand report for the basis of holding that the genuineness of the unsecured loans were not proved as under:
Sr. No. Name of Party Amount Documents Remarks Our comment submitted 1 Dharshanaben 50,000 Copy of On verification of bank statement, it is Pg No. 95 my paper Chokshi ledger, PAN noticed that immediately before book dated 11-03-
Confirmation, lending the amount of Rs.50,000/- to 2022 Rs. 50,000/- bank the assessee, an amount of Rs.50,000/- she has confirmed statement had been deposited in the bank that loan was given account of the individual. Copy of out of amount reed, I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 13 Shri Chirag H. Shah HUF vs. ITO return of income not filed. Hence from her Debtor on genuineness of transaction & 02-04-2008 in creditworthiness of the loan depositor cheque.
could not be established.
2 Gautam Shantilal 4,24,000 Copy of On verification of bank statement, it is Pg. No. 13 of my Shah Ledger, PAN, noticed that immediately before paper book dated Confirmation, lending the amount of Rs.4 lacs to the 11-03-2022 incomplete assessee, an amount of Rs.4,00,000/- Gautambhai Shah bank had been deposited in the bank is engaged in the statement, account of the individual. Moreover, business the same return of bank statement also reveals that most can be verified on income of the time the bank balance is having the copy of ITR -4.
minimum deposit and before Pg. No. 12 of my
transferring amount to other account paper book dated
immediately before that nearly same 11-03-2022, He has
amount deposited in the bank account. made payment of
Hence genuineness of transaction Rs. 4 lakhs to me
could not be established. Also, the from his current
loan depositor has filed his return of Account with Shri
income at Rs. 2,51,176/- However Vinayak Sahkari
advanced Rs.4,24,000/- to the Bank Limited out
assessee. Hence, creditworthiness of of amount received
the loan depositor could not be from "Om
established. Bhagwati Textile"
in cheque. The
same can be
verified on the copy
of Bank Statement.
3 Hiral A. Shah 1,01,000 Copy of On verification of bank statement, it is Pg. 99 of our paper
ledger, noticed that immediately before book, she confirm
PAN, lending the amount of Rs.l,00,000/- to that she has given
confirmation, the assessee, an amount of the loan through
Bank Rs.1,00,000/- had been deposited in cheque from her
Statement, the bank account of the individual. saving out of her
return of Hence genuineness of transaction income of Rs.
income could not be established" 3,79,257/-.
4 Kanubhai patel 10,39,000 Copy of Return of income for A.Y. 2011-12 Pg. No. 66 of my
ledger, PAN, has been filed instead of relevant paper book dated
confirmation, period i.e. A.Y.2009-10. Secondly, on 11-03-2022 2nd
Bank perusal of return for A.Y.201 1- 12, it last para and also
Statement, is noticed that the party has filed Refer Appendix - II
return of return of income at Rs.59,010/-. of today's summary
income A.Y. Looking to the quantum of loan chart.
"of, 201 1-12 advanced to the assessee of Rs. Kanubhai Patel has
has been filed 10,39,000/-creditworthiness of the given loan through
loan depositor could not be cheque from his
established: OD Account out of
the sale proceeds
received by him on
sale of land.
Your appellant has
already submitted
copy of Statement
of Income for the
A.Y.2009-10
reflecting same
with CIT(A)-XX,
Ahmedabad vide
Annexure -B of
Submission dated
I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 14
Shri Chirag H. Shah HUF vs. ITO
18-09-2014.
N.B.:- at the time
of preparing Paper
book dated 11-03-
2022, through
oversight, we
forgot to attach that
copy.
5 Pareshbhai Dave 2,00,000 Copy of Copy of return of income has not filed. Pg. No. 25 of my
ledger, PAN, Hence creditworthiness of the loan paper book dated
confirmation, depositor could not be established. 11-03-2022.
Bank Amount was
statement given out of
balance in Saving
account
6 Samprati 4,24,000 Copy of Bank statement as well as return of Pg. No. 27 of my
Enterprise ledger, income have not been filed. Hence, paper book dated
PAN, Genuineness of transaction & 11-03-2022. Copy confirmation creditworthiness of the loan depositor of ITR of Ashok could not be established. Jethalal Shah Prop:- of Samprati Enterprise reflecting income of Rs. 2,17,429/-.
Though given at the time submission of additionalevidences on 03-03-2014 vide Ann. H. Pg. No. 2 of my paper book dated 11-03-2022.
For any reason Ld.
AO has not
considered that.
7 Sulochana R Shah 1,00,000 Copy of Creditworthiness of the loan depositor Pg. No. 109 of my
Ledger, PAN, could not be established as Return of paper book dated
Confirmation, income has not been filed. 11-03-2022.
Incomplete She is 82 years old.
Bank Amount was given
Statement through cheque out
of balance in
Saving account.
8 Swetaben Shah 2,00,000 Copy of complete Bank Statement and return Pg. No. 116 of my
Ledger, PAN, of income have not been filed. Hence paper book dated
Confirmation, genuineness of transaction & 11-03-2022.
Incomplete creditworthiness of the loan depositor Amount was given
Bank could not be established. through
Statement cheque out of
balance in Saving
account
accumulated from
Salary income.
9 Trivedi Deven K 43,600 Copy of On verification of bank statement, it is Pg. No. 121 of my
Ledger, noticed that immediately before paper book dated
PAN, lending the amount of Rs.40,000/- to 11-03-2022. He is Confirmation, the assessee, an amount of Rs.40,000/- brother of Niren Bank had been deposited in cash in the bank Trivedi (My Statement, account of the party. Moreover, bank Brother-in-Law). return of statement also reveals that most of the He has given income time the bank balance is having money through I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 15 Shri Chirag H. Shah HUF vs. ITO minimum deposit and before cheque after cash transferring amount to other account deposit of Rs. immediately before that nearly same 40,000/- out of his amount deposited in the bank account saving. He is in cash. Hence genuineness of the residing outside transaction could not be established. India and since long., His Last Year ITR i.e. AY.
2008-09 was
reflecting income
of Rs. 1,21,3237-
Refer Pg. No. 125.
10 Trivedi Niren 43,600 Copy of On verification of bank statement, it is Pg. No. 126 of my
Ledger, PAN, noticed that immediately before paper book
Confirmation, lending the amount of Rs.40,000/- to dated 11-03-2022.
Bank the assessee, an amount of Rs.40,000/- He is My Brother-
Statement, had been deposited in cash in the bank in-Law. He
return of account of the party. Hence has given money
income genuineness of transaction could not through
be established. cheque after cash
deposit of
Rs. 40,000/- out
of his
AutoCAD
design work
income.
He is residing
outside India
and since long.
His Last Year ITR
i.e. AY.
2008-09 was
reflecting income
of Rs. 1,14,457/-
Refer Pg.
No. 130.
8. Ld. Counsel for the assessee heavily relied on the submission made above supported with documents filed in the paper book before us.
9. Ld. D.R. on the other hand relied on the order of the ld. CIT(A).
10. We have heard both the parties and have also gone through the order of the Ld.CIT(A) before us. We have also carefully gone through the summary details of the arguments made by the Ld. counsel for the assessee before us as also the documents referred to therein placed before us in the I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 16 Shri Chirag H. Shah HUF vs. ITO paper book filed by the assessee. We are sufficiently convinced that the assessee had discharged its onus of proving the genuineness of the unsecured loans and the findings of the A.O. to the effect their genuineness were not proved has been sufficiently demonstrated by the assessee to have been met during proceedings before the CIT(A) themselves.
11. With respect to all the 11 parties involved undisputedly their PAN details and confirmations and copies of bank statements reflecting the transactions have been filed. All the parties have admittedly given the loans through cheques/banking channels. There is no cash deposit in any bank account of depositors prior to issue of cheque. In almost all cases the source of depositors has also been explained and copies of their ITR's also filed in several cases. Also interest has been paid on most of these loans and all loans except one amounting to Rs.50,000/-, stand repaid in subsequent years . Further we find, each and every adverse observation made by the A.O. with respect to the loans have been sufficiently met by the assessee.
12. With respect to parties listed at S. No. 1 to 3 in the table above at para 7, the AO has doubted their creditworthiness since he found cheque deposited in their accounts immediately before issue of cheque to the assessee. In this regard we find that all these loan depositors had explained their sources in the confirmations filed as being out of money received from debtors in the case of Darshanaben Choksi who had advanced Rs.50,000/-; out of payment received from one party by cheque in the I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 17 Shri Chirag H. Shah HUF vs. ITO proprietorship concern of Gautam Shantilal Shah who had advanced Rs.4,24,000/- ; and out of her savings in the case of Hiralal Shah who had advanced Rs.1,00,000/-.Clearly the source of making the advances was also explained in each of the above cases. And we find no adverse observation with respect to the same by the Revenue authorities. The fact of cheque deposited in their accounts immediately before issuance of cheque to the assessee either stands explained or is of no consequence as long as the source of deposit is sufficiently explained.
13. Similarly in the case of Kanubhai Patel ,who had advanced Rs,10,39,000/- the AO found that the assessee had filed the depositors return of income for some other year, i.e A.Y 2011-12,instead of A.Y 2009- 10 the impugned year, and even the same reflected very low income of Rs,59,010/-which did not substantiate the creditworthiness of the said party to advance loan of Rs. 10,39,000/-To this we find that the assessee has pointed out that it was submitted to the Ld.CIT(A) that the loan had been advanced out of sale proceeds received from sale of land and return of income for the impugned year of the loan provider reflecting capital gain from sale of land was filed to the Ld.CIT(A) vide submission dated 18-09-14.
13.1. In the case of Paresh Bhai Dave, Sulochana Shah and Swetaben Shah who had advanced Rs, 2 lacs, 1 lacs and Rs.2 lacs respectively, the AO doubted their creditworthiness since their Return of Income was not filed. The assesses contention is that the said amounts were stated to have been advanced from their savings. The fact that the amounts have been I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 18 Shri Chirag H. Shah HUF vs. ITO advanced through banking channels and there is no allegation of cash deposit prior to advancing such amounts, we see no reason to disbelieve the explanation of the assessee.
14. In the case of Samprati Enterprises which had advanced Rs.4,24,000/- the creditworthiness has been doubted since return of income not filed. To this we find the assessee has pointed out that the ITR of the proprietor of the firm, Sh.Ashok Jethalal Shah had been filed as additional evidence vide letter dated 03-03-2014 which the AO failed to take note of. The Ld.DR was unable to controvert the same.
15. With respect to Rs. 43,600/- each advanced by Shri Trivedi Deven K and Trivedi Niren the findings of the A.O. are that there was cash deposited immediately before issuance of cheque. Ld. Counsel for the asessee has pointed out that it was demonstrated that both the persons were brother in law who resided abroad and had field return of income of Rs. 1,20,000/- odd in the preceding year and for the purposes of advancing the loan had deposited cash out of their savings.
16. In our view the evidences filed by the assessee sufficiently demonstrate the genuineness of the unsecured loans taken, coupled with the fact that the unsecured loan were returned in the subsequent years and also the fact of having paid interest on them to the loan depositors. I.T.A No. 1256/Ahd/2019 A.Y. 2009-10 Page No 19 Shri Chirag H. Shah HUF vs. ITO
17. Considering the above, we hold that the assessee had sufficiently demonstrated the genuineness of the unsecured loan receipt and the findings of the ld. Counsel for the assessee in this regard were not based on proper appreciation of the facts before them.
18. In view of the same, therefore we deleted the addition made u/s. 68 of the Act amounting to Rs. 26,25,200/-.
19. In effect, appeal of the assessee is allowed.
Order pronounced in the open court on 29-06-2022 Sd/- Sd/-
(TR SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad : Dated 29/06/2022
आदे श क त ल प अ े षत / Copy of Order Forwarded to:-
1. Assessee
2. Revenue
3. Concerned CIT
4. CIT (A)
5. DR, ITAT, Ahmedabad
6. Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद