Income Tax Appellate Tribunal - Jaipur
Sh. Rajesh Kumar Somani, 107, Adarsh ... vs Dcit, Circle (Intl Tax), Jaipur on 16 February, 2023
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,"A" JAIPUR
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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM
vk;dj vihy la-@IT(IT)A No. 22/JP/2022
fu/kZkj.k o"kZ@Assessment Year :2019-20
Sh. Rajesh Kumar Somani cuke
DCIT ,
107, Adarsh Nagar, Vs. Circle (Intl Tax),
Pali. Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACOPS 6577 L
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@Assessee by : Shri P.C. Parwal (Adv.)
jktLo dh vksj ls@Revenue by: Shri James Kurian (CIT)
lquokbZ dh rkjh[k@Date of Hearing :22/11/2022
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 16/02/2023
vkns'k@ORDER
PER: DR. S. SEETHALAKSHMI, J.M. This appeal is filed by the assessee aggrieved from the order of the Income Tax Department, Jaipur for the assessment year 2019-20 dated 25.08.2022, which in turn arises from the order passed by the Dispute Resolution Panel-1, New Delhi under Section 144C(5) of the Income Tax Act, 1961 (in short 'the Act') 22.06.2022.
2. The assessee has marched this appeal on the following grounds of appeal:-
"1.The ld. AO has erred on facts and in law in making addition of Rs.81 lacs u/s 69 A of the Act by treating the loan given to M/s Somani Ecobuild Products LLP (75 lacs) and Mr. Nitesh Khandelwal ( Rs. 6 lacs) as unexplained money by incorrectly holding that assessee has not furnished supporting documentary evidence of the source of funds in 2 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani NRO A/c from where the loan was given without raising any query to furnish the same which otherwise is verifiable from the documents submitted to him.
1.1. The Ld AO has erred on facts and in kaw in making the addition of loan of Rs. 6 lacs given to Mr. Nitesh Khandelwal on 22.12.2017 which pertain to AY 2018-19 and not of the year under consideration.
2. The Ld AO has erred on facts and in law in making addition of Rs. 2,16,000/- on account of alleged interest income on interest free loan given to M/s Monani Ecobuild Products LLP and Mr. Nitesh Khandelwal by making incorrect and irrelevant observation. He has further erred in incorrectly calculating the amount of interest for 1 month at Rs. 2,16,000/- instead of on actual days basis at Rs. 1,65,205/-.
3. The appellant craves to alter, amend & modify any ground of appeal.
4. Necessary cost be awarded to the assessee.
3. The brief facts of the case are that the assesseeis a non-resident working in Dubai as President of Swiss Singapore Overseas Enterprises Pvt. Ltd. since 1993.For the year under consideration he filed his return of income in India declaring total income of Rs.64,03,100/-. The AO observed that assessee has given loan of Rs.2.10 crores (Rs.1.35 crores+Rs.75 lacs) to M/s Somani Ecobuild Product LLP and Rs.6 lacs to Mr. Nitesh Khandelwal from his NRO bank account maintained with Axis Bank Ltd. The assessee's explanation regarding source of loan of Rs.1.35 crores given on 26.03.2019 to M/s Somani Ecobuild Product LLP is found acceptable. However, assessee has failed to provide documentary evidence 3 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani regarding source of remaining loan amount of Rs.75 lacs given on 06.03.2019 as the source of credit in NRO account from where this amount is given is not proved with supporting documents and thus, this amount is added to the total income u/s 69A of the Act. Further an amount of Rs.16,00,000/- was credited in the NRO bank a/c on 22.12.2017 from the a/c of Mrs. VarshaSomani out of which an amount of Rs.6,00,000/- was given to Mr. Nitesh Khandelwal on 22.12.2017. However, whether this amount was transferred from NRE a/c or normal saving a/c or NRO a/c is not clear. Accordingly, Rs.6 lacs is also added u/s 69A of the Act.
4. The AO further observed that the above loan of Rs. 2.16 crores was provided without charging any interest. The assessee submitted that the loan was provided from his own funds and he has not taken any loan from others. There is no interest expenses claimed by him hence there is no diversion of interest bearing borrowed fund warranting any disallowance. The AO, however, held that assesse has not submitted the LLP agreement of M/s Somani Ecobuild Product LLP. The onus is on the assessee to prove that no interest has been accrued. The assessee has not submitted any documentary evidence during the course of assessment proceedings and also during the proceedings before Hon'ble DRP. Accordingly, he made addition of Rs.2,16,000/- under the head unexplained interest income by calculating it @ 12% for 1 month.
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IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani
5. The ld. AR for assessee submitted a detailed statement of facts which are as under:-
"1. The source of loan of Rs.75 lacs given by assessee to M/s SomaniEcobuild Product LLP on 06.03.2019from his NRO bank account maintained with Axis Bank Ltd. is explained hereunder:-
(a) During FY 2016-17 assessee has booked 4 flats in Mumbai with M/s J.P. Infra Mumbai Pvt. Ltd. The principal amount of Rs.96,79,000/- was paid for booking these 4 flats from NRO bank account, details of which is as under(PB 18):-
11.11.2016- Initial booking amount @ Rs.5 lacs eachfor 4 flats- Rs.20,00,000/- 17.02.2017- Service tax paid of Rs.1,04,200/-per flat for 4 flats- Rs. 4,16,800/- 28.02.2017- 2ndinstalment paid of Rs.18,15,550/- each for 2 flats- Rs.36,31,100/- 04.03.2017- 2ndinstalment paid of Rs.18,15,550/- each for 2 flats- Rs.36,31,100/-
Rs.96,79,000/-
(b) The main source of above payment is out of the funds of Rs.87,60,000/- transferred by assessee from his NRE bank a/c maintained with Axis Bank Ltd. and rent of Rs.3,88,800/- received from Mundra Solar Pvt. Ltd.(PB 18).
(c) During the year assessee received back the said amount along with interest on cancellation of the said booking in his NRO bank a/c, details of which is as under (PB 13-14):-
01.09.2018- Refund of booking of 2 flats with interest- Rs. 70,67,808/- 31.01.2019- Refund of booking of another 2 flats with interest- Rs. 65,06,452/-
TDS on interest- Rs. 17,66,454/-
Rs.1,53,40,714/-
In the bank account net of TDS Rs.1,35,74,260/- is credited. The interest incomehas been offered in the return for the year ending 31.03.2019 at Rs.56,61,714/-(PB 1).
Further assessee has also received rent of Rs.4,35,672/- on 14.01.2019 & 22.01.2019 from Mundra Solar Pvt. Ltd.
(d) From the above, it can be noted that the source of loan of Rs.75 lacs given by assessee to M/s Somani Ecobuild Product LLP on 06.03.2019 is the refund amount received by assessee on cancellation of booking of flats and rent received from Mundra Solar Pvt. Ltd. Thus, the source of funds of Rs.75,00,000/- is fully verifiable and hence no addition can be made u/s 69A of the Act.
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IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani
2. Regarding source of loan of Rs.6,00,000/- given by assessee to Mr. NiteshKhandelwal on 22.12.2017from his NRO bank account (PB 19) is concerned, it can be noted that this loan was given in FY 2017-18 and not in the year under consideration. Section 69A provides that where in any financial year the assessee is found to be the owner of any money which is not recorded in the books of account and the assessee offers no explanation about the nature and source of acquisition of the money or the explanation offered by him is not satisfactory, then such money may be deemed to be the income of the assessee for such financial year. In the present case, since the loan amount was given in FY 2017-18, no addition can be made in the year under consideration u/s 69A of the Act. So far as source is concerned it is out of the amount received from Varsha Somani, wife of the assessee who is also a non-resident and filing return of income in India declaring rental income, interest income, capital gain income and dividend income. Thus, the addition made u/s 69A of the Act is unjustified. In view of above, addition of Rs.81 lacs made u/s 69A of the Act is uncalled for and be directed to be deleted.
3. The AO made addition of Rs.2,16,000/- under the head unexplained interest income. In this connection it is submitted that M/s Somani Ecobuild Product LLP is the start-up venture of assessee's son and his wife. The interest free loan was given by assessee out of his own funds to help this start-up venture. Copy of assessee's ledger account in books of accounts of M/s SomaniEcobuild Products LLP and copy of certificate from M/s SomaniEcobuild Products LLP confirming that no interest has been paid is at PB 15-16. The observation of AO that assesse has not submitted the LLP agreement of M/s SomaniEcobuild Product LLP is irrelevant. Similarly interest free loan was given to Mr. NiteshKhandelwal to meet the medical expenses of his family. Such loan was subsequently repaid by him. Neither assessee has claimed any interest expenses nor he has received any interest. Hence, no addition on account of alleged unexplained interest income can be made. Further AO has incorrectly calculated the amount of interest for 1 month at Rs.2,16,000/- instead of on actual days basis at Rs.1,65,205/-.
In view of above, addition of Rs.2,16,000/- made on account of unexplained interest income is uncalled for and be directed to be deleted."
6. Per contra, ld. DR relied on the orders of the lower authorities.
7. We have heard both the parties and perused the materials available on record. It is noted that the assessee has booked four flats and consequently the booking were canceled which has been produce in paper books at page 18 where it has been paid to J P infra ( Mumbai) Private Limited amount to Rs. 5,00,000/- 6
IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani each and again thereby 4 entries on 17.02.2017 to which amount to Rs. 1,04,200/ per flat and on 28.02.2017 again two entries were made to Rs. 18,15,550/-, the whole amounts which were paid to JP Infra (Primate) Limited for the purpose of 4 flats and taking of these flats were canceled during the year and which they have paid with interest which is reproduced as under:-
7
IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani The ld. AR for the assessee further submitted that the repaid back the said amounts for the cancellation flats along with interest of Rs 56,61,714/- which has been produced as documentary evidences before us in paper book at page 3 as 8 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani computation income in which TDS has been deducted for Rs. 17,66,454/- and the assessee has offered tax in the interest of TDS also which has been reflected in paper books at page 1 of the computation on total income which is reproduced as under:-
we are of the opinion that the present facts and circumstances of the case is purely technical where we find that the DRP and ld. AO erred in making addition of Rs.
75,00,000/-. We have observed that the finding of the ld. AO in page 12 and 13 of his order which are produced as under:-9
IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani "As per the direction issued by the hon'ble DRP this issued was re-examined and on perusal of the bank alc statements produced by the assesse before Hon'ble DRP it is noted that the following credit entries were made into assesss's NRE bank a/c and then transferred to self NRO bank a/c to further use this fund to give loans and advances-
Sr. No. Date Amount credited Credited from 1. 23.03.2019 75,00,000/- Self NRE a/c 910010031676237 of Axis Bank 2. 25.03.2019 60,00,000/- Self NRE a/c 910010031676237 of Axis Bank
This amount totalling Rs. 1,35,00,000/- was then transferred to M/s Somani Ecobuild Product LLP on 26.03.2019. The contention of the assessee for this amount of Rs. 1,35,00,000/- is found acceptable.
However, the assessee has failed in providing documentary evidence regarding source of Rs 75,00,000, given to M/s Somani Ecobuild Product LLP on 06.03.2019 as loan and hence, in absence of supportive documentary evidence the source of this amount remains unverified. On perusal of the NRO account, it is observed that there are credit entries in the NRO account for which there is no supporting documents of the source of these credits and flow of funds. The source of this fund of Rs. 75,00,000/- remains unverified. The onus is on the assessee to provide the complete details for verification which the assessee has failed to produce during the assessment proceedings and also before the Hon'ble DRP As per section 69A of the Act-
"Where in any financial year the assessee is found to be the owner of any money, bullion jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."
The Hon'ble Supreme Court in the case of ChuharmalVs CIT (1988) 172 ITR 250 while affirming the view of the Madhya Pradesh High Court has held that the expression INCOME' as 10 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani used in Section 69A of the Act, 1961 had a wide meaning which meant anything which came in or resulted in gain and on this basis, concluded that the assessee had income which he had invested in purchasing article and he could be held to be owner and the value could be deemed to be his income by virtue of Section 69A of the Act Also, The Hon'ble Supreme Court in the case of Smt Srilekha Banerjee and others Vs CIT,Bihar & Orissa, reported in 1964 AIR 697, dated 27/03/1963, the Hon'ble Court held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source.
"Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, and that if he did not, then, the Department was free to reject his explanation and to hold that the amount represented income from some undisclosed source. The Hon'ble Supreme Court further held in the case of Smt Srilekha Banerjee and othersthat it was not correct that the assessee was not required to prove anything and that the burden was entirely upon the department to prove that the amount received from the encashment of high denomination notes was income The correct position is as follows if there is an entry which shows the receipt of a sum or conversion of the notes by the assessee by himself, it is necessary for the assessee to establish, if asked what the source of that money was and to prove that it did not bear the nature of income. The department is not at this stage required to prove anything. The fact that there was receipt of money or conversion of notes is itself prima facie evidence against the assessee on which the Department can proceed in absence of good explanation."
Hence, on basis of the discussion made above and taking into consideration the directions issued by the DRP this amount of Rs. 75,00,000/- is hereby added to the total income of the assessee for the year under consideration under the head Unexplained Money u/s 69A of the Act"11
IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani From the above order, we are of the opinion that the ld. AO has accepted Rs.
1,35,00,000/-and to fail to accept the source of Rs. 75,00,000/- given to M/s Somani Ecobuild Product LLP on 26.03.2019. It is noted that the submissions and documentary evidences that the source of loan of Rs. 75,00,000/- given to the assessee M/s Somani Ecobuild Product LLP on 06.03.2019 is the amount received by the assessee for cancelling of booking of flats and received from Mundra Solar PV Limited and where the source of funds of Rs. 75,00,000/- is purely verifiable from the record already available based on the clear availability of record about source of money advanced. Hence, no addition made can be made u/s 69 of the Act. Thus the ground No. 1 of the assessee appeal is allowed.
8. Regarding ground No. 1.1, the ld. AO has erred in making addition of loan of Rs. 6,00,000/- given to Mr. Nitesh Khandelwal on 22.12.2017 which pertain to assessment year 2018-19 and the year under consideration where Rs. 6,00,000/- was given during the FY 2017-18 which is not in the year under consideration.
9. Going through the evidences produce the show cause notice issued by the AO u/s 142(1) of the Act are two show cause notice on 17.09.2021 in paper book at para 4 to 6 and second notice dated 27.09.2021 in paper books at page 7 & 8 and the queries were raised by the ld. AO in both the show cause notices was replied 12 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani response to the two show cause notices by the assessee which is in paper book at page 9 to 12,we observe that there are no any queries raised by the Assessing Officer in the show cause notice in specific and the ld. AR for the assessee submitted that this issues were explained in the DRP also. Regarding the DRP order in page 5 at para 3.2.2 where the ld. AR for the assessee has explained the submissions and which has been taken into record but fail to accept the statement submitted by the assessee and hence, passed the order which is reproduced as under:-
"3.2.2 The Panel has considered the submission. The AO has noted in this regard that the assessee did not offer any information regarding the source of loan and advances given by him, however, it is not clear from the assessment order whether this information was called for and by which notice and when. Before the Panel, it has been stated that the loan was made from the NRO bank account maintained by him in Axis Bank Limited from his own fund. A copy of the Axis Bank Account No. 910010031688832 has been furnished before the Panel. But, since the AO did not have an opportunity to consider these evidences, the Panel directs the AO to consider the same and pass a speaking order in this regard."
Based on the DRP direction the ld. AO again passed the speaking order, the ld. AO has accepted the evidences in partial and made the additions. The DRP and ld. AO has failed to peruse the NRO bank account which has been furnished before them. 13
IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani Where the DRP in its direction as specifically mentioned the Axis Bank Limited transactions of the assesee which is submitted before us in page 19 which is reproduced as under:-
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IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani 15 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani We find that assesses investment was made in the Financial Year 2017-18 but the additions have been made in the Financial year 2018-19 and going through the documentary evidences in the audit report at page 19 where the entries on 22.012.2017 to Rs. 6,00,000/- has been shown debit entries which falls in the financial year 2017-18. Hence, the ground no. 1.1 of the assessee appeal is allowed on merit and no addition can be made.
10. Regarding Ground No. 2 the ld. AO has made an addition of Rs. 2,16,000/- where the finding of the AO in page 10 & 11 which are reproduced as under:-"
"Taking into consideration the directions issued by the Hon'ble DRP, the following are the findings of this office:-
On the issue of unexplained interest income:-
Sr. No. Name of the payee Amount of Date of
Loan and Loan and
advances Advances
1. M/s Somani Ecobuild Product LLP 75,00,000/- 04.03.2019
2. M/s Somani Ecobuild Product LLP 1,35,00,000/- 25.03.2019
3. Mr. Nitesh Khandelwal 6,00,000/- 22.12.2017
For these loans and advances paid, the assessee has contended that-
1. Assessee makes all interest free loans from his own fund, assesse not taken any loan from others to make loan. There is no interest expenses claimed by assesse hence there is 16 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani no diversion of interest bearing borrowed fund warranting any disallowance out of interest expense claimed by the assesse
2. Learned AO calculated interest @12% on whole amount for one year, this shows that account statement and loan detail was not with AO, because loan of Rs 75,00,000/- was given on dated 04.03.2019 and Rs. 1,35,00,000/- was given on dated 25.03.2019"
The submission of the assesse during the assessment proceeding and the DRP was considered and the issued was re-examined as per the directions issued by the Hon'ble DRP After examining the contention of the assesse it was found that the assesse has not submitted the LLP agreement of M/s Somani Ecobuild Product LLP. The then Assessing Officer has made addition on the basis of the interest free loans and advances given to M/s Somani Ecobuild Product LLP. The onus is on the assessee to prove that there was non interest accrued. In the absence of the LLP agreement copy of M/s Somani Ecobuild Product LLP, the addition made by the AO is correct and as per law. The assessee has failed to prove that there was no interest accrued. The assessee has not submitted the documentary evidence during the course of assessment proceedings and also during the proceedings before the Hon'ble DRP."
We observe that the addition has been made by the ld. AO and DRP that in absence of the above LLP agreement, the assessee has failed to proof that there was no interest accrued but the ld. AR for the assessee submitted that the LLP agreement is not crucial and mandatory to make the addition where the interest has been 17 IT(IT)A No. 22/JP/2022 Sh. Rajesh Kumar Somani reflected in the back account and where the interest cannot be for one month nor for whole of the month which is reflected in paper books at page 13-14. We are of the considered view that it is start-up venture of the assessee's son and his wife and where the interest free loan was given by the assessee of his own funds. Neither assessee has claimed any interest expenses nor he has received any interest. hence the addition of Rs. 2,16,000/- made on account of unexplained interest income is to be deleted. Thus the Ground no. 2 of the assessee appeal is allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16/02/2023.
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(RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalakshmi)
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Tk;iqj@Jaipur
fnukad@Dated:- 16/02/2023
*Santosh
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. The Appellant- Sh. Rajesh Kumar Somani, Pali.
2. izR;FkhZ@ The Respondent- DCIT, Circle (International Taxation), Jaipur.
3. vk;dj vk;qDr@ The ld CIT
4. vk;dj vk;qDr¼vihy½@The ld CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (IT(IT)A No.22/JP/2022) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar