Income Tax Appellate Tribunal - Ahmedabad
Amitkumar S.Agarwal, Ahmedabad vs Assessee on 6 December, 2012
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'बी
बी'
बी अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" B " BENCH, AHMEDABAD
सव[ौी मुकुल कुमार ौावत, Ûयाियक सदःय एवं ौी टȣ.आर.मीणा, लेखा सदःय के सम¢ ।
BEFORE SHRI MUKUL Kr.SHRAWAT, JUDICIAL MEMBER AND
SHRI T.R. MEENA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A. No.3498/Ahd/2010
( िनधा[रण वष[ / Assessment Year : 2007-08)
Shri Amitkumar बनाम/ The ITO
S.Agarwal Vs. Ward-11(4)
C/o.Amit Textiles Ahmedabad
135, New Cloth Market
O/s.Raipur Gate
Ahmedabad
ःथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AEKPA 4942 B
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से / Appellant by : Shri Sanjay R.Shah
ू×यथȸ कȧ ओर से/Respondent by : Shri B.K.S. Pandya, CIT-D.R.
सुनवाई कȧ तारȣख / Date of Hearing : 6/12/2012
घोषणा कȧ तारȣख /Date of Pronouncement : 11/1/13
आदे श / O R D E R
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
This is an appeal filed by the Assessee arising out of the order of ld.CIT(A)-XVI, Ahmedabad dated 22.10.2010 passed for A.Y. 2007-08 and the grounds concised are as under:
1. In the facts and circumstances of the case, the learned CIT(A) erred in confirming the order of learned A.O. holding the loans of Rs.5,50,000/- (from M/s.Subhodh Enterprises and Rs.2,00,000/- from M/s.Naresh Trading Co.ITA No.3498/Ahd/2010
Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -2- as bogus and adding the same to the income of the appellant and also erred in disallowing the consequential interest paid on such loans amounting to Rs.36,309/- in spite of the appellant discharging the primary onus that rested on him by submitting the copies of confirmation giving names, addresses, Permanent Account Numbers [PAN], Income tax return copies, TDS certificates and copy of accounts. It is submitted that it be so held now and the additions made be deleted.
2. The learned CIT(A)erred in law and on facts in concluding that the loans obtained by the appellant are bogus relying solely on the statement of third party Mr.Ram Dinesh Sharma, which has o connection with the appellant and that too on the basis of a dumb document found during the course of survey u/s.133A on the said party namely, Mr.Ram Dinesh Sharma. Your appellant submits that such paper does not have evidential value nor does it in any way relates to the appellant and hence additions made by relying on such statements and papers deserve to be deleted.
3. The learned CIT(A) erred in law and on facts in holding that the authorized representative of the appellant and that of Mr.Ram Dinesh Sharma are the same and that because the depositors were not produced before the learned A.O. appellant failed to prove the genuineness of loans. The learned CIT(A) failed to appreciate that in spite of the request by the appellant the learend A.O. did nto issue summons to the depositors for their appearance before him and since the appellant had discharged the primary onus that lay on him regarding genuineness of transactions, identity of the depositors and their capacity, the said loans of Rs.7,50,000/- along with interest paid thereon of Rs.36,309/- should not have been added as bogus. Yours appellant submits that it be so held now."
ITA No.3498/Ahd/2010Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -3-
2. Facts in brief as emerged from the corresponding assessment order passed u/s.143(3) of the IT Act dated 7.12.2009 were that the assessee in individual capacity is in the business of manufacturing and trading cloth. The assessee is proprietor of M/s.Amit Textile. It was noted that the assessee had taken unsecured loans from the following two parties:-
"Sr.No. Name of the party Amount (Rs.)
1. Subodh Enterprise (Prop. 5,50,000/-
Smt.Nandini Manoj Agarwal)
2. Naresh Trading Co.
(Prop.Amar G.Agarwal) 2,00,000/-
------------
Total 7,50,000/-"
======
2.1. The assessee was required to furnish the confirmation and the facts relating to the unsecured loans. In compliance, the assessee has furnished the bank statement, etc. Further, it was observed by the AO that a survey was conducted in a case, namely Shri Lalith S.Sharma, etc. During the course of the said survey, it was noticed that there was one Shri Ramdinesh Ranjit Sharma who was alleged to be managing the business affairs of certain persons. His statement was recorded where it was found that he had admitted that the bank accounts were opened by him and deposited the cash in the bank accounts. Further, it was noted by the AO that during the course of survey proceedings, it was revealed that Shri Ramdinesh Sharma was involved in issuing cheques to various parties against the cash received. So it was commented by the AO that the assessee had received accommodation entries in the form of ITA No.3498/Ahd/2010 Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -4- unsecured loans from the said two parties. According to AO, it was a bogus loan, hence disallowed and taxed in the hands of the assessee. Being aggrieved, the matter was carried before the first appellate authority.
3. When the matter was carried before the first appellate authority, it was objected that the impugned addition was made without giving an opportunity to cross-examine Shri Ramdinesh Sharma. A Remand Report was called for. In the Remand Report, the AO had informed that the assessee had not attended to cross-examine Shri Sharma although a particular date was granted. It has also been informed by the AO in the said Remand Report that the addition was made on the basis of the statement of Mr.Sharma as well as on the basis of a page bearing No.47 of Annexure-B/10, seized during the course of survey which was as under:-
"Amit textiles
1. Subodh ent 350 04/11/06
2. -do- 200 24/11/06
3. Naresh Tr.Co. 200 29/01/07"
3.1. The vehement objection of the assessee was that the said statement of Shri Ramdinesh Sharma had no link with the case of the assessee. Further, it was informed that the assessee has furnished the requisite information, such as, Bank statement, details of cheque issued, interest account with TDS certificate, addresses with confirmation, PAN with income-tax returns, etc. It was argued before ld.CIT(A) that the assessee had discharged the primary onus and the AO was at liberty to call those ITA No.3498/Ahd/2010 Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -5- parties for examination, if he wanted to further verify the genuineness of the loan. However, ld.CIT(A) was not convinced and decided the issue in favour of the Revenue primarily on the basis of the said statement of Mr.Sharma. Ld.CIT(A) has concluded that by simply filing the confirmation, PAN, income-tax return, bank statement have not proved the genuineness of the loan. The action of the AO was confirmed. Now the assessee is further in appeal.
4. From the side of the assessee, ld.ARMr.Sanjay R.Shah appeared and informed that the assessee has properly discharged the primary onus. In this regard, he has drawn our attention on a letter dated 26.11.2009 addressed to the AO, relevant portion reproduced below:-
"Dear Sir, Re: Assessment Proceedings under section 143(3) for the Assessment Year 2007-08 Kindly refer to you notice dated 27.10.2009. As desired, I am submitting herewith copies of Return Of Income of the following unsecured loans. I am also submitting their bank statements. Hope you will please find them in order.:
1. Smt. Nandini Manoj Agarwal, proprietor Subodh Enterprises;
2. Sri Amar Gopal Agarwal, proprietor Naresh Trading Co.
As far as the personal appearance of these parties is concerned kindly note that this loan was repaid long back and we do not have personal relationship with them. Sop these parties would not heed to our advice for personal appearance. You are requested to issue necessary summons to these parties for personal appearance, if you so desire.
ITA No.3498/Ahd/2010Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -6- Thanking you, Yours faithfully, For AMIT ENTERPRISES"
4.1. Ld.AR has pleaded that although the assessee has furnished every information in November-2009, but till the date of assessment order dated 7.12.2009, the AO had not issued any summons to those parties. Ld.AR has further drawn our attention on the photocopies of the income- tax returns filed by those parties and argued that both of them are duly assessed to tax, therefore their respective income-tax records should have been examined by the AO. Ld.AR has also drawn our attention on the bank statement of those parties to demonstrate that the amounts in question were advanced as a loan through account payee cheques. The assessee had paid interest to those parties and also deducted TDS, therefore it was wrong to assume that the loans in question were bogus or not genuine. Copies of Form 16A in respect of the deduction of tax at source as also placed on record. The Ld.AR has also explained the entry which was found recorded in the seized material, contents already reproduced supra. It was explained that nothing adverse was found recorded in the said seized material. The assessee has also disclosed that very amount and there was no discrepancy. He has also objected the allegation of the Revenue Department about the opportunity for cross- examination dated 20/08/2010 granted to the assessee. Ld.AR has drawn our attention on a letter dated 8/10/2010 addressed to the ld.CIT(A) through which it was informed that on 20/08/2010 Mr.Sharma did not appear before the AO, hence there was no question of the assessee's appearing before the AO. Ld.AR has thus pleaded that merely on the basis of a statement the impugned addition was made although the ITA No.3498/Ahd/2010 Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -7- assessee had complied the requisite conditions of section 68 of IT Act. Reliance was placed on the decision(s) of Hon'ble Supreme Court in the case of CIT-Orissa vs. Orissa Corporation Pvt.Ltd. (158 ITR 78)[SC], Hon'ble Gujarat High Court in the case of Murlidhar Lahorimal vs. CIT (280 ITR 512)[Guj.] and Hon'ble Gujarat High Court in the case of DCIT vs. Rohini Builders (256 ITR 360)[Guj.].
4.2. Ld.AR has also argued that the said statement had no evidentiary value because it was recorded during the course of survey u/s.133A as held in the case of Paul Mathews and Sons vs. CIT [2003] 263 ITR 101(Ker.), Khaderkhan 300 ITR 157(Mad.) and ITAT "B" Bench Ahmedabad in the case of Smt.Babiben R.Patel & Shri Dashrathbhai Prahladbhai Patel vs. ITO in ITA Nos.32 & 33/Ahd/2004 for AY 200-01 order dated 16/07/2010.
5. From the side of the Revenue, ld.DR Mr.BKS Pandya has placed reliance on the factual findings of the AO and CIT(A). His foremost argument was that the assessee had not discharged the primary onus. The assessee was granted opportunity to cross-examine Mr.Sharma but he had deliberately avoided the opportunity of cross-examination. Merely filing of confirmation and the bank statement have not conclusively proved the genuineness of the loan specially when a statement was recorded that the loans were nothing but accommodation entries. Reliance was placed on the decision(s) of Hon'ble Gujarat High Court in the case of Murlidhar Lahorimal vs. CIT [2006] 280 ITR 512 (Guj.), Hon'ble Supreme Court in the case of CIT vs. P.Mohanakala ITA No.3498/Ahd/2010 Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -8- [2007] 291 ITR 278 (SC), Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC), ITAT Ahmedabad Bench 'SMC' in the case of Prakashchandra Singhvi (HUF) vs. ITO [2011] 16 Taxmann.com 96 (Ahd.), Hon'ble Gujarat High Court in the case of CIT vs. Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj.) and Hon'ble Gujarat High Court in the case of CIT-III vs. Jay Enterprise [2012] 22 taxmann.com 163(Guj.).
6. We have both the sides at some length. We have also perused the orders of the authorities below in the light of the compilation filed and the case laws cited. As far as the compliance of the provisions of section 68 are concerned, we have noted that there was no dispute about the fact that the assessee had filed confirmation letters, bank statements, address verification, PANs, TDS details, income-tax returns of the depositors and the information about the repayment of loan to those persons. As far as the question of personal appearance of those two depositors were concerned, from the side of the assessee, it was clearly informed that those parties were not having any personal relationship and their respective amounts were repaid long back, therefore those parties would not heed to the request of the personal appearance, therefore, in the alternative, it was pleaded to the AO to issue summons directly to those parties for their personal appearance. Due to these facts, the assessee's foremost argument is that the primary onus as prescribed under law had been discharged. Upto this extent, we are also with the argument of the assessee, hence we hereby hold that the reliance placed by ld.AR aptly apply on the issue in hand.ITA No.3498/Ahd/2010
Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08 -9- 6.1. The main reason for the impugned addition was a statement recorded under survey of one Mr.Sharma. The survey was not conducted on the assessee but the said survey was conducted in some other cases. In that proceeding, the allegation of the Revenue Department was that a statement of one Mr.Sharma was recorded who had stated that the accommodation entries were given to the assessee in the form of unsecured loans. Now the question is that whether that statement was sufficient to invoke the provisions of section 68 of IT Act. First of all, we want to mention that in the case of Paul Mathews and Sons(supra), it was made clear that a statement elicited during the survey operation had no evidentiary value. Secondly, we have also noted that there was no cogent reason assigned by the Revenue Department for rejecting several other corroborative evidences which were filed by the assessee to establish the genuineness of the loans. All those evidences were in corroboration of the said loan transactions and furnishing of those evidences were inconfirmity and requirement of the provisions of section 68 of the IT Act. We therefore hold that there was no valid reason for rejecting the evidences of the assessee and placing reliance by the Revenue Department on a statement which was not recorded in connection with any proceedings against this assessee.
6.2. As far as the case laws filed by the ld.DR are concerned, few of them are in respect of the gift taken by the assessee and for that reason, we hereby hold that the requirement of acceptance of gift is somewhat different than the unsecured loans. Rather, in a decision of CIT vs. Ranchhod Jivabhai Nakhava [2012] 21 Taxman.com 159(Guj.), the Hon'ble Gujarat High Court had held that once the assessee has ITA No.3498/Ahd/2010 Shri Amitkumar S.Agarwal vs. ITO Asst.Year - 2007-08
- 10 -
established that the money was taken by way of account payee cheques and the lenders are subject to income-tax, whose PAN have been disclosed and that their confirmations were produced, then the initial burden u/s.68 was discharged. The Hon'ble Court has opined that it was the duty of the AO to ascertain from the AO of those lenders, whether in their respective returns they have shown the amount of loan. The AO can decide to examine the lenders. If the AO is satisfied with the explanation, then there should not be any question to disbelieve the genuineness of the loan transaction and the AO had no authority to dispute the correctness of the loan transaction. Resultantly, we hereby reverse the findings of the authorities below and direct to delete the addition.
7. In the result, Assessee's appeal is allowed.
Sd/- Sd/-
(टȣ.आर.मीणा) (मुकुल कुमार ौावत)
लेखा सदःय Ûयाियक सदःय
( T.R. MEENA ) ( MUKUL Kr. SHRAWAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 11 / 1 /2013
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-XVI, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / Learned Departmental Representative, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad