Income Tax Appellate Tribunal - Jaipur
Surendra Kumar Pancholi, Jaipur vs Ito, Jaipur on 16 February, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM
vk;dj vihy la-@ITA No. 166/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2010-11
Surendra Kumar Pancholi, cuke Income Tax Officer,
B-4, Vishnu Colony, ESI Vs. Ward 2(3),
Hospital, Ajmer Road, Jaipur, Jaipur, Rajasthan.
Rajasthan.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAPPP 9118 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri N.K. Sharda (CA)
jktLo dh vksj ls@ Revenue by : Shri Ashwini D. Hosmani (Jt.CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 12/02/2018
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 16/02/2018
vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A)-I Jaipur dated 20/12/2016 for the A.Y. 2010-11.
2. The assessee is engaged in the business of advertising and running his business in the name and style of M/s Alfa Advertising & Marketing Company. The assessee has filed his return of income on 15/10/2010 declaring total income of Rs. 3,25,780/-. The case was selected for scrutiny. The Assessing Officer has passed assessment order 2 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO U/s 143(3)/144 of the Income Tax Act, 1961 (in short the Act) by making addition of Rs. 28,92,456/- on account of trading addition, Rs.
42,45,117/- on account of unsecured loan U/s 68 of the Act and added the same to the total declared income of the assessee. The ld. CIT(A) has given part relief to the assessee.
3. Now the assessee is in appeal before the ITAT by taking following grounds of appeal:
"1. Under the facts and circumstances of the case, CIT(A) has erred by not accepting the fact that proper opportunity of hearing was not provided.
2. Under the facts and circumstances of the case, CIT(A) has erred by confirming application of Section 145 and rejection of books of account maintained by assessee.
3. Under the facts and circumstances of the case, CIT(A) has erred by confirming the part of the trading addition and enhancing the rate comparing to previous year amounting to Rs. 6,44,685/-.
4. Under the facts and circumstances of the case, CIT(A) has erred by confirming Rs. 26,25,000/- unsecured loan U/s 68 of Income Tax Act in spite of submitting all necessary evidence in this respect.
5. The assessee reserves the right to add, reduce and amend, withdrawn of all or any grounds of appeal."
4. Grounds No. 1 and 2 of the appeal were not pressed by the assessee, therefore, the same stands dismissed as not pressed.
3 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO
5. Ground No. 5 of the appeal is general in nature and does not require any adjudication, therefore, same stands dismissed.
6. In the ground No. 3 of the appeal, the issue involved is confirming the part of the trading addition and enhancing the rate comparing to previous year amounting to Rs. 6,44,685/-. The ld. CIT(A) has dealt the issue by holding as under:
"3.3.1 Determination:
(i) It is noted from the assessment order that on total sales of Rs.
2,13,70,110/-V the appellant has shown gross profit of Rs. 21,25,2457- giving a GP rate of 9.94% against GP rate of 23.48% declared by the appellant for the immediate preceding year i.e. AY 2009-10 and after rejection of books of account of the appellant, the AO has applied GP rate of 23.48% to the total sales of Rs. 2,13,70,110/- and consequently, has made trading addition of Rs. 28,92,456/- to the income of the appellant.
(ii) During the appellate proceedings, it was submitted by the appellant that the calculation of GP rate at 9.94% by the AO is incorrect and it has furnished the calculation of GP rate as under:
AY 2009-10 AY 2010-11
Sales / Services 2,68,29,513/- 2,13,70,110.50
Less: Cost of Goods sold/ Services (1,82,33,969) (1,45,67,590)
Less: Direct expenses (22,94,662) (16,77,275)
Gross Profit 63,00,882/- 51,25,245.50
GP rate 23.48% 23.98%
It was submitted by the appellant that in view of the above calculation, the trading addition of Rs. 28,92,456/- is not justified as the G.P. rate has been increased as compared to last year.
4 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO
(iii) I have duly considered the submission of the appellant, assessment order and the material placed on record. I have also examined the assessment records of the appellant for the AY 2009- 10 and 2010-11. It is noted that in Tax Audit Report for the year under consideration, the Auditor has taken the gross profit at Rs. 21,25,245.50 while computing the GP ratio whereas as per the above working submitted by the appellant, which is also verified from the Profit and Loss account of the appellant for the year under consideration, the gross profit was to the tune of Rs. 51,25,245/- and consequently, the GP rate worked out to 23.98%, which is better than the GP rate declared for the immediate preceding year but on decreased sales. It appears that some typographical error was made by the Auditor while computing the GP ratio in the Tax Audit Report for the year under consideration. However, I think it would be proper to take GP rate at 27% as the turnover has decreased [almost 20%) because it is trite law that with increase in turnover, there is fall in GP rate and vice versa. Therefore, the trading addition is restricted to Rs. 6,44,685/- (57,69,930 - 51,25,245), Thus, this ground of appeal is partly allowed."
7. While pleading on behalf of the assessee, the ld AR has submitted as under:
a. The Assessee is a Service Industry engaged in the business of Advertising, where the Assessee took on hire spaces for advertisement on a fixed annual charge from various agencies like Jaipur Municipal Corporation, Indian Railway and Shopping Malls for advertisement. On the other side, the available space was provided to the various clients on Monthly Rent Basis. It is usual practice that a particular site remain vacate for few months and the another site may or may not engage for whole of the 5 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO year. In this context, it is not possible to calculate the Gross Profit in Service Industry.
b. On the other side, from the figures available in the Balance Sheet, if we calculate the Gross Profit then it is on the higher side comparing to the preceding year i.e. 23.98% whereas in the preceding year it was 23.48%. The detailed figure is available in the Assessment Order as well as in the order of CIT (Appeals) as annexed in Annexure-2 and Annexure-3.
c. From the above context, the CIT (Appeal) has assumed it 27% without any basis and without commenting on the facts that how Gross Profit can be calculated in Service Industries. d. It is also important to note that the Assessing Authority has accepted the GP Rate 23.48% in the A.Y. 2010-11 which was the GP Rate of A.Y. 2009-10. The mistake was only that due to typographical error in Form No. 3CD, the GP was shown as 9.94% for A.Y. 2010-11 instead of 23.98%. But the CIT (Appeal) has increased the GP Rate from the GP rate which was taken by the Assessing Officer and for which he has not followed the procedure laid down in Sub Section 2 of Section 251 of Income Tax Act, 1961, where it is mentioned that before enhancing an Assessment the CIT (Appeal) has to showing cause against such enhancement. It is clearly evident from the Order passed by the Ld. CIT (Appeals) that no show cause notice was provided to the Assessee, neither the enhancement was discussed by the Assessee. Therefore the enhancement made by the Ld. CIT is unlawful and unjustified.
e. There are various judgments passed by various Authorities which support our contention:-
(i) Roshan Motors, Muzaffarnagar V CIT (ITAT)
(ii) CIT v Shapoorji Pallonji Mistry (1962) 44 ITR 862 (SC) 6 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO
(iii) Loknath Tolaram V CIT (1986) 161 ITR 82 (Bom)
8. On the other hand, the ld DR has relied on the orders of the authorities below.
9. The Bench have heard both the sides on this issue. The Assessing Officer has worked out the gross profit rate @ 9.94% while the ld.
CIT(A) has accepted the assessee version regarding the G.P. rate @ 23.98%. The ld. CIT(A) has not given any opportunity to the A.O. to verify the veracity of the claim of assessee. Further the ld. CIT(A) has also adopted G.P. rate @ 27% for the reason that there was a decrease in the turnover without providing opportunity to the assessee in contravention of the provisions of law. Therefore, considering the totality of the facts and circumstances of the issue in appeal, we find deem it fit and just to restore the issue to the file of the ld. CIT(A) to be decided de novo after providing reasonable and effective opportunity of being heard to both the sides.
10. The issue involved in ground No. 4 of the appeal is confirming Rs.
26,25,000/- as unsecured loan U/s 68 of the Act. The ld. CIT(A) has dealt this issue by holding as under:
"3.4.1 Determination:
(i) The appellant has shown unsecured loans of Rs. 59,95,109/- in its financial statements as on 31.03.2010 and since it was not able to file confirmations from some of these creditors of unsecured loans during 7 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO assessment proceedings, the AO has made addition of Rs. 42,45,117/-
(the correct amount should be 43,95,387/-) u/s 68 of the Act.
(ii) During the appellate proceedings, the appellant tiled confirmations from these cash creditors as additional evidences before the then Ld. CIT(A) under Rule 46A of the IT Rules, the same were forwarded to the AO for making enquiries and to submit its remand report after verifying the identity and credit worthiness of the cash creditors and the genuineness of such transaction. The AO has submitted its remand reports as reproduced above in this order. It is evident from the remand report of the AO that it was stated by the appellant before the AO that it has received fresh loan of Rs. 28.85 Lac during the year under consideration. The AO, after making enquiries, out of fresh cash creditors of Rs. 28.85 Lac, has accepted the cash creditors amounting to Rs. 12.10 Lac. However, on a perusal of the material placed on record, it has been observed that the appellant has also received the unsecured loans during the year under consideration as under:
Name of the creditors Amount (in Rs.)
Dikshu Gupta 2,00,000/-
Harishankar Maheshwari 50,000/-
Harpal Singh Pali 5,00,000/-
Kamlesh Agrawal 1,00,000/-
Neha Agrawal 1,00,000/-
Total 9,50,000/-
The AO has taken unsecured loan of Rs. 1 Lac whereas as per copy of account placed on record, the same was Rs. 2 Lac each.
Thus, the appellant has taken fresh unsecured loans of Rs. 38.35 Lac (28.85 + 9.50) and not Rs. 28.85 Lac, as stated before the AO, during the year under consideration.
(iii) It has been stated earlier that no rejoinder was filed by the AR in response to the remand report dated 08.09.2016 of the AO which was required to be filed on or before 19.09.2016. Again, notices u/s 250 of 8 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO the Act was issued to the appellant on 27.09.2016 and 06.12.2016 fixing the date of hearing for 03.10.2016 and 19.12.2016 respectively but no compliance was made. Since sufficient opportunities have been provided to the appellant to controvert the findings of the AO as stated in the remand report, the findings of the AO as stated in the remand report dated 08.09.2016 in respect of cash creditors amounting to Rs. 16.75 Lac remained uncontroverted. Further, the appellant has misrepresented before the AO that it has received fresh loans of Rs. 28.85 Lac during the year under consideration and not Rs. 38.35 Lac as worked out in this order. Further, it is noted from the confirmation of Shri Harishankar Maheshwari and Dikshu Gupta placed on record that even their PAN were not stated therein. In the case of Shri Harpal Singh Pali, the alleged confirmation was filed without signature and PAN of Shri Harpal Singh Pali i.e. practically no confirmation was filed from Shri Harpal Singh Pali. It is pertinent to mention here that the appellant has filed a copy of the civil suite filed by Shri Hardeep Arora s/o Shri Harpal Singh Pali wherein a sum of Rs. 2.50 Lac was given as advanced to the appellant on 08.09.2010 i.e. the said loan from Shri Hardeep Arora do not fall in the year under consideration i.e. AY 2010-11. In the cases of Ms. Kamlesh Agrawal and Ms. Neha Agrawal, the unsecured loan taken during the year was Rs. 2 Lac and not Rs. 1 Lac as stated by the appellant before the AO. Further, since, the appellant could not prove the cash creditors standing in the names of Kamlesh Agrawal and Ms. Neha Agrawal, the unsecured loan in their cases is taken as Rs. 2 Lac each and not Rs. 1 Lac each as taken by the AO. Therefore, in view of the tacts and circumstances of the case, out of fresh loans of Rs. 38.35 Lac taken by the appellant during the year under consideration, the addition of Rs. 42,45,117/- made by the AO is hereby restricted to Rs. 26.25 Lac (38.25 - 12.10) is hereby sustained u/s 68 of the Act as the appellant has failed to prove these cash creditors. Hence, this ground of appeal is partly allowed."
11. While pleading on behalf of the assessee, the ld AR has submitted as under:
The Ld. CIT has sustained the unsecured loans of Rs. 26,25,000/- u/s 68 of Income Tax Act, 1961. Details of which are as under: -
9 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO S. No. Name of Party Amount
1. Alfa Motors 2,25,000/-
2. Gayatri Sharma 1,50,000/-
3. Kamlesh Agarwal 2,00,000/-
4. Neha Agarwal 2,00,000/-
5. Koshal Kishore Sharma 9,00,000/-
6. Chogani Devi 1,50,000/-
7. Radhey Shyam Ladha 50,000/-
8. Harpal Singh Pali 5,00,000/-
9. Hari Shankar Maheshwari 50,000/-
10. Dikshu Gupta 2,00,000/-
Total 26,25,000/- 1. Alfa Motors - 2,25,000/-
Alfa Motors has advanced a loan of Rs. 2,25,000/- to the Assessee vide Cheque No. 151759 dated 19.08.2009 (Pg No. 116). Copy of the Bank Statement of M/s Alfa Motors is annexed herewith in Annexure - 4 (Pg No. 35) where it can be seen that the loan given by M/s Alfa Motors is out of own sources, i.e. receipt from various customers. Alfa Motors is an authorized service center of Maruti Limited. The Books of Accounts of M/s Alfa Motors is duly audited where the Total Turnover of Alfa Motor is Rs. 73,75,074/- and Total share capital of the Alfa Motor is Rs. 23,86,858/- . Alfa Motors is regularly filing his Income Tax Return since long back. Copy of the Balance Sheet of Alfa Motors on 31.03.2010, Profit St Loss Account, Computation of Total Income and Income Tax Return is annexed herewith in Annexure- 4.
In the Remand Report, the Ld. Assessing Officer has issued notice u/s 131 and gathered the desired information and accepted in the remand report that the amount has been advanced to the Assessee through cheque. Further comments of the AO in remand report are as under:-
10 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO "As per copy of Return of Income for the A.Y. 2010-11, the firm has filed it s return of Income on 19.10.2010 declaring Income of Rs.
51,010/-. In this way, the identity, credit worthiness and genuineness of the transaction have been not proved."
Sir the above comment is purely unjustified and of course against the basic principle of the law. The partner of Alfa Motor Sh. Hemendra Sharma himself visited to the AO and submitted the desired details including the PAN Card, Bank Statement, Copy of ITR etc. and still the comment of the AO that identity is not proved is really a serious matter where your interference is required. Further the AO has not mentioned any comment on the genuineness and creditworthiness of the firm. Therefore the comment is not justified and liable to be rejected.
Further the CIT has not even tried to look into the documents submitted by the Alfa Motors and commented that whatever the Assessing Officer has accepted is allowed and whatever the Assessing Officer has not accepted is disallowed.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
2. Gayatri Sharma - 1,50,000/-
The above subjected party has advanced a loan of Rs. 2,50,000/ (Pg No. 116)- vide:-
a. Amount of Rs. 1,00,000/- vide Cheque No. 358506 dated 10.08.2009 drawn on ICICI Bank, Account Number 023501517107 (Pg No. 52) 11 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO b. Amount of Rs. 1,50,000/- vide Cheque No. 434184 dated 10.08.2009 drawn on State Bank of India, Account Number 10002147641 (Pg No. 63) It seems from the remand report that the Assessing Officer over side Bank Statement of Bank of India from where the party has advanced a loan of Rs. 1,50,000/- to the Assessee. Although the Statement of Bank of India was available on record. The certified copy of the same is annexed herewith in Annexure -5. In the remand report, the A.O. has mentioned that Rs. 1,50,000/- has not found place in the Bank Account which is not true. The subjected party is regularly filing her Income Tax Return since A.Y. 2007-08 and has advanced the loan to the Assessee out of her savings. In response to the notice u/s 131 the Statement was recorded and all desired documents were submitted by the party which is available on record.
Further the CIT has not even tried to look into the documents submitted by Gayatri Sharma and commented that whatever the Assessing Officer has accepted is allowed and whatever the Assessing Officer has not accepted is disallowed.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
3. Kamlesh Agarwal - 2,00,000/-
During the year under consideration, subjected party has advanced a loan of Rs. 1,00,000.00 to the Assessee. The Ld. CIT has further added Rs. 1,00,000/- on the basis of Account Statement available on record. The amount which is added by Ld. CIT is actually the same cheque of Rs. 1,00,000/- which returned back first time and the Assessee represent the same in the Bank then it was cleared. The 12 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO Assessee in his books of Accounts made the two entries in credit side and one entry into debit side(Pg No. 77) whereas in the Bank Statement of Smt. Kamlesh Agarwal, there is only one entry and of course cheque returned charges were debited ( Pg No. 74)and in the same way in the books of Assessee, only one entry is there (Pg No.
146). The Ld. CIT (Appeals) on the basis of the Books of Accounts where 2 credit entry of Rs. 1,00,000/- each is there added the same without verifying with the Bank Statement of Smt. Kamlesh Agarwal and the Assessee whereas the Bank Statement was already available on the record.
Notice u/s 131 was issued to Smt. Kamlesh Agarwal where statement was recorded and entire documents including confirmation of accounts was filed where the figure is Rs. 1,00,000/- only. We are enclosing the certified copies of documents submitted by Smt. Kamlesh Agarwal and Ledger of Confirmation for your kind reference in Annexure-6.
Regarding the actual loan of Rs. 1,00,000/- which is also disallowed by the Assessing Authority in spite of the fact that Smt. Kamlesh Agarwal is a regular Income Tax Assessee and having a income from rent and she is partner in M/s Poornima Fire Works. We would like to draw your kind attention that in the question no. 6 in her statement (Pg No. 67) the Assessing Authority asked the source of Rs. 1,00,000/- deposited in the Bank where she informed in the answer that there was a search in her house where the Department found Rs. 1,00,000/- with her which she deposited in Bank. Therefore, it is well in the notice of Income Tax Department and cannot be said this amount belongs to the Assessee.
13 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO Further the CIT has not even tried to look into the documents submitted by Smt. Kamlesh Agarwal and statement recorded of her and commented that whatever the Assessing Officer has accepted is allowed and whatever the Assessing Officer has not accepted is disallowed.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
4. Neha Agarwal - 2,00,000.00 During the year under consideration, subjected party has advanced a loan of Rs. 1,00,000.00 to the Assessee. The Ld. CIT has further added Rs. 1,00,000/- on the basis of Account Statement available on record. The amount which is added by Ld. CIT is actually the same cheque of Rs. 1,00,000/- which returned back first time and the Assessee represent the same in the Bank then it was cleared. The Assessee in his books of Accounts made the two entries in credit side and one entry into debit side (Pg No. 88)whereas in the Bank Statement of Smt. Neha Agarwal, there is only one entry and of course cheque returned charges were debited (Pg No. 83)and in the same way in the books of Assessee, only one entry is there (Pg No.
146). The Ld. CIT (Appeals) on the basis of the Books of Accounts where 2 credit entry of Rs. 1,00,000/- each is there added the same without verifying with the Bank Statement of Smt. Neha Agarwal and the Assessee whereas the Bank Statement was already available on the record.
Notice u/s 131 was issued to Smt. Neha Agarwal where statement was recorded and entire documents including confirmation of accounts was filed where the figure is Rs.1,00,000/- only. We are 14 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO enclosing the certified copies of documents submitted by Smt. Neha Agarwal and Ledger of Confirmation for your kind reference in Annexure-7.
Regarding the actual loan of Rs. 1,00,000/- which is also disallowed by the Assessing Authority in spite of the fact that Smt. Neha Agarwal has mentioned in the Statement recorder of her that she has a Job Work Income as well as Salary Income from M/s Poornima Fire Works and the accumulated cash was deposited by her.
It seems from the statement recorded of that Smt. Neha Agarwal and Smt. Kamlesh Agarwal that they are relative and live in a same House No. 2-A-138, Shiv Shakti Colony, Shastri Nagar, Jaipur and both deposited Rs. 1,00,000/- on same dated which is 21.07.2009 which is a date subsequent to the date of search on their house. It means this amount is the amount which the search party has left with each and every ladies of the house and the same was deposited into the Bank Account.
It is a matter of serious concern that one side the Assessing Authority does not believe the creditworthiness of the person and other side search is operating on the same person.
Smt. Neha Agarwal gave the loan to Alfa Advertising & Marketing on dated 29.07.2009 and received back on 09.12.2010. If the Assessing Officer has assumed that the money of the loan belongs to the Assessee and only deposited in the Bank Account of Smt. Neha Agarwal then on returning the amount it should be again cash withdrawal so that the Assessee can take back his amount but while going through the Bank Statement it can be seem the amount has not been withdrawn directly or indirectly.
15 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO Further the CIT has not even tried to look into the documents submitted by Smt. Neha Agarwal and statement recorded of her and commented that whatever the Assessing Officer has accepted is allowed and whatever the Assessing Officer has not accepted is disallowed.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
5. Koshal Kishore Sharma - 9,00,000/-
Koshal Kishore Sharma advanced a loan of Rs. 9,00,000 to the Assessee vide cheque no. 496204 (Pg No. 116). Sh. Koshal Kishore Sharma is a NRI since long living in Japan since more than 30 years. He is indulged in the business of import-export of jewellery. Sh. Koshal Kishore Sharma visited the office when he came to India. The Assessing Officer asked to come back with the Bank Statement. The Bank Statement which was very old could not be received by him in due course. Therefore, it could not be submitted to the Assessing Officer. However now we are enclosing herewith the Bank Statement in Annexure -8 (Pg No. 89) from where he advanced to the Assessee. We are enclosing herewith the passport in Annexure- 8 of Sh. Koshal Kishore Sharma to prove the identity of the same. He is a rich person and it is beyond to the doubt about his creditworthiness and genuineness. As the transactions are from cheque, therefore it should be allowed.
The Japan address of Sh. Koshal Kishore Sharma is as under:-
944-6, Kasai Showa, Cho, Nakakoma Gun Yamanashi Jnan, Japan- 409-3851 In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
16 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO
6. Chogani Devi - 1,50,000/-
Smt. Chogani Devi gave a loan of Rs. 1,50,000/- to the Assessee by cheque which cleared in the Assessee's Bank Account on dated 26.06.2009 (Pg No. 140). The Assessing Authority issued notice u/s 131 to her which was not returned back. Smt. Chogani Devi is an Income Tax Assessee having PAN: ABXPD6396E and provided the confirmation of Account which are available on the record and again we are enclosing herewith in Annexure - 9 (Pg No. 90).
It is worthwhile to mention that the Assessee borrowed most of the amount through Finance Broker and this amount was also borrowed through Finance Broker, Sh. Deepak Bhala to whom the Assessee had paid brokerage. The Brokerage Account of Sh. Deepak Bhala is enclosed herewith in Annexure-10 (Pg No. 91). As the party is not in directly touch with the Assessee but on the basis of the PAN, the Assessing Officer could have verified the Income Tax Return of Smt. Chogani Devi which we believe that she must be filing regularly. In such circumstances, the identity, genuineness and creditworthiness is not doubtful.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
7. Radhey Shyam Ladha - 50,000/-
Sh. Radhey Shyam Ladha has also given loan to the Assessee which was cleared in the Assessee's Bank Account on 13.10.2009 (Pg No.
151). Copy of the same is enclosed herewith in Annexure-11 (Pg No.
92). This loan was also taken from the finance broker, Sh. Kedar Mai Bhala for which the brokerage was paid. The Brokerage account is enclosed herewith in Annexure-10. Sh. Radhey Shyam Laddha expired 17 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO on 06.02.2014. The death certificate is enclosed herewith in Annexure-11. The PAN of Sh. Radhey Shyam Ladha is ACZPA3304K. The Assessee is having PAN issued by Income Tax Department and Death Certificate issued by Municipal Corporation, Jaipur therefore the identity of the person cannot be questioned.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
8. Harpal Singh Pali- 5,00,000/-
The subjected party advanced a loan of Rs. 5,00,000 to the Assessee vide Ch. No. 984225. (Pg No. 139). Sh. Harpal Singh Pali is an owner of a very old and famous restaurant "Surya Mahal, Ml Road, Jaipur". The Assessee took total 3 loans from his family. Details are as under:
-
Name Address Amount Date of Loan Taken
Harpal Singh Pali S/o 21, Amar Garden, 5,00,000/- 20.07.2009
Late Sh. Mehtaab Maharani Farm,
Singh Ji Durgapura, Jaipur
Hardeep Arora S/o Suryamahal 2,50,000/- 08.09.2010
Sh. Harpal Singh Pali Restroplex Private
Limited, Mirza Ismail
Road, Jaipur
Anisha Arora Maharani Farm, 4,00,000/- 17.07.2009
W/o Sh. Hardeep Durgapura, Jaipur
Arora
As the Assessee could not pay the above loan in the stipulated time due to the financial crisis, the lender Smt. Anisha Arora and Sh. Hardeep Arora filed civil suit against the Assessee and Sh. Harpal Singh Pali's Advocate issued a legal notice to the Assessee. There was no cordial relation of the Assessee with the lender, therefore the confirmation of accounts were not signed. The details of suit/legal notice filed by them are as under:-
18 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO Name Suit/Legal Notice Filed Date Harpal Singh Pali 12.01.2018 Hardeep Arora 22.03.2012 Anisha Arora 22.03.2012 The copy of the suit/legal notice filed is enclosed herewith in Annexure-12 (Pg No. 93-107). The Assessing Officer has allowed the loan of Smt. Anisha Arora and identified it as genuine and proved.
Therefore, on the same ground the loan from Sh. Harpal Singh Pali should be allowed.
It is worthwhile to mention that the Assessing Authority has not issued notice u/s 131 to Harpal Singh Pali. Therefore, the addition made by CIT (Appeals) without any enquiry is unjustified and unlawful.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
9. Hari Shankar Maheshwari- 50,000/-
Sh. Hari Shankar Maheshwari gave a loan of Rs. 50,000/- to the Assessee by cheque which cleared in the Assessee's Bank Account on dated 23.07.2009 (Pg No. 139). The Assessing Authority did not issue notice u/s 131 to him. Sh. Hari Shankar is an Income Tax Assessee having PAN: ADRPM0182D and provided the confirmation of Account which are available on the record and again we are enclosing herewith in Annexure-13 (Pg No.108).
It is worthwhile to mention that the Assessee borrowed most of the amount through Finance Broker and this amount was also borrowed through Finance Broker, Sh. Kedar Mai Bhala to whom the Assessee 19 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO had paid brokerage. The Brokerage Account of Sh. Kedar Mai Bhala is enclosed herewith in Annexure-10. As the party is not in directly touch with the Assessee but on the basis of the PAN, the Assessing Officer could have verified the Income Tax Return of Sh. Hari Shankar Maheshwari which we believe that he must be filing regularly. In such circumstances, the identity, genuineness and creditworthiness are not doubtful.
In view of the above, the addition made by the A.O. and confirmed by CIT (Appeals) is unlawful and liable to be quashed.
10. Dikshu Gupta- 2,00,000/-
The Ld. CIT (Appeals) added Rs. 2,00,000/- borrowed from Dikshu Gupta (Pg No. 136). However the same was not added by the Ld. Assessing Officer. The ld. CIT (Appeals) has not done any enquiry/investigation in this case. No notice u/s 131 was issued by either AO or CIT (Appeals). We are enclosing herewith the copy of Bank Statement, Copy of ITR with computation of Total Income for the relevant year of Dikshu Gupta in Annexure-14 (Pg No. 109-113). It is very clear from the Bank Statement that the lender has its own sources from which she financed to the Assessee. Therefore, the identity, creditworthiness and genuineness of Dikshu Gupta is proved.
The addition made by Ld. CIT (Appeals) is unlawful, unjustified and against the natural justice and liable to be quashed."
12. On the other hand, the ld DR has relied on the orders of the authorities below.
20 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO
13. After hearing both the sides on this issue, the Bench find that the ld. CIT(A) has sustained the part addition made U/s 68 of the Act to the tune of Rs. 26,25,000/-. The ld. CIT(A) has also added certain amounts, which were not considered by the Assessing Officer. Further the ld.
CIT(A) has not considered the various submissions made by the assessee, therefore, we are of the view that the whole issue of addition sustained U/s 68 of the Act and also the additional additions made by the ld. CIT(A) needs a fresh look at the level of the ld. CIT(A). Considering the totality of the facts and circumstances, this issue is also restored back to the file of the ld. CIT(A) to be decided de novo after providing effective and reasonable opportunity of being heard to the assessee.
14. In the result, appeal of the assessee is allowed for statistical purposes only.
Order pronounced in the open court on 16/02/2018.
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fnukad@Dated:- 16th February, 2018
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Surendra Kumar Pancholi, Jaipur.
2. izR;FkhZ@ The Respondent- The ITO, Ward 2(3), Jaipur.
21 ITA 166/JP/2017_ Surendra Kr. Pancholi Vs. ITO
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 166/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar