Income Tax Appellate Tribunal - Ahmedabad
The Dcit(Osd)-1, Circle-4,, Ahmedabad vs Jbr Nirman Pvt. Ltd.,, Ahmedabad on 28 February, 2018
आयकर अपीलीय अिधकरण,
अिधकरण अहमदाबाद यायपीठ 'डी' अहमदाबाद।
IN THE INCOME TAX APPELLATE TRIBUNAL
"D" BENCH, AHMEDABAD
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 2694/Ahd/2014
नधारण वष/A.Y. 2011-12
Dy. Commissioner of Vs JBR Nirman Pvt Ltd,
Income-tax (OSD)-I, 12, Royal Crescent
Circle-4, Ahmedabad Bungalows, Opp. New York
Tower, Thaltej, Ahmedabad
PAN : AABCJ 9174 G
अपीलाथ / (Appellant) यथ / (Respondent)
By Revenue : Shri V.K. Singh, Sr DR
By Assessee : Shri G.C. Pipara, AR
सन
ु वाई क तार ख/ Date of Hearing : 06/12/2017
घोषणा क तार ख /Date of Pronouncement: 28/02/2018
आदे श/O R D E R
PER PRADIP KUMAR KEDIA, AM:
1. The instant appeal has been filed by the Revenue against the order of the CIT(A)-VIII, Ahmedabad dated 14.07.2014, arising from the assessment order dated 27.03.2014 passed under Section 143(3) of the Income-tax Act, 1961 (in short "the Act"), concerning Assessment Year 2011-12.
2. The Revenue is aggrieved by the order of the CIT(A) for which following grounds of appeal have been raised:-
"1. The Ld. CIT)(A) has erred in law and on facts to delete the addition of Rs.52,50,000/- being income disclosed during the course of survey but not reflected in the return of income without cogent reason.ITA No. 2694/Ahd/2014
DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -2-
2. The Ld. CIT(A) has erred in law and on facts to delete the addition made u/s 68 of the Act amounting to Rs.3,19,00,726/- from Prerna Mercantile Pvt Ltd."
3. First issue concerns addition of Rs.52,50,000/- being a part of income allegedly disclosed during the course of survey but not reflected in the return of income.
4. The facts concerning the issue are that a survey was conducted in the business premises of the assessee under Section 133A of the Act on 22.10.2010. In the course of survey, statement of one of the Directors Shri Suresh Agrawal was recorded under Section 133A of the Act. The Assessing Officer noted that the aforesaid Director had disclosed an amount of Rs.4,50,00,000/- on account of profits arising from projects namely 100 Acres (Scheme of the company) Share of Dhara Infrastructure (JBR Residency and JBR Arcade) and towards unexplained credits etc. The Assessing Officer in the course of assessment, however, found that the assessee has included Rs.3,97,50,000/- only towards such disclosure in the return of income filed for the year under consideration as against the disclosure made of Rs.4,50,00,000/- in the course of survey. The Assessing Officer accordingly added the difference in disclosure amounting to Rs.52,50,000/- to the total income of the assessee being additional income in terms of disclosure made during the course of survey.
5. The CIT(A), in first appeal, noted various contentions of the assessee in this regard. One of the significant contentions of the assessee, as noted by the CIT(A), was that the disclosure of Rs.4,50,00,000/- also included the current year income of the assessee as per regular books of accounts together with undisclosed income as offered in the course of survey. It was further noted by the CIT(A) that no incriminating document was ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -3- found in the course of survey to corroborate the aforesaid disclosure and the sole basis for such addition is some disclosure made in the survey. It was observed by the CIT(A) that the assessee has shown an amount of Rs.4,85,28,254/- as per its books of accounts which also includes undisclosed income of Rs.3,97,50,000/- as disclosed in the course of survey. The current year profits of the company was shown at Rs.87,78,254/- and thus aggregate current year income was reflected at Rs.4,85,28,254/-. The CIT(A) noted that the Assessing Officer has merely added the difference between the survey disclosure of Rs.4,50,00,000/- and unaccounted income disclosed at Rs.3,97,50,000/- as total income in Return of Income without taking cognizance of the current year income. The CIT(A) has also taken note of the statement made by the Director, Shri Suresh Agrawal and subsequent statement of Managing Director, Shri Vineet Agrawal and accepted the plea of assessee that the disclosure of Rs.4,50,00,000/- was not exclusively towards undisclosed income but represented total current year income. The CIT(A), after taking note of the judicial precedents in the case of CIT vs. Dhingra Metal Works, (2010) 328 ITR 284 (Del); CIT vs. S. Khader Khan Son, (2012) 25 taxmann.com 413 (SC); Paul Mathews & Sons vs. CIT, (2003) 263 ITR 101 (Kerala); CIT vs. Kader Khan, (2008) 300 ITR 157 (Mad) and some other decisions and found merit in the plea of the assessee for deletion of the addition of the differential amount based solely on the statement recorded in the course of survey. The relevant operative paragraph of the order of the CIT(A) in this regard is reproduced hereunder:-
"2.3 I have carefully considered the assessment order and the submission made by the appellant during the course of appellate proceedings. The AO has made an addition to the Income of Rs. 52,50,000/- as, in his opinion, the appellant did not honour the disclosure of Rs. 4.5 crores made during the course of survey conducted by the Dept on the premises of the ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -4- appellant. The appellant had shown additional unaccounted income of Rs.3,97,50,0007- only. Accordingly the AO made the addition of the balance amount.
The appellant on the other hand has submitted that it has honoured the disclosure made by it during the course of survey. It has been pointed out by him that during the course of survey in the statement of Shri Suresh Agrawal was recorded. He stated that his son Vineet Agrawal handled the affaires of the company and after consulting him for current FY 2010- 11 a disclosure of Rs. 4.5 crores was made. Subsequently the statement of Shri.Vineet Agrawal, the director and the main person of the appellant company was recorded who stated that he confirmed the disclosure of Rs.4.5 crores including the current year's income. In view of these facts it has been submitted by the appellant that the income offered including the current year's income is as per the statement made during the course of survey.
After examining the relevant facts it is noted from the statement of Shri Suresh Agrawal recorded during the course of survey the following answer was given by him to the question number 5, in which he was asked to state the current year's profitability and unaccounted income noticed. The answer given by him is reproduced as under: -
"I have gone through the various papers, statements and since my son Vineet Agrawal handles the entire affairs of the company, I have consulted him and for the current FY 2010-11, I disclose an amount of Rs. 4,50,00,000/- (4r crore 50 lakhs) on account of profit of Hundred Acres (a scheme of the company), share of Dhara Infrastructure (JBR residency and JBR Arcade) and unexplained credit in the books of accounts of the company, if any, as well as unaccounted cash found during the course of survey and the unaccounted expenditure. The said disclosure does not include credit in the form of unsecured loan taken by the company from......... The tax on the said income of the current FY2010-11 shall be paid by the company. However, the exact working of the disclosure will be provided by my son Shri Vineet Agrawal, upon his arrival from Dehradun."
Subsequently the statement of Shri Vineet Agrawal was also recorded and he stated as under: -
"With respect to disclosure made by Shri S.C. Agarwal recorded as on 22/10/10 under Income fax Act 1961, I confirm the disclosure of ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -5- Rs. 4.50 cr. of the Company for the year 2010-11 including current year's income."
Therefore, it is clear from the above statements that Shri Suresh Agrawal as well as Shri Vineet Agrawal that the income for the current year would be Rs. 4.5 crores. The statement of Shri Suresh Agrawal is categorical on the issue that the income includes the income arising out of various schemes of the company and share of profit from partnership firms and explained cash credits in the books, if any. Subsequently, Shri Vineef Agrawal clarified the statement and stated that the disclosure would be Rs. 4.50 crores including the current year's income. There is no difference in both the statements. It is observed that the appellant has offered total income of Rs.4,85,28,254/- in the return of income which includes an unaccounted income of Rs.3,97,50,000/- and current year's profit of the company amounting to Rs. 87,78,254/-. Therefore, the company has shown more than what was disclosed in the survey. It is also observed from the records and the submission given by the appellant that no incriminating documents were found indicating any receipt of on money etc. The assessing officer has also not recorded any specific fact indicating to the income which Is based on any documents found during the course of search. The addition has only been made on the basis of two statements which are recorded during the course of survey. As discussed above the appellant has honoured the disclosure made by it during the course of survey and the difference has arisen on account of interpretation of the same statement made by the AO. In view of the above discussion, I am of the considered opinion that the AO was not justified in making the addition of Rs. 52,50,000/-to the income of the appellant on the basis of statement recorded during the survey. The same is therefore, directed to be deleted.
The ground of appeal is accordingly, allowed."
6. Aggrieved, the Revenue is in appeal before the Tribunal.
7. We have heard the rival submissions on the issue and perused the orders of the authorities below and judicial precedents cited. A perusal of the orders of the authorities below clearly shows that the sole basis of addition of Rs.52,50,000/- made is on account of statement given by the Director in the course of survey. A further perusal of the statement clearly shows that the disclosure of Rs.4,50,00,000/- made by the Director and ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -6- subsequently endorsed by the Managing Director represents profit from construction business etc. but does not give an unequivocal impression that the aforesaid disclosure was exclusively towards undisclosed income. Besides, we do not find any reference to any incriminating material to justify the aforesaid difference as unaccounted income. The long line of judicial precedents quoted in the order of the CIT(A) uniformly holds that mere statement given by an assessee making disclosure, which is not supported by any corroborative material, cannot be assigned evidentiary value for the purposes of additions of alleged undisclosed income in the hands of the assessee. Thus, in our view, the reasonings adopted by the CIT(A) while granting relief to the assessee are based on sound legal proposition and thus cannot be faulted. In the absence of any reference of incriminating materials to justify the addition, we find no infirmity in the order of the CIT(A) towards cancelling the addition made by the Assessing Officer on this score. Therefore, we decline to interfere with the order of the CIT(A) in this regard.
8. In the result, ground no.1 of the Revenue's appeal is dismissed.
9. The second ground concerns addition of Rs.3,19,00,726/- under Section 68 of the Act.
10. The relevant facts concerning the issue, as emanated from the records, are that in the course of scrutiny assessment the Assessing Officer found that the assessee has obtained unsecured loan of Rs.3,19,00,726/- from M/s. Prema Mercantile Pvt Ltd, Kolkata during the year. The Assessing Officer issued notice to the lender under Section 133(6) of the Act and collected evidences viz: copy of Income-tax Returns, balance- sheet, profit and loss account as well as bank statement of the lender, apart ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -7- from copy of annual return filed by the lender with the Registrar of Companies etc. The Assessing Officer, however, asked the assessee to produce the Principal Officer of the lender in person to completely discharge the onus placed upon the assessee to establish bonafides of such loan. The Assessing Officer noted that the assessee failed to produce the lender in person and accordingly held that the genuineness and creditworthiness remained unestablished. The Assessing Officer accordingly added the aforesaid sum of Rs.3,19,00,726/- to the total income of the assessee with the aid of Section 68 of the Act.
11. Aggrieved, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee contended that, apart from the loan confirmation, the Income-tax Return, balance-sheet and Profits & Loss account of the lender as well as its bank statement were also collected by the Assessing Officer which clearly establishes the identity, creditworthiness and genuineness of the transactions. The assessee next contended before the CIT(A) that the assessee had taken loan of Rs.80 lakhs from the aforesaid lender (M/s. Prema Mercantile Pvt Ltd) in the earlier year which is shown as opening balance during the year. Thus, apart from the brought forward outstanding, the assessee took further loan of Rs.3 Crores during the year on which the assessee also paid interest of Rs.21,11,918/- to the lender during the year. The assessee also deducted TDS of Rs.2,11,192/- on the interest payments. The Assessing Officer has wrongly considered the interest amount also as part of loan obtained without any application of mind. The assessee also pointed out before CIT(A) that in the earlier assessment year 2010-11, where the loan was taken from the same lender, the identity, genuineness or the creditworthiness of the said party was not disputed by the then Assessing Officer while passing order under Section ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -8- 143(3) of the Act. The assessee also made reference to various returns filed by the lender with the Registrar of Companies to establish its existence beyond doubt. After detailed analysis of the facts in the light of legal proposition prevailing in this regard, the CIT(A) found merit in the grievance of the assessee and deleted the addition made under Section 68 of the Act. The relevant operative paragraphs of the order of the CIT(A) are reproduced hereunder for ready reference :-
" 3.3 I have carefully considered the assessment order and the submission made by the appellant during the course of appellate proceedings. The AO has made an addition on account of unsecured loan of Rs. 3,19,00,726/- taken by the appellant from Prema Mercantile Pvt Ltd Kolkata during the year. The AO was of the opinion, after examining the details filed by the appellant, that the appellant had failed to discharge its onus as it has failed to produce the directors of the Prema Mercantile Pvt Ltd. It has been further held that as the existence of the party itself was in question the genuineness and creditworthiness of the transaction could not be established.
The appellant, on the other hand, has submitted that it has furnished duly confirmed Ledger account of the party giving complete particulars such as name and address, PAN etc. for the relevant year and the documents from the Registrar of Companies were also filed to prove the existence and genuineness of the company. Further, the appellant also filed the Income Tax Return of that company. Audited Balance Sheet and P&L account along with Schedules, Bank Statement of the company and Ledger account of the appellant company in the books of Prema Mercantile Ltd. It has also been pointed out by the appellant that the AO had also issued a notice under section 133(6) which has been responded by the party. It has therefore, been submitted by the appellant that it has established the identity, genuineness and the creditworthiness of the party and accordingly no addition should have been made by the AO. It has also been submitted by the appellant that insistence for producing the directors of Prema Mercantile was unjustified as the appellant had duly discharged its onus. On a careful consideration of the entire facts of the case, it is noted that the appellant has furnished confirmation giving the loan. It has also furnished data from the ROC, which indicates the name of the directors and shareholding pattern of the company. AH the schedules from the return filed with ROC for the relevant year were also submitted. Bank statement of that company, in which the loan given has been shown, as well as the ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12 -9- Ledger account of the appellant company in the books of that company was also submitted. Further the AO also issued a notice under section 133(6) which has also been complied by Prema Mercantile. During the course of appellate proceedings I have called the assessment records and perused the same, It was noted that the reply to the notice issued by the AO has been submitted by Prema Mercantile and the fact of giving loan has duly been confirmed by it. These facts clearly show that the appellant has duly discharged its onus by proving the identity of the party, genuineness of the transaction and also the creditworthiness of the creditor in respect of the loan obtained by it. It is also observed that there was an opening balance of Rs. 80 lakhs in the Ledger account of that party, which shows that the loan was obtained in earlier year also. Further the transactions have been carried out through banking channel as evident by the bank statement of that company. The AO on its part has not been able to place any contrary finding of fact to show that there was any doubt in respect of any of the information furnished by the appellant which would require the presence of the director to cross verify the same. Therefore, I am of the considered opinion that no useful purpose would have been served by summoning the director of Prema mercantile by the AO. The appellant has given sufficient information to discharge its onus in respect of proving the unsecured loan taken by it.
Honourable High Court of Gujarat has held, in series of decisions, that if the confirmation letters have been filed, the identity of the party has been established, the transaction is through banking channel, PAN has been given and a copy of acknowledgement of return is given no addition could be made in respect of that deposit or loan. The recent decision which been given by the honourable High Court of Gujarat is in the case of Patel Romniklal Hirji, 41 taxman.com 493 (2014). It has been held by the honourable court that if the above information is furnished no interference was called for. The relevant extracts from the head note of the judgement is reproduced as under: -
"II. Section 68 of the Income-tax Act, 196-1 - Cash credits [Loan] - Assessment year 2005-06 - Assessee had shown unsecured loans in name of four different persons in books of account - Assessing Officer added said amount as unexplained credit on ground that genuineness of transactions and creditworthiness of depositors were not properly established - Commissioner found that assessee had furnished copies of accounts, copies of bank statements and copies of income-tax returns of all depositors, and therefore, identity of parties were established - Moreover, loan was received through account payee cheques - Commissioner (Appeals) thus deleted addition made by Assessing Officer - Tribunal confirmed said order - Whether on ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12
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facts, impugned order passed by Tribunal did not require any interference - Held, yes [Para 4] [In favour of assessee]".
In view of the above discussion and the preponderant opinion given by honourable Gujarat High Court the addition made by the AO on account of unexplained cash credit received during the year is directed be deleted. The ground of appeal is accordingly, allowed."
12. The CIT(A), accordingly deleted the additions made by the Assessing Officer under Section 68 of the Act.
13. The Revenue has challenged the legitimacy of the action of CIT(A).
14. We have heard the rival submissions made in this regard and perused the orders of the authorities below as well as the judicial precedents cited in this regard. The issue in dispute is whether unsecured loan of Rs.3,19,00,726/- taken by the assessee from the lender M/s. Prema Mercantile Pvt Ltd can be treated as unexplained cash credit in the facts and circumstances of the case or not. A perusal of the order of the CIT(A) clearly brings out the fact that the lender is not a stranger to the assessee. The assessee has availed loan in the earlier year of significant amount which has been considered bonafide on the touchstone of Section 68 of the Act in the past. The assessee has paid interest on such loan and has also deducted TDS on the interest payments. The notice under Section 133(6) issued by the Assessing Officer for inquiry about the loan was duly served and responded. The Assessing Officer has collected vital information in the form of return of income, financial statements as well as extract of bank statement of the lender. The Assessing Officer has not pointed out any disproportionate circumstance with reference to these documents which may suggest any form of disguise on the part of the assessee. There is no reference to bring any sordid and extraneous affairs as may be emerging from such documents in the assessment order. The transaction ITA No. 2694/Ahd/2014 DCIT(OSD) vs. JBR Nirman Pvt Ltd A.Y. 2011-12
- 11 -
was also found to be through banking channel and reported in the return of income of the lender. On these facts, the CIT(A) concluded the issue in favour of the assessee. We find rationale in the view taken by the CIT(A) on the basis of such evidences and find no reason to disturb the same. This apart, we also reckon another crucial fact pointed out on behalf of the assessee that the aforesaid loan has actually been repaid during the FY 2015-16 through banking channel to the lender. The loan thus has ceased to exist in the later year. We find potency in the argument of the assessee that where, apart from the clinching evidences towards loan procurement, the loan itself stood repaid, the assessee does not ultimately stand to gain any spurious benefit from such alleged unexplained cash credit. In the totality of facts, where the trail for obtaining the loan and repayment thereof is proved and the lender has duly filed its return of income the encompassing transaction with the assessee; we see little merit in the grievance of the Revenue on the aforesaid issue. The conclusion drawn by the CIT(A) is based on proper appreciation of evidences and founded on peculiar facts of the case. Therefore, we decline to interfere with the conclusion drawn by the CIT(A) deleting the addition towards unexplained credit.
15. In the result, ground no.2 of the Revenue's appeal is dismissed.
16. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 28th February, 2018 at Ahmedabad Sd/- Sd/-
(S.S. GODARA) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad, Dated 28/02/2018
*Bt
ITA No. 2694/Ahd/2014
DCIT(OSD) vs. JBR Nirman Pvt Ltd
A.Y. 2011-12
- 12 -
आदे श क त ल!प अ"े!षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं"धत आयकर आय$
ु त / Concerned CIT
4. आयकर आयु$त(अपील) / The CIT(A)
5. 'वभागीय *त*न"ध, आयकर अपील य अ"धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड/ फाईल / Guard file.
आदे शानुसार/ BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील'य अ(धकरण, अहमदाबाद / ITAT, Ahmedabad