Gujarat High Court
The Principal Commissioner Of Income ... vs Naresh Nemchand Shah on 28 August, 2023
Author: Biren Vaishnav
Bench: Biren Vaishnav, Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/389/2023 ORDER DATED: 28/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 389 of 2023
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THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT
Versus
NARESH NEMCHAND SHAH
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Appearance:
KARAN G SANGHANI(7945) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 28/08/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. Heard learned advocate Mr.Karan G. Sanghani for the applicant.
2. This Appeal has been filed by the Revenue arising out of an order of the Income Tax Appellate Tribunal (for short 'the ITAT') dated 29.07.2022 passed in ITA No.197/SRT/2020.
3. The substantial questions of law raised in Page 1 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined the Appeal are as under :
"(a) Whether in the facts and circumstances of the case and in law, the order of the Hon'ble ITAT is ex- facie perverse because the Hon'ble ITAT held we do not agree with the sweeping allegation of the Hon'ble Assessing Officer that "Transactions were accommodation entries" despite of the facts that during the course of survey proceedings in the case of the director of the said company Shri Tamal Roy in his statement recorded on oath u/s.131 of the Income Tax Act, 1961 has accepted that he was engaged in providing accommodation entries and not engaged in the real business and have never retracted from his statement?
(b) Whether in the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in holding that the statement was not based on any cogent evidence to back such high voltage statement despite the facts that during the course of survey Shri Tamal Roy has explained entire modus operandi of providing accommodation entries and the entries are settled through angadiya and also in the year under consideration the assessee also taken accommodation entries in the name Page 2 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined of Shri Rameshchandra Rangildas Mehta (PAN : ABJPM8972H), Shri Maheshbhai Tulsidas Patel (PAN : ADSPP3124B) and after their statement the assessee has disclosed the principal amount of Loan under PMGKY?
(c) Whether in the facts and circumstances of the case and in law, the order of Hon'ble ITAT is ex facie perverse because the Hon'ble ITAT deleted the addition of Rs.12,14,13,015/- made under sec. 68 of the Act on account of bogus unsecured loan, without appreciating that such loans were arranged by the assessee from the entry providers, which was accepted by the main persons of the entry providing group before the Income Tax Department and these entry providers were only paper entities and provided accommodation entries to the assessee, so the documentary evidences regarding the identity, genuineness and creditworthiness provided by these entry providers cannot be relied upon?"
4. It was the case of the Revenue as is evident from the Assessment Order that pursuant to a survey carried out, in the perception of the Revenue, it was noticed that the assessee had taken bogus loans from individuals who were engaged in cheque Page 3 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined discounting activities facilitating many entries of loans/purchases/advances to various persons. Accordingly, on the basis of such information, the unsecured loans were treated as bogus and added to the total income of the assessee on account of disallowance of deduction. On an Appeal being filed by the respondent, the Commissioner of Income Tax (Appeals) (for short 'the CIT (Appeals)') found that it was a fact that the actual loan amount taken from Gujarat Computer and Software Limited (for short 'the GCSL') by the appellant during the year was Rs.12,14,13,015/- and not Rs.13,75,13,015/-.
The CIT (Appeals) held that the Assessing Officer had made additions considering the loan amount as non-genuine only on the basis of the statement of one Shree Tamal Roy, Director of GCSL recorded during the course of Page 4 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined survey and paused survey inquiries. Perusal of the order of the CIT (Appeals) which held in favour of the assessee indicates that the appellant authority was of the opinion that no documentary evidence was found during the course of survey which remotely indicates that the transactions with GCSL were not genuine.
There was evidence in the form of confirmation from the Creditor, Audited Accounts of the Creditor and Copies of the Banks Accounts to prove the genuineness and the creditworthiness of the Creditor which was within the parameters of Section 68 of the Income Tax Act, 1961.
5. Having perused the reasons of the ITAT, it is apparent that both the authorities i.e. CIT (Appeals) and the Tribunal have on the basis of evidence found that the identity, Page 5 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined genuineness and creditworthiness of the loan of the assessee were confirmed by way of the evidence produced. These documents were filed by the Director Shri Tamal Roy. Even, during the course of survey of GCSL, there was no other evidence found which would support the statement of the Director. The Tribunal observed as under :-
"22. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee. We note that to prove the identity genuineness and creditworthiness of the loan, the assessee filed confirmation signed by the director of the company, copy of bank statement of creditor, copy of return of income of creditor, PAN number, Name and address and copy of audit report of creditor. All these documents were also filed by Shri Tammal Roy, director of the company before the assessing officer along with letter dated 07.10.2017, which confirm the contention of the assessees. The ld Counsel contended that Rs.1.61 Crore is the opening balance and Rs.12,14,13,015/- is the correct amount of loan taken during the year. The Page 6 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined assessing officer passed the order u/s 154 of the Act on bringing this mistake to notice. The ld Counsel argued that the survey upon GCSL was conducted for the transactions entered into with HAH Global Enterprise & Services. Most of the statement was recorded during the survey on this issue only, therefore, the transaction related to the assessee was not the subject matter of survey and Shri Tammal Roy raised story of providing accommodation entry to the assessee to divert the attention of the survey team. The ld Counsel stated that Shri Tammal Roy's statement that 'angadias' was used to send money abroad for the transaction with HAH Global Enterprise & Services is also factually incorrect as Angelis do not work for transfer of money overseas, but within country only, thus, statement of Shri Tammal Roy is not reliable.
23. We note that during the survey on GCSL, no corroborative evidence was found, which support the statement of Shri Tammal Roy. The ld Counsel also contended that statement recorded during the course of survey does not have an evidentiary value even in the case of the assessee upon whom survey has been conducted in absence of any corroborative evidence. Therefore, relying upon third party statement without any corroborative evidence is against the settled principle of law on this issue. We note that there is no written evidence, against the assessee Page 7 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined except statement of Shri Tammal Roy. The statement of third party cannot be used against the assessee without giving opportunities of cross examination. The Ld Counsel stated that during the course of assessment proceedings, cross examination of Shri Tammal Roy was sought by the assessee by making specific request in this regard. Shri Tamal Roy was summoned by the assessing officer, but instead of appearing for cross examination, he sent reply in writing on 07.10.2017. These facts clearly prove that in spite of specific request made by the assessee, opportunity of cross examination was not provided to the assessee, hence addition made by the assessing officer relying upon such statement is clearly in violation of the principle of natural justice. We note that confirmation from the creditor was filed before the assessing officer, along with copy of ITR, copy of bank account and audit report of the auditor. Survey ws 133A of the Act was conducted by the Department on the creditor, which prove identity beyond doubt as state ment of the director was recorded twice.
24. Regarding creditworthiness of the creditor, the ld Counsel stated that creditor had turnover in A.Y. 2011-12 of Rs.8.56 Crores and Rs.35.25 Crores, in 2012-13. There is no cash deposit found in the bank account of the creditor, Page 8 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023 NEUTRAL CITATION C/TAXAP/389/2023 ORDER DATED: 28/08/2023 undefined prior to the cheque issued to the assessee. Regarding genuineness of transaction, the ld Counsel stated that loan was received through regular banking channels, interest was regularly paid and TDS was deducted and deposited in government account as per the provision of the I.T. Act. We note that that if the transaction is through regular banking channels and creditor has confirmed the transactions, such transactions are genuine and therefore, addition made by the assessing officer are not sustainable."
6. For the aforesaid reasons, we do not find any question of law much-less substantial question of law arising in the present appeal.
Hence, the appeal is dismissed.
(BIREN VAISHNAV, J) (BHARGAV D. KARIA, J) PALAK Page 9 of 9 Downloaded on : Sun Sep 17 02:42:19 IST 2023