Income Tax Appellate Tribunal - Raipur
M/S Vijay Agrotech, Balod, Baloda Bazar ... vs Income Tax Officer-1(2), Bhilai, Durg on 24 January, 2024
आयकर अपील य अ धकरण, रायपरु यायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी र वश सूद, या यक सद य एवं ीअ ण खोड़ पया, लेखा सद य के सम ।
BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
ITA No.46/RPR/2023
Assessment Year: 2015-16
M/s. Vijay Agrotech, Village Chitod, V Income Tax Officer,-1(2),
Bastar Road, Balod, C.G. s Bhilai
(अपीलाथ /Appellant) ( यथ / Respondent)
PAN No. AAJFV8535A
ITA No.106/RPR/2023
Assessment Year: 2015-16
Income Tax Officer,-1(2), V M/s. Vijay Agrotech, Village Chitod,
Bhilai s Bastar Road, Balod, C.G.
PAN No. AAJFV8535A
(अपीलाथ /Appellant) . ( यथ / Respondent)
.
नधा रतीक ओरसे /Assessee by : Shri R.B. Doshi, CA
राज वक ओरसे /Revenue by : Shri Sathya Prakash Sharma, Sr DR
सुनवाईक तार ख/ Date of Hearing : 07.11.2 023
घोषणाक तार ख/Date of : 24.01.2 024
Pronouncement
आदे श / O R D E R
Per Arun Khodpia, AM:
The captioned cross appeals are filed by the assessee and the revenue against the order of the Ld. CIT(Appeals)-3, Bhopal for the assessment year 2015-16, in the matter of assessment under section 143(3) of the Income Tax Act. 1961.
2 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
2. Brief facts of the case are that the assessee is a firm derives income from running from rice mill and from custom milling activity. During the assessment year under consideration, the assessee filed its return of income on 27.09.2015 declaring total income at Rs.11,52,040/-. The case was selected for complete scrutiny under CASS and notice u/s.143(2) of the Act was issued by the Assessing Officer and the case was discussed. The Assessing Officer completed the assessment under section 143(3) of the Act on 27.12.2017, inter alia, making the following additions:
i) Rs.34,60,000/- u/s. 68 of the Act on account of credits in partner's capital account.
2) Rs.92,68,661/- and Rs.3,73,262/- u/s. 68 of the Act on account of unsecured loans & interest.
3) Rs.60,19,047/- u/s. 68 of the Act on account of sundry
creditors'
4) Rs.18,57,825/- u/s.41(1) of the Act.
5) Rs.78,78,059/- on account of concealed sale of husk &
6) Rs.7,789/- on account of unexplained expenditure.
3. Aggrieved by the above additions, the assessee carried the matter in appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed additional evidence, which were forwarded to the Assessing Officer for his comments. After receiving the two remand 3 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 reports of the Assessing Officer, the Ld. CIT(A) partly allowed the appeal of the assessee. Hence, both the sides are in appeal before the Tribunal,
4. First, we take up the appeal of the assessee in ITA No.46/RPR/2023.
5. In its ground of appeal, the assessee is aggrieved by and has raised the sole controversy, regarding the confirmation of addition of Rs.80,53,236/- by the ld CIT(A) on account of unsecured loans u/s.68 of the Act and interest thereon.
6. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had raised unsecured loans from 13 different individuals and firms amounting to Rs.92,68,661/- and has paid interest of Rs.3,73,262/-, details of the same is extracted as under:
Sr.No. Name of the persons/firms Amount (Rs.) Int. (Rs.)
1. Dharam Gangber 5,00,000 21,304
2. Dinesh Mishra 15,00,000 71,457
3. Durgashankar Sinjha 5,00,000 21,304
4. Kamlesh Kumar Saha 3,00,000 12,783
5. Raghunath Dewangaon 3,00,000 12,783
6. Ramesh Verma HUF 7,00,000 3,322
7. Shreyansh Baradiya 3,00,000 14,647
8. S.K. Investment 15,00,000 71,457
9. Mamta Mishra 10,00,000 47,639
10. Meena Gupta 8,00,000 34,087
11. Ramkanya Mishra 10,00,000 47,639
12. Sheelam Baradiya 5,68,661 2,057
13. Umanand Dewangan 3,00,000 12,783 4 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 Total 92,68,661/- 3,73,262
7. The Assessing Officer required the assessee to explain the identity and creditworthiness of the creditors and genuineness of the transactions. Although the assessee has furnished the certain documents, but the same were not up to mark so as to convince the Ld. AO and observed that the assessee failed to furnish the required information in support of the claim of unsecured loans. The Assessing Officer also found that one Shri Santosh Mishra has received the notice u/.143(2) of the Act on behalf of the assessee, in backdrop this fact the Assessing Officer presumed that Shri Mishra is an employee of the firm and all the credits appearing in the group of Mishra family. With these observations the Assessing Officer concluded that it is not possible to arrive at positive satisfaction about the essential ingredients of identity, genuineness and creditworthiness of the loan transactions, therefore, he treated the transaction as accommodation entries and added back the unsecured loan of Rs.92,68,661/- along with interest of Rs.3,73,262/- to the income of the assessee by invoking the provisions of section 68 of the Act.
8. In the first appeal, the assessee filed written submissions and evidence in support of the unsecured loans. It was submitted that during the assessment proceedings, the assessee had filed loan confirmation of all lenders, containing PAN, return of income of all 5 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 lenders, bank statement of the assessee confirming the receipt of loans through banking channel. It was submitted that all the loans have been repaid fully in the subsequent year, details of which were furnished before the Ld. CIT(A). The Ld. CIT(A) made analysis for each of the unsecured loans received by the assessee and has accepted the three unsecured loans in respect of Ramesh Verma HUF of Rs.7,00,000/-, Shri Shreyansh Baradiaya of Rs.3,00,000/- and Smt Sheelam Baradiaya of Rs.5,68,661/- totaling to Rs.15,68,661/- after examining the return of income, bank statement of the lenders and confirmed balance of Rs.77,00,000/- as not being proved. While confirming the addition, the Ld. CIT(A) made proper analysis of return of income, bank statement and computation of income and observed that the creditors are man of insufficient means and did not have adequate funds to provide loan to the assessee. The funds might have routed through the assessee in the creditors bank account. Ld. CIT(A) also observed that though the identity of the creditors is proved, but the creditworthiness and genuineness of the transaction are not proved. As regards to repayment of loan, Ld. CIT(A) observed that mere repayment of loan in subsequent year does not suo moto discharge the onus lies on the assessee u/s 68 of the Act. Ld. CIT(A) also relied various judicial pronouncements on this issue.
9. Before us, Ld. Authorized Representative (AR) submitted that the observation of the ld CIT(A) stating that the burden is not discharged by 6 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 the assessee is not correct. He submitted that all necessary evidence were submitted, which establishes the identity of lenders, genuineness of the transaction & creditworthiness of the loan creditors. It was the submission that nothing has brought on record to dispute the evidences furnished by the assessee. Ld AR placed reliance on the following judicial pronouncements to support the claim that in the absence of any enquiry by the AO and Ld. CIT(A), the onus never shifted back to the assessee and, therefore, the addition could not have been made:
i) CIT vs Orissa Corporation Pvt Ltd., 159 ITR 78 (SC)
ii) CIT vs Jai Kumar Backliwali, 366 ITR 217 (Raj)
iii) CIT vs Metachem Industries, 245 ITR 160M(MP)
10. As regards to the allegation by the lower authorities that Shri Santosh Mishra is an employee of the assessee firm, ld AR submitted that Shri Santosh Mishra is not an employee of the assessee. It was the submission that Shri Mishra is authorized representative of the assessee. It was the submission that the bank account, financial statement, ITR etc of Shri Santosh Mishra and his family members submitted before the AO stood established that they are having financial capacity to advance the loan to the assessee. As regards to the allegation that the cash has been deposited before advancing the loan, it was the submission that this fact has not been confronted to the assessee. He submitted that the cash deposit by itself could not result 7 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 into addition in absence of any enquiry. For this proposition, he relied on the following decisions:
i) DCIT vs Rohini Builders, 256 ITR 360m(Guj)
ii) Amit Kumar Bansal vs ITO, (2017) 50 CCH 3 (Raipur)
iii) ITO vs Gaurm Prasad Nishad in ITA No,101/BLPR/2012 dt.5.10.2015
11. Ld AR submitted that in case the AO is not satisfied with the cash deposit in the respective bank account of the lender, the proper course is to make assessment in the case of those creditors. Lastly, ld AR submitted that the addition made by the AO and confirmed by the ld CIT(A) is unjustified and uncalled for and same should be deleted.
12. Adverting to the submission of Ld. AR of the assessee, Ld. Sr DR submitted that as revealed from the ITR of the loan lenders that their income in the relevant assessment year is meager. They had deposited the money in their account just before issuing cheque to the assessee. He further submitted that the parties were not produced before the AO when the notices were issued to the parties. The Assessee has failed to establish creditworthiness of lenders and genuineness of the transaction hence the Assessing Officer is quite justified in treating the said transactions as non-genuine and bringing the same to tax u/s. 68 of the Act.8 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
13. We have considered the rival submissions, perused the material available on record and the case laws relied upon before us. The main crux of the dispute in this appeal is as to whether the addition made u/s.68 on account of unsecured loan is justified or not. The provisions of section 68 deal with cases where any sum found credited in the books of account of the assessee in any financial year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee for the relevant previous year. A plain reading of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to establish the three main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. It is also not in dispute that the assessee has repaid back all the loans with interest to the loan creditors in the subsequent year. As regards to the presumption by the lower authorities that Shri Santosh Mishra is an 9 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 employee of the assessee is not supported by any concrete evidence as also other members of Mishra family are related to him and routed money in their accounts. Therefore, we are of the considered view that the assessee has discharged its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise, however, Ld. AO and Ld. CIT(A) have decided the issue with their on presumption regarding creditworthiness of the parties without any further enquiry or examination of such parties. Therefore, we are of the view that there is no reason for the AO to treat loans from the persons as confirmed by ld CIT(A) on account of unsecured loans u/s 68 of the Act. Our view is duly supported by the binding judgment of Hon'ble Jurisdictional High Court in the case of Pawan Kumar Agarwal vs. ITO, TAX Case No. 24 of 2011 dated 04.04.2017, wherein Hon'ble High Court has held as under:
6. Section 68 of the Act provides a process by which the Assessing Authority has to reach at transactions of those persons with whom the Assessee had entered into transactions in which the particular assessee is involved, to conclude the assessment on the basis of the transactions referable to those persons. Such concluded assessments will have a bearing on the acceptability or otherwise the plea set up by the Assessee in the course of proceeding under Section 68 of the Act. So much so, notwithstanding, the finality attained by the assessment proceeding in relation to the lender, the borrower is entitled to say that the contents of the returns of the lender and 3 the matters emanating therefrom have to be looked into. In that view of the matter, the First 10 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 Appellate Authority was justified, also on the basis of the judicial precedents referred by it, in entering the finding that the Assessee had discharged his primary onus under Section 68 of the Act. That having been done, the First Appellate Authority was fully justified in taking the view that it was open to the department to take recourse of Section 131 or Section 133(6) of the Act if they were to further proceed. That not having done so, the First Appellate Authority was within its jurisdiction to conclude on facts and law, in favour of the Assessee. The Appellate Tribunal, in the Appeal at the instance of the Revenue, has not rendered the decision holding the finding of the First Appellant Authority regarding applicability of Sections 131 and 133(6) of the Act, as the case may be, is erroneous in law. So much so, the impugned decision of the Tribunal stands faulted on a substantial question of law referable to the contents of Section 68 of the Act and the failure of the Revenue to take recourse to Sections 131 and 133(6) of the Act, in the case of the Assessee, where the primary onus under Section 68 of the Act stood discharged by the Assessee. 7. For the foregoing reasons, we are of the view that the impugned order of the Tribunal has to be set aside, answering the question of law, framed and quoted above, in favour of the Assessee. We do so.
14. Since the sole controversy raised by the assessee that the additions made on account of unexplained unsecured loans u/s 68 and interest on such loans, which is partly allowed by the Ld. CIT(A) is decided by us in favour of the assessee, in terms of our observations 11 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 hereinabove, consequently the appeal of the assessee in ITA No.46/RPR/2023, stands allowed.
Now, we shall be adverting to the appeal of the revenue in ITA No.106/RPR/2023
15. The revenue has raised the following grounds:
"1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in admitting copious additional evidence and giving relief to the assessee, ignoring that the assessee has been broadly non-compliant despite ample opportunities with regard to submission of details and evidences before the AO.
2. Whether on the facts and in the circumstances of the case and in law, ld CIT(A) was justified in deleting the addition of Rs.60,19,047/- made by the AO on account of unexplained credit u/s.68?
3. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) was justified in deleting the addition of Rs.60,19,047/- made by the AO on account of unexplained credit u/s.68 on the presumption that AO has accepted as genuine the purchases qua alleged bogus creditors and so the genuine creditors cannot be doubted ignoring that:
a) The assessee has been non-compliant and, as stated in the assessment order, has not provided details (breakup) of the creditors and therefore, there is no basis for such presumption?12 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
b) The assessee cannot be allowed to take advantage of its own wrong (non-compliance) as held by the Hon'ble Apex court in BM Meklani vs CIT(2008) 10 SCC 617 and Kusheshwar Prasad Singh vs State of Bihar(2007) 11 SSC?
4. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) was justified in deleting the addition of Rs.78,78,059/- made by the AO on account of concealed sale of Husk, ignoring that despite of non-compliance by the assessee the AO has made a well reasoned addition on this account?
5. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) was justified in deleting the addition o Rs.34,60,000/- made by the AO on account of unexplained credit u/s.68 of the Income Tax Act, 1961 shown as addition to partner's account.
6. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) was justified in providing relief of Rs.15,88,687/- out of addition made by the AO on account of unsecured loans and interest expenses.
7. Whether on the facts and in the circumstances of the case and in law, the ld CIT(A) was justified in deleting the addition of Rs.15,87,825/- made by the AO u/s.41(1) of the Act?"
16. Both the parties were heard at length.
17. With regard to Ground No.1 of the revenue's appeal, we find that during the first appellate proceedings, the assessee had filed some additional evidence, which were forwarded to the AO for remand reports 13 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 and the AO has furnished his two remand reports after considering the detailed evidence produced by the assessee. The ld CIT(A) after considering the remand reports of the AO and the submission of the assessee, has disposed of the appeal by allowing part relief to the assessee. The revenue is unable to furnish any specific details pertaining to additional evidences which were relied upon by the assessee, furnished before the first appellate authority but were not confronted to the Ld. AO for his comments, therefore, the contention of the revenue that relief to the assessee was granted ignoring the fact that the assessee has been broadly non-compliant, who had not furnished the required details before the Ld. AO, cannot help the department as the assessee is permitted to submit additional evidence in terms of provisions of Rule 46A which in our opinion are duly adhered to by the Ld. CIT(A). . Hence, ground No. 1 of the appeal of revenue is dismissed.
18. Ground Nos.2 & 3 relates to deletion of addition of Rs.60,19,047/- on account of unexplained sundry creditors u/s.68 of the Act.
19. The facts as emanated from the lower authorities are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee had claimed Rs.3,10,92,610/- as outstanding sundry creditors. Hence, the AO required the assessee to furnish the list of all sundry creditors for current and preceding two years. The Assessing Officer also found that in the amount of sundry creditors includes sum of Rs.60,19,047/- on account of Mandi Payments (Balod). The AO 14 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 accordingly required the assessee to furnish ledger account of Mandi payments and nature of balance outstanding in this account. As there was no compliance from the assessee, the Assessing Officer made addition of Rs.60,19,047/- as unexplained cash credit u/s.68 of the Act. Hence, the assessee carried the matter in appeal.
20. Before the ld CIT(A), the assessee filed written submissions, which are reproduced by ld CIT(A) at pages 46 to 50 of the impugned order. After considering the submissions of the assessee, ld CIT(A) deleted the addition, inter alia, by observing as under:
"15 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16 16 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 17 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 18 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16
21. Having heard the rival submissions, we do not find any infirmity in the order of the ld CIT(A) to interfere as the ld CIT(A) has 19 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 followed the order of the Co-ordinate Bench of this Tribunal in the case of Satyanarayan Agrawal (supra), wherein also, on identical facts, as the purchases are not disputed and accepted by the revenue authorities, the Tribunal has deleted the addition. We also find that the Ld. CIT(A) had rightly appreciated the contentions of the assessee and its related legal position in the instant case as is evident from the findings as reproduced above. Hence, we uphold the same, Accordingly, Ground No.2 & 3 of the revenue stand dismissed.
22. Ground No. 4 relates to deletion of addition of Rs.78,78059/- on account of concealed sale of Husk.
23. Facts are that during the course of assessment proceedings, the Assessing Officer noticed that the assessee had shown consumption of 206100 quintals of paddy in milling both of own paddy and custom milling paddy. The assessee had also shown sale of husk at Rs.3,65,941/-. However, no opening and closing stock of husk has been maintained and the sale of husk has been shown very less as compared to the industry average. Therefore, the Assessing Officer required the assessee to furnish month wise details of generation of husk, opening and closing stock and sales details of husk. Further, on perusal of tax audit report of the assessee, the Assessing Officer noticed that the composite rice yield out of paddy was at 74% and the general rate of husk production is 22%. The AO opined that as per research paper of Jawaharlal Nehru Krishi Vidyalaya, Jabalpur published in 2012 and 2% further rebate was given 20 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 on account of sampling error and yield of husk was determined at 20%. Therefore, on the basis of paddy consumption, the AO determined husk generation at 41220 quintals and by applying prevailing rate of husk @ Rs.200/- per quintal, determined sale of husk at Rs.82,44,400/-. Accordingly, the AO determined the concealed sales at Rs.78,78,059 (Rs.82,44,400 - Rs.3,65,941) and added the same to the total income of the assessee.
24. In the first appeal, after considering the written submission of the assessee and perusing various judicial pronouncement on this issue, the Ld. CIT(A) deleted the addition, inter ala, observing as under:
"21 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16 22 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 23 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16
25. We have heard the rival submissions and perused the record of the case.
26. Ld. Sr. DR on this issue has vehemently supported and relied upon the order of Ld. AO.
27. On the contrary, Ld. AR submitted that the sale of husk in the present case is less on account of use of measure quantity of husk as fuel in the Parboiling plant for boiling of paddy this fact is substantiated by showing that there were no other fuel expenses claimed by the assessee in its manufacturing profit & loss A/c copy of which is furnished in the assessee's PB in page no. 225 to 227. It is the submission of Ld. AR that there is nothing on record by the revenue to controvert this fact. The 24 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 addition made was on presumption and surmises, no material to show that the sale of husk more than the amount which is offered by the assessee. Assessee was not queried regarding disposal of husk generated, only the month wise quantities of husk generated sold and closing stock was required to furnished. Ld. AR placed his reliance on the following cases:
(i) M/s Annapurna Industries vs. ITO in ITA No. 72/RPR/2016 dated 17.01.2019.
(ii) M/s Anant Rice Industries vs. ITO in ITA no. 280/NAG/2008 dated. 26.08.2008,
28. On thoughtful consideration of the facts of the issue, perusal of the material available on record and case laws furnished for our consideration. In the present case the assessee has duly explained the utilization of husk produced in the process of milling of paddy to rice. The yield of husk by the assessee during the relevant period was of 19% of the total milling of paddy which is not far away from the standard yield of 20%, set as per research paper of Jawaharlal Nehru Krishi Vidyalaya, Jabalpur published in 2012. Further, as observed by Ld. CIT(A) similar results in the earlier year were not objected by the revenue. The findings in the case of M/s Anant Rice Industries (surpa), relied upon by the assessee in a similar case are extracted as under: 25 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
4. We have heard the parties and perused the material placed before us. In our opinion, the A.O. has gone more on presumption than on reality.
He has not pointed out a single instance of sale of husk by Ille assessee or even there is no evidence of such sales brought on record. It has been pointed out by the learned counsel that even in earlier assessment years also, there was no sale of husk, and the department did not make any addition on that account. The assessee has also furnished examples of various other assessee doing similar nature of rice milling business who have not sold any husk. The exercise of the in A.O. in adopting the net saleable price of husk was based on his surmises and conjectures. In that view of the matter, the addition of Rs. 1,88,000/- made on account of unrecorded sale of husk was not justified and the C.I.T.(A) went wrong in upholding the same, the addition, therefore, is directed to be deleted.
29. In view of the aforesaid facts and circumstances, we are of the considered opinion that the addition made by the Ld. AO was only on the basis of his own presumptions without going through the facts by enquiry with the assessee regarding the consumption of the husk generated from the milling of paddy. Ld. CIT(A) has duly and rightly appreciated the facts and has vacated the addition therefore, we do not see any reason to interfere with the same. In the result, ground no. 4 of the revenue in absence of any plausible explanation in support of their contention, stands dismissed.
30. Ground No. 5 of the revenue regarding deleting the addition of Rs. 34,60,000/-, on account of explained cash credit shown as addition to partners' capital.
31. During the assessment proceedings, Ld. AO has observed that Shri Anil Baradia & Shri Vijay Lal Baradia, the partners of the assesse firm 26 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 have made certain additions to their capital account. When the assessee was asked to explain and justified the amount so credited in the partner's capital account, the assessee has not submitted any information. Ld. AO placing his reliance on the order in the case of Raisons Engineer's vs. CIT in ITA No. 95 of 2000, wherein Hon'ble Jurisdictional HC vide order dated 08.07.2009 has upheld the order of Hon'ble ITAT confirming the addition relating to partner's capital account made u/s 68 of the Act holding that when the firm did not produced the partner's for confirmation of entries nor any affidavit sworn by them was filed, the addition of deposited by partner's remains unexplained and has made the addition.
32. Ld. CIT, while dealing this issue has accepted the request of the assessee for admission of additional evidence under rule 46A, wherein the assessee has also explained the reasons for which such evidence could not the filed before the AO. All the requisite information to satisfy the ingredients required u/s 68 of the Act, so as to establish that the sums credited in the books of assessee's firm in the form of partner's capital were furnished before the Ld. CIT(A). Such information /evidence have been forwarded to the Ld. AO for his comments, the Ld. AO in his remand report dated 19.02.2020 remained silent on the merits of documentary evidence furnished by the assessee, he only has commented with the allegation that the assessee was provided with ample opportunities to furnish the requisite details during the assessment proceedings, but the assessee was failed to do so, Ld. AO have finally commented that the 27 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 issue shall be decided on the basis of merits of the facts. Ld. CIT(A) have deliberated upon the facts emanating from the documents submitted by the assessee and has decided the issue with following observations:
4.2.3 I have considered the facts of the case, plea raised by the appellant and findings of the Ld. AO. The appellant during the course of appellate proceedings claimed that copy of accounts of the two partners were furnished before the Ld. AO, however, the other details were not furnished for the reason that the appellant was under bonafides belief that the amount introduced by partners as capital does not comes under preview of section 68 of the Act. Also, the partners have shown the capital balance in their returns of income. Further the appellant was also under bonafides belief that the PAN, income tax return, addresses of the partners were already available on the record of the Ld. AO and therefore, such details were not required to resubmit again. The submission of the appellant in this regard found justifiable. The Ld. AO could have suo moto collected all the information relating to the partners from the records available with him and made further independent enquiry in respect of source of capital introduced in the appellant firm. The Ld. AO, however, on other hand by placing reliance on decision of Hon'ble jurisdictional High Court in the case of Raisons engineer's vs CIT in ITA No 95 of 2000 has held that the appellant has failed to furnish any documentary evidence to explain creditworthiness of the partners and genuineness of the transaction. The relevant extract of decision of Hon'ble High Court is reproduced as under:-
" 10. Indisputably, deposit in the capital accounts of the four partners of the firm were made through cash. The assessee was afforded sufficient opportunity to explain the aforesaid deposits; he did not produce any confirmation from the partners or their affidavits who were the family members.
ll. In the matters of Metachem Industries (supra), the explanation given by the assessee was found to be satisfåctory by both the CIT(A) and the Tribunal by recording a concurret finding offact. It has been observed that the moment the firm gives a satisfactory explanation andproclitces the person who has deposited the amount, then the burden of the firm is discharged and in that case that credit entry cannot be treated to be the income of the firm for the purpose of income tax. It is is open to the Assessing Officer to take appropriate action uncler section 69 of the Act, against the person who has not been able to explain the investment. The assessee is only to explain that this investment has been made by the particular individual Cind if that person owns that entry, then the burden ofthe assessee firm is discharged. 28 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
12. In the matter of Burma Electric Corporation (supra) also, it has been helcl that if it is found upon confirmation by the partners that the money was, in fåct, receivedfrom them by the firm, in the absence of any material to indicate that it is the profit of the firm, it cannot be assessed as the firm's income though it may be assessed in the hands of individual partners as unexplained investment, if that is permissible under Section 68 of the Income Tax Act, 1961.
13. In Shri Shakti Timbers (supra), the High Court of MP has held that it is well established that in such situation where there is credit entry in the books of account of the assessee and there is no satisfactory explanation, then it will be deemed to be the income of the firm and will be added to the income of the firm and can be accordingly taxed.
14. In the instant case, as already observed, the entries were shown in the names of partners of the firms in their capital accounts. However, the assessee did not produce the partners or confirmation of those entries nor any affidavit sworn by them was filed, despite they were afforded sufficient opportunity for the same. The deposits were sought to explained by filing affidavits of the relatives, who claimed to have gifted the amount to the partners in whose names the credit entries were made in the books of account.
15. From the above decision, it is well established that it is the onus of the assessee to separately explain the credit entries in the account of the firm, particularly when the entries are made through cash. The onus can be satisfactorily discharged where the person, in whose name the credit entry is made, owns that entry or where the assessee satisfactorily explains by documentary evidence and satisfies the AO regarding genuineness of the deposits. The Tribunal, on the basis of the material avgilcd21e on record and also considering that the assessee did not file confirmation from the partners or their affidavits, has rightly confirmed the order of the AO, wherein it has been held that the deposit by partners remain unexplained. "
The appellant per contra has placed reliance on decision of Hon'ble jurisdictional ITAT Raipur bench in the case of ACIT vs M/S Tirath Singh Manmohan Singh in ITA No 194/BLPR/2012 dated 16.09.2016. The Hon'ble ITAT by placing reliance on decisions of various High Courts including Hon'ble MP High Court in the case of Metachem Industries /(2000) 245 ITR 160 (MP)/ has held as under:-
2. So far as first grievance of the assessee is concerned, it is sufficient to take note of the fact that out of the Rs. 33, 08, 251 which are added to the income of the assessee firm, Rs.27,40, 000 are received from the partners of the firm, namely Shri Jagtar Singh, Shri Jietndra Singh and Shri Devendrajit Singh. It is well settled legal position that once an amount is received from the partners, it cannot be said that the credit given in respect of the same is unexplained. This proposition has the judicial approval of Ilon 'ble High Courts in the cases of CIT vs Rameshwar 29 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 Prasad Suresh Pal Cheeka [(2007) 208 CTR 459 (P&fl)], CIT vs Jaiswal Motor Finance [(1983) 147 ITR 706 (All)] and CIT vs Metachem Industries 245 ITR 160 (MP)]. As a matter of fact there are number of decisions, by Raipur division benches of this Tribunal as well, holding so.
The relief granted by the learned CIT(A) is based on these judicial precedents.
Here, it becomes important to mention that the only difference in judgments rendered by Hon'ble jurisdictional High Court in the case of Raisons Engineers and Metachem Industries (supra) is that in the case of Raison Engineers, the assessee failed to furnish any confirmation/affidavit of the partners and therefore, the capital introduced by the partners remained unexplained. However, the in the case of Metachem Industries, the assessee filed confirmation of the partners and therefore, the onus of explaining the credit was treated as discharged by the assessee. The relevant act of decision in the case is as under:-
Once it is established that the amount has been invested by a particular person, be he a partner or an individual, then the responsibility of the assessee-firm is over. The assessee-firm cannot ask that person who makes investment, whether the money invested is properly taxed or not. The assessee is only to explain that the investment has been made by the particular individual and it is the responsibility of that individual to account for the investment made by him. If that person owns thC1t entry, then the burden of the assessee-firm is discharged. It is open for the Assessing Officer to undertake further investigation with regard to that individual who has deposited this amount. So far as the responsibility of the assessee is concerned, it is satisfactorily discharged. Whether that person is an income-tax payer or not or from where he had brought this money, is not the responsibility of the firm. The moment the firm has given a satisfactory explanation and produced the person who has deposited the amount, then the burden of the firm is discharged and in that case thC1t credit entry cannot be treated to be the income of the firm for the purposes of income tax. It is open for the Assessing Officer to take appropriate action under section 69 against the person who has not been able to explain the investment. In the present case, there was the concurrent finding of both the Commissioner (Appeals) as well as of the Tribunal that the firm had satisfactorily explained the aforesaid entries. Therefore, no addition in the instant case could be made in the hands of the assessee-firm on account of the cash credits in the names of its partners. In the instant case, appellant in order to explain ingredients of section 68 of the Act has filed documentary evidence viz. confirmation from partners, 30 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 copies of bank account statement, documentary evidence to explain source to source of investment as additional evidence. The Id. AO in his remand report dated 19.02.2020 remained silent on merits of the documentary evidence furnished by the appellant. On perusal of evidence on record, it has been observed that Shri Vijay Lal Baradiya has introduced total capital of Rs. 22,00,000/- during the year under consideration. Shri Vijaylal Baradiya has introduced capital of Rs. 16,00,000/- through RTGS on 07.10.2014, Rs.3,00,000/- on 15.10.2014 through cheque no 212584 and Rs. 3,00,000/- through cheque no 212586 on 18.10.2014. Further, the amount invested in appellant firm was withdrawn from his proprietary concern namely M/s Vijaylal Baradiya on 07.10.2014 of Rs. 16,00,000/- through RTGS, Rs. 3,00,000/- on 14.10.2014 through Cheque no. 212584 and Rs. 3,00,000/-, on 17.10.2014 through cheque no. 212586.Hence, the capital introduced by Shri Vijaylal Baradiya was out of withdrawal from his proprietary concern namely M/s Vijaylal Baradiya. Similarly, Shri Anil Baradiya has introduced total capital of Rs. 12,60,000/- through cheque no 405664 on 03.02.2015, during the year under consideration. The said amount has been introduced from withdrawn made from partnership firm namely M/S Baradiya Metal Industries on 03.02.2015 of Rs. 20,00,000/through cheque nos. 019286 & 019287 of Rs. 10,00,000/- each. Thus, it is abundantly clear that the amount introduced by both the partners has been introduced out of disclosed source of income and therefore, the appellant has successfully discharged all the ingredients of section 68 of the Act. Considering above facts, the decision relied upon by the Ld. AO cannot be applied here.
4.2.4 In view of the above discussion, the Ld. AO was not justified in making impugned addition by invoking provisions of section 68 of the Act and thus, addition amounting to Rs. 34,60,000/- is directed to be deleted. Therefore, appeal on this ground is allowed.
33. Ld. Sr. DR on this issue has placed his reliance on the order of Ld. AO.31 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
34. Ld. AR on the other hand placed his reliance on the Ld. CIT(A), and has furnished the confirmations of partner's, partner's individual returns, copy of accounts of proprietorship firm M/s Vijay Lal Baradia and other relevant documents in the assessee's PB. Ld. AR further submitted that the introduction of additional amounts in partner's capital account have been duly explained by the assessee, therefore, the addition made by the Ld. AO is uncalled-for, unjustified, and liable to be vacated. Ld. CIT(A) has rightly decided the issue in favor of the assessee, the same therefore, deserves to be sustained.
35. We have considered the rival submissions, perused the material available on record and case laws placed before us in support of contentions raised by the parties. In the present case the addition was made by the Ld. AO on account of credits in the partner's capital account in absence of any explanation furnished by the assessee, however, all the requisite details were furnished by the assessee before the Ld. CIT(A) which were admitted under due compliance with the provisions of rule 46A. Ld. CIT(A) have exhaustively deliberated upon the facts of the issue, have examined the documents furnished by the assessee and has recorded his observations explaining the facts thereby accepting the claim of the assessee that the genuineness of transaction and creditworthiness of the partner's cannot be doubted. We, thus, found force in the argument of the Ld. AR that the additions in partner's capital account by the respective partner's have been duly explained, which have been rightly appreciated 32 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 by the Ld. CIT(A). We, therefore, are of considered opinion that the decision of Ld. CIT(A) vacating the addition made by Ld. AO was on right footing, needs no interference, accordingly, deserves to be upheld and we do so. In the result, ground no. 5 of the department is dismissed.
36. Ground No.6 of the revenue relates to part confirmation of addition of Rs.15,88,687/- on account of unsecured loan and interest u/s.68 of the Act.
37. The issue pertaining to addition on account of unexplained cash credit in the garb of unsecured loans to the extent of Rs.96,41,923/- including unsecured loans of Rs. 92,68,661/- & interest thereon of Rs. 3,73,262/- made by the Ld. AO, which was scaled down to Rs.77,00,000/- for unsecured loan and 3,53,236/- towards interest.
38. Since the ground pertaining to the aforesaid addition u/s 68 is raised by the assessee in the cross appeal filed in ITA No.46/RPR/2023, which we have discussed in the present order and have decided the issue in favor of the assessee. Our decision on the issue in the appeal of the assessee shall be mutatis mutandis applicable on the ground no. 6 raised by the revenue, accordingly, ground no. 6 of the revenue is disposed-off.
39. Ground No. 7 relates to deletion of addition of Rs.18,57,825/- made by the Assessing Officer u/s.41(1) of the Act. 33 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
40. Facts in brief are that during the course of assessment proceedings, the Assessing Officer noticed that the Schedule 'C' of the balance sheet shows amount of Rs.1,31,625/- payable to M/s. Ashok Traders, Amalipadar (old) and Rs.17,26,200/- payable to M/s. Chaman Trading Co. Sonarpal (old). Hence, the AO required the assessee to substantiate its claim. Since no information was provided by the assessee, following the decision of ITAT Mumbai Bench in the case of ITO vs. Shailesh D Shah in ITA No.7012/Mum/2010 and ITAT Delhi in the case of CIT vs Chipsoft Technology Pvt Ltd (2010) taxmann 173 (Del) treated the same cessation and remission of liability and added the same to the income of the assessee u/s.41(1) of the Act.
41. Before the Ld. CIT(A), the assessee filed written submission. The gist of the submission is as under:
i) Purchases from M/s Ashok Traders and M/s. Chaman Trading Co. were made during February and March, 2014, respectively and the amount payable to above two parties was on account of purchase of paddy. This liability is trading liability,
ii) The amount to two parties has been paid subsequently and it is no longer outstanding. The amount to M/s. Ashoka Traders was paid in F.Y. 2017-18 and to M/s. Chaman Trading Co. was paid in F.Y. 2015-16.
iii) The AO raised common query vide query vide letter dated 16.10.201 and the assessee was required to give details of creditors along with past two years. In response to the query, the assessee vide letter 18.120.2017, provided the list of creditors. Thereafter, without providing any opportunity, the AO made addition u/s.41(1) of the Act.
iv) The AO has not conducted any enquiry to both the parties. 34 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16
v) The assessee has also submitted some decisions in its favor, as is reproduced by the impugned order.
42. After considering the written submission of the assessee, the ld CIT(A) observed that the assessee had purchased paddy from both the parties in the month of February and March 2014, respectively and the liability was discharged as the amount was paid to both the parties. Therefore, there was no remission or cessation of liability as per provisions of section 41(1) of the Act. Another aspect viewed by the ld CIT(A) that before passing of the assessment order on 27.12.2017, the liabilities were discharged. Ld CIT(A) also distinguished the facts as presented by Ld. AO in the assessment order. Hence, the ld CIT(A) deleted the addition made by the Assessing Officer u/s.41(1) of the Act.
43. Ld. Sr DR relied on the order of the Assessing Officer. It was the submission that during the assessment proceedings, no evidence were furnished by the assessee despite query raised in this regard. Therefore, it was urged that the order of the ld CIT(A) be reversed and that the order of the AO restored.
44. On the other hand, Ld. AR supported the order of ld CIT(A). It was the submission that nothing was on record to dispute that payment was made during subsequent year. Ld. AR also argued that once payment was made, section 41(1) of the Act cannot be invoked. Ld AR also referred to CBDT INSTRUCTION No.20/2015 dated 29.12.2015, 35 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 wherein, it is clearly mentioned that the AO should make specific query by issuing specific show cause to take a view against the assessee. Ld AR placed on the following decisions:
I) A.C Strips Pvt Ltd. Vs ACIT in ITA No.53/RPR/2020 dtd.6.1.2023
ii) DCIT vs Shashin Construction (2016)47 CCH 124 (Ahd)
iii) ITO vs Marcopolo Products Pvt Ltd. (2016) 159Nitd 266 (Kol)
45. We have considered the rival contentions in light of the material produced and precedent relied upon. We find that liability incurred by the assessee is on account of trading liability. As far as taxation u/s 41(1) is concerned, it is clear that the said section is applicable only if an allowance or deduction has been made, in the computation of profits and gains of a business or profession, in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently, during any previous year the assessee had obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof. Therefore, in order to apply the provisions of section 41(1) of the IT Act conditions mentioned above should cumulatively exist and that too in respect of the trading liability. In the case at hand, the liability by way of creditors was 36 ITA No.46 &106/RPR/2023 M/s Vijay Agrotech, Balod Assessment Year: 2015-16 outstanding as on 31.03.2014 in the name o M/s. Ashok Traders for Rs.1,31,625/- and M/s. Chaman Trading Co. for Rs.17,26,200/- and both the liabilities had been discharged before passing of the assessment order and therefore, there exist no cessation or remission of liability. Even otherwise, it is transpired that the AO raised common query vide query vide letter dated 16.10.201 wherein, assessee was required to give details of creditors along with past two years. In response to the query, the assessee vide letter 18.120.2017, provided the list of creditors. Thereafter, without providing any opportunity, the AO made addition u/s.41(1) of the Act. Hence, the instruction issued by CBDT (supra) has not been complied with to give an opportunity to the assessee by issuing a specific query to provide the details. Accordingly, we do not find any infirmity in the order of the Ld. Commissioner of Income Tax (Appeals) in holding that the addition of Rs.18,57,825/- made by the Assessing Officer u/s 41(1) is liable to be deleted. Therefore, we uphold the findings of the Ld. CIT(A) and dismiss ground no. 7 of the revenue.
46. In the result the appeal of the revenue is dismissed, as per aforesaid discussion, deliberations, and observations on various grounds.
47. In combined result appeal of the assessee in ITA No 46/RPR/2023 is allowed and the appeal of the revenue in ITA No. 106/RPR/2023 stands dismissed, as observed.
37 ITA No.46 &106/RPR/2023
M/s Vijay Agrotech, Balod Assessment Year: 2015-16 In the result, Order pronounced in the open court on 24/01/2024.
Sd/-
Sd/- (ARUN KHODPIA)
(RAVISH SOOD)
या यकसद य / JUDICIAL MEMBER लेखासद य / ACCOUNTANT MEMBER
रायपुर/Raipur; दनांक Dated 24/01/2024
B.K. Parida, SPS (OS) / Vaibhav
आदे शक त ल पअ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. यथ / The Respondent-
3. आयकरआयु (अपील) / The CIT(A),
4. आयकरआयु त/ CIT
5. िवभागीय ितिनिध, आयकरअपीलीयअिधकरण,रायपुर/ DR, ITAT, Raipur
6. गाडफाईल / Guard file.
// स या पत त True Copy // आदे शानुसार/ BY ORDER,
(Assistant Registrar)
आयकरअपील यअ धकरण, रायपुर/ITAT, Raipur