Gujarat High Court
The Principal Commissioner Of Income ... vs Dharmesh Padamshibhai Patel on 28 August, 2023
Author: Bhargav D. Karia
Bench: Biren Vaishnav, Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/391/2023 ORDER DATED: 28/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 391 of 2023
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THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), SURAT
Versus
DHARMESH PADAMSHIBHAI PATEL
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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 BHARGAV D. KARIA)
1. Feeling aggrieved and dissatisfied by the Judgement and Order passed by the Income Tax Appellate Tribunal, Surat (for short 'the Tribunal'] dated 16.08.2022 in ITA No.18/SRT/2017 for the A.Y. 2014-15, the Revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 [for short 'the Act'].
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2. The Revenue has raised the following substantial questions of law:
"(a) Whether in the facts and circumstances of the case and in law, the order of the Hon'ble ITAT is exfacie perverse, because, Hon'ble ITAT has held that the credit worthiness of the creditors and genuineness of transaction have been established, despite the facts that the identity of creditors have not been proved and that the three tenets of the issue operate in the sequence of (i) Identity of creditors (ii) creditworthiness of creditors and
(iii) genuinity of transactions and not in any random sequence or basis?
(b) Whether in the facts and circumstances of the case and in law, the order of the Hon'ble ITAT is ex facie perverse, because Hon'ble ITAT has held that assessee has proved creditworthiness and genuineness of the transaction despite the fact that the so called creditors have not filed any reply in pursuance of notice u/s.
133(6) and summons u/s. 131 of the Income Tax Act, 1961 and on field enquiries it was proved that the so called creditors were not available on the given addresses?
(c) Whether on the facts and in the circumstances of the case and in law the Hon'ble ITAT has erred in deleting the addition of Rs. 20,87,54,237/- made on account of unexplained cash credit u/s. 68 of the IT Act, 1961?"
3. Brief facts of the case are that the respondent-assessee who is partner in a firm declared the income from house property, Page 2 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023 NEUTRAL CITATION C/TAXAP/391/2023 ORDER DATED: 28/08/2023 undefined income from capital gain, share of profit from partnership firm and income from other sources.
4. During the course of the assessment proceedings, for the Assessment Year 2014-15, the Assessing Officer on verification of the balance sheet as on 31.03.2014 found that during the year under consideration, the assessee received unsecured loan amounting to Rs. 30,60,25,000/-. The Assessing Officer therefore conducted the inquiry by issuing the notice under section 133(6) of the Act and summons under section 131 of the Act upon the parties from whom the unsecured loans have been taken by the assessee.
5. As nothing was heard from such parties, show cause notice dated 16.12.2016 was issued requiring the assessee to show cause as to why unsecured loans as reflected in the balance sheet should not be treated as unexplained cash credit and should not be added to the total income for the year under consideration under section 68 of the Act. Page 3 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023
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6. The assessee in response to such notice, filed the details with regard to unsecured loan received by it in form of
(i) confirmation of accounts or transaction (ii) a copy of the bank account of the creditor showing transaction to the assessee (iii) copy of income tax returns filed for A.Y. 2014- 15 by the lenders (iv) copy of audited final account in case of the companies and copy of balance-sheet capital account in case of individuals filed (v) copy of ledger account of these creditors from the books of the assessee and the bank statement of assessee which are reflecting the repayment of the loans which are shown as unsecured loans as on 31.03.2014 in the balance sheet in the subsequent year.
7. The Assessing Officer however noted that, on inquiry it is found that, there is no business activity conducted by the lender and the turnover of one of the parties was equal to the amount given as unsecured loans to the assessee and thereafter Page 4 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023 NEUTRAL CITATION C/TAXAP/391/2023 ORDER DATED: 28/08/2023 undefined made an addition of Rs. 20,87,54,237/- under section 68 of the Act.
8. The assessee, being aggrieved by the such additions preferred appeal before the CIT (Appeal) after recording detailed reasons deleted such addition on the ground that the assessee has discharged the onus of explaining the creditworthiness and genuineness and identification of the persons who have advanced unsecured loans to the assessee.
9. The Revenue therefore preferred appeal before the Tribunal. The Tribunal, after considering the facts of the case as well as the findings of the CIT (Appeal), remanded the matter back to the Assessing Officer to verify the identity of the parties and to decide the matter in accordance with law after giving opportunity of being heard to the assessee in view of the fact that the assessee failed to prove the identity of the parties from whom unsecured loan had been received. Page 5 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023
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10. Learned advocate Mr. Karan Sanghani appearing for the Revenue Submitted that the Tribunal could not have remanded the matter back to the Assessing Officer to verify the identity of the assessee when the assessee has failed to discharge the same though the assessee could have been said to have discharged the onus of proving creditworthiness and genuineness of the persons from whom unsecured loan was received by him during the year under consideration.
11. It was further submitted that the Tribunal has committed an error by holding that as identity of the persons who have advanced loan to assessee is not established, one more chance is given to the assessee to prove the identity of the lenders by remanding the matter is contrary to the decision of the Apex Court in case of Principal Commissioner of Income Tax vs. NRA Iron and Steel Pvt Ltd. reported in 142 ITR 161 SC.
12. Learned advocate Mr. Sanghani referred to and relied upon para 11 of the said decision to submit that once the Page 6 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023 NEUTRAL CITATION C/TAXAP/391/2023 ORDER DATED: 28/08/2023 undefined identity of the creditor is not established after the inquiries and investigation and the same appears to be dubious or doubtful, then the genuineness of the transaction would not be established and in such cases, the assessee would not have discharged a primary onus contemplated under section 68 of the Act.
13. It was therefore submitted that the Tribunal, instead of deciding the appeal in favour of the Revenue, has remanded the matter to the Assessing Officer to examine only the identity of the lender parties by ignoring judicial finding of Assessing Officer with regard to creditworthiness of the parties and genuineness of the transaction .
14. It was therefore submitted that the appeal requires consideration and it may be admitted on the substantial questions of law raised by the Revenue. Page 7 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023
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15. Having heard learned advocate for the Revenue, we are of the opinion that the Tribunal, after considering the facts as well as the findings of CIT (A) which are reproduced hereinbelow, has come to the conclusion that to prove the identity of such parties from whom the unsecured loan had been received, one more opportunity should be given to the assessee to plead his case before the Assessing Officer to prove the identity of such parties. The Tribunal therefore could not be said to have committed any error by considering the facts of the case.
"8.1 It is observed that the status of both the companies are duly considered as Active Status in the records of the Company Master Data obtained from the Ministry of Company affairs. The lenders were maintaining and having operative banking accounts with regular dealings in these accounts.
Copies of the bank accounts of all the lenders, including the three individuals were also furnished to the AO and the loans claimed were duly reflected in these. All the claimed creditors are assessed to tax in Surat only and their confirmations have been filed. Besides the loans have been all returned through banking channels before the close of the next financial year and much before the impugned assessment was taken up for scrutiny u/s. 143(2).Page 8 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023
NEUTRAL CITATION C/TAXAP/391/2023 ORDER DATED: 28/08/2023 undefined The AO has observed that it has been gathered that these companies are running from rented one room and occasionally changed their addresses, and that some of these parties have closed down their activities after squaring up their unsecured loan transactions. The observations are not specific at all and even do not mention the alleged changes (old and new addresses alleged in case of which company). In fact there is no change of address in the records of the Company Master Data with the Ministry of Company affairs for these two companies. Whether the creditor continues to do activities/business or not, after the loan is returned by the assessee cannot be of any concern to the appellant and cannot be held against him."
16. In view of the above findings of CIT (A) on the facts of the case as well as the view taken by the Tribunal to give opportunity to the assessee to prove the identity of the lenders, the ingredients to be complied with for invoking section 68 of the Act as held by the Apex Court in case of Principal Commissioner of Income Tax vs. NRA Iron and Steel Pvt Ltd. (supra) cannot be stated to have been violated or ignored because if the assessee would be able to prove identity of the lenders, then the creditworthiness and genuineness, as held by the CIT (A), are already proved. In such cases, there cannot be any addition under section 68 of the Act, 1961. The Hon'ble Page 9 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023 NEUTRAL CITATION C/TAXAP/391/2023 ORDER DATED: 28/08/2023 undefined Apex Court in the aforesaid decision of Principal Commissioner of Income Tax vs. NRA Iron and Steel Pvt Ltd. (supra) has observed as under:
"11. The principles which emerge where sums of money are credited as share capital/premium are:
(i) The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors and creditworthiness of the investors who should have the financial capacity to make the investment in question to the satisfaction of the Assessing Officer, so as to discharge the primary onus.
(ii) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders.
(iii) If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack creditworthiness, then the genuineness of the transaction would not be established.
In such a case, the assessee would not have discharged the primary onus contemplated by section 68 of the Act."
17. In view of the above facts emerging from the record as well as in view of the fact that the Tribunal has remanded the Page 10 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023 NEUTRAL CITATION C/TAXAP/391/2023 ORDER DATED: 28/08/2023 undefined matter back to the Assessing Officer by partly allowing appeal of the Revenue, we are of the opinion that no question of law much less any substantial question can be said to have arisen from the impugned Judgement and Order passed by the Tribunal. The appeal, therefore being devoid of any merit, fails and is accordingly dismissed.
(BIREN VAISHNAV, J) (BHARGAV D. KARIA, J) JYOTI V. JANI Page 11 of 11 Downloaded on : Sun Sep 17 02:42:21 IST 2023