Gujarat High Court
The Principal Commissioner Of Income ... vs Ambe Tradecorp Private Limited ... on 11 July, 2022
Author: N.V.Anjaria
Bench: N.V.Anjaria, Bhargav D. Karia
C/TAXAP/318/2022 ORDER DATED: 11/07/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 318 of 2022
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THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL),
AHMEDABAD
Versus
AMBE TRADECORP PRIVATE LIMITED (FORMERLY KNOW AS J.P.
FINCORP SERVICES PVT. LTD.)
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Appearance:
MR. M.R.BHATT, SR. ADV. WITH MR. KARAN SANGHANI, ADV. FOR M R
BHATT & CO.(5953) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 11/07/2022
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr. M. R. Bhatt with learned advocate Mr. Karan Sanghani for M. R. Bhatt & Co. for the appellant.
2. The present Tax Appeal filed under section 260-A of the Income Tax Act, 1961, is directed against judgment and order dated 7.2.2022 of the Income Tax Appellate Tribunal, "D" Bench, in ITA No. 1235 of 2019 in respect of the Assessment Year 2010-2011.
2.1 The appellant Revenue has proposed the following substantial question of law claiming to be arising in the appeal, "Whether on the facts and circumstances of the case and in law, the decision of the Appellate Tribunal is ex-facie perverse because the Appellate Tribunal has erred in deleting the addition of Rs. 39,05,50,000/- made u/s 68 of the Act for the funds received from M/s. Rachna Finlease Pvt. Ltd. without appreciating the entire gamut of facts making it evident that the transaction was in the nature of accommodation entry?"
Page 1 of 5 Downloaded on : Sat Dec 24 20:49:58 IST 2022C/TAXAP/318/2022 ORDER DATED: 11/07/2022
3. The facts are that, a search was undertaken under section 132 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') in one JP Iscon group on 25.2.2016 as well as the respondent assesee which is one of the group of companies of JP Iscon Group. The respondent assessee filed its original Return of Income on 9.8.2011 declaring total income of Rs. 2,82,902/-. The case was subsequently reopened under section 147 of the Act upon receipt of the information from the investigating wing. The said information was in respect of credits received from one M/s. Rachna Finlease Pvt. Ltd. . Thereupon, the income of the assessee came to be reassessed after making addition of Rs. 39,05,50,000/- under section 68 of the Act treating the same towards unexplained credit receipts from the said M/s. Rachna Finlease Pvt. Ltd.. Order was passed on 13.12.2019 under section 147 of the Act. The assessee company filed appeal before the Commissioner of Income Tax (Appeals) which was allowed by the Appellate Authority as per order dated 27.5.2017. The Revenue thereafter preferred appeal before the Tribunal against the order of the Appellate Authority. The Tribunal dismissed the Appeal.
3.1 Before the Assessing Officer, the case of the assessee was that it received the share application money from M/s. Rachna Finlease Pvt. Ltd. as per the ledger account during the period from 1.4.2009 to 31.3.2010 and that the said amount was paid back fully to the said M/s. Rachna Finlease Pvt. Ltd. in the financial year 2010-2011 relevant to the Assessment Year 2011-2012. It was the case of the assessee that the credit was recorded in the Books and was paid back also. Accordingly to the Assessing Officer, the explanation given by the assessee was not satisfactory to prove the creditworthiness of the creditor, that is M/s. Rachna Finlease Pvt. Ltd..
4. Invoking provisions of section 68 of the Act, the Assessing Officer Page 2 of 5 Downloaded on : Sat Dec 24 20:49:58 IST 2022 C/TAXAP/318/2022 ORDER DATED: 11/07/2022 treated the amount of Rs. 39,05,50,000/- as unexplained cash credit and added in the total income of the assessee. Also started were the penalty proceedings under section 271 (1)(c) read with section 274 of the Act. Section 68 of the Act is regarding Cash Credits. It says that where any sum is found credited in the books of assessee maintained for any previous year and the assessee offers no explanation about the nature and source of such sum credited or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, then in such eventuality, the sum so credited shall be liable to be charged to income tax as the income of the assess of that previous year.
4.1 When the aspect of the said addition was considered by the Commissioner of Income Tax (Appeals) in the Appeal preferred by the assessee, it was found that there was no rational basis in the order of the Assessing Officer in rejecting the application of the appellant to hold that the creditworthiness of the said named creditor was not proved by the appellant. It was the view of the Appellat Authority that invoking provisions of section 68 of the Act was not legally tenable in the facts of the case. It was recorded that the appellant assesee had discharged its onus under section 68 of the Act and it also furnished the details of source of the fund and had established identity and creditworthiness of the creditor in relation to the said amount. The Appellate Authority therefore refused to sustain the addition of amount in the income of the assessee by giving cogent reasons.
5. It could be seen from the facts of the case that the assessee had submitted Pan Card, Ledger Confirmation, his own bank statement and bank statement of M/s. Rachna Finlease Pvt. Ltd. to demonstrate that amount was received through banking channel. Before the Appellate Authority, the assesee could establish that M/s. Rachna Finlease Pvt. Ltd.
Page 3 of 5 Downloaded on : Sat Dec 24 20:49:58 IST 2022C/TAXAP/318/2022 ORDER DATED: 11/07/2022 had received money from one Smt. Hansaben H. Patel and from one Shri Rameshbhai Thakore and the said factumm was fortifiable from the bank statement of the creditor M/s. Rachna Finlease Pvt. Ltd. It was noted by the Appellate Authority that the said aspect was recorded by the 5.1 Assessing Officer also in paragraph No. 6.1.3 of its order, which reads as under, "On verification of the bank book of Rachna Finelease Pvt. Ltd. it is found that the fund have travelled within minutes of being credited from the bank account of Hansaben H. Patel and Rameshbhai Thakor and immediately the funds have landed in the bank account of JP Fincorp Services Pvt. Ltd. (Renamed as Ambe Tradecorp Pvt. Ltd.)."
5.2 It could be said that the finding of the Assessing Officer that the identity and creditworthiness of said party was not proved, was devoid of any basis, on the contrary, the facts established by the assessee suggested otherwise. The genuineness of transaction was shown by producing bank statements and also by explaining the source of fund at the hands of the party.
5.3 The Appellate Tribunal dismissed the Appeal of the Revenue on the said count holding and observing as under, "It was alleged by the Assessing Officer that the amount received by the assessee represents the accommodation entries from M/s. Rachna Finlease Pvt. Ltd. for the reason that such company was not filling its income tax return. In this connection, we find that the finding of the Assessing Officer is not correct to some extent. It is for the reason that the company namely M/s. Rachna Finlease Pvt. Ltd. has filed income tax return in response to the notice issued under section 148 of the Act and accordingly the assessment was completed under section 147 read with section 143(3) of the Act where huge additions were made in the hands of the company on account of unexplained cash credit under section 68 of the Act."
5.4 The Tribunal further stated that the findings of the Assessing Page 4 of 5 Downloaded on : Sat Dec 24 20:49:58 IST 2022 C/TAXAP/318/2022 ORDER DATED: 11/07/2022 Officer was not correct, observing thus,
"Furthermore, once the source of fund in the hands of above company was held as explained by learned CIT(A) then amount received by the assessee from that company cannot be held as unexplained under section 68 of the Act in the absence of contrary information. Likewise, there cannot be addition of one item in the hands of two different persons."
6. Learned senior advocate attempted in vain to contend that the creditworthiness and genuineness of said M/s. Rachna Finlease Pvt. Ltd. was not established and that towards the share application money, the said party was a non-filer assessee company. It was sought to be argued that when the amount was given towards share application money, the assessee was not free from suspicion. Once the Books of Accounts and the facts reflected therein showed the source of the fund and the identity of the party and the aspect that Books of Accounts of the assessee also reflected the receipt and the amount was repaid by the assessee, it was not open to the Assessing Officer to raise doubts about the creditworthiness of the creditor. The Assessing Officer ignored the relevant material.
6.1 The Appellate Authority as well as the Income Appellate Tax Tribunal concurrently reversed the findings of the Assessing Officer on the said count. It could not be said that any question much less any substantial question of law arise in the appeal.
7. The appeal stands meritless and stands summarily dismissed.
(N.V.ANJARIA, J) (BHARGAV D. KARIA, J) C.M. JOSHI Page 5 of 5 Downloaded on : Sat Dec 24 20:49:58 IST 2022