2015 (8) TMI 839 - AT - Income Tax

Unsecured loan as unexplained cash credit u/s.68 - Held that - Considering the contention of the assessee that the assessee had furnished PANs, addresses, etc. to prove the identity, genuineness of the transaction and creditworthiness of the depositors. We find that the assessee has filed PANs, addresses, etc. for demonstrating that the depositors were assessed to tax. In view of the case-laws as relied upon by assessee more particularly judgement of Hon ble Jurisdictional High Court in the case of CIT vs. Dharamdev Finance (P.) Ltd. reported at (2014 (4) TMI 1005 - GUJARAT HIGH COURT) . Therefore, we direct the AO to delete the addition. - Decided in favour of assessee

Summary

Issues Involved:
1. Confirmation of addition of Rs. 1,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961 for AY 2006-07.
2. Confirmation of addition of Rs. 2,00,000/- as estimating income for AY 2007-08.

Issue 1: Confirmation of Addition of Rs. 1,00,000/- as Unexplained Cash Credit (AY 2006-07)

Both these appeals by the Assessee are directed against the separate orders of the Ld. Commissioner of Income Tax(Appeals)-I, Ahmedabad ('CIT(A)') dated 18/11/2010 and 18/10/2010 pertaining to Assessment Years (AYs) 2006-07 and 2007-08 respectively. Since identical grounds have been raised in both these appeals by the assessee, therefore these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.

First, we take up the Assessee's appeal in IT(ss)A No.19/Ahd/2011 for AY 2006-07 as a lead case. The Assessee has raised the following ground of appeal: "The learned CIT(A) has erred in Confirming the addition of Rs. 17,87,000/- of unsecured loan as unexplained cash credit u/s.68 of the I. T. Act, 1961 which is requested to be quashed."

Briefly stated facts are that a search action u/s.132(1) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was carried out in the case of Neptune Group of Cases by the ITO Investigations, Unit-1, Ahmedabad. Subsequently, the assessment u/s.153A(1)(b) r. W. S.144 of the Act was framed vie order dated 31/12/2008. While framing the assessment, the AO made addition on account of unexplained cash credit amounting to Rs. 17,87,000/-. Against the assessment order, assessee preferred an appeal before the ld. CIT(A), who after considering the submissions of the assessee, partly allowed the appeal, thereby the CIT(A) directed the AO to verify the facts in case the facts are found to be correct, then the addition to be restricted to Rs. 1 lac. The present appeal was originally filed against the confirmation of entire addition of Rs. 17,87,000/-, however, the assessee has revised the ground restricting the ground to the extent of addition of Rs. 1 lac.

The only ground in this appeal is against confirmation of addition of Rs. 1 lac. The ld. Counsel for the assessee reiterated the submissions as were made vide written submissions dated 15/06/2015. On the contrary, Sr.DR supported the orders of the authorities below.

We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The written submissions as made by the ld. Counsel for the assessee are reproduced hereunder: "At the outset, we mention the fact that we have revised the ground of appeal. A separate letter revising the ground of appeal has been submitted separately on today."

Factual Background: The assessee is a Pvt. Ltd. Company being a builder. During the year under consideration, assessee company has incurred a loss amounting to Rs. 83,961.50. The company has filed the Return of Income has been filed on 05/12/2006 Vide Acknowledgement No.90298074. The books of accounts have been maintained and the same have been audited. At the time of assessment proceedings, the details were submitted to the Assessing Officer including the Profit and Loss Account, Balance Sheet, Audit Report etc. Thereafter, the new Assessing Officer took the charge in the first week of December- 2008 and on 31/12/2008, the Assessing Officer passed the order making the addition under section 68 of the Income Tax Act, 1961 amounting to Rs. 17,87,000/-.

Before, Honourable CIT(A), vide submission dated 16/11/2010, Assessee submitted the confirmations, Identity proofs, Return of Income, Ledger, Bank Statement, etc of the three parties namely "Mangaldeep Developers Pvt. Ltd.", "Mangal Sagar Associates & Developers Pvt. Ltd." & "Popatlal B Patel" in respect of whom the Assessing Officer made the addition in its Assessment Order. Honourable CIT(A) after considering the submission of the Assessee, passed the appellate order on 18/11/2010 directing the Assessing Officer to verify whether the facts submitted by the assessee are correct and if the same are found correct then addition of Rs. 16,87,000/- in respect of the two parties namely "Mangaldeep Developers Pvt. Ltd." & "Mangal Sagar Associates & Developers Pvt. Ltd." are to be deleted and the addition in respect of Mr. Popatlal B. Patel amounting to Rs. 1,00,000/- being the fresh credit introduced during the year under consideration was confirmed.

The learned CIT(A) failed to pass the speaking order due to the fact that he has not mentioned as to why the unsecured loan amounting to Rs. 1,00,000/- in respect of Popatlal B. Patel is unexplained and why the such addition made by the Assessing Officer is confirmed. While confirming such addition in respect of Popatlal B. Patel the learned CIT(A) failed to appreciate the following documents which were submitted vide submission dated 16/11/2010: Return of Income & PAN, Confirmation on the copy of Account of Unsecured Loan Holder's Books, Bank Pass Book of Unsecured Loan Holder. The transaction has been done through account payee cheque and the unsecured loan holder's pass book also does not reveal any cash deposit immediately prior to issuance of loan cheque. The source of source is also through account payee cheque. Such documentary evidences are sufficient enough to prove the identity, capacity, Genuineness, creditworthiness of the unsecured loan holder Popatlal B Patel.

Case Laws: Gujarat High Court - CIT V. Sachitel Communications (P.) Ltd., Gujarat High Court - CIT V. Dharamdev Finance (P.) Ltd., Gujarat High Court - CIT V. Apex Therm Packaging (P.) Ltd., Gujarat HC - CIT Vs. SaileshKumar Rasiklal Mehta, Gujarat HC - CIT Vs. Harishbhai Raojibhai Patel HUF, Ahmedabad ITAT - Shantilal Keshavlal Bhatt Vs. ITO, Ahmedabad ITAT - Sarjan Corporation Vs. ACIT, Ahmedabad ITAT - Rohini Builders Vs. DCIT, Ahmedabad ITAT - B. S. Corporation Vs. ACIT, Ahmedabad ITAT - Dimco Silk Mills Vs. ITO, Mumbai ITAT - ACIT Vs. Disha Constructions, Agra ITAT - Umesh Electricals Vs. ACIT.

It is the contention of the ld. Counsel for the assessee that the assessee had furnished PANs, addresses, etc. to prove the identity, genuineness of the transaction and creditworthiness of the depositors. We find that the assessee has filed PANs, addresses, etc. for demonstrating that the depositors were assessed to tax. In view of the case-laws as relied upon by the ld. Counsel for the assessee more particularly judgement of Hon'ble Jurisdictional High Court in the case of CIT vs. Dharamdev Finance (P.) Ltd. reported at (2014) 51 taxmann. Com 205 (Guj.):: (2014) 227 Taxman 219. Therefore, we direct the AO to delete the addition. Thus, ground of assessee's appeal is allowed.

In the result, assessee's appeal for Asst. Year 2006-07 is allowed.

Issue 2: Confirmation of Addition of Rs. 2,00,000/- as Estimating Income (AY 2007-08)

Now, we take up the Assessee's appeal in IT(ss)A No.21/Ahd/2011 for AY 2007-08. The assessee has raised the following ground of appeal: "The learned CIT(A) has erred confirming the addition of Rs. 2,00,000/- of estimating income, which is requested to be quashed."

In this appeal, the facts are identical to the facts of assessee's own case in IT(ss)A No.19/Ahd/2011 for AY 2006-07(supra). The respective representatives of the parties adopted their arguments as were advanced in IT(ss)A No.19/Ahd/2011(supra), wherein we have allowed the assessee's appeal with a direction to AO to delete the addition. Accordingly, for the same reasoning, assessee's appeal in IT(ss)A No.21/Ahd/2011 for AY 2007-08 is also allowed.

In the combined result, both the appeals of the Assessee are allowed.

Order pronounced in the Court on Friday, the 14th day of August, 2015 at Ahmedabad.