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TMI Blog2018 (11) TMI 590X X X X Extracts X X X X X X X X Extracts X X X X ..... ectfully following the decision of ACIT V/s Girish Kumar Sharda (2014 (10) TMI 352 - ITAT INDORE) as well as detailed finding of fact by CIT(A) which is unconverted by the Ld. Departmental Representative as no material evidence has been placed to prove anything contrary. Therefore we find no infirmity in the finding of CIT(A) deleting the addition of ₹ 1,02,00,000/- and ₹ 1,25,00,000/- for alleged unsecured loans and also deletion of disallowance of interest on such loans at ₹ 6,14,855/- and ₹ 5,55,815/- and also deleting the addition for undisclosed expenditure of ₹ 5,25,000/- and ₹ 6,25,000/-. We accordingly dismiss Revenue’s Ground No.1, 2 &3 for Assessment Year 2006-07 and 2007-08 respectively. Nature of income - Rental income earned - house property or busniss income - Held that:- The alleged receipts of ₹ 26,87,635/- are purely rental income from renting out unsold property and manner of earning such income is purely taxable under the head income from house property and by no canon can be treated as business income and therefore the assessee is eligible for deduction u/s 24 of the Act @30% of the rental income which in this case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor companies which gave loan to the assessee were not part of the group of companies held by the Lunkard Group but they were in association with the Lunkard Group of companies. Though the assessee furnished all necessary evidences to prove the identity, genuineness and creditworthiness of the cash credit companies by way of providing various documentary evidences along with the confirmation letters to show that the alleged loans were repaid during the year itself and the interest for the period for which they were held as loan was given after deducting tax at source and all the transactions were carried out through account payee cheque. But these evidences were not sufficient to satisfy the Ld.A.O and he held that the alleged unsecured loans are not genuine and made addition u/s 68 of the Act at ₹ 1,05,00,000/-. Ld.A.O also disallowed interest expenditure of ₹ 6,14,855/- claimed on these unsecured loans. Ld.A.O also made addition for unexplained expenditure of ₹ 5,25,000/- being the amount that the assessee may have incurred for procuring alleged accommodation entries. 4. During the assessment proceedings Ld.A.O also observed that the assessee has shown rental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the relevant ground raised by the assessee. However the addition for disallowance of deduction u/s 24 claimed by the assessee on the rental income was sustained at ₹ 7,92,350/-. 7. Now both the revenue and assessee are in cross appeal for Assessment Year 2006-07 and revenue appeal for Assessment Year 2007-08. 8. We will first take up revenue s appeals I.T.A.No.382/Ind/2014 I.T.A.No. 383/Ind/2014 raising following common ground for Assessment Year 2006-07 and 2007-08 respectively. 1. Deleting the addition of ₹ 1,05,00,000/- ₹ 1,25,00,000/- for A.Y. 2006-07 2007-08 respectively. That on the facts circumstances of the case, the identity, creditworthiness and genuineness of the creditors was not properly proven before AO and therefore the same needed to be added. 2. Deleting the addition of ₹ 6,14,855/- and ₹ 5,55,875/- on account of interest on these loans. That on the facts circumstances of the case, as the creditors were not properly proven and therefore the same needed to be added. 3. Deleting addition on account of estimation of expenditure incurred for procuring the above mentioned loans of ₹ 5,25,000/- an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the A.O for Assessment Year 2006-07 and 2007- 08 for the alleged unexplained cash credit and interest paid there on and undisclosed expenditure for procuring accommodation entries. S. No. Name of the Company Unsecured loans taken Interest paid 1 Trimurti Finvest P.Ltd 30,00,000/- 1,65,040/- 2 Purvi Finvest Ltd 5,00,000/- 63,782/- 3 K.K. Patel Finance Ltd 40,00,000/- 3,08,740/- 4 East West Finvest India Ltd 27,00,000/- 77,293/- 1,02,00,000/- 6,14,855/- Addition of ₹ 5,25,000/- made for Assessment Year 2006-07 for procuring loans. S. No. Name of the Company Unsecured loans taken Interest paid 1 Trimurti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) in case of all the 4 depositor companies, which were forwarded to AO for his comments. The AO has only referred to the decision in case of Narmada Extrusion P. Ltd. (ITAT, Indore) and to the examination of Mr. Lunkad as regards the material found in survey, who according to AO was evading appearance. AO could not furnish final remand report despite giving opportunities on 10-12-2010, 08-01-2013, 09-10- 2013, 31-10-2013, 23-12- 2013, 17-01-2014 and 21-02-2014. According to appellant case of Narmada Extrusion P. ltd. is not applicable to their case, as that was regarding addition of share capital while appellant's case is that of receiving of unsecured loans, wherein identity of all depositors is established, as they are assessed to tax and even assessment made is] s 143(3) in case of depositors is also filed. They further submitted that AO framed assessment assuming that various depositors were of Lunked group, but none of these companies belong to Lunkad group as they are belonging to Darak group. 7. I have gone through the arguments of both AO as well as that of appellant. Since all the depositors have confirmed about giving such deposits, the amounts were gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of LT. Act. and payments were made through account payee cheques, genuineness of transaction cannot be doubted, AO has not conducted any enquiry into the same or has no material in his possession to show those particulars are false and cannot be acted upon, then no addition can be made in hands of appellant vi] s 68 as held in case of Gangehwari Metal P. ltd (2013) 214 Taxman 423 (Del). In this case it was noted by the Hon'ble judges that AO sat with folded hands till the appellant exhausted all the evidence or material in his possession and then came forward to merely reject the same on .the presumptions. In such an eventuality no addition can be made u/ s 68 of LT. Act. 9. On the basis of facts of the case and relying on various case laws discussed above the addition of unsecured loans ₹ 1 ,05,00,000 1- ₹ 1,25,00,0001- and interest on such loans of ₹ 6,14,855/- ₹ 5,55,875/- In AY 2006-07 AY 2007-08 is deleted. Gr. No. 1 2 of appeal are allowed. 15. It is also observed that Ld. Counsel for the assessee placed heavy reliance on the decision of the Indore Tribunal in the case of ACIT V/s Girish Kumar Sharda (supra) wherein similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of deposits received from others. 11.From the record, we also found that the Ld. Assessing Officer asked to explain the genuineness of the credits as well as identity and creditworthiness Q creditors. in response, the assessee filed confirmation from the creditors. 12.However, the Assessing Officer did not agree with the assessee's contention and added the amount u/s 68 of the Income-tax Act, 1961. By the impugned order, the Ld. CIT(A) deleted the addition by following his order in another assessee, wherein similar additions were deleted by observing that these additions were not warranted in the hands of the assessee but in the hands of the lenders. During the course of hearing, the Ld. CIT DR drew our attention to the order of the Tribunal, in the case of Asstt. CIT Vs. Narmada Extrusion Ltd. (2012) 19 ITJ 202 (Trib.-Indore), Order dated 30.12.2011, wherein the Tribunal have observed that the Ld. CIT(A) was not justified in deleting the addition on the ground that the addition is to be made in the hands of the person who has given the loan and not in the hands of the beneficiaries. It is clear from the order of the Tribunal in that order of the Ld. CIT(A) was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on so made b the Assessing Officer, we do not find any substance in so far as the assessee has discharged the onus casted upon a cost upon him by filing a confirmation certificate of the creditors duly signed and specifying full name, address and PAN of the creditors. In addition to the confirmation certificate the assessee has also filed the acknowledgement for filing of return of income by the creditor along with their computation of income, audited accounts, bank statements and copies of account. 15.After perusing bank statement of the creditors as placed on record, we find that no cash was deposited in the Bank prior to issuance of cheque moreover there is no cash transaction in the bank statement and we found that all the amounts are received and paid through account payee cheques. 16.As per material placed on record, we found that the Ld. Assessing Officer has not made any efforts by calling information Vis 133(6) or by issuing summon VIS 131 to any of the creditors which is evident from the, assessment order itself. Moreover, it is also clear from the assessment order that the Assessing Officer had never asked the assessee to produce the creditors. 17.As pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as per the audited balance sheet with various companies were as under : Name of the creditor Paidup share capital as on 31st March Reserve surplus as on 31st March Cash Bank balance as on 31st March East West Finvest India Ltd 3,67,11,000/- 86,424/- 21,31,898/- Purvi Finvest Ltd 4,47,67,000/- 63,229/- 20,62,494/- Trimurti Finvest Pvt. Ltd 3,60,00,000/- 3,08,99,041/- 21,23,021/- K.K. Patel Finance Ltd 89,32,500/- 61,43,922/- 26,73,752/- 20.Merely on the basis of returned income, the Assessing Officer jumped to the conclusion that these lenders were not having sufficient funds to advance the money to the assessee. The Ld. Assessing Officer without going through the audited accounts unnecessarily gone on the fact that these creditors are not having sufficient inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsecured loan, is not justified. In the instant case before us, the Assessing Officer could not bring out any material to suggest that any incriminating entry was found in the documents so collected by the Department from Lunkad Group which pertains to the period 1.4.2006 to 1.5.2006. It is not in dispute that all the loan transactions were through account payee cheques, confirmations were given, creditworthiness were also proved from the balance sheet. Furthermore, all the loans were also repaid by cheques, we, therefore, do not find any merit in the action of Assessing Officer for making any addition in respect of these loan transactions. 23.As the addition made U!S 68 is held to be not justified, we do not find any infirmity in the order of CIT(A) for deleting the disallowance of interest, which was based on the addition of cash credit U IS 68. 24.As we have already dealt with the issue on merit we are not going in the validity of the assessment framed U/S 153A read with Section 143(3) for making addition, where no incriminating material relating to assessment years in question were found and seized from the premises of the assessee. 16. Examining the fact of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged unsecured loans and also deletion of disallowance of interest on such loans at ₹ 6,14,855/- andRs.5,55,815/- and also deleting the addition for undisclosed expenditure of ₹ 5,25,000/- and ₹ 6,25,000/-. We accordingly dismiss Revenue s Ground No.1, 2 3 for Assessment Year 2006-07 and 2007-08 respectively. 18. Ground No.4 being general in nature needs no adjudication. 19. In the result appeal of the Revenue for Assessment Year 2006-07 and 2007-08 stands dismissed. 20. Now we take up assessee s case for Assessment Year 2006-07 being I.T.A.No.392/Ind/2014 raising following grounds; 1. That on the facts circumstances of the case, the learned CIT has erred in treating the rental income earned from House property for ₹ 26,87,635/- as business income and thereby confirming an addition of ₹ 7,92,350/- claimed u/s 24 as a deduction . 21. The sole grievance raised is against the order of Ld.CIT(A) denying the benefit of deduction u/s 24 of the Act at ₹ 7,92,350/- against the income earned from House property at ₹ 26,87,635/-. Brief facts relevant to this issue are that the assessee is engaged in the real estate business. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was to lease out land, commercial complex etc and therefore the rental income would be chargeable under the head income from business and not income from house property. 6. That it is pertinent to submit before this Hon'ble bench that the similar issue was raised by Ld.AO while doing assessment for AY 2005- 06 i.e treating rental income as income from business instead of income from house property and disallowed the standard deduction of 30% u/s 24 of Income Tax Act, 1961. However, Ld.CIT(A) upon appeal of appellant against the impugned order of Ld.AO has allowed the appeal in favour of the appellant. Also, it is important to note here that department has not appealed further in this case against the order of Ld. CIT(A). 7. That we wish to submit before this bench that even in A Y 2007-08 department has allowed the standard deduction of 30% on rental income and has not raised this issue during the course of assessment proceedings. 8. Ld. Counsel for the assesee relied on following judgments; i) East India Housing and Land Development Trust Ltd. V(1961) 42 ITR 49 (S.C) ii) Azimganj Estate Pvt. Ltd Vs CIT (2013) 352 ITR 82(Cal) iii) New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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