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TMI Blog2022 (3) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... he department has accepted repayment of loan in subsequent order, no addition was to be made in the current year for cash credit. We find that case of assessee is a better footing as the assessee received unsecured loan in the month of October and repaid the same in February, 2007 along with interest. Further, the Revenue has not disputed the payment of loan in the same assessment year. The Hon ble jurisdictional High Court in case of DCIT Vs Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] held that when the Assessing Officer has not disallowed the interest in relation to credit in the assessment year and the assessee as deducted tax at source for the interest paid to the creditors, the Department is not justified in making addition under section 68 of the Act. When the unsecured loan has been paid within a short span of time for which the assessee has paid interest and deducted tax thereon. Therefore, the Assessing Officer was not justified in making addition under section 68. Thus, substantial ground of appeal is allowed. - ITA No.1450/AHD/2016 - - - Dated:- 14-3-2022 - Shri Pawan Singh, Judicial Member And Dr. Arjun Lal Saini, Accountant Member For the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny submits that the learned Commissioner of Income Tax Appeals erred in confirming the addition of ₹ 1,50,00,000/- made by the learned Assessing Officer by invoking the provisions of section 68 of the Act without appreciating the fact and circumstances of the case and position of law. 2. The Appellant Company submits that the Learned Assessing Officer erred in initiating and the Learned Commissioner of Income Tax Appeals erred in confirming the initiation of proceedings u/s 148 of the Act despite the fact that the said reopening was bad in law, being based on borrowed satisfaction, without appreciating the facts and circumstances of the case and position of law. 3. The Appellant Company submits that the Learned Assessing Officer erred in issuing notice u/s 148 of the Act after the expiry of the 4 years from the end of the relevant assessment year, despite the fact that assessment had been concluded in the present case u/s 143(3) of the act, without bringing out any issue as regards the income chargeable to tax had escaped assessment for said assessment year by reason of the failure on the part of the appellant to make disclosure of all the material facts truly and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 1.50 Crores from Avi Exports, the proprietorship of concern of Rajendra Jain Group. In response to show cause notice, the assessee furnished copy of confirmation from lender, acknowledgment of return of income of lender and bank statement showing that amount was received through banking channel by the assessee. The assessee contended that transaction is genuine and fully supported by documentary evidences. The loan was received and it was repaid during the year itself. The assessee prayed to drop the re-assessment proceedings. The Assessing Officer recorded that amount was received and repaid during the year (in para 7.1), however the reply of assessee was not accepted by taking view that it is arrangement, which is found to be orchestrated and the whole thing has been admitted to be an arrangement to lauder unaccounted cash in a masqueraded in form of unsecured loan . 5. The Assessing Officer further recorded that entry provider / the said operator has given a statement on oath about modus-operandi and whole transaction carried out at his premises. The statement of Rajendra Jain was provided to the assessee for its comments. The assessee further vide his reply dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The evidence was once gain filed before ld. CIT(A). The assessee further stated that statement of Rajendra Jain was recorded on 11.03.2015 during the course of reassessment proceedings of Rajhans Enterprises and Rajhans Developers, a sister concerns of the assessee on similar issue, where the similar loan is taken and repaid by those assessee, wherein Rajendra Jain not only filed confirmation with the transaction but also explain source of loan given to the assessee. Rajendra Jain in answer to question no. 8, confirmed that loan of ₹ 50 lakhs was also given to Rajhans Developer and ₹ 70 lacks to Rajhans enterprises, sister concern of the assessee through his proprietary firm Avi Export on 16.10.2006 as interest bearing loan and the same was received back on 06.02.2007 through bank. The loan of Assessee Company was also received and repaid on the same date. In answer to question nos. 9 and 10 Rajendra Jain confirmed that he received interest on the loans and advances made by him and was offered to tax in return of income filed by him. In answer to question no. 12, he explained the source of loan giving i.e credit of ₹ 2.73 Crores immediately before giving the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion cannot be doubted. On the observation of Assessing Officer about retraction of statement of Rajendra Jain, the assessee stated that Assessing Officer presume retraction of Rajendra Jain is invalid on certain basis that it was filed after one year. However, the said retraction and statement given in re-assessment proceeding in case of assessee and its sister concern cannot be doubted. The ld. CIT(A) admitted the additional facts as additional evidence under Rule 46A of Income-tax Rules by taking view that the same is crucial in deciding the issue. The ld CIT(A)after recording the modus-operandi of Rajendra Jain in providing accommodation entries, through benami concern held that the transaction of loan from Rajendra Jain was make believe arrangement through source of unaccounted funds through merely lender to look of genuine transaction. The whole arrangement of providing accommodation entries were established being doubt during the search proceedings is no evidence of sales and purchase of diamonds were found nor any stock were found. These evidences were admitted by Rajendra Jain himself. The income tax proceedings were not restricted by rules of evidence and not required to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y recorded at the back of the assessee cannot be relied and used against the assessee, without giving opportunity of corss examination to the assessee. To support his submission he relied on the following decisions; Andaman Timber Industries v. Commissioner of Central Excise, Kolkata in (281 CTR 241) (Civil Appeal No.4228 of 2006 dt.02.09.2015), H. R. Mehta vs. ACIT (387 ITR 561) (Bom. HC) C Vasantlal Co. Vs CIT (45 ITR 206) (SC), Kishinchand Chellaram Vs CIT (125 ITR 713) (SC) CIT vs. Ashish International (ITA No.4299 of 2009), CIT vs. Ashwani Gupta (322 ITR 396) (Bom. HC) , State of M.P.Vs Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623, 13. The ld AR for the assessee further submits that where AO has not disallowed the interest claimed in respect of credits, once interest payment is accepted, no addition under Section 68 of same credit is not justified. 14. On the merits of the additions made under section 68, the ld AR for the assessee submits that in DCIT v Rohini Builders [2002] 256 ITR 360 (Guj.) / [2003] 127 Taxman 523 (Guj), the Hon ble Gujarat High Court held that when the assessee has primarily discharged the initial onus laid on him in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was the sale proceeds made in the local market. The source of loan in assessee s case is same as Rajhans Enterprises and Rajhans Developer. Rajendra Jain further stated in his statement recorded on 11.03.2015 is the true statement and his statement recorded on 03.10.2013 during search action has been retracted. The ld AR for the assessee submits that similar additions under section 68 was made in cases of sister concern of assessee, however, on appeal before ld CIT(A), the additions were deleted. 17. The ld AR for the assessee submits that the Hon ble Gujarat High Court in case of Pr. CIT Vs. Skylark Build (ITA No. 616 of 2016 dated 24.10.2018) held that when amount borrowed by the assessee as unexplained cash credit to make the addition by provisions of section 68, no addition can be made when such borrowing was repaid. The ld AR also relied in case of CIT Vs Ayachi Chandrasekhar Narsangji ( 2014)41 taxmann.com 251 (Gujarat), wherein the Hon ble High Court held that where the department has accepted repayment of loan in subsequent order, no addition was to be made in the current year for cash credit. 14. On the other hand, ld. Sr. DR for the Revenue supported the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R of the assessee that unsecured loan paid within short time. It was obtained in October, 2006 and 2007 and was paid in further 2008. The ld. Sr.DR submits that even if the loan is repaid the transaction is not genuine and the addition made by Assessing officer is fully justified. The assessee was merely paper transaction. 15. We have considered the rival submissions of both the parties and perused the material available on record. We have also considered the written submissions filed by ld AR for the assessee as well as on various case laws relied by both the parties at the time of making their respective submissions. We have noted that the assessee in the original grounds of appeal has challenged the validity of reopening under section 147 on the ground that it was based on information of investigation by search party on third, however, in revised grounds of appeal the assessee has raised altogether new grounds of appeal against re-opening in Ground No.2 3. On perusal of order of ld CIT(A) and the Form-35 [Appeal form for filing appeal before ld CIT(A) and grounds of appeal], we find that no such ground of appeal challenging the validity of reopening was raised. No applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash credit to make the addition by provisions of section 68, no addition can be made when such borrowing was repaid. Further, the Hon ble Gujarat High Court in case of CIT v. Ayachi Chandrasekhar Narsangji (supra) also held that where the department has accepted repayment of loan in subsequent order, no addition was to be made in the current year for cash credit. We find that case of assessee is a better footing as the assessee received unsecured loan in the month of October and repaid the same in February, 2007 along with interest. Further, the Revenue has not disputed the payment of loan in the same assessment year. The Hon ble jurisdictional High Court in case of DCIT Vs Rohini Builders (265 ITR 360) held that when the Assessing Officer has not disallowed the interest in relation to credit in the assessment year and the assessee as deducted tax at source for the interest paid to the creditors, the Department is not justified in making addition under section 68 of the Act. 17. In view of the aforesaid factual and legal discussion. We are of the view that when the unsecured loan has been paid within a short span of time for which the assessee has paid interest and deducted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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