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TMI Blog2023 (7) TMI 397X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly remitted by party from the bank account held NBD Emirates bank which can be verified from copy of bank statement placed on record. As the assessee discharged primary onus with regard to identity, genuineness as well as creditworthiness of creditor. The revenue authority without bringing contrary material in the submission of the assessee has treated the loan from Sri Salim Menon as unexplained cash credit on the reasoning that there being no formal loan agreement, cash flow statement of lender, schedule of repayment and interest and permission of RBI/authority to accept money from NRI. The revenue held the amount credited as unexplained cash credit u/s 68 - we note that, the allegation of the revenue that there is no formal agreement, repayment schedule cannot be the basis for treating the credit of loan as deemed income of the assessee u/s 68 - As such it is the understanding between the assessee and loan parties whether to enter into formal agreement or not and how to when to make repayment of such loan. Similarly, not filling cash flow statement of loan party does not tantamount the loan party is not genuine or does not have sufficient credit worthiness. Approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the involvement of the labours. Thus, Restrict the addition to tune of 50% to prevent any revenue leakage. Decided partly in favour of assessee. - ITA No. 1763/Ahd/2019 and ITA No. 924/Ahd/2018 - - - Dated:- 17-5-2023 - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER For the Assessee by : Shri S.N. Soparkar, Sr. Advocate Shri Parin Shah Shri Anil R. Shah, Ars For the Revenue by : Shri Vijay Kumar Jaiswal, CIT-DR SHRI ATUL PANDEY, SR DR ORDER PER WASEEM AHMED, AM : These two appeals are preferred by the assessee against the orders of the learned Commissioner of Income-tax (Appeals) (hereinafter referred to as CIT(A) ) dated 18.09.2019 and 31.01.2018 passed under Section 250(6) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Years (AYs) 2012-13 2014-15, respectively. First, we take-up ITA No. 1763/AHD/2019 an appeal by the assessee for A.Y 2012-13 2. The assessee has raised following grounds of appeal: I. On Addition u/s 68 of Rs. 2,38,76,291/- 1. The CIT(A) has erred both in Law and in Fact in upholding invoking of Sec. 68 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee submitted that Sri Salim Hamid Menon is a close friend residing in Dubai who is engaged in the business of package drinking water and plastic industries. He received interest free unsecured loan to fund ongoing project with a condition that amount will be refunded once revenue is generated from the project. The assessee in support of his argument furnished copy of confirmation letter. However, the AO found that the assessee has not furnished proper details of the lender such as the address as well as return of income of the lender. Therefore, merely the amount was received through banking channel and filing confirmation letter will not discharge the assessee from his obligation cast under section 68 of the Act. Hence the AO, treated the credit of loan amount as unexplained cash credit under section 68 of the Act and added to the total income of the assessee. 5. Aggrieved assessee preferred an appeal before the learned CIT(A). 6. The assessee before the learned CIT(A) submitted that he has furnished copy of PAN card, confirmation letter and copy of ITR of Sri Salim Hamid Memon during the assessment proceeding but the AO without pointing any defect or providing furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NR/NRO/NRNR account. (c) The sale/maturity proceeds shall be credited only to NRSR account where the purchase consideration was paid out of funds held in NRSR account and to NRO/NRSR account where the purchase consideration was paid out of NRE/FCNR/NRO/NRNR account. (d) The capital appreciation cannot also be repatriated. 4.5 Reliance is placed in the case of Sunder Chhabra Vs DCIT [2012] 20 taxmann.com 640(P H), the Hon ble High Court held that Where revenue authorities had concurrently come to conclusion that two cash credits were unexplained money introduced by assessee in his business, addition made under section 68 in respect of those cash credits was to be upheld. In A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC), it was held that it is not necessary for the department to adduce evidence to show from which sources the income was derived and as to why it should be treated as undisclosed income. If the assessee fails to prove satisfactory the source and nature of certain amount of cash received through the accounting year. In CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), it was held that the discharge of onus is dependent on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1995]214 ITR 801 (SC), wherein the Hon ble Supreme Court has held as under: In all cases in which a receipt is sought to be taxed income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But, in view of Section 68 of the Act, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. IN such a case there is, prima facie, evidence against the assessee, viz., the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income nature. (emphasis supplied) In that case the amount was credited in the capital account in the books and the assessee offered her explanation about the said receipt being her winnings from horse races. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligation only extends to show that the genuineness of the impugned credit transaction is doubtful or has not been satisfactorily proved by the assessee. I fully agree with the Assessing Officer that the ratio of the landmark decisions of the Apex Court delivered in the cases of Sumati Dayal Vs CIT [1995] 214 ITR 801 (SC), Durga Prasad More [1971] 82 ITR 540 (SC) and Mo Dowell Co. Ltd. [1985] 154 ITR 148 (SC) is fully applicable in the present case and appellant has not been able to satisfactorily prove the genuineness of these unsecured loans from a NRI and keeping in view the facts narrated above. Recently jurisdictional ITAT, Ahmedabad in the case of Pavankumar M Sanghvi Vs ITO, Ward 3(1)(2), Vadodara [2017] 81 taxmann.com 308 (Ahmd. Tri.) has considered similar issue where alleged unsecured loan from unrelated person was received through banking channels. Hon ble ITAT held that the onus of assessee, of explaining nature and source of credit, does not get discharged merely by filing confirmatory letters, or demonstrating that transactions are done through banking channels or even by filing income tax assessment particulars. It was held that the assessee had not been a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing but afterthought. The learned DR vehemently supported the order of the authorities below. 12. We have heard the rival contentions of both the parties and perused the materials available on record. The provision of section 68 of the Act fastens the liability on the assessee to make proper and reasonable explanation regarding the nature and sources of sum credited in the books of accounts to the satisfaction of the AO. The assessee is liable to provide proof of the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the credit entries under section 68 of the Act by the Hon ble Calcutta High Court in the case of CIT Vs. Precision finance (p) Ltd reported in 208 ITR 465 wherein it was held as under: It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. The enquiry of the ITO revealed that either the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in The New Lexicon Webster's Dictionary, the word creditworthy has been defined as under:- creditworthy, adj. of one who is a good risk as a borrower. 12.5 It the duty of the assessee to establish that creditor party has capacity to advance such loan and having requisite fund in its books of account. The capacity to advance loan can be established by the showing sufficient income, capital and reserve or other fund in the hands of creditor. It is required by the AO to find out the financial strength of the creditor to advance loan with judicious approach and in accordance with materials available on record but not in arbitrary and mechanical manner. 12.6 In the light of the above discussion, we proceed to adjudicate the issue on hand. The assessee during the year under consideration received unsecured loan of Rs. 47 Lakh and Rs. 1,91,76,229/- from the parties namely Sri Navjit Singh Anand and Sri Salim Hamid Memon respectively. The assessee during the appellate proceeding furnished the copy of PAN, confirmation letter and bank statement of Sri Navjit Singh Anand. The learned CIT(A) called for remand report from the AO and on perusal of the same, we find that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red opinion when the identity and credit worthiness of creditor is established, genuineness of transaction is also not in doubt as the party has confirmed and the transaction was carried out through banking channel by way foreign direct remittance. Then, such amount cannot be deemed as unexplained since the assessee has not got the approval from competent authority to accept foreign direct remittance. As such, it may the violation RBI which is independent to Income Tax Act. But the violation of certain other statute cannot be used to draw an inference that the amount received as loan represents unexplained cash credit and deemed income of the assessee under the provisions of section 68 of the Act. 12.9 In view of the above, we hold that the assessee has discharged the onus cast under section 68 of the Act. Therefore, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. 13. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the disallowance of land leveling expenses for Rs. 7,55,750/- under section 40(a)(ia) of the Act. 14. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from the assessee in its income. Thus, the assessee cannot be given the benefit of the proviso to section 40(a)(ia) of the Act. However, we find that Finance (No. 2) Act has made amendment to section 40(a)(ia) of the Act w.e.f. 1-4-2015. Various benches of the Tribunals have held the amendment made by Finance (No 2) Act to be curative in nature. We further find the coordinate bench of the Tribunal in the case of M/s. R. H. International v. ITO ITA No. 6724/Del/2018 dated 20-3-2019 has held that disallowance u/s. 40(a)(ia) of the Act be restricted to 30% of the expenses paid as against 100% because amended provision is curative in nature and the provisions should be applied retrospectively. We, therefore, hold that the disallowance of expenses on account of non-deduction of TDS be restricted to 30% of the expenses in the given facts and circumstances. We thus hold so. Hence, the ground of appeal of the assessee is partly allowed. 20. The next issue raised by the assessee is that the learned CIT(A) erred in confirming the addition for Rs. 6,20,000/- being outstanding labor charges payable to one Shri Gavarsinh Mavi. 21. The AO during the assessment proceedings found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is partly allowed. Coming to ITA No. 924/Ahd/2018 an appeal by the assessee for A.Y. 2014-15 28. The only issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 4,63,76,371/- being unsecured loan under section 68 of the Act. 29. At the outset, we note that the issue raised by the assessee in its grounds of appeal for the AY 2014-15 is identical to the issue raised by the assessee in ITA No. 1763/AHD/2019 for the assessment year 2012-13. Therefore, the findings given in ITA No. 1763/AHD/2019 shall also be applicable for the assessment years 2014- 15. The appeal of the assessee for the AY 2012-13 has been decided by us vide paragraph No. 12 of this order in favour of the assessee. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2012-13 shall also be applied for the assessment years 2014-15. Hence, the ground of appeal filed by the assessee is hereby allowed. 30. In the result appeal of the assessee is hereby allowed. 31. In the combined result, assessee s appeal bearing ITA No. 1763/Ahd/2019 for A.Y. 2012-13 is partly allowed and ITA No. 924/Ahd/2018 A.Y. 2014-15 is allowed. Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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