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Case Law Details

Case Name : Nitin Madhukar Rathi Vs DCIT (ITAT Pune)
Appeal Number : ITA No. 272/PUN/2018
Date of Judgement/Order : 13/06/2022
Related Assessment Year : 2013-14
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Nitin Madhukar Rathi Vs DCIT (ITAT Pune)

Introduction: The case of Nitin Madhukar Rathi vs. DCIT, heard at ITAT Pune, revolves around the assessment of unexplained cash deposits arising from unsecured loans. The Assessing Officer (AO) raised concerns about the credibility and regular income source of certain creditors, resulting in an addition of Rs.60,00,000 to the assessee’s total income. The Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief, but a significant addition of Rs.38,00,000 was confirmed.

Detailed Analysis: The AO scrutinized unsecured loans received by the assessee and issued notices under section 133(6) to the loan creditors. Details, including names, loan amounts, return income, bank statements, and AO remarks, were outlined. The AO contended that creditors listed at Sr. No. 2, 5, and 8 lacked income-generating apparatus and a regular income source. Consequently, an addition of Rs.60,00,000 was made to the assessee’s total income.

The CIT(A) conducted a detailed examination, granting partial relief. Notably, Rs.10,00,000 related to Mr. Manoj Pardeshi’s loan, earmarked for property purchase, was deleted. Additionally, Rs.12,00,000 in the hands of Ms. Kalpana Kataria was deleted, considering her asset and liability statements and acknowledging her source/income capacity.

For the remaining six creditors, the CIT(A) upheld the AO’s stance, asserting their lack of creditworthiness to lend the loan amount. It was claimed that the authorized representative on behalf of the assessee admitted this fact. The appeal before ITAT Pune lacked evidence to support the grounds, leading to the confirmation of the addition of Rs.38,00,000.

Conclusion: The case underscores the importance of establishing the creditworthiness and regular income sources of loan creditors. While partial relief was granted, the addition of Rs.38,00,000 was confirmed due to the inability to substantiate the creditworthiness of certain creditors. Taxpayers should diligently maintain and present evidence supporting the legitimacy of transactions, especially when dealing with unsecured loans.

This case serves as a reminder for taxpayers to exercise caution in financial dealings and ensures that all aspects of transactions are well-documented. It highlights the significance of providing verifiable evidence to substantiate claims and defend against potential additions to the total income. The confirmation of a substantial addition by ITAT Pune reiterates the need for thorough documentation and compliance with tax regulations.

FULL TEXT OF THE ORDER OF ITAT PUNE

This appeal by the assessee against the order dated 04-09-2017 passed by the Commissioner of Income Tax (Appeals)-4, Pune [‘CIT(A)’] for assessment year 2013-14.

2. We find no representation on behalf of the assessee nor any application filed seeking adjournment. Thus, the assessee called absent and set ex-parte. Therefore, we proceed to dispose of the appeal by hearing the ld. DR and perusing the material available on record.

3. The assessee raised four grounds of appeal amongst which the only issue emanates for our consideration is as to whether the CIT(A) is justified in deleting the addition made on account of unexplained cash deposits in the facts and circumstances of the case.

4. Heard ld. DR and perused the material available on record. We note that the AO found the assessee received unsecured loan from various parties and issued notice u/s. 133(6) to all loan creditors. The AO reproduced such details in the assessment order at Page No. 2 which is as under :

Sr. No.

Name Amount of
Unsecured
Loan Given
Return
Income
Bank
Statement
Submitted
Remark
1 Alka Jain 800000 287000 Yes
2 Ashok Jain 1000000 290000 Salary Account No       income     generating apparatus    and    regular
source of income. Money comes in banks flows out.
3 Ashwini
Kulkarni
500000 300000 No
4 Pankajlal Mundada 500000 Yes
5 Shobha Battad 500000 Below Taxable Limit Yes No       income     generating apparatus    and regular
source of income. Money comes in banks flows out.
6 Kalpana Kataria 1200000 315000 Yes
7 Manoj Pardeshi 1000000
8 Bharati Tapadia 500000 228000 Yes No       income     generating apparatus    and regular
source of income. Money comes in banks flows out.
Total 6000000

5. On perusal of the above, names of the loan creditors, amount of loan, return income, bank statement and remark of AO were given. We note that the contention of AO is that no income generating and regular source of income, money comes in banks flows out against Sr. No. 2, 5 and 8 for remaining the AO held bank statement were submitted for all except Sr. No. 3. In pursuance of such remark the AO added Rs.60,00,000/- to the total income of the assessee. The CIT(A) discussed the issue in detail and taking into consideration the submissions of assessee and evidences produced with regard to cash deposits given partial relief to an extent of Rs.22,00,000/- (Rs.60,00,000/- – Rs.38,00,000/-). We note that from the impugned order at Para No. 5.3.2 that the CIT(A) considering the details regarding Mr. Manoj Pardeshi has given amount for purchase of property deleted the addition of Rs.10,00,000/-. Further, an amount of Rs.12,00,000/- has been deleted in the hands of Ms. Kalpana Kataria taking into consideration the statements in respect of asset and liability. Further, holding that she has source/income capacity to lend such money. In the remaining six creditors the CIT(A) held that they have no creditworthiness to lend such loan amount to the assessee which was said to have been admitted by the authorized representative on behalf of the assessee. Before us, no evidence submitted in support of the grounds filed and therefore, the order of CIT(A) is justified in confirming the addition of Rs.38,00,000/-. Thus, the grounds raised by the assessee fails and are dismissed.

6. In the result, the appeal of assessee is dismissed.

Order pronounced in the open court on 13th June, 2022.

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