PCIT Vs Hareshkumar Manilal Somaiya (Gujarat High Court)
Summary: The Gujarat High Court dismissed the Revenue’s appeal under section 260A of the Income Tax Act, concerning deletion of an addition of Rs. 11,69,50,000 made under section 68 of the Income Tax Act, 1961 on account of unsecured loans.
The assessee was proprietor of M/s. Rohit Trading Co., engaged in trading of grains and other food items. For AY 2012-13, the assessee filed his return on 29.09.2012 declaring total income of Rs. 7,05,650/-. The return was selected for scrutiny and notice under section 143(2) was issued on 22.8.2013, followed by notice under section 142(1). According to the department, the assessee did not produce the books of accounts. Consequently, assessment was completed on 17.3.2015 under section 143(3) read with section 144, determining total income at Rs. 23,01,11,530/-.
Before the Commissioner of Income Tax (Appeals), the assessee challenged the assessment. The appellate Commissioner partly allowed the appeal on 28.3.2017. In relation to the addition of Rs. 11,74,50,000 under section 68, the Commissioner deleted Rs. 11,69,50,000 and confirmed Rs. 5,00,000. The Commissioner also deleted Rs. 9,55,33,843 out of the disallowance of Rs. 9,56,33,843 relating to purchases and sustained Rs. 1,00,000.
The Revenue appealed to the Income Tax Appellate Tribunal, which dismissed the appeal. The Revenue therefore approached the High Court under section 260A.
The substantial questions proposed by the Revenue concerned whether the Tribunal was justified in holding that the assessee had discharged the onus under section 68 and whether it was justified in upholding deletion of the addition of Rs. 11,69,50,000 relating to unsecured loans.
The High Court noted that the appellate Commissioner had considered the Assessing Officer’s remand report dated 14.3.2017. The remand report and evidence placed on record showed that, except for unsecured loans of Rs. 50,000 and Rs. 4,50,000 received and paid in the cases of Shri Kiritkumar Somchand and Shri Mohanlal Morarji respectively, the assessee had furnished satisfactory evidence regarding the balance amounts. The appellate Commissioner accordingly deleted the balance addition.
The Tribunal endorsed these findings and noted that evidence including copies of PAN, ledger accounts, confirmations, bank statements and audited books had been made available during the remand proceedings. The Tribunal found that the Assessing Officer had not pointed out any deficiency in those primary documents while holding that the assessee had failed to establish the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors.
The High Court held that the findings recorded by the appellate Commissioner and the Tribunal were based on material and proper appreciation thereof. They were findings of fact and were not liable to interference in the appeal.
Accordingly, the Court held that the substantial questions of law proposed by the Revenue could not be said to arise. No other substantial question of law arose, and the appeal was dismissed.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Karan Sanghani with Ms. Kalpanak Raval for the appellant.
2. This appeal is filed u/s 260A of the Income Tax Act and the same is arising out of the order passed by the Income Tax Appellate Tribunal, Rajkot on 16.11.2022 in Tax Appeal No.191 of 2017 for the assessment year 2012-13.
3. The following substantial questions are proposed by the appellant-department.
“(i) Whether the Tribunal was justified in holding that the assessee has discharged the onus cast u/s. 68 of the Act. ?
(ii) Whether the Income Tax Appellate Tribunal is justified in upholding the order of the CIT(A) in deleting made on account of unsecured loans of Rs. 11,69,50,000/- u/s. 68 of the Act ?”
4. The basic facts are that the assessee is proprietor of M/s. Rohit Trading Co., which deals in trading of grains and other food items. The assessee filed return of income on 29.09.2012 declaring total income of Rs. 7,05,650/-. The return of income was selected for scrutiny. Notice under section 143(2) was issued on 22.8.2013. Thereafter, notice under section 142(1) came to be issued. The assessee, however, did not produce books of accounts, according to the department. Therefore, the assessment order was passed on 17.3.2015 under section 143(3) read with section 144 of the Act. The assessement order was passed on 17.3.2015 declaring total income at Rs. 23,01,11,530/-.
4.1 The assessee preferred appeal against assessment order before the Commissioner of Income Tax (Appeals), who partially allowed the appeal on 28.3.2017. As far as the addition of Rs. 11,74,50,000/- under section 68 of the Act was concerned, the appellate Commissioner deleted the addition of Rs. 11,69,50,000/- and confirmed the addition of Rs. 5,00,000/-. In respect of disallowance of Rs. 9,56,33,843/- of purchases, the appellate Commissioner deleted the addition to the extent of Rs. 9,55,33,843/- and sustained addition of Rs. 1,00,000/-
4.2 When the appeal was preferred by the department, the appellate Tribunal dismissed the appeal. Therefore, this Tax Appeal under section 260A of the Act came to be filed.
5. The only issue raised in form of substantial questions as noted above, is whether the Income Tax Appellate Tribunal is justified in upholding the order of the appellate Commissioner in deleting the addition made on account of unsecured loan of Rs. 11,69,50,000/- under section 68 of the Act.
5.1 In para 14.1 of the order, the appellate Commissioner considered that the Assessing Officer had confirmed in his report dated 14.3.2017 about the group entries appearing in the balance-sheet as also in the audit report. The same was considered by the appellate Commissioner. The following finding was recorded,
“It is seen from the remand report as well as evidences placed on record that except the unsecured loans of Rs. 50,000/- and Rs. 4,50,000/- received and paid in the cases of Shri Kiritkumar Somchand and Shri Mohanlal Morarji respectively, the appellant failed to discharge the onus lies on him by proving the identity, genuineness of transactions and creditworthiness of the depositors and as such the same stand unexplained. In respect of balance the appellant has furnished satisfactory evidences the same has been verified by the AO as such stand deleted. The appellant gets relief accordingly.”
5.2 In the appeal by the Revenue, the Income Tax Tribunal endorsed to the findings of the appellate Commissioner to notice that there were evidences and material to establish the creditworthiness, genuineness and identities of lenders in the transactions. After detailed discussion, the Tribunal recorded its own finding thus,
“We find that during the remand proceedings, the details such copy PAN, ledger account and confirmation and other details such as bank statement, audited books were made available before the AO. However, the AO without considering and pointing any deficiency in the above primary document held that the assessee failed to prove the identity of the creditor, explain the genuineness of transaction and establish the credit worthiness of the creditor.”
6. The findings recorded by the appellate Commissioner as well as the Income Tax Tribunal are based on material and proper appreciation thereof. They are the findings of facts not liable to be interfered with.
7. In view of the above, the substantial questions of law sought to be raised could not be said to be arising. No other substantial question of law arises. The appeal is dismissed.
