Case Law Details
F.M. Amin Co (Dashrath) Vs Assessment Unit (ITAT Ahmedabad)
ITAT Ahmedabad held that addition towards unexplained cash credit under section 68 of the Income Tax Act not justified since loan transactions were done through banking channels and loans were repaid in short period. Accordingly, addition deleted.
Facts- The assessee is a firm and dealer of Hindustan Petroleum for sale of petrol, diesel and CNG, etc. The return of the assessee was taken for scrutiny assessment. The assessee has shown unsecured loans from Shri Pravinbhai Mavani of Rs. 15,50,000/-, Shri Sagar Mavani of Rs. 1,50,000/- and Smt. Vandanaben Mavani of Rs. 6,50,000/-. The assessee was required to show the identity, genuineness and creditworthiness of the above loan transactions. In response, the assessee filed confirmations from the above creditors. Thus AO is not satisfied with the explanation thereby added the entire unsecured loans of Rs. 23,50,000/- as unexplained income within the meaning of Section 68 of the Act and added to the total income of the assessee and taxed at 60% u/s. 158BBE of the Act and demanded tax thereon.
CIT(A) confirmed addition made by the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Held that all the loan transactions were done through banking channels, wherein due interest is also paid by the assessee after deducting TDS u/s. 194A of the Act. The corresponding interest income is offered by the unsecured creditors in the Returns of Income filed before their respective Income Tax Authorities. Further the entire loans were repaid through banking channels within a very short period. Thus the above loans transaction cannot be doubted and the additions made on this account is liable to be deleted. Thus, the additions made u/s. 68 of the Act by the Assessing Officer is not sustainable in law and the same are hereby directed to be Consequently, taxing income u/s. 115BBE does not arise.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee as against the appellate order dated 20.12.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.
2. The brief facts of the case is that the assessee is a firm and dealer of Hindustan Petroleum for sale of petrol, diesel and CNG, etc. For the Asst. Year 2017-18, assessee filed its Return of Income on 29-09-2017 declaring total income of Rs. 24,43,860/-. The return was taken for scrutiny assessment. The assessee has shown unsecured loans from Shri Pravinbhai Mavani of Rs. 15,50,000/-, Shri Sagar Mavani of Rs. 1,50,000/- and Smt. Vandanaben Mavani of Rs. 6,50,000/-. The assessee was required to show the identity, genuineness and creditworthiness of the above loan transactions.
2.1 In response, the assessee filed confirmations from the above creditors. Thus the Assessing Officer is not satisfied with the explanation thereby added the entire unsecured loans of Rs. 23,50,000/- as unexplained income within the meaning of Section 68 of the Act and added to the total income of the assessee and taxed at 60% u/s. 158BBE of the Act and demanded tax thereon.
3. Aggrieved against the assessment order, the assesse filed an appeal before Ld. CIT(A). During the appellate proceedings, the assessee provided the PAN details, Bank statements, Confirmations from the unsecured On perusal of the bank details of Shri Pravinbhai Mavani, the Ld. CIT(A) noted that the loans have been debited to the assessee on 14-02-2017 of Rs. 5 lacs. Immediately before debit of loan, there are instances of cash deposit of Rs. 6,15,310/- for the period 26-09-2016 to 22-11-2016. Further there are three credit entries on 09-01-2017 at Rs. 15,50,000/-. Thus it can be clearly inferred that this bank account is solely used for the purpose of advancing unsecured loan to the assessee. Similarly in the case of Smt. Vandanaben Mavani, there was cash deposit of Rs.39,000/- and credits received from a person Shri Mehul L. Shah of Rs. 4,63,000/- on 13-06-2016 and Rs. 2 lakhs on 18-06-2016. Similarly in the case of Shri Sagar Mavani, there is a credit entry of Rs. 2,00,000/- on 13-07-2016 and debited on 20-07-2016 in the name of the assessee as loan . Thus the creditworthiness of the loan transactions are not established by the assessee thereby ld. CIT(A) confirmed the additions made by the Assessing Officer.
4. Aggrieved against the same, assessee is in appeal before us raising the following Grounds of Appeal:
1) THE LEARNED CIT HAS ERRRED IN UPHELDING THE ADDITION OF UNEXPLAINED CASH CREDIT OF RS. 23,50,000/- U/S 68 OF INCOME TAX ACT MADE BY LEARNED A.O. WHICH WERE RECEIVED FROM THREE DEPOSITORS WITH SUBSTANTIAL EVIDENCES. THIS ADDITION NEEDS TO BE DELETED.
2) THE LEARNED O. TAXED THE ABOVE AMOUNT U/S 115BBE OF THE INCOME TAX ACT AND LEVIED TAX AT 60 PERCENTAGE OF THE AMOUNT ADDED. THIS BEING GENUINE TRANSACTION THE APPLICATION OF THIS SECTION BE CANCELLED.
3) THE LEARNED A.O. HAS LEVIED INTEREST U/S 234B OF RS.6,20,796/- ND U/S 234C OF 12,759/- AND INTEREST U/S 234D OF RS.200/- TOTALLING RS.6,33,755/- THIS NEEDS TO BE DELETED.
4) THE APPELANT CRAVES LEAVE TO ADD TO, AMEND AND OR ALTER ANY GROUND OF APPEAL ON OR BEFORE THE DATE OF HEARING.
5. Counsel Shri Deepak R. Shah appearing for the assessee filed before us a Paper Book running to 25 pages containing the PAN Card, ITR, Statement of Total Income, Bank Statement, Confirmation of accounts of all the three creditors. The assessee received unsecured loan from Shri Pravinbhai Mavani on 18-06- 2016 of Rs. 5,50,000/-, 01-07-2016 of Rs. 3,00,000/-, 20-07-2016 of Rs. 2,00,000/- on 14,02-2017 of Rs. 5,00,000/- all totaling Rs. 15,50,000/- by cheque transactions and paid interest of Rs. 1,02,740/- and also made TDS of Rs. 10,274 to Shri Pravinbhai Mavani. Further the entire loans were repaid in November and December 2017. The repayment is also made through cheque payments with clearly reflecting in Shri Pravinbhai Mavani’s bank account namely Pragati Sahakari Bank Ltd. Further in the Return of Income filed by Shri Pravinbhai Mavani, the interest income of Rs.1,02,740/- and TDS amount of Rs. 10,274/- is also claimed. Thus the Lower Authorities are not correct in treating the above loan transaction as non-genuine.
5.1 Similarly in the case of Smt. Vandanaben Mavani wherein the unsecured loan of 4,50,000/- and Rs. 2,00,000/- received on 18-06-2016 and 01-07-2016 and interest of Rs. 60,263/- paid by cheque after making TDS of Rs.6,026/-. Further the entire loan was repaid through cheque payments on 15-12-2017.
5.2 Similarly in the case of Shri Sagar Mavani wherein the unsecured loan of Rs.1.50 lakhs received on 01-02-2017 through cheque payments and the loans was repaid on 15-12-2016 with interest of Rs.2860/-. Thus the additions made by the Lower Authorities are not sustainable in law and the same is liable to be deleted. In support of the same, Ld.Counsel relied upon Jurisdictional High Court Judgment in the case of PCIT Vs. Ambe Tradecorp (P.) Ltd. reported in [2023] 147 taxmann.com 375 (Guj.)
6. Per contra, Ld. Sr. D.R. appearing for the Revenue supported the order passed by the Lower Authorities and requested to confirm the
7. We have perused the materials available on record as well as the Paper Book filed by the assessee including the PAN, Return of Income of the Creditors, Bank Statements, Ledger Confirmation, repayment details available at Page Nos. 1 to 22 of the Paper Book. All the loan transactions were done through banking channels, wherein due interest is also paid by the assessee after deducting TDS u/s. 194A of the Act. The corresponding interest income is offered by the unsecured creditors in the Returns of Income filed before their respective Income Tax Authorities. Further the entire loans were repaid through banking channels within a very short period. Thus the above loans transaction cannot be doubted and the additions made on this account is liable to be deleted.
8. The Hon’ble Jurisdictional High Court in the case of Ambe Tradecorp (P.) (cited supra) held as follows:
“Assessee-company claimed to have received certain amount towards share application money from creditor ‘R’ during period from 1-4-2009 to 31-3-2010 and was paid back fully in financial year 2010-11 Assessing Officer opined that explanation was not satisfactory to prove creditworthiness of creditor and invoking provisions of section 68, treated amount as unexplained cash credit and added in total income of assessee Assessee had submitted Pan Card, Ledger Confirmation, his own bank statement and bank statement of ‘R’ to demonstrate that amount was received through banking channel Before Appellate Authority, assessee could establish that ‘R’ had received money from two persons and said factum was fortifiable from bank statement of ‘R’ Whether once books of account and facts reflected therein showed source of fund and identity of party and aspect that books of account also reflected receipt of amount and amount was repaid, it was not open to Assessing Officer to raise doubt about creditworthiness of creditor – Held, yes – Whether thus, Tribunal had not erred in deleting addition made under section 68 for funds received from said creditor.”
8.1 Respectfully following the same, the additions made u/s. 68 of the Act by the Assessing Officer is not sustainable in law and the same are hereby directed to be Consequently, taxing income u/s. 115BBE does not arise. Thus the Grounds raised by assessee are hereby allowed.
9. In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the open court on 06-12-2024
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