Case Law Details

Case Name : Girish Madhukar Rathi Vs DCIT (ITAT Pune)
Appeal Number : ITA No. 184/PUN/2017
Date of Judgement/Order : 05/03/2020
Related Assessment Year : 2013-14
Courts : All ITAT (6898) ITAT Pune (237)

Girish Madhukar Rathi Vs DCIT (ITAT Pune)

The issue under consideration is that confirming the addition made u/s 68 by A.O. in respect of the loan taken from father of the appellant on mere suspicion.

ITAT have heard both the sides on this limited issue of making addition u/s 68 of the Act. It is an undisputed fact that the assessee has Running Account in matters of taking loans from Shri Madhukar Rathi (father) and Shri Madhukar Rathi in turn taking loans from Rahul Anil Birla and Nand Sales Corporation. The said transactions are undisputedly through banking. It is further an undisputed fact that during the year under consideration, the assessee repaid to the tune of Rs.1,25,50,000/- to Shri Madhukar Rathi. So, it is case of taking loans and repayment of loans through a Running Account. Regarding balance of loan in the Running Account, it is also an undisputed fact that, in past too, no addition of these loans amounts were added by AO despite the similar loan transactions with Shri Madhukar Rathi and, in turn, Shri Madhukar Rathi with Rahul Anil Birla, Rakesh N. Birla and Nand Sales Corporation. In our view, therefore, it is case of mere suspicion of the AO that led to invoking of the provisions of section 68 of the Act. Otherwise, there is no evidence with Revenue to demonstrate that it is case of money laundering, non discharge of onus by the assessee. With the loans taken from Birlas & others, Shri Madhukar Rathi is capable of providing loan of Rs. 79 lakhs to the assessee. AO has not disturbed the loans in the cases of Birlas & others. In our view, there is no case of addition u/s 68 of the Act. The additions made by the AO are not sustainable. Therefore, we are of the opinion, the grounds raised by the assessee are required to be allowed. In the result, the appeal of assessee is allowed.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal filed by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-4, Pune, dated 28.10.2016 for the Assessment Year 2013-14.

2. The grounds raised by assessee are extracted as under:-

On the facts and in law –

1] The learned CIT(A) erred in confirming the addition of Rs. 79 lakhs made u/s 68 in respect of the loan taken from Shri Madhukar Rathi, father of the appellant.

2] The learned CIT(A) erred in holding that the assessee had failed to prove the creditworthiness of Shri Madhukar Rathi and accordingly, the addition made of Rs. 79 lakhs u/s 68 was justified.

3] The learned CIT(A) failed to appreciate that Shri Madhukar Rathi had confirmed giving of loan to the assessee and further the sources were also proved from which Shri Madhukar Rathi had given loan to the assessee and hence, the addition made u/s 68 of Rs. 79 lakhs was not justified at all and the same ought to have been deleted.

3. Briefly stated the relevant facts include that the assessee is son of Shri Madhukar Rathi. The assessee filed his return of income declaring total income of Rs.56, 10,180/-. At the end of the scrutiny proceedings, the assessment was completed determining the assessed income at Rs. 1,75,53,770/-. Apart from others, the Assessing Officer made an addition of Rs.79 lakhs u/s 68 of the Income-tax Act, 1961 (hereinafter referred to as the Act”). The contents of para 7 and its sub-paras are relevant in this regard. As per discussion given in the said para the assessee has Running Account in matters of taking and repayment of loans from his father Shri Madhukar Rathi. Further, it is also discussed that Shri Madhukar Rathi (father) in turn takes and repays loans from Birla family (Rahul Anil Birla, Rakesh N. Birla and Nand Sales Corporation). The details of taking loans and repayment of loans are tabulated as under:-

“Annexure I : Statement showing details of Interest received from Girish Rathi by Mr. Madhukar Rathi

Name of
Party
Op. Balance (Dr) Loan given to Girish Rathi Loan repaid by Girish Rathi Cl. Balance Interest received during the year Interest Rate
Girish Rathi 8,226, 728.77 10,187, 453.00 12,550, 000.00 5,864, 181.77 2,287, 453.00 21% p.a.
Total 8,226, 728.77 10,187, 453.00 12,550, 000.00 5,864, 181.77 2,287, 453.00

Annexure II : Statement showing details of Interest paid by Mr. Madhukar Rathi

Name of Party Op. Balance
(Cr)
Loan Amt. Taken during the year Loan Amt. repaid during
the year
Cl. Balance Interest paid during the year Interest Rate
Rahul Anil Birla 2,000, 000.00 1,000, 000.00 3,000, 000.00 591,500.00 21% p.a.
Rakesh N.
Birla
4,000, 000.00 1,500, 000.00 2,000, 000.00 3,500, 000.00 1,145,959.00 21% p.a.
Nand Sales
Corporation
6,000, 000.00 6,000, 000.00 380,625.00 21% p.a.
Total 6,000, 000.00 8,500, 000.00 11,000, 000.00 3,500, 000.00 2,118, 084.00

4. The Assessing Officer is of the view that despite the filers income tax return by concerned loan creditors, banking transactions, the loan transactions are not genuine. According to Assessing Officer, Shri Madhukar Rathi lacks creditworthiness. Despite the documentation furnished by the assessee with regard to creditworthiness of Shri Madhukar Rathi, loan transactions through banking channels, repayment of loans with interest, compliance of TDS provisions, wherever applicable, the AO invoked the provisions of section 68 of the Act and made addition on account of unsecured loan of Rs.79 lakhs. No such additions were made in the past although similar loans were taken in earlier assessment years.

5. During the first appellate proceedings, the assessee could not win the appeal before the CIT(A). The CIT(A) as per discussion given in para 8.3 of his order, the CIT(A) dismissed the appeal of assessee and confirmed the

6. Aggrieved with the order of the CIT(A), the assessee is in appeal before us with the grounds extracted above.

Addition of Rs.79 lakhs u/s 68 of the Act

7. Before us, ld. Counsel brought our attention to the facts relating to the said loan transactions i.e. taking loans from Shri Madhukar Rathi and Shri Madhukar Rathi in turn taking loans from Rahul Anil Birla, Rakesh N. Birla and Nand Sales Corporation and submitted that the transactions are The repayments of loans, compliance to the TDS provisions, the creditors have also filed their returns, the fact of the transactions being effected through banking channel, etc. supports the case of the assessee. As pr ld. AR, the assessee stands discharged the onus cast on his side. It is not the case of the Revenue that this is a case any money laundering or accommodation entries or scams, etc. On such facts, as per ld. AR, it is unfair to make addition by the Assessing Officer and confirmed by the CIT(A).

8. On the other hand, ld. DR heavily relied on the orders of Assessing Officer and CIT(A). It is the case of ld. DR that, with meagre taxable income of Shri Madhukar Rathi, so much money could not have been given as loan to the assessee (his son).

9. We have heard both the sides on this limited issue of making addition u/s 68 of the Act. It is an undisputed fact that the assessee has Running Account in matters of taking loans from Shri Madhukar Rathi (father) and Shri Madhukar Rathi in turn taking loans from Rahul Anil Birla and Nand Sales Corporation. The said transactions are undisputedly through banking It is further an undisputed fact that during the year under consideration, the assessee repaid to the tune of Rs.1,25,50,000/- to Shri Madhukar Rathi. So, it is case of taking loans and repayment of loans through a Running Account. Regarding balance of loan in the Running Account, it is also an undisputed fact that, in past too, no addition of these loans amounts were added by AO despite the similar loan transactions with Shri Madhukar Rathi and, in turn, Shri Madhukar Rathi with Rahul Anil Birla, Rakesh N. Birla and Nand Sales Corporation. In our view, therefore, it is case of mere suspicion of the AO that led to invoking of the provisions of section 68 of the Act. Otherwise, there is no evidence with Revenue to demonstrate that it is case of money laundering, non discharge of onus by the assessee. With the loans taken from Birlas & others, Shri Madhukar Rathi is capable of providing loan of Rs. 79 lakhs to the assessee. AO has not disturbed the loans in the cases of Birlas & others. In our view, there is no case of addition u/s 68 of the Act. The additions made by the AO are not sustainable. Therefore, we are of the opinion, the grounds raised by the assessee are required to be allowed.

10. In the result, the appeal of assessee is allowed.

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