TMI Blog2021 (3) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... nders, it was his duty to ascertain from the AO of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. In the assessee`s case department had accepted repayment of loan in subsequent year. The assessee provided the assessing officer, the new addresses of these parties during the assessment proceedings along with the confirmations, ledger account, capital account, bank statement, Income Tax Return and computation of income. All these persons are assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee. The transactions have been made through account payee cheques and the bank accounts have not been credited with any cash deposits. The loan amount has also been repaid during the subsequent assessment year. In view of the above facts, we note that assessee has discharged the onus of proof and therefore the addition made by the assessing officer and the consequent disallowance of the interest were rightly deleted by ld CIT(A). That being so, we decline to interfere in the order of the Ld. CIT(A), his order on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn of income by showing income under section 44 AD of the Act. Further, it was noticed that both the parties have shown total turnover just below auditable limit of Rs.60 lacs and the whole transactions were shown to have been done exclusively with the assessee only. Accordingly, with a view to further verify the genuineness of the purchases shown by the assessee, summons under section 131 of the Act were issued to these parties and in response; they have attended the proceedings before the Assessing officer. The statement, on oath was recorded of these parties. In the statement recorded on oath, Shri Chandresh S. Dalal categorically admitted that he is engaged in the work of part time Accountant for certain parties and derives income there from. He has also stated that he has done the work of part-time accountant for the assessee. He further categorically admitted that he and his wife Smt. Damini Dalal has never done any business of textile items or cloth with any party or the assessee. After recording the statement, an opportunity of cross examination of Shri Chandresh Dalal was provided to the Authorized Representative, as well as to the husband of assessee. However, assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses with a view to reduce the tax incidence. The books of the accounts of the assessee are therefore found to be unreliable to this extent. The book results were therefore rejected to this extent in accordance with the provisions of Section 145(3) of the Act and the income of the assessee is computed under Section 144 of the Income Tax Act. In view of the above, purchases of Rs.56,48,508/- alleged to have been made from Chandresh D Dalal at Rs. 58,23,095/- alleged to made from Damini C. Dalal totaling to Rs.l,14,71,603/- ( Rs.56,48,508 + Rs. 58,23,095 ) was treated bogus and added to the total income of the assessee. 7. Aggrieved by the order of the Assessing officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition made by the Assessing officer. Aggrieved the Revenue is in appeal before us. 8. Before us, Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. On the other hand, the learned Authorized Representative (in short the ld. AR ) of the assessee relied on the order of ld CIT(A). 9. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s S Dalal and Smt. Damini C Dalal recorded on 21.03.2014, the Assessing officer offered for cross examination. The assessee had submitted before the Assessing officer the copy of the ledger account with contra confirmation, PAN card, ITR-V acknowledgment computation of income, bank statement showing entries of payment receipts and sale bills/delivery challans duly signed by the authorized signatory of the seller in support that the purchases made by these two parties were genuine. It was contended that the assessee request to produce the party for cross examination on 24.03.2014, which was declined by the Assessing officer. It was contended that the assessee had made a total purchase of Rs. 8,27,50,188/- during the year and the notices u/s 133(6) were issued to various parties who had confirmed the transactions except for the two parties. The total payments of the purchases have been made by the account payee cheque and the payments are duly reflected in the bank statement of the purchase parties. The Assessing officer provided the copies of the statement on oath on 04.03.2014 and the request of the assessee vide letter dated 11.03.2014 and 24.03.2013 to cross examination were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Shri Chandres Dalal and Smt. Damini Dalal during the course of the assessment proceedings. The statement on oath of these two persons have been examined wherein in response to question no. 21 to 27 Shri Chandres Dalal had submitted that he has not done any business with Ruchi Sarees and he used to give signed blank cheques to a person from Ruchi Sarees and the amount was withdrawn against blank cheques from his account. The two bank accounts statement of these two persons in the OBC Ring Road, Surat (account no. 01022010001820 in the name of Chandres Dalal and the account no. 01022010054190 in the name of Smt. Damini Dalal was examined. In order to ascertain the claim of the assessee that the payment have been made through account payee cheques to these two parties against the purchases, the Assessing officer was directed u/s 250(4) of the Act on 13.11.2015, to conduct inquiries regarding the clearing of the cheques issued by these two parties to verify whether the payments have been withdrawn through clearing/cash withdrawals back to the assessee or not. Therefore, the directions u/s 250(4) of the Act was issued by ld CIT(A), directing the Assessing officer to furnish the follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f remand report, which is reproduced below: As per your directions photo copies of the cheques are collected on test check basis from the OBC Bank Surat by which purchaser shri Chandresh D Dalal Smt Damani C Dalal have issued the account payee cheques to the various parties. Details of which are as under: Shri Chandresh D Dalal (OBC bank account no. 01022010001820 Sr. No. Cheques no. Date of withdrawals Amount of withdrawals Name of the party to whom cheques have been issued 1. 421008 18.11.2010 108045/- Nidhi Corporation 2. 421009 18.11.2010 106250/- Nidhi Corporation 3. 421010 18.11.2010 110825/- Nidhi Corporation 4. 430732 18.11.2010 107755/- Nidhi Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gopi Handworks 8. 423711 18.12.2010 118452/- Raj Fashion 9. 423712 18.12.2010 117218/- Raj Fashion 10. 423713 18.12.2010 115650/- Raj Fashion 11. 423714 18.12.2010 117325/- Raj Fashion 12. 434249 22.12.2010 135412/- Bajrangbali Agency 13. 434248 22.12.2010 136457/- Bajrangbali Agency 14. 434247 22.12.2010 133353/- Bajrangbali Agency 15. 434241 22.12.2010 97265/- Bajrangbali Agency 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 179147/- Poonam Dyeing and printing mills Pvt Ltd Photo copies of the cheques collected from the bank are enclosed as under: Shri Chnadresh D Dalal (Annxure A) Smt Damini C Dalal (Annexure B) In this connection it is submitted that photo copies of above mentioned cheques are enclosed for your kind perusal and appropriate action. 14. The copy of the remand report was provided to the assessee. In response to that, the assessee vide, his letter dated 17.03.2016 submitted as follows: Please refer to your letter dated 14.03.2016 requiring assesses to furnish submission in regard to the remand report dated 11.03.2016. Assessing officer in the remand report has reported that from the bank accounts of Shri Chandresh D Dalal Shri Damini C Dalal the amount has been paid through account payee cheques to different purchase parties which proves the contention of the assessee as per his submission before your goodself. In the above connection, it is submitted that assessee has purchased the goods from Shri Chandresh D Dalal Shri Damini C Dalal which have entered the Stock Register. Assessee made the payments of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to withdraw the amount from the bank account of the two persons. Hence, ld CIT(A) deleted the addition made by the assessing officer on account of bogus purchases of Rs.1,14,71,603/-. 16. We note that Hon`ble High Court of Gujarat in the case of Nangalia Fabrics (P) Ltd, [2013] 40 Taxmann.com 206 (Guj) held that where purchases were supported by bills, entries were made in books of account and payment was made by cheques, said purchases could not be held as bogus purchases. The findings of the Hon`ble Court is reproduced below: 3. The question pertains to the purchases made by the assessee-respondent. On account of unverifiable purchases, the Assessing officer made additions to the tune of Rs. 1.27 crores. He was of the opinion that none of the parties could be located and therefore, such purchases were held to be bogus. When it was challenged before the CIT(A), the CIT(A) was of the opinion that they could not be held bogus as the corresponding sales had been effected by the respondent in the next year. In subsequent year also and in the past, such purchases were made which were never questioned. When challenged before the Tribunal on the basis of the facts presented bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the books of accounts were bogus entries. Thus, we have observed that purchases are supported by bills, there is entries in the books of account, payment was made by account payee cheques and assessee maintains quantitative details, and we also noted that Assessing officer did not find any inflation in purchase price. Besides, Assessing officer has failed to prove that payment made by assessee for these purchases came back to assessee in cash. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue is dismissed. 18. Now, we shall take Ground No.2 raised by the Revenue, which relates to deletion of addition of Rs.1,23,00,00/- made on account of unexplained, unsecured loan and addition of Rs.2,76,499/- made on account of disallowance of interest thereon. 19. Succinct, facts of the issue under consideration are that during the assessment stage the assessing officer noticed that the assessee had taken unsecured loans of Rs.1,87,37,285/- from various persons. The assessing officer issued notices to some parties u/s 133(6) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all these parties are filing their return regularly and the loans have been given through banking channels and have also been repaid in Financial Year 2011-12. It was submitted that the 4 parties namely, Pritesh Gajjar, Kokila Patel, Mahesh Patel etc had filed an affidavit retracting their earlier statement recorded before the assessing officer on 20.03.2014. The ld Counsel contended that assessee had filed the confirmation to all the parties and the payment have been received through account payee cheque and therefore the had discharged the onus of proof regarding the identity, capacity and genuineness of the transaction. 23. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that, on the perusal of the details filed by the assessee during the appellate proceedings, the Ld. CIT(A) observed that out of fourteen (14) parties to whom summons were issued u/s 131, summons were served on four (4) parties who submitted their reply and their st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, ledger account, capital account, bank statement, ITR return and computation of income. All these persons are assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee. These persons have in filing return of income for the past many years as per the ITD Data Base which was got verified. The transactions have been duly reflected in their financial statements. The transactions have been made through account payee cheques and the bank accounts have not been credited with any cash deposits. The loan amount has also been repaid during the subsequent assessment year. Therefore, the identity, creditworthiness and genuineness of the transactions have been proved. 26. On similar facts, the Hon`ble High Court of Gujarat in the case of Ayachi Chandrashekhar Narsanhji, [2014] 42 taxmann.com 251 (Guj), held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. Findings of the Hon`ble court is reproduced below: 5. Heard Shri Pranav Desai, learned Counsel appearing on behalf of the revenue. The only contention on behalf of the revenue is that on the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to further prove the genuineness and creditworthiness of the creditors. 15. In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees, whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. 16. Once the Assessing officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing officer of the lenders of the assessee, the Assessing officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing officer did not follow the principle laid down under Section 68 of the Income Tax Act. 17. If on verification, it was found that those lenders did not disclose in their incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted repayment of loan in subsequent year. The assessee provided the assessing officer, the new addresses of these parties during the assessment proceedings along with the confirmations, ledger account, capital account, bank statement, Income Tax Return and computation of income. All these persons are assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee. The transactions have been made through account payee cheques and the bank accounts have not been credited with any cash deposits. The loan amount has also been repaid during the subsequent assessment year. In view of the above facts, we note that assessee has discharged the onus of proof and therefore the addition made by the assessing officer of Rs.1,23,00,000/- and the consequent disallowance of the interest of Rs.2,76,499/- were rightly deleted by ld CIT(A). That being so, we decline to interfere in the order of the Ld. CIT(A), his order on this issue is hereby accepted and grounds of appeal raised by the Revenue is dismissed. 29. In the result, the appeal filed by the Revenue is dismissed. Order is pronounced on 22/03/2021 by placing record on Notice Board. - - Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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