TMI Blog2023 (1) TMI 617X X X X Extracts X X X X X X X X Extracts X X X X ..... sitors. There is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that credit/ advance in the books of assessee was result of some circular transactions. We find that before granting relief to the assessee, the ld CIT(A) cross checked all such details, including the proof of repayment. - Decided in favour of assessee. - ITA No.126/SRT/2020 - - - Dated:- 11-1-2023 - Shri Pawan Singh, Judicial Member And Dr Arjun Lal Saini, Accountant Member For the Assessee : Shri Prakash G Jhunjhunwala, C.A For the Revenue : Shri H.P. Meena CIT-DR/Sh Ashok B. Koli, CIT-DR ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income-tax (Appeals)-1 Surat [for short to as Ld. CIT(A) ] dated 10.02.2020 for the assessment year 2016-17, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) of Income Tax Act, 1961 (hereinafter referred to as the Act for the sake of brevity) on 30.12.2018. The Revenue has raised the following grounds o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the view that such funds are in the nature of unsecured loan, so the claim of advances of funds were not accepted. On the contention of assessee that they have produced the vouchers of such advances for delivery of goods and the advances were repaid because sale was not realised. The Assessing Officer concluded that such contention confused the nature of money received by assessee as it is shown in Form 3CD as unsecured loan. 3. The Assessing Officer deputed Ward Inspector for verification of such parties at their respective given addresses. The Ward Inspector furnished his report dated 29.11.2018. The Assessing Officer recorded party-wise report of Ward Inspector in para-8.1 of the assessment order. The Assessing Officer recorded that in most of the cases, either the office of party, was closed or sign board of such company of entity was found or such parties were not available at the time of visiting of Ward Inspector. Thus the Assessing Officer doubted the identity of such lenders / deposits. On the creditworthiness of parties / lenders, the Assessing Officer prepared a summary of return of income as per the income tax return of party and the amount outstanding agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of assessee was selected for scrutiny. During assessment proceedings, the assessee furnished several documentary evidence to prove the identity, creditworthiness and genuineness of such transactions. The assessee has discharged its onus on furnishing name, address, PAN, CIN master data, confirmation of accounts and bank statement, acknowledgement of ITR of all the parties. All the parties furnished their reply and notarized affidavits in response to notice under section 133(6) of the Act. The assessee submitted that major funds pertain to advance received from customers against the supplies and since the sales did not materialize, the funds were refunded back to the respective customers. The assessee requested the Assessing Officer to provide the alleged piece of material and statements which is likely to be used against the assessee but no such material or piece of contrary evidence was provided to the assessee. The Assessing Officer relied only on the report of Ward Inspector who was unable to serve the notice under section 133(6) of the Act. The Assessing Officer ought to have considered the relevant replies, notarized affidavits and exhaustive documentary evidences. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at their given addresses and inquiries were made by Ward Inspector from the watchmen and not from office bears of society, where the office of taxpayers are situated. The assessee further stated that the allegation in the assessment order that their companies have no business relation with the assessee-company is totally incorrect for the reasons that assessee has received advance for supplying of goods / diamond, which was not materialized. Therefore, entire advances were immediately returned back but none of the parties were identified as hawala party or suspicious party involved in providing accommodation entries. The assessee reiterated that loans / advances received was returned back immediately, within a short span of period, which cannot be a case of accommodation entry, being a pure business transaction and deeming provision of Section 68 would not apply. 7. The Ld. CIT(A) after considering the contents of the assessment order and the submission of assessee directed the Assessing Officer to provide the Ward Inspector s report to assessee. The said report of Ward Inspector was provided to assessee. The assessee filed their objection / reply to the report of Ward Inspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal in the case of Kalubhai A. Dhamelia in ITA No.88/SRT/2018 dated 18.09.2018, wherein it was also held that repayment of loan / advance constitute evidence regarding genuineness of the impugned loan or advance. On relying such decision, the Ld. CIT(A) held that such binding decision are squarely applicable to the facts of the present case. The Ld. CIT(A) also examined the case from another angle and noted that one of the lender has shown gross receipt up to Rs.506.60 crores and subjected to tax audit report with individual and two more lenders, have gross receipt of Rs.500 crores and above another two lenders have turnover of more than Rs.100 crores; four lenders have their turnover of Rs.10 crores and further two lenders have their turnover of Rs.5.00 crores respectively. All the lenders filed their regular return of income, closing stock of substantial amounts, they have incurred expenses on personnel (employee s salary benefits) and administrative expenses. In some cases, on examination of bank account, statement shows that they contain large number of transactions like any business accounts. The Ld. CIT(A) after referring various other case law of Hon'ble jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance of such amount. Thus, genuineness of transaction was also not proved by assessee. The Assessing Officer thus made addition under section 68 of the Act. The assessee failed to discharge its onus during the assessment, however, the CIT(A), while giving relief to the assessee failed to appreciate that on physical inquiry made by Ward Inspector, none parties were found at their given addresses. So the Ld. CIT(A) failed to appreciate that identity of the parties were not proved, further none of the party having creditworthiness to make such payments. The assessee received unsecured loan without any collateral security or formal agreement and no interest was charged. The Ld. CIT(A) failed to appreciate that no reasonable explanation regarding creditworthiness of such parties were made by the assessee. The Ld. CIT-DR for the Revenue prayed to reference finding of Ld. CIT(A) and to restore the addition made by the Assessing Officer. The Ld. CIT-DR for the Revenue submits that statement of fact filed by Assessing Officer may also be taken into consideration. 10. On the other hand, the ld. AR for the assessee supported the order of Ld. CIT(A) and submits that during the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing than fact in the case of Ayachi Chandrashekhar Narsangji (supra). In the present case, the assessee refunded the amount to four lenders / depositors within one day, such repayment is nowhere doubted. Similarly, other repayments were also not doubted. 12. The Ld. AR for the assessee further submits that if the Assessing Officer was not convinced about the creditworthy of the lender / depositors, the addition was to be made in the hands of depositors / lenders as their complete details with PAN (s) were furnished and no such exercise was made by the Assessing Officer. The Ld. AR for the assessee further submits that once the relevant documents to prove the genuineness of such transactions are filed no addition is to be made against the assessee. To support such submission, Ld. AR for the assessee relied on the following case law: Dy. CIT vs. Rohini Builders 256 ITR 360 (Guj.) [SLP rejected by Hon'ble Supreme Court in 254itr 275 (St) CIT vs. Ranchhod Jivabhai Nakhava (2012) 208 Taxman 35 (Guj.) CIT vs. Jai Kumar Bakliwal (2014) 366itr 217 (Raj.) CIT vs. Avant Grade Carpets Ltd. (2015) 230 Taxman 165 (All.) 13. The Ld. AR for the assessee further submits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arsangji (supra), wherein it was held that when loan amount has been repaid by the assessee in the immediately next year and the Department has accepted the repayment of such loan without proving it, no addition can under section 68 can be made, deleted the entire additions. During the hearing, the ld AR for the assessee vehemently argued that the assessee received the said amount during the course of its business activities and the amount was return either within one or two days or in a span of very short period, for which the provisions of section 68 cannot be invoked. We find the ld AR for the assessee filed following summary of impugned deposits and refunds; Sr. No. Details of payers Details of trade advance received Details of trade advance repaid Repayment within Name Date of receipt Amount received Date of payment Amount Repaid 1. M/s Anushul Gems Pvt. Ltd. 20/08/2015 Rs. 31,00,000/- 21/08/2015 Rs. 31, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19/05/2015 Rs. 27,00,000/- 1/10/2015 Rs. 27,00,000/- 135 days 12. Rajen Vasant Dhruv 29/12/2015 Rs. 2,00,00,000/- 13/05/2016 16/05/2016 Rs. 1,00,00,000/- Rs. 1,00,00,000/- 138 days 13. M/s Osiaji Exports 22/03/2016 Rs. 49,54,500/- 22/03/2016 Rs. 49,54,500/- 1 day Total Rs. 11,57,79,500/- Rs. 11,57,79,500/- 16. A bare perusal of the aforesaid details makes it clear that the assessee has refunded the entire deposits either within in a day or in a week in respect of seven transactions. It was refunded in a maximum period of five months in respect of six transactions. Thus, no amount was left at the end of financial year. It is also matter or record that the repayment is not doubted by the assessing officer. The Hon ble Jurisdictional High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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