TaxTMI 
TaxTMI 
2016 (6) TMI 974
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.... 1. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the action of learned assessing officer in re-opening validly completed assessment of the assessee. 2. The Learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs. 15,65,000/- made by the assessing officer inspite of the fact that assessee had conclusively proved the source of investment made in the flat. 3. The Learned Commissioner of Income Tax (Appeals) has erred" in confirming the addition on irrelevant considerations." 3. The brief facts of the case are that the assessee filed his return of income on 20th June, 2007 which was processed u/s 143(1) of the Income Tax Act, 1961 on 6th July, 2007. The case was reopened u/s 147 of the Act after recording the reasons and with prior approval of the CIT dated 20th July, 2011. Statutory notice u/s 148 and 142(1) of the Act dated 21st July, 2011 along with questionnaire was issued and duly served on the assessee. The assessee in response submitted vide his letter dated 19th July, 2012 that the original return of income filed may be treated to have been filed in response to the notice u/s. 148 of the Act. D....
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.... that he has invested total amount of Rs. 66,08,512/- for the said flat and out of which an amount of Rs. 65,58,500/- was borrowed from M/s San Finance Corporation, Nagpur for purchasing the said flat. It was observed by the AO that the said loan amount was not routed through the assessee and the amount was directly paid by the said San Finance Corporation to Adarsh Co-operative Housing Society Limited and during the year an amount of Rs. 15,65,000/- was directly paid by the San Finance Corporation, Nagpur to the said society. Since in the opinion of the AO the assessee had not given proper evidence in support of his claim that the assessee has received the above amount as loan from San Finance Corporation , Nagpur and the same was invested in the above mentioned flat/property , the assessee was asked by the AO to explain as to why an amount of Rs. 15,65,000/- should not be added to the total income of the assessee as investment from unexplained sources u/s. 69B of the Act. The assessee in response submitted that the said amount was given by San Finance Corporation, Nagpur out of their funds directly to Adarsh Co- operative Housing Society Limited in respect to the afore-stated ....
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...., no addition should be made of the said loan given by the said San Finance Corporation to the assessee. The A.O. after considering the reply of the assessee held that the case laws relied upon by the assessee related to the unexplained cash credit u/s 68 of the Act while in this case, the assessee did not reflect any cash credits entries in the books of accounts of the assessee and the issue is regarding the partly recorded unexplained investment by the assessee which is covered u/s 69B of the Act whereby the investment has never been fully disclosed by the assessee. The assessee disclosed only Rs. 50,000/- investment in the Adarsh Co-Operative Housing Society Limited in the Balance Sheet and the loan from San Finance Corporation, Nagpur is also not reflected by the assessee as liability in the Balance Sheet filed along with the return of income with the Revenue, hence, the transaction cannot be accepted as genuine loan transaction due to the following reasons:- i) There is no proper structured loan agreement entered into between assessee and the lender; ii) The lender has not asked from the assessee for the collateral security; iii) The lender has not charged any inte....
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.... will directly pay the amount to the said society on behalf of the assessee. The written agreement containing all the terms will be signed in due course and in process a draft agreement was prepared to be approved jointly. But before it could be signed , then at the instance of Hon'ble Bombay High Court some enquiries were started and all the records of the society were seized by the CBI and since the issue has become sub-judice , no further action on the draft agreement was taken. The copy of draft agreement was submitted before the CIT(A). The photo-copy of confirmation letter from San Finance Corporation, Nagpur showing amount of loan, date, cheque/DD, name of the bank etc. were submitted before the CIT(A). The ledger extract of the assessee's account in the books of San Finance Corporation, Nagpur for the financial years from 2005-06 to financial year 2010-11 were also submitted before the CIT(A). The loan confirmation letter from San Finance Corporation, Nagpur for the period 01-04-2004 to 21-05-2012 containing its name, address & PAN duly signed and that the cheques were issued directly in the name of Adarsh Co-Operative Housing Society Ltd. by San Finance Corporation on beha....
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....ed that Section 69B of the Act is not applicable to the case of the assessee as there is no requirement cast under law on the assessee for maintenance of books of accounts keeping in view the affairs of the assessee and also it was not an intentional and purposeful default on the part of the assessee to have not reflected the said investment in the flat at Adarsh Co-operative Housing Society Limited and of the corresponding borrowings made from San Finance Corporation . The assessee submitted before the CIT(A) that in any case the assessee during re-assessment proceedings has come forward and has given sufficient documentary evidences to substantiate the raising of loan by the assessee. The assessee submitted the copy of loan confirmation letter of M/s San Finance Corporation, Nagpur dated 8-12-2010 along with copy of accounts for different years and the draft loan agreement have been furnished before the CIT(A) along with written submissions , which were forwarded by the CIT(A) to the A.O. for necessary verifications and investigations about the sources of funds and for submission of remand report. The A.O. submitted the remand report dated 1st July, 2013 to CIT(A) in which it ....
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....there being no loan agreement or non-payment of interest etc. will have no bearing on the matter involved in this case. The assessee again reiterated its submissions as were made earlier which are not repeated for sake of brevity. The CIT(A) after considering the facts on records, submissions of the assessee and the remand report of the A.O. , held that the assessee has invested an amount of Rs. 66,08,512/- for purchase of a flat in the said Adarsh Co-op Group Housing Society Limited, but the assessee has only disclosed Rs. 50,000/- in his Balance Sheet. As such the A.O. had strong reasons to believe that the income of the assessee has escaped assessment. The reasons of the re-opening were duly recorded after specific information. The original assessment was completed u/s 143(1) of the Act. There is no change of opinion. The CIT(A) held there is no infirmity in reopening of the assessment by the AO and the AO has validly initiated the proceedings u/s 147 and completed the assessment. With respect to the source of investment in the said flat at Adarsh co- operative Housing Society Limited of Rs. 15,65,000/- made during the instant year under appeal, it was held that the San Fi....
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....inance Corporation , no collateral securities have been taken by the said San Finance Corporation to secure the lending and no interest is charged on the said loans , thus this transaction is an unusual transaction , hence addition u/s 69-B of the Act is attracted as genuineness of the loan transactions is not proved. The CIT(A) directed AO to make verification and called for the remand report from the A.O. . The A.O. issued notice u/s 133(6) of the Act to the lender San Finance Corporation, Nagpur who has confirmed the transaction of having made direct payment to the society towards the purchase of the said flat by the assessee. The CIT(A) after considering the submission and remand report held that this is not a normal transaction and confirmed the orders of the A.O. . No action has been taken by the Revenue against the lender. The ld. counsel for the assessee stated that the finance company has given the loan directly to the Adarsh Co-operative Housing Society Limited. The assessee has only declared Rs. 50,000/- which is the initial payment made by the assessee in his Balance Sheet while the loan raised from San Finance Corporation is not reflected in the balance sheet which was....
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....at it has given deposit and advance of Rs. 32,37,432/- to the assessee as at 31.03.2007. 9. We have considered the rival contentions and also perused the material on record including the case laws relied upon by the rival parties. The Revenue has not filed any written submissions as was indicated during the course of hearing as set-out above , thus we are proceeding to adjudicate the instant appeal based on material and facts as are available presently on record. We have observed that the assessee has booked a flat in Adarsh Co- operative Housing Society Limited in the previous year relevant to the assessment year 2005-06 and payment of Rs. 50,000/- was made by the assessee towards membership fee which has been duly reflected in the Balance Sheet's filed by the assessee with Revenue . The assessee has stated to have raised loan from San Finance Corporation, Nagpur of Rs. 65,58,500/- as on 31st March 2011 which has been disbursed by San Finance Corporation, Nagpur over a period from the assessment year 2005-06 to assessment year 2011-12 by making direct payment to Adarsh Co-operative Housing Society Limited . The assessee has produced the loan confirmation letter dated 08-12-2010....
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....of the loan transactions on the ground that no structured loan agreement has been entered into between the assessee and the lender, no interest has been charged by the lender on the loans so disbursed, no collateral securities have been taken by the lender from the assessee to secure loan amount disbursed and no effort has been made by San Finance Corporation to recover the said loan and interest on these loans from the assessee and the assessee has also not made any re-payment of loan to San Finance Corporation till date. The assessee has also not declared these loans and investment in the afore- stated flat to the tune of Rs. 65,58,500/- in his Balance Sheet filed with the Revenue over the years and only initial payment of Rs. 50,000/- made by the assessee towards membership fee has been disclosed. The Revenue has thus doubted the genuineness of the loan transaction and it was incumbent on the assessee to give explanation not only to prove by cogent material identity and creditworthiness of the lenders but also it is incumbent on the assessee to prove the genuineness of the whole loan transactions as the said loan transactions were undertaken by the assessee and the primary onus ....
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.... 16,50,650.00 25 Mar, 2006 MBP M25032006 1 To Ch No. 158544 Paid Adarsh Co Op Housing 5,00,000.00 31 Mar, 2006 JV 31032006 77 Society Ltd Colaba Mumbai To advance paid transfer to Sanson Developers Properties A/c Total/Closing Balance 10,00,000.00 16,50,650.00 16,50,650.00 0.00 0.00 ----------------------------------------------------------------------------------------------- San Finance 06-07 31 Mar,2007 Ledger for the period 01 Apr, 2006 to 31 Mar,2007 Group : Assets Account selection:Selected transacted Accounts (All amounts in Rs.) Document Narration &n....
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....losing balance outstanding being receivable from assessee in the books of accounts of San Finance Corporation as at 31-03-2006 with respect to the said loans were reduced to 'Nil' by passing a journal entry by the said San Finance Corporation on 31-03-2006 titled ' To advance paid transfer to Sanson Developers Properties A/c-Rs.16,50,650' meaning thereby that the amount of Rs. 16,50,650/- which stood receivable from the assessee on account of said loans as on 31-03-2006 was reduced to ' Nil' by passing the above journal entry by making the corresponding debit entry to 'Sanson Developers Properties'. This balance outstanding of 'Nil' as on 31-03-2006 from the assessee in the books of accounts of 'San Finance Corporation' is not matching with the loan confirmation submitted by San Finance Corporation for the entire period 13-09-2004 to 21-05-2012 whereby this journal voucher entry is not reflected (PB,page 21). Similarly ,the perusal of the above ledger extract of San Finance Corporation for the financial year 2006-07 (paper book, page 24) reveals that the opening balance outstanding to be receivable from the assessee in the books of accounts of San Finance Corporation as at 01-04-20....
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.... Corporation was reduced to Nil as on 31-03-2006. It is almost after one year on 31-03-2007, the said amount of Rs. 16,50,650/- was transferred back to the debit of the assessee as being receivable by said San Finance Corporation by passing a journal entry on 31-03-2007 of the amount of Rs. 16,50,650/-. No clarification and explanation has been given by the assessee with respect to above entries. Revenue also has not made any enquiry and examination to understand the reason and purpose of transferring the entry by San Finance Corporation by debiting to the account of 'Sanson Developers Properties' as on 31-03-2006 with Rs. 16,50,650/- and removing the name of the assessee as borrower of the said loans from San Finance Corporation from its books of accounts as on 31-03-2006 and bringing the loan receivable from assessee to 'Nil' as on 31-03-2006 , before fastening liability on the assessee. Thus, in our considered view , it is very important to bring on record why the loan receivable from the assessee was reduced to Nil on 31-03-2006 by San Finance Corporation by transferring the outstanding loan receivable amount of Rs. 16,50,650/- from the assessee to the debit of said 'Sanson Dev....