TaxTMI 
TaxTMI 
2018 (11) TMI 590
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the assessee is an individual engaged in the business of real estate. He declared income of Rs. 15,56,530/- in the return of income filed on 13.10.2006. Case selected for scrutiny. Notices u/s 143(2) and 142(1) of the Act were duly served upon the assessee. Ld.A.O while examining the financial statements noticed that certain unsecured loans were taken during the year from four parties for a total amount of Rs. 1,02,00,000/- and interest of Rs. 6,14,855/- was paid thereon. In order to satisfy about the identity, genuineness and creditworthiness of alleged unsecured loans, Ld.A.O called for various information which were duly supplied by him. Ld.A.O linked the alleged cash creditor companies as part of Lunkard Group of Companies on which survey was conducted u/s 133A of the Act on 2.5.2006 wherein it was noticed that some of the group companies are alleged to be in the practice of providing accommodation entries. Ld.A.O gave his finding of fact that the alleged cash creditor companies which gave loan to the assessee were not part of the group of companies held by the Lunkard Group but they were in association with the Lunkard Group of companies. Though the assessee furnished all n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Income as per return Rs. 27,72,380/- Add: 1. Addition U/s 68 of the I.T. Act, 1961 Rs.1,25,00,000/- 2. Interest on the loans Rs. 5,55,875/- 3. Expenditure incurred for procuring loans Rs. 6,25,000/- Total assessed income Rs.1,64,53,255/- 6. Aggrieved assessee preferred appeal before the Ld.CIT(A) for Assessment Year 2006-07 and 2007-08. Ld.CIT(A) deleted the addition relating to unexplained cash credit and interest paid there on and unexplained expenditure along with the relevant ground raised by the assessee. However the addition for disallowance of deduction u/s 24 claimed by the assessee on the rental income was sustained at Rs. 7,92,350/-. 7. Now both the revenue and assessee are in cross appeal for Assessment Year 2006-07 and revenue appeal for Assessment Year 2007-08. 8. We will first take up revenue's appeals I.T.A.No.382/Ind/2014 & I.T.A.No. 383/Ind/2014 raising following common ground for Assessment Year 2006-07 and 2007-08 respectively. "1. Deleting the addition of Rs. 1,05,00,000/- & Rs. 1,25,00,000/- for A.Y. 2006-07 & 2007-08 respectively. That on the facts & circumstances of the case, the identity, creditworthiness and g....
X X X X Extracts X X X X
X X X X Extracts X X X X
....; 1. Mod Creations (P) Ltd V/s ITO 354 ITR 282 (Delhi) 2. CIT v/s Peoples Gen. Hospital Ltd 356 ITR 65 (M.P) 3. CIT v/s Kinetic Cop Finance 354 ITR v/s 296 (Delhi) 4. Gangeshwari Metal (P) Ltd Income-tax Act, 1961, 597/2012 order dated 21.01.2013 (High Court of Delhi) 12. We have heard rival contentions and perused the records placed before us and gone through the judgments carefully. Revenue is aggrieved with the deletion of following additions by Ld.CIT(A) made by the A.O for Assessment Year 2006-07 and 2007- 08 for the alleged unexplained cash credit and interest paid there on and undisclosed expenditure for procuring accommodation entries. S. No. Name of the Company Unsecured loans taken Interest paid 1 Trimurti Finvest P.Ltd 30,00,000/- 1,65,040/- 2 Purvi Finvest Ltd 5,00,000/- 63,782/- 3 K.K. Patel Finance Ltd 40,00,000/- 3,08,740/- 4 East West Finvest India Ltd 27,00,000/- 77,293/- 1,02,00,000/- 6,14,855/- Addition of Rs. 5,25,000/- made for Assessment Year 2006-07 for procuring loans. S. No. Name of the Company Unsecured loans tak....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al found in survey, who according to AO was evading appearance. AO could not furnish final remand report despite giving opportunities on 10-12-2010, 08-01-2013, 09-10- 2013, 31-10-2013, 23-12- 2013, 17-01-2014 and 21-02-2014. According to appellant case of Narmada Extrusion P. ltd. is not applicable to their case, as that was regarding addition of share capital while appellant's case is that of receiving of unsecured loans, wherein identity of all depositors is established, as they are assessed to tax and even assessment made is] s 143(3) in case of depositors is also filed. They further submitted that AO framed assessment assuming that various depositors were of Lunked group, but none of these companies belong to Lunkad group as they are belonging to Darak group. 7. I have gone through the arguments of both AO as well as that of appellant. Since all the depositors have confirmed about giving such deposits, the amounts were given 'through account payee cheques, the depositors were all filing returns of income, proof of which is furnished and even bank statements of depositors were furnished and in such bank accounts of depositors, no cash deposits were seen. Furthe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....annot be acted upon, then no addition can be made in hands of appellant vi] s 68 as held in case of Gangehwari Metal P. ltd (2013) 214 Taxman 423 (Del). In this case it was noted by the Hon'ble judges that AO sat with folded hands till the appellant exhausted all the evidence or material in his possession and then came forward to merely reject the same on .the presumptions. In such an eventuality no addition can be made u/ s 68 of LT. Act. 9. On the basis of facts of the case and relying on various case laws discussed above the addition of unsecured loans Rs. 1 ,05,00,000 1- & Rs. 1,25,00,0001- and interest on such loans of Rs. 6,14,855/- & Rs. 5,55,875/- In AY 2006-07 & AY 2007-08 is deleted. Gr. No. 1&2 of appeal are allowed." 15. It is also observed that Ld. Counsel for the assessee placed heavy reliance on the decision of the Indore Tribunal in the case of ACIT V/s Girish Kumar Sharda (supra) wherein similar issue of unexplained cash credit from the same set of four companies came up for adjudication and the Tribunal dismissed the revenue's appeal observing as follows; "9. Rival contentions have been considered and records perused. From the record, we f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee, wherein similar additions were deleted by observing that these additions were not warranted in the hands of the assessee but in the hands of the lenders. During the course of hearing, the Ld. CIT DR drew our attention to the order of the Tribunal, in the case of Asstt. CIT Vs. Narmada Extrusion Ltd. (2012) 19 ITJ 202 (Trib.-Indore), Order dated 30.12.2011, wherein the Tribunal have observed that the Ld. CIT(A) was not justified in deleting the addition on the ground that the addition is to be made in the hands of the person who has given the loan and not in the hands of the beneficiaries. It is clear from the order of the Tribunal in that order of the Ld. CIT(A) was reversed on the issue of taxability of the impugned amount in the hands of creditors or assessee who was beneficiaries. The Tribunal have held that amount is required to be added in the hands of the beneficiaries, thus, reasoning given by the Ld. CIT(A) was not accepted. However, in this order of Narmada Extrusions (supra), the Tribunal have also dealt with the merit of the addition and found that addition to be restricted to the extent of entries found in the material collected during the course of survey at Lun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....through account payee cheques. 16.As per material placed on record, we found that the Ld. Assessing Officer has not made any efforts by calling information Vis 133(6) or by issuing summon VIS 131 to any of the creditors which is evident from the, assessment order itself. Moreover, it is also clear from the assessment order that the Assessing Officer had never asked the assessee to produce the creditors. 17.As per requirement of Section 68 the sum credited in the books of accounts can be considered to be the income of the assessee in a case where the assessee does not offer any explanation or the explanation offered by him, in the opinion of Assessing Officer is not satisfactory. The explanation of the assessee in the present case is that all these creditors are income tax assessees and their PANs have given alongwith their copy of bank account as well as preceding years. By filing these evidences, it can be said that the assessee had is charged the initial burden laid upon him under Section 68. When the particulars regarding income tax assessment and bank account, audited balance sheet duly indicating advancing of loan to the assessee, have been filed then initial....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts unnecessarily gone on the fact that these creditors are not having sufficient income to advance the money. It is settled law that the financial worth of a company could not be judged with its income but one has to see that how many funds is available with it in the bank account at the time of advancing loan. 21.It was also contention of Ld. Authorized Representative that the Ld. CIT(A) has rightly deleted the addition by relying on various decisions gi yen in his order in addition to that reliance was also placed on the following decision :- (a) CIT v. Orissa Corporation P. Ltd., (1986) 159ITR 78 (SC) (1986) 52 CTR 138 in the instant case, the Hon'ble Apex Court held as under : "In this case, the assessee had given the names and address of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit worthy or were such who could advance the alleged loans. There was no effort made to pursue the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....question were found and seized from the premises of the assessee. 16. Examining the fact of instant appeal for Assessment Year 2006-07 and 2007-08 in the light of the above judgment of the Co-ordinate Bench in the case of ACIT V/s Shri Girish Kumar Sharda (Supra), we find that the same set of companies i.e. M/s. K.K. Patel Finance Limited, Indore, M/s. East West Finvest India Limited, Indore, M/s. Purvi Finvest Ltd, Indore and M/s. Trimurti Finvest Ltd, Indore are in question before the Tribunal in the instant two appeals before us. It has been clearly held by the Hon'ble Tribunal that all the alleged four companies are genuine and unsecured loans from these companies cannot be held to be unexplained cash credit u/s 68 of the Act. Even the linking of the assessee's case to the Lunkard Group was there in the case of ACIT V/s Girish Kumar Sharda (supra) and detailed finding has been given by the Tribunal in its order dated 30.1.2014. It is also evident from the perusal of the record that all the four companies are regularly assessed to tax and their assessment u/s 143(3) of the Act have been framed for Assessment Year 2006-07 and copies of the same are placed at page 66-73 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee is engaged in the real estate business. Some immoveable property which remains unsold are part of the closing stock. As these properties could not be sold the assessee leased them for earning rental income to various consultants. The rental income received at Rs. 26,87,635/-has been shown under the head income from house property and deduction u/s 24 of the Act @30% of the rent received was claimed at Rs. 7,92,350/-. Ld.A.O took a view that the main activity of the assessee is of real estate business and leased out properties were commercial complex, therefore the alleged receipt of Rs. 26,87,635/- is a business receipt and no deduction is allowable u/s 24 of the Act. Appeal filed by the assessee before the Ld.CIT(A) find no favour to the assessee. 22. Now the assessee is in appeal before the Tribunal. 23. Ld. Counsel for the assessee has made following written submissions in support of his contention that the rental income from the said unsold immoveable property is being regularly shown under the head income from house property and deduction u/s 24 of the Act have been claimed consistently. In the subsequent years also this claim has been allowed by the revenue ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....state Pvt. Ltd Vs CIT (2013) 352 ITR 82(Cal) iii) New Delhi Hotels Ltd. V(2014) 360 ITR 187 (Del) 24 Per contra Ld. Departmental Representative vehemently argued and supporting the orders of both the lower authorities. 25. We have heard rival contentions and perused the records placed before us. The sole grievance of the assessee relates to the eligibility of the deduction u/s 24 of the Act @30% from rental income from house property. The assessee is engaged in the business of real estate and some part of the constructed area which remain unsold were being rented out. The rented immoveable properties are included in the closing stock of the company. Now whether the rental income received from such immovable properties which are part of the business stock are to be taken as business income or from house property. The above question needs to be adjudicated in the light of judicial pronouncements of Hon'ble Apex Court in the case of East India Housing and Land Development Trust Ltd (Supra) wherein Hon'ble Apex Court has categorically held that "the income derived by the company from shops and stalls was income received from house property and fell under the spec....