TaxTMI 
TaxTMI 
2022 (10) TMI 227
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.... under section 68, in this year and in all subsequent three assessment years, the assessing officer disallowed the interest expenses. In this appeal, the assessee has raised following grounds of appeal: "1. The Hon'ble CIT(Appeals)-II, Surat was not justified in confirming the disallowance of interest expenses of Rs. 80,811/- under Section 68 of the Income Tax Act, 1961. 2. The Hon'ble CIT(Appeals)-II, Surat was not justified in confirming the addition made of Rs. 26,00,000/- on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961. 3. The appellant reserves the right to add, alter, amend or withdraw any grounds of appeal." 3. The assessee vide application filed on 20/05/2022 raised following additional ground of appeal: "The ld. Income Tax Officer has erred in reopening of the case u/s 147 of the Income-tax Act, 1961 and in issuing notice u/s 148 of the Act particularly when the original assessment was completed u/s 143(3) of the Act." 4. Brief facts of the case are that the assessee company filed its return of income on 28/09/2012 declaring total income of Rs. 4,20,570/-. The case of assessee was selected for scrutiny and assessment was....
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....s repaid on 14/6/2014 whereas the other loan from Shri Ramesh Rangildas Mehta was taken from his proprietary firm Sunit Trading Company on 30/12/2011 and it was paid on 14/6/2014. There is no allegation of cash deposit against the assessee. The assessee further submitted that the proprietor/director of assessee company (Ruchi Sarees) also taken loan from Shri Maheshbhai Tulshibhai Patel. The same was added in her income under Section 68, however, the addition was deleted by the ld. CIT(A) in appeal No. CAS/II/105/2014-15 as the identity, creditworthiness and genuineness of transaction was proved. Copy of order of ld. CIT(A)-II, Surat was also filed. The assessee also submitted that one of the Director of assessee company also availed loan from Shri Ramesh R Mehta and was paid in A.Y. 2012-13 and Shri Ramesh R Mehta has given loan of Rs. 16.00 lacs to assessee out of fund received from Ruchi Sarees. The assesse also relied upon the decision of Hon'ble Jurisdictional High Court in the case of CIT Vs Ayachi Chandrasekhar Narsangji (2014) 42 taxmann.com 251 (Gujarat) and in DCIT Vs Rohini Builders 256 ITR 230 (Guj). The Assessing officer further noted that the assessee sought cross exa....
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....hbhai Tulshibhai Patel to provide loan to the assessee on 26/12/2011. The Assessing Officer made addition in case of Ruchi Sarees for A.Y. 2011-12 which was deleted by ld. CIT(A), so the source of fund is established. Both the persons might be involved in cheque discounting business, but that does not mean that they cannot have surplus fund and provide that surplus fund as a loan to the assessee. In case of assessee, fund was received and was paid through banking channel. In only cheque discounting business transaction, amount received is never repaid which clearly proves the genuineness of transaction. In case of assessee, first the loan was given by both the parties and it was paid with interest. The submission with explanation of assessee was not accepted by the Assessing officer and held that both the persons who were involved in cheque discounting stated that they have not advanced any loan to the assessee and it was mere entries. The mere payment of cheque is not sacrosanct nor can it make a non-genuine transaction as genuine. The Assessing officer treated the transaction of loan as unexplained cash credit under Section 68 of the Act in the assessment order dated 31/08/2017. ....
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....on, the ld. AR of assessee submits that the facts related to validity of reopening is available on the assessment record and they are not bringing any new facts on record. All the facts are emanating from the order of Assessing officer and the ground of appeal raised by assessee goes to the root of the case. 8. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. We find that the case of assessee was reopened within four years from the end of the relevant assessment year. The case of assessee was reopened on the basis of information of DDIT (Inv.), Surat that the assessee is a beneficiary of cheque discounting transaction. We further find that before the Assessing officer, the assessee has filed objection against the reopening which was disposed of by the Assessing officer in a speaking order. No such ground of appeal was raised by assessee before the ld. CIT(A). Thus, the ld. CIT(A) have no occasion to consider such fact on validity of reopening under Section 147 of the Act. Even otherwise, we find that the assessee has not placed on record the copy of rejection of objection filed by Assessing officer to subs....
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....ven out of credit in his bank account of Rs. 17,24,511/- on 24/11/2012. The credit in the lenders' bank account was also on account of loan returned by the sister concern of assessee firm Ruchi Sarees (proprietary concern of Anuradha Agarwal). During the reassessment proceedings, the assessee furnished complete details of loan which was accepted as genuine in the original assessment. The case of assessee was reopened on the basis of statement of third party, which was not supported by any material or evidence. In fact, in the statement, both the lenders stated that they were involved in cheque discounting business. No independent investigation was carried out by the Assessing Officer. Both the lenders in their return of income has shown income either from civil contractor or as a civil work. The assessee was required to prove the identity, creditworthiness and genuineness of transactions. The identity of the persons was not in dispute. The assessee has shown the source of lender having sufficient credit. To prove the genuineness, the assessee shown that the interest payment was made by deducting tax at source till the repayment of loan. Thus, the assessee has proved all three condi....
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....as dismissed. 10. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR submits that the assessee was the beneficiary of accommodation entry provided by Shri Maheshbhai Tulshibhai Patel and Shri Ramesh Rangildas Mehta, proprietor of Sunit trading company. The statement of both the persons who have given alleged unsecured loans were recorded by the Assessing Officer and they have categorically contended that they were engaged in cheque discounting business and provided accommodation entry. The assessee was given opportunity to cross examine such witnesses. The ld. Sr. DR submits that in first year i.e. in A.Y. 2012-13, the Assessing Officer made addition under Section 68 by treating the loan as unsecure cash credit and disallowed interest expenses. In all three subsequent years, the Assessing Officer disallowed interest expenses. 11. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied upon by the ld. AR of the assessee. We find that the case of assessee was reopened on the basis of information received ....
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....of transactions. 13. Before us, the ld. AR of the assessee vehemently submitted that the credit in the bank of lender was on account of unsecured loan returned by Ruchi Sarees, a group concern of assessee. We find that in case of Anuradha Agarwal, who is proprietor of Ruchi Sarees, the Assessing officer made similar addition, however, on appeal before the ld. CIT(A), the additions were deleted and on further appeal before the Tribunal, the appeal of revenue was dismissed. In our view all these submissions of ld AR for the assessee strengthen the case of the assessing officer and the stand of money lender that it was a circular transaction. 14. We find that in the present case the assessing officer has brought sufficient evidence on record to prove the transaction of loan being sham transaction by examining the lender that they were actually engaged in providing mere entry by circular transactions. The assessee was given sufficient opportunity for cross examination of the lender, the lender in their cross examination retreated that they had provided accommodation entry. Such evidence cannot be ignored by us. 15. The ld AR for the assessee vehemently argued that the amount of loan....