Gujarat High Court

The Principal Commissioner Of ... vs Gopal Heritage P. Ltd. on 13 September, 2021

Bench: Sonia Gokani, Rajendra M. Sareen

     C/TAXAP/243/2021                             ORDER DATED: 13/09/2021




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                        R/TAX APPEAL NO. 243 of 2021

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            THE PRINCIPAL COMMISSIONER OF INCOME TAX 1
                              Versus
                       GOPAL HERITAGE P. LTD.
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Appearance:
MRS MAUNA M BHATT(174) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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 CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
       and
       HONOURABLE MR. JUSTICE RAJENDRA M. SAREEN

                              Date : 13/09/2021

                        ORAL ORDER

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. Following are the substantial questions of law raised in

the present appeal: -

"(A) Whether the Appellate Tribunal has erred in law on facts in deleting the addition of Rs. 3,25,29,000/- made under Section 68 of the Act on account of unexplained cash credit in the nature of unsecured loan received from three entities, namely, Shaan Leisure Ltd., GSM Infra Projects Ltd. and Manibhadra Tradelink Pvt.Ltd.?

(B) Whether the Appellate Tribunal has erred in not appreciating that mere factum of filing return of income does not ipso facto lends credence to the creditworthiness of a party?

(C) Whether the Appellate Tribunal has erred in law and on facts in deleting the addition by ignoring that the lenders had filed Return of Income declaring very meagre taxable/operational income which casts aspersions on the capacity of such lenders to advance such huge amounts to the

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

assessee?"

2. The brief facts leading to the present appeal are as

follows: -

2.1. The Assessing Officer had made an addition of

Rs.4,03,34,000/- under Section 68 of the Income Tax Act,

1961 (hereinafter referred to as 'the Act') in respect of six

parties. The Revenue is aggrieved by the decision of the

Appellate Tribunal only in respect of unsecured loans received

from Shaan Leisure Limited, GSM Infra Projects Limited and

Manibhadra Tradelink Private Limited.

2.2. According to the Assessing Officer, the assessee had not

been able to prove the immediate source of cash in the hands

of the party. From the audit balance sheet and profit and loss

account of the previous year, it held that the company had no

fund of its own and the net worth of the company was

negative. Thus, Assessing Officer was of the opinion that the

assessee was not in a position to establish the capacity and

creditworthiness of the depositor and thus, made an addition

of Rs. 1,25,64,000/- in case of Manibhadra Tradelink Private

Limited. The Assessing Officer observed that the depositor

had filed return of income on 18.12.2013 declaring the income

of Rs. 15,426/- only and the assessee failed to file the audited

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

balance sheet and profit and loss account of the depositor

company.

2.3. In GSM Infra Projects Limited, according to the

Assessing Officer, there is no explanation regarding

immediate source of funds in the hands of the depositor

company till the depositor had declared the income at

Rs.4,334/-.

2.4. When challenged before the CIT(Appeals), it deleted the

addition by making following observations: (i) the depositor

was regularly assessed to tax and filing of its return of

income. There is no evidence brought by the Assessing Officer

on record which could support the contention that the amount

received from the depositor was income of the assessee; (ii)

that the loans have been granted through banking channels

and, in support, copy of the bank statement was provided by

the assessee; (iii) in the event of any doubts with regard to the

cash deposits in the banks of the depositors, the action can be

taken against them, but, no adverse view could be taken at

the ends of the assessee. It held that once the assessee

discharges the primary onus cast upon it by submitting the

copy of supporting documents in form of confirmation, copy of

bank statement and return of income, the onus would shift

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

upon the Assessing Officer to make further inquiries through

issuing summons and notices under Section 133(6).

2.5. When challenged before the Appellate Tribunal, it

concurred with the view of the CIT (Appeals). The same has

been challenged before this Court with the aforementioned

substantial questions of law.

3. We have heard both the sides. At the outset, the decision

of the Apex Court in case of Omar Salay Mohamed Sait vs.

Commissioner Of Income-Tax, reported in (1959) 37 ITR

151 (SC) requires reference which holds that the ITAT is a

fact finding tribunal and once it arrives at any conclusion after

due consideration of evidence, this Court is not to interfere.

What is required is to consider every fact with due care and

the Tribunal is required to give its findings on the questions

which arise for determination along with the evidence pro and

contra in regard to each one of them. The findings reached on

the evidence on record before it and the conclusions reached

by the Tribunal should not be coloured by any irrelevant

considerations or prejudice and if there are any circumstances

which are required to be explained by the assessee, the

assessee should be given an opportunity of so doing.

4. We could notice that the assessee and the Revenue

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

preferred cross appeals against the order of CIT(Appeals),

Ahmedabad-II for the assessment year 2012-13. In Revenue's

appeals, the Tribunal examined the grievance of the Revenue

of CIT(Appeals) having deleted the addition of Rs.

4,03,34,000/- which was added by the Assessing Officer with

the aid of Section 68 of the Act. It was revealed to the

Assessing Officer that assessee had taken unsecured loans of

the said amount from the following persons: - (1) Mit G. Shah

- Rs. 5,75,000/-, (2) Sejal Shah - Rs. 67,30,000/-, (3) Shaan

Leisure Ltd. - Rs. 1,07,05,000/-, (4) GSM Infra Projects Ltd. -

Rs. 92,60,000/-, (5) Yuva Sports Academy Pvt. Ltd. - Rs.

5,00,000/-, and (6) Manibhadra Tradelink Pvt. Ltd. - Rs.

1,25,64,000/-. The Assessing Officer directed to submit the

identity of the creditors, their creditworthiness and

genuineness of the transactions and since when he

disbelieved the creditworthiness of the creditors, he made the

additions.

4.1. The CIT(Appeals), as could be noticed, threadbare

examined the entire material in case of each of these persons

and entities and eventually held that the identity of the

depositors had been proved as they had filed the return of

income along with the PAN. Moreover, loans have been

granted through banking channels and in respect of the same

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

copy of the bank statement also has been provided and hence,

genuineness also has been believed by the CIT(Appeals) and

further the return of income had been filed by the said

depositors and hence, the creditworthiness also has been

proved. The appellant provided a copy of audited balance

sheet and profit and loss account for the year under

consideration in respect of depositors to the Assessing Officer

and after verification, the Assessing Officer has the only

objection that the company was not having fresh funds in its

books of accounts and negligible operational income was

derived.

4.2. The CIT(Appeals) has rightly opined that since the

depositor company had duly recorded the deposits/loans given

to the appellant in its books of accounts out of its own funds

or borrowed funds, no addition in the hands of the appellant is

permissible so far as the transactions are recorded in the

books of depositor company.

4.3. It relied on the judgment of the Apex Court in case of

CIT vs. Orissa Corporation Pvt. Ltd. reported in 1986

(159) ITR 0078 to hold that once the appellant duly

discharges the primary onus cast upon it by making available

the details and copies of supporting documents in the form of

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

conformation, copy of bank account and return of income, it is

for the Assessing Officer then to make further inquires

through issuing summons and notices under Section 133(6) to

the depositors for further verification, which in the instant

case, has not been done and for which the appellant could not

be held responsible. In case of every person and entity, it has

gone into these details and accordingly allowed the appeal of

the appellant.

4.4. The ITAT on detailed representation of this, concluded

thus: -

"11. A perusal of the finding of the ld. CIT(A) extracted (supra) it would reveal that the ld. CIT(A) has examined each transaction in detail in the light of conditions enumerated in section 68. For example, in the case of Shri Mit Gopalbhai is concerned a sum of Rs. 5,75,000/- was taken by the assessee as unsecured loan during this year. The ld. CIT(A) as a matter fact found that there was an opening balance as on 1.4.2011 at Rs.

1,77,24,000/-. Source of this opening balance was not doubted in the earlier assessment year. He has confirmed the transaction. He has given his identity and other details. The ld. CIT(A) was of the view that when such a huge amount received from this person in the last year can be treated as genuine, then why to doubt a small amount of Rs. 5,75,000/- in this year. It is also pertinent to note that the assessment order of Shri Mit G. Shah for the Asstt. Year 2012-13 passed under section 143(3) r.w.s. 147 of the Act has been placed on record by the ld. DR. This order has been passed on 3.10.2019 i.e. after decision of the ld. CIT(A) and nothing adverse could be collected by the AO. Similarly, the ld. CIT(A) has examined the facts with regard to Sejal G. Shah and observed that the

C/TAXAP/243/2021 ORDER DATED: 13/09/2021

assessee has fulfilled all necessary conditions contemplated in section 68 of the Act. We also find that the ld. CIT(A) has examined these details in light of decisions of the Hon'ble Gujarat High Court as well as of Hon'ble Supreme Court. The ld. CIT(A) has made reference to the ratio of law laid down in all these decisions from pages no. 22 to 27 of the impugned order, and we have gone through the proposition in these decisions and examined as to how the ld. CIT(A) has appreciated the facts of the assessee's case in the light of these propositions. After looking to the well reasoned finding of the ld. CIT(A) coupled with absence of any incriminating evidence in the subsequent assessment orders of the creditors, we are of the view that no interference is called for in the finding of the ld. CIT(A). This ground of Revenue is dismissed."

5. We could notice the concurrent findings of both the

authorities on facts which deserve no interference from this

Court. The ITAT as a final fact finding body, in absence of any

material under Section 133(6) with the AO, has chosen to

uphold the version of CIT(Appeals) which also elaborately

treated the material evidence and concluded with sound

reasoning. We do not see any reason for us to interfere as

addition contemplation was under Section 68 of the IT Act

which provides that any sum found credited in the books of

account of an assessee maintained for any previous year and if

the assessee does not offer any explanation about the nature

and source thereof or even when explanation is given and the