INCOME TAX OFFICER Vs. BABULAL RAMPRASAD AGARWAL HUF
LAWS(IT)-2014-5-94
INCOME TAX APPELLATE TRIBUNAL
Decided on May 30,2014

INCOME TAX OFFICER Appellant
VERSUS
Babulal Ramprasad Agarwal Huf Respondents

JUDGEMENT

MUKUL KUMAR SHRAWAT,JM. - (1.) THIS is an appeal filed by the Revenue arising from the order of learned CIT(A) and the grounds raised are hereby decided as follows: "(1) The Ld. CIT(A) erred in law and on facts in deleting the addition of Rs.15,00,000/ - made by the AO on account of unsecured loan u/s.68 of the IT Act without properly appreciating the facts of the case and the material brought on record by the AO. (1.1) The Ld. CIT(A) -XVI, Ahmedabad has erred in law and on facts in stating that the statement relied upon by the AO cannot be made for addition without appreciating that the statement of Shri Ramdinesh Sharma recorded on oath during the course of survey proceedings is an extremely important piece of evidence wherein he has categorically stated that he was managing the business, operating the bank accounts, etc. of the parties surveyed from whom the assessee had taken the unsecured loan and that he had given accommodation entry to the assessee in the form of unsecured loans. (1.2) The Ld. CIT(A) -XVI, Ahmedabad has erred in law in and on facts in not appreciating that the addition made by the AO is also supported by corroborative evidences found during the course of survey."
(2.) FACTS in brief as emerged from the corresponding assessment order passed u/s. 143(3), dated 08.12.2009 were that the assessee HUF is a proprietor of M/s. Shivco Prints and engaged in the business of manufacturing of cloth. It was noted by the AO that the assessee had shown unsecured loans of Rs.15 lacs from the following parties: "Sr. No. Name of the party Amount (Rs.) 1. Vishnu International (Prop. Hemant J. Shah) 2,50,000/ - 2. Pankaj Trading Co. (Prop. Mahendra M. Shah) 2,00,000/ - 3. Raviraj International (Prop. Santosh J. Patel) 4,00,000/ - 4. Naresh Trading Co. (Prop. Amar G. Agarwal) 2,50,000/ - 5. M.J. International (Prop. Manoj J. Jain) 4,00,000/ - Total 15,00,000/ - 2.1 The assessee was asked to furnish the confirmation and copy of return along with bank statement of those depositors. In compliance, the details of PAN were furnished as under: Sr.No. Name of person Amount (Rs.) PAN AO Charge 1. Vishnu 2,50,000 ARHPS0597C 12(4) International 2. Pankaj Trading 2,00,000 ARHPS9413P 6(4) Co. 3. Raviraj 4,00,000 AGAPP2970Q 6(4) International 4. Naresh Trading 2,50,000 AENPA9022K 12(4) Co. 5. M.J. 4,00,000 AECPJ7083A 5(1) International 2.2 It was also informed that the loans were taken through account payee cheques. It was also explained that the transaction which was made through banking channel was duly reflected in the books of accounts of the assessee and that all the depositors were existing tax payers. The assessee has also paid interest to those depositors and TDS @ 10.2% has also been deducted. Details of the TDS were furnished. An another fact has also been informed to the AO that the loans were repaid in subsequent years through account payee cheques of the City Bank. The assessee has, therefore, pleaded that the primary onus discharged. 2.3 However the AO was not convinced. The AO has noted that a survey u/s.133A was carried out in the case of one Sri Lalit S. Sharma on 31.08.2009. During the course of survey, it was noted that one Sri Ramdinesh Ranjit Sharma was managing the business affairs and bank accounts of the said parties. It was admitted by Sri Ramdinesh Ranjit Sharma that he himself had opened the bank account in the name of those depositors and deposited the cash and issued cheques to various persons. So, it was noted that Sri Ramdinesh Ranjit Sharma was involved in issuing cheques to various parties. The AO has concluded that the assessee had received accommodation entries of a secured loan. According to AO, Sri Ramdinesh Ranjit Sharma was managing the accounts of 61 persons including the accounts of the above mentioned 5 depositors. The AO had added back the loan amount along with interest thereupon u/s. 68 of IT Act.
(3.) WHEN the matter was carried before the First Appellate Authority, a remand report was called for. In remand proceedings, a question of cross -examination had arose and the assessee had informed the learned CIT(A) that he was present in the office of the AO on the appointed day for cross -examination of Sri Ramdinesh Ranjit Sharma but the AO had failed to produce him. After examining the facts of the case, learned CIT(A) has deleted the addition by assigning the following reasons: "2.3.1 I have considered the submission made by the appellant and observation of the AO. From the above discussion, it is clear that the appellant has filed copies of confirmations giving names, addresses, PAN number, income tax return copies of these parties and initially discharge its onus. From the remand report, it is also clear that the AO has failed to give cross -examination to the appellant. And hence the statement relied upon by the AO cannot be made for the addition. The paper on which the AO has relied also does not speak about the loan being bogus or only an arrangement or accommodation entry. In view of this reason, I agree with the appellant and the addition of the loan, as well as disallowance of consequent interest is deleted. These grounds of appeal are allowed." From the side of the Revenue, learned DR has submitted a short paper book containing the statement of Sri Ramdinesh Ranjit Sharma recorded during the course of survey dated 31.08.2009. Learned DR has also furnished the copies of the impounding material during the course of survey dated 31.08.2009. He has informed that as per the impounding material, the assessee's name was there as loan received from various persons, whom bank accounts were borrowed by Sri Ramdinesh Ranjit Sharma. On the issue of cross -examination, a letter is filed in the paper book dated 11.08.2010. Referring the remand report and asking the assessee to attend office on a particular date to cross -examine Sri Ramdinesh Ranjit Sharma. On the basis of these evidences, learned DR has emphasized that the loan entries were bogus entries. Because Sri Sharma has stated during the survey proceedings that he was managing the bank accounts of those persons and providing the accommodation entries to various parties. Learned DR has cited a decision of Hon'ble Supreme Court in the case of ITO Vs. M. Pirai Choodi, 334 ITR 262 (SC) for the legal proposition that the High Court should have directed the AO to grant an opportunity to assessee to cross -examine the concerned witnesses instead of setting aside assessment order. He has therefore pleaded that the matter can be restored back so that merely on the basis of the issue of cross - examination the addition in question ought not to have been deleted by learned CIT(A). At this juncture, it is worth to mention that from the side of the respondent -assessee an order of ITAT 'B' Bench Ahmedabad pronounced in the case of Shri Amikumar S. Agarwal Vs. ITO Ahmedabad bearing ITA No.3498/Ahd/2010, dated 11.01.2013 has been cited but learned DR has objected that the question of addition u/s.68 is to be decided on the facts of each case, therefore, the issue in hand should not be treated as covered by the aforesaid order of the Respected Tribunal. At the outset, it is worth to note that the view in favour of the assessee was not taken by learned CIT(A) merely on the ground that the cross -examination of the said party was not granted to the assessee. Therefore, the ratio laid down by Hon'ble Supreme Court is not applicable on the present facts of the case.;


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