S.RAVINDRA BHAT - (1.) . Admit. The following substantial question of law arises in these batch of appeals i.e. whether the Tribunal's approach in confirming the CIT's order which had deleted the addition made on account of unsecured loans by the Assessing Officer, for the concerned assessment years i.e. 2000-01 to 2006-07 and the interest component, is correct, having regard to the facts and circumstances of the case.
(2.) THE brief facts of the case are that the assessee's premises were searched on 13.12.2005, pursuant to which, a notice was issued under Section-153A on 09.07.2007 for the assessment years, 2000-01 to 2006-07. A detailed questionnaire was issued under Section-142 (1)/143 (2) on 29.10.2007. The assessee filed returns thereafter. The firm claimed to have earned NIL income. One of the claims made by the assessee was in respect of unsecured loans obtained from individuals and firms. The assessee was required to file the details of such loans obtained along with complete particulars. After consideration of these, the assessing officer passed separate orders of assessment. Broadly in all the cases, the assessing officer added back the loans except for two years i.e. 2003-04 and 2005-06. In these years, there were no fresh loans taken by the assessee. Assessing Officer in addition disallowed the interest component for all the years and added back an amount of Rs. 5 Lakh of unexplained cash. This Court is not inclined to go into the other aspect vis-a-vis unexplained cash and gross profit addition which have been dealt with by the CIT (Appeals) as well as the Tribunal. The assessee had declared a gross profit depending and based on the peculiar circumstances of each case. With regard to the rate of gross profit and unexplained cash, the decision of the Tribunal is factual and no substantial question of law arises. As far as the addition of the loan amount and the interest component is concerned, the Assessing Officer held as follows: - "2. Loan Creditors: The assessee was required to file details of loans obtained along with the complete particulars of the persons i.e. their names, addresses, PAN particulars, source, financial capacity etc. Assessee has merely filed names & addresses with PAN particulars in some of the cases. In most of the cases merely GIR No. has been filed. It is a know fact that these days GIR Nos. have no great significance after the introduction of the new series of PAN number. Source of loan and financial capacity of the lenders has not been provided at all, this gives a strong signal that this is the precise mode in which unaccounted money is being rotated by the assessee into his business. Each year assessee obtain loan and squares up next year. In the next to next year again loans are claimed to be obtained. It is also interesting that some person, his wife, father, brother and HUF is giving loans to assessee as is seen from the addresses of the lenders. As stated above, assessee has failed to establish the credit worthiness of the lenders, hence all these loans obtained in each year will be treated as non-genuine and assessee's own money generated through under-invoicing etc. which is being pulled in and pulled out at the will of the assessee. On this account addition is made as under: Assessment Year Amount (Rs.) 2000-01 19,80,000 2001-02 1,21,75,000 2002-03 19,00,000 2004-05 68,50,000 2006-07 3,75,000 It is further seen that most of the so called loans received are utilized only for partners personal requirement. For example, in A.Y.2001-02, when loans of Rs.1.21 crores were allegedly received, partners had withdrawn collectively above Rs.75.00 lacs. Therefore, I see no reason to allow interest paid on these loans as business expenditure. I, therefore, disallow 75% of interest paid in each year towards non-business use and for the personal needs of the partners. Firm's fond an interest are being utilized Disallowance of interest an above basis will work out as under: Assessment Year Amount (Rs.) 2000-01 2,10,137 2001-02 9,58,065 2002-03 5,45,173 2003-04 2,70,350 2004-05 3,95,738 2005-06 5,98,725 2006-07 4,63,194 The assessee's appeal was considered by the CIT (A) by a common order dated 31.08.2010, allowed the claim with regard to the loan and interest made by the assessee. The CIT (Appeals) reasoning is as follows: "2. Loans and interest therefor. Submissions of the appellant are that the loans is a regular feature of the business and these are raised almost every year and so far so long no addition had been made. The loans raised are from persons who are existing assessee, their confirmations as mentioned in letter dated 25.3.2008 have been filed, loans are through banking channel, these are interest bearing loans. TDS has been deducted from the interest paid, necessary details for which have been filed. The appellant also contended that the loans have been added because the people did not respond to summons sent by the A.O. because the matter was old one. The appellant had repeatedly requested A.O. to enforce the attendance of creditors if they are not responding but no action on this was taken by A.O. The appellant had even offered to the A.O. that if he deputes his Inspector, he can get fresh supporting confirmations from majority of these parties. The Learned A.O. did not accede to this request. It was also pleaded that majority of the loan creditors even sent confirmation second time directly to the ITO and about this the lenders even informed the appellant, who has filed the speed postage proof of sending the intimation to the A.O. It was pleaded that where payments are through cheque, genuineness of payment could not be doubted when these are also supported by deduction of TDS. It is contended that where the persons are existing assesses, it ipso facto proves the credit worthiness as per 82 TTJ 13. Several judgments have been quoted in support and on these facts of the appellant, no addition in respect of loans and interest thereon is called for. It is also pleaded that similar addition in the case of the sister concern M/s Shri Raghunath Traders has also been deleted except for Rs.2,50,000/- and Rs.1,00,000/- in respect of the parties who have changed either addresses and their present addresses are not known. Appeals against these additions have been filed because taking of the loan does not mean that appellant can keep watch on their movements especially when the loans have already been returned and more than 8 years have passed. In this case, there is no such loan for which addresses are not available. The arguments of the appellant were sent to the A.O. and A.O.'s only objection is that they are not responding to the summons. To this appellant added that for this, he is helpless because power to enforce their attendance is with the A.O. and the matter being old one. They are not co-operating especially because in few cases, the loan creditors who had attended, were sent by to come again as is clear from Affidavit of Shri Rajesh Bhatia, one of the partners of the appellant. Considering the history of the case and legal position, this addition is uncalled for and is deleted along with interest for all the above years."
(3.) THE learned counsel for the Revenue contends that the CIT (Appeals)' order is bereft of any reasoning. Apart from reciting the submissions of the assessee's appeal, the CIT (A) did not furnish any independent reasons to displace the inference and reasoning given by the Assessing Officer. This plainly amounted to perverse and unreasonable approach which called for interference by the ITAT. Learned counsel also relied upon two remand reports said to have been called by the CIT (Appeals) during the pendency of the assessee's appeals before him. They are dated 27.01.2009 and 26.05.2009. It was contended that these remand reports bore out the assessing officer's inferences and conclusions that the unsecured loans had to be added back and could not be allowed as claimed by the assessee. Learned counsel for the assessee contended that neither in the grounds of appeal by the revenue nor even in the submissions made before the ITAT, was the issue of non-consideration of the remand reports brought to the notice of ITAT. In the absence of such contentions, the ITAT could not be faulted with for overlooking the alleged lapses on the part of the CIT (Appeals). Independently, on merits of the CIT (Appeals) order, counsel highlighted that the reasoning of that body were sufficient to displace the inferences which the Assessing Officer had drawn based upon his own understanding of the record and the material available which included the enquiries made by the Assessing Officer and the material available with the CIT (Appeals). Counsel highlighted the fact that the CIT (Appeals) was seized of the entire proceedings including the remand reports which were duly taken into consideration by him.;