Ground not press at the time of hearing deserved to be dismissed

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “C”, MUMBAI

BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND

SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER

ITA No.2306/Mum/2010

Assessment Year: 2006-07

M/s. Oracle Entertainment Pvt.

Ltd. Plot No.184, Kaira

Shopping Centre, Opp.

Raghunath Vihar, Sector-13

Kharghar

Navi Mumbai-410 610.

PAN No. AAACO 6741 P

(Appellant)

Vs.

Income tax Officer

Ward-1(4), Kalyan Rani

Mansion, 2nd Floor, Kalyan

Murbad Road

Kalyan (West)

Mumbai.

(Respondent)

Appellant by: Shri K. Gopal and Shri S. Pandey

Respondent by: Shri Rajarshi Dwivedi

Date of hearing: 23.7.2012

Date of Pronouncement: 3.8.2012

O R D E R

PER RAJENDRA SINGH, AM:

This appeal by the assessee is directed against the order dated 30.11.2009 of CIT(A) for the assessment year 2006-07. The assessee in this appeal has raised disputes on two different grounds which relate to addition under section 68 of the Income tax Act, 1961 (the Act) and addition of unexplained expenditure under section 69C of the Act.

2. We first take up the dispute relating to additions of unsecured loans under section 68 of the Act. The AO during the assessment proceedings noted that the assessee who was engaged in the business of film production and marketing, had declared unsecured loans to the tune of Rs.2.16 crores out of which a sum of Rs.1.81 crores had been raised during the year. The AO asked the assessee to file loan confirmations along with copy of the bank pass books and copy of returns of income of the creditors. The assessee filed loan confirmation on 9.4.2008 without any supporting evidence such as bank pass book etc. With a view to verify the genuineness of loans, the AO issued letters under section 133(6) to the creditors who did not reply to these letters. The AO noted that the assessee had filed only photocopies of confirmations and not the originals. Further all the confirmations had handwritten addresses and the same pen had been used for signing the confirmations. The AO also noticed differences in signatures on the confirmations with respect to signatures of creditors in the returns of income and PAN card. The AO, therefore, issued summons to the creditors under section 131 of the Act in response to which only one creditor i.e. Shivpujan P. Tiwari attended. Shri Tiwari denied having given any loan to the assessee and also stated that he was a man of meager means and there was no question of giving loan of Rs.2.00 lacs. As per the AO, the statement of Shri Tiwari was shown to authorized representatives of assessee who showed helplessness in the matter. The AO thereafter asked the assessee to produce loan creditors but despite several opportunities, the assessee could not produce loan creditors for examination. The AO, therefore, concluded that the assessee was deliberately avoiding to produce the creditors for cross examination and that the assessee was trying to prevent appearance of creditors to avoid being exposed as the only creditor who appeared had denied the loan. The AO observed that under section 68 of the Act, the burden was on the assessee to prove the identity of the creditors, their credit worthiness as well as genuineness of the transactions which had not been discharged by the assessee.

2.1 The AO, therefore, treated the unsecured loans in 18 cases aggregating to Rs.67.00 lacs as income of the assessee under section 68 of the Act as per details given below:-

Sr.No. Name Amount (Rs.)

1. Rekha P. Mav 3,00,000/-

2. Bhavesh J. Bhanushali 2,90,000/-

3. Jethalal B. Bhanushali 8,00,000/-

4. Kesarben Hirji 1,25,000/-

5. Ashok J. Bhanushali 8,00,000/-

6. Annapurna R. Bhanushali 3,35,000/-

7. Govind H. Josier 3,75,000/-

8. Chandrika S. Bhanushali 3,00,000/-

9. S.P. Tiwari 2,00,000/-

10. Dhanpati J. Lapsiya 7,50,000/-

11. Vershi Karji (HUF) 2,50,000/-

12. Govindji B. Nakhava 3,00,000/-

13. Tejal Mitesh Mange 3,25,000/-

14. Deepak Shivji (HUF) 1,50,000/-

15. Ramesh J. Bhanushali 4,00,000/-

16. Narangji R. Bhanushali 3,00,000/-

17. Kirit D. Thakkar 6,00,000/-

18. Rajesh R. Mange 1,00,000/-

Total 67,00,000/-

3. The assessee disputed the decision of the AO and submitted before CIT(A) that the assessee had filed loan confirmations in respect of loan creditors who were regularly assessed to tax and were having P.A. Nos. The assessee had also given copies of acknowledgment of filing the returns of income by the creditors as well as copies of their bank pass-books in many cases. The AO had never asked for giving original confirmations which were lying with the assessee and copies thereof had been filed before AO. As regards the differences in signatures pointed out by AO on loan confirmation with respect to signatures of creditors in the return of income and PAN card, the assessee submitted that it had no control over such matters and that it was quite common that people sign in different styles and format at different points of time. The AO made addition merely on the basis of non appearance of the creditors and inability of the assessee to produce them before AO. The AO had not considered other documents which established the identity and credit worthiness of the creditors and which prove the genuineness of transactions. The assessee also pointed out that Shri Tiwari who had denied loan had duly signed loan confirmation and also had given copy of acknowledgment of filing return of income. He was being assessed to tax. Thus, there was sufficient evidence of Shri Tiwari giving loan to the assessee and it was not clear to the assessee as to the reasons for giving adverse statements. CIT(A) after considering the submission of the assessee and material on record, observed that the assessee had received loans through banking channels and there was no dispute regarding filing of return of income by the creditors. However, if the creditors were genuine, then it was not clear as to what prevented the assessee to produce them before AO. CIT(A) also observed that there were discrepancies in the signatures of the crediting parties and one of the creditors denied having given loan. CIT(A), therefore, agreed with the conclusion drawn by the AO that the cash credit was nothing but assessee’s own unaccounted income introduced in the books of account. He, therefore, confirmed the addition made by AO, aggrieved by which, the assessee is in appeal before the Tribunal.

4. Before us, the ld. AR for the assessee submitted that assessee had filed confirmations from all loan creditors who were assessed to tax along with their Income tax return detail. The assessee had, therefore, discharged the onus placed on it. It was also submitted that the creditors were not co-operating with the assessee as it had not been able to repay the loan and which was the reason for creditors not appearing before the AO and one of them denying the loan. They had given loans by cheque and filed confirmations giving them P.A. Numbers. The ld. AR also submitted that the assessee had been pursuing with loan creditors to appear before the AO and has been successful in obtaining affidavits from nine creditors which are enclosed in the form of additional evidence. These creditors have again confirmed loan in the affidavit and one of them has also explained the reasons for difference in signature on different documents which is for the sake of security. They have also stated that they will appear before the authorities when required. It was pointed out that affidavits from eight other creditors had been filed earlier before authorities below but no enquiries had been made. The ld. AR further submitted that he was giving an undertaking to produce these creditors also as and when required by the authorities below. As regards Shri Tiwari, it was submitted that statement of the party was never provided to the assessee. It was requested that in the interest of justice these additional evidences may be admitted and assessee may be provided opportunity to produce the parties before the authorities as and when required.

4.1 The ld. DR on the other hand strongly supported the orders of authorities below and argued that the assessee had already been provided enough opportunities by the AO and therefore, further opportunity is not required to be given. It was also submitted that one of the creditors had clearly denied having given any loan. The ld. DR placed reliance on the findings given in the orders of authorities below.

5. We have perused the records and considered the rival contentions carefully. The dispute raised is regarding addition under section 68 of the Income tax Act. The assessee during the relevant year had raised fresh loans of Rs.1.81 crores. To substantiate the loans the assessee had filed copy of confirmations from the creditors giving their P.A. Number and also filing copy of acknowledgement of filing returns by them. The AO noted differences in the signatures on the confirmations and on the return of the income and on Pan Card of the creditors. He, therefore, issued letters under section 133(6) to the creditors which were not responded to. The AO thereafter issued summons under section 131 in response to which only one creditor attended who denied the loan. The AO, thereafter asked the assessee to produce creditors which was not complied with. The AO, thereafter, treated the aggregate loans of Rs.67.00 lacs in 18 cases, details of which have been given in para-2 earlier to the total income under section 68 of the Act. In appeal CIT(A) confirmed the addition.

5.1 The case of the assessee is that all loan creditors are assessed to tax and confirmation of the P.A. Numbers had been given to the AO. The addition has been made only on the ground that there were differences in the signatures and that the assessee could not produce the creditors. It has been submitted that the creditors were not cooperating with the assessee as the assessee was unable to make payment to them. However, the assessee after sustained efforts has obtained affidavits from nine creditors in which they have confirmed the loans again and have also stated that they will appear before authorities below if asked for. Some of them have given reasons for differences in signatures. The ld. AR also submitted that he was giving undertaking that he would produce the remaining eight creditors also before the authorities as and when required. As regards Shri Tiwari who had denied loan, it has been submitted that copy of statement had not been provided to the assessee. After considering all the aspects of the matter including the affidavits and undertaking given, before us and also the fact that the creditors are assessed to tax with P.A. Numbers and loans have been taken by cheque, we are of the view that, additional evidences need to be considered for arriving at a fair decision in the matter and the assessee needs to be given one more opportunity for producing the creditors. We, therefore, set aside the order of CIT(A) and restore the matter back to him for fresh order after examination if necessary by remanding the matter to the AO and after providing opportunity to the assessee to produce the creditors and after cross examination of Shri Tiwari and after hearing the assessee.

6. Ground No.2 is regarding addition of Rs.68,017/- under section 69C of the Act as unexplained expenditure. The ld. AR for the assessee did not press this ground at the time of hearing of the appeal. This ground is, therefore, dismissed as not pressed.

7. In the result, appeal of the assessee is partly allowed for statistical purposes.

Order pronounced in the open court on 3.8.2012

                                                      Sd/-                            Sd/-

                                        (D. MANMOHAN)     (RAJENDRA SINGH)

                                        VICE PRESIDENT ACCOUNTANT MEMBER

Mumbai, Dated: 3.8.2012.

Jv.

Copy to: The Appellant

The Respondent

The CIT, Concerned, Mumbai

The CIT(A) Concerned, Mumbai

The DR “ ” Bench

True Copy

By Order

Dy/Asstt. Registrar, ITAT, Mumbai.