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Commissioner Of Income Tax 1 (S) v. Apex Therm Packaging P. Ltd. Opponent(S)
Factual and Procedural Background
The assessee, a company, filed its income tax return for the Assessment Year 2007-08 declaring nil income, disclosing receipt of unsecured loans from 17 lenders. The Assessing Officer (AO) issued a notice under Section 142(1) of the Income Tax Act requiring the assessee to furnish confirmations, lender details, balance sheets, and bank statements. The assessee provided these documents for most lenders, except initially for two, for whom confirmations and other details were later furnished. Despite this, the AO made an addition of Rs. 33,55,011 under Section 68 of the Income Tax Act on account of unexplained cash credits and disallowed interest expenses of Rs. 3,10,478. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition and disallowance. The revenue challenged this before the Income Tax Appellate Tribunal (ITAT), which upheld the CIT(A)'s order. Aggrieved, the revenue filed the present Tax Appeal before the Court to consider substantial questions of law arising from the ITAT's decision.
Legal Issues Presented
- Whether the tribunal was justified in confirming the deletion of addition made on account of unexplained cash credits under Section 68 of the Income Tax Act amounting to Rs. 33,35,011/-?
- Whether the tribunal was justified in confirming the deletion of addition made on account of interest expenses of Rs. 3,10,478/-?
Arguments of the Parties
Revenue's Arguments
- The Assessing Officer made the addition under Section 68 with respect to loans from 17 lenders, contending that the assessee failed to satisfactorily prove the genuineness of the loans.
- The revenue relied on a decision of the Delhi High Court in the case of N.R Portfolio to support the addition and disallowance.
Assessee's Position (as presented through CIT(A) and ITAT findings)
- The assessee furnished confirmations with names, addresses, PAN numbers, copies of ledger accounts, balance sheets, profit and loss accounts, income tax returns, and computations of total income for all lenders except two initially, for whom confirmations and PAN details were later provided.
- The loans were received through cheques and reflected in the lenders' balance sheets, discharging the initial onus cast upon the assessee under Section 68.
- The Assessing Officer failed to bring any material to rebut the assessee's evidence.
- The CIT(A) and ITAT relied on precedents including Rohini Builders (256 ITR 360) and Orissa Corporation Ltd. (153 ITR 78) to uphold the deletion of additions.
- The ITAT found the Delhi High Court decision relied upon by the revenue to be distinguishable on facts and inapplicable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Rohini Builders, 256 ITR 360 (Gujarat High Court) | Principle regarding discharge of onus by assessee under Section 68 through submission of satisfactory evidence. | Relied upon by CIT(A) and ITAT to confirm that assessee discharged initial onus and additions were rightly deleted. |
| Orissa Corporation Ltd., 153 ITR 78 (Supreme Court) | Guidance on evidentiary burden and treatment of unexplained cash credits under Section 68. | Followed by CIT(A) and ITAT to support deletion of additions after assessee furnished adequate evidence. |
| N.R Portfolio (Delhi High Court) | Case law relied upon by revenue to justify additions under Section 68. | Distinguished by ITAT on facts and held not applicable to the present case. |
Court's Reasoning and Analysis
The Court examined the evidence furnished by the assessee, which included confirmations with detailed particulars such as names, addresses, PAN numbers, ledger accounts, balance sheets, profit and loss accounts, income tax returns, and computations of total income for all lenders except two initially. Even for these two, confirmations and PAN details were eventually provided. Furthermore, the loans were received through cheques and reflected in the lenders' balance sheets, which satisfied the initial onus under Section 68 of the Income Tax Act. The Assessing Officer failed to produce any material to rebut this evidence. The Court noted that the CIT(A) and ITAT correctly applied established legal principles and precedents, including Rohini Builders and Orissa Corporation Ltd., to conclude that the additions were unwarranted. The Court also found the revenue's reliance on the Delhi High Court's decision in N.R Portfolio to be factually distinguishable and therefore not applicable. Consequently, the Court found no error or illegality in the ITAT's order and held that no substantial question of law arose for consideration.
Holding and Implications
The Tax Appeal is dismissed.
The direct effect of this decision is the confirmation of the deletion of the addition of Rs. 33,55,011/- under Section 68 and the disallowance of Rs. 3,10,478/- towards interest expenses. No new precedent is established, and the Court's ruling affirms the correct application of legal principles regarding the discharge of onus by the assessee under Section 68 of the Income Tax Act.
ORAL JUDGMENT
(PER: HONOURABLE MR. JUSTICE M.R SHAH)
1. Being aggrieved and dissatisfied with the impugned judgment and order passed by the Income Tax Appellate Tribunal (hereinafter referred to as ‘ITAT’) dated 10/05/2013 in ITA No. 1151.AHD for the Assessment Year 2007-08, the revenue has preferred the present Tax Appeal with the following proposed questions of law;
(a) Whether in facts and in law the tribunal was justified in confirming the action of CIT(A) in deleting the addition made on account of unexplained cash credits under Section 68 of the Income Tax Act of Rs. 33,35,011/-?
(b) Whether in facts and in law the tribunal was justified in confirming the action of CIT(A) in deleting the addition made on account of interest expenses of Rs. 3,10,478/-?
2. The assessee filed the return of income for the year under consideration declaring the total income of ‘NIL’. In the return of income filed by the assessee-Company, it disclosed the receipt of new unsecured loans with respect to 17 lenders. The assessee-Company was asked to furnish the confirmation letter, copy of acknowledgment of lenders, their balance sheet and bank statement for the year under consideration vide notice under Section 142(1) of the Income Tax Act. It appears that the assessee-Company furnished the confirmation letter, details of assessability and balance sheet of most of the lenders, except in the case of two lenders. Despite the above, the Assessing Officer made the addition of Rs. 33,55,011/- under Section 68 of the Income Tax Act and accordingly taxed the assessee. Consequently, the Assessing Officer disallowed the interest amount of Rs. 3,10,478/-.
3. Being aggrieved and dissatisfied with the assessment order passed by the Assessing Officer directing to make the addition of Rs. 33,55,011/- under Section 68 of the Income Tax Act and disallowance of Rs. 3,10,478/- towards interest, the assessee preferred appeal before the CIT(A) and vide order dated 10/02/2010 CIT(A) allowed the said appeal and deleted the addition of Rs. 33,55,011/- made under Section 68 of the Income Tax Act as well as deleted the disallowance of Rs. 3,10,478/- towards interest.
4. Being aggrieved and dissatisfied with the order passed by the CIT(A), the revenue preferred appeal before the ITAT and by impugned judgment and order ITAT has dismissed the said appeal. Being aggrieved and dissatisfied with the impugned judgment and order passed by the ITAT, the revenue has preferred the present Tax Appeal to consider the aforesaid substantial questions of law.
5. Heard Shri Sudhir Mehta, learned advocate appearing on behalf of the revenue. At the outset, it is required to be noted that the Assessing Officer directed to make the addition of Rs. 33,55,011/- under Section 68 of the Income Tax Act with respect to 17 lenders. However, it has been found that with respect to most of the lenders, except two, necessary documents, inclusive of confirmation with name, address and PAN Numbers, copy of the IT return and acknowledgment, balance sheet and profit and loss account and computation of total income in respect of all the parties, except two parties, were furnished before the Assessing Officer. Even with respect to the remaining two depositors the assessee filed the confirmation, address and PAN Numbers. Under the circumstances, when it was found that the assessee already discharged the initial onus cast upon him with respect to all the creditors and accordingly when the CIT(A) has deleted the addition of Rs. 33,55,011/- made under Section 68 of the Income Tax Act and consequently deleted the disallowance of Rs. 3,10,478/-, which was made with respect to interest and when the same has been confirmed by the ITAT, it cannot be said that ITAT has committed any error and/or illegality, which calls for the interference of this Court.
In paragraph 11, ITAT has observed and held as under;
“We have heard the rival submissions and perused the material on record. It is an undisputed fact that during the year the assessee had received loan from 17 parties aggregating to 33,35,011/-. The details of which are listed at page 2 of Assessing Officer order. CIT(A) while deleting the addition has given a finding that the assessee had filed before Assessing Officer the confirmations with name, address, PAN Number, copy of ledger account, copy of balance sheet and profit and loss account, copy of Income Tax returns and computation of total income in respect of all the parties except two depositors. With respect to the two depositors, the assessee had filed confirmation, address and PAN Numbers and hence the assessee had also discharged the initial onus cast upon the assessee with respect to the two creditors. He has further noted that the loans were received through cheques and the loan account were duly reflected in the balance sheet of lenders CIT(A) has further held once the onus was fulfilled by the assessee, it was for the Assessing Officer to examine and bring any material on record which may help in rebutting the onus of assessee. The Assessing Officer has not brought any material on record in its support CIT(A) while deleting the addition has also relied on the decision of the Hon'ble Gujarat High Court in the case of Rohini Builders 256 ITR 360 and the decision of Hon'ble Supreme Court, in the case of Orissa Corporation Ltd. 153 ITR 78. Before us, nothing has been brought on record by the revenue to controvert the findings of CIT(A). Revenue has relied on the decision of Hon'ble Delhi High Court in the case of N.R Portfolio (Supra). We however find that the ratio of the aforesaid Delhi High Court decision are distinguishable on facts and therefore cannot be applied to the facts of the present case. In view of the aforesaid facts, we find no reason to interfere with the order of CIT(A) and thus dismiss this ground of revenue.”
6. We are in complete agreement with the reasoning given by the CIT(A) as well as the ITAT. When full particulars, inclusive of the confirmation with name, address and PAN Number, copy of the Income Tax Returns, balance sheet, profit and loss accounts and computation of the total income in respect of all the creditors/lender were furnished and when it has been found that the loans were received through cheques and the loan account were duly reflected in the balance sheet, the Assessing Officer was not justified in making the addition of Rs. 33,55,011/-. Under the circumstances, no question of law, much less substantial question of law arises in the present Tax Appeal. Accordingly, the present Tax Appeal deserves to be dismissed and is accordingly dismissed.
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