The Commissioner Of Income Tax 21 v. M/S. Ajeet Construction

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1019 OF 2011 The Commissioner of Income Tax 21.... Appellant.Vs.M/s. Ajeet Construction.... Respondent. ... Respondent. Ms.Suchitra Kamble for the Appellant. Ms. Sanjukta Chowdhary i/by PKP Legal Solution for the Respondent. CORAM : S.J.VAZIFDAR & M.S. SANKLECHA, JJ. DATE : 25[th] June, 2012 PC: This appeal by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the “said Act”) from the order dated 25/2/2010 of the Income Tax Appellate Tribunal (hereinafter referred to as the “Tribunal”) relates to Assessment Year 1998-99. Being aggrieved by the Order dated 25/2/2010 of the Tribunal the appellant has formulated the following questions of law for consideration by this Court: a)Whether on the facts and in the circumstances of the case and in law, the ITAT is right in law in deleting the addition of Rs.15,60,000 on account of alleged unexplained loans u/s. 68 of the Income Tax Act, 1961? b)Whether on the facts and circumstances of the case and in law the ITAT is in law in deleting the disallowance of interest of Rs.49,431/- paid on the alleged unexplained loans u/s. 68 of the Income Tax Act, 1961? c)Whether on the facts and circumstances of the case and in law the ITAT is in law in deleting the above addition without verifying the three ingredients in the loan transactions i.e. Identities of the creditors, credit worthiness and genuineness of the transaction? 2The respondent-assessee is a partnership firm engaged in the business of ceramics and sanitary ware. For theassessment year 1998-99, the Assessing Officer while passing an order dated 20[th] March, 2001 under Section 143(3) of the said Act added to the respondent’s income a sum of Rs.29.10 lacs as income from undisclosed source on disallowing the aforesaid amount claimed as loan taken and also disallowed the interest of Rs.73,012/- paid on the above alleged loans. This was primarily for the reason that the respondent was unable to furnish confirmation letters from its creditors. 3 On appeal, the CIT (Appeals) sustained an addition of only Rs.19.80 lacs out of Rs.29.10 lacs added by the Assessing Officer and also disallowed interest only to the extent of Rs.49,431/- instead of Rs.72,002/-. This conclusion was reached after considering the confirmation letters and brokers notes etc. produced during appellate proceedings. The CIT (A) had classified the creditors in respect of whom the addition was sustained into three categories viz. 13 parties from whom no loan confirmation was filed-Rs.7,70,000/- and interest thereon Rs.22,703/- (Annexure-1); 8 parties on whom summons returned un-served- Rs. 4,20,000 and interest thereon Rs.7,769/- (Annexure-2) and 15 parties on whom summons served but no reply received- Rs.7,90,000/- and interest there on Rs.18,959/-(Annexure-3). 4On further appeal by the respondent, the Tribunal considered the evidence before it in its entirety and examined each of the Annexures in the light of the evidence. So far as Annexure -1 is concerned, the Tribunal found that legal proceedings against the respondent-assessee had been filed for recovery of loan aggregating to Rs.2,50,000/- by 4 parties. Therefore, the loan attributable to those parties could not be added nor could the interest paid thereon be disallowed. Further two parties from whom loans of Rs.50,000/- each were taken had filed confirmation letters. Therefore the addition of Rs.1.00 lacs was also deleted and the interest paid thereon was allowed. Therefore the addition was sustained only in respect of Rs.4,20,000/- and the interest disallowed thereon was only Rs.2,960/-. So far as Annexure -2 is concerned, the Tribunal held that summons were sought to be served upon the creditors in 2004 in respect of loans taken in 1998 and therefore the summons being returned un-served could be on account of the fact that that they may have shifted their address. However taking into account the confirmation letters filed along with the brokers slip and the fact that loans were taken and repaid by cheques, the addition of Rs.4,20,000/- was deleted and the interest paid thereon of Rs.7,769/- was also allowed. So far as Annexure -3 is concerned, the Tribunal held that the respondent could not be faulted if the creditor did not turn up even after the summons were served. However taking into account the fact that confirmation letters were filed along with the brokers slip and the fact that loans were taken and repaid by account payee cheques, the addition of Rs.7,90,000/- was deleted and the interest paid thereon of Rs.18,959/- was also allowed. In the result, the Tribunal finally sustained the addition of Rs.4,20lakhs as cash credit and disallowed the interest thereon of Rs.20,960/- alone. 5From the aforesaid facts, it is clear that issues arising in the present appeal are essentially questions of facts. The view taken by the Tribunal is a possible view on the basis of the evidence produced before it. Consequently, no substantial question of law arises for consideration by this Court. Appeal is dismissed. No order as to costs. ( M.S. SANKLECHA, J. ) ( S. J. VAZIFDAR, J.)