Ronak Motors, Surat vs Department Of Income Tax

Income-tax Officer, Ward-5(4), Room No.316, Aayakar Bhavan, Majura Gate, Surat. Appellant

Vs. M/s. Ronak Motors, Devdarashan Complex, Opp. Dada Bagwan Mandir, N.H.No.8, Kamrej, Surat Respondent

PAN: AAHFR3900K

राजःव क ओर से / By Revenue :Shri V. K. Singh, Sr. D.R. आवेदक क ओर से / By Assessee : Shri Hardik Vora, A.R. सुनवाई क तार ख/Date of Hearing :12.01.2015 घोषणा क तार ख/Date of Pronouncement :29.01.2015

ORDER

PER SHAILENDRA KUMAR YADAV, J.M:

This appeal has been filed by Revenue against the order of Commissioner of Income Tax (Appeals)-IV, Surat, dated 21.12.2010 for A.Y. 2006-07 on the following grounds:

I . T. A . N o . 1 08 3/ A hd /2 01 1 f o r A . Y. 06 -0 7 (I TO v s . M / s . R o n ak Mo to rs ) Page 2

"[1]. On the facts and in the circumstances of the case and in Law, the Ld.CIT(A), Surat has erred in deleting the addition of Rs.18,90,653/- made on account of unexplained credit u/s.68.

[2] On the facts and in the circumstances of the case and in Law, the Ld.CIT(A), Surat has erred in deleting the addition of Rs.1,14,777/- made on account of disallowance of interest.

[3] On the facts and in the circumstances of the case, and in Law, the Ld.CIT(A), Surat ought to have upheld the order of the Assessing Officer."

2. The main component of addition is Rs.13,08,000/- as unexplained cash credits u/s. 68 of the Act. Assessing Officer while making addition mentioned that assessee did not furnish any information regarding the following unsecured loans:

i) Shri Hirenkumar S. Shah Rs.1,00,000/-

ii) Ronak Motor Re-powering Rs.9,08,000/-

iii) Shri Chandreshkumar B. Shah Rs.3,00,000/-

Assessing Officer stated that in compliance to show cause notice was made, no information on confirmation regarding these loan accounts were furnished. He, therefore, considered that unexplained cash credit u/s.68 of the Act added to the income of assessee.

2.1 Matter was carried before First Appellate Authority, wherein various contentions were raised, who after calling for remand report CIT(A) has granted relief to assessee. Same has been opposed on behalf of revenue. On other hand, ld. Authorized Representative supported the order of CIT(A).

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2.2 After going through rival submissions and material on record, we find that in appeal, CIT(A) observed that assessment order was passed in hurry and without due consideration of facts which is evident from the addition of Rs. 1 lac in case of Hirenkumar Shah, when the person is claimed to have given loan of Rs.50,000/- only. Regarding addition on account of loan from Ronak Motor Re-powering Rs.9,08,000/- was deleted in view of remand report. As regards C.B. Shah, Assessing Officer has accepted creditworthiness of creditor. Confirmations have been provided as also his income-tax acknowledgment. There is nothing adverse on record by Assessing Officer to suggest that transaction was not genuine. Therefore this addition of C.B. Shah was also deleted by CIT(A). As regards Hirenkumar S. Shah is concerned though confirmation has been given and PAN mentioned, the confirmation itself does not inspire confidence. PAN on confirmation is mentioned as applied, then one PAN has been written and scratched out and another PAN written. The transaction of loan is proceeded by deposit of cash and the source of said cash has not been explained. This transaction of loan does not seem to be justified. Under the facts and circumstances, cash credit in the name of Hirenkumar S. Shah was held to be unexplained. However, Assessing Officer has by mistake considered this amount to be Rs.1,00,000/- when it was only Rs.50,000/- and along with interest the total outstanding against his name is Rs.54,981/-. Therefore, addition was confirmed to the extent of Rs.54,981/-. Assessee I . T. A . N o . 1 08 3/ A hd /2 01 1 f o r A . Y. 06 -0 7 (I TO v s . M / s . R o n ak Mo to rs ) Page 4

got relief of Rs.12,53,019/- for above cash credit. This reasoned finding of CIT(A) whereby he has granted relief to assessee after considering remand report need no interference from our side, we uphold the same.

3. Next addition of Rs.2,94,000/- as unexplained cash credit u/s. 68 of the Act. While making the said addition Assessing Officer has mentioned as under:

"Further, as per show cause that the loan amount of Rs.1,50,000/- through cheques from Bharatbhai K. Sha (HUF) who has deposited and an amount of Rs.98,000/- on 28.03.2006 and cheque given and the same way Shri Shailesh A. Savan has give a loan amount of Rs. 2,00,000/-

by deposited Cash for Rs.1,96,000/- on various dates in his accounts and issued cheque. The assessee has not given reply to the show cause notice. Hence, the amount of Rs.98,000/-.and Rs.1,96,000/- (total Rs.294000) are also treated as unexplained cash credit U/s.68 of the IT Act and added to the total income of the assessee. Penalty proceedings u/s. 271(1)( c) of the IT Act is initiated for furnishing inaccurate particulars of income."

3.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same and by calling remand report, CIT(A) has granted relief to the assessee. Same has been opposed on behalf of Revenue. On other hand, learned Authorized Representative supported the order of CIT(A).

3.2 After going through rival submissions and material on record, we find that CIT(A) in appeal observed that evidences have been provided to Assessing Officer during assessment proceeding who instead of carrying further investigation into I . T. A . N o . 1 08 3/ A hd /2 01 1 f o r A . Y. 06 -0 7 (I TO v s . M / s . R o n ak Mo to rs ) Page 5

the source of funds with the lenders, issued show cause on the basis of doubts and suspicion. Even during course of remand proceedings, Assessing Officer did no investigations, which is not justified. Both the lenders are Income Tax assessee and confirmations were given. Source of funds with creditors were also provided to Assessing Officer. Assessing Officer instead of taking action, made addition for the reason that cash was deposited before the loan transactions. The deposit of cash proceeding transactions can give rise to doubt and be a starting point for investigation but cannot be the basis of conclusion disregarding other evidences. Nothing adverse has been brought on record by Assessing Officer with regard to evidence produced by assessee on this point. In any manner, since creditors were assessed to tax, confirmation were filed, TDS deducted on interest credit and loan were reflecting in their accounts, no addition could be made in the hands of assessee u/s. 68. Accordingly, CIT(A) justified in deleting addition of Rs.2,94,000/- to the income of assessee. Same is upheld.

3.3 Coming to the disallowance of interest of Rs.1,14,777/-. As per Assessing Officer, assessee had debited interest expenses which was provided at 12% but had not charged interest on loan given to M/s. Royal Agencies, Goetze India Ltd., Perfect Circles Ltd., Shriram Automotive P.Ltd. and Shriram I'iston & Ring P. Ltd. He therefore disallowed interest to the extent it could be related to the amounts outstanding in I . T. A . N o . 1 08 3/ A hd /2 01 1 f o r A . Y. 06 -0 7 (I TO v s . M / s . R o n ak Mo to rs ) Page 6

the names of these persons calculating interest to be disallowed @ 12%.

3.3.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having called for remand report and considering the same CIT(A) observed that evidence shows that interest had been charged by assessee on advances given to M/s. Royal Agencies and fact that advances to other concerns were business advances, disallowance of interest was not warranted. Accordingly, same was rightly deleted. We uphold the same.

4. Next addition is with regards to addition of Rs.3,43,634/- as unexplained income on the basis of interest non receipt of reply from parties u/s. 133(6) of the Act. It was explained by assessee that these were regular business parties. While making the addition, Assessing Officer mentioned that notices were issued u/s. 133(6) of the Act but either they could not be served or no reply was received in following cases :-

1. Victor Casket

2. Haresh Motors

3. Shri Ram Automotive

4. Surod Engineering

5. Putchraj Auto Services He therefore treated the outstanding balances as unexplained and added them to the income of assessee.

4.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee inter alia stated that assessee had regular business dealings I . T. A . N o . 1 08 3/ A hd /2 01 1 f o r A . Y. 06 -0 7 (I TO v s . M / s . R o n ak Mo to rs ) Page 7

with these persons. Assessee submitted ledger copies in his books as also confirmations from the said parties to establish that transactions and outstanding balances were genuine.

Same were forwarded to Assessing Officer for his comments after verification of genuineness. It was stated by Assessing Officer in remand report that contentions put for by Authorized Representative is correct and matter be decided on merits. In view of comments of Assessing officer and fact that necessary confirmations were submitted on behalf of assessee, which was in conformity with the outstanding balances in the books. CIT(A) was justified in deleting addition. We uphold the same.

5. As a result, appeal filed by Revenue is dismissed.

Pronounced in the open Court on this the 29th day of January, 2015.

Sd/- Sd/- (ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER True Copy S.K.SINHA

आदे श क ूितिल&प अमे&षत / Copy of Order Forwarded to:-

1. राजःव / Revenue

2. आवेदक / Assessee

3. संबंिधत आयकर आयु- / Concerned CIT

4. आयकर आयु-- अपील / CIT (A)

5. &वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड6 फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।