Section 68 : Cash credits – Unsecured loans received – Confirmation, balance sheet and bank accounts of creditor was produced – A.O has not made enquiry in respect of the creditors – Deletion of addition was held to be justified.

13.  The Pr. CIT-27 vs. Parth Enterprises [ Income tax Appeal no 786 of 2016 Dated: 11^th December, 2018 (Bombay High Court)].

[ITO-22(1)(4) vs. Parth Enterprises; dated 10/06/2015; ITA. No 976/Mum/2013, Bench : C , AY: 2009-10     Mum.  ITAT ]

Section 68 : Cash credits – Unsecured loans received – Confirmation, balance sheet and bank accounts of creditor was produced – A.O has not made enquiry in respect of the creditors –  Deletion of addition was held to be justified.

The assessee is engaged in the business of builders and developers. During the year, the assessee had taken unsecured loans from 90 persons. However, confirmations were filed only in respect 77 persons. The AO conducted enquiry from external sources on the basis of information available on record and on test check basis on 01.12.2011. Enquiries were conducted in a few cases, based on the statement given by those parties . During  a survey action u/s.  133A of the IT Act at the premise of one Deepak Kapadia CA by the DDIT (investigation), unit IX(3), Mumbai his statement was also recorded, that in his statement he admitted that he had provided entries for loans in lieu of cash received from the assessee and also explained that the modus operandi is of giving cheques and receiving cash back which were then returned to those parties whose names are appearing as unsecured creditors in the books of account of the appellant.

This resulted in the A.O concluding that unsecured loans to the extent of Rs. 3.35 crore were hit by section 68 of the Act. Thus, added to the income of the assessee.

Being aggrieved by the assessment order the assessee filed an appeal to the CIT(A). The CIT(A) found that creditworthiness of the parties were not doubted. On facts, it came to the conclusion that out of 90 parties, loan reflected in the names of 13 parties was hit by Section 68 of the Act. Accordingly, an addition of Rs.36 lakh was confirmed against the addition of Rs. 3.35 crore made by the A.O. In regard to the balance of Rs. 2.99 crore, the CIT(A) found that the loans were genuine and therefore not hit by section 68 of the Act resulting in its deletion.

Being aggrieved by order, further appeals were filed by the Assessee as well as Revenue to the Tribunal. The Revenue challenged the deletion of Rs. 2.99 crore while the assessee challenged the upholding of addition of Rs. 36 lakh.

The Tribunal find that there were total 90 loan creditors from whom unsecured cash credit amounting to Rs. 3,35,00,000 had been introduced in the books of accounts by the assessee, that out of the 90 loan creditors confirmations were submitted only in the case of 77 parties and for the remaining 13 parties confirmation were not furnished during the assessment proceedings, that during the course of appellate proceedings  the remaining loan confirmation were filed along with other supporting documents. The FAA after considering the remand report and reply of the assessee – decided the matter. Thus the ITAT decided the effective ground of appeal against the assessee with regard to the creditors who had advance Rs.36 lakh to it. Further it held that the FAA had rightly deleted the addition of Rs. 2.99 crore. The AO had made no effort to verify the details filed by the assessee before him.

Being aggrieved with the order of the ITAT, the Revenue filed the Appeal before High Court. The Hon. Court find that there are concurrent finding on facts rendered by the CIT(A) and the Tribunal holding that only Rs. 36 lakh can be added to the declared income and the balance amount of Rs. 2.99 crore was not hit by section 68 of the Act. This finding is premised on the fact that no enquiry was made in respect of 76 creditors out of 77 creditors and the assessee had provided required documentary evidence in respect of the 76 creditors. Thus, these are essentially finding of fact and the view taken by the Tribunal is a possible view on these facts. In view of the above, the question raised does not give rise to any substantial question of law. Accordingly, appeal was dismissed.