Nitesh Kumar Goyal Vs Income Tax Officer

1. The present appeal preferred by the appellant/ assessee under Section 260A of the Income Tax Act, 1961 ( the Act ) was admitted for hearing on 1.9.2022 by formulating the following substantial questions of law:-

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(Tax Case No. 63 of 2022)

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"1. Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal erred in law in upholding the order of Commissioner of Income-tax (Appeals) by confirming the addition of Rs.20,70,000/- made by the Assessing Officer without adhering to appellant's request to issue summons under Section 131(1) of the Income-tax Act, 1961 to the lenders by using his powers under section 250(4) of the Act or omitting to direct Assessing Officer to make further inquiry by issuing summons under section 131(1) of the Act?

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2. Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal, erred in law in upholding the order of the Commissioner of Income-tax (Appeals) whereby he confirmed addition of Rs.20,70,000/- made by Assessing Officer without adhering to appellant's request to issue summons under Section 131(1) of the Income-tax Act, 1961 on the ground that raising such request for the very first time in the course of appeal proceedings before the CIT (Appeals) did not merit acceptance?

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3. Whether, on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal, erred in law in upholding the order of the learned CIT (Appeals) by confirming the addition of Rs.20,70,000/made by the Assessing Officer without pursuing for final outcome of notice issued under Section 133(6) of the Income-tax Act, 1961 and without imposing penalty, despite specifically expressing his intention to do so in the same notice served in person on the creditor?

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4. Whether, since the Assessing Officer accepted repayments of Rs.11,30,000/- made during the year out of total loan of Rs.18,20,000/- in respect of creditor Shri Anil Kumar Dengwani as genuine, the learned Tribunal was correct in confirming entire addition made under section 68 of the Act? "

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2. Learned counsel(s) appearing for the parties jointly

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submit that they are pressing their case only in respect of the first and second substantial questions of law and not pressing the case so far as third and fourth substantial questions of law are concerned.

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(Tax Case No. 63 of 2022)

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Therefore, the present appeal is being considered by us only in respect of the first and second substantial questions of law.

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3. The present appeal is directed against the Order dated 30.3.2022 passed by the Income Tax Appellate Tribunal ( ITAT ), Raipur Bench, Raipur in ITA No.36/RPR/2017, affirming the Order dated 4.1.2017 passed by the Commissioner of Income Tax (Appeals)II [ CIT(A) ], Raipur whereby the CIT(A) has dismissed the appeal preferred by the appellant/assessee filed against the Order dated 30.3.2015 of the Assessing Officer ( A.O. ), under Section 143(3) of the Act, recomputing the income of the appellant/assessee at Rs.34,02,650/after making addition of Rs.24,78,800/- under Section 68 of the Act.

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4. On 12.3.2013, return of income for the Assessment Year 2012-13 was filed by the appellant/assessee declaring his income at Rs.9,23,850/-. Thereafter, on 12.8.2013, his case was selected for scrutiny and notice under Section 143(2) was issued by Income Tax Officer-2(1), Raipur, which was duly served on the appellant/assessee on 22.8.2013. Ultimately, on 30.3.2015, assessment order under Section 143(3) of

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the Act was passed by the A.O. re-computing the income of the appellant/assessee at Rs.34,02,650/after making addition of Rs.24,78,800/- under Section 68 of the Act. Against the assessment order, the appellant/assessee preferred an appeal which was dismissed by the CIT(A) by Order dated 4.1.2017. Assailing the order of the CIT(A), the appellant/assessee again preferred an appeal before the ITAT who also dismissed the appeal of the appellant/assessee by the Order dated 30.3.2022. It is against these orders, the present appeal has been filed by the appellant/assessee.

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5. Mr. S. Rajeshwar Rao, learned counsel appearing for

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the appellant/assessee, submits that the assessee had disclosed the names of one Ms. Seema R. Mutreja from whom Rs.2,50,000/- was borrowed by him and one Mr. Anil Dengwani from whom he had borrowed Rs.18,20,000/-. Notice under Section 133(6) of the Act was issued only to Mr. Anil Dengwani, on which no final conclusion was drawn, whereas, no notice was issued to Ms. Seema R. Mutreja under Section 133(6) of the Act and addition was made by the A.O., which was affirmed by the CIT(A) as well as by the ITAT by

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recording perverse finding and therefore the impugned Orders are liable to set aside/quashed.

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6. Mr. Amit Choudhary, learned counsel appearing for the respondent/revenue, supporting the impugned Orders, submits that to prove the authenticity of the loan transaction, merely Permanent Account Number ( PAN ) of Mr. Anil Dengwani was furnished and backed by his income-tax credentials, notice under Section 133(6) of the Act was issued to Mr. Anil Dengwani and he was called upon to furnish confirmation along with relevant documents, but since he did not reply and further since there were no details made available regarding the other lender i.e. Ms. Seema R. Mutreja, though PAN of Ms. Seema R. Mutreja was furnished in appeal before the CIT(A), the addition was made holding both the loan transactions as unexplained cash credits under Section 68 of the Act. As such, the impugned Orders are just and proper and the appeal deserves to be dismissed.

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7. We have heard learned counsel(s) for parties,

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considered their rival submissions and also perused the record of the case with utmost care and circumspection.

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8. Before proceeding further in the matter, it would be profitable to notice herein a decision of this Court v.

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rendered in the matter of Pawan Kumar Agrawal Income Tax Officer1 with regard to Section 68 read with Section 131/133(6) of the Act, relevant paragraph of which states as under:-

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“6. Section 68 of the Act provides a process by which the Assessing Authority has to reach at transactions of those persons with whom the Assessee had entered into transactions in which the particular assessee is involved, to conclude the assessment on the basis of the transactions referable to those persons. Such concluded assessments will have a bearing on the acceptability or otherwise the plea set up by the Assessee in the course of proceeding under Section 68 of the Act. So much so, notwithstanding, the finality attained by the assessment proceeding in relation to the lender, the borrower is entitled to say that the contents of the returns of the lender and the matters emanating therefrom have to be looked into. In that view of the matter, the First Appellate Authority was justified, also on the basis of the judicial precedents referred by it, in entering the finding that the Assessee had discharged his primary onus under Section 68 of the Act. That having been done, the First Appellate Authority was fully justified in taking the view that it was open to the department to take recourse of Section 131 or Section 133(6) of the Act if they were to further proceed. That not having done so, the First Appellate Authority was within its jurisdiction to conclude on facts and law, in favour of the Assessee. The Appellate Tribunal, in the Appeal at the instance of the Revenue, has not rendered the decision holding the finding of the First Appellant Authority regarding applicability of Sections 131 and 133(6) of the Act, as the case may be, is erroneous in law. So much so, the impugned decision of the Tribunal stands faulted on a substantial question of law referable to the contents of Section 68 of the Act and the failure of the Revenue to take recourse to Sections 131 and 133(6) of the Act, in the case of the Assessee, where the primary onus under Section 68 of the Act stood discharged by the Assessee. ”

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1 Tax Case No.24 of 2011, decided on 4.4.2017.

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(Tax Case No. 63 of 2022)

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9. Coming to the facts of the case, it is quite vivid that though the appellant/assessee has provided the names of Ms. Seema R. Mutreja from whom he took Rs.2,50,000/- and Mr. Anil Dengwani from whom he borrowed Rs.18,20,000/-, but notice under Section 133(6) of the Act was issued only to Mr. Anil Dengwani and though he did not reply to the notice, but no further action was taken to ascertain as to whether the assessee had borrowed the said amount from Mr. Anil Dengwani or not. No notice was issued to Ms. Seema R. Mutreja. Once the A.O. was satisfied and notice was issued to Mr. Anil Dengwani, a similar notice was also required to be issued to Ms. Seema R. Mutreja and then, after making an enquiry, appropriate orders ought to have been passed. There seems to be no basis for not issuing notice to the other creditor i.e. Ms. Seema R. Mutreja. The A.O. should have uniformly applied the provision of Section 133(6) of the Act on both the creditors in order to verify the genuineness of the transaction between the assessee and the creditors i.e., Ms. Seema R. Mutreja and Mr. Anil Dengwani, and having not done so the action of the A.O. stands faulted to take recourse to Section 131/133(6) of the Act and which has vitiated the

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process, whereas the assessee had discharged its primary burden under Section 68 of the Act by providing the names of the two creditors i.e. Mr. Anil Dengwani, whose PAN details and confirmation account were already furnished by the assessee with the A.O., and Ms. Seema R. Mutreja whose PAN details/confirmation account were provided in the appeal before the CIT(A), but neither the CIT(A) nor the ITAT has considered the case in accordance with the provisions of Section 68 of the Act or for that matter for taking action under Sections 131/133(6) of the Act and simply proceeded to decide the appeal of the appellant/assessee against the mandate of the aforesaid provisions of law.

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10. Accordingly, the impugned Orders passed by the ITAT and the CIT(A) affirming the Assessment Order passed by the A.O., all stand set-aside/quashed. The matter is remitted back to the A.O. to issue fresh notice to both the aforesaid creditors and after receipt of their response, pass a fresh order in accordance with law. However, it would be open for the A.O. to take penal action against both the creditors, if they did not respond to the summons issued. The A.O. is also expected to proceed and conclude the proceeding

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expeditiously in accordance with law, as the appeal is of the Assessment Year 2012-13.

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11. The first and second substantial questions of law accordingly are answered in favour of the assessee and against the revenue.

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12. The appeal stands allowed to the extent indicated herein-above, leaving the parties to bear their own costs.

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Sd/- Sd/- (Sanjay K. Agrawal) (Sanjay Kumar Jaiswal) Judge Judge