Where department has accepted repayment of loan in subsequent year, no addition can be made in current year on account of cash credit.

The ACIT Vs. Smt. Anuradha Anilkumar Agarwal

[ITA No.1536/AHD/2016]

Facts of the case

Pertaining to Ground 1:The assessee has shown total purchases of Rs.8,27,50,188/- in respect of Finished Sarees, Grey and Border. According to the AO, the purchases claimed to have been made from Shri Chandresh D. Dalal of Rs.56,48,508/- and Smt. Damini Chandresh Dalal of Rs.58,23,095/- were treated as bogus purchases and thus added to her total income.

Pertaining to Ground 2:Also, the assessee had taken unsecured loans of Rs.1,87,37,285/- from various persons. After issuing notices u/s 133(6) to all parties and on account of non compliance of notice by certain number of parties, the assessing officer held that assessee failed to prove the identity, creditworthiness and genuineness of the transactions therefore he made an addition of Rs.1,23,00,000/- and also disallowed the interest payment made on the unsecured loan of Rs.2,76,499/-.

Assessee’s Contention

Ground 1:The assessee contented that purchases were made through account payee cheque and they were genuine. The assessee had submitted before the Assessing officer the copy of the ledger account with contra confirmation, PAN card, ITR-V acknowledgment computation of income, bank statement showing entries of payment receipts and sale bills/delivery challans duly signed by the authorized signatory of the seller in support that the purchases made by these two parties were genuine.

Ground 2: The assessee contented that she had received unsecured loans of Rs.1,87,37,285/- from 23 parties and the complete details of these loans with the name, address, PAN, amount of loan, etc. was provided in the tax audit report. The Ld. CIT(A) noticed that all the loans were repaid before 22.12.2011 whereas the scrutiny notice was issued upon the assessee on 31.07.2012. The assessee provided to the assessing officer, the new addresses of these parties during the assessment proceedings along with the confirmations, ledger account, capital account, bank statement, ITR return and computation of income & all these persons were assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee.

Crux of the case

Ground 1: Where the purchases are supported by bills, there are entries in the books of account, payment was made by account payee cheques and the assessee maintains quantitative details, and also no inflation in purchase price was found by the AO & the AO in remand proceedings have scrutinised the bank account of the creditors and has failed to prove that payment made by assessee for such purchases came back to assessee in cash, and thus the addition on account of bogus purchases stands deleted.

Ground 2: Once the Assessing officer gets hold of the PAN of the lenders, it is his duty to ascertain from the Assessing officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. Where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit.

Reliance placed on

Nangalia Fabrics (P) Ltd, [2013] 40 Taxmann.com 206 (Guj)

M.K.Brothers, 163 ITR 249 (Guj-HC)

Ayachi Chandrashekhar Narsanhji, [2014] 42 taxmann.com 251 (Guj)

Ranchhod Jivabhai nakhava, 21taxmann.com 159 (Guj)

ITAT ruled in favor of assesse.

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