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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: JUSTICE P.P. BHATT, HONBLE & HONBLE MANISH BORAD
PER MANISH BORAD, AM.
The above captioned appeals filed at the instance of revenue
pertaining to Assessment Year 2011-12, 2015-16 and 2016-17 are
directed against the order of Commissioner of Income Tax (Appeals)-
3 (in short ‘Ld.CIT’], Bhopal dated 02.05.2019, 02.05.2019 and
04.04.2019 which are arising out of the order u/s 147 r.w.s. 143(3),
u/s 143(3) r.w.s. 144C and u/s 143(3) of the Income Tax Act
1961(In short the ‘Act’) dated 28.12.2018, 27.12.2018 and
26.12.2018 respectively framed by ACIT(Central), Ujjain.
Revenue has raised following grounds of appeal :-
(i) M/s Ariba Foods Pvt. Ltd ITA No.736/Ind/2019 Assessment Year 2016-17 1.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,44,12,690/- made u/s 68 of the LT. Act, on the ground of cross examination, without appreciating the fact that the persons whose statements are relied upon in the assessment order are the very persons who own, control, manage, operate & run the assessee- group including the assessee-company; and therefore, in the name of natural justice, the assessee-group cannot claim to cross-examine itself. 2
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2.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,44,12,690/- made uls 68 of the LT. Act, while insisting that since the lender parties were making some paper formalities, they are not dummy concerns. The Ld. CIT(A) has failed to appreciate that all the dummy/shell/bogus/paper/briefcase entities used to be perfect in papers; otherwise, how will they achieve their desired purposes. Therefore, genuineness of an entity cannot be judged by the heap of papers it has created, but only through its activities.
3.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,44,12,690/- made U/S 68 of the LT. Act, while stating that the addition was made on the basis of guess work, assumption and presumption and on mere suspicion. He actually ignored that the very content of the assessment order establishes beyond doubt that the lender companies were dummy/shell/bogus/paper/briefcase entities, and the assessee's claimed transactions with them were merely an eye-wash.
4.On the facts and in the circumstances of the case, the Ld, CIT(A) has erred in deleting the addition of Rs. 12,44,12,690/- made u/s 68 of the LT. Act, by making factually incorrect conclusion that the same AO has made assessment u/s 147/143(3) and u/s 143(3) in the cases of M/s Famous Vanijya Pvt. Ltd. and Mls Navyug Vyapaar Pvt. Ltd., and has drawn no negative inference. This conclusion of the Ld. CIT(A) is factually incorrect, since the said AO has made the similar observations/conclusion (i.e. negative inference) as made in the assessment order in the case of the assessee in the following assessments-
a)from para 2.0 to para 2.7 of the assessment order u/s 147/143(3) dated 28/12/2018 for
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b)from para 4.0 to para 4.7 of the assessment order u/s 143(3) dated 25/12/2018 for AY 2016-17 in the case of M/s Navyug Vyapaar Pvt. Ltd.,
c)in para 3.0 of the assessment order u/s 143(3) dated 25/12/2018 for A.Y. 2016-17 in the case of M/s Famous Vanijya Pvt. Ltd., and
d)in para 2.0 of the assessment order u/s 147/143(3) dated 25/12/2018 for A.Y. 2011-12 in the case of M/s Navyug Vyapaar Pvt. Ltd.
5.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,44,12,690/- made u/s 68 of the LT. Act, while stating that nothing incriminating was found in the course of search and seizure and survey actions in the assessee-group, which could warrant such an addition. He has ignored that incriminating material information were indeed found during such actions, and the same are elaborately discussed in the body of the assessment order while making the addition.
6.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,44,12,6901- made u/s 68 of the LT. Act, while not appreciating that merely making transactions through banking channels, payment of interest on alleged loans, and repayment of the alleged loans cannot make the transactions as genuine, when the activities of the entire group had been carried out in such a fashion to route and rotate the unaccounted cash.
7.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 12,44,12,690/- made u/s 68 of the LT. Act, in dismissing the reliance placed by the AO on various case-laws while ignoring the facts and circumstances of the case in its entirety.
ITA No.736,737 & 773/2019 Ariba Foods Pvt. Ltd & Ors.
(ii) M/s Vyanktesh Plastics and Packaging Pvt. Ltd
ITA No.737/Ind/2019 Assessment Year 2015-16 1.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 52,552/- made u/s 36(l)(va) of the LT. Act, while completely ignoring para-5 of the CBDT's Circular No. 2212015 dated 11th December 2015.
2.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 4,50,000/- out of total expenses claimed on account of power & fuel expenses, while completely ignoring the fact that with almost equal amount of claimed expenses, the production of corrugated boxes was much higher in the preceding year vis-a-vis the current year, and therefore, the quantum of expenses cannot be accepted on face value.
3.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the LT. Act, on the ground of cross examination, without appreciating the fact that the persons whose statements are relied upon in the assessment order are the very persons who own, control, manage, operate & run the assessee- group including the assessee-company; and therefore, in the name of natural justice, the assessee-group cannot claim to cross-examine itself.
4.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the LT. Act, while insisting that since the lender parties were making some paper formalities, they are not dummy concerns. The Ld. CIT(A) has failed to appreciate that all the dummy/shell/bogus/paper/briefcase entities used to be perfect in papers; otherwise, how will they achieve their desired purposes. Therefore, genuineness of an entity cannot be judged by the
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heap of papers it has created, but only through its activities.
5.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the LT. Act, while stating that the addition was made on the basis of guess work, assumption and presumption and on mere suspicion. He actually ignored that the very content of the assessment order establishes beyond doubt that the lender companies were dummy/shell/bogus/paper/briefcase entities, and the assessee's claimed transactions with them were merely. an eye-wash.
6.On the facts and in the circumstances of the case, the Ld. ClT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the l.T. Act, by making factually incorrect conclusion that the same AO has made assessment u/s 1471143(3) in the case of M/s Famous Vanijya Pvt. Ltd. (one of the lender companies) and has drawn no negative inference. Actually, from para 2.0 to para 2.7 of the assessment order u/s 1471143(3) dated 28112/2018 for A.Y. 2011-12 in the case of Mls Famous Vanijya Pvt. Ltd., the said AO has made the similar observations/conclusion (i.e. negative inference) as made in the assessment order in the case of the assessee.
7.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the I.T. Act, while stating that nothing incriminating was found in the course of search and seizure and survey actions in the assessee-group, which could warrant such an addition. He has ignored that incriminating material/information were indeed found during such actions, and the same are elaborately discussed in the body of the assessment order while making the addition :
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8.On the facts and in the circumstances of the case, the Ld. CJT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the LT. Act, while not appreciating that merely making transactions through banking channels, payment of interest on alleged loans, and repayment of the alleged loans cannot make the transactions as genuine, when the activities of the entire group had been carried out in such a fashion to route and rotate the unaccounted cash.
9.On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,44,49,554/- made u/s 68 of the I.T. Act, in dismissing the reliance placed by the AO on various case-laws while ignoring the facts and circumstances of the case in its entirety. (iii) M/s Famous Vanijya Pvt. Ltd, ITA No.773/Ind/2019, Assessment Year 2011-12
On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.4,07,35,000/- (out of total addition of Rs.4,16,15,000/-) made u/s 68 of the I.T. Act ignoring the fact that the assessee failed to substantiate its contention of ‘refunds received out of investment made in earlier years”. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid addition of Rs.4,07,35,000/- ignoring that the assessee has failed to establish the link between the said amount and its alleged source (share capital & share premium amount received earlier). 3. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid addition of Rs.4,07,35,000/- while not appreciating that the assessee has failed to show as to how the said share capital & share premium amount was liquidated, and how the same was translated to the refund of Rs.4,07,35,000/- allegedly received by the assessee. 7
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On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid addition of Rs.4,07,35,000/- without appreciating that the assessee itself had filed appeal against the addition made on account of share capital & share premium amount. On the one hand, the assessee is contesting the said addition; and on the other hand, taking the basis of the said addition, the assessee is challenging the instant addition of Rs.4,07,35,000/-. The assessee cannot claim both the benefits; and the outcomes of legal proceedings cannot be accepted on a selective manner and on the sweet will of the assessee. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs.8,80,000/- (out of total addition of Rs.4,16,15,000/-) made u/s 68 of the I.T. Act while accepting the assessee’s ground of cross examination, without appreciating the fact that the persons whose statements are relied upon in the assessment order are the very perons who own, control,manage, operate & run the assessee- group including the assessee-company; and therefore, in the name of natural justice, the assessee-group cannot claim to cross-examine itself.
6 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid addition of Rs. 8,80,000/-, while insisting that since the lender party was making some paper formalities, it is not a dummy concern. The Ld. CIT(A) has failed to appreciate that all the dummy/shell/bogus/paper/briefcase entities used to be perfect in papers; otherwise, how will they achieve their desired purposes. Therefore, genuineness of an entity cannot be judged by the heap of papers it has created, but only through its activities.
7 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid addition of Rs. 8,80,000/-, while stating that the addition was made on the basis of guess work, assumption and presumption and on mere suspicion. He actually ignored that the very 8
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content of the assessment order establishes beyond doubt that the lender company was a dummy/shell/bogus/paper/briefcase entity, and the assessee's claimed transactions with it was merely an eye-wash.
8 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid addition of Rs.8,80,000/-, by making factually incorrect conclusion that the same AO has made assessment u/s 147/143(3) in the case of M/s Etiam Emedia Ltd. (the lender company) and has drawn no negative inference. Actually, in para 2 of the assessment order u/s 147/143(3) dated 29/12/2018 for A.Y. 2011-12 in the case of M/s Etiam Emedia Ltd., the said AO has made the negative inference.
9 On the facts and in the circumstances of the case, the Ld. C[T(A) erred in deleting the aforesaid addition of Rs. 8,80,000/-, while not appreciating that merely making transactions through banking channels, payment of interest on alleged loans, and repayment of the alleged loans cannot make the transactions as genuine, when the activities of the entire group had been carried out in such a fashion to route and rotate the unaccounted cash.
On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the aforesaid additions, while stating that nothing incriminating was found in the course of search and seizure and survey actions in the assessee- group, which could warrant such additions. He has ignored that incriminating material/information were indeed found during such actions, and the same are elaborately discussed in the "body of the assessment order while making the addition.
On the facts and in the circumstances of the case, the Ld. CIT(A) erred m deleting the aforesaid additions, in dismissing the reliance placed by the AO on various case-laws while ignoring the facts and circumstances of
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the case in its entirety.
The appellant reserves the right to add, amend or alter the ground of appeal on or before the date the appeal is finally heard for disposal. 3. As the instant appeals relates to the assessee(s) from same
Group and the issues raised in various grounds and facts involved
are mostly common, we have heard these appeals together. Since
there is no objection by both the parties, all these appeals are being
disposed off by this common order for the sake of convenience and
brevity. As submitted by Ld. Counsel for the assessee and also by
Ld. Departmental Representative M/s Ariba Foods Pvt. Ltd is the
lead case.
First we take up Revenue’s Appeal No.ITA/736/Ind/2019 for
Assessment Year 2016-17 in the case of M/s Ariba Foods Pvt. Ltd.
Brief facts of the case as called out from the records are that
the assessee is a company and stated to be a food processing
concern, engaged in manufacturing of various food stuffs. The
assessee is one of the various entities of Shriji Polymers (India) Ltd.
Group in which search and seizure operations u/s. 132 were
carried out by the DDIT(Inv.)-II, Indore on 27/07/2017. However, in
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the case of the assessee, only survey proceedings u/s. 133A were
initiated on the same day. The assessee filed its original return of
income on 17/11/2016 declaring total income at Rs. Nil and
claiming current year loss at Rs. 1,19,76,320/-. Subsequently, the
assessee furnished a revised return on 22/08/2017 declaring total
income at Rs. Nil and reducing the current year loss at Rs.
23,07,528/-. In pursuance of the revised return filed by the
assessee, the case got selected for Limited scrutiny under CASS and
accordingly, Notices u/s. 143(2) of the Act were issued by the ACIT
– 1(1), Indore on 13.08.2018 and 25.09.2018. Thereafter, the case
of the assessee got centralized u/s. 127 of the Act from the ACIT -
1(1), Indore to the ACIT (Central Circle) – Ujjain and then, the ACIT
(Central Circle) – Ujjain issued a fresh notice u/s. 143(2) on
03.12.2018. The AO then issued a notice on 12.12.2018 u/s. 142(1)
to the assessee. In terms of the Notice, the assessee was required
to establish identity of the creditors, capacity of the creditors and
genuineness of the transactions, in respect of fresh unsecured
loans taken by it during the relevant previous year. In compliance
to the notice the assessee vide its letter dated 20.12.2018 submitted
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before the AO that during the relevant previous year it had accepted
fresh loans from 8 parties. The assessee further submitted before
the AO that all the transactions had been carried out through
banking channels only and have duly been recorded in its regular
books of account. In order to establish the genuineness of the loan
transactions, the assessee furnished various documentary
evidences before the AO. However, the AO formed a view that out of
the 8 loan creditors loan taken from following three loan creditor
companies remained unexplained as there are dummy paper
companies namely;
Name of Company Amount (Rs.) i) M/s.Dwarkesh Finance Ltd.[(In short) ‘DFL’] 15,26,111/- ii) M/s. Famous Vanijya Pvt. Ltd.[ .[(In short) 2,15,03,302/- ‘FVPL’] iii) M/s. Navyug Vyapar Pvt. Ltd. [(In short) 10,13,83,277/- ‘NVPL’] Total 12,44,12,690/- Accordingly, the AO, by invoking the provisions of s. 68 of the
Act, made an addition of Rs. 12,44,12,690/- in the hands of
assessee. Besides this, a further addition of Rs. 34,330/- was made
by the AO on account of disallowance out of Pre Operative
Expenses. The issue of disallowance of Pre Operative Expenses is
not before us. 12
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Aggrieved assessee preferred appeal before CIT(A) and filed
detailed submissions along with necessary evidences to prove the
identity, genuineness and creditworthiness of the three cash
creditors M/s DFL, M/s FVPL and M/s NVPL. Ld. CIT(A) after
examining the facts narrated by the Ld. Counsel for the assessee as
well as in view of the fact that in preceding years the alleged cash
creditors have been assessed U/s 143(3)/147 of the Act and the Ld.
A.O has not taken any adverse view. Further Ld. CIT(A) deleted the
impugned addition of Rs.12,44,12,690/- based on the following four
reasons:-
(a) The AO erred in making additions merely on the basis of statements of third parties recorded by the Investigation Wing and without providing opportunity of their cross examination before making the impugned addition;
(b) The AO erred in converting case selected for limited scrutiny to complete scrutiny;
(c) The AO erred in making additions on suspicion, surmise and conjecture basis and without having any incriminating material on record found from the residential premises of the appellant relating to the year in which additions have been made; 13
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(d) The AO erred in 'considering the documentary evidences filed in support of creditworthiness of the lender and genuineness of the transaction including explaining source of source. 8. Ld. CIT(A) after being satisfied by the documentary evidences
filed by the Ld. Counsel for the assessee in order to prove the
identity, genuineness and creditworthiness also placed reliance on
various judgments and decisions including that of Co-ordinate
Bench, Agra in the case of M/s Umesh Electricals V/s ACIT 131 ITD
127, the decision of this Tribunal in the case of Aseem Singh V/s
ACIT (2012) 19 ITJ 52 and also relying on the judgment of Hon'ble
Jurisdictional High Court in the case of CIT V/s Metachem
Industries (2000) 245 ITR 0160 (M.P).
Now, the Revenue is in appeal before the Tribunal.
Since, all the seven grounds taken by the Revenue are inter
connected and directed against the action of the Ld. CIT(A) in
deleting the addition of Rs. 12,44,12,690/- made by the AO u/s. 68
of the Act, we consider it appropriate to adjudicate all the grounds
simultaneously.
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Ld. CIT-DR for the Revenue vehemently argued at length. The
main contention of the Ld. CIT-DR was that in this case, the Ld. AO
has given a detailed finding in the body of the assessment order to
establish that all the loan taken from three lender companies for
which the additions have been made u/s. 68 are mere paper
companies which have been formed by entry operator Mr. Amit
Kedia of Kolkata. According to the Ld. CIT-DR, Mr. Amit Kedia in
his statement taken on 26.08.2014 had categorically stated that he
was engaged in providing bogus accommodation entry in lieu of
commission through his various companies and Navyug Vyapar Pvt.
Ltd., one of the three creditors, was also a company formed by him
for providing accommodation entries. The CIT-DR argued that a
commission u/s. 131(1)(d) of the Act was issued to DDIT (Inv.)-
Kolkatta for conducting inquiry and report thereof and in response
the DDIT (Inv.) vide his letter dated 05.09.2017 informed that the
company is not in existence on the given address. The Ld. CIT-DR
further buttressed his argument by pointing out that during the
course of the simultaneous survey u/s. 133A in the premises of the
creditor companies, statements of the directors of the creditor
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companies were recorded and the directors of such companies
expressed their inability to give details about the working of the
companies in which they were directors and merely stated that they
were acting on the instruction of Shri Anand Bangur, the key
person of Shriji Group. The Ld. CIT-DR also pointed out that at
page no. 18 of the assessment order, the AO has given the trail of
the loans which establish that cash were being deposited in certain
bank accounts and subsequently, those were layered in the lender
companies and then to the assessee company. The Ld. CIT-DR also
made reference of various tally screen shots which were reproduced
by the AO in the body of the assessment order and contended that
the screenshots of various vouchers and ledger accounts clearly
proves that all the lender companies were paper companies
indulged in providing the accommodation entries. As regard non
providing of opportunity of cross-examination to the assessee of the
persons whose statements were relied upon by the AO, the Ld. CIT
vehemently argued that all the persons whose statements were
relied upon by the AO were close associates of the assessee
company and therefore, the assessee company was supposed to be
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aware of the statements given by such persons and therefore, there
was no necessity for giving any specific opportunity of cross
examination. During the course of the hearing, the Ld. CIT-DR also
filed one Paper Book vide letter dated 18.12.2020. Along with the
Paper Book, the Ld. CIT-DR also furnished a copy of letter dated
17.12.2020 addressed by the present AO to the Ld. CIT(DR) which
inter alias include the comments of the AO on the Ld. CIT (A)’s
Order. In the Paper Book furnished by the Ld. CIT(DR), copies of the
assessment orders passed in the cases of lender companies and as
also the copy of the appeal memo filed before the ITAT have been
furnished. By making a reference of the assessment orders passed
in the cases of the lender companies, the Ld. CIT(DR) reiterated the
contention of the AO that the Ld. CIT(A) was not correct in holding
that while making the separate assessments in the hands of the
lender companies, no adverse findings were given. In sum and
substance, as per the Ld. CIT(DR), all the lender companies were
paper companies and the directors of such companies were also
dummy directors acting merely on the instruction of Shri Anand
Bangur a key person of the Shriji Polymers Group.
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Per Contra, Ld. Counsel for the assessee also made his
arguments at length by making a reference of the various
documentary evidences furnished by him in Paper Books in two
volumes, running from Page No. 1 to 676. The Ld. Counsel also filed
before us a copy of the written synopsis by making reference of
various findings of the AO, the Ld. CIT(A) and various documentary
evidences furnished in the Paper Book. The relevant abstract of the
Synopsis filed by the Ld. Counsel of the assessee is reproduced as
under:
“F. Key Points of Assessee’s Submission and Relevant Pages of Paper Book: S. Submission in Brief Relevant Remarks No. Pages of Paper Book 1 All the lender companies from - Para (6.0) on page no. 4 of whom the assessee accepted the AO’s Order loans are the group companies of the Bangur Group itself to which the assessee belongs. 2 In respect of all the lender - i) First sub-para of Para (6.1) companies, simultaneous on page no. 12 of the AO’s survey proceedings u/s. 133A Order for NVPL. were carried out. Further, the ii) Para (6.2) on page no. 34 & directors of the lender 36 of the AO’s Order for companies were found on FVPL. given address and their iii) Last sub-para of Para (6.3) statements were also on page no. 42 of the AO’s recorded. Order for DFL.
3 During the course of the - - search/ survey, in the 18
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assessee company as well as lender companies, not a single incriminating material or document was found giving any iota of assessee’s obtaining non-genuine loans. 4 In respect of all the lender NVPL i) Assessment Order of FVPL companies, simultaneous Order at for A.Y. 2011-12 is also a assessment proceedings got 488 to subject matter of separate completed for A.Y. 2011-12 490; Appeal before this Hon’ble u/s. 147/143(3) of the Act. Bench. FVPL ii) Framing of the Order at Assessments in the hands of 309 to lender companies establish 396; the identity of the lender companies. and iii) Interest income shown by the lender companies from DFL Order the assessee company and at 233 to as also, corresponding credit 243 for TDS claim has been granted. Thus, no adverse cognizance has been taken in the cases of the lender companies. 5 During the course of the 138 to 141 On a perusal of the Page No. assessment proceedings, the being the 139 of the Paper Book, it may AO of the assessee had not only Notice be gathered that except whispered a single word u/s. 142(1) asking certain documents, regarding the so-called dated 12- the AO had not uttered any enquiries and statements 12-2018 single word regarding the recorded by the Investigation alleged enquiries and other Wing. The opportunity of materials referred to by him cross-examination of any of in the body of the the witnesses of the AO was assessment order. Thus, the not given. question of giving any cross- examination does not arise. The relevant findings of the ld. CIT(A) are at para (4.4.2)(a) on page no. 74 to 77 of his Order.
6 The assessee had specifically Sub-para Despite making specific requested the AO for either (E) at Page request, the AO did not giving the opportunity to No. 169 of conduct any independent 19
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produce the creditors or to the enquiry by himself. issue summons u/s. 131(1) or assessee’s letters u/s. 133(6) to the submission lender companies. for NVPL, 165 for FVPL AND 161 for DFL 7 During the course of the Written - assessment proceedings, the submission assessee had duly before AO established the identity of the dated 24- creditors, genuineness of the 12-2018 – transactions, creditworthiness PB Page of the lenders and as also, the No. 151 to sources of availability of funds 169 in the hands of the lender companies for making loans to the assessee company. 8 Loan Transactions from two of Page No. - the lenders viz. FVPL & NVPL 400 for have got completely repaid FVPL & during the relevant previous 609 for year itself. NVPL 9 All the lender companies have Page No. - duly shown interest income 265 for from the assessee company DFL; 431 and have also claimed TDS for FVPL & 637 for NVPL 10 None of the findings given by - The AO’s findings and the the AO is relevant for making assessee’s rebuttal on each the impugned additions of the findings of the AO have been reproduced by the ld. CIT(A) at para (4.3.1) on page no. 70 to 73 of his Order. 11 During the course of the Page No. None of the documentary assessment proceedings, the 170 to 283 evidences have been rebutted assessee had furnished all for DFL; or contravened by the ld. AO. the necessary documentary 284 to 461 evidences for establishing (i) for FVPL identity of the loan creditors; and (ii) genuineness of the loan 462 to 676 transactions; (iii) for NVPL 20
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creditworthiness of the loan creditors; (iv) sources of funds in the hands of the loan creditors; (v) relevant documentary evidences regarding the identity & creditworthiness of the sub- creditors 12 The share capital transactions PB 103 – During the relevant previous carried out by all the lender copy of the year, the assessee company companies with the assessee audited had issued 1,29,90,000 company during the relevant Balance equity shares of Rs.10/- previous year have been Sheet each, at par, to various accepted by the same AO and PB shareholders and out of while framing the impugned 143 – which, equity shares assessment. assessee’s numbering 23,40,000; submission 15,80,000; & 24,50,000; before AO respectively to DFL, FVPL & NVPL were issued. The ld. AO has duly verified and accepted the genuineness of the share capital transactions. When the share capital transactions have been accepted, then, there was no justification to form an adverse view in respect of the loan transactions with the same companies.
13 In earlier years too, the PB Page The ld. CIT(A) has also given assessee company had No. 244 – a finding to this effect at page accepted the loans from lender Copy of no. 82 of his Order. companies and the same were Account of duly accepted by the Revenue. DFL in books of assessee showing the opening balance
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G. Manner of Discharging the Initial Onus by the Assessee:
S. Nature of For Dwarkesh For Famous Vanijya For Navyug Vyapaar No Document Finance Ltd. [DFL] Pvt. Ltd. [FVPL] Pvt. Ltd. [NVPL] . Addition – Addition – Addition – Rs.15,26,111/- Rs.2,15,03,302/- Rs.10,13,83,277/- PB Remarks PB Remarks PB Remarks Pag Page Pag e No. e No. No. I. FOR IDENTITY: 1 Certificate of 170 Originally 284 An old company 462 An old company Incorporation Incorporated in incorporated on incorporated on the name of 25-10-2007 09-11-2004 ‘Richmore Finance & Leasing Ltd.’ in the year 1992.
2 Memorandum 171 Main object is 285 Shri Amit Kedia 463 Shri Amit Kedia and Articles of to Financing to was neither a to was neither a Association 224 300 promoter nor a 476 promoter nor a director of FVPL director of NVPL as alleged by as alleged by the the AO. AO. 3 Certificate for 225 - - - - - Commencement of Business 4 Certificate for 226 Name got - - - - Change of changed to Name Dwarkesh Finance Ltd. 5 Letter dated 23- 227 The lender - - - - 02-2005 issued company is a by the company in Vadodara Stock which the Exchange public is Limited substantially interested and earlier it was listed on Stock Exchange. Such fact 22
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speaks about the genuineness of the company. 6 Acknowledgem 228 Substantial 301 Taxable Income 477 Taxable Income ent of Income- Taxable of Rs.4.07 lakhs of Rs.5.46 lakhs Tax Return for Income of shown by FVPL shown by NVPL A.Y. 2016-17 Rs.4.18 lakhs shown by DFL 7 Master Data 229 The company 302 The company 481 The company downloaded shown as an shown as an shown as an from the official active active company. active company. website of the company. The The directors The directors MCA. directors shown are shown are shown are associated with associated with associated the group the group with the group company of the company of the company of the assessee only. assessee only. assessee only. Thus, it is a Thus, it is a Thus, it is a group company group company group of the assessee. of the assessee. company of the assessee. 8 Statement 230 All the 303 All the directors 482 Both the showing details directors are are income-tax directors are of directors of income-tax payees and income-tax the company. payees and having DIN payees and having DIN allotted by the having DIN allotted by the Ministry of allotted by the Ministry of Corporate Ministry of Corporate Affairs Corporate Affairs Affairs Assessment 231 i) Scrutiny 304 i) In the Order of 483 i) In the Order of Orders for to Assessment to Assessment of to Assessment of earlier years 243 for A.Y.2014- 399 FVPL [PB Page 584 NVPL [PB Page framed under 15 u/s. 143(3) No. 304], u/s. No. 483], u/s. scrutiny assessing the 143(3)/147, for 143(3), for A.Y. income at A.Y. 2008-09, 2006-07, the Rs.8,66,400/- the then AO at then AO at last establishes the last para at para at internal identity and internal page no. page no. 1 of the creditworthine 1 of the Order, Order, has stated ss of DFL. has stated that that the NVPL the FVPL had had raised fresh ii) In raised share share capital and 23
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simultaneous capital and share premium assessment share premium amounting to proceedings in amounting to Rs.48.02 lakhs case of DFL for Rs.51.60 lakhs and Rs.1152.48 A.Y. 2011-12 and Rs.961.40 lakhs u/s. lakhs respectively 143(3)/147, respectively which transactions of which automatically DFL with the automatically proves the assessee have proves the creditworthiness not been creditworthiness of NVPL. disputed and of FVPL. the genuine ii) In the Order of existence of ii) In the Order of Assessment of the DFL has Assessment of NVPL for A.Y. also not been FVPL for A.Y. 2015-16 [PB disputed. The 2012-13 [PB Page No. 485], AO, at para (5), Page No. 307], the returned accepted the the genuineness income shown by activities of FVPL has not NVPL has been claimed by been doubted. accepted at DFL. Rs.10,78,290/- iii) Simultaneous and thus, the assessment genuineness of proceedings NVPL has not u/s. 143(3)/147 been doubted. by the same AO were carried out for A.Y. 2011-12 and the AO nowhere alleged that the FVPL is merely a paper company. 10 Order passed - - - - 585 In the case of one by the ld. CIT(A) to of the group on an earlier 606 entities namely occasion in M/s. Arpit case of a group Plastics Pvt. Ltd. company for A.Y. 2010-11, wherein similar an addition of issue of Rs.46.62 lakhs unsecured loan was made in from lender respect of company was unsecured loan 24
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treated as received from unexplained NVPL. The ld. cash credit u/s. CIT(A), while 68 adjudicating the appeal of aforesaid assessee, also required the AO to submit his remand report but the AO could not find any defect in the documentary evidences furnished by such assessee. Accordingly, the ld. CIT(A), at PB Page No. 599 to 606, held that the assessee had fully established the identity, creditworthiness of NVPL and genuineness of loan transactions. II. FOR GENUINENESS OF THE TRANSACTIONS: 11 Ledger account 244 All the 400 All the 607 All the of lender in the transactions transactions transactions took books of took place took place place through assessee through through banking banking banking channels and channels and the channels. the entire loan entire loan got Opening got completely completely balance is also repaid. repaid. getting reflected. 12 Ledger account 245 --- do --- 401 --- do --- 608 --- do --- of assessee in the books of lender. 13 Confirmation 246 - 402 - 609 - 25
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letter duly signed by the authorized signatory of the lender 14 Relevant Bank 247 The entire 403 Transactions 610 Transactions Statement of & transactions to through banking to through banking the assessee 248 have taken 411 channels 616 channels place through banking channels only 15 Relevant Bank 249 i) No cash 412 All the payments 617 All the payments Statement of & deposit made to have been made to have been made the lender 250 by DFL before 415 by the FVPL by 622 by the NVPL making loan to obtaining either by the assessee. refunds of loans obtaining refunds from various of loans from ii) In the bank entities given on various entities statement, the earlier given on earlier name of the occasions. occasions or by assessee obtaining company is overdraft facility getting clearly against FDR from reflected. bank or from issuing fresh iii) The loan share capital. has been given by the DFL by obtaining refunds of loans from two group entities namely M/s. Vyanktesh Plastics & Packaging Pvt. Ltd. and M/s. Shriniwas Polyfabrics & Packwell Pvt. Ltd.
III. FOR CREDITWORTHINESS: 16 Acknowledgem 228 - 301 - 477 - ent of Income- 26
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Tax Return for A.Y. 2016-17
17 Audited 260 i) DFL is 425 As per the 632 i) As per the Financial & having huge audited balance & audited balance Statements of 261 owned funds sheet, before 633 sheet, before lender company of Rs.1438.77 making loan to making loan to for F.Y. 2015- lakhs which the assessee, the assessee, the 16 [A.Y. 2016- proves its the FVPL was NVPL was having 17] creditworthine having substantial ss substantial owned funds of owned funds of Rs.1577.23 ii) DFL has Rs.1025.52 lakhs as on 31- shown profit lakhs as on 31- 03-2015. before tax at 03-2015. Rs.5.97 lakhs ii) NVPL has shown profit before tax at Rs.95.72 lakhs
18 Statement 272 DFL has paid 438 FVPL has paid 643 NVPL has paid showing details substantial substantial substantial of taxable amount of tax amount of tax amount of tax. income and tax For A.Y. 2018-19, paid for last 8 it has shown years. taxable income of Rs.2,25,20,162/- and paid the tax of Rs.47,09,735/- as per the CIT(A)’s findings at page no. 88 of his Order.
19 The lender - - 304 In the Order of 483 In the Order of companies to Assessment of to Assessment of were having 306 FVPL [PB Page 484 NVPL [PB Page sufficient funds No. 304], u/s. No. 483], u/s. by way of 143(3)/147, for 143(3), for A.Y. share capital A.Y. 2008-09, 2006-07, the and share the then AO at then AO at last premium raised last para at para at internal by them in internal page no. page no. 1 of the earlier years. 1 of the Order, Order, has 27
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has clearly clearly stated stated that the that the NVPL FVPL had raised had raised fresh share capital share capital and and share share premium premium amounting to amounting to Rs.48.02 lakhs Rs.51.60 lakhs and Rs.1152.48 and Rs.961.40 lakhs lakhs respectively respectively which which automatically automatically proves the proves the creditworthiness creditworthiness of NVPL. of FVPL. 20 The PB During the PB During the PB During the creditworthines 103 relevant 103 relevant 103 relevant previous s of the lender – previous year, – previous year, – year, the companies cop the assessee copy the assessee cop assessee accepted by the y of company had of company had y of company had same AO in the aud received a sum the received a sum the received a sum of same Order ited of audi of aud Rs.2,45,00,000/- while accepting Bal Rs.2,34,00,00 ted Rs.1,58,00,000/ ited from NVPL by the anc 0/- from DFL Bala - from FVPL by Bal way of share genuineness of e by way of nce way of share anc capital and share capital She share capital Shee capital and e genuineness of received by the et and t genuineness of She such share assessee from and genuineness of and such share et capital receipt all the lender PB such share PB capital receipt and from NVPL has companies 143 capital receipt 143 from FVPL has PB not been doubted – from DFL has – not been 143 by the AO ass not been asse doubted by the – framing the ess doubted by the ssee’ AO framing the ass subject ee’s AO framing the s subject ess assessment sub subject sub assessment ee’s order. mis assessment miss order. sub sion order. ion mis befo befor sion re e AO befo AO re AO IV. FOR SOURCE OF THE SOURCE:
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21 Statement 273 DFL had 439 FVPL had 644 i) A substantial showing details provided loan provided loans sum of Rs.4.60 of Immediate to the to the assessee crores was Source of assessee company by received by the unsecured loan company by taking the NVPL from the given by the taking the refund of loans assessee lender refund of loans given earlier to company itself company. given earlier to four entites. Two against the loan two other of these entites given on earlier entities namely namely M/s. occasions. M/s. Vyanktesh Vyanktesh Corrugators Pvt. ii) A substantial Plastics & Ltd. and M/s. sum of Rs.6 Packaging Pvt. Shree Packers crores was Ltd. (MP) Pvt. Ltd. received by NVPL [AAACV6547J] [aggregate sum by way of and M/s. of issuance of share Shriniwas Rs.1,90,00,000/ capital and Polyfabrics & -] are group genuineness of Packwell Pvt. concerns of the such share Ltd. assessee capital have duly [AARCS5889F] been accepted in the assessment proceedings u/s. 143(3) of NVPL for A.Y. 2016-17 [PB Page No. 583].
iii) A sum of Rs.1 crore was received by NVPL from another group company namely M/s. Vyanktesh Plastics
iv) A sum of Rs.2.75 crores was received by NVPL by availing OD facility from their banker.
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22 Copies of Bank 274 In the bank 440 On a perusal of 645 On a perusal of Statements of to statements of to the bank , the bank the sub- 276 the sub- 442; statements of 649 statements of creditors for the AN creditors 446 two sub- , sub-creditors, it relevant period D namely M/s. & creditors namely 653 may be observed 280 Vyanktesh 447 M/s. Vyanktesh to that the Plastics & Corrugators Pvt. 655 transactions of Packaging Pvt. Ltd. and M/s. , share capital/ Ltd. [PB 274 to Shree Packers 659 loans / refunds 276] and M/s. (MP) Pvt. Ltd., it & of loans by them Shriniwas may be 660 with NVPL are Polyfabrics & observed that , getting clearly Packwell Pvt. repayment of 664 reflected. Ltd. [PB 280], loan by them on & repayment of various dates to 665 Incidentally, even loan by them FVPL are getting , in the bank on various clearly reflected. 669 statements of all dates to DFL , the sub-creditors, are getting Incidentally, 673 no cash deposits clearly even in the bank were made. reflected. statements of both the sub- Incidentally, creditors, no even in the cash deposits bank were made. statements of both the sub- creditors, no cash deposits were made. 23 Copies of 277 The sub- 443, The sub- 646 - Ledger & creditors are 448 creditors are , Accounts of 281 confirming the confirming the 650 lender company refund of loans refund of loans , in the books of taken by them taken by them 656 the sub- from DFL from FVPL , creditors 661 , 666 , 670 24 Copies of 278 - 444, - 647 - Confirmation & 449, , Letters by the 282 451 651 sub-creditors A, , 30
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confirming their 452 657 transactions A , with the lender 662 company , 667 , 671 , 674 25 Copies of 279 The sub- 445, The sub- 648 The sub-creditors Acknowledgme & creditor 450, creditors have , have shown nts of Income- 283 namely M/s. 451 shown 652 substantial Tax Returns of Vyanktesh B, substantial , taxable income in sub-creditors Plastics & 452 taxable income 658 their return of for A.Y. 2016- Packaging Pvt. B in their return of , income for A.Y. 17 Ltd. has income for A.Y. 663 2016-17. shown 2016-17 , At page no. 658, substantial 668 663, 668 & 672, taxable income , Shri Govind of Rs.22.60 672 Maheshwari, lakhs in its , Shri Rajesh return of 675 Maheshwari, income for A.Y. Shri Naveen 2016-17. Maheshwari & Shri Brajesh Maheshwari (Share applicants of NVPL), have shown taxable income of more than Rs.20 crores in their respective ITRs for A.Y. 2016-17.
The Ld. Counsel for the assessee also placed reliance on the
following decisions;
i) ACIT vs. EI Dorado Biotech Pvt. Ltd. (2020) 60 CCH 233 (Ahd-Trib) Order dated 11-11-2020. [In this case, addition u/s. 68 deleted on the ground 31
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that opportunity of cross examination was not given. In this case too, the assessee had furnished the similar documentary evidences] ii) CIT vs. Metachem Industries (2000) 245 ITR 0160 (MP) iii) Nemichand Kothari vs. CIT (2003) 264 ITR 254 (Gau.) iii) CIT vs. Mehrotra Brothers (2004) 270 ITR 0157 (MP) iv) Ashok Pal Daga vs. CIT (1996) 220 ITR 0452 (MP) v) DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj) vi) CIT vs. STL Extrusions Pvt. Ltd. (2011) 333 ITR 269 (MP) vii) CIT vs. Devi Prasad Khandelwal & Company Ltd. (1971) 81 ITR 460 (Bom.) viii) CIT vs. Orissa Corporation P. Ltd. (1986) 159 ITR 0078 (SC) ix) Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 0723 (Bom) x) CIT vs. Taj Borewell (2007) 291 ITR 0232 (Mad.) xi) Addl. CIT vs. Bahri Brothers (P) Ltd. (1985) 154 ITR 0244 (Pat) xii) CIT vs. Hanuman Agarwal (1985) 151 ITR 150 (Pat) xiii) Jalan Timbers vs. CIT (1997) 223 ITR 11 (Gau) xiv) CIT vs. Dalmia Resorts International (2007) 290 ITR 508 (Del) xv) Lalitha Jewellery Mart P. Ltd. vs. DCIT (2017) 399 ITR 0425 (Mad) xvi) CIT vs. Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj) xvii) CIT vs. Shri E.S. Jose (2014) 220 Taxman 0032 (Ker) xviii) CIT vs. Kamdhenu Steel & Alloys Ltd. & Ors. (2014) 361 ITR 0220 (Del) xix) Mr. Gaurav Triyugi Singh vs. ITO 2020 (1) TMI 1153 (BomHC) xx) M/s. Kumar Nirman and Nivesh Pvt. Ltd. vs. ACIT 2020 (3) TMI 340 (KarHC) xxi) ACIT vs. M/s. Jay Enterprise 2019 (4) TMI 1811 (ITAT Rajkot) xxii) Pr.CIT vs. M/s. Jay Enterprise 2020 (1) TMI 657 (GujHC) xxiii) ITO vs. M/s. Riddhi Siddhi Corporation 2017 (2) TMI 1129 (ITAT Ahd.) xxiv) ITO vs. M/s. RE N Raga Media Pvt. Ltd. 2019 (6) TMI 651 (ITAT Mum.) xxv) Mahipal Ishwarlal Sottany vs. ITO 2019 (10) TMI 1161 (ITAT Ahd.)
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xxvi) ITO vs. M/s. Celebrity Lifespace Pvt. Ltd. 2019 (12) TMI 1157 (ITAT Mum.) xxvii) DCIT vs. M/s. Chetan R. Shah (HUF) 2020 (1) TMI 1239 (ITAT Mum.) xxviii) ITO vs. M/s. MJD Financial Services Pvt. Ltd. 2020 (10) TMI 651 (ITAT Mum.) xxix) DCIT vs. M/s. Manba Finance Ltd. 2020 (1) TMI 645 (ITAT Mum.) xxx) ACIT vs. Mittal Appliances Ltd. (2016) 27 ITJ 120 (Trib.-Indore) xxxi) ACIT vs. Shree Sai Vihar (2016) 28 ITJ 158 (Trib.-Raipur) xxxii) ITO vs. Vaibhav Cotton Pvt. Ltd. (2012) 19 ITJ 113 (Trib.-Indore) xxxiii) Shri Sumati Kumar Kasliwal, Shri Parth Kasliwal, Smt. Sharda Kasliwal, M/s. Nishant Finance Pvt. Ltd., Shri Manoj Kasliwal and M/s. Pumarth Infrastructure Pvt. Ltd. vs. ACIT (Central)-1, Indore 2019 (5) TMI 338 (ITAT-Indore)” 14. The crux of the arguments of the Ld. Counsel for the assessee
are that; (i) the AO framing the assessment had not conducted any
independent inquiry and he had merely relied upon certain so
called inquiries conducted by the Investigation Wing and during the
course of the entire assessment proceedings, only one notice u/s.
142 (1) dated 12.12.2018 was issued and in such notice too, no
reference of any inquiry conducted by the Investigation Wing or the
statements recorded during the course of the survey/search was
made and thus, the assessee was not confronted with any material
gathered behind his back and in such circumstances, the
opportunity of cross examination of the Revenue’s witnesses were
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not afforded to the assessee which was mandatory as per the settled
legal position; (ii) all the three subject lender companies from whom
the assessee had taken loans are the group companies of the
Bangur Group itself to which the assessee belongs. In respect of
which simultaneous survey proceedings u/s. 133A were carried
out. Further, the directors of the lender companies were found on
given address and their statements were also recorded; (iii) During
the course of the search/ survey, in the assessee company as well
as lender companies, not a single incriminating material or
document was found giving any iota of assessee having obtained
non-genuine loans; (iv) In respect of all the lender companies,
simultaneous assessment proceedings got completed for A.Y. 2011-
12 u/s. 147/143(3) of the Act; (v) During the course of the
assessment proceedings, the AO of the assessee had not whispered
a single word regarding the so-called enquiries and statements
recorded by the Investigation Wing. The opportunity of cross-
examination of any of the witnesses of the AO was not given; (vi)
The assessee had specifically requested the AO for either giving the
opportunity to produce the creditors or to issue summons u/s.
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131(1) or letters u/s. 133(6) to the lender companies, but such
request was not adhered to; (vii) During the course of the
assessment proceedings, the assessee had duly established the
identity of the creditors, genuineness of the transactions,
creditworthiness of the lenders and as also, the sources of
availability of funds in the hands of the lender companies for
making loans to the assessee company; (viii) Loan Transactions
from two of the lenders viz. FVPL & NVPL have got completely
repaid during the relevant previous year itself; (ix) All the lender
companies have duly shown interest income from the assessee
company and have also claimed TDS; (x) None of the findings given
by the AO is relevant for making the impugned additions; (xi)
During the course of the assessment proceedings, the assessee had
furnished all the necessary documentary evidences for establishing
(a) identity of the loan creditors, (b) genuineness of the loan
transactions, (c) creditworthiness of the loan creditors, (d) sources
of funds in the hands of the loan creditors, (e) relevant documentary
evidences regarding the identity & creditworthiness of the sub-
creditors; (xxii) The share capital transactions carried out by all the
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lender companies with the assessee company during the relevant
previous year have been accepted by the same AO while framing the
impugned assessment; (xxiii) In earlier years too, the assessee
company had accepted the loans from lender companies and the
same were duly accepted by the Revenue. Besides making the
contentions as above, the Ld. Counsel for the assessee also relied
upon the plethora of judicial pronouncements as noted down in the
preceding para.
We have heard rival contentions and perused the records
produced before us and carefully gone through the judgments
referred to by both the parties. In the instant case of M/s. Ariba
Foods Pvt. Ltd, Revenue has challenged the finding of Ld. CIT(A) by
way of 7 grounds of appeal but the grievance challenging the finding
of Ld. CIT(A) deleting the addition of Rs.12,44,12,690/- is on two
grounds firstly Ld. CIT(A) erred in deleting the addition observing
that assessee was not given the opportunity to cross examine which
thus denied the opportunity of natural justice and secondly Ld.
CIT(A) erred on merits in accepting the identity, genuineness and
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creditworthiness of the three cash creditors namely M/s DFL, M/s
FVPL and M/s NVPL.
We observe that the assessee was subjected to survey u/s
133A of the Act on 27.7.2017. In the assessment proceedings
carried out through CASS assessee was directed to explain the fresh
unsecured loan taken during the year. Detalied replies were filed
by the assessee which could partly satisfied the Ld. A.O and he was
of the view that unsecured loan taken from following 3 companies
could not be explained by the Ld. A.O and thus provision of Section
68 of the Act are applicable.
Name of Company Amount (Rs.) i) M/s.Dwarkesh Finance Ltd.[(In short) ‘DFL’] 15,26,111/- ii) M/s. Famous Vanijya Pvt. Ltd.[ .[(In short) 2,15,03,302/- ‘FVPL’] iii) M/s. Navyug Vyapar Pvt. Ltd. [(In short) 10,13,83,277/- ‘NVPL’] Total 12,44,12,690/-
Against the addition assessee preferred appeal before Ld.
CIT(A) and succeeded who deleted the addition on the basis of the
following 4 observations:-
(a) The AO erred in making additions merely on the basis of 37
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statements of third parties recorded by the Investigation Wing and without providing opportunity of their cross examination before making the impugned addition;
(b) The AO erred in converting case selected for limited scrutiny to complete scrutiny;
(c) The AO erred in making additions on suspicion, surmise and conjecture basis and without having any incriminating material on record found from the residential premises of the appellant relating to the year in which additions have been made;
(d) The AO erred in 'considering the documentary evidences filed in support of creditworthiness of the lender and genuineness of the transaction including explaining source of source. 18. Through Ground No. 1, the Revenue has challenged the
finding of the Ld. CIT(A) in deleting the addition of Rs.
12,44,12,690/- made u/s. 68 of the Act on the ground of cross
examination, without appreciating the fact that the persons whose
statements were relied upon in the assessment order are the
persons who own, control, manage, operate and run the assessee
group, including the assessee company and therefore, in the name
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of natural justice, the assessee group could not have claimed to
cross examine itself.
We observe that the Ld. CIT(A) has dealt with the issue of
cross examination at para 4.3.2 (a) of his order. We find that the Ld.
CIT(A) has given a categorical finding that despite having on record
the correct new address of one of the lender companies namely,
M/s. Navyug Vyapar Pvt. Ltd. being at Shop No. 126, Dawa Bazar,
Madhav Club Road, Ujjain, the AO had sent commission for the old
address to DDIT(Inv.) – Kolkata. The Ld. CIT(A) further observed
that the AO has made reference of the salaries drawn by the
directors of the lender companies for adjudging the capacity of
lending by the lender companies, but, the AO failed to appreciate
that the loans were given by the lender companies and not by its
directors in their individual capacity. The Ld. CIT(A) also observed
that the AO has concentrated his findings on the basis of various
statements given by Shri Amit Kumar Kedia, Shri Kailash Kumar
Garg, Shri Amit Jhavar, Shri Rajesh Gupta, Shri Abizer Pithewan,
Shri Amrish Parmar, Smt. Chhaya Parmar, Shri Avinash Parasram
Bapuskar, but, the AO did not mention about these statements in
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Notices or questionnaire issued time to time. The AO has completely
drawn his findings on the basis of these statements which were
recorded behind the back of the assessee and no opportunity of
cross examination of these persons were provided to the assessee.
Then the Ld. CIT(A) relied upon the decision of the Hon’ble Supreme
Court in the case of Andaman Timber Industries vs. Commission of
Central Excise Kolkata, in Civil Appeal No. 248 of 2006 for the
proposition that in absence of cross examination of parties, the
assessment proceedings are required to be quashed. The Ld. CIT(A)
further relied upon the decision of the Hon’ble High Court of
Gujarat in the case of Praful Chunnilal Patel vs. M.J. Makwana [236
ITR 832 (Guj.)] and JCIT & Ors. vs. George Williamson (Assam) Ltd.
258 ITR 126 (Guj.) for holding that the statement of third party
cannot be relied upon without having any corroborative evidence.
The CIT(A) also relied upon the decision of the Hon’ble Supreme
Court in the case of Kishanchand Chellaram vs. CIT 125 ITR 713
(SC) in which the Apex Court held that adverse inference cannot be
drawn against the assessee from the statement of third parties. The
Ld. CIT(A) further relied upon the decision of Hon’ble High Court of
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Gujarat in the case of CIT vs. Indrajeet Singh Suri (2013) 33
Taxmann 281 (Guj.) in which the Hon’ble Court held that where
additions have been made on the basis of statements of persons
who are not allowed to be cross examined by the assessee,
additions were not sustainable. The Ld. CIT(A) further held that non
providing the opportunity of cross examination was a serious flaw
on principles of natural justice which renders the order a nullity.
We find that during the course of the search/survey
operations carried out in the various entities of the Shriji Polymer
Group, including the case of the assessee company, no
incriminating material or loose paper was found from which it could
have been inferred that the loan transactions carried out by the
appellant company with the subject three lender companies were
not genuine and that the lender companies were merely paper
companies. In the entire body of the assessment order, there is no
mention of any independent inquiry conducted by the AO himself
and the Ld. AO has made reference of some statements of various
persons recorded either during the course of the search/survey in
the Shriji Polymer Group or even prior to that. The Ld. AO has
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made reference of some statement of Amit Kumar Kedia recorded by
the DDIT (Inv.) – Kolkata, u/s. 131, on 26.08.2014. As the previous
year relevant to the instant case is F.Y. 2015-16 and the statement
of Shri Amit Kumar Kedia has no direct nexus with the loan
transactions carried out by the assessee company during the year.
Even from the statements of various persons recorded during the
course of search/survey in the various business premises of Shriji
Polymers Group, we could not find any adversity in the statements
of Directors of the lender companies to support the assumption of
the Ld. AO that the loan transactions carried out by the assessee
company with them were not genuine. Rather the whole case of the
Ld. AO is hinging upon the statement of various persons and during
the entire course of the assessment proceedings, not even once in
any notice or questionnaire, the Ld. AO whispered about recording
of such statements or his proposal to rely upon such statements. In
our considered view, merely because the persons whose statements
were recorded were associates or employees of the assessee
company, the statutory requirement of confronting the assessee
with such statements could not have been dispensed with and the
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Ld. AO was duty bound to provide an opportunity to the assessee to
comment upon the statement of such persons and to cross
examination of them, if requested by the assessee. We find that
during the course of the assessment proceedings, the assessee had
specifically requested the AO to issue summons/letters u/s.
131/133(6) to the loan creditor companies, but, the AO remained
silent and did not even apprise the assessee that the statements of
the directors of these companies had already been recorded by the
Investigation Wing. Thus, the AO, placed absolute reliance upon the
statements/ material gathered behind the back of the assessee
without confronting the same to the assessee at any stage which is
impermissible in view of the judicial pronouncements made by the
Hon’ble Apex Court in the cases of Kishanchand Chellaram vs. CIT
(1980) 125 ITR 0713 (SC); and again in the case of Andaman Timber
Industries vs. Commission of Central Excise Kolkata (2016) 15 SCC
785 (SC) and by Hon’ble High Court of Rajasthan in the case of CIT
vs. Sunita Dhadda & Ors. (2018) 406 ITR 0220 (Raj.).
We find that recently the Coordinate ‘D’ Bench of ITAT
Ahmedabad in the case of ACIT vs. E I Dorado Biotech Pvt. Ltd.
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(2020) 60 CCH 0233 (Ahm. Trib), at para (33) has held that if AO
intends to rely, for the purpose of making addition to the total
income of an assessee, on the basis of statement of third party as a
witness, then he has to summon such witness, record his
statement, offer that witness to the assessee for cross examination.
The Coordinate Bench, Ahmedabad at para (36) has held as under:
“ In other words where AO wants to rely on the statement of a witness (such as statement of entry operator recorded by investigation wing) to hold that share application money received by the assessee is not genuine but is only an accommodation entry then he has to provide copy of such statement to the assessee. Where the AO does not provide the copy of the statement of the witness then it is violation of principle of natural justice, and entire addition solely based on such statement is likely to be deleted.”
Respectfully relying upon the recent decision of the Coordinate
Bench of Ahmedabad Tribunal in the case of ACIT vs. E I Dorado
Biotech Pvt. Ltd (supra) and as also various judicial
pronouncements, referred to hereinabove, we find no infirmity in
the findings given by the Ld. CIT(A) on the issue of cross
examination. However, from the appellate order, we find that the
Ld. CIT(A) has not deleted the addition merely on the legal issue of
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cross examination, but, the Ld.CIT(A) has also dealt with the entire
addition on merits also which will be dealt by us in the subsequent
paras while examining the facts of the case and the documentary
evidences placed before us and also before the lower authorities in
order to prove the identity and creditworthiness of the cash
creditors and genuineness of the transaction. Thus we find no
infirmity in the finding of Ld. CIT(A) deleting the addition for
unexplained cash credit of Rs.12,44,12,690/- based on his
observation that the Ld. A.O failed to follow the principles of natural
justice as no opportunity to cross examination was provided to the
assessee. Thus Ground No.1 of the Revenue’s appeal stands
dismissed.
Now we take up issues in Ground No.2 to 7 in respect M/s
Ariba Foods Pvt. Ltd through which the Revenue has agitated the
action of the Ld. CIT(A) in deleting the addition of Rs.
12,44,12,690/- made u/s. 68 of the IT Act, 1961, contending it
that all the dummy/shell/bogus/paper/briefcase entities used to
be perfect in papers and therefore, merely for the reason that such
companies were making paper formalities or merely for the reason
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that the transactions were made through banking channels,
payment of interest was made on alleged loans and repayment of
the alleged loans were also made, the genuineness of the
transactions cannot be accepted. The Revenue also agitated that in
the case of the lender companies, while framing assessment orders
in their hands, negative inference was also drawn and has lastly
agitated that the CIT(A) was not justified in dismissing the reliance
placed by the AO on various case laws. The Ld. CIT(A) has dealt
with this issue from para (4.3) on page no. 69 to para (4.3.5) at page
nos. 96 of his appellate order. At para (4.3), the Ld. CIT(A) has
narrated the background of the issue. At para (4.3.1), the Ld. CIT(A)
has reproduced the chart containing the findings of the AO and
rebuttal of the assessee thereon. The ld. CIT(A) has further
acknowledged the filing of various documentary evidences by the
assessee in support of identity of lenders, creditworthiness of
lenders and genuineness of the transactions. At para (4.3.2), the ld.
CIT(A) has stated that the assessee has challenged the arbitrary
approach of the AO mainly on four major counts i.e. (a) the AO
made additions merely on the basis of statements of third parties
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recorded by Investigation Wing and without providing opportunity
of cross examination; (b) the AO erred in converting the limited
scrutiny case into complete; (c) the AO erred in making additions on
suspicion, surmise and conjecture without having any
incriminating material on record found from premises of the
assessee; and (d) the AO erred in not considering the documentary
evidences filed by the assessee. Further, from page no. 74 to 91, the
ld. CIT(A) has discussed in detail the assessee’s contentions made
before him on the aforesaid four counts. At page nos. 81 to 91, the
ld. CIT(A) has also discussed and described each and every
documentary evidence filed by the assessee in support of
establishing the identity of the loan creditor companies,
creditworthiness of the lender companies and genuineness of the
loan transactions. At page no. 91 & 92, the ld. CIT(A) has relied
upon the decision of the ITAT Agra Bench in the case of Umesh
Electricals vs. ACIT (supra) and the decision of the ITAT Indore
Bench in the case of Aseem Singh vs. ACIT (supra). Thereafter, on
the same page, the ld. CIT(A) has stated that the assessee has
furnished all the required details in order to provide the identity of
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lenders, genuineness of transactions and creditworthiness of
creditors. The ld. CIT(A) has also relied upon the decision of the
Hon’ble MP High Court in the case of Metachem Industries (supra) to
the effect that the law does not cast any obligation on the assessee
to explain the source of the source for the amount borrowed. At
para (4.3.3) on page no. 93 to 95, the ld. CIT(A) has referred to the
case laws relied upon by the AO and has stated that none of these
case laws are applicable to the case of the assessee. At para (4.3.4),
the ld. CIT(A) has stated that the AO except relying upon the
findings of Investigation Wing, could not bring any cogent material
to establish that the lender companies were non-existent or bogus
or paper companies. According to the ld. CIT(A), the assessee has
fully discharged its onus of proving the genuineness of loan
transactions and the identity & creditworthiness of the loan
creditors have also been established beyond all doubts. The Ld.
CIT(A) held that the identity of the lender companies is self proven
from the fact the assessments in the case of the lender companies
have been framed either by the AO himself or by some other officer.
The Ld. CIT(A) observed that non compliance of the commission
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issued at a wrong address cannot be viewed adversely for adjudging
the identity of the lender companies specially in a situation where
the statements of the directors of lender companies were duly
recorded by the Investigation Wing itself. The Ld. CIT(A) also
observed that the genuineness of the transactions also gets fully
established as the transactions have taken place through banking
channels and these have been confirmed by the lender companies.
The Ld. CIT(A) held that the lender companies were having
sufficient net owned funds for making advances to the appellant or
anyone also. The Ld. CIT(A) further observed that the assessee had
been able to establish even the source of the sources in the hands
of the lender companies and all the lender companies are also
assessed to Income Tax. Further, the ld. CIT(A) also stated that in
none of the transaction, cash has been found deposited in bank
account of lenders. Furthermore, during the survey proceeding, no
incriminating material or any other evidence was found from which
it could have been inferred that the assessee had provided any fund
to the lender companies before obtaining loans. Finally, at para
(4.3.5), the ld. CIT(A), keeping in view the facts of the case, the
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documentary evidences filed and the case laws relied upon by the
assessee, held that the AO was not justified in making addition of
Rs.12,44,12,690/- on account of unsecured loans taken by the
assessee from the lender companies.
We observe that Ld. CIT(A) has thoroughly examined various
documentary evidences filed by the assessee to prove the identity
and creditworthiness of the lenders and genuineness of the
transaction. Relevant extract of Ld. CIT(A) finding examining the 3
cash creditors namely M/s DFL, M/s FVPL and M/s NVPL is
mentioned below:-
(d) The AO erred in considering the documentary evidences filed in support of creditworthiness of the lender and genuineness of the transaction including explaining source of source:-
Appellant before the AO as well as before me has filed copies of PAN, bank account statement of lenders, audited balance sheet, profit and loss statement, certificate of incorporation, copy of MOA, details collected from website of Ministry of Corporate Affairs, and confirmations of lenders. The brief details of these lender companies are as under :-
M/s Dwarkesh Finances Ltd PAN-AABCD7162N in short DFL :-
Regarding the identity of the company the app e1l ant submitted that originally, the DFL was incorporated in the name of "Richmore Finance and
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Leasing Limited", as a public limited company, duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Gujarat, on 09-06-1992 vide registration No.04-17790 of 1992-1993. Presently, the company is having Unique Corporate Identification Number i.e. CIN as U6910GJ1992PLC017790. The DFL was incorporated with the main object of carrying out the business of finance, hire purchasing and leasing as per the objects contained in its Memorandum of Association, under which it has got incorporated. The DFL was also granted Certificate for Commencement of Business by the concerning Registrar of Companies on 24-06-1992. The original name of company got subsequently changed to Dwarkesh Finance Limited vide Certificate of Change of Name granted by the concerning Registrar of Companies on 23-06-1995. Initially, the registered office of the DFL was situated at 201, Laxmi Gopal Building, 2nd Floor, Dandiya Bazar, Baroda, Gujarat-390001, but subsequently, w.e.f. 29-09-2017, the registered office of the company got shifted to a new place situated at 415-416, 4th Floor, pushpam Mall, Opp. Seema Ha1l, Anand Nagar Road, Satellite, Ahmedabad. Besides holding the registered office at Ahmedabad, the DFL is also holding one administrative office at 126, Dawa Bazar, Ujjain which was also confirmed by the AO. The DFL was listed with Vadodara stock Exchange Limited. The DFL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA) , Government of India. Further, DFL for AY 2011- 12 has been reassessed by the ITO-1(1)(2), Vadodara by determining the total income at Rs.16,20,690/-
Regarding the genuineness of the transaction the appellant submitted that all the transactions by the appellant with DFL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. Appellant in
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support has filed copy of bank account statement of DFL. Further, copy of ledger account of the appellant in the books of DFL and copy of loan confirmation has also been filed. The appellant had duly credited a sum of Rs.4,95,678/- in the unsecured loan account of DFL on account of interest and in respect of such interest, the appellant company has also paid TDS of Rs.49,567/-. Further, the DFL had duly offered the receipt of interest income of Rs.4,95,678/made by them from the appellant company, in respect of loan transactions, in their return of income for the year under consideration and in respect of such income, the DFL has not only got duly assessed but has also availed credit of TDS on such income. The appellant has also submitted that it has borrowed sum aggregating to Rs.83,00,000/- from DFL in earlier years and the genuineness of such borrowing have never been doubted in any of the assessment proceedings carried out in earlier years. In support of his claim appellant has placed reliance on the decision of Hon'ble ITAT, Lucknow Bench, in the case of Dwarikadhish Sugar Industries Vs. ITO (2012) 149 TTJ 0401 (Luk), wherein it has been held that part acceptance of loan indicates identity and genuineness of the creditors and, therefore, no adverse inference in respect of such creditor can be drawn.
In order to prove credit worthiness of the creditor, the appellant has filed copies of audited financial statements of DFL along with Auditors' Report, in respect of the financial year ended 315t March 2016. On perusal of the sane it was found that DFL has duly shown an amount of Rs. 83,00,000/- and Rs. 15,26,111/- in the name of appellant company as on 31.03.2015 and 31.03.2016 respectively. Further, DFL as on 31.03.2015 has net owned fund of Rs. 14.34 crores by way of share capital and reserves & surplus. Likewise, as on 31-03-2016, DFL have net owned funds to the tune of Rs.14.39 crores by way of share
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capital and reserves. & surplus. The share capital of the company DFL were held from long back and therefore cannot be doubted on source of share capital as held by Hon'ble High Court of Delhi, in the case of CIT Vs. Gangaur Investment Ltd. (2011) 335 ITR 0359 (Del). On perusal of balance sheet of DFL it was observed that DFL has also made investment in the shares of the appellant company to the extent of Rs.2,34,OO,OOO/-- and the AO has already accepted the same. The AO cannot judge two similar things with different view. On one hand the AO is doubting the genuineness and source of unsecured loan and on other hand has accepted the share capital investment by the same company in same previous year. Further, DFL has surplus funds to advance the same to appellant company in relevant assessment year.
M/s Famous Vaniiya Pvt ltd (PAN-AABCF1483G) [in short FVPL]:Regarding the identity of FVPL the appellant submitted that the FVPL is a private limited company duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, West Bengal, on 25-10-2007, vide registration No.U51109WB2007PTC120050 of 2007-2008. Presently, the company IS having Unique Corporate Identification Number i.e, CIN as U 511 09MP2007PTC031640. The FVPL was incorporated with the objects of carrying out the business of trading in various commodities, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. Initially, the registered office of the F VPL was situated at 67-B, Metcalfe Street, Kolkata, W.B., but subsequently, w.e.f. 17-09-2013, the registered office of the- company got shifted to a new place situated at 125, Dawa Bazar, Madhav Club Road, Ujjain (M.P.) which is also accepted by the AO. The FVPL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. In the case
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of FVPL for AY 2011-12 and for AY 2016-17 order u/s 147 rws 143(3) and u/s 143(3) has been passed by the same as of the appellant. Thus, from the above it is very clear that identity of the company FVPL has been duly proved by the appellant with supportive evidences.
Regarding the genuineness of the transaction the appellant submitted that all the transactions have taken place through account payee cheques. Appellant in support has filed copies of bank account statement of FVPL. Appellant has also filed copy of ledger account of appellant in the books of FVPL showing each and every transaction relating to unsecured loan. A copy of confirmation letter duly signed by director of FVPL has also been filed by the appellant. The appellant further has brought some other facts to light and stated that the AO has made addition of Rs. 2,15,03,302/- on account of unsecured loan, however, the appellant has availed loan of Rs. 2,08,00,000/- only and balance amount represents interest i.e. of Rs. 7,03,302/-. The appellant has duly credited a sum of Rs.7,81,447/- in the unsecured loan account of FVPL on account of interest and in respect of such interest TDS of Rs. 78,145/- was also deducted. Apart from the above, the company FVPL had duly offered the receipt of interest income of Rs.7,81,447/- made by them from the appellant company, in respect of loan transactions, in their return of income for the year under consideration and in respect of such income and has also availed TDS credit on such income. The loan taken by the appellant has been fully repaid through banking channels.
From the above it is very clear that all the transactions have been executed through banking channels and the AO has simply doubted the genuineness of the transaction without having any incriminating material on record.
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Regarding the creditworthiness of FVPL the appellant has filed copies of audited financial statements of FVPL along with Auditors' Report, for FY 2014-15 (AY 2015-16). On perusal of audited balance sheet it was observed that the company FVPL has owned funds of Rs. 10.26 crores by way of share capital and reserves & surplus and has net owned funds of Rs. 16.28 crores by way of share capital and reserves & surplus as on 31.03.2016 (AY 2016-17). FVPL is a regular income tax payer which can also seen from copies of return of income filed by the appellant. On perusal of balance sheet of FVPL it was further observed that FVPL has also made investment in the shares of the appellant company for Rs.1 ,58,00,000/- and the AO has already accepted the same. The AO cannot judge two similar things with different view. On one hand the AO is doubting the genuineness and source of unsecured loan and on other hand has accepted the share capital investment by the same company in same previous year.
Appellant has also explained source of source and submitted that a sum Rs.2,08,00,000/- was provided to the appellant company, through banking channel, immediately before providing the loan to the company, the FVPL had recovered loans aggregating to a sum of Rs.2,05,00,000/- from its four creditors (i) M/s. Vyanktesh Corrugators, (ii) M/s. Shree Packers (MP) Pvt. Ltd, (iii) Shri Sujit Lodha and (iv) Shri Nikhilesh G. Rathi, HOP. Further, FVPL long back has issued its 5,16,000 equity shares of face value of Rs.10/- each for a total consideration of Rs.51 ,60,0001- by charging total share premium of Rs.9,61,40,000/- during the financial year 2007-08 relevant to A.Y. 2008-09 which has also been accepted by the ITO Ward- 5(4), Kolkata who framed assessment order under s. 143(3)/147 of the Act in the case of FVPL for A.Y. 2008-09 on 30-04- 2010. However, a fresh assessment was done in pursuant to order u/s 263 of the Act and a fresh assessment under s.
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143(3)/263/143(3)/147 of the Act has been framed in the case of FVPL for A.Y. 2008-09 by the ITO-5(4), Kolkata on 26-03-2014 by making an addition of Rs.10,12,00,000/- in the hands of the FVPL, on account of acceptance of fresh share capital and share premium and thereby, framing the assessment at Rs.1 0, 12,22,570/-. Thus, FVPL has surplus funds to advance the same to appellant company in relevant assessment year.
•M/s Navyug Vayapar Pvt Ltd PAN-AACCNl168M in short NVPL :- Regarding the identity of NVPL the appellant before AO as well as before me submitted that NVPL is a private limited company duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, West Bengal, on 09-11-2004 vide registration No. U51909 WB2004PTC100365. Presently, the company is having Unique Corporate Identification Number i.e. CIN as U51909MP2004PTC031641. The NVPL was incorporated with the objects of carrying out the business of trading in various commodities, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. Initially, the registered office of the NVPL was situated at B-18, Shanti Niketan, 8, Abanindra Nath Thakur Road, Sarani, Kolkata, W.B., but subsequently, w.e.f. 17-09-2013, the registered office of the company got shifted to a new place situated at 126, Dawa Bazar, Madhav Club Road, Ujjain (M.P.). The NVPL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. The identity can also be proved by the fact that assessments order pertaining to the assessment year A.Y. 2011-12 and A.Y. 2016-17 have been passed by the same AO as of the appellant. Thus, from the above it is very clear that identity of the company NVPL has
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been duly proved by the appellant with supportive evidences.
Regarding the genuineness of the transaction the appellant submitted that all the transactions have taken place through account payee cheques. Appellant in support has filed copies of bank account statement of NVPL. Appellant has also filed copy of ledger account of appellant in the books of NVPL showing each and every transaction relating to unsecured loan. A copy of confirmation letter duly signed by directors of NVPL has also been filed by the appellant. The appellant further has brought some other facts to light and stated that the AO has made addition of Rs. 10,13,83,277/- on account of unsecured loan, however, the appellant has availed loan of Rs. 10,09,00,000/- only and balance amount represents interest i.e. of Rs. 4,83,277/-. The appellant has duly credited a sum of Rs, 5,36,975/- in the unsecured loan account of FVPL on account of interest and in respect of such interest TDS of Rs. 53,698/- was also deducted. Apart from the above, the company NVPL had duly offered the receipt of interest income of Rs.5,36,975/- made by them from the appellant company, in respect of loan transactions, in their return of income for the year under consideration and in respect of such income and has also availed TDS credit on such income. The loan taken by the appellant has been fully repaid through banking channels. From the above it is very clear that all the transactions have been executed through banking channels and the AO has simply doubted the genuineness of the transaction without having any incriminating material on record.
Regarding the creditworthiness of NVPL the appellant has filed copies of audited financial statements of NVPL along with Auditors' Report, for AY 2015-16 & 2016-17. On perusal of audited balance sheet for AY 2015- 16, it was observed that the company NVPL has owned funds of Rs. 15.77 crores by way of share capital and reserves & surplus and for AY 2016-17 has net owned funds of Rs. 25.56 crores by way of share capital and 57
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reserves & surplus. NVPL is a regular income tax payer which can also be seen from copies of return of income filed by the appellant. The NVPL had shown taxable income, under s. 115JB of the Act at Rs.92,02,584/- and had paid tax amounting to Rs.17,78,752/-, for A.Y. 2016-17. Further, NVPL for the A.Y. 2018-19 has shown a taxable income of Rs.2,25,20,162/- and on such income has also paid a substantial amount of tax of Rs.47,09,735/-. On perusal of balance sheet of NVPL it was further observed that NVPL has also made investment in the shares of the appellant company to the extent of Rs.2,45,00,000/- and the AO has already accepted the same. The AO cannot judge two similar things with different view. On one hand the AO is doubting the genuineness and source of unsecured loan and on other hand has accepted the share capital investment by the same company in same previous year.
Appellant has also explained source of source and submitted that a sum Rs.10,09,00,000/- was provided to the appellant company, through banking channel, immediately before providing the loan to the company, NVPL had procured the funds by way of (i) receiving a dividend income of Rs.3,69,783/- from M/s. Shriji Polymers India Ltd., (ii) making recovery of unsecured loans of Rs.1,15,00,000/- given on earlier occasions to various group companies of the appellant, (iii) obtaining refund of loan of Rs.4,60,OO,OOO/- from the appellant company itself; and (iv) obtaining share capital money aggregating to Rs.6,00,00,000/- from various persons. It is also submitted that dividend income so received by the NVPL has duly been shown by it in its return of income for A.Y. 2016-17. Further, the genuineness of receipt of share capital money aggregating to Rs.6,OO,OO,OOO/- has duly been accepted by the AO who framed an assessment under s. 143(3) in the case of NVPL for A.Y. 2016-17.
Furthermore, the factum of refund of loan by the appellant to NVPL is evident from the copy of ledger account of NVPL in the books of account of 58
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appellant for the relevant year. It was further submitted that receipt of refund of loan of Rs.1,15,00,000/-- from the various entities as made by the NVPL can be verified from Note-8 of the audited financial statements of NVPL for the financial year 2015-16 in which under the column of previous year, the making of loans and advances by NVPL to various persons at Rs.5,31,40,967/- has been clearly reflected. Thus, NVPL has surplus funds to advance the same to appellant company in relevant assessment year
Further, interest income earned by the lender companies on the loans given by them has been accepted and assessed by the same AO in their assessments. All the three lenders are sister associated companies of the appellant company taking loan from the company which is having surplus funds is one of the features of the group. The funds transfer is taking place from one company to other company. 26. After referring the relevant paper documents which included
the loan confirmations, copy of bank accounts, proof of filing
Income Tax Returns, financial statements, copies of the assessment
orders of preceding years Ld. CIT(A) has held that the assessee had
duly explained the source of cash credits from the alleged three
companies in the books of account and the relevant observation of
Ld. CIT(A) in this regard reads as follows:-
i. Identity of the creditors - the creditors are income tax payer and filed the loan confirmations and two of them are assessed by the same AO. ii. Genuineness of the transaction- the appellant has taken the 59
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loan through banking channel. The appellant is in the receipt of loan by cheque. Copies of bank statements of lender companies are placed on record and perused. There has been repayment of loan by the appellant to FVPL through banking channel. From perusing the bank statements of the lender companies as furnished in the paper book, it is found that no cash was deposited in the bank account prior to issuance of cheque to the assessee for the loan given. Moreover, there are few cash transactions of meager amount in the bank statements and it is found that all the amounts are received and paid through account payee cheques.
Appellant has made repayments of the loan taken per his convenience of fund availability as is evident from loan confirmation letters and ledger statements of the lender companies duly accompanied by bank statements.
Appellant has also paid interest to the lender companies on the loans borrowed and the same have been offered to tax by the respective lender companies in their regular income tax return and have been accepted as well as assessed by the same Assessing Officer in their assessment made under section 147 rws 143(3) and uls 143(3) w.r.t two lenders i.e. FVPL and NVPL. The appellant has also deducted TDS on interest and the TDS credit has also been availed by respective lender company.
iii. Creditworthiness of the creditors - the creditors are income tax payer and filing the income tax return. The companies have not only given the loan to the appellant but to other parties also. DFL is a Public Limited Company and has been duly registered with Ministry of Corporate Affairs. FVPL and NVPL are duly registered private limited company which can also be verified from web site of Ministry of
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Corporate Affairs. The lender companies has sufficient surplus and share application money which was received far long back and has already been accepted by their concerned Assessing Officer. The AO on the contrary has held that these lender companies are non-existent, non-functional and a shell/paper/briefcase company. The AO has drawn his belief on the basis of investigation carried out by DDIT(Inv), Kolkata, who was unable to trace the lender companies. In the case of DFL it was explained that the company has been planning to shift its office to Ahmadabad and therefore, the said company was not traceable at Vadodara. In the case of FVPL and NVPL both the companies has changed their address from Kolkata to Ujjain and this fact is also duly addressed by the AO while framing the assessment order. Thus, there is no case for the AO to hold it as non-existent, non- functional and a shell/paper company.
From the above it is clear that the appellant has satisfied all the three conditions required for genuineness of the transaction. The same view has been upheld by Honb'le ITAT in the following cases:-
1.Umesh Electricals v/s Asst. CIT(2011) 18 ITJ 635 (Trib.Agra): (2011) 131 ITD 127 : (2011) 141 TTJ
Establishment of identity and credit-worthiness proved- Assessee produced the bank account of creditor in his bank account on the same day on which loan was given- Assessee furnished the cash flow statement of creditor-Based on inquiry, AO noted that creditor was engaged in providing accommodation entries-HELD- In group cases, it has been held that there was no evidence against the creditor to prove that he was providing accommodation entries- Further, mere deposit of money by the creditor on the same day, does not establish that the loan is not genuine-Assessee has proved the
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source of credit and also the source of source -Addition cannot be made.
11.Aseem Singh v/s Asst. CIT (2012) 19 ITJ 52 (Trib.-Indore) Identity and credit-worthiness proved-Assessee took loan of Rs.1,00,0001- confirmation of creditor was filed-Lower authorities made addition uls 68 holding that amount was deposited in cash in the bank account of lender immediately prior to date of loan - HELD- Assessee has established the identity- The party has confirmed the transaction-If AO doubted the transaction, AO should have called creditor u/s 131- Addition cannot be made.
Thus, appellant has furnished all the required details in order to prove identity of lenders, genuineness of the transaction and creditworthiness of the creditor.
Hon'ble jurisdictional MP High Court in the case of Metachem Industries (2001) 245 ITR 160 (MP) has held that law does not cast any obligation on the assessee to explain the source of source for the amount borrowed. However, appellant has explained the source of source in the case of two major lenders FVPL and NVPL. It is most important to mention here that both the lender companies i.e. FVPL and NVPL were assessed with the same assessing officer under section 147 rws 143(3) and u/s 143(3). Even the directors of these lender companies were covered under the search operation and were assessed by the same AO under section 147 rws 143(3) and u/s 143(3). Hence, the AO had before him all the records and documents of the lender companies including those of the directors for verification of the facts and documents presented in support of his contention. Thus, the AO has erred totally, in overlooking the key facts and documents on record and in continuously stressing merely on the
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statements of third parties recorded behind the back of the appellant. 27. We are also in conformity with the finding of Ld. CIT(A) dealing
with various case laws relied by Ld. A.O and distinguishing the
same being not applicable to the assessee on the basis of
observation that the assessee has duly proved the genuineness of
the transaction and creditworthiness of the cash creditors which
support the evidence. The crux of the finding of Ld. CIT(A) after
thoroughly examining the facts in the light of settled judicial
position is mentioned in para 4.3.4 and 4.3.5 of the impugned order
which reads as follows;
4.3.4 In my considered view, the AO except relying upon the findings of the Investigation Wing could not bring on record any cogent material to establish that the lender companies from whom appellant had claimed to have received loans were non-existent or bogus or paper companies. In my view, the appellant could be 'able to fully discharge its onus of proving the genuineness of the loan transaction beyond all doubts. The identity of the lender companies is self proven from the fact that the assessments in the case of the lender companies have been framed either by the AO himself or by some other assessing officer. Non compliance of the commission issued at a wrong address cannot be viewed adversely for adjudging the identity of such lender companies, especially in a situation when the statements of the directors of the lender companies was duly recorded by the Investigation . The genuineness of the transactions also gets fully
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established as the transactions have been taken place through banking channels and these have been confirmed by the lender companies. Also find that the lender companies were having sufficient net owned funds for making advances to the appellant or anyone also. The appellant has been able to establish even the source of the source in the hands of the lender companies. The lender companies are assessed to Income Tax. In none of the loan transaction any cash has been found deposited in the bank account of the lenders. During the course of the search/survey no incriminating material or any other evidence was found from which it could have been inferred that the appellant had provided any fund to the lender companies before obtaining loans.
4.3.5 Therefore, in view of the above discussion, the AO was not justified m making addition of Rs. 12,44,12,690/- on account of unsecured loan from DFL, FVPL and NVPL. In fact the appellant has availed unsecured loan of Rs. 10,80,000/- from DFL, Rs.· 2,08,00,000/- from FVPL and Rs. 10,09,00,000/- from NVPL and the balance addition made the AO is on account of interest paid by the appellant. Thus, keeping in view facts of the case, the documentary evidences filed by the appellant and the case laws cited above, the addition made by the AO amounting to Rs.12,44,12,690/- is deleted. Therefore, appeal on these grounds are allowed. 28. We observe that in the instant case, the assessee had taken
loans through banking channels from its own group entities in
whose cases too, simultaneous survey proceedings were carried out
u/s. 133A of the Act and during the course of such survey
proceedings, the lender companies and their directors were duly
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found in existence. During the course of the search/survey
operations, no incriminating material or evidence was found. In the
entire body of the assessment order, as also, in the paper book filed
by the Revenue before us, there is no reference of any incriminating
document. In the Paper Book filed before us, the Revenue has
merely filed the copies of assessment orders passed in the cases of
lender companies and in our considered view, such assessment
orders on the contrary strengthen the case of the assessee
inasmuch it establishes beyond all doubts that the lender
companies were in existence and were assessed to Income-Tax.
We find that the entire assessment order is based upon some 29.
statements recorded by the Investigation Wing or by some other
authorities on some earlier occasions, and the AO has not
conducted any independent inquiry at his own from the lender
companies, despite the assessee’s making a specific request to him
to issue summons u/s. 131 or letters u/s. 133(6) to the lender
companies. Recently, the Coordinate Bench of Mumbai in the case
of Smt. Kalpana Mukesh Ruia vs. DCIT 2021 (1) TMI 93 – ITAT
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Mumbai in its order pronounced on 31/12/2020 has deleted the
addition made u/s. 68 by holding as under:
“56. As regards the addition of unsecured loans is concerned, we note that assessing officer has accepted that assessee had submitted the confirmation, ITR, Bank Statement of parties. However, he rejected by simply observing that investigation wing at Kolkata has reported that some of the entry operators are providing bogus loans at Kolkata. The assessing officer did not make any enquiry of his own and only referred to the date of the confirmation of the unsecured loan and give adverse inference…. 57. We find that by simply referring to the general findings of the Investigation Wing at Kolkata entry operators providing bogus loans, the revenue authorities cannot fasten liability of unsecured loans upon the assessee, unless the assessing officer makes enquiries of his own and rebut the documentary evidences submitted by the assessee. The assessee has duly discharged its onus of submitting the loan confirmation, Income Tax Returns and Bank Statements and Financial Statements of the loan creditors. Without making inquiry of his own, the assessing officer has rejected them which is totally unsustainable.” 30. We observe that the Ld. AO issued the commission in respect
of one of the lender companies at the old address whereas, in the
body of the assessment order itself, he has brought on record the
copy of the Notice of the Extra Ordinary General Meeting held by
one of the lender companies for changing its address from Kolkata
to Ujjain. In the similar circumstances, their lordships of the
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Hon’ble Bombay High Court in the case of PCIT vs. Shree Rajlaxmi
Textile Park Pvt. Ltd. (2020) 268 TAXMAN 0405 (Bom.) was pleased
to upheld the order of the Tribunal deleting the addition u/s. 68 of
the Act where the AO despite having correct address on his record
sent notice to the creditor at a wrong address which came back
unserved.
Further we observe that during the course of the assessment
proceedings, the assessee had furnished all the necessary
documentary evidences such as copy of certificate of incorporation,
copy of Memorandum and Articles of Association, copy of
Acknowledgement of Income Tax Return, copy of Master data
downloaded from the official website of the MCA, particulars of
directors of all the lender companies for establishing the identity of
the lender companies. For establishing the genuineness of the
transactions, the assessee had also furnished the copies of ledger
accounts of the lender companies in the books of the assessee
company and vice versa, copies of confirmation letters duly given by
the lender companies, copies of the relevant bank statements of the
lender companies and as also of the assessee company
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demonstrating that all the transactions had taken place through
banking channels only. Further, in order to establish the
creditworthiness of the loan creditors before the AO, the assessee
had furnished copies of the audited financial statements of the
lender companies, copies of assessment orders passed in the cases
of the lender companies and as also statement showing details of
the taxable income and tax paid by the lender companies in the last
eight years. Although, the transactions being loan transactions and
not the transactions relating to the share capital, the assessee was
not required to establish the source of the source as contemplated
under proviso to Section 68 of the Act, but, despite such fact, the
assessee had not only furnished the details regarding availability of
funds in the hands of the lender companies immediately before
providing loans to the assessee company but has also furnished
the necessary documentary evidences such as the copies of bank
accounts, financial statements and Income-Tax Returns of the sub-
creditors. We find that all the aforesaid documentary evidences
have also been furnished by the assessee before us in Paper Books
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filed in two volumes and the relevant aforesaid documents are
placed at Page No. 170 to 676 of the Paper Book.
We also observe that in the instant case, although the AO has
disputed the identity and genuineness of the loan transaction
carried out by the assessee with the Dwarkesh Finance Ltd.,
Famous Vanijya Pvt. Ltd. and Navyug Vyapar Pvt. Ltd., but, in
respect of the share capital transactions aggregating to a sum of Rs.
6,37,00,000/- carried out by the same three companies with the
assessee company in the same financial year, the same AO has
accepted the genuineness of the transactions and as also the
identity of these companies. Thus, the AO has adopted two different
approaches for two different kind of transactions carried out by the
assessee in the same companies in the same financial year which in
our view is not permissible.
We further observe that one of the lender companies namely,
Navyug Vyapar Pvt. Ltd. had provided loans to the assessee
company for an aggregate sum of Rs. 10,13,83,277/- and before
providing loan to the assessee company, the lender company had
raised substantial amount of Rs. 9,00,45,000/- by way of issuance 69
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of Share Capital and the Shareholders subscribing the shares in
such lender companies were having taxable income of more than
Rs. 20 Crores as per their personal income tax returns for A.Y.
2016-17 and this fact strongly goes in favour of the assessee and its
cash creditor company about the source of funds received by the
assessee.
It is also observed that Dwarkesh Finance Ltd. was a Public
Limited Company duly listed on Vadodra Stock Exchange and
therefore, its identity cannot be disputed. Further such company
provided funds to the assessee company out of the funds received
by it from other group companies namely, Vyankatesh Plastics and
Packaging Pvt. Ltd. and Shree Niwas Polyfabrics and Packwell Pvt.
Ltd.
We further observe that the other lender company namely,
M/s. Famous Vanijya Pvt. Ltd. had also provided funds to the
assessee company out of funds procured by it from other group
companies namely, M/s. Vyankatesh Corrugators, Shree Packers
M.P. Private Limited, etc. Thus, by any stretch of imagination, the
trail of the funds in the hands of the assessee company emanated 70
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from the lender companies cannot be disputed or doubted. The Ld.
AO could not rebut the genuineness of the various documentary
evidences furnished by the assessee before him for establishing the
genuineness of the loan transactions. Thus, the assessee had
discharged its onus of proving the genuineness of the sum credited
in its books of accounts as contemplated u/s. 68 of the Act and
since, no inquiry was conducted by the AO, the addition was not
sustainable as held by the Hon’ble Karnataka High Court in the
case of M/s. Kumar Nirman and Nivesh Pvt. Ltd. vs. the Assistant
Commissioner of Income Tax Bangalore 2020 (3) TMI 340 (Karn. HC).
Their Lordships at para (7) of the Order were pleased to hold as
under:
“In the background of aforesaid well settled legal principles, the facts of the case may be seen. In the instant case, the assessee in support of identity, genuineness of transaction and credit worthiness of M/s. Bhuawania Bros. Pvt. Ltd. had supplied a copy of the balance sheet and profit and loss account to the Assessing Officer. The appellant had also filed the copy of the return of income of M/s. Bhuwania Bros Pvt. Ltd. as well as copy of information letter. The appellant having proved the identity and creditworthiness of the party as well as the genuineness of the transaction had discharged its burden and it was for the revenue to conduct an enquiry and to prove that the transaction in question was not genuine and the identity of the creditor was not established and it had no 71
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credit worthiness. In the instant case, the revenue has not conducted any enquiry and has failed to discharge its burden. In view of preceding analysis, we answer the substantial question of law Nos. (i), (ii) and (iii) in the negative and in favour of the assessee and against the revenue.” 36. We also observe that the various screenshots and cash trail
pointed out by the CIT(DR), from the findings given by the AO in
respect of one of the lenders namely, Navyug Vyapar Pvt. Ltd.
pertain to the year 2010 only and therefore, they cannot be said to
be having any nexus with the loan transactions carried out by the
assessee during the year under consideration. From the Paper Book
filed by the assessee, it is appearing that the case of aforesaid
lender company, an assessment u/s. 143(3) r.w.s. 147 of the Act
was framed post survey event in the assessee’s group on
24.12.2018 for A.Y. 2011-12 and the AO framing such assessment
has not found any irregularity or infirmity in the transactions
pointed out by the present AO.
It is also not disputed that all the lender companies are
assessed to tax and they have duly shown the interest income
earned by them on the loans provided to the assessee company in
their returns of income for the concerning assessment year and
have also claimed the TDS made by the assessee company on such 72
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interest payment which has duly been allowed. The assessee
company has made substantial repayment of the loans again
through banking channels. The Ld. CIT in his order has very
elaborately dealt with loan transactions carried out by each of the
lender companies with the assessee company. Before us, the ld. DR
could not point out any discrepancy in the findings given by the ld.
CIT(A) on the merits of the loan transactions.
Further we do not find any substance in the ground of the
revenue that no consideration is required to be given to the various
documentary evidences but the facts should be on the groups of the
assessee and group companies working as dummy paper
companies. It is a trite law that a suspicion howsoever strong it
may be cannot substitute the legal proof especially when such legal
proof remains uncontroverted. The addition made by the Ld. A.O
are more on the basis of the theory adopted on the basis of some
investigation carried out in the preceding years which either may
had its fate by way of additions in the hands of the respective
companies in those years. Had there been additions in the hands of
those companies in the preceding years then there remains no
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reason to make any additions in the hands of other assessee(s) in
the subsequent years and in case in the preceding years if no
addition could be made by the revenue authorities in other lender
companies or assessee company that could not be a basis with the
revenue authorities to tax such untaxed income in the hands of the
in the subsequent assessment years because it is well established
rule that each assessment year is to be treated separately and the
assessee should be taxed for the income earned during the year to
which it pertains.
We therefore in the given facts and circumstances of the case,
respectfully following the judgments and decisions referred herein
above and being satisfied with the documentary evidences filed
before us are of the view that the assessee has successfully
discharged its onus to prove the identity and creditworthiness of the
three cash creditors i.e. M/s DFL, M/s FVPL and M/s NVPL and the
genuineness of transaction of unsecured loan taken by the assessee
company from these three companies. Thus there remains no
reason to interfere in the detailed finding of Ld. CIT(A) deleting the
impugned addition of Rs.12,44,12,690/- made by the Ld. A.O
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invoking provisions of Section 68 of the Act for unexplained cash
credit. Ground No.2 to 7 of the Revenue stands dismissed.
Accordingly appeal of the revenue in the case of M/s Ariba
Foods Pvt. Ltd raised vide ITA No.736/Ind/2019 for Assessment
Year 2016-17 stands dismissed.
Now we take up revenue’s appeal No.ITA/737/Ind/2019 in the
case of M/s Vyanktesh Plastics and Packaging Pvt. Ltd pertaining
to Assessment Year 2015-16. In this appeal revenue has raised 9
grounds of appeal but the issues raised therein challenging the
finding of Ld. CIT(A) can be summarized as follows:-
(i) Deletion of addition of Rs.52,552/- for delay in depositing
employees contribution of PF and ESIC.
(ii) Adhoc disallowance of Rs.4,50,000/- on account of power
and fuel expenses.
(iii) Addition for unexplained cash credit u/s 68 of the Act at
Rs.3,44,49,554/- for the unsecured loan taken from
following two companies:-
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Name of Company Amount (Rs.) i) M/s DFL 3,39,01,393/- ii) M/s. NVPL 5,78,161/- Total 3,44,79,554/-
As regards the deletion of addition of Rs.52,552/- made by Ld.
A.O u/s 36(1)(va) of the Act for delay in depositing the employees
contribution, we find that the issue raised in this ground is
squarely covered in favour of the assessee which has been rightly
relied upon by the Ld. CIT(A). Recently this Tribunal in the case of
Bajrang Agrawal Pvt. Ltd ITA No.1346/Ind/2016 dated 31.01.2018
deleted such type of addition relying on the judgment of Hon’ble
Rajasthan High Court in the case of Central Office
Mewara.....Organisation Pvt. Ltd V/s JCIT ITM 6777. We thus find
no reason to interfere in the finding of Ld. CIT(A) and accordingly
dismiss revenue’s Ground No.1.
As regards Ground No.2 relating to adhoc disallowance of
Rs.4,50,000/- deleted by Ld. CIT(A), brief facts are that the
assessee claimed power and fuel expenses at Rs.18,04,136/- are
the corrugated boxes manufactured during the year are 2912200
whereas in the preceding year it manufactured 4065639 corrugated 76
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boxes and expenses on power and fuel were incurred at
Rs.18,02,721/-. Since the manufacturing was less but the
expenses remained the same. Ld. A.O made an adhoc disallowance
of Rs.4,50,000/-. However Ld. CIT(A) deleted this disallowance
observing that the same has been made by the Ld. A.O purely on
lump sum and presumption basis and without finding any
incriminating material on record.
We have heard rival contentions and perused the records
placed before us and carefully gone through the submissions. We
observe that the payment for power and fuel has been made
through banking channel to Madhya Pradesh Kshetriya Power
Vitaran Nigam (Government undertaking). The Ld. A.O has failed to
find any defect in the books of accounts as the same has not been
rejected and financial statement of company are duly audited. Ld.
A.O has not made any efforts to examine the sizes of corrugated
boxes manufactured and just focused on the number. Thus the
addition made was merely on assumption and surmises which the
Ld. CIT(A) has rightly deleted. Since there is no inconsistency in
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the finding of Ld. CIT(A) Ground No.2 of Revenue’s appeal stands
dismissed.
As regards Ground No.3 to 9 the grievance of the revenue is
with regard to deletion of addition made u/s 68 of the Act for
unsecured loan of Rs.3,44,79,554/- taken from following two
companies:-
Name of Company Amount (Rs.) i) M/s Dwarkesh Finance Ltd (DFL) 3,39,01,393/- ii) M/s. Navyug Vyapar Pvt. Ltd (NVPL) 5,78,161/- Total 3,44,79,554/-
Brief facts are that Ld. A.O was not satisfied with the identity,
genuineness and creditworthiness of the above stated two cash
creditors and accordingly made addition u/s 68 of the Act which
was thereafter deleted by Ld. CIT(A) who on the basis of
documentary evidence was satisfied with the identity and
creditworthiness of the cash creditors and genuineness of the
transaction. Now the revenue is in appeal before the Tribunal.
Ld. Departmental Representative vehemently argued
supporting the finding of Ld. A.O and making same submission as
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were made in the case of M/s Ariba Foods Pvt. Ltd in ITA
No.736/Ind/2017 mentioned in the preceding paras, since similar
type of addition made by the Ld. A.O in this case also for the
unsecured loan taken from same lender companies.
Ld. Counsel for the assessee has also relied on the finding of
Ld. CIT(A) as well as the submissions made for similar issue during
the course of hearing of Revenue’s appeal in the case of M/s Ariba
Foods Pvt. Ltd ITA No.736/Ind/2017.
We have heard rival submissions and perused the records
placed before us. Revenue’s grievance through Ground No.3 to 9
revolves around the issue of addition of unexplained cash credit u/s
68 of the Act at Rs.3,44,79,554/- made by Ld. A.O u/s 68 of the Act
but subsequently deleted by Ld. CIT(A). The alleged unsecured
loans were taken from following two companies:-
Name of Company Amount (Rs.) i) M/s Dwarkesh Finance Ltd (DFL) 3,39,01,393/- ii) M/s. Navyug Vyapar Pvt. Ltd (NVPL) 5,78,161/- Total 3,44,79,554/-
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We observe that while adjudicating the issues raised in the
case of another group concern M/s Ariba Foods Pvt. Ltd for
Assessment Year 2016-17 ITA No.736/Ind/2017, similar issue of
unexplained cash credit from various cash creditors was under
consideration. Some of the unsecured loans in the case of M/s
Ariba Foods Pvt. Ltd were also taken from the alleged two cash
creditors namely M/s Dwarkesh Finance Ltd (In Short ‘DFL’) and
M/s. Navyug Vyapar Pvt. Ltd (In short’NVPL’). We after examining
the records placed before us and the detailed finding of Ld. CIT(A)
considering relevant judicial decisions were satisfied with the
identity and creditworthiness of the cash creditors namely M/s DFL
and M/s FVPL and also with regards to the creditworthiness of
these two lender companies since they were having sufficient funds
to provide loans including that to the assessee. We thus taking
consistent view and applying our own decision taken in the case of
M/s Ariba Foods Pvt. Ltd vide ITA No.736/Ind/2017 as held in para
22 of this order are of the considered view that Ld. A.O was not
justified in making addition for unexplained cash credit u/s 68 of
the Act at Rs. 3,44,79,554/- for the loans taken from M/s DFL and
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M/s FVPL. Thus we find no infirmity in the finding of Ld. CIT(A)
and same stands confirmed. We accordingly dismiss revenue’s
Ground No.3 to 9 raised in the case of M/s Vyanktesh Plastics and
Packaging Pvt. Ltd vide ITA No.737/Ind/2017 for Assessment Year
2015-16.
In the result all the grounds raised by the revenue in appeal
vide ITA No.737/Ind/2017 for Assessment Year 2015-16 stands
dismissed.
Now we take up revenue’s appeal in the case of M/s Famous
Vanijya Pvt. Ltd vide ITA No.773/Ind/2017 for Assessment Year
2015-16.
Brief facts of the case as called out from the records are that
the assessee is a company, duly incorporated on 25.10.2007 and
stated to be engaged in investment and financing activities. The
assessee is one of the various entities of Shriji Polymers (India) Ltd.
Group in which search and seizure operations u/s. 132 were
carried out by the DDIT(Inv.)-II, Indore on 27/07/2017. However, in
the case of the assessee, only survey proceedings u/s. 133A were
initiated on the same day. The assessee filed its original return of 81
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income, u/s. 139(1), on 30.09.2011 declaring total income at Rs.
35,700/-. Thereafter, the then AO found that the assessee had
bogus investment/transactions with Dummy/Bogus Concerns such
as M/s. Etima Emedia Ltd. and therefore, notice u/s. 148 was
issued on 30.03.2018. The assessee, in reply on 05.09.2018 has
furnished return of income declaring total income at Rs. 35,700/-.
The AO, while framing assessment u/s. 147 r.w.s. 143(3) made
addition of Rs. 4,16,15,000/- on account of unexplained cash credit
u/s. 68 of the Act. According to the AO, the assessee could not
establish the genuineness of the refund received out of investments
made in earlier years to the tune of Rs. 4,07,35,000/- and also,
could not establish the genuineness of the loan transactions
claimed to be carried out by it with one company namely, M/s.
Etima Emedia Ltd. to the extent of Rs. 8,80,000/-.
Aggrieved assessee preferred appeal before CIT(A) and filed
detailed submissions along with documentary evidences. After
considering the same Ld. CIT(A) decided the issue in favour of the
assessee and deleted the addition of Rs.4,16,15,000/- made by Ld.
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A.O and the relevant extract of finding of Ld. CIT(A) is mentioned
below:-
4.2.4 In my considered view, the AO except relying upon the findings of the Investigation Wing could not bring on record any cogent material to establish that the lender company from whom appellant had claimed to have received loan was non-existent or bogus or paper company. In my view, the appellant could be able to fully discharge its onus of proving the genuineness of the loan transaction beyond all doubts. The identity of the lender company is self proven from the fact that the assessments in the case of the lender company have been framed by the AO himself. The genuineness of the transactions also gets fully established as the transactions have been taken place through banking channels and these have been confirmed by the lender company. Also find that the lender company was having sufficient net owned funds for making advances to the appellant or any one also. The lender company is assessed to Income Tax and by same AO. In none of the loan transaction any cash has been found deposited in the bank account of the lender company. During the course of the search/survey no incriminating material or any other evidence was found from which it could have been inferred that the appellant had provided any fund to the lender company before obtaining loans.
4.2.5 Therefore, in view of the above discussion, the AO was not justified in making addition of Rs. 4,16,15,000/- (Rs. 4,07,35,000/- (refund of investment) + 8,80,000/-(unsecured loans) on account of disallowance made u/s 68 of the Act. Thus, keeping in view facts of the case, the documentary evidences filed by the appellant and the case laws cited above, the addition made by the AO amounting to Rs. 4,16,15,000/- is Deleted. Therefore, appeal on these grounds are Allowed. 83
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Now, the Revenue is in appeal before the Tribunal.
Since, all the eleven grounds taken by the Revenue are inter
connected and directed against the action of the Ld. CIT(A) in
deleting the addition of Rs. 4,16,15,000/- made by the AO u/s. 68
of the Act, we consider it appropriate to adjudicate all the grounds
simultaneously.
Ld. CIT-DR for the Revenue vehemently argued at length. The
main contention of the Ld. CIT-DR was that the assessee, in its
books of accounts, had shown to have received a refund aggregating
to a sum of Rs. 4,07,35,000/- out of the alleged investments made
in earlier years, but, the assessee failed to discharge its onus of
establishing identity and creditworthiness of the creditor parties
and genuineness of the transactions. The CIT(DR) also contended
that during the relevant year, the assessee had taken unsecured
loan of Rs. 8,80,000/- from yet another dummy entity namely, M/s.
Etima Emedia Ltd. but, during the course of the survey action in
the premises of the aforesaid company, it was found that such
company was only a paper company and engaged in the practice of
providing accommodation entries only. It was also contended that 84
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all the director of the lender company are dummy and for the
namesakes and they work only on the direction of Shri Anand
Bangur, a key person of the Shriji Group. The CIT(DR) contended
that the lender company has been formed to route its unaccounted
income into other group concerns and it was not having any
substantial assets available in its Balance Sheet. Finally, the
CIT(DR) contended that the additions made by the AO, u/s. 68, at
Rs. 4,16,15,000/- be confirmed and the Order of the CIT(A) be set-
aside. During the course of the appellate proceeding before us, the
Ld. CIT(DR) also filed one paper book containing the copy of the
show cause notice issued by the AO to the assessee during the
course of the assessment proceedings, the copy of the assessee’s
reply thereon, the copy of the assessment order u/s. 147/143(3)
dated 29.12.2018 for A.Y. 2011-12 in the case of the lender
company and Grounds of Appeal raised before us.
Per Contra, Ld. Counsel for the assessee also made his
arguments at length by making a reference of the various
documentary evidences furnished by him in a Paper Book, running
from Page No. 1 to 170. The Ld. Counsel for the assessee also filed
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before us a copy of the written synopsis by making reference of
various findings of the AO, the Ld. CIT(A) and various documentary
evidences furnished in the Paper Book. The relevant abstract of the
Synopsis filed by the Counsel of the assessee is reproduced as
under:
“ F. Key Points of Assessee’s Submission and Relevant Pages of Paper Book : [in respect of addition of Rs. 4,07,35,000/- for Disinvestment]
S. Submission in Brief Relevant Remarks No. Pages of Paper Book 1 The addition so made was 60 & 61 While recording the reasons, it not an issue for reopening the was wrongly assumed that the assessment as is evident assessee made investment from the copy of the amounting to Rs.10,12,02,256/- statement of reasons during the year under consideration whereas the factual position remained that such investment was made during earlier years which is evident from the copy of the audited balance sheet for F.Y. 2009-10 [A.Y. 2010-11] placed at page no. 105 of the Paper Book. 2 During the entire assessment 87, 91 to The assessee had made full proceedings, except calling 93, 94, compliance of the notice and had for the information of fresh 95 to 98 furnished the desired details investments made and vide its letter dated 21-12-2018 sources thereof vide the only placed at page no. 91 to 93 of notice dated 07-09-2018, no the Paper Book. The assessee further information or had also furnished the complete evidences were called for. details of the disinvestments made the proceeds wherefrom were utilized for making fresh
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investments [kindly refer PB Page No. 94]. Further, in evidence of receipts of sale proceeds, the assessee had also produced the copy of relevant bank statements [kindly refer PB Page No. 95 to 98].
3 The making of investments in 105 In such audited balance sheet, shares in earlier years, which investment amounting to have been disinvested during Rs.10,10,89,960/- as on 31-03- the previous year under 2010 and as also, as on 31-03- consideration, is evident from 2009 is getting clearly reflected. the copy of the audited balance sheet of the assessee for F.Y. 2009-10 [A.Y. 2010- 11]
4 The assessee company had made investments aggregating to Rs.10,10,89,960/- in earlier years out of share capital and share premium received by it from various persons.
5 The assessee company has 112 to In the assessment order, at para already been taxed in respect 120 (4) [PB Page No. 119], the fact of of the share capital and receipt of a sum of share premium aggregating to Rs.10,12,00,000/- by the Rs.10,12,00,000/- received assessee company by way of by it during the financial year share capital and share 2007-08 relevant to A.Y. premium is getting clearly 2008-09 in an assessment reflected. proceeding carried out under s.143(3)/263/143(3)/147 of the Act by the ITO, Ward-5(4), Kolkata, vide his Order dated 26-03-2014.
6 It is a settled law that the - - sources of funds emanating from realization of old debtors or disinvestments, shown in the audited balance sheets of 87
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earlier years, cannot be disputed or doubted.
7 Double taxation is not - Since in respect of the sources of permissible original investments, the assessee has already been taxed in A.Y. 2008-09, then upon change of the spice of such investments, no further addition can be made.
D. Key Points of Assessee’s Submission and Relevant Pages of Paper Book : [in respect of addition of Rs. 8,80,000/- for Loan from Etima Emedia Ltd. ]
S. Submission in Brief Relevant Remarks No. Pages of Paper Book 1 The addition has been made 60 & 61 While recording the reasons, the on an issue which was not AO had merely formed the belief the subject matter of qua the investments and loans reopening u/s. 148 given by the assessee and not in respect of any unsecured loan claimed to have been taken by the assessee.
2 The lender company from - Para (2.0) on page no. 18 of the whom the assessee accepted AO’s Order loan is one of the group companies of the Bangur Group itself to which the assessee belongs.
3 In respect of the lender - Para (2.6) on page no. 63 of the company, simultaneous AO’s Order. survey proceedings u/s. 133A were carried out. Further, the directors of the lender company were found on given address and their statements were also recorded.
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4 In respect of the lender 159 to i) Framing of the Assessment in company, simultaneous 164 the hands of lender company assessment proceedings got establish the identity of the completed for A.Y. 2011-12 lender company. u/s. 147/143(3) of the Act. ii) Interest income shown by the lender company from the assessee company and as also, corresponding credit for TDS claim has been granted. Thus, no adverse cognizance has been taken in the cases of the lender company.
5 During the course of the - On a perusal of the only Notice assessment proceedings, the issued u/s. 142(1) placed at AO of the assessee had not page no. 87 & 88 of the Paper whispered a single word Book, it may be gathered that regarding the so-called the AO had not uttered any enquiries and statements single word regarding the recorded by the Investigation alleged enquiries and other Wing. The opportunity of materials referred to by him in cross-examination of any of the body of the assessment the witnesses of the AO was order. Thus, the question of not given. giving any cross-examination does not arise.
6 The assessee had 121 to All these documents establish established identity of the 170 the identity of the lender lender company by furnishing company, the genuineness of the all the necessary documents loan transactions and as also, before the ld. CIT(A). the creditworthiness of the lender company.
7 None of the findings given by - The AO’s findings and the the AO is relevant for making assessee’s rebuttal on each of the impugned additions the findings of the AO have been reproduced by the ld. CIT(A) at para (4.2.1) on page no. 53 to 55 of his Order.
ITA No.736,737 & 773/2019 Ariba Foods Pvt. Ltd & Ors.
The Ld. Counsel for the assessee also placed reliance on the
following decisions;
i) ACIT vs. EI Dorado Biotech Pvt. Ltd. (2020) 60 CCH 233 (AhdTrib) Order dated 11-11-2020. ii) CIT vs. Metachem Industries (2000) 245 ITR 0160 (MP) iii) Nemichand Kothari vs. CIT (2003) 264 ITR 254 (Gau.) iii) CIT vs. Mehrotra Brothers (2004) 270 ITR 0157 (MP) iv) Ashok Pal Daga vs. CIT (1996) 220 ITR 0452 (MP) v) DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj) vi) CIT vs. STL Extrusions Pvt. Ltd. (2011) 333 ITR 269 (MP) vii) CIT vs. Devi Prasad Khandelwal & Company Ltd. (1971) 81 ITR 460 (Bom.) viii) CIT vs. Orissa Corporation P. Ltd. (1986) 159 ITR 0078 (SC) ix) Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 0723 (Bom) x) CIT vs. Taj Borewell (2007) 291 ITR 0232 (Mad.) xi) Addl. CIT vs. Bahri Brothers (P) Ltd. (1985) 154 ITR 0244 (Pat) xii) CIT vs. Hanuman Agarwal (1985) 151 ITR 150 (Pat) xiii) Jalan Timbers vs. CIT (1997) 223 ITR 11 (Gau) xiv) CIT vs. Dalmia Resorts International (2007) 290 ITR 508 (Del) xv) Lalitha Jewellery Mart P. Ltd. vs. DCIT (2017) 399 ITR 0425 (Mad) xvi) CIT vs. Jai Kumar Bakliwal (2014) 366 ITR 217 (Raj) xvii) CIT vs. Shri E.S. Jose (2014) 220 Taxman 0032 (Ker) xviii) CIT vs. Kamdhenu Steel & Alloys Ltd. & Ors. (2014) 361 ITR 0220 (Del) xix) Mr. Gaurav Triyugi Singh vs. ITO 2020 (1) TMI 1153 (BomHC) xx) M/s. Kumar Nirman and Nivesh Pvt. Ltd. vs. ACIT 2020 (3) TMI 340 (KarHC) xxi) ACIT vs. M/s. Jay Enterprise 2019 (4) TMI 1811 (ITAT Rajkot) xxii) Pr.CIT vs. M/s. Jay Enterprise 2020 (1) TMI 657 (GujHC) xxiii) ITO vs. M/s. Riddhi Siddhi Corporation 2017 (2) TMI 1129 (ITAT Ahd.) xxiv) ITO vs. M/s. RE N Raga Media Pvt. Ltd. 2019 (6) TMI 651 (ITAT Mum.) xxv) Mahipal Ishwarlal Sottany vs. ITO 2019 (10) TMI 1161 (ITAT Ahd.) xxvi) ITO vs. M/s. Celebrity Lifespace Pvt. Ltd. 2019 (12) TMI 1157 (ITAT Mum.) xxvii) DCIT vs. M/s. Chetan R. Shah (HUF) 2020 (1) TMI 1239 (ITAT Mum.) xxviii) ITO vs. M/s. MJD Financial Services Pvt. Ltd. 2020 (10) TMI 651 (ITAT Mum.) xxix) DCIT vs. M/s. Manba Finance Ltd. 2020 (1) TMI 645 (ITAT Mum.) xxx) ACIT vs. Mittal Appliances Ltd. (2016) 27 ITJ 120 (Trib.-Indore) xxxi) ACIT vs. Shree Sai Vihar (2016) 28 ITJ 158 (Trib.-Raipur) xxxii) ITO vs. Vaibhav Cotton Pvt. Ltd. (2012) 19 ITJ 113 (Trib.-Indore)
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xxxiii) Shri Sumati Kumar Kasliwal, Shri Parth Kasliwal, Smt. Sharda Kasliwal, M/s. Nishant Finance Pvt. Ltd., Shri Manoj Kasliwal and M/s. Pumarth Infrastructure Pvt. Ltd. vs. ACIT (Central)-1, Indore 2019 (5) TMI 338 (ITAT-Indore) 60. The crux of the arguments of the Ld. Counsel of the assessee
on the issue of Disinvestment, for which the addition amounting to
Rs. 4,07,35,000/- was made by the AO, are that; (i) the addition so
made was not an issue for reopening the assessment as is evident
from the copy of the statement of reasons; (ii) during the entire
assessment proceedings, except calling for the information of fresh
investments made and sources thereof vide the only notice dated
07.09.2018, no further information or evidences were called for and
in reply the assessee had furnished complete details and copy of the
relevant bank statement in which the proceeds of disinvestment
were credited; (iii) The making of investments in shares in earlier
years, which have been disinvested during the previous year under
consideration, is evident from the copy of the audited balance sheet
of the assessee for F.Y. 2009-10 [A.Y. 2010-11] in which the
investment aggregating to Rs.10,10,89,960/- is getting clearly
reflected ; (iv) The assessee company had made investments
aggregating to Rs.10,10,89,960/- in earlier years out of share
capital and share premium received by it from various persons; (v) 91
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The assessee company has already been taxed in respect of the
share capital and share premium aggregating to Rs.10,12,00,000/-
received by it during the financial year 2007-08 relevant to A.Y.
2008-09 in an assessment proceeding carried out under
s.143(3)/263/143(3)/147 of the Act by the ITO, Ward-5(4), Kolkata,
vide his Order dated 26-03-2014; (vi) It is a settled law that the
sources of funds emanating from realization of old debtors or
disinvestments, shown in the audited balance sheets of earlier
years, cannot be disputed or doubted; (vii) Double taxation is not
permissible as the sources of funds for making investment by the
assessee company have already been taxed in the F.Y. 2007-08,
again the addition in respect of the proceeds of disinvestment of
such investments cannot be made.
Further, in respect of addition of Rs. 8,80,000/- made on
account of unsecured loan taken by it from M/s. Etima Emedia
Ltd., the Ld. Counsel for the assessee argued that: (i) The addition
has been made on an issue which was not the subject matter of
reopening u/s. 148; (ii) The lender company from whom the
assessee accepted loan is one of the group companies of the Bangur
ITA No.736,737 & 773/2019 Ariba Foods Pvt. Ltd & Ors.
Group itself to which the assessee belongs; (iii) In respect of the
lender company, simultaneous survey proceedings u/s. 133A were
carried out. Further, the directors of the lender company were
found on given address and their statements were also recorded; (iv)
In respect of the lender company, simultaneous assessment
proceedings got completed for A.Y. 2011-12 u/s. 147/143(3) of the
Act; (v) During the course of the assessment proceedings, the AO of
the assessee had not whispered a single word regarding the so-
called enquiries and statements recorded by the Investigation Wing.
The opportunity of cross-examination of any of the witnesses of the
AO was not given; (vi) The assessee had established identity of the
lender company by furnishing all the necessary documents before
the ld. CIT(A); (vii) None of the findings given by the AO is relevant
for making the impugned additions. Besides making the
contentions as above, the Ld. Counsel for the assessee also relied
upon the plethora of judicial pronouncements as noted down in the
preceding para.
ITA No.736,737 & 773/2019 Ariba Foods Pvt. Ltd & Ors.
We have heard rival contentions and perused the records
produced before us and carefully gone through the judgments
referred to by both the parties.
Through Ground Nos. 1 to 4, the Revenue has challenged the
finding of the Ld. CIT(A) in deleting the addition of Rs.
4,07,35,000/- made by the AO u/s. 68 of the Act by disbelieving
the assessee’s claim that during the relevant previous year, the
appellant had received refunds out of genuine investment made in
earlier years. The Revenue agitated that the CIT(A) completely
ignored that the assessee had failed to establish the link between
the said amount of disinvestment and share capital and share
premium amount received in earlier years and also did not
appreciate that the assessee had failed to show as to how the share
capital and share premium amount was liquidated and translated
to the refund of Rs. 4,07,35,000/- . The Revenue also agitated that
when the assessee itself had filed appeal against the addition made
on account of share capital and share premium amount, then
assessee was not eligible to take the basis of addition for explaining
the sources of investments.
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We observe that during the course of the search/survey
proceedings in the Shriji Group to which the assessee belongs, no
incriminating material or document was found or recovered from
which it could have been inferred that the transactions of receipt of
refund shown by the assessee out of the liquidation of the
investments made in earlier years was not genuine. In the entire
body of the assessment order, the AO has not made reference of any
incriminating material. Even in the paper book filed before us, there
is no mentioning of any incriminating material or document.
From the copy of the audited balance sheet of the assessee
filed at page no. 49A of the Paper Book, we observe that as on
31.03.2011 and 31.03.2010, the assessee company has shown
investments amounting to Rs. 7,53,89,960/- and Rs.
10,10,89,960/- respectively. During the course of the assessment
proceedings, the AO vide his questionnaire annexed to the notice
u/s. 142(1) dated 07.09.2018, placed at page no. 87 of the Paper
Book filed by the assessee, had only required the assessee to
furnish information regarding all kinds of investments made during
the year with sources of funds. In response, the assessee had
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furnished the details of investments/disinvestments made during
the year and had duly demonstrated that how the amount of
investments as on 01.04.2010 at Rs. 10,10,89,960/- reduced to Rs.
7,53,89,960/- on 31.03.2011. The assessee also demonstrated that
during the relevant previous year, it had made some fresh
investments and had also received refund aggregating to a sum of
Rs. 4,07,35,000/- out of the investments made in the earlier years.
The assessee had furnished the complete details of the amount
realized from sale of investments made in earlier years before the
AO and the same is also placed in its paper book at page no. 94. In
order to establish its claim that the entire sale proceeds had been
received through banking channels, the assessee has also furnished
copies of its relevant bank statements at page no. 95 to 98 of its
paper book. Various documentary evidences furnished by the
assessee have not been contravened either by the AO or by the Ld.
CIT(DR).
It is observed that the AO has discarded the claim of the
assessee as regard to the liquidation of the investment made in
earlier years without properly appreciating the facts of the case and
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merely on extraneous considerations. The assessee company in its
audited balance sheet had shown making of investment to the
extent of Rs. 10,10,89,960/- as on 31.03.2010 and such fact has
not been disputed or doubted by the AO. The assessee company in
its audited financial statements as of 31.03.2010 has shown its
own funds amounting to Rs. 51,60,000/- and Rs. 9,61,40,000/-
respectively by way of Equity Share Capital and Share Premium.
Thus, the sources of making the investments in the earlier years
cannot be disbelieved or doubted. The assessee company had raised
such share capital and share premium aggregating to a sum of Rs.
10,12,00,000/- during the F.Y. 2007-08 relevant to A.Y. 2008-09
and such receipt of money had already been subjected to
assessment in the concerned year.
In respect of the funds received by way of share capital and
share premium, the assessee company has already been subjected
to tax u/s. 68 of the Act in pursuance to an order of assessment
passed for A.Y. 2008-09, u/s. 143(3)/263/143(3)/147 of the Act by
the ITO Ward – 5(4), Kolkata (copy of the assessment order placed
at page no. 112 to 120 of the paper book filed by the assessee). We
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have been apprised by the Ld. Counsel for the assessee that against
such taxation, the assessee company has already preferred a
separate appeal which is pending for adjudication. Irrespective of
the outcome of the aforesaid appeal for A.Y. 2008-09, we are of the
considered view that the assessee company was having sufficient
funds to make various investments and therefore, any subsequent
realization of such investments cannot again be subjected to tax
under the garb of Section 68 of the Act.
We are in full agreement with the findings of the Ld. CIT(A)
that in view of the ratio laid down by the Hon’ble Supreme Court in
the case of CIT vs. Laxmipat Singhania 72 ITR 291 (SC) double
taxation is not permissible in Law. Ld. AO took an adverse view
solely on the basis of his assumptions and presumptions that the
investment made by the appellant is bogus. We also concur with the
findings of the CIT(A) that additions made in the absence of
incriminating material are unjustified and since, during the course
of the survey/search proceedings in the case of the assessee and
other group concerns, no incriminating material was found, no
addition could have been made.
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In our considered view, when the assessee is in a position to
demonstrate making of the investment in earlier years out of the
explained/already taxed sources viz. share capital and share
premium claimed to have been received during the F.Y. 2007-08
relevant to A.Y. 2008-09, and has also demonstrated that the sales
proceeds were received through banking channels, then without
any cogent material on record, the explanation of the assessee
cannot be disbelieved.
We find no substance in the ground taken by the Revenue that
since the assessee has agitated the addition qua the share capital
and share premium shown to have been received by it during the
F.Y. 2007-08 relevant to A.Y. 2008-09, by filing an appeal, the
assessee cannot claim the availability of such funds for making the
investments. In our view, once, it is found that the assessee
company had received some funds, whether through explained
sources or unexplained sources, the same has to be regarded as
available with it for making further investments. In our view, merely
because the assessee has agitated the addition made u/s.68 of the
Act against the addition made for A.Y. 2008-09, its claim regarding
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availability of funds raised in the aforesaid year cannot be denied.
We therefore in the given facts and circumstances of the case
and the factual matrix are of the considered view that the source of
alleged amount was from liquidation of investment made in the
earlier years. The dispute about the source of fund utilized for
making the investment in earlier years before the tax authorities in
itself cannot be the sole basis to make the addition in the hands of
the assessee as unexplained cash credit for the amount received
from liquidating the investments made in the shares of unlisted
companies which were invested in the earlier years and were duly
appearing in the audited balance sheet. The alleged sum is received
from sale of shares appearing as opening balance in the investment
account. There is no dispute about the identity, genuineness and
creditworthiness of these companies, the equity shares of which
were sold by the assessee during the year and the funds were
thereafter utilized to make the fresh investments. It is a simple
case of switch over of investments from one company to another
and is not the case of fresh loan received during the year. We thus
find no substance in the ground that since the assessee has
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agitated the addition qua the share capital and share premium
shown to have been received by it during assessment year 2008-09
by filing an appeal the assessee cannot claim the availability of
such fund for making the investments. It is not in dispute that the
matter for Assessment Year 2008-09 is open and the fate of the
issue of the addition for that year will have its own process. We
thus find no justification in the action of Ld. A.O making the
addition for unexplained cash credit of Rs.4,07,35,000/- and thus
find no inconsistency in the finding of Ld. CIT(A) deleting the
addition. Accordingly 1,2,3 & 4 of revenue’s appeal in the case of
Famous Vanijya Pvt. Ltd vide ITA No.725/Ind/2017 stands
dismissed.
As regards Ground No. 5 to 11 which relate to the deletion of
addition of Rs. 8,80,000/- made by the AO u/s. 68 of the Act in
respect of unsecured loan claimed to have been received by it from
M/s. Etima Emedia Ltd., we observe that the assessee had
furnished before the AO, copy of PAN, bank account statement of
the lender company, audited financial statement, profit and loss
account statement, certificate of incorporation, copy of MOA and
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AOA, details collected from website of Ministry of Corporate Affairs
and confirmation of lender. All these documents have also been
furnished by the assessee in its paper book from page nos. 121 to
We find that the Ld. CIT(A) has dealt in depth with the various
documentary evidences furnished by the appellant and reached to
the conclusion that the appellant had been able to satisfy all the
three condition required for genuineness of transactions u/s. 68 of
the Act. We find that the Ld. CIT(A) has rightly placed reliance upon
the decision of Umesh Electricals vs. ACIT (2011) 18 ITJ 635 (Trib.
Agra) and as also on the decision of Aseem Singh vs. ACIT (2012) 19
ITJ 52 (Trib. Indore) and Ld. CIT(A) has rightly distinguished the
various decision relied upon by the Revenue.
We thus find that the assessee had discharged its onus of
proving the genuineness of the sum credited in its books of
accounts as contemplated u/s. 68 of the Act and since, no inquiry
was conducted by the AO, the addition was not sustainable as held
in similar case by the Hon’ble Karnataka High Court in the case of
M/s. Kumar Nirman and Nivesh Pvt. Ltd. vs. the Assistant
Commissioner of Income Tax Bangalore 2020 (3) TMI 340 (Karn. HC).
ITA No.736,737 & 773/2019 Ariba Foods Pvt. Ltd & Ors.
Their Lordships at para (7) of the Order were pleased to hold as
under:
“In the background of aforesaid well settled legal principles, the facts of the case may be seen. In the instant case, the assessee in support of identity, genuineness of transaction and credit worthiness of M/s. Bhuawania Bros. Pvt. Ltd. had supplied a copy of the balance sheet and profit and loss account to the Assessing Officer. The appellant had also filed the copy of the return of income of M/s. Bhuwania Bros Pvt. Ltd. as well as copy of information letter. The appellant having proved the identity and creditworthiness of the party as well as the genuineness of the transaction had discharged its burden and it was for the revenue to conduct an enquiry and to prove that the transaction in question was not genuine and the identity of the creditor was not established and it had no credit worthiness. In the instant case, the revenue has not conducted any enquiry and has failed to discharge its burden. In view of preceding analysis, we answer the substantial question of law Nos. (i), (ii) and (iii) in the negative and in favour of the assessee and against the revenue.”
In view of the facts and circumstances of the case and as also
the various judicial authorities relied upon by the assessee and as
referred hereinabove, we are satisfied with the identity and
creditworthiness of the cash creditor M/s Etima Emedia Ltd and
also satisfied with the creditworthiness of the cash creditor. Thus
we find no infirmity in the findings of Ld. CIT(A) deleting the
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addition of Rs.8,80,000/- made u/s 68 of the Act by Ld. A.O. We
accordingly dismiss Ground No.5 to 11 raised by the revenue.
In the result appeal of the revenue in case of M/s Famous
Vanijya Pvt. Ltd is dismissed.
In the result all the appeals raised by the revenue in the case
of (i) M/s Ariba Foods Pvt. Ltd for Assessment Year 2016-19 (ITA
No.736/Ind/2019), (ii) M/s Vyanktesh Plastics and Packaging Pvt.
Ltd for Assessment Year 2015-16 (ITA No.737/Ind/2019) and (iii)
M/s Famous Vanijya Pvt. Ltd for Assessment Year 2011-12 (ITA
No.773/Ind/2017) are dismissed.
The order pronounced in the open Court on 11.01.2021.
Sd/- Sd/-
(JUSTICE P.P. BHATT) (MANISH BORAD) PRESIDENT ACCOUNTANT MEMBER Dated : 11 January, 2021 /Dev Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt. Registrar, I.T.A.T., Indore