SULOCHANA GODHWANI,MUMBAI vs. INCOME TAX OFFICER-10(3)(3), MUMBAI

Per N.K. Choudhry (JM): This appeal has been preferred by the Assessee against the order dated 25/04/2023 impugned herein passed by the National Faceless Appeal Centre (NFAC) Delhi / Ld. Commissioner of Income Tax (Appeal) [in short, Ld. Commissioner ] under section 250 of the Income-tax Act, 1961 (in short, the Act) for the A.Y.2009-10.

2.1 In the re-assessment proceedings, it was observed by the AO that the Assessee has obtained following accommodation entries in respect of unsecured loan:-

PAN Concern AY PAN of Name of Amount (Rs.) Address of the of Pravin benefic beneficiary beneficiary Jain group -iary AANP Jasoda 2009- AABPG Sulochana 8,00,000 16, Kakkad V6131 Exports 10 8131B Godhwani Market, 306, Kalbadevi Road, Kalbadevi, Mumbai AIPPP6 Natasha 2009- AABPG Sulochana 8,00,000 16, Kakkad 372H Enterprise 10 8131B Godhwani Market, 306, Kalbadevi Road, Kalbadevi, Mumbai 3 ITA 2245/Mum/2023 Sulochana Godhwani 2.2. The Assessing Officer while relying upon the statement recorded from Shri Pravin Kumar Jain, made additions of the above unsecured loan credits, under section 68 of the I.T. Act, 1961.

4 ITA 2245/Mum/2023 Sulochana Godhwani 5. Heard the parties and perused the material available on record. In the instant case, the addition has been made u/s 68 of the Act, wherein loan amount of Rs. 16,00,000/- received by the Assessee, has been added. The Co-ordinate Bench of the Tribunal in the case of ITO Ward 4(2)(4) Vs M/s Lucky Star {ITA No 5691/Mum / 2017 decided on 19-07-2023 dealt with identical issue and held as under Sec. 68 enables assessment of such types of cash credits, if the Assessee fails to prove the nature and source of cash credits. “Nature of cash credit” would mean that the Assessee is required to show that it is not of revenue nature. In order to prove the sources, the Assessee should discharge initial burden to prove the cash credits placed upon his shoulders of the Assessee u/s 68 of the Act, the Assessee is required to prove three main ingredients, viz., the identity of the creditor, the genuineness of the transactions and the credit worthiness of the creditor. If the assessee discharges the initial burden, then the burden would shift to the shoulders of the assessing officer, i.e., it is the responsibility of the AO to disprove the claim of the assessee by bringing evidences on record.

5.1 We observe It is not in controversy that in this case the Assessee in order to discharge the burden cast upon it under section 68 of the Act, filed certain documents viz-a- viz evidence of the loan confirmations, copy of bank statement of the year in which loan was taken, ITR Acknowledgements and the evidence towards repayment of loan with interest in next year along with Loan 5 ITA 2245/Mum/2023 Sulochana Godhwani confirmations, bank Statements, ITR acknowledgements of M/s Jasoda Exports (Prop. Shri Sushil Kumar Ratanlal Verma) and Natasha Enterprises (Prop. Ms. Rose Padbidri) and therefore by furnishing above said documents, in our view, the Assessee prima facie discharged its onus cast upon it under section 68 of the Act.

5.2 It is also a fact that Shri Pravin kumar Jain on whose statement, the Assessing Officer has mainly relied upon for making the addition has in fact, retracted his statement. Therefore, the statement made by Shri. Pravin kumar Jain lacks authenticity. The question as to whether the Assessing Officer could have made addition under section 68 of the Act by relying upon the statement given by an accommodation entry provider was examined by the Coordinate Bench in the case of M/s. Moraj Realty Pvt. Ltd. (ITA No.708 & 709/Mum/2019 dated 08-12-2020 by holding as under :-

“17. Moreover, except for relying on the statement of VVB the Assessing Officer has not done any inquiry himself except for referring to a notice issued under section 133(6) in A.Y. 2009-10 only. The learned counsel of the assessee has challenged the very veracity of this observation. He has submitted that assessee has asked for the copy of the said notice issued under RTI Act. In response it was replied that copies thereof are not available. Hence, this shows that even the so called inquiry by the Assessing Officer was done in case of only one party for A.Y. 2009-10 and the veracity of which is itself in doubt.

We find ourselves in agreement with the 18. submissions of the assessee’s counsel. We note that 6 ITA 2245/Mum/2023 Sulochana Godhwani except for the statement of the entry operator which was also retracted the addition made by the authorities below is devoid of cogent material. In this regard we note that in similar circumstances honourable Bombay High Court in the case of CIT Vs. Orchid Industries Pvt. Ltd. (ITA No. 1433 of 2014 dated 5.7.2017) held as under :- “The Assessing Officer added Rs.95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account.

The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.”

7 ITA 2245/Mum/2023 Sulochana Godhwani 5.3 No doubt, the creditors failed to appear before the Assessing Officer, however, as Shri Pravin kumar Jain on whose statement, the Assessing Officer has mainly relied for making the addition has in fact, retracted his statement and therefore such statement made by Shri. Pravin kumar Jain lacks authenticity, further as the Assessee by providing all the necessary details/documents such as bank statement, loan confirmations and ITR acknowledgements of creditors reflecting repayment of loan with interest in next year, prima facie discharged its onus as cast upon it, under the provisions of section 68 of the IT Act and therefore the addition under consideration made under section 68 of the Act, is un- sustainable. Consequently, the same is deleted.