MANOJ KUMAR AGRAWAL,MUMBAI vs. INCOME TAX OFFICER,18(2)(3), MUMBAI

This has been preferred by the Assessee against the order dated 11.03.2023, impugned herein, passed by the Ld. Commissioner of Income Tax(Appeals) / National Faceless Appeal Centre(NFAC) Delhi, u/s. 250 of the Income Tax Act 1961 (in short ‘the Act’) for AY 2014-15.

The Ld. Commissioner on the similar reasoning given by the AO, affirmed the said additions.

We have given thoughtful consideration to the peculiar facts and circumstances of the case and observe that the Assessee purchased the shares through one broker namely M/s Geojit BNP Paribas Financial services Ltd, which was never 4 Manoj Kumar Agrawal proved to be settler or rig master and the shares were recorded in the Assessee as well as in the broker ledger’s account etc. and received in the demat account and the financial performance available of M/s Geojit BNP Paribas Financial services ltd is also satisfactory and the authorities below failed to note that the Assessee has purchased the shares in January 2014, whereas Shri Deepak Patwari made the statement in July 2013 which was relied upon by the authorities below for making the addition, hence his statement cannot be relied upon in this case. 5.1 It is a fact that the addition has been made merely on the basis of the statements recorded during the course of survey u/s 131/133A of the Act and without supporting evidence and material on record. It is also a fact that the statements of such persons were never provided to the Assessee nor was the Assessee given any opportunity to cross examine the said persons. Even otherwise there is no abnormal difference between the purchase and sale price of the shares. In fact the shares of Nouveau Multimedia Ltd were purchased by the Assessee on a consideration of Rs. 91923/- whereas the same were sold on consideration of Rs. 38511/- which resulted into loss of Rs. 53412/- and therefore this circumstance, also strengthen the genuineness of the case of the Assessee. 5.2 We also observe that the coordinate bench of the Tribunal in the case of IWI Stationary Pvt Ltd. Vs ACIT ITA No. 1571 & 1572/M/2023 decided on 20.07.2023 also dealt with the identical case/situation, wherein the addition was

The first issue relates to the addition of Rs.20.00 lakhs relating to unsecured loan taken by the assessee from M/s. Shyam Alcohol & Chemicals Limited treating the same as unexplained cash credit u/s 68 of the Act.

We heard rival contentions on this issue and perused the record. In the instant case, the loan taken by the assessee has been added u/s 68 of the Act. 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 source, the assessee should discharge initial burden to prove the cash credits placed upon his shoulders of the assessee u/s 68 of the Act, i.e., 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. 8. We shall now examine the facts prevailing in the instant case. It is noticed that it is not the case of the AO that the assessee did not discharge the initial burden placed upon it with regard to the loan taken by it. We notice that the assessee has furnished all the details relating to the loan in order to discharge the burden placed upon it u/s 68 of the Act. However, the AO has refused to accept those details, only for the reason that the above said company has been categorized by the investigation wing as accommodation entry provider. 9. We noticed from the record that the assessee has filed following documents in order to discharge the burden placed upon it under section 68 of the Act :- a) Annual audited account of lender company. b) Bank statements showing receipt of money. c) Copy of income tax return filed by lender company. d) Confirmation of ledger account by the lender company.

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). It was held 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 submissions of the assessee's counsel. We note that 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 honorable 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 I who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account.

In our view, the above said decision rendered by the co- ordinate bench supports the case of the assessee. Accordingly, following the above said decision, we hold that the addition made by the Assessing Officer under section 68 of the Act, in the facts and circumstances of the case, was not justified. Accordingly we set aside the order passed by the learned CIT(A) on this issue and direct the AO to delete the addition of Rs.20.00 lakhs made under section 68 of the Act. (Highlighted by us for clarity)