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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
The present appeals by the Revenue and cross objections by the assessee have been filed challenging the common impugned order dated 21/07/2022, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals)–53, Mumbai, [“learned CIT(A)”], for the assessment years 2018-19 and 2019-20.
Since both appeals pertain to the same assessee and the issues involved are also common, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. With the consent of the parties, the Revenue’s appeal and assessee’s cross objection for the assessment year 2018–19 is taken up as a lead case.
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 ./2022 Revenue’s appeal - A.Y. 2018-19
3. In this appeal, the Revenue has raised the following grounds:- “
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of 1,90,00,000/- u/s 68 of the Act in respect of unsecured loans and ignoring the facts that the assessee has not proved the genuineness of the transaction, and credit-worthiness of the parties, to the satisfaction of the AO, so as to discharge the primary onus?
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of 14,08,662/- u/s. 68 of the Act in respect of interest paid on unsecured loans and ignoring the facts that the assessee has not proved the genuineness of the transaction, and credit- worthiness of the parties in respect of unsecured loans, to the satisfaction of the AO, so as to discharge the primary onus?
3. The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal if need be.”
The brief facts of the case as emanating from the record are: The assessee is a private limited company and is engaged in the business of construction of roads and buildings and also undertakes BMC and government contracts. For the year under consideration, the assessee filed its original return of income under section 139(1) on 12/02/2021, declaring a total income of Rs.29,03,530. A search and seizure action under section 132 of the Act was carried out in the group case of Skyway group and related entities on 06/11/2019. As noted in the assessment order passed under section 153C r/w 143(3) of the Act, the investigation and enquiries done by the Department had revealed that the assessee and the group companies have been involved in systematic over-invoicing, bogus billing, and accommodation entry for unsecured loans from various entities. Further, these groups have availed loans from various entities which are in the business of providing accommodation entries in lieu of some commission. The entities from which Page | 3
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 the aforesaid loans have been availed do not have any creditworthiness and not doing any genuine business. Accordingly, notice under section 153C of the Act was issued to the assessee on 22/09/2021. In response to the above notice, the assessee filed its return of income declaring a total income of Rs.78,90,700. Thereafter, statutory notices under section 143(2) and 142(1) were issued and duly served on the assessee. During the assessment proceedings, it was noticed that the assessee has been showing a huge amount of outstanding unsecured loans every year. During the departmental proceedings, the key persons of the company were asked to furnish details of said loans with complete address and PAN of parties, bank statements and documentary evidence of the transactions with the parties like confirmation letter, ledger, details of repayment of principal/interest proofs and details of TDS, etc. In response, the assessee, inter-alia, submitted details of loan parties along with address, PAN, and repayment of principal and interest thereon during the last 6 assessment years along with ledger copies reflecting the transactions. Upon examination of details filed by the assessee, it was noticed that in respect of 7 parties, the assessee did not have all the documents in order and the assessee has only produced ledger copies and payment proofs for the said parties. Further, evidence like confirmation letters, proof of documents for creditworthiness, bank statement, and TDS statement was not produced, in respect of these parties. The Assessing Officer referred to the profile of the parties as available in the ITBA system and recorded that these parties are not in existence and no business was carried out after the field enquiry. During the assessment proceedings, the assessee submitted that Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 it has returned loans in respect of various parties in full and in some cases partially. The assessee also produced the Karta of M/s Rajendra Madhani HUF for verification of the parties about the genuineness and creditworthiness of the transaction. Since the assessee had a personal relationship with these lenders and from their bank statements back-to-back debit and credit entries were appearing, the Assessing Officer rejected the mere reliance on the bank statement and ledger confirmation of the parties. The Assessing Officer held that the assessee did not produce any substantial evidence to prove the identity, genuineness, and creditworthiness of the creditors. Accordingly, treated the unsecured loans of Rs.2,04,08,662, as unexplained credit within the meaning of section 68 of the Act and added the same to the total income of the assessee.
During the appellate proceedings before the learned CIT(A), the assessee submitted loan confirmation along with ITR copies of the parties of unsecured loans in respect of which the Assessing Officer had made an addition. Since these evidences were additional evidence, accordingly, the learned CIT(A) sent the same to the Assessing Officer and called for a remand report. In the remand proceedings, the Assessing Officer issued summons under section 131 to all the 7 parties and thereafter, submitted its remand report vide letter dated 24/06/2022. The learned CIT(A), after considering the remand report filed by the Assessing Officer and assessee’s reply thereto, deleted the addition of unsecured loans of Rs.1,90,00,000, in respect of 3 parties, namely, Hitesh Kantilal Shah HUF, Rushabh Trading Company and Rushabh Corporation. The learned CIT(A) also deleted the addition of interest Page | 5
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 amounting to Rs.14,08,662, paid to the aforesaid 3 parties. Being aggrieved by the relief granted by the learned CIT(A), the Revenue is in appeal before us.
During the hearing, the learned Departmental Representative (“learned DR”) vehemently relied upon the order passed by the Assessing Officer and submitted that parties in respect of whom addition was deleted by the learned CIT(A), the Assessing Officer only recorded its findings in the remand report and left the case to be decided on merits by the learned CIT(A).
On the other hand, the learned Authorised Representative (“learned AR”) submitted that the loan was received by the assessee from friends/relatives/business associates. It was also submitted that once in the remand report, the Assessing Officer recorded no adverse comment, the appeal filed by the Revenue is not maintainable. The learned AR also submitted that the Assessing Officer has recorded facts of some other case in its order and there is no specific mention of the information found during the search, which is related to the assessee or any of the loan lenders.
We have considered the rival submissions and perused the material available on record. In the present case, proceedings under section 153C of the Act were initiated pursuant to search and seizure action carried out under section 132 of the Act in the group case of Skyway group. On the basis of investigation enquiries done by the Department, it was alleged that the assessee and the group companies have been involved in systematic over- invoicing, bogus billing, and accommodation entry for unsecured loans from Page | 6
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 various entities. It was also alleged that the groups have availed loans from various entities, which are in the business of providing accommodation entries in lieu of some commission. As noted above, during the assessment proceedings, it was observed that the assessee has availed a huge amount of unsecured loans during the previous years. Accordingly, details of said loans with complete address of parties and PAN, bank statements and documentary evidences of the transaction with parties like confirmation letter, ledger, details of repayment of principal/interest proof, and details of TDS, etc. were sought from the assessee. The Assessing Officer noted that the following parties did not have all the documents in order and evidence like confirmation letters, proof of documents for creditworthiness, bank statement, and TDS statement are also not produced:
Sr. PAN Entity No. FWGPS5928J Hitansh H. Shah 1. AAEHH4254B Hitesh Kantilal Shah HUF 2. Rushabh Corporation (Prop. AODPS4671N 3. Reema Hitesh Shah) AAEHR0696D Rajendra Madhani HUF 4. Rushabh Trading Co. (Prop. AAGPS4404E 5. Hitesh K. Shah) AODPS4671N Reema Hitesh Shah 6. AAGPS4404E Hitesh K. Shah 7.
The Assessing Officer also referred to the profiling of the parties as carried out in the ITBA system and came to the conclusion that in respect of these parties the test of identity and creditworthiness of creditors, and genuineness of the transaction has failed, accordingly addition was made under section 68 of the Act. The assessee in support of his submission, during Page | 7
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 the appellate proceedings before the learned CIT(A), furnished loan confirmation along with ITR copies of these parties. Following the procedure prescribed under Rule 46A of the Act, the learned CIT(A) sent these documents to the Assessing Officer for further verification and sought the remand report. As is evident from the record, the Assessing Officer issued summons under section 131 of the Act to all 7 loan lenders, which were doubted in the assessment proceedings. As is evident from pages no.9-12 of the impugned order, the Assessing Officer in its remand report filed vide letter dated 24/06/2022 submitted the outcome of verification in the case of 7 parties as under:
Sr. Remarks of A.O. Name of the Party No.
1. Party has attended the office and statement recorded on oath 2. Submitted ledger of loan confirmation, ITR form, bank statement.
3. Party provided its contact number & address in statement, which was verified 1. Rushabh Corporation (Prop. independently by the inspectors Reema Hitesh Shah) and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed. Therefore, the Ld.CIT(A) may decide the case on merits based on the above facts.
1. Party has attended the office and statement recorded on oath. Hitesh K. Shah (HUF) 2.
2. Submitted ledger of loan confirmation, ITR form, bank Page | 8
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 statement.
3. Party provided its contact number & address in state– ment, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed. Therefore, the Ld.CIT(A) may decide the case on merits based on the above facts.
1. Party has attended the office and statement recorded on oath, 2. Submitted ledger of loan confirmation, ITR form, bank statement.
3. Party provided its contact number & address in state– ment, which was verified Rushabh Trading Co. (Prop. independently by the inspectors 3. Hitesh Kantilal Shah) and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed. Therefore, the Ld.CIT(A) may decide the case on merits based on the above facts.
1. Party has attended the office and statement recorded on oath.
2. Submitted ledger of loan confirmation, ITR form, bank Hitesh K. Shah 4. statement. 3. Party provided its contact number & address in statement, which was verified independently by the inspectors Page | 9
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 and submitted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed. Therefore, the Ld.CIT(A) may decide the case on merits based on the above facts.
1. Party has attended the office and statement recorded on oath.
2. Submitted ledger of loan confirmation, ITR form, bank statement.
3. Party provided its contact number & address in statement, which was verified Reema H. Shah 5. independently by the inspectors and submit–ted report. As per the inspector report, party was found at the premise.
4. Copy of the statement enclosed. Therefore, the Ld CIT(A) may decide the case on merits Ebased on the above facts.
Party has attended the office and statement recorded on oath.
2. Submitted ledger of loan confirmation, ITR form, bank statement. Rajendra L. Madhani HUF 6.
Party provided its contact number & address in state– ment, which was verified independently by the inspectors and submitted report. As per the inspector report, party was found at the premise. 4. Copy of the statement enclosed. Page | 10
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022
Therefore, the Ld.CIT(A) may decide the case on merits based on the above facts. 1. Party has not appeared before this office. 2. Submitted ledger confir– mation, ITR form, bank Hitansh H. Shah 7. statement. Therefore, the Ld.CIT(A) may decide the case on merits based on the above facts.
From the above findings, it is evident that in respect of 6 out of 7 parties, the Assessing Officer noted that the parties have attended the office and recorded the statement on oath. Further, it is noted that they have also submitted ledger of loan confirmation, ITR form, and bank statement. The Assessing Officer also noted that the parties have provided their contact no. and address in the statement, which was verified independently by the Inspectors and submitted report. As per Inspector’s report, the parties were founded at the premises. In respect of the 7th party, it is evident from the above that though the party did not appear before the Assessing Officer, however, the ledger confirmation, ITR form, and bank statement were submitted in the remand proceedings. It is undisputed that no other finding was recorded by the Assessing Officer in the remand report. Thus, from the above, it is evident that the identity of the parties is proved, since the parties not only appeared before the Assessing Officer but the Inspector also independently made the verification. It is undisputed that in respect of 7th party, who did not appear before the Assessing Officer in the remand proceedings, no addition has been made. Though, in the remand report it has Page | 11
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 been noted that the parties provided the ledger of loan confirmation, ITR form, bank statement, however, there is neither any examination by the Assessing Officer nor by the learned CIT(A) as to how the same prove the creditworthiness of the parties and genuineness of the transaction. Since in respect of 3 parties, namely, Hitesh Kantilal Shah HUF, Rushabh Trading Company, and Rushabh Corporation neither the Assessing Officer in the remand proceedings nor the learned CIT(A) have examined the creditworthiness of the parties and genuineness of the transaction, therefore we deem it appropriate to remand the matter to the file of the Assessing Officer for de novo adjudication after necessary examination/verification of the aforesaid aspects. Since the matter is remanded to the Assessing Officer for fresh examination on the above aspects, the assessee shall be at liberty to file any document or adduce any evidence in support of its submission regarding the creditworthiness of the parties and genuineness of the transaction. Needless to mention that no order shall be passed without affording reasonable opportunity of being heard to the assessee. As a result, ground no.1 raised by the Revenue is allowed for statistical purposes.
Ground no.2 raised in Revenue’s appeal pertaining to deletion of addition on account of interest paid on loans to aforesaid parties is consequential to ground no.1, therefore, this issue is also remanded to the file of the Assessing Officer to be decided in accordance with the decision in respect of the main issue. As a result, ground no.2 is allowed for statistical purposes.
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022
In the result, the appeal by the Revenue is allowed for statistical purposes.
C.O. No.154/Mum./2022 Assessee’s Cross Objection–A.Y.2018-19
We find that the issues raised in grounds no.1 and 2 in assessee’s cross- objection pertaining to the initiation of proceedings under section 153A of the Act do not arise from the facts of the present case, as the assessment order has been passed under section 153C r/w section 143(3) of the Act pursuant to the notice dated 22/09/2021 issued under section 153C of the Act. Accordingly, the aforesaid grounds are dismissed.
As regards the other grounds raised in assessee’s cross-objection, since the issue on merits has been remanded to the Assessing Officer for de novo adjudication, the assessee shall be at liberty to raise all its pleas before the Assessing Officer in respect of same. As a result, grounds no.3-5 raised in assessee’s cross-objection are allowed for statistical purposes.
In the result, the cross-objection filed by the assessee is partly allowed for statistical purposes. ./2022 Revenue’s appeal- A.Y. 2019-20
In this appeal, the Revenue has raised the following grounds:-
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of 10,34,25,000/- u/s 68 of the Act in respect of unsecured loans and ignoring the facts that the identity of the parites were not proved as the parties were not produced and assessee has not Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022 proved the genuineness of the transaction, and credit-worthiness of the parties, to the satisfaction of the AO, so as to discharge the primary onus? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of 61,36,589/- in respect of interest paid on unsecured loans and ignoring the facts that the assessee has not proved the genuineness of the transaction, and credit-worthiness of the parties in respect of unsecured loans, to the satisfaction of the AO, so as to discharge the primary onus? 3. The appellant craves to leave, to add, to amend and/ or to alter any of the ground of appeal if need be.“
During the hearing, both parties agreed that the facts for the year under consideration are similar to the preceding assessment year. Since similar issues have been decided in Revenue’s appeal being ITA No. 2702/Mum./2022, for the assessment year 2018–19, therefore, our findings/conclusion rendered in the said appeal shall apply mutatis mutandis. As a result, the grounds raised by the Revenue are allowed for statistical purposes.
In the result, the appeal by the Revenue is allowed for statistical purposes.
C.O. No.155/Mum./2022 Assessee’s Cross Objection–A.Y.2019-20
Since similar issues have been decided in assessee’s cross-objection being C.O. No.154/Mum./2022, for the assessment year 2018–19, therefore, our findings/conclusion rendered in the said cross-objection shall apply mutatis mutandis. As a result, the grounds raised in assessee’s cross-objection are partly allowed for statistical purposes.
In the result, the cross-objection filed by the assessee is partly allowed for statistical purposes. Page | 14
Shri Rajendra Lavjiji Madhani ITA no.2702/Mum./2022, C.O. no.154/Mum./2022 ITA no.2707/Mum./2022, C.O. no.155/Mum./2022
To sum up, both appeals by the Revenue are allowed for statistical purposes, while the cross-objections filed by the assessee are partly allowed for statistical purposes. Order pronounced in the open Court on 28/02/2023