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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM
O R D E R PER PRASHANT MAHARISHI, AM:
This appeal is filed by M/s Blue Circle Organics Pvt. Ltd., ( the assessee/ appellant) against Appellate order of National Faceless Appeal Centre, Delhi [the learned CIT (A)] dated 27th June, 2022 for A.Y. 2012-13, wherein the appeal filed by the assessee against the assessment order passed by the Asst. Commissioner of Income-tax, 2(1)(1), Mumbai (the learned Assessing Officer) under Section 143(3)/ 147 of the Income-tax Act, 1961 (the Act) dated 26th December, 2019, was dismissed.
“I. Reopening U/s. 147
On the facts and circumstances of the law, the Ld.CIT (A), National Faceless Appeal Centre (NFAC), Delhi [Referred as CIT (A)] erred in confirming reassessment disregarding the fact that the initiation was purely based upon surmises, conjecture and suspicion and in absence of any tangible material necessary and having direct nexus for the reassessment under the provisions of section 147 of the Act.
II. Addition of ₹ 3,00,00,000/- u/s. 68 as unexplained loans-
1. On the fact and circumstances and in law, the learned CIT(A) erred in confirming the addition of ₹ 3,00,00,000/- under the provisions of section 68 disregarding that Your Appellant has discharged prima-facie onus to prove the identity, genuineness, & creditworthiness of transactions by submitting all the necessary documentary evidences.
The learned CIT(A) failed to appreciate that the alleged parties had given confirmations in response to the notice u/s. 133(6) of the Act, that too was given categorically during the impugned reassessment proceedings i.e. precisely after the alleged statements allegedly recorded u/s. 132(4) and 131 of the Act.
3. The learned CIT(A) failed to appreciate that Your Appellant was never allowed to be confronted with the
4. Without prejudice to the above, the learned CIT (A) failed to appreciate that the onus was heavily casted upon the Dept., to prove and conclude that Your Appellant had taken alleged accommodation entries.
5. In addition to, other without prejudice and without admitting, the learned CIT(A) failed to appreciate that the alleged parties has given categorical statement of giving accommodation entries for share application money and LTCG whereas your Appellant had taken loans from the alleged parties and hence, it corroborates that the approach of the Dept., was based upon surmises, conjecture and suspicion.
6. On the facts and circumstances and in law, the learned CIT(A) failed to appreciate that the alleged addition was made without providing the alleged material and without giving any opportunity to cross-examine the alleged parties, which , in the interest of justice, was violative of the principles of natural justice, particularly in the light of the fact that the assessee had refunded the amount in the subsequent years.
Without prejudice to the above, the learned CIT (A) failed to appreciate that the learned ACIT has not established money trail which would conclusively establish the allegation that the alleged transactions were accommodation entries.
9. Alternatively, in the interest of justice, it is humbly prayed that copies of material, including the alleged statements, relied upon may be provided with a proper and reasonable opportunity to explain coupled with an opportunity to cross-examine the parties.”
Brief facts of the case shows that assessee is a company engaged in the business of export of intermediates for X-ray contrast media APIs and also manufacturing of chemical products Saccharin. The assessee filed its return of income on 31 September 2012 at a total income of ₹1,33,36,750/-. Assessment was completed under Section 143(3) of the Income-tax Act, 1961 (the Act) on 30 March 2015, determining the total income of the assessee at ₹1,37,09,500/-.
Subsequently, information was received and reasons were recorded to reopen the case of the assessee by issue of notice under Section 148 of the Act on 30 March 2019. Assessee on 27 April 2019 stated that original return filed might be treated as compliance. The reasons for reopening were provided to the assessee and subsequently, notice under Section 143(2) and 142(1) of the Act were issued.
Reasons for reopening states assessee has taken loan of ₹1,50,00,000/- from Mangalmayee Hirise Pvt. Ltd on 13th October, 2011 and ₹74 lacs, on 14th October, 2011 and ₹76 lacs on 14th October, 2011, from another company Khosboo Complex Pvt. Ltd. The information was received from DDIT (Inv), Unit-4(3), Kolkata as per letter dated 1st March, 2019 that on the basis of credible information in case of Mr. Chiranjit Mahanta, who is a director of several companies that bank account of these corporate entities have been used for high value transfer followed by withdrawal through RTGS and fund transfer
During the course of assessment proceedings, assessee submitted a letter dated 4 December 2019 giving copy of bank statement stating refund of loan by the assessee company to those companies. Assessee has also submitted loan confirmation, copy of income tax return, copy of bank statement as well as the financial statements of lender companies. The learned Assessing Officer issued notice under Section 133(6) of the Act to both these companies on 7 November 2019. Those notices were duly served through ITBA, and through speed post, however, within the stipulated time information was not received. The assessee was asked to produce the parties along with the confirmation and supporting documents. In response to that assessee submitted confirmation of the above parties and also submitted compliances to the notices from the above said parties on 23rd December, 2019 and 24th December, 2019, which were received by the learned Assessing Officer also directly from the lender.
7. On perusal of the above detail, the learned Assessing Officer examined the same and after considering the statement of the accommodation entry provider noted that though the assessee has obtained the loan and has repaid, basic ingredient of Section 68 of the Act are not The learned CIT (A) vide order dated 27th June, 2022 held that mere 08. filing of ITR, Permanent Account Number transactions through banking channel, financial statements, confirmation, do not prove identity creditworthiness as well as the genuineness of the transaction and therefore, the addition was confirmed on the merit. On the issue of reopening in paragraph no.30, CIT (A) held that reassessment was based on information received from the office of DDIT (Inv), Kolkata vide letter dated 1st March, 2019, specifically mentioned the modus operandi adopted by accommodation entry provider. Therefore, reopening is valid. Thus, assessment order was confirmed on the issue of reopening as well as on the merits. The assessee is once again aggrieved and has preferred the appeal before us.
During the course of hearing, the assessee has submitted a paper book containing 81 pages, wherein the submissions made before the learned
The crux of the submission was that i. Reopening of assessment made by the ld AO is without any inquiry independent of information of DDIT Inv Department. Absence of inquiry before recording reasons clearly shows that it is a borrowed satisfaction. Where Assessing Officer had issued a reassessment notice on basis of intimation from DDIT (Inv.) about a particular entity entering into suspicious transactions, this was clearly in breach of settled position in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction as held by Principal Commissioner of Income-tax-5 vs Shodiman Investments (P.) Ltd 422 ITR 337. Ad. CIT V DRM Enterprises [2015] 55 taxmann.com 181 (Bombay).
ii. Assessee was originally assessed u/s 143 (3) of the act where all the details are verified by the ld AO. Now reopening on the basis of same information is merely change of opinion. iii. Assessee has discharged initial onus to prove the identity, creditworthiness and genuineness of the transaction. This onus has not been thrown back to the assessee by the learned Assessing Officer by making any enquiry; the addition deserves to be deleted. iv. Lenders have replied with respondent to notice under Section 133(6) of the Act directly to the learned Assessing Officer, It shows identity and creditworthiness of the lenders. For genuineness, v. Learned Assessing Officer did not have anything else other than the information received from DDIT, based on this information there is no enquiry made by the learned Assessing Officer and therefore, reopening of the assessment as well as the addition on the merit is not proper. vi. Lender companies have huge reserve and surpluses, huge turnover therefore; merely having low income do not show that these entities do not have creditworthiness. vii. Learned Assessing Officer does not have any material on record to show that the amount of reserve and surplus invested by these entities in the current assets such as inventories, stock-in-trade, loans and advances, are not existing. viii. Accounts of the lenders i.e. Balance sheets are audited and assessed by the Income Tax Department, therefore, the findings of the learned Assessing Officer does not have any basis. On the contrary, these parties are assessed as stated by LD AO about claim of refund. ix. The learned Assessing Officer without brining any material on record has held that these were circular transactions. He submits that the circular transactions are not defined. The learned Assessing Officer did not explain what they are. The learned Assessing Officer also did not bring any material to show that how these transactions are circular transactions, which make them non- genuine. x. Learned Assessing Officer has heavily relied on the statement of accommodation entry provider. Neither that statement has put before the assessee, nor the opportunity for cross examination was given, the addition is wholly based on that statement without
The learned Departmental Representative vehemently supported the order of the lower authorities. It was submitted that based on the information received from the investigation wing gave the information about the accommodation entry provider and based on this there was valid information for reopening of the assessment. It was further stated that the learned Assessing Officer gave detail reason for confirming the addition. Accordingly, there is no infirmity in the order of the lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The ground no.1 of the appeal is against the reopening of the assessment challenging it that reopening has been made without any material having direct nexus for the reassessment. Ground no.2 is on the merits of the addition.
On careful consideration of the reasons recorded at para 4.1 of the assessment order, according to that the DDIT (Inv) Wing, Kolkata, had credible information in case of Chiranjit Mahanta, who is a director of Dreamland Plaza Limited, Linkpoint construction Ltd. Parmeshwar Merchandise Pvt. Ltd., Wellbuild Complex Pvt. Ltd, Suryamukhi Projects Pvt. Ltd. Blue Print Securities Ltd. In the bank account of these entities, there were high value transfers and withdrawals without any economic rationale. The statement of entry operators who controlled these companies was recorded on under Section 131 of the Act who admitted to provide accommodation entries. The fund trail from the above listed entities controlled by Chiranjit Mahanta, the name of the assessee was found. Thus, it was found that assessee has received loan from Mangalmayee Hirise Pvt. Ltd. of ₹1.5 crores in
On the merits also, we find that assessee has provided the confirmation, the audited financial statements, the bank statements, the income tax return and the proof of repayment of the above loan taken from these two entities before the learned Assessing Officer. The 133(6) notices were issued on ITBA portal as well as by ‘speed post’. Replies to Such notices were not submitted in time on ITBA portal but complied with by reply through post by both the lenders. This fact is confirmed in the assessment order itself. Based on information supplied by the assessee, the learned Assessing Officer did not carry out any further independent enquiry. The learned Assessing Officer has merely relied upon the statement of the accommodation entry provider and analyzes the annual accounts of the lender companies. Despite having the huge turnover and huge current assets, the learned Assessing Officer itself discredited those financial statements.
In case of Khusboo Complex Private Limited the turnover of that company is ₹161 crores and ₹19.54 crores for year ended 31st march, 2011 and 31 March 2012. It has made purchase of ₹121 crores and 40 crores for the respective two assessment years. No doubt, they have shown lesser profits. However, the fact shows that they have traded in shares. The only accounts of the lender shows the inventory of ₹79 crores cash and bank account of ₹39 crores and loans and advances of 16.05 crores. The shareholders of the above company are two different entities i.e. private limited companies wherein not stated to be the companies belonging to an accommodation entry provider. The ICCI bank balances as on 31 March 2012 is ₹29 lacs. The inventory of shares of ₹79 crores and advances of ₹16 crores was not examined by the
In case of Mangalmaye Hirse private limited assessee has submitted the confirmation of the account stating the permanent account number and the income tax officer where the assessee is assessed. Bank account of the lender is also submitted wherein on 11/10/2012 a sum of 150 lakhs issued in favour of the assessee company. Prior to the issue of the above check by the lender, in its bank account there was no credit from the companies mentioned in the statement of the accommodation entry provider but from other parties. The lender company is assessed with income tax officer Ward 8 (1) Kolkata. It has claimed a refund of Rs 2 71,110 which has been issued to that company. Audited accounts of the lender were furnished. The lender has recorded sales of approximately 63 crores for this year and 79 crores for earlier year. The purchase of the shares at 60 crores is shown in this year and 78 crores in the earlier year. Admittedly, the profit or loss shown by the assessee for respective two years is a small amount. However it cannot be discarded that assessee has traded in shares. Shares of this company were also held by different private limited companies. The shareholders of the lender company were not shown to be operated by the accommodation entry provider. The lender company has a closing stock of shares of 89 crores at the end of this year and 91 crores at the end of earlier year. Further, it has total
It is a fallacy propounded by the ld AO that if the returned income is low, the creditworthiness of the lender is hampered. Creditworthiness needs to be assessed on holistic presentation of financial worth of the lender. In this case huge turnover, current assets, bank balance and the corresponding amount of loan, justifies the creditworthiness of the parties.
So far as genuineness is considered ld AO has not brought on record any independent material, by making an inquiry on his own to show the transaction is not real. The documentary evidences produced were not at all inquired.
When the assessee discharges its initial onus cast upon him by producing the confirmation, the bank statement, the annual accounts, the income tax returns as well as the details of repayment which is also confirmed by production of the bank account of the lender, the learned assessing officer is duty-bound to make an independent enquiry. Unless an independent enquiry is made by the learned assessing officer, onus does not travel back to the assessee. If the learned AO failed to throw onus back on the assessee, the addition cannot be made by him under section 68 of the act.
Further, the learned assessing officer has made the addition only on the basis of the statement recorded of the accommodation entry provided by the investigation wing. The learned assessing officer has
The learned CIT – A has not at all considered the explanation of the assessee, evidence produced by the assessee as well as the evidences available before the learned assessing officer to make the addition, it has merely confirmed the finding of the learned assessing officer without giving its own reason. It did not consider and reason the several judicial precedents relied upon by the assessee and how those decisions do not apply to the facts of the case of the assessee.
In the result on the issue of reopening of the assessment as well as the addition on the merit deserves to be decided in favour of the assessee. Accordingly, we allow appeal of the assessee, holding that reopening of
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 15.02.2023