MOHIT BHARATIYA,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX - 4(3)(1), MUMBAI

2. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 13,71,59,121/- by AO on account of unsecured loan taken from Mumbadevi Bullion even though the assessee was not able to discharge its onus to prove the creditworthiness and genuineness of the loan transaction 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 30,00,000/- by AO on account of unsecured loan taken from Rakhi Parikh even though the assessee was not able to discharge its onus to prove the creditworthiness and genuineness of the loan transaction 4. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition made u/s. 68 of the I.T Act on and 3850/MUM/2025 Mohit Bharatiya AY 2011-12 account of unsecured loans taken by the assessee merely on the basis of co-relating of the book entries of the balance sheet ignoring the specific finding of the Assessing Officer in the assessment order that substantial cash deposits were made in the bank account before issue of loan cheques, which does not prove the creditworthiness of the loan creditors and genuineness of the loan transaction.

3.2. The details of the loan transactions undertaken by the assessee during the year under consideration is tabulated as under:

3.3. The documentary evidences which the assessee had furnished in support of the loan transactions is also tabulated below:

Sr.No. Name of the party Amount Supporting documents (Rs.) for loans 1 Anoop Saxena 5,00,000 a) Copy of Income Tax 2 Arvind Parekh 20,00,000 Ack/Return 3 Lucky Motors Prop Mr. 10,14,500 b) Copy of Bank statement Ikhalaq Abdul Gaffar Davawalla c) Copy of Loan 4 Mumbadevi Bullion Prop Mr. 13,71,59,121 Confirmation Irtesh Jawaharlal Mishra 5 Rakhi Kapil Parikh 30,00,000 d) Copy of Annual report 6 Sanjev Malhotra 14,00,000 in case of Mumbadevi Bullion 3.4. Out of the loan transactions with the above tabulated six parties, ld. CIT(A) granted relief to the assessee for three parties namely, Arvind Parekh, Mumbadevi Bullion and Rakhi Parikh for which revenue is in appeal. The ld. CIT(A) sustained the addition for the other three parties

4.1. In respect of the loan taken from Mumbadevi Bullion, it was pointed out that similar loan transaction by the assessee with this lender in AY 2010-11 and AY 2012-13 was added in the hands of the assessee which travelled in appeal before the Coordinate Bench of ITAT, Mumbai in 6384/Mum/2018 for AY 2010-11 and in for AY 2012-13, order pronounced on 28.09.2022. The Coordinate Bench while dealing with the addition made in respect of loan taken by the assessee from this party, held in favour of the assessee. Coordinate Bench in para 10 took note of the comments offered by ld. Assessing Officer in the remand report which is extracted below: 5. Mumbadevi 9,46,69,537 On perusal of the confirmation, Bullion there is of an opening balance Rs.30,00,000/- and adjusting the transaction during the year, there is a closing balance of and 3850/MUM/2025 Mohit Bharatiya AY 2011-12 Rs.9,76,69,537/-outstanding in the name of the assessee. Whereas, on perusal of the audited balance sheet, an amount of Rs.9,76,69,537/- is appearing in the name of the assessee under the head Loans & advances. The Capital of Shri Irtesh Jawaharlal Mishra is only Rs.9,37,327/- and the source of funds in the hands of Mumba Devi jewels (Irtesh Mishra) from which the loans has been given to the assessee is not clear.

4.2. On the factual position, Coordinate Bench gave its observation and findings in para 15 with conclusion drawn in para 27. Both the paragraphs are extracted below for ready reference. It is noted that the six lenders in question noted in para 15 extracted above, one of the lender is Mumbadevi Bullion. “15. Having heard both the parties and after giving thoughtful consideration to the facts of the case and upon examining the material on record, it is noted that the assessee had furnished name, complete address, PAN details, account confirmation and the financial statements of all the six (6) lenders in question. It is also not in dispute that the loans were transacted through banking channel and cach of the loan creditor was assessed to income-tax. The Ld. AR showed us that, the financial statements of each loan creditor for the financial year 2009-10 reflected the transaction with the assessee. These facts are noted to have been acknowledged by the AO in his remand reports as well. It was further brought to our notice that the loans in question had been fully re-paid in subsequent FYs 2010-11 to 2013-14 and as such repayments were not doubted or questioned by the succeeding AOs.” “27. For the elaborate reasons as discussed in the foregoing, we therefore hold that the additions made u/s 68 of the Act-in AY 2010-11 was untenable both on facts as well as in law and was, therefore, rightly deleted by the Ld. CIT(A). Accordingly, Ground No. 4 of the Revenue stands dismissed.”

4.3. In addition to the above favourable finding of the Coordinate Bench ld. CIT(A) also took note of the factual position about submission made by the assessee of confirmation of income tax return, bank statement, audited financial statements and audit report of the lender Mumbadevi Bullion. He analysed the balance sheet of the lender to take note of the credit worthiness for granting loan to the assessee. A doubt and 3850/MUM/2025 Mohit Bharatiya AY 2011-12 was casted by ld. Assessing Officer about the source of cash deposits in the bank account of the lender for which ld. CIT(A) noted that these deposits of cash were from sales made by the lender which was minuscule to the total turnover of Rs. 77.49 crore with bank balance of Rs.21.95 crore at the year end. He further noted that ld. Assessing Officer did not choose to make any further enquiry or investigation in this regard to taint the loan transaction undertaken by the assessee. Thus, ld. CIT(A) deleted the addition so made in respect of loan from Mumbadevi Bullion.

4.4. For the transaction of loan with Rakhi Parikh, ld. CIT(A) noted about the doubt casted by ld. Assessing Officer of loan being taken without charging of any interest, was nothing but a baseless presumption and a mere suspicion. Assessee proved the onus casted u/s. 68 by furnishing all the relevant documentary evidences with which no discrepancy or deficiency was pointed out. Thus, ld. CIT(A) gave relief in respect of this addition.

6.1. We draw our force from the decision of the Hon’ble jurisdictional High Court of Bombay in the case of PCIT v. Paradise Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Bom) wherein it was held that once the assessee has produced documentary evidence to establish the existence of the lenders, the burden would shift on the revenue to establish their case. We also draw our force from the decision of Hon’ble Jurisdictional High Court of Bombay in the case of CIT vs. Orchid Industries Pvt. Ltd. 397 ITR 136 (Bom) wherein it was held that mere non-compliance of summon under section 131 would not disprove the transaction and other documents filed on record cannot be brushed aside by the Ld. Assessing Officer. The relevant extract from the said decision is reproduced 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 and 3850/MUM/2025 Mohit Bharatiya AY 2011-12 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 ie 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.”

6.2. Ld. Assessing Officer has not bothered to discuss or point out any defect or deficiency in the documents of the lenders, furnished by the assessee. These evidences furnished have been neither controverted by the ld. Assessing Officer during the assessment proceedings nor anything substantive brought on record to justify the addition made by him. Thus, going by the records placed by the assessee of all the lenders, it can be safely held that the assessee has discharged its initial burden and the burden shifted on the ld. Assessing Officer to enquire further into the matter which he failed to do so. It is also noted from their audited financial statement that all the lenders have sufficient own funds available with them to grant loans to the assessee.

6.3. It is relevant to quote the decision of Hon’ble jurisdictional High Court of Bombay in the case of CIT v. Creative World Telefilms P. Ltd. (2011) 333 ITR 100 (Bom) wherein it was held as under: “In the case in hand, it was not disputed that the assessee had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". The Assessing Officer ought to have found out their details through PAN cards, bank account details or from and 3850/MUM/2025 Mohit Bharatiya AY 2011-12 their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be faulted. No substantial question of law was involved in the appeal.'' 6.4. Similar view was taken by the Hon’ble High Court of Madras in the case of Pranav foundations Ltd. (2015) 229 Taxman 58 (Mad) wherein it was held as under: “In view of the fact that all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment. Thus, the assessee has categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of section 68. When the nature and source of the amount so invested is known, it cannot be said to undisclosed income. Therefore, the addition of such subscriptions as unexplained credit under section 68 is unwarranted.”

6.5. Further, reliance is placed on the decision of Hon’ble Supreme Court in the case of CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) wherein it was held as under: “In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee had discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such could arise. The High Court was, therefore, right in refusing to refer the questions sought for. Decision of the High Court affirmed.”