M/S GREEN VALLLEY HOMES DEVELOPERS P. LTD.,MUMBAI vs. DY CIT - 2(3), MUMBAI

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ITA 57/MUM/2021Status: DisposedITAT Mumbai22 May 2025Bench: SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND MISS. PADMAVATHY S (Accountant Member)1 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged its onus under Section 68 by providing all necessary documentary evidence, which the revenue failed to disprove. The AO's addition, based on a retracted statement and without independent verification or cross-examination opportunity, was deemed unsustainable.

What were the facts?

The assessee company received loans from 15 companies, which the Assessing Officer (AO) treated as unexplained cash credit based on a retracted statement of a third party and an investigation report. The AO added the principal amount and interest to the assessee's income.

What were the issues?

Whether additions under Section 68 for loans are sustainable when the AO relies solely on a retracted statement and investigation reports without independent verification or granting cross-examination, and whether the assessee discharged its onus by providing documentary evidence.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI

Before: SHRI ANIKESH BANERJEE & MISS. PADMAVATHY S

For Appellant: Shri Rushabh Mehta a/w, Shri Niraj Soni
For Respondent: Shri Rajesh Sakhardande – Sr.AR
Hearing: 06/05/2025Pronounced: 22/05/2025

Instant appeal of the assessee was filed against the order of the Learned Commissioner of Income-tax (Appeals)-48, Mumbai *in short, ‘Ld.CIT(A)+ passed under section 250 of the Income Tax Act, 1961 (in short, ‘the Act’) date of order 22/09/2020 for A.Y. 2012-13. The impugned order emanated from the order of the Learned Deputy Commissioner of Income-tax, Central Circle 2(3), Mumbai (for M/s Green Valley Homes Developers Pvt Ltd brevity the “Ld. AO”), passed under section 143(3) of the Act, date of order 31/03/2015.

2.

The assessee has taken the following grounds of appeal:-

1. (a) The Id. CIT (A) erred in facts and law in confirming the addition of Rs.5,99,00,000/-on account of loan received u/s. 68 made by the Id. Assessing Officer following peak theory as unexplained cash credit and confirming the disallowance of interest paid of Rs.1,25,43,806/- on his surmises and conjectures that loans taken were sham transactions.

(b) The Id. CIT (A) erred in facts and law in not appreciating the fact that the identity of the payer, genuineness of the transaction and capacity of the payer were duly established.

(c) The Id. CIT (A) and Id. Assessing Officer erred in facts and law in making the addition solely relying on the statement of a third party and not granting any opportunity of cross examination.

(d) The Id. CIT(A) erred in facts and law in not appreciating that name of the appellant company is not appearing in the statement on oath recorded of the third party, which is the basis on which addition made.

2. Your appellant prays that-

(a) Addition of Rs.5,99,00,000- u/s.68 as unexplained cash credit, be deleted,

(b) Disallowance of Rs. 1,25,43,806/- of interest paid on alleged loans taken; be deleted,

(c) Such other relief, as may be deemed fit in the matter, be granted.

3.

Each of the above Grounds of Appeals an independent and without prejudice to one another.

4. Your appellant craves leave to add, amend, alter or drop all or any of the above grounds of appeal.”

M/s Green Valley Homes Developers Pvt Ltd 3. The brief facts of the case are that the assessee is engaged in construction and development of complexes including malls. A return of income filed was filed under section 139(1) of the Act by declaring loss of Rs.5,63,16,308/-. The return was processed under section 143(1) of the Act. Subsequently, the assessee’s case was taken for scrutiny and notices under section 143(2) / 142(1) of the Act were served upon the assessee. During the assessment proceedings, the Ld.AO issued show cause notice related to receiving of loan from bogus entities by observing that the assessee has taken loan from 15 companies, which are related to Shri Praveen Kumar Jain and his group. In case of following companies, the assessee has taken loan as has been mentioned in the notice issued under section 142(1) of the Act:- Sr.No. Naame of the Party Amount of loan during the year (Rs.) 1 Anchal Properties (P) Ltd - 2 Ansh Merchandise (P) Ltd 50,00,000/- 3 Atharv Business (P) Ltd 47,00,000/- 4 Casper Enterprises (P) Ltd - 5 Duke Business (P) Ltd 11,00,000/- 6 Josh Trading (P) Ltd 4,43,00,000/- 7 Nakshtra Business (P) Ltd 54,00,000/- 8 RaghunandanReyons Ltd - 9 Triangular Infocom Ltd - 10 Vanguard Jewels Ltd - 11 Alka Diamond Industries Ltd 50,00,000/- 12 Viraj Mercantile (P) Ltd 50,00,000/- 13 Taj Impex P. Ltd - 14 Olive Overseas P. Ltd 15,00,000/- 15 Sumukh Commercial P. Ltd 70,00,000/- Total 790,00,000/- M/s Green Valley Homes Developers Pvt Ltd In reply, the assessee submitted that in case of the following six companies, the assessee has not made any transaction:- Sr.No. Name of the Party 1 Anchal Properties (P) Ltd 2 Casper Enterprises (P) Ltd 3 Raghunandan Reyons Ltd 4 Triangular Infocom Ltd 5 Vanguard Jewels Ltd 6 Taj impex P Ltd Finally, the assessee submitted all relevant documents, but without any issuance of notice under section 131 or 133(6) of the Act, the Ld.AO added back the loan transaction on peak credit basis amount to Rs.5,99,00,000/- and also the interest amount of Rs.1,25,43,806/- to the total income of the assessee. Considering this, the assessee filed an appeal before the Ld. CIT(A). But the Ld.CIT(A) upheld the impugned assessment order. Being aggrieved on the impugned appellate order, the assessee filed this appeal before us.

4.

The Ld.AR argued and filed a paper book spanning pages 1 to 743, which is kept on the record. The Ld.AR argued that the assessee has taken loan of Rs.7,90,00,000/- during the impugned assessment year. The Ld.AO has considered the repayment of loan and accordingly, the addition is worked out amount to Rs.5,99,00,000/-. The assessment was completed on the basis of the report of DGIT(Inv), Mumbai and on the statement of “Shri Praveen Kumar Jain” which was taken on 06/10/2013.

M/s Green Valley Homes Developers Pvt Ltd 5. The Ld.AR invited our attention to relevant part of the oath recorded of“Shri Praveen Kumar Jain”, which is as under:- “Q.72 Please provide the detailed list of the accommodation entries in the nature of unsecured loan / advance arranged by you through brokers as explained in response to the question above. Sir, I am furnishing the detailed lit as follows:- 1 2 3 4 5 Date Party Company Amount through 15.09.2010 VISHESH INFO ANUSHKA 10000000 bhagwanji 15.09.2010 VISHESH INFO ANUSHKA 13800000 bhagwanji 05.10.2010 ALLIED GREEN VELLY DEVE 10000000 bhagwanji 05.10.2010 ALLIED GREEN VELLY DEVE 10500000 bhagwanji 04.06.2012 ADITYA BROOKS -2500000 HS 30.08.2012 arrow KHYATI JAIN 6000000 PARIKH 30.08.2012 EVERSHINE MANSI JAIN 6000000 PARIKH 06.09.2012 PRINTAGE METRO INFRA 9200000 MULUND 07.09.2012 MANSARE BUILD WAY CORP 2350000 MULUND 07.09.2012 MANSARE BUILD WAY CORP 2500000 J SETH 12.09.2012 EVERSHINE NEERJA PRIKH 2500000 J SETH 28.09.2012 ASTONISH PREMIER 2000000 ARUN STAR 28.09.2012 ARM STAR PREMIER 2000000 ARUN 22.10.2012 EVERSHINE DIKSHIT REALTORS 2500000 HS 17.04.2012 KOMAL BHARAT ASSUDANI 2000000 JS 26.04.2012 KOMAL BHARAT ASSUDANI 1840000 JS 29.01.2013 KOMAL DEVANSH CORP 1600000 PARIKH 08.02.2013 KOMAL DEVANSH CORP 1550000 PARIKH 08.01.2013 KOMAL JAGDAMBA CONST 500000 MT It is mentioned that the name of party is showing ‘Green Valley Deve’ where there is no matching with the assessee’s name. Further, no cross verification was allowed by the Ld.AO during the assessment proceedings. It is further noted that the said “Shri Praveen Kumar Jain” has retracted the recorded statement dated 06/10/2010 by an affidavit dated 15/05/2014, which is enclosed in paper book M/s Green Valley Homes Developers Pvt Ltd pages 334(a) to 334(d). So, the Ld.AO entirely relied on the recorded statement of “Shri Praveen Kumar Jain”, which was retracted later. The Ld.AR further stated that during the assessment proceedings, the assessee submitted all the relevant documents by a letter dated 25/03/2015 which is annexed in APB pages 329 to 334. The said documents are also annexed in the paper book filed before the ITAT. All the relevant documents in compliance of section 68 were duly submitted which are also annexed in paper book filed before the ITAT. The list of the documents are as follows: - S.No. Name of the parties Documents APB Page Nos i) 1 LedgerConfirmation 60-61 ii) Bank Statement 62 iii) Copy of ITR 63 Ansh Merchandise Acknowledgement iv) Copy of PAN Card 64 v) Copy of Audited Financial 65-84 Statement i) 2 Ledger Confirmation 85-86 ii) Bank Statement 87-92 iii) Copy of ITR 93 Atharv Business Pvt Ltd Acknowledgement iv) Copy of PAN Card 94 v) Copy of Audited Financial 115 Statement i) 3 LedgerConfirmation ii) Bank Statement 116-118 iii) Copy of ITR 119 Duke Business Pvt Ld Acknowledgement iv) Copy of PAN Card 120 v) Copy of Audited Financial 121-140 Statement i) 4 LedgerConfirmation 141 ii) Bank Statement 141-154 iii) Copy of ITR 155 Josh Trading Pvt Ltd Acknowledgement iv) Copy of PAN Card 156 v) Copy of Audited Financial 157-174 Statement M/s Green Valley Homes Developers Pvt Ltd i) Ledger Confirmation 175-176 ii) Bank Statement 177-180 iii) Copy of ITR 181 5 Nakshtra Business Pvt Acknowledgement Ltd iv) Copy of PAN Card 182 v) Copy of Audited Financial 183-202 Statement i) Ledger Confirmation 203 ii) Bank Statement 204-205;236 iii) Copy of ITR 206-234 6 Alka Diamond Industries Acknowledgement Ltd iv) Copy of PAN Card 235 v) Copy of Audited Financial 237-238 Statement

6.

In argument, he further mentioned that all the loans are duly paid in later years and the TDS are deducted related to payment of interest to the parties and all the companies are active in the MCA portal. The confirmations of repayment of loan and interest with supporting bank statements are duly submitted before the ITAT which are annexed in APB page nos. 337 – 374. The details of repayment of loan & interest and deduction of tax on interest are enclosed in APB page 337 to 374 which is reproduced as below: -

7.

The Ld.DR vehemently argued and relied on the orders of the revenue authorities. The relevant para of the assessment order, para 5 is reproduced as below:- “5. I have considered the facts, material and submission made by the assessee. The submission ofthe assessee that its loans from aforesaid partiesare genuine is not acceptable for the following reasons:- (i) It is categorically stated by Shri Praveen Kumar Jain in his statement recorded on oath by explaining whole modus operandi with flowchart that he has been indulged in providing accommodation entries through its various concerns. Filing of affidavit about hisretraction is merely an afterthought after a long gap of period and has no evidentiary value in eyes of law. (ii) Mere filing of certain documents cannot rescue the assessee from the rigours of addition, as the genuineness of the loan transactions from the above parties itself is unproved considering the overall circumstances of the case.

M/s Green Valley Homes Developers Pvt Ltd (iii)Theassessee has failed to discharge its onus to establish the genuineness of the loans taken from concerns of Shri Praveen Kumar Jain and that the same is not in the form of accommodation entries. (iv)The statement of Praveen Jain was recorded during the course of search and has evidentiary value. (v) All the paper submitted by the party are paper work to prove the non - genuine loan as genuine. It is clear cut finding of investigation wing that Shri Praveen Jain is indulged in providing accommodation entries in various form and the same fact is accepted by Shri Praveen Jain also. The retraction filed by Shri Praveen Jain merely to save the parties. (vi)As the loan amount received from these companies are non-genuine and are accommodation entry, therefore interest paid of Rs. 1,25,43,806/- on the said loan also treated as non-genuine as the same is paid to reduce the profit of the company. In view of the above discussion, the loans taken during the year under consideration amounting to Rs.7,90,00,000/- remains unproved and are held of accommodative in nature. Therefore, considering the peak theory on the loans accepted and repaid amongst the aforesaid parties during the year, the addition worked out in this regard amounts to Rs. 5,99,00,000/- which is accordingly made to the total income of the assessee.”

8.

We have heard the rival submissions and perused the material available on record. The addition made by the Ld. AO comprises a principal sum of Rs.5,99,00,000/- and interest thereon amounting to Rs.1,25,43,806/-. It is an undisputed fact that all the loans were availed through banking channels. The assessee duly submitted loan confirmations, copies of PAN cards, income tax returns, and audited financial statements before both the revenue authorities and this M/s Green Valley Homes Developers Pvt Ltd Tribunal. The loans were obtained from nine companies, and the assessment was framed solely on the basis of a report from the Investigation Wing of the Income-tax Department, wherein the assessee was alleged to be a beneficiary of accommodation entries purportedly provided by “Shri Praveen Kumar Jain” and his group. However, we find that the assessee had furnished all requisite documentary evidence in compliance with Section 68 of the Act, including Form 16, quarterly TDS statements on interest, profit and loss account, balance sheet, ledger accounts of creditors, and income tax returns. Despite the availability of such documentation, the Ld. AO did not undertake any independent verification or issue notices to the loan creditors to ascertain the genuineness of the transactions. The Ld. AR placed reliance on the judgment of the Hon’ble Bombay High Court in PCIT-27 v. Parth Enterprises, of 2016, dated 11.12.2018. The relevant portion of paragraph 7 of the said judgment reads as under: “7. We find that there are concurrent finding on facts rendered by the CIT(A) and the Tribunal holding that only Rs.36 lakhs can be added to the declared income and the balance amount of Rs.2.99 crores was not hit by section 68 of the Act. This finding is premised on the fact that no enquiry was made in respect of 76 creditors out of 77 creditors and the respondent had provided required documentary evidence in respect of the 76 creditors. Thus, these are essentially finding of fact and the view taken by the Tribunal is a possible view on these facts. In view of the above, the question as proposed does not give rise to any substantial question of law. Thus, not entertained.

8. Accordingly, appeal is dismissed. No order as to costs.”

M/s Green Valley Homes Developers Pvt Ltd We observe that the Hon’ble jurisdictional High Court has clearly held that in the absence of any verification undertaken by the Assessing Officer, such an addition under Section 68 is unsustainable in law.

Further reliance was placed on the decision of the Co-ordinate Bench of the ITAT, Chennai Bench-D, in ITO v. Central Finance Co [1982] 13 TTJ 248 (Mad), which held that mere general statements by hundi bankers regarding their engagement in hawala transactions, without any specific statement linking the assessee's transactions to such hawala activities, cannot justify the reopening of assessments. In the present case, the assessee's name was not even correctly mentioned in the recorded statement, appearing merely as “Green Valley Deve.”

The assessee had obtained loans from nine companies, which were subsequently repaid along with interest in the succeeding years. It is also pertinent to note that these very companies have been adjudicated upon in other matters before the Tribunal, and the transactions involving them have been held to be genuine. The Ld. AR placed reliance on several orders of the Co-ordinate Benches of the ITAT, Mumbai, where the genuineness of transactions with these companies has been upheld. A summary is as follows:

S.No. Name of Company Order of ITAT in 1 Ansh Mercantile Pvt Ltd ACIT vs Abani Sarbeshwardas Duke Business Pvt Ltd & 232/Mum/2018, dt of Viraj Mercantile order 15/05/2019 Olive Overseas Pvt Ltd 2 Atharv Business Pvt Ltd ITO Vs M/s Manav Finance Ltd Sumukh Commercial ITAs 1448, 1449 & 1449 & 1467/Mum/2017, Nakshatra Business Pvt Ltd date of order 05/10/2018 3 Josh Trading DCIT vs M/s Trinity Infra Tech Pvt Ltd dt of order 06/02/2019 In our considered opinion, the assessee has duly discharged the onus cast upon him under Section 68 of the Act by submitting all relevant documentary evidence, which has neither been discredited nor rejected by the revenue. The Ld. AO, instead of conducting any independent enquiry or verification, merely relied upon the report of the DGIT (Investigation), Mumbai, and the statement of “Shri Praveen Kumar Jain”, which was subsequently retracted. No opportunity for cross-examination was granted to the assessee, and such adverse material was used without adhering to the principles of natural justice. The Ld. DR has also not brought any material on record to controvert the submissions made by the Ld. AR. In view of the above, we find no merit in the impugned appellate order. Accordingly, the addition made by the Ld. AO towards the loan amount of Rs.5,99,00,000/- and interest of rs.1,25,43,806/- stands deleted.

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