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Facts
The assessee filed its return of income, and subsequently, received information regarding accommodation entries for unsecured loans amounting to Rs. 1,25,00,000. The Assessing Officer (AO) issued a notice u/s 148, and the assessee filed a revised return. The AO made an addition on account of alleged bogus unsecured loans.
Held
The Tribunal held that the assessee failed to prove the identity, genuineness, and creditworthiness of the lender parties. While the assessee provided documentary evidence, the financial statements of the lenders, particularly Manirattnam Exim Pvt Ltd, were not in proper format, and the creditworthiness was questionable. The addition made by the AO invoking Section 69A was upheld by the CIT(A) but later overturned by the Tribunal.
Key Issues
Whether the unsecured loans were genuine and whether the addition made by the AO under Section 69A for unexplained money was justified.
Sections Cited
147, 143(1), 148, 143(3), 69A, 133(6), 68, 136
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI GIRISH AGRAWAL
Per: Smt. Beena Pillai, J.M.: The present appeal filed by the assessee arises out of order dated 10/06/2024 passed by National Faceless Appeal Centre (NFAC), Delhi, for assessment year 2012-13 on following grounds of appeal : “1 Whether the order passed by learned CIT(A) is bad in law.
A.Y. 2012-13 Prakash R Mehta (HUF) 2 Whether the assessment order passed dated 17/12/2019 does not bear DIN on the body of the order thereby, rendering it invalid as per CBDT Circular No. 19 of 2019. 3 The learned CIT(A) erred in not appreciating that, the notice issued u/s 148 was bad in law. 4 The learned CIT(A) erred in confirming the action of learned AO in making an addition on account of Y alleged bogus unsecured loan u/s 69A of Rs.1,25,00,000. 5 The Appellant prays leave of the Hon'ble Tribunal to add, amend, alter any of the Grounds of Appeal.” Brief facts of the case are as under:
2. The assessee filed its return of income for year under consideration on 08/12/2012, declaring total income of Rs.9,23,946/-. The return was processed u/s. 143(1) of the Act. Subsequently, an information was received from the DGIT (INV) wing Mumbai about the assessee having availed benefit of taking accommodation entries of unsecured loan amounting to Rs. 1,25,00,000/-. The reasons were recorded and notice u/s. 148 was issued to the assessee on 25/03/2019. In response to the notice u/s. 148, the assessee filed its return of income on 10/04/2019 declaring the total income of Rs. 9,23,950/-. 2.1 The Ld.AO noted that the assessee has obtained unsecured loans from following concerns during the financial year relevant to assessment year under consideration.
Sr. Name of the hawala Nature of Bill Amount(RS) No. parties Transaction 1. Manirattnam Exim Pvt. Unsecured Loan 1,10,00,000/- Ltd.
Kingstar Unsecured Loan 15,00,000/- Total 1,25,00,000/- A.Y. 2012-13 Prakash R Mehta (HUF) 2.2 The assessee vide various statutory notices issued u/s.142(1) called upon to furnished details. In respect of the loan creditors and to establish the genuineness of the transaction. The assessee vide its reply date 7/12/2019 furnished following details to establish identity and creditworthiness of the loan creditors along with genuineness of the transaction.
“a) Copies of Loan Confirmation of both Loan Creditors and photocopies of Bank Statement of M/s Manirattnam Exim Pvt Ltd. highlighting the relevant entries. b) Details of Unsecured Loans including the details and Rate of Interest. Loans were Interest investing in Share and Securities, particularly in the Shares of Tradewell Ferromet Pvt. Ltd. C) Copy of ITR Acknowledgment Manirattnam Exim Pvt Ltd. and Balance Sheet of d) Our clients came into contact with abovementioned Loun Creditors through a broker Mr. Dilip Bhansalı.” 2.3 The Ld. AO thereafter issued notice u/s.133(6) of the Act to the parties who provided loan to the assessee. It is noted by the Ld.AO that, the notices could not be served on parties and it was returned back by postal authorities with the remark “left”. Based on the details furnished by the assessee. The Ld.AO was of opinion that assessee was indulged in obtaining accommodation entries from the parties who are paper companies and managed by the concerns operated by Gautam Jain and Group. The Ld. AO thus after noting detailed modus operandi made addition in the hands of the assessee as unexplained money u/s.69A amounting to Rs. 1,25,00,000/-. Aggrieved by the order of the Ld.AO the assessee preferred appeal before the Ld.CIT(A).
A.Y. 2012-13 Prakash R Mehta (HUF) 3. The Ld.CIT(A) after considering the submissions of the assessee and the assessment order passed by the Ld.AO observed and held as under: “DECISION OF THE APPELLATE AUTHORITY The both side contentions of the assessing officer and the appellant assessee have been carefully considered and this appellate authority has noted following points: i) Return of Income was filed for the assessment year 2012-13 on 08.12.2012 declaring total income at Rs.9,23,9461/-. ii) Information was received from the DGIT(Inv.) Wing, Mumbai, about the assessee having availed of benefit of taking accommodation entries of unsecured loan amounting to Rs. 1,25,00,000/-. iii) Accordingly, notice u/s. 148 of the Act dated 25.03.2019 was issued by the Ld Assessing officer, which was duly served upon the assessee, In response, the assessee filed return on 10/04/2019 declaring total income at Rs.9,23,950/-. iv) It is seen that the assessee had indulged in taking benefit of accommodation entry of unsecured loan from the following parties: Sr. Name of the hawala Nature of Bill Amount(RS) No. parties Transaction 1. Manirattnam Exim Pvt. Unsecured Loan 1,10,00,000/- Ltd.
2. Kingstar Unsecured Loan 15,00,000/- Total 1,25,00,000/- v) The assessing officer has stated that "During the course of assessment proceedings, the assessee submitted loan confirmation of both the loan creditors and photocopies of bank statements of M/s. Manirattnam Exim Pvt. Ltd. highlighting the relevant entries vi) The assessing officer has made the addition stating "the assessee has not been able to prove the identity, genuineness and creditworthiness of the unsecured loan transactions and thus the said transactions are liable to be disallowed for want of cogent proof and justification, this sum of Rs. 1,25,00,000/- is deemed to be the income of the assessee during for the previous year 2011-12 under section 69A of the Act, and is therefore, added to the income of the assessee"
vii) It is also noted by the appellate authority that in the Assessment order the Gautam jain and group has said on oath that they have been using benami concerns to give accommodation entries in the nature of bogus purchase and bogus unsecured loans to various beneficiaries. It is also established fact that M/s Manirattnam Exim Pvt. Ltd. is a benami concern of Gautam Jain and group. The relevant portion of AO's order is reproduced here below: - 5. M/s. Parshwanath Geims Pvt. Ltd., M/s. Keshariya Gems Pvt. Ltd., M/s Nikhil Gems Pvt. Ltd., M/s Karishma Diam Pvt. Ltd., M/s. Manirattnam Enim Pvt. Ltd., M/s. Shri Ganesh Gems, M/a. Majas Gems and M/s. Khushi Gems Pvt. Ltd. and the related concerns having the same bey person (Director/Proprietor/Partner namely M/s. Rajah Gema(Prop Dharmendes Akshaysingh Babel, M/s. Krishna Diam, M/s. Bahubali Exim Pvt. Lad., M/a. Rajat Diamond Pvt. Ltd., M/s. Frontline Diamond Pvt. Ltd. & M/s. Kothari impex (Prop. Vijay N. Kotharij are having the above mentioned modus operandi. Theses concerns are involved in providing "accommodation purchase entries and scommmodation "unsecured loan entrine". The stock in the books of the concerns is either shown to be imported ur procured locally. In case of imports the stock upon clearance at Customs is taken away by the "real importer". Thus, in the books of the non-genuine concerns the stock remains, however physically there is no stock. Thereafter, nan-genuine sales are shown by these concerns to interested parties, who want to book bogus purchases from time to time. Receipts are by the mode of cheque or RTGS. Upon receipt of which the concerns which had actually imported the stack, makes payment in cash to the other beneficiary concern thus completing the cycle. viii) The appellant assessee with its submissions to this appellate authority has provided documentary evidences like Balance sheet, Profit and loss account of the parties from which the appellant assessee has taken unsecured loan. ix) From the perusal of the documents provided by the appellant assessee, this appellate authority has noted that the Balance sheet of M/s Manirattnam Exim Pvt Ltd is unav proper format Share capital of the company is only Rs 1 Lakhs, total shareholder fund is Rs 5,33,055/-. The appellant assessee has not provided Profit and loss account of the company and it is also pertinent to mention here that the gross total income of the company as per the ITR is Rs 5,03,853/-. The appellant assessee has taken a loan from the company M/s Manirattnam Exim Pvt Ltd amounting to Rs 1,10,00,000/- which is not justified from the above points. x) This appellate authority is in the view that after seeing the Balance sheet and other documents of the company M/s Manirattnam Exim Pvt. Ltd, the creditworthiness of the lenders does not seem so healthy to lend a sum of Rs 1,10,00,000/- to the appellant assessee. xi) Similarly in case of second loan of Rs.15,00,000/- taken from M/s. Kingstar, the appellant assessee has not provided copy of ITR, Balance Sheet and Profit & loss account, bank Statement and any documentary evidences/proofs of the firm to proof the creditworthiness and genuineness of M/s. Kingstar from which the appellant assessee has taken loan of Rs 15,00,000/-. xil) It is also pertinent to mention here that the Ld. AO also sent notice u/s. 133(6) of the income tax act 1961 to the parties from whom the appellant assessee has taken loan but it returned un-served with remarks "left". So the onus is on the appellant assessee to prove the genuineness of the transactions but the assessee has grossly failed to prove the same. xiii) Under the above circumstances, and in the light of the above findings, facts and circumstances, the assessee is hit by the provisions of section 69A of the Act, which reads: "Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money. bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the incomes of the assessee for such financial year. xiv) From the above discuss facts it is very much clear that prove the identity and creditworthiness of the lender company/firm and genuineness of the transactions. xv) This appellate authority puts the reliance on the following Judgments a. The Hon'ble Supreme Court in the case of Chuharmal Vs CIT (1988) 172 ITR 250 while affirming the view of the Madhya Pradesh High Court has held that 'the expression 'INCOME' as used in Section 69A of the Act, 1961 had a wide meaning which meant anything which came in or resulted in gain and on this basis, concluded that the assessee had income which he had invested in purchasing article and he could be held to be owner and the value could be deemed to be his income by virtue of Section 69A of the Act. b. The Hon'ble Supreme Court in the case of Smt. Srilekha Banerjee and others Vs CIT, Bihar &Orissa, reported in 1964 AIR 697, dated 27/03/1963, held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. The Hon'ble Supreme Court further held that "The correct position is as follows. If there is an entry which shows the receipt of a sum or conversion of the notes by the assessee by himself, it is necessary for the assessee to establish, if asked, what the source of that money was and to prove that it did not bear the nature of income. The department is not at this stage required to prove anything. The fact that there was receipt of money or conversion of notes is itself prima facie evidence against the assessee on which the Department can proceed in absence of good explanation.' c. In Manindranath Das v. Commissioner of Income Tax, Bihar & Orissa, the tax-payer had encased Notes of the value of Rs. 28,600/-, which he contended were his accumulated savings. His explanation was accepted in respect of Rs.15,000/-, because 15 notes could be traced to a bank, but was rejected in respect of the balance. The Patna High Court pointed out that if an assessee received an amount in the year of account, it was for him to show that the amount so received did not bear the character of income, and the tax-payer in the case had failed to prove this fact in respect of the remaining notes. The Hon'ble Supreme Court has held that 'The cases involving the encashment of high denomination notes are quite numerous, In some of them the explanation tendered by the tax-payer has been accepted and in some it has been rejected. Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, and that if he did not, then, the Department was free to reject his A.Y. 2012-13 Prakash R Mehta (HUF) explanation and to hold that the amount represented income from some undisclosed source.' In the light of above discussion and the by putting reliance on the Judgments of Supreme Court and High court, it is clear that the appellant assessee has grossly failed in proving the identity, creditworthiness of the lender parties and genuineness of the transactions before the assessing officer and before this appellate authority also thus the addition of Rs.1,25,00,000 made by the Assessing officer invoking section 69A of the income tax Act 1961 is UPHELD.
5. Conclusion: In the result, the appeal is dismissed.” Aggrieved by the order of the Ld.CIT(A) the assessee is in appeal before this Tribunal.
At the outset the Ld.AR submitted that Ground No.1 is general in nature and therefore do not require adjudication. 4.1 He submitted Ground No.2 and 3 are legal issues raised by the assessee challenging validity of assessment order passed u/s. 143(3) r.w.s. 147 of the Act. He submitted that assessee do not wish to argue thus legal issues and therefore the same may be left open. 4.2 Considering the submissions of the Ld.AR the legal issues raised ground no. 2and 3 are not adjudicated and are left open to be argued in appropriate circumstances. Accordingly Ground No. 2 and 3 are dismissed as academic at this stage.
Ground no.4 raised by the assessee is challenging the addition made on account of alleged bogus unsecured loan u/s. 69A of the Act. 5.1 The Ld. AR submitted that, assessee during the assessment proceedings furnished all the details in respect of the lenders. He placed reliance on letter dated 17/12/2019 filed before the A.Y. 2012-13 Prakash R Mehta (HUF) Ld.AO, wherein details pertaining to the loan creditors are filed at and placed pages 16 to 25 of the paper book. He also refered to page 50 of the paper book, which is the ledger book of Manirattnam Exim Pvt Ltd. and the banks statement along with confirmation from M/s. Kingstar. He submitted that all this details were already available during the assessment proceedings. However, the same has not been verified by the Ld.AO. The Ld.AR submitted that, merely because there was no response from the loan lenders to the notice issued u/s.136 of the Act, the addition was made in the hands of the assessee as unexplained monies. 5.2 The Ld.AR on identical issues placed reliance on following decision in support of its claim • The decision of co ordinate Bench of this Tribunal in case of ACIT v. Adhiraj Constructions Pvt Ltd in C.O. No. 100/Mum/2022) vide order dated 27/12/2022 • The decision of Co ordinate Bench of this Tribunal in case of Nanda Sumemal Jain v. Income Tax Officer 19(2)(4) in ITA 2526/Mum/2022 vide order dated 09/03/2023 • The decision of co ordinate Bench of this Tribunal in case of Rajuram Savaji Purohit v. Income-tax Officer reported in [2024] 169 taxmann.com 18. • The decision of co ordinate Bench of this Tribunal in case of ITO v. Leena Haresh Harde in 5.3 The Ld.AR further submitted that, assessee has paid interest two both the loan creditors amounting to Rs. 73,000/- and 6,73,375/- during the year under consideration, the details of which is tabulated at page 23 of the paper book. It was submitted that the assessee had paid loan partially to Manirattnam Exim Pvt. Ltd., which has not been considered by the Ld.AO. He thus submitted that loan taken from both the parties were genuine in so far as assessee is concerned.
5.4 The Ld.AR also has placed reliance on the decision of Hon’ble Bombay High Court in case of H.R. Mehta vs. ACIT in of 2001 vide order dated 30/06/2016 wherein Hon’ble High Court placing reliance on the decision of Hon’ble Delhi High Court in case of CIT vs. Ashwini Gupta reported in 322 ITR 396 and the decision of Hon’ble Supreme Court of M/s. Andman Timber Industries vs. Commissioner of Central Excise reported in (2015) 62 taxmann.com 3 observed as under : “The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross- examine the party concerned. The Division Bench held that once there is violation of the principles material was not opportunity of cross examining justice inasmuch as seized provided Pauralsich be examin the assessee nor was given the person whose statement was being used against the assessee the order could not be sustained.
In M/s Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Authority had not granted an opportunity to the assessee to cross examine the witnesses and the tribunal merely observed that the cross examination of the dealers in that case, could not have brought out any material which would not otherwise be in possession of the appellant-assessee. The Supreme Court set aside the impugned order and observed that it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks such as was done in that case.
In the instant case although the appellant assessed has called upon us to draw an inference that the burden shifted to the revenue in the present case once it was established that the payments were made and repaid by cheque we need not hasten and adopt that view after having given our thought to various issues raised and the decisions cited by Mr.Tralshawalla and finding that on a very fundamental A.Y. 2012-13 Prakash R Mehta (HUF) aspect, the revenue was not justified in making addition at the time of reassessment without ion at the time having first given the assessee an opportunity to cross examine the deponent on the statements relied upon by the ACIT. Quite apart from denial of an opportunity of cross examination, the revenue did not even provide the material on the basis of which the department sought to conclude that the loan was a bogus transaction.
In our view in the light of the fact that the monies were advanced apparently by the account payee cheque and was repaid vide account payee cheque the least that the revenue should have done was to grant an opportunity to the assessee to meet the case against him by providing the material sought to be used against assessee in arriving before passing the order of reassessment. This not having been done, the denial of such opportunity goes to root of the matter and strikes at the very foundation of the reassessment and therefore renders the orders passed by the CIT(A) and the Tribunal vulnerable. In our view the assessee bound to be provided with the material used against him apart from being permitting him to cross examine the deponents. Despite the request dated 15th February, 1996 seeking an opportunity to cross examine the deponent and furnish the assessee with copies of statement and disclose material, these were denied to him. In this view of the matter we are inclined to allow the appeal on this very issue.” 5.4 On the contrary the Ld.DR submitted that, identical issue arising out of search and survey action in the case of Shri. Pravin Kumar Jain was considered by Hon’ble Ahmadabad Tribunal in case of Shri. Pravinkumar M Sagvi Vs. ITO in for the assessment year 2007-08, vide order dated 17.05.2017. He submitted that, Hon’ble Ahmadabad Tribunal has tradable analysed genuineness and credit worthiness of the leander and came to the conclusion that leander were basically shell companies without any activities and that, the assessee had not discharged its onus to establish that loan transaction were genuine and bonafide, taken in the normal course of business. 5.5 The Ld.DR submitted that, the said decision of the Hon’ble Ahmadabad Tribunal has been upheld by the Hon’ble Gujarat A.Y. 2012-13 Prakash R Mehta (HUF) High Court in vide order dated 12/02/2018. He thus heavily relied on the observation of the Hon’ble Ahmadabad Tribunal in similar circumstance. We have perused the submissions advance by both sides in the light of record placed before us.
Primarily, in the present facts of the case, we note that, the assessee furnished relevant details as called for by the Ld. AO in respect of the loan creditors during assessment proceedings. The Ld. AO did not carry out any verification of the evidence submitted by the assessee as regard the source in the hands of the lenders. 6.1 However, we agree with the Ld.DR that the genuineness of the transaction does not get established even though the assessee file all relevant documents required to discharge its onus u/s. 68 of the Act. Be that as it may, the observation of the Hon’ble Bombay High Court in case of H.R. Mehta vs. ACIT (supra) reproduced here in above, squarely applies to the present facts of the case. Specifically we refer to para 16 and 17 of the decision of Hon’ble Bombay High Court wherein, it is observed that once the repayment are made by assessee was established, the provisions of section 69 would not be applicable unless the revenue disproves the evidences furnished in respect of repayment. 6.2 It is further noted that interest has also been paid by the assessee to the lenders which has also not been disproved by the revenue. The decisions relied by the Ld.DR of Hon’ble Allahabad High Court is distinguishable with present facts in thus specific circumstances. It is noted that, there was no repayment of loan by the assessee therein, based on which the Tribunal took such A.Y. 2012-13 Prakash R Mehta (HUF) view. Thus the ratio of the decisions relied by Ld.DR is not applicable to the peculiar facts of therein present assessee. Based on the above where of the opinion that the addition made by the Ld.AO in the present facts of the case deserves to be deleted. Accordingly the ground no.4 raised by the assessee stands allowed. In the result the appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 08/04/2025 Sd/- Sd/- (GIRISH AGRAWAL) (BEENA PILLAI) Accountant Member Judicial Member Mumbai: Dated: 08/04/2025 Poonam Mirashi, Stenographer Copy of the order forwarded to:
(1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.