RAHUL JABARMAL JAIN,MUMBAI vs. ASSISTANT. COMMISSIONER OF INCOME TAX -19(3), MUMBAI, MUMBAI

PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the appellant/assessee against the order of Learned Commissioner of Income Tax (Appeals)/ National Faceless Appeal Center (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 [hereinafter referred to as Rahul Jabarmal Jain “the Act”] dated 20.06.2024 for the A.Y. 2008-09 wherein the appeal of the assessee has been dismissed. 2. The brief facts of the case are that, the assessee filed his return of income on 30.09.2008 declaring total income at Rs. 22,69,603/-. The return was processed u/s 143(1) of the Act. The case was selected for scrutiny and statutory notice u/s 143(2) of the Act dated 18.09.2008 was issued and served on the assessee. Further notice u/s 142(1) of the Act dated 03.11.09 and served on the assessee. It was noticed during the scrutiny assessment that assessee has debited net interest amounting to Rs. 1,50,51,522/- on secured loans and unsecured loans during the year. The submissions of the assessee were accepted and scrutiny assessment was completed vide assessment order dated 21.12.2009. A search and survey action was conducted in the case of Shri Bhanwarlal Jain and others on 3.10.2013 by DGIT (Inv.), Mumbai. During the search action it was revealed that the companies managed and controlled by Shri Bhanwarlal Jain were in the business of providing bogus accommodation entries through various benami concerns operated and managed by them. Rahul Jabarmal Jain 3. Post search information was received from DGIT(Inv.) Mumbai about accommodation entries from the following parties from AY 2008- 09:- Sr. No. Name of the hawala Parties Bill amount 1. Rahul Exports 81,05,475 2. Navkar Diamonds 26,99,507 3. Rajan Diamonds 1,13,47,665 4. Prime Star 26,99,507 5. Parvati Exports 55,97,675

Total
30,449,829
4. The case was reopened by issuance of notice u/s 148 of the Act dated
16.03.15 after recording reasons for reopening u/s 147 of the Act. It was observed by the AO that it was firmly established that Bhawarlal Jain and Family through their 70 concerns provided accommodation entries of bogus transactions to various beneficiaries and the assessee is also one of the beneficiary of these transactions as was documented with Mr.
Bhanwarlal Jain. After considering the reply of the assessee, it was observed by the AO that in the books of accounts of the assessee, the unsecured loans to the extent taken from the above said parties remained unverifiable, hence, it was concluded that the assessee has taken unsecured loan entries from certain parties to introduce unaccounted cash in its books of account and that creditworthiness of loan creditors was not established
Rahul Jabarmal Jain and corroborated by relevant supporting documents. It was further observed that though the assessee had provided the details of unsecured loans but it had failed to establish the creditworthiness and genuineness of lenders. Mere filing of evidences such as copies of bank statement showing payment through account payee cheque cannot be conclusive in a case where genuineness of transaction is in doubt. Payment by account payee cheques is not sacrosanct. The AO accordingly proceeded and disallowed the interest amount of Rs. 22,50,000/- u/s 37 of the Act and also initiated penalty proceedings against the assessee.
5. Aggrieved by the assessment order, assessee filed the appeal before the NFAC Delhi [Ld. CIT(A)] wherein the appellant has questioned the validity of reopening of the assessment alongwith disallowance made u/s 37
of the Act, however the Ld. CIT(A) vide impugned order confirmed the assessment order and dismissed the appeal on the ground that the appellant failed to substantiate the identity, creditworthiness and genuineness of the transaction before the Ld. AO.
6. Aggrieved by the impugned order the assessee preferred the appeal before the Tribunal and has raised the following grounds:-
Rahul Jabarmal Jain
1. That on fact and circumstances of the case and in law the ld. C.I.T. (Appeals),
NFAC, Delhi has erred in upholding the validity of reassessment proceeding initiated under section 147 of the Income Tax Act, 1961 by the ld. Assessing Officer to reopen the already concluded assessment earlier u/s.143(3) of the Act merely on change of opinion and borrowed satisfaction. In view of the same appellant prays that reassessment proceeding initiated to reopen the concluded assessment u/s.143(3) by issue of impugned notice u/s.148 dated 16-03-2015 and consequent reassessment order passed u/s.143(3) r.w.s.147 on 28-03-2016 being bad in law and without juri iction therefore, may be quashed and set aside.
2. That on facts of the case and in law the ld. C.I.T. (Appeal), NFAC, Delhi has erred in sustaining the wrong disallowance made by the ld. Assessing Officer of interest paid at Rs.22,50,000/- after deduction & deposit of due applicable TDS on old unsecured loans taken in earlier assessment years without bringing any contrary evidence on record and also, without appreciating that said old unsecured loans and interest paid thereon were accepted in scrutiny assessment after due verification in the assessment order passed u/s.143(3) for that earlier assessment years. Being the disallowance of legitimate interest claim which stands duly assessed as income and claim of TDS deducted and paid thereon stands allowed by Department in the hands of respective cash creditors, legally and factually unsustainable, hence may kindly be deleted.
3. That both the above appeal ground raised hereinabove are independent ground and without prejudice to each other. 4. That appellant craves the leave to amend, alter, substitute any of the above appeal ground and or to raise new or additional grounds of appeal at the time of hearing.

Total
30,449,829

The evidence available with Ld AO clearly showed that the appellant had taken accommodation entries from the above parties and was never disclosed to the department. In view of this, the case was reopened by issuance of notice u/s 148
of the Act dtd. 16.03.2015 after recording reasons for reopening the assessment u/s 147 of the IT Act 1961. Subsequently, notices u/s. 143(2) & 142(l) dtd.
Rahul Jabarmal Jain
13.10.2015 were issued and served on the appellant. The appellant has also cooperated in the reassessment proceedings.
5.2. I find that the investigation report received shows that the appellant is part of an organized racket of providing accommodation entries. After examining the evidence provided by the investigation wing and return of income filed by the appellant, the Ld AO had come to the prima facie belief that this is a fit case for reopening of the assessment. Thus, there is a clear application of mind by the Ld
AO. There is a live link or close nexus between the material obtained and formation of belief. It is not a case where the reasons recorded by the Ld. A.O. are not germane and the Ld. A.O. wanted to simply verify and make fishing enquiries with respect to bogus purchase bills. The Ld. A.O. has applied his own mind. After the receipt of the information, AO verified the record. Subsequently, reasons were recorded for reopening the assessment u/s 147 Of the Act and approval was sought from the appropriate authority. Thereafter, the notice U/s 148 was issued.
Thereafter notices u/s 143(2) and 142(1) were issued on various dates. In response to these notices, the A/R of the appellant filed submission. The appellant has also cooperated in the assessment proceedings by filing various submissions from time to time. Similar view has been held in the case of Yogendrakumar
Gupta, [2014] 46 taxmann.com 56 (Gujarat), in which the Hon’ble court has decided that the AO acquires juri iction u/s 147 r.w.s. 148 of the Act when specific and reliable information is received from investigating agencies. It was held in this case that where subsequent to the completion of original assessment,
Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee. Reopening on the basis of the report of the Investigation Wing about receipt of loans / LTCG / bogus bills from Entry Providers held to be justified by the hon’ble courts in the cases of Bright Star Syntex (P.) Ltd, 71 taxmann.com 64
Rahul Jabarmal Jain
(Bombay) [2016], Peass Industrial Engineers Pvt.Ltd. 2016 (72 Taxman.com 302
(Guj), Rajat Export Import India (P.) Ltd. 18 taxmann.com 311 (Delhi) [2012],
Money Growth Investment & Consultants (P.) Ltd. [2012] 21 taxmann.com 438
(Delhi), Jayant Security & Finance Ltd. Vs. ACIT 91 taxmann.com 181 (Guj.),
5.3. Another argument of the appellant is that the reopening of the case after more than 4 years. In this regard, it is pertinent to examine section 149 and 151 of the Act, which is reproduced as under-
“Time limit for notice.
149. [(1) No notice under section 148 shall be issued for the relevant assessment year,—
( a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b ) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year.]
Explanation.—In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Rahul Jabarmal Jain
Explanation 2 of section 147 shall apply as they apply for the purposes of that section.
(2) ---------------------------------------------------------------------------
(3)---------------------------------------------------------------------------
Sanction for issue of notice.
151. (1) In a case where an assessment under sub-section (3) of section 143
or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 [by an Assessing Officer, who is below the rank of Assistant Commissioner [or Deputy Commissioner], unless the [Joint] Commissioner is satisfied on the reasons recorded by such Assessing
Officer that it is a fit case for the issue of such notice] :
Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief
Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of [Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the [Joint] Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.]
[Explanation.—For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.]
Rahul Jabarmal Jain
5.4. From the plain reading of section 149 of the Act, it is seen that a notice under section 148 can be issued for the relevant Assessment year after four years, but before six years from the end of the relevant assessment if the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. In the instant case notice under section 148 was issued on 16.03.2015 which is within six years from the end of the AY 20108-09. It is also clear from the reason recorded that the income chargeable to tax which has escaped assessment amounts is more than one lakh rupees. Thus, the conditions enumerated in section 149 are clearly satisfied in the instant case.
Accordingly, this plea of the appellant is also dismissed.

Total
30,449,829
On the basis of the aforesaid information available with the undersigned, I have reason to believe that income chargeable to tax, as indicated above, to the tune of Rs. 30449829/-, or any other income chargeable to tax which comes to my notice subsequently in the course of proceedings for re-assessment, has escaped assessment for A.Υ. 2008-09 within the meaning of section 147 of the IT Act 1961. 12. From the above observation as well as the facts and circumstances of the case, we find that what is important at the time of formation of belief by the AO regarding the escapement or under assessment of income is sufficiency of the reasons for reopening of the assessment and not its accuracy that cannot be questioned at that time. Our above view gets strength from the judgment of Hon'ble Supreme Court in the case of S. T
Narayappa Vrs. CIT (1967) 63 ITR 219 (SC). Hence in our view, the order of reopening is valid and needs no interference. Hence this ground raised by the assessee is dismissed.
Ground no. 2
13. It is evident from the record that in response to the notice issued u/s 148 of the Act dated 16.03.2015, the assessee has filed his reply before the Rahul Jabarmal Jain
AO which are enumerated in para no. 5 of the order of AO stating that the authorized representative of the assessee attended from time to time and furnished the requisite details called for which are placed on record and the case is discussed with him. We have noticed that AO in para no. 6 to 8.3 of the assessment order has discussed the modus operandi of Bhanwarlal Jain and sons and nothing discussed pertains in respect of the assessee. The relevant para of the order of AO is in para no. 8.4 to 12 is extracted below:-
8.4 Admission of facts by Shri Bhanwarlal Jain.
Shri. Bhanwarlal Jain too in his statement recorded under section 132 (4) of the Income Tax Act, 1961 at 16, Mohan Building, JSS Road, Khandhawadi Police
Station, Girgaum, Mumbai on 11/102013 has admitted the modus operandi of providing accommodation entries of bogus transaction through various benami concerns operated and managed by him.
9. In view of the facts narrated above, it was firmly established that Bhanwarlal
Jain & family through their 70 concerns provided accommodation entries of bogus transaction to various beneficiaries, The assessee is also one of the beneficiaries of these transactions as was documented with Mr. Bhanwarlal Jain.
10. Based on these findings and after verifying the documents submitted by the assessee during the proceedings, the assessee was asked to explain as to why transaction made from parties mentioned in para 3, being Bhanwarlal Jain concerns, should not be treated as non-genuine and added to the total income of the assessee.
Rahul Jabarmal Jain
11. The submission / details furnished by the assessee as also the materials available on record have been carefully perused and considered. From the above discussions, the followings facts emerge -
(i) The DGIT (Inv.), Mumbai, has conducted search & seizure action in the case of Shri Bhanwarlal Jain & his group concerns and conclusively proved that these parties are engaged in the business of providing accommodation entries for unsecured loans and purchases. The parties are issuing bills without delivering any goods and services.
(ii) Thus, in the books of accounts of the assessee, the unsecured loans to the extent taken from the above said party remained unverifiable and hence, I arrive at a conclusion that the assessee has taken unsecured loan entries from certain parties to introduce unaccounted cash in its books of account and that the creditworthiness of the loan creditors was not established and corroborated by relevant supporting documents.
(iii) Assessee could not provide any documents to substantiate the creditworthiness of the above loan creditors and hence these loans remained unexplained. Even though the assessee had provided the details of the unsecured loans but it had failed to establish the creditworthiness&
genuineness of the lender.
(iv)
The onus was upon the assessee to establish the genuineness of the loan taken by the assessee.
(v) Mere filing of evidences such as copies of bank statement showing payment through account payee cheque cannot be conclusive in a case where genuineness of transaction is in doubt. Payment by account payee cheques are not sacrosanct.
Rahul Jabarmal Jain
12. The assessee vide letter dtd. 29.02.2016 stated that the above loans were taken in previous years and he has paid interest of Rs. 22,50,000/ on above loans. On verification of the audited balance sheet, the assessee's contention was found correct. Further, the assessee failed to provide the evidences whatsoever which would cumulatively prove all the three essential ingredients, such as, identity, creditworthiness, genuineness of the loan lenders, it is held that the said unsecured loan cannot be accepted as genuine borrowings of the assessee and the same are squarely covered by the provisions of section 68 of the Act.
14. It has been argued on behalf of the assessee that all the necessary documents have been produced and no material was supplied to the assessee with respect to the satisfaction for reopening of assessment despite the fact that all material was duly considered in regular assessment u/s 143(3) of the Act and the explanation for receiving loans and payments were duly accepted by the revenue authorities. Ld. AR has brought to our notice the documents placed at page no. 39 to 43 of the paper book wherein confirmation of lenders of loan creditors namely Rahul Exports, Navkar
Diamonds, Rajan Diamonds, M/s Prime Star and Parvati Exports were filed. However, the assessment order, nowhere mentioned about those confirmation of lenders of loan creditors which shows that AO has not considered the entire material submitted by the assessee in support of its case.
Rahul Jabarmal Jain
15. We have also examined the impugned order of Ld. CIT(A) who has dealt with assessment order and arguments of the assessee from para no.
6.2 to 6.5 which are extracted below:-
“6.2
I have considered the assessment order and the reply of the appellant. I find that the appellant failed to substantiate the identity, creditworthiness and genuineness of the transaction before the Ld AO. Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT[1963] 50
ITR 1 (SC), Roshan Di Hatti v CIT [1977] 107 ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. An assessee can discharge his onus of proof by proving three things: Identity of the creditor, capacity of the creditor and the genuineness of the transaction In question. Once the assessee proves all three things his onus is discharged. It is also to be noted that there are many case laws wherein it has been held that the assessee only needs to prove the source of an entry he need not prove the source of the source or the creditor's creditor.
6.3. The Hon'ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540
at pages 545-547 made a reference to the test of human probabilities in the following fact situation :-
It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals. Otherwise it will be very easy to make self- serving
Rahul Jabarmal Jain statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favor then the door will be left wide-open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while locking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents..
6.4. It is a well settled principle of law as declared by the Hon'ble Supreme Court in the case of Sumati Dayal Vs.CIT" (214 ITR 801)(SC) that the true nature of transaction have to be ascertained in the light of surrounding circumstances. It needs to be emphasized that a standard of proof beyond reasonable doubt has no applicability in determination of matters under taxing statutes. In the present case, it is clear that apparent is not the real as evidenced from the observation made by the Ld AO. Further, the Hon'ble Supreme Court, in the case of Chuhar
Mal V CIT (1988) 172 ITR 250, highlighted the fact that the principle of evidence law are not to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeshwari Cotton Mills v CIT (1954) 261 TR 775. The Hon'ble Supreme Court, in the case of Chuhar Mal V CIT (supra) heid that what was meant by saying that evidence Act did not apply to the proceedings under Income-tax Act, 1961, was that the rigors of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possessing of Rahul Jabarmal Jain anything, the onus of proving that he was not its owner, was on that person.
Thus, this principle could be attracted to set of circumstances that satisfies its conditions and was applicable to taxing proceedings.
6.5. Therefore, the Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In view of the above discussion, I find no infirmity in the order of the Ld.
AO, and I confirm the same. All factors considered these grounds of appeal stand dismissed.”

Copy of the Order forwarded to:

(Asstt.