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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLE
2 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., ORDER PER S. RIFAUR RAHMAN (AM) 1. These appeals are filed by the revenue against different assessees of same group and different orders of the Learned Commissioner of Income Tax (Appeals)-47, Mumbai [hereinafter in short “Ld.CIT(A)”] for the A.Y. 2012-13 and A.Y. 2013-14.
Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in ITA.No. 536/MUM/2019 for Assessment Year 2012-13 as a lead appeal.
Briefly facts of the case are, assessee is the proprietor of M/s. Shree Mangal Jewels engaged in the business of trading of Jewellery. The Search and Seizure operations were carried out in the case of assessee group along with search and seizure proceedings in case of Shri Praveen Kumar Jain on 01.10.2013. Consequently, a notice u/s 153A was issued on 09.01.2015 in response to which assessee filed return of income on 19.02.2015 declaring a total income of ₹.15,85,990/.
During the course of assessment proceedings, the assessee was confronted in respect of money received by it during the year under 3 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., consideration as unsecured loan amounting to ₹.3,29,50,000/- from various entities controlled by Mr. Praveen Kumar Jain, with a view to consider them as accommodation entries and making addition by applying provisions of section 68 of Income Tax Act, 1961 (in short “Act”). The Assessee submitted before the Assessing Officer as under: - “As your goodself has noticed close association of Shri Praveen Kumar Jain with the assessee and its group. Further, Shri Praveen Kumar Jain has a keen interest of joining the assessee group with substantial interest. For this reason, he has at many occasions, given or arranged unsecured loans for the assessee group. Affidavit of Shn. Praveen Kumar Jain in this respect is enclosed herewith (Page 85 to 87), Whenever there was requirement of assessee group and Mr.Praveen Kumar Jain had sufficient balance, he used to lend money to assessee group. At some occasions, the money was lent to M/s Fastline Multitrade Private Limited and then funds were transferred to the other group companies while in some cases it was directly lent to the concern which is in need of funds. In some cases where Mr. Praveen Kumar Jain did not have sufficient funds available he has arranged the loans through other companies under his influences, wherein his associates/knowns are controlling the affairs. Moreover, interest has been charged in most of the cases as agreed by the parties. The loans taken have been paid back in most of the cases as per the details submitted to your goodself The relationship of Mangal Group and Mr. Praveen Kumar Jain is also established from an instance of transaction of secured loan taken by Shri Praveen Kumar Jain in his company M/s Nakshatra Business Private Limited by putting collaterals/securities arranged by promoters of Mangal Group. Your goodself's attention is invited towards copies of valuation reports of the said properties, which have been found and seized during the course of search from the premises of PranjalBapna, 702, Arihant building. Thakur complex, Kandiwali E Mumbai (Annexure A2 page 1 to 102 of seized documents). Which were arranged by promoters of Mangal Group for obtaining CC Limit of Rs. 10 Crore in M/s Nakshatra Business Private Limited from The Bharat Co-operative Bank (Mumbai) Ltd, where Mangal group is having various limits. It is pertinent to note that Mr.Meghraj Jain was the Surety/Guarantor for the said loan and Mr.Ajit Jain has taken directorship for a certain period in 4 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., M/s Nakshatra Business Private Limited, which also confirms the business relations of Mangal Group and Mr. Praveen Kumar Jain A copy of sanction letter of The Bharat Co-operative Bank (Mumbai) Ltd is also enclosed with this letter at Page 129 to 136 It can be noticed that Part of the loan has utilised for making payment to Mangal Group entities and part has been utilised by him for his own purposes Annexure 8.(page 137 to 1371 This shows that the source of money to this entity of Mr. Praveen Kumar Jain was baked by personal guarantee of Mr.Meghraj Jain & money was utilised for business of both persons as per mutual understanding & business requirements. This also shows that your goodself's version that cash has been paid against the loan received is incorrect. We are also enclosing herewith statement showing various transactions along with this letter at Annexure-9 (Page 154 to 154) which shows that the source of money received in Mangal group companies from entities/associates of Mr. Praveen Kumar Jain has gone to entities/associates from Mangal group companies only. This also shows that there is no involvement of cash at all. Accordingly, your goodself's observation that we have received/paid cash against these loans is incorrect. These instances have been taken from the limited information available with us. Further these are one type of transaction and various other types of transactions are there which prove that there cannot be any involvement of cash in such transactions. Thus, it is proved that there are no transactions of making payment of cash for obtaining loan from the entities/associates of Shri Praveen Kumar Jain as being presumed by our goodself on the basis of general statement of Shri Praveen Kumar Jain. No specific mention has been made by Shri Praveen Kumar Jain in his statements recorded during the course of search that the transactions of unsecured loan given to Mangal Group companies are accommodation entries. The statements have been recorded at the back of the assessee which cannot be treated as evidence unless confronted. As against this he has given confirmatory affidavit that none of the transaction of loan given to the assessee group was in the nature of "accommodation entry" as alleged by your goodself.”
It was also submitted that since there was a close business interest of Shri. Praveen Kumar Jain with the assessee’s group, the amount has been received as unsecured loan and all documentary evidences in that 5 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., respect were submitted. Assessing officer rejected the submissions made by the assessee and has not given any specific finding on the specific replies made by the assessee and generally rejected the same by observing that all the loans etc., given by the entities controlled by Shri Praveen Kumar Jain are bogus in view of the findings of the search and seizure operations in case of Shri. Praveen Kumar Jain. Accordingly Assessing officer has made the addition of ₹.3,29,50,000/- by applying the provisions of section 68 while passing the assessment order dated 30.03.2016.
On appeal the Ld.CIT(A) considering the evidences and various submissions of the assessee and also relying in the case of DCIT v. Smt Meghraj Sohanlal Jain in ITA.No. 4703/Mum/2017 allowed the ground raised by the assessee. Against this order revenue is in appeal before us.
Revenue has raised following grounds in its appeal: - “1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs.3,29,50,000/- made u/s 68 of the Income Tax Act, 1961 on account of bogus unsecured loans without appreciating that said loans are from companies controlled and managed by Shri Praveen Kumar Jain, who has confessed in his statement recorded on oath that he was engaged in providing accommodation entries and that his later retraction from the statement has been considered as an afterthought and hereby rejected.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in not upholding the aforementioned addition made by the A.O. even though the modus operandi of obtaining accommodation entries in the form 6 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., of unsecured loan is well established and that the transactions of loans should have been considered in light of surrounding circumstances, normal course of human conduct and preponderance of probability.
3. Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) erred in not appreciating the decision in Nova Promoters and Finlease 342 ITR 169 (2012) wherein the Hon'ble Delhi High Court held that mere filing of PAN, ITRs, account confirmations and bank statements of the creditors is not sufficient enough to discharge the onus cast upon the assessee u/s 68 of the Income Tax Act, 1961 when there are sufficient evidences of accommodation entry.
4. Whether on the facts and circumstances of the case and in law, Ld.CIT (A) erred in not appreciating the fact that presence of cash deposits in bank accounts of creditors before the loan transaction is not sine qua non in the process of providing accommodation entries as cash deposits are usually layered through multiple intermediate entities.
5. Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) erred in not upholding the additions made by the AO in view of the judgement of the Supreme Court in Principal Commissioner of Income Tax (Central)-1 Vs. NRA Iron & Steel Pvt. Ltd (arising out of SLP (Civil) No, 29855 of 2018) wherein the Apex court held that the practice of conversion of un-accounted money must be subjected to careful scrutiny.
6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in not upholding the additions made by the AO in view of the decision in Commissioner of Income Tax vs. Golcha Properties Pvt. Ltd (in Liquidation) (1996) 136 CTR 222 (RAJ.), wherein the Rajasthan High Court held that the genuineness of the transaction could be decided on the basis of primary facts on record and it is not necessary for the Department to bring a positive evidence.”
Ld. DR relied on the order of the Assessing Officer and submitted that Ld. CIT(A) has simply deleted the addition made by the Assessing Officer rather than taking the investigation/enquiries conducted by the
Ld. AR of the assessee submitted that the loans have been received through account payee cheques and the same were repaid through account payee cheques, confirmations from the concerned creditors were also furnished, the PAN details of the creditors, ledger copy of the creditors, bank statements of the creditors, assessee’s bank statements and also the affidavit of the Shri Praveen Kumar Jain retracting his statement earlier given in the course of the search before investigation authorities. Therefore, all these evidences prove that the loan transaction is genuine. Ld. Counsel for the assessee submits that the assessee has established the identity, genuineness and credit worthiness and the primary onus cast on the assessee has been discharged. Ld. Counsel for the assessee submits that no further enquiry has been made by the Assessing Officer except relying on the statements and the investigation report to prove that the loan transactions were non-genuine.
Considered the rival submissions and material placed on record, on a careful perusal of the financial statements we observe that loan taken by the assessee are repaid in the subsequent assessment years. It was further
8 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., observed that the loan was received and repaid only through account payee cheques, confirmations filed, bank statements along with financial statement were filed, PAN details of creditors were also filed. Ld. AR brought to our notice that on similar facts in assessee’s group case in ITA.No. 566/Mum/2021 for the A.Y. 2012-13 the Coordinate Bench has considered and adjudicated the issue in favour of the assessee. While holding so the Coordinate Bench held as under: - “11. Considered the rival submissions and material placed on record, we observed that the search and seizure operation u/s. 132(1) was conducted in Mangal Group of cases on 01.10.2013 it is relevant to note that Mangal group is owned by Shri Mangal jain and Shri Ajit Jain and family members and they hold major shares and directorship in companies of Mangal group. Assessee is also part of Mangal group which is owned by Shri Mangal Jain and others. In the case of Mangal group, Assessing Officer observed that assessee made additions related to transactions with PKJ group by way unsecured loans/ share application money/bogus purchases. We observed that in the instant case also assessee made similar additions which is relating to unsecured loans and it is pertinent to note that the above said unsecured loans were repaid during the assessment year or in subsequent Assessment Years. We observe from the record that in the case of DCIT v. Smt Meghraj Sohanlal Jain (supra) who is one of the director of the Mangal Group companies, in her case, the Coordinate Bench has decided the issue as below: “The appellant furnished the copies of the account confirmation of the lender companies, acknowledgement of income tax return of lender companies, and their audited financial statement, bank account of lender companies and affidavit of the lender companies confirming the loan transactions. The companies had also filed the return of income in the relevant assessment year. There were no where found immediate deposit of cash before issuance of cheques. The loan was given by account payee cheques through normal banking channels. The interest was also paid and TDS was also 9 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., deducted thereon. The identity, credit-worthiness and genuineness of the transaction were not seems in genuine. The evidence is required to be rebutted by the AO on basis of some cogent and convincing reason on record. The AO did not conducted any further enquiry. The addition raised by AO u/ 68 of the Act was on the basis of the statement of Shri Praveen Kumar Jain. No material of any kind was found and recovered from the Shri Praveen Kumar Jain which was if any related to the assesse. The evidence is also not on record to the fact that the assesse introduced his own money. Moreover, it also came into notice that Shri Praveen Kumar Jain was also director of one company M/s Mangal jewels Pvt Ltd who also mortgaged his own residential flat against the bank loan availed by M/s Mangal Jewels Pvt Ltd. This fact was also admitted by Shri Praveen Kumar Jain in his statement recorded on 01.10.2013 u/s 132(4) of the Act in the question no. 34 which specify all these contents. The appellant was also guarantor of the company in which shri Praveen kumar jain was the director namely M/s Nakshtra Business Pvt Ltd which showned that both were in business relationship. Moreover, we found that the identical issue has been decided by the Honble ITAT in which the sole statement of Shri Praveen Kumar Jain was not found justifiable to raise the addition u/s 68 of the Act. These are the following - cases 1. ITA No. 5589/M/2017 in case of ACIT Vs M.s Shreedham Builders 2. ITA No. 5954/M/2016 in case of M/s Shree Laxmi Estate Pvt Ltd. VS. ITO 3. ITA. No. 1477/M/2017 in case of ACIT Vs. M/s. Shree Ganesh Developers 4. ITA No. 3091 to 3096/M/2017 in case of ACIT Vs. Shri Ramesh Ramswarupdas Jindal.
5. ITA No. 930/M/2017 in case of ACIT Vs. M/s. H.K. Pujara Builders 6. ITA. No. 6006/M/2016 in case of ITO 12(2)(3) Vs. M.s GGF Industries Pvt Ltd 7. ITA No. 930/M/2017 In case of DCIT Vs Bairagra Builders. Taking into account all the facts and circumstances of the case, we are of the view that the CIT(A) has decided the matter of controversy
10 641 & 642/MUM/2021 Ajit Sohanlal Jain & Dhakad Properties and Financial Services Pvt. Ltd., judiciously and correctly which is not liable to be interference with at this appellate stage. Accordingly, both the issues are decided in favour of the assesse against the revenue.” 12. Since the facts in the present appeal is exactly similar to the facts in the above case, respectfully following the said decision, we dismiss the grounds raised by the revenue. The case law relied by Ld.DR is distinguishable with the facts on record.”
11. Since the issue is exactly similar and grounds as well as the facts are also identical, respectfully following the above decision in assessee’s group case, we dismiss the grounds raised by the revenue.
The issues raised by the revenue in other appeals i.e., (A.Y: 2013-14) and ITA.No. 642/MUM/2021 (A.Y.2012-13) are same, accordingly the grounds raised by the revenue in all the above said appeals are dismissed.
In the result, appeals filed by revenue are dismissed.
Order pronounced in the open court on 21st September, 2022.