Loading judgment…
Facts
The assessee, a builder and developer, filed its return of income. Subsequently, following a search action, reassessment proceedings were initiated based on information suggesting accommodation entries for unsecured loans. The Assessing Officer (AO) made additions for unexplained money and commission, which were upheld by the CIT(A).
Held
The Tribunal held that the reassessment proceedings were validly initiated as new and tangible material was received. The Tribunal further found that the assessee had provided sufficient evidence to establish the identity and creditworthiness of the loan lender and the genuineness of the transaction, thus deleting the additions made.
Key Issues
Whether the reassessment proceedings were validly initiated and whether the loan transactions were genuine, or mere accommodation entries.
Sections Cited
147, 148, 250, 132(4), 153A, 143(3), 133(6), 131, 69A, 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI OM PAKASH KANT & SHRI SANDEEP SINGH KARHAIL
Date of Hearing – 28/11/2024 Date of Order – 14/02/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The assessee has filed the present appeal against the impugned order dated 08/02/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals)-11, Pune [“learned CIT(A)”], for the assessment year 2012-13.
In this appeal, the assessee has raised the following grounds: - “
The following grounds of appeal are without prejudice to one other: -
1. On the facts and circumstances in the appellant's case and in law, the Id. CIT(A) erred in holding the action of Id.AO in re-opening the assessment
Majestic Premises Pvt. Ltd.. 2 u/s 147 by issue of notice dated 27.03.2019 u/s 148 which is merely due to change in the opinion and therefore re-opening is bad in law.
2. On the facts and circumstances in the appellant's case and in law, the Id. CIT(A) erred in holding the action of Id.AO in re-opening the assessment u/s 147 by issue of notice u/s 148 dated 27.03.2019 which is barred by limitation in the first proviso to section 147 of the Income tax Act, 1961.
On the facts and circumstances in the appellant's case and in law, the Id. CIT(A) erred in holding the action of Id.AO in alleging that assessee has entered into accommodation transactions of unsecured loans without any material evidence on record, for the reasons mentioned in the impugned order or otherwise.
On the facts and circumstances in the appellant's case and in law, the Id. CIT(A) erred in holding the action of Id.AO in treating loan borrowing amounting to Rs. 50,00,000/- as unexplained money u/s 69A of the Act, for the reasons mentioned in the impugned order or otherwise.
5. On the facts and circumstances in the appellant's case and in law, the Id. CIT(A) erred in holding the action of Id.AO in disallowing an amount to the extent of Rs.1,37,500/-, being commission paid on the alleged bogus unsecured loans u/s 69C of the Act, for the reasons mentioned in the impugned order or otherwise.
6. The Appellant craves leaves to alter, amend, withdraw or substitute any ground or grounds or to add any new ground or grounds of appeal on or before the hearing. The Appellant prays your Honour to delete the additions/disallowances made by the Id.AO and upheld by the Id. CIT(A).”
3. The brief facts of the case are that the assessee is engaged in the business of builders and developers. For the year under consideration, the assessee filed its return of income on 28/09/2012, declaring a total income of INR 1,98,37,510. Thereafter, the assessee filed its revised return of income on 13/12/2012, declaring a total income of INR 6,50,37,510. Subsequently, on the basis of the search action conducted under section 132(4) of the Act at the business and residential premises of Mutha Group on 22/02/2012, which also covered the assessee, proceedings under section 153A of the Act were initiated and assessment order was passed on Majestic Premises Pvt. Ltd.. 3 25/03/2014 accepting the returned income amounting to INR 6,50,37,510. Thereafter, re-assessment proceedings were initiated and the assessment was completed under section 143(3) read with section 147 of the Act on 28/12/2017 accepting the returned income. Later on, the case was reopened under section 147 of the Act on the basis of the information that the assessee has obtained accommodation entry on account of loan from Aditi Gems Private Ltd, the company floated by Mr. Shripal Vora, who in turn stated in his statement under section 132(4) of the Act that he and his entities are engaged in providing the accommodation entries. Accordingly, notice under section 148 of the Act was issued to the assessee on 27/03/2019. In response to the notice, the assessee filed its return of income on 30/04/2019. After receipt of the reasons recorded for reopening the assessment, the assessee filed its detailed objections against the reassessment proceedings, which were disposed of. During the assessment proceedings, notice under section 133(6) of the Act was issued to Aditi Gems Private Ltd and Mr. Shripal Vora for confirmation of the alleged transactions of accommodation entries of loans amounting to INR 50 lakh. However, neither anyone attended nor filed any response to the notice issued under section 133(6) of the Act despite due service of the notice at the address provided by the assessee. Further, a summon under section 131 of the Act was issued to the director of the assessee, and in response to the same the statement of Mr. Anil Mutha, the director of the assessee company, was recorded, wherein he confirmed that he did not have any business transaction with Aditi Gems Pvt Ltd or Mr. Shripal Vora nor have any relationship with them in any concern. It was further stated by Mr. Anil
Majestic Premises Pvt. Ltd.. 4 Mutha that he doesn’t know Mr. Shripal Vora nor have any business transaction in any of its concerned. Mr. Anil Mutha submitted that he had approached a common friend Mr. Shakhar Jethwa, who arranged this loan, but the assessee failed to produce the address and business details of such friend. Mr. Anil Mutha also denied having any transaction with Aditi Gems Private Ltd in any other assessment year. Accordingly, vide order dated 31/10/2019 passed under section 147 read with section 143(3) of the Act, the Assessing Officer (“AO”) held that the assessee has failed to produce the director or employee of the lender company, and thus, the identity of the lender is not proved. Further, the AO held that as per the information received from the Investigation Wing, Surat, the premises of all companies related to Mr. Shripal Vora were found locked and no real business was being conducted from such premises. Further, on the basis of the statement of Mr. Shripal Vora recorded under section 131 of the Act, the AO held that the assessee is a beneficiary of accommodation entry transaction in lieu of cash and after payment of commission @2.75% of the amount. Accordingly, the amount of INR 50 lakh was held to be taxable in the hands of the assessee as unexplained money under section 69A of the Act, which is provided to Aditi Gems Private Ltd for obtaining a loan through RTGS of equivalent amount and subsequently received back by making payment through RTGS to Aditi Gems Private Ltd. In addition to the above, an addition of INR 2,75,000 was made in respect of alleged commission expenditure under section 69C of the Act.
Majestic Premises Pvt. Ltd.. 5
4. The learned CIT(A), vide impugned order, upheld the initiation of re- assessment proceedings under section 147 of the Act. Further, the learned CIT(A) also upheld the addition amounting to INR 50 lakh on the basis that the assessee has availed accommodation entry of an unsecured loan from Aditi Gems Private Ltd (a shell entity operated by Mr. Shripal Vora), and has failed to establish the identity and creditworthiness of the loan lender and genuineness of the transaction. The learned CIT(A) also upheld the addition in the hands of the assessee on account of commission expenditure for availing the accommodation entry. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. The present appeal is arising out of the third round of assessment proceedings pursuant to the notice issued under section 148 of the Act. In the first round of assessment proceedings, notice under section 153A of the Act was issued to the assessee pursuant to the search action conducted under section 132(4) of the Act at the business and residential premises of the assessee’s group concern including the assessee. Vide order passed under section 143(3) read with section 153A of the Act, the assessment was concluded accepting the return of income filed by the assessee. Thereafter, proceedings under section 147 of the Act were initiated on the basis that the assessee declared additional income on account of on-money received as sales, whereas it should have been included in the total income of the assessee. However, again the assessment was concluded by accepting the return of income filed by the assessee vide
Majestic Premises Pvt. Ltd.. 6 order passed under section 143(3) read with section 147 of the Act. In the third round of assessment proceedings, which resulted in the present appeal, proceedings under section 147 of the Act were initiated on the basis of the information received from the DCIT, Central Circle-1(2), Ahmedabad, that the assessee is a beneficiary of accommodation entry transaction of unsecured loans from Aditi Gems Private Ltd, which is a company floated by Mr. Shripal Vora, who in turn in his statement recorded under section 132(4) of the Act admitted that he and his entities are engaged in providing accommodation entries. Accordingly, notice under section 148 of the Act was issued to the assessee, and re-assessment proceedings were initiated. Vide order dated 31/10/2019 passed under section 147 read with section 143(3) of the Act, the AO made an addition of INR 50 lakh under section 69A of the Act and an addition of INR 2,75,000 as commission expenditure under section 69C of the Act on the basis that the assessee has availed accommodation entry of unsecured loan from an entity controlled by Mr. Shripal Vora.
From the perusal of the reasons recorded for reopening the assessment, forming part of the paper book from pages 23-24, it is ostensible that the only basis for initiating the reassessment proceedings was the information received from the DCIT, Central Circle-1(2), Ahmedabad, that the assessee is a beneficiary of accommodation entry transaction of unsecured loans from Aditi Gems Private Ltd, which is a company floated by Mr. Shripal Vora, who in his statement recorded under section 132(4) of the Act admitted that he and his entities are engaged in Majestic Premises Pvt. Ltd.. 7 providing accommodation entries. Further, it is evident from the record that in the earlier two rounds of assessment proceedings, the transaction with Aditi Gems Private Ltd was not examined by the AO. The assessee has also not brought any material on record to show that in the earlier two rounds of assessment proceedings, the AO formed any opinion in respect of the assessee’s transaction of unsecured loans from Aditi Gems Private Ltd. Such being the facts, we find no merits in ground no.1 raised in the assessee’s appeal that the reopening of assessment under section 147 by issuing of notice dated 27/03/2019 under section 148 is due to a change of opinion of the AO. Further, there is no material available on record to substantiate the plea of the assessee that the present case falls within the ambit of the first proviso to section 147 of the Act. It is pertinent to note that in ACIT v/s Rajesh Jhaveri Stock Brokers (P.) Ltd., reported in [2007] 291 ITR 500 (SC), the Hon’ble Supreme Court held that if there is relevant material on the basis of which a reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that the sufficiency or correctness of the material is not a thing to be considered at the stage of recording the reasons. In the present case, we are of the considered view that the information received from the DCIT, Central Circle- 1(2), Ahmedabad, constitutes new and tangible material for initiating the reassessment proceedings in the case of the assessee. As a result, we find no infirmity in the reassessment proceedings initiated by the AO under section 147 of the Act. As a result, grounds no.1 and 2, raised in the assessee’s appeal are dismissed.
Majestic Premises Pvt. Ltd.. 8
In the present case, it is the plea of the assessee that at the time of taking the loan, Mr. Shripal Vora was not the director of Aditi Gems Private Ltd, on whose statement additions have been made. The assessee submitted that Mr. Shripal Vora was the director of Aditi Gems Private Ltd only at the time of the recording of the statement and therefore Mr. Anil Mutha denied having any dealings with Mr. Shripal Vora. In order to substantiate the identity and creditworthiness of the loan lender and the genuineness of the transaction, the assessee has furnished a copy of the ITR and financials of Aditi Gems Private Ltd for the year under consideration. The assessee has also submitted a copy of the loan confirmation issued by Aditi Gems Private Ltd. Further, bank statements reflecting the transfer of loan through the banking channel and repayment of same through the banking channel have also been furnished by the assessee. The assessee has also filed a copy of Form 16A, reflecting the deduction of TDS on interest paid to Aditi Gems Private Ltd in respect of the loan availed by the assessee. We find that these details were also furnished before the AO during the assessment proceedings. However, without doubting the correctness of any of the documents submitted by the assessee in support of its claim that the loan of INR 50 lakh was genuinely availed by the assessee from Aditi Gems Private Ltd, the AO made the impugned addition solely on the basis of the statement of Mr. Shripal Vora and findings of the Investigation Wing. From the perusal of the statement of Mr. Shripal Vora, recorded under section 131 of the Act, which forms part of the assessment order, we find that there is no mention of any transaction by Mr. Shripal
Majestic Premises Pvt. Ltd.. 9 Vora with the assessee, and instead, Mr. Shripal Vora has admitted of a transaction with Globe 200 Sourcing Private Limited. Without highlighting the relevance of the aforesaid statement vis-à-vis the transaction of the assessee with Aditi Gems Private Ltd, the AO concluded that the transaction of unsecured loan is nothing but an accommodation entry transaction availed by the assessee from Aditi Gems Private Ltd. Further, there is no evidence available on record to substantiate the claim of cash trail between the assessee and Aditi Gems Private Ltd. Thus, apart from the fact that the assessee availed loan from Aditi Gems Private Ltd, which was later repaid by the assessee along with interest, there is no material available on record to prove that the transaction was not genuine. The assessee, in the paper book filed before us on pages 92-94, has also placed on record a copy of the bank statement of Aditi Gems Private Ltd. from where the assessee received a loan of INR 50 lakh on 13/04/2011, which was repaid by it to the same account of Aditi Gems Private Ltd. on 17/01/2012. From the perusal of the same, it is evident that there is neither any cash transaction prior to the grant of loan to the assessee nor any material has been brought on record by the Revenue to show that there was layering of funds prior to the grant of loan to the assessee.
Therefore, having considered the facts and circumstances of the present case, in light of the documents placed on record, we are of the considered view that the identity and creditworthiness of the loan lender and the genuineness of the transaction are proved in the present case. Before concluding, we may also note that the Hon’ble Jurisdictional High Court in Majestic Premises Pvt. Ltd.. 10 PCIT v/s Bairagra Builders (P) Ltd., reported in [2024] 164 taxmann.com 162 (Bom.) held that where the taxpayer had taken unsecured loan from two companies and had submitted all evidences to substantiate loan including confirmation from creditors and loan was taken and repaid through banking channels, the AO was not justified in treating said unsecured loan as fake and unexplained cash credit. Accordingly, we find no merits in the additions amounting to INR 50 lakh made under section 69A and INR 2,75,000 made under section 69C of the Act, and the same are deleted. As a result, grounds no.3 – 5, raised in the assessee’s appeal, are allowed.
In the result, the appeal by the assessee is partially allowed. Order pronounced in the open Court on 14/02/2025.