I.T.O. - 3(2)(4), MUMBAI vs. PARTH TRADELINKS PVT. LTD., MUMBAI

Since, identical grounds have been raised by the Revenue in both the appeals assailing the order of CIT(A) deleting the addition under section 68 of the Income Tax Act, 1961 ( in short ‘the Act’), these appeals are taken up together for adjudication and are decided vide this common order.

The brief facts of the case as emanating from records are: The assessment for assessment year 2008-09 in the case of assessee was reopened on the basis of information received by ADIT(Investigation), Maharashtra that the assessee is engaged in providing accommodation entries. The assessee is one of the group companies formed by Shri Harsh Dalmia and Shri Arun Dalmia. The assessee along with its Group Companies is alledgely engaged in rigging share prices of Himalchal Futuristic Company Ltd.( in short ‘HFCL’), Patna Media Graphic, Zee Telefilms Ltd. and other companies. The Assessing Officer on the basis of information received held that during the period relevant to assessment year under appeal, the assessee has taken unsecured loans from following companies aggregating to Rs.8,57,64,358/-:

Arneja & Co. 1,50,000 2. Birla Power Solutions Ltd. 1,43,07,500 3. Basant Marketing Pvt. Ltd. (1,41,48,142) 4. Himachal Futuristic Communications Ltd. 6,95,00,000 5. Real Tradelink Pvt. Ltd. 1,75,000 6. Watermark Financial Consultants Ltd. (95,70,000) 7 Zenith Birla (India) Ltd. 2,54,00,000 Total 8,57,64,358 The Assessing Officer made addition of the aforesaid amount under section 68 of the Act, stating that genuineness of unsecured loans is prima-facie doubtful. Aggrieved by the assessment order dated 10/03/2014 passed under section 143(3) r.w.s. 147 of the Act, the assessee filed appeal before the CIT(A). The CIT(A) after considering submissions of the assessee and documents on record deleted the addition. Hence, the present appeal by the Revenue.

Shri. R.A. Dhyani representing the Department vehemently supporting the assessment order submitted that the assessee and its Group Companies are engaged in providing accommodation entries. No actual business is being carried out by the assessee. During the period relevant to assessment year under appeal, the assessee has allegedly taken loans from various companies, however, the identity, creditworthiness and genuineness of the loan transactions were not proved. The investigation was carried out by CBI, ACB in the case of Dalmia Brothers and Group Companies including assessee. From investigation assessee’s involvement in providing accommodation entries is clearly discernable. The ld.Departmental Representative prayed for reversing the findings of CIT(A) and uploading the addition made in the assessment order.

Per contra, Shri A.K.Tibrewal appearing on behalf of the assessee vehemently defended the impugned order passed by the CIT(A). The ld. Authorized Representative of the assessee submitted that the Assessing Officer has made addition merely on the basis of suspicion and without properly ascertaining the facts. The assessee had furnished detailed documents viz. copy of confirmation from the creditors, copy of annual report of the creditors, copy of the bank account of the assessee endorsing that the amount has been received through banking channel, copy of bank account statement of creditors, PAN of creditors, copy of ITRs to substantiate creditworthiness and identity of the creditors and genuineness of the transactions. However, the Assessing Officer has failed to examine these documents and has merely placed reliance on the information received from CBI ACB. The CIT(A) after examining the documents has deleted the addition. The ld.Authorized Representative of the assessee pointed that all the relevant documents in respect of the creditors has been filed before the Tribunal in the form of paper book. The ld.Authorized Representative of the assessee prayed for upholding the order of CIT(A) and dismissing appeal of the Revenue.

We have heard the submissions made by rival sides and have examined the orders of authorities below. A perusal of assessment order shows that the Assessing Officer has placed huge reliance on the investigation conducted by CBI ACB without examining creditworthiness and identity of the lenders and the genuineness of the transactions. For making addition under section 68 of the Act three conditions that are required to be examined are identity and creditworthiness of the lenders and genuineness of the transactions. In penultimate paragraph of the assessment order, the Assessing Officer has recorded that investigation carried out by the CBI, ACB has established prima-facie that unsecured loans appearing in the books of account of the assessee company are not genuine loans but are bogus accommodation entries. The assessee has not made any submissions in this regard.

The CIT(A) in the impugned order after examining the documents on record and the assessment order has held that the Assessing Officer has not disputed any of the evidences filed by the assessee nor has come up with any adverse investigation findings. The addition made by the Assessing Officer is based merely on suspicion. It is not through the lens of suspicion but an objective consideration of facts that the issue have to be decided. Since, the assessee has discharged initial onus to establish identity, creditworthiness and genuineness of the transactions and the Assessing Officer has not faulted the confirmation, etc. filed before him, therefore, the addition made under section 68 of the Act is unsustainable. We concur with the findings of the CIT(A), hence, the impugned order is upheld and appeal of the Revenue is dismissed being devoid of any merit.

The assessee has filed application under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, assailing validity of re-opening of assessment. The ld. Authorized Representative of the assessee stated at Bar that he is not pressing the said application at this stage. In view of the statement made by Ld. Authorized Representative of the assessee, the issue regarding admissibility of application under Rule 27 and the issue raised therein is not deliberated upon at this stage and is left open.

Since, the grounds of appeal and the facts germane to the issue in appeal are identical to appeal in assessment year 2008-08 except for the quantum of addition under section 68 of the Act, the findings given while adjudicating appeal of Revenue for assessment year 2008-09 would mutatis mutandis apply to the present appeal. Consequently, the appeal of the Revenue for assessment year 2013-14 is dismissed, for parity of reasons.