NETWORTH AGRO SERVICES LTD.,MUMBAI vs. ITO 10(3)(1), MUMBAI

O R D E R

PER AMARJIT SINGH, JM:

1. On the facts and circumstances of the case and in law, the Hon’ble Commissioner of Income Tax (Appeals) (CIT(A)) has erred in upholding the reopening of assessment done by the learned Assessing Officer (‘AO’) u/s 147 of the Act.

2. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition of Rs.45,00,000/- 68 of the Act in respect of share application money received from M/s. Alka Diamond Industries Ltd.

3. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition of Rs.41,34,000/- u/s 68 of the Act in respect of loan obtained from M/s. Topcare Trading Co. Pvt. Ltd.

4. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in upholding the addition of Rs.1,00,00,000/- u/s 68 of the Act in respect of loan obtained from M/s. New Tree Mercantile Co. Pvt. Ltd.” 3. The brief facts of the case are that the assessee filed its return of income on 22.08.2015 declaring total income to the tune of Rs.26,70,733/-. The assessment of the assessee was reopened on the basis of information received from the DGIT(Inv.), Mumbai to the effect that during search and seizure action carried out in the case of Shri Praveen Kumar Jain Group on 01.10.2013 it was found that the assessee is beneficiary of accommodation entries. It was revealed during search that Shri Praveen Kumar Jain is providing accommodation entries through his related concerns/entites which runs into thousands of crores. The assessee was one of the beneficiaries of such accommodation entries by way of share capital as per the details collected by the Investigation Wing. The assessee company has also received of Rs.45,00,000/- as Share Application Money from various entities from entities related to Shri Praveen Kumar Jain the details of which were as under:-

Sr. Name of concern controlled managed by Amount of Investment No. Praveen Kumar Jain 1 Alka Diamond Industries Ltd. (AAACA5236D) 15,00,000 2 Alka Diamond Industries Ltd. (AAACA5236D) 10,00,000 3 Alka Diamond Industries Ltd. (AAACA5236D) 10,00,000 4 Alka Diamond Industries Ltd. (AAACA5236D) 10,00,000 45,00,000 The case of the assessee was reopened as per provision u/s 147 of the Act. Notice u/s 148 of the Act was issued and served upon the assessee which on 05.03.2015. The assessee filed its e-return of income in response to notice u/s 148 of the Act on 22.08.2015. Thereafter statutory notices were duly issued and served upon the assessee. Besides the assessee also received the unsecured loans as per details below:

Sr. Name of the account Date of entry Bank Account Amount No. holder Number 1 Topcare Trading Co. 1.11.2007 02321300000134 41,34,000 Pvt. Ltd. in DCB nariman point branch 2 New Tree Mercantile 31.07.2007 02321300000198 55,00,000 Pvt. Ltd in DCB nariman point baranch 3 New Tree Mercantile 24.10.2007 02321300000198 20,00,000 Pvt. Ltd. in DCB nariman point branch 4 New Tree Mercantile 31.07.2007 02321300000198 25,00,000 Pvt. Ltd in DCB nariman point branch The AO during the course of assessment proceedings issued notices u/s 131 of the Act to the above parties which were not complied with . The assessee during AO comprising names addresses, confirmations, copies ITRs & annual audited accounts etc. of the parties however the AO was not satisfied with the genuineness of the creditors/investors. Finally, the said amount of unsecured loans of Rs.1,41,34,000/- and share capital of Rs. 45,00,000/- were added to the income of the assessee in the assessment framed u/s 143(3) r.w.s. 147 of the Act dated 31.3.216 by assessing the income at Rs.2,13,04,730/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who dismissed the appeal of the assessee, therefore, the assessee has filed the present appeal before us. ISSUE NO.1 4. At the time of argument, this issue has not been pressed by the Ld. Representative of the assessee, therefore, this issue is being decided in favour of the revenue against the assessee being not pressed. ISSUE NO.2 5. Under this issue the assessee has challenged in respect of Share Application Money from M/s. Alka Diamond Industries Ltd, in sum of Rs.45,00,000/-. The Ld. Representative of the assessee has argued that the assessee has filed the sufficient proofs/documents to prove the genuineness and creditworthiness of the parties but the CIT(A) has wrongly dismissed appeal of the assessee and therefore, the order passed by the ld CIT(A) is wrong and can not be sustained. However, on the other hand, the Ld. Representative of the Department has refuted the said contentions. We noticed that the assessee filed the copies of ledger accounts , confirmation of Share Application Money received from M/s. Alka Diamond Industries Ltd, which is filed at page no. 3 of the paper book meaning thereby the confirmation from M/s. Alka Diamond Industries Ltd is on record. Similarly the bank account statement of M/s. Alka Diamond Industries Ltd is also furnished and lies at page no. 4 to 6 of the paper book which testifies the transfer of the said amount to the assessee. The income tax return and audited financial statements of M/s. Alka Diamond Industries Ltd, for the A.Y.2008-09 is also on record. Thus all these evidences proved the genuineness and creditworthiness of the investors. Moreover, the addition was made on the basis of the statement of Mr. Praveen Kumar Jain but Praveen Kumar Jain had retracted from his statement. Therefore addition can not be made on the basis of statement with has been retracted. The Hon’ble ITAT in the case of Diwali Capital & Finance Private Ltd. Vs. DCIT (ITA. No.2091/Mum/2018 dated 10 January, 2019 (ITAT Mumbai) & DCIT Vs. Blue Stock Investment Pvt. Ltd. (ITA. No.3987/Mum/2017 dated 10 January, 2019) has held that the transactions as genuine under similar facts and circumstances. The relevant finding is hereby reproduced as under:-

“8. Coming to assessee’s appeal in for AY 2008-09, the issue is against the order of CIT(A) confirming the action of the AO in making addition of share application money of ₹ 1,62,50,000/- and consequently addition of adhoc expenditure on account of commission paid to obtain these bogus capital at the rate of 5% i.e. ₹ 28,12,500/-. For this assessee has raised the following two grounds: - “1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of Ld. A. 0. in making addition of Rs. 1,62,50,000/- on account of Shares Application Money received during the year by treating it as alleged unexplained cash credit u/s 68 of the Income Tax Act that too by recording incorrect fact and findings and without observing the principle of natural justice. The learned CIT(A) has also failed to appreciate the fact that the appellant has discharged the onus cast upon it to establish the identity and creditworthiness of the share applicants and genuineness of the transactions.

2. In the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of Ld. A. 0. in making an ad-hoc addition of estimated unexplained expenditure u/s 69C of the Income Tax Act at the rate of 5% of the amount of addition made as alleged unexplained cash credit u/s 68 of the Act.”

ISSUE NO.3 & 4 7. Issue no.3 & 4 is against the confirmation by CIT(A) of addition of Rs.1,41,34,000/- as made by the AO towards non genuine loans u/s 68 of the Act. These loans were taken from taken from M/s. Topcare Trading Co. Pvt. Ltd. Rs, 41,34,000/- and Rs.1,00,00,000/- from M/s. New Tree Mercantile Co. Pvt. Ltd. The Ld. Representative of the assessee has argued that the assessee has given the all documents/evidences which sufficiently proved the creditworthiness and genuineness of the loan and are on record. The ld AR also argued that reliance on the statement of Mr. Praveen Kumar Jain’s retracted statement is wrong and against the provisions of the law unless some substantive evidences are brought on records by the revenue. Therefore, the addition is not justified. However, on the other hand, the Ld. Representative of the Department has refuted the said contentions and strongly relied upon the order passed by the CIT(A) in question to prove his claim. We note that the assessee has filed the copy of ledger account , confirmation, PAN bank statement, ITR and audited annual accounts both the lenders which are also available in the paper book which showed the transactions in question are proved by the asessee. In this regard, we also place reliance upon the decision of CIT Vs. A.L. Lalpuria Construction Pvt. Ltd. (2013) 32 taxmann.com 384 (Raj HC) and the decision of the Hon’ble Gujarat High Court in the case of PCIT Vs. Texraj Reality Pvt. Ltd. (2018) 102 CCH 0077. The assessee has given the sufficient documentary proofs to prove the transactions which areon record. The Hon’ble ITAT in the case of Diwali Capital & Finance Pvt. Ltd. (supra) and Blue Stock Investment Pvt. Ltd. (supra) has held that the sufficient evidences have been given by the assesse qua the money raised , the no the addition towards the loan/share application money could be made . Accordingly, we set aside the finding of the CIT(A) on this issue and allow the claim of the assessee. Ground no. 3 and 4 are allowed.