ASSTT. CIT-CENTRAL CIRCLE- 1(3), MUMBAI vs. M/S. STAR ONE REALCON P. LTD, MUMBAI

The aforesaid appeals have been filed by the Revenue challenging the order dated 28th February 2020, passed by the learned Commissioner of Income Tax (Appeals)–47, Mumbai, for the assessment year 2011–12.

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1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,00,00,000/- made on account of Bogus loan without appreciating the findings of the search and post search

2 M/s. Star One Realcon Pvt. Ltd. proceedings in the case of Bhanwarlal Jain group of cases wherein the group has admitted u/s 132(4) of the Act to have indulged in providing accommodation entries in the nature of unsecured loans and the findings of the survey and post survey proceedings in the case of the assessee group wherein it was clearly established that the assessee had availed accommodation entry of bogus unsecured loan from the Bhanwarlal Jain Group when statement of Shri Bhanwarlal Join recorded u/s 132(4) of the Act clearly falls under the provisions of section 115 of the India Evidence Act and hence, the case is hit by provision of section 115 of the Indian Evidence Act? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not appreciating the fact that the Assessing Officer had brought sufficient evidence on record to establish that the identity, genuineness and creditworthiness of the lenders have remained unexplained? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not upholding the addition made by the A.O. even though it is well established that the modus operandi of obtaining accommodation entries of unsecured loan had to be considered in the light of surrounding circumstances, normal course of human conduct and preponderance of probability?"

4. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in not upholding the additions made by AO in view of the judgment by the Apex court in the case of Principal Commissioner of Income Tax (Central)-1 Vs NRA Iron & Steel Pvt. Ltd (arising out of SLP(Civil) No.29855 of 2018) where it is held by the Apex court that the practice of conversion of un-accounted money must be subjected to careful scrutiny"

5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in not upholding the addition made by the A.O. in view of the judgment by the Apex court in the case of Commissioner of Income Tax Vs Golcha Properties Pvt. Ltd (in Liquidation) (1996) 136 CTR 222 (RAJ.) upholding the genuineness of transaction could be decided on the basis of primary facts on record. The Department is not required to lead a clinching evidence to prove that transaction in question is bogus.

6. Whether on the facts and in the circumstances of the case and in law, in consequence to the question of law at 1 (supra), the ld. CIT(A) was justified in not upholding the additions made by the A.O. amounting to 3,57,534/– on account of interest paid on bogus loan and 1,20,000/– on account of commission.”

3 M/s. Star One Realcon Pvt. Ltd.

unsecured loans received from the parties belonging to Shri Bhanwarlal Jain group. In response, the assessee filed written submissions and documentary evidence to justify the identity and creditworthiness of the lenders and genuineness of loan transactions. However, the Assessing Officer rejected the submissions and documents furnished by assessee and relying on survey report and statements of Shri Bhanwarlal Jain and his related persons held the loans as non-genuine. The Assessing Officer also considered the statement recorded during survey of Shri Nemichand Jain and held that the assessee has failed to prove the identity, genuineness and creditworthiness of the entities which had to provided unsecured loans to various group concerns of Shri Nemichand Jain. Finally, the Assessing Officer passed the assessment order where in the addition has been made under section 68 on account of bogus loans from the various entities belonging to Shri Bhanwarlal Jain group of 2 crore. The Assessing Officer also made disallowance on account of interest paid of 3,57,534, and further made an estimated addition of commission expenses of 1,20,000. The Assessing Officer completed the assessment under section 143(3) r/w section 147 of the Act determining total income at 2,04,77,534. Being aggrieved, the assessee filed appeal before the first appellate authority.

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4. The learned CIT(A) deleted the addition on account of unsecured loan as well directed the Assessing Officer to delete the disallowance of consequential interest of 3,57,534 and consequential addition of commission paid of 1,20,000/–. The relevant observations of the learned CIT(A) are reproduced below:– “Decision on 7.1. I have considered the facts of the case, submissions and contention of the Appellant, as also the observations of the AO contained in the assessment order and the other materials on record on this issue. As discussed a search and seizure action u/s 132(1) of the Act was conducted by the office of the DGIT(Inv.), Mumbal on Shri Bhanwarlal Jain group of cases on 03.10.2013. On the basis of information gathered during the course of search operation on Bhanwarlal Jain group, a survey u/s 133A was conducted on the Neminath Group of cases on 16.10.2014. The appellant is a group company of the Neminath Group. Subsequently the assessement proceedings were initiated. In the assessment order, AO observed that the appellant had obtained the unsecured loans from certain entities belonging to Shri Bhanwarlal Jain and his employees/associates. The AU relied on the investigation report and observed the Shri khanwarlal Jain and his employees/associate are engaged in providing the accommodation transactions and the appellant is one of the beneficiary of the non- genuine transactions. The AU relied on the statements of Shri Bhanwarlal Jain and his employees/associates Shri Basant D. Jain and Shri Lunkaran Parasrnal Kothari. The AU held that the retraction statement filed by Shri Bhanwarlal Jain and others is an afterthought since had been filed after 6 months from the date of search. The AU observed that the entities managed and controlled by Shri Bhanwarlal Jain had disclosed the high turnover, loans& advances, debtors and investment against which had not disclosed adequate taxable income. The AO also analyzed the statement of Shri Nemichand P. Jain and held that the identity, genuineness and credit-worthiness of the lender had not been substantiated. The AU observed that Shri Nemmchand P. Jain had not furnished the copies of loan agreement, collateral security, etc and had merely stated that the unsecured loans were taken through proper banking channel. The AO further observed that the rate of interest corresponding to the disputed loans is paid 9% p.a. which is less than the interest paid on secured loans to the banks. Finally, the AU has made the assessment wherein the addition has been made u/s 68 on account of bogus loans taken from the various

6 M/s. Star One Realcon Pvt. Ltd. entities of Bhanwarlal Jain group. Also, the AO disallowed the corresponding interest paid on such loans and also made an estimated addition on account at commission expense. 7.2 On the other hand, the Ui AR submitted that the issues involved in the appeal are covered by the decision of Hon'ble ITAT in various cases of Neminath Group and the appellant is one of the entity belonging to the same group (Neminath Group). The Ld. AR further submitted that my Id. predecessor had passed the similar appeal orders in the case of M/s Neminath Homes Pvt Ltd related to A.Y-2010-11 and 2011-12, wherein he had followed the decision of Hon'ble ITAT and had deleted the similar additions of loans and addition/disallowance of interest and commission made in the assessment orders. The Ld. AR submitted that the facts of the appellant's case is exactly identical and similar to the facts of the cases decided by Hon'ble ITAT and also by my Id. predecessor. On merits, Ld. AR submitted that the appellant had filed exhaustive documentary evidence to justify the identity, genuineness and credit worthiness of the loans and interest paid thereon. The Ld.AR submitted that the appellant had filed the copies of PAN of the lenders to prove the identity of the lenders. The copies of confirmation of account, own bank statements and TDS certificates had been filed to prove the genuineness of the loan transactions. The copies of I T Return Acknowledgement receipts, bank statements and balance sheet of the lenders are filed to prove the credit worthiness of the lenders. It can be seen from the details that the sources of lenders funds is not out of cash deposits but otherwise. The Ld. AR also filed the copies of retraction statement of Shri Bhanwarmal Jain and submitted that the addition made in assessment merely on the basis of retracted statement is unjustified. The Ld. AR submitted that the appellant's director Shri Nernichand jain in the statement recorded u/s 131 had explained the genuineness of the loans received. The Ld. AR further submitted that the appellant had repaid the major loans to such parties in subsequent years. It is observed that AO had not pointed any fault in the documentary evidences filed by the appellant and AO had not rejected the appellant's books of accounts u/s 145(3), thus is not justified in making the addition of the loans and consequential disallowance of interest thereon. The Ld. AR also relied on various judicial decisions to support the case of the appellant. 73 During the year under consideration the AO added an amount of Rs. 2,00,00,0001- as unsecured loan taken by the assessee from three different companies. The assessee vehemently contested the addition made by the AO and have made derailed arguments in this regard and have furnished confirmations from these parties, their income tax returns, bank statements, balance sheet, P & L A/c and other relevant details. The assessee has also submitted that these loans have already been paid during the financial year 2013-14 and before the survey action u/s 133A was carried out in their case or even before the search

7 M/s. Star One Realcon Pvt. Ltd.

& seizure action in case of Shri Bhanwrlal Jain Group. The assessee also argued that during the course of survey at point of time they admitted that this loan is bogus or non-genuine and it was also mentioned that even Jhanwarlal Jain retracted his statement and such retraction was accepted by the Hon’ble ITAT in the appellate proceedings in his case and relief was granted to him. The Ld. AR drawn my attention to the appellate order passed by my Ld. Predecessor in its case for A.Y. 2010-11 and also the Hon'ble ITAT decision which was relied upon by my Ld. Predecessor. 7.4 I have considered the facts of the case and arguments of the assesse. First of all it is very important to mention over here that impugned loans were already repaid by the assessee during the financial year 2013-14 through banking channels. Further, the repayment has taken place much before the survey action u/s 133A was carried out in the case of the assessee. Moreover, the repayment has taken place even before search and seizure action in case of Bhariwarlal Jam. It has also been noticed that the assessee has paid interest at the rate of 9% on these loans, which has been paid , year on year basis, through cheques and relevant entries were appearing in the bank statement of the assessee, which is on record. It has also been noticed that TDS has been duly deducted year on year basis and TDS have been filed by the assessee, 7.5 it has been further gathered that Registrar of Companies (ROC) is showing the status of these companies as active, even after ten years of the loan transactions and the companies continue to do business at the given address and have not disappeared. It is also gathered that these entities continue to file their tax return and making other compliances. It is also seen that the assessee duly furnished its own bank statement and bank statement of the creditor companies before the AD. The bank accounts are showing significant cash balances all along and it is not the case that some amounts have been deposited just before the loan entries to the assessee. It is also seen that the money in the said bank accounts have come from sales operation to other big companies. The sales turnover of these companies is more than Rs. 100 crores and their accounts are duly audited and significant income has been shown there in, year on year basis. These companies have duly confirmed the loan transactions. In fact it has been found that the assessee even offered to the AO to issue notices u/s 133(6), to examine the genuineness of the transactions and at no point of time expressed its inability in producing any details or relevant persons. 7.6 In this regard it is also relevant to see as to what did the assessee said at the time of survey in his statement on oath, which is reproduced as under, for the sake of clarity:- “Ans to Q 15 :The loans from the above mentioned parties .rere

8 M/s. Star One Realcon Pvt. Ltd. arranged by Shri RaranlaUi Sankhla. I do not know the nature of business carried out by any of these parties. I have no idea regarding their identity and creditworthiness. So far as genuineness of the transaction are concerned, the loans have come through banking channels. Ans to Q 18: The borrowings of unsecured loans have Jen made from each of the above mentioned parties at the rate of 9% per annum. Ans to Q 19: Loans were initially raised in financial year 2008-09 to 2010-11. Loans were initially raised for period of 18 months for financing Chaitanya and Nerninath Park projects. However, due to resource constraints, these loans continues and were repaid in subsequent period depending on availability, of funds. Ans to Q 21: 1 have nothing to say except that these loans have been extended without any security, collateral or a guarantee based on my track record and financial worth. Ans to Q 22: These unsecured loans were arranged by Shri Ratanlalji Sankhla and I did not meet any of the lenders personally, interest has been paid through banking channels after deducting TDS thereon. Ans to Q 23: All the above loans stand repaid as on date. There is no outstanding loan from the above parties now." 7.7 From the above statement of the assessee it is quite clear that at no point of time, he accepted that these loans were non- genuine in fact in response to question no. 23 he very clearly mentioned that all the above loans stand repaid and there was no outstanding. Prior to that the assessee clearly mentioned in response to question no 19, as to for what purposes these loans were taken and the rate of interest. The assessee also clearly mentioned that interest at the rate of 9% paid on these loans. It is also brought to my notice that the Ld. AR that the statements on the basis of which the Ld. AO have added these amounts in the hands of the assessee have already been retracted and apparently there has been no other material which has been brought on the record by the AD to establish non-genuineness of these credits. In the situation like the above, the action of the AO in treating these loans as non-genuine, on the basis of statements of a third party, which already stands retracted cannot be upheld especially when there is no material on the record and the assesse has discharge its Onus in this regard. 7.8 I have considered the facts of the case and arguments put

9 M/s. Star One Realcon Pvt. Ltd. forward by the Ld. AR and legal matrix and past appellate history. It can be seen that the facts of the present appeals are exactly similar to that of the Appellant's associate companies/concerns named M/s. Neminath Homes Pvt. Ltd, DCIT, M/s. Neminath Associates,M/s. Neminath Enterprises and its director Shri Nemichand P. Jain related to A.Y.2010-11 to 2014-15. The issues involved in the above stated appeals also related to the addition of unsecured loans obtained, disallowance of interest on such loans and addition of commission paid thereon. The additions/disallowance were sustained by my predecessor initially. However, Hon'ble ITAT, 'B' bench, Mumbai side order dated 08,107/2019 in all above stated cases belonging to appellant's group and its director Shri Nemiichand P. Jain had deleted the additions of the unsecured loans and also had deleted the disallowance of interest of such loans and commission estimated thereon. The relevant appeal numbers of the appellant's associate companies and in director are ITA- 2641. 2480 & 2388/Muni/2018 in the case of Shri Nemichand P. lain for A.Y.2010-11, 2011-12 & 2014-15, bearing & 3018/Mum/2018 in the case of M/s, Neminath Enterprises for A.Y.2012-13, 2013-14 & 2014-15, bearing ITA No.2436 & 2591/Mum/2018 in the case of M/s. Neminath Associates for A.Y.2013-14 & 2014-15 & bearing ITA No.2661 & 2718/Mum/2018 in the case of M/s. Nemninath Homes Pvt Ltd for A.Y 2013-14 & 2014-15. The Hon'ble ITATI after detailed discussion, had deleted the entire additions made on account of unsecured loans and consequent additions/disallowances on account of interest and commission with the following observations:- “7.The solitary issue that needs to be resolved under given facts and circumstances of this case is whether unsecured loans taken from certain companies controlled and managed by Shri Bharnvarial Jain is unexplained cash credit, which comes under the provisions of section 68 of the Act or not. The AO has made additions of Rs.15,00,000/– towards unsecured loans taken from cc rraTh companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act, on the ground that the assesse has failed to file necessary documents in order to prove identity, genuineness of transactions and creditworthiness of' the parties. The AG has extensively discussed the issue in his assessment order in light of facts gather during the course of search in case of Bhanwarlal Jain group of cases and survey in the case of assessee group concern. Accordingly, the AO, opined that although the assesse has furnished various documents including confirmations from the loan creditors and their ITR acknowledgment, but failed to prove the genuineness of 10 M/s. Star One Realcon Pvt. Ltd. transactions and creditworthiness of the parties in order to come out the provisions of section 68 of the Act. The AO further was of the opinion that mere furnishing certain paper documents is not sufficient enough In light of various facts gathered by the department during the course of search. The A0 further was of the opinion that payment through proper banking channel and interest payment to those unsecured loans is not sacrosanct because all these shell companies/hawala operators would keep necessary paper document in order to give colour of genuineness to their transactions. Therefore, he opined that the transactions between the parties are failed to pass the test of genuineness and accordingly made additions u/s 68 of the Act. The provisions of section 68 of the Act deals with the cases, where any sum found credited in the books of account of the assesse in any Financial Year, and the assessee offers no explanation about the nature and source there of or explanation offered by the assesse is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assesse of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e. identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provided u/s 68 of the Act, then the onus shifts to the AO to prove otherwise. In this legal background, if you examine the identity of the assessee in light of findings recorded by the AG in his assessment order; one has to examine whether the assesse has discharged burden caste upon it u/s 68 of the Act in respect of unsecured loan received from certain companies controlled and managed by Shri Jhanwarlal Jain. The AO never disputed the fact that the assesse furnished various evidences to prove identity of the loan creditors. The AG has categorically admitted that the assesse has filed various details including PAN Card, ITR acknowledgment, financial statements, bank statements, confirmation letters and affidavit from the parties from whom loan has been taken. The AO has disputed the genuineness of transactions and creditworthiness of the parties. The sole basis for the AO to doubt the genuineness of transaction is search conducted in the cases of Bhanwarlal fain by the DGIT (lnv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal fain and his associates were involved in providing accommodation entries and the assesse is one of the beneficiaries of such accommodation entries. The AO has taken note of statement recorded by the department from Shri Bhanwarlal Jain and his associates. The AU has taken note 11 M/s. Star One Realcon Pvt. Ltd. to survey proceedings conducted in the group cases of assesse and statement recorded from directors and employees of the assessee group cases. Except this, no contrary evidences has been brought on record by the AU to disprove the claim of the assesse that the such genuine transactions and unsecured loan taken under normal business circumstances. Therefore, under these factual matrix, we have to examine whether the credits found in the books of accounts of the assesse are hit by the provisions of section 68 of the Act or not. The sole basis for the no to make additions is statement of Shri Bhanwarlal fain recorded u/s 32(4) of the Act, where he was admitted that he is involved in providing bogus unsecured loans entries to various beneficiaries. The statement given by Shri Bhanwarlal fain has been retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason for the AU to go only on the basis of statement of Shri Bhanwarlal Jain so as to treat unsecured loan taken by the assesse from the firm and companies controlled and managed by Shri Bhanwarlal Jain and his associates.

9. Having said so, let us examine what is the basis for the AO to arrive at conclusion that the transactions between the parties are not genuine and which are hit by the provisions of section 68 of the Act. The AO never brought out any further facts to link credits found in the books of accounts of the assessee to the evidences found during the course of search in the case of Shri Bhanwalal Jain except statement of Shri Rhanwalal Jain. Even during the course of survey in group cases of assessee, no incriminating material was found which can be linked to evidences collected during the course of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group Companies for arranging loans. The AG did not controvert this fact by bringing any other evidences. On the other hand, the assesse has filed complete details including confirmations from loan creditors, their PAN details, masterdata, affidavit from the directors/partners/proprietors of those companies, income tax acknowledgments receipts along with financial statements, hank statements of loan creditors in order to prove the identity, genuineness of transaction and credit worthiness of the parties. We, further, noted that all these loans have been taken through proper banking channels. The assesse has paid interest after deducting applicable TDS as per the law. These loans have been repaid during next financial year. All these documents are part of assessment proceedings. The AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing 12 M/s. Star One Realcon Pvt. Ltd.

necessary evidences in order to prove identity genuineness of transactions and credit worthiness of the parties, then there is no reason for AO to suspect the transactions between the parties only on the ground that the person who gave unsecured loan had admitted in his statement u/s 32(4) of the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. Further, the AO failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal fain to make additions u/s 68 of the Act. No doubt, the AO is having every right to suspect the transactions hut, that by itself would not give rise an occasion for the O to make additions u/s 68 of the Act, when the evidences filed by the assesse clearly proves the facts that these transactions were genuine transactions which are undertaken under normal commercial business circumstances. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act.

10. Coming to the cases relied upon by the assessee, the assesse has relied upon various judicial precedence including the decision of the Hon'ble Supreme Court in the case of CIT vs Lovely Export Pvt. Ltd. (2008) 216 CTR 195. The case laws relied upon by the assesse has been dealt as under:-

CIT vs. Goa Sponge and Power Ltd(13/02/2012)Tax Appeal No.16 of 2012 (High Court-Bombay)

"Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as lbogus!. The controversy is covered by the judgements rendered by the Hon'hle Supreme Court in the case of Lovely Exports Pvt Ltd. vs. CIT. (2008)216 CTR(SC)195, as also by this Court in CIT vs. Creative World Telefilms Ltd, (2011) 333 ITR 100 (Bom). In such circumstances, we are of the view that the Tribunal's finding that there is no justification in the addition made under Section 68 of the Income Tax Act, 1961 neither suffers from any perversity nor gives rise to any substantial question of law.

CIT vs. Creative World Telefilms Ltd (2011) 333 ITR 100 (Bom- 13 M/s. Star One Realcon Pvt. Ltd. High Court)

The questions ought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P)Ltd(2008) 216 CTR (SC) 195. Wherein the apex Court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AG, then the Department can always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assesse had given the details of name and address of the shareholder, their PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the AG to make proper investigation and reach the shareholders. The AG did nothing except issuing summons which were ultimately returned hack with an endorsement 'not traceable In our considered view, the AG ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders in all the relevant material details and particulars were given by the assesse to the AO. In the above circumstances, the view taken by the Tribunal cannot he faulted.

CIT vs. Lovely Exports (P) Ltd (2008) 216 CTR 195 (SC)

"If the share application money is received by the assesse company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assesse company." CIT vs. Steller Investment Ltd (2001)251 ITR 263(SC)(civil appeal) "That the increase in subscribed capital of the respondent company could not be a device of converting black money in to white with the help offormation of an investment company, on the round that, even if it be assumed that the subscribers to the increased capital were not genuine, tinder no circumstances could the amount of share capital he regarded as undisclosed income, an appeal was taken by the Department to the Supreme Court. The Supreme Court dismissed the appeal holding that the Tribunal had come to a conclusionon facts and no interference was called for. CIT vs. Nav Bharat Duolex Ltd (2013) 35 Taxmann.com 289 (All-High Court)

14 M/s. Star One Realcon Pvt. Ltd. We have considered the arguments of the counsel for the parties. CIT(A) found that five companies subscribing the equity shares amounting to Rs.25,00,000/- were Identified and they had submitted their bank statements, cash extracts and returns filing receipts. As such identity of the share applicant companies and purchase of share had been proved by the assessee. Supreme court in the cases of CIT vs. Steller Investments Ltd. [2001] 251 ITR 263 and Lovely Exports case supra), has held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the shareholders. Accordingly CIT(A) and the Tribunal has not committed any illegality in allowing the appeal of the assessee. We do not find any illegality in the judgment of the CIT(A) and the Tribunal.” CIT vs. Jay Dee Securities & Finance Ltd (2013) 32 Taxmann.com 91 (All- High Court) "The Tribunal recorded findings that the assesse had produced the return of income filed by the relevant shareholders who had paid share application money The assesse had also produced the confirmation of shareholders indicating the details of addresses, PAN and particulars of cheques through which the amount was paid towards the share application money. The Tribunal thereafter relied upon the judgment of the Supreme Court in CIT vs. Lovely Exports (P.) Ltd wherein it was held that if the assesse produces the names, addresses, PAN details of the shareholders then the onus on the assesse to prove the source of Share application money stands discharged. If the Assessing Authority was not satisfied with the creditworthiness of the shareholders, it was open to the Assessing Authority to verify the same in the hands of the shareholders concerned, The Tribunal has relied upon an order of the Supreme Court in case of CIT vs. Divine Leasing & Finance Ltd. In view of the decision of the Supreme Court, we dismiss the appeals with observations that the depart mentis free to proceed to reopen their individual assessments of the shareholders whose names and details were given to the Assessing Officer." ACIT vs. Venkareshwar Ispat Pvt Ltd (2009) 319 ITR 393 (Chhatisgarh High Court) "If the share applications are received by the assesse from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as the undisclosed income of the assessee.

15 M/s. Star One Realcon Pvt. Ltd. Mod Creations Pvt Ltd vs. ITO(201 3)354 ITR 282(DeI-High Court) "Held, allowing the appeal, 'I) that the assesse had discharged the Initial onus placed on it. In the even the Revenues till had a doubt with regard to the genuineness of the transactions in issue or regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the Assessing Officer that the credits were a circular route adopted by the assesse to plough hack its own undisclosed income in to its accounts, could be of no avail. The Revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The Revenue would he required to bridge the gap between the suspicions and proof in order to bring home this allegation. The Tribunal without adverting to the principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction Based on this it construed the intentions of the assesse as being mala fide. The Tribunal ought to have analysed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the Assessing Officer. If the Assessing Officer had any doubt about the material placed on record, which was largely bank statements of the creditors and their income-tax returns, it could gather the necessary information from the sources to which the information was attributable...... If it had any doubts with regard to their creditworthiness, the Revenue could always bring the sum in question to tax in the hands of the creditors or sub-creditors. CIT vs. AL4nani Agro Foods(P.) Ltd. (2013) 38 Taxmunn.com 375 (All High Court) "Tribunal, however, held that since identity of shareholders to proved on record amount of share application money could not be added to income of assessee. According to Tribunal, in such a case amount could he taxed in hands of persons who had invested" CIT vs. Dwarkadhish investment (P)Ltd. (2011) 330 ITR 298 (Del-High Court) "Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s.68— Revenue has all the power and where with all to trace any person— Moreover, it is settled law that the assesse need not to prove the 'source of source'—In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the 16 M/s. Star One Realcon Pvt. Ltd. impugned addition holding that the assesse has been able to prove the identity of the share applicants ancl the share application money has been received by way of account payee cheques." CIT vs. Naniasrey Chemicals Pvt Ltd (2013)33 Taxmann..com 271 (Gui- High Court) "In the present case also, the respondent assesse has received share application money from different subscribers. It was found that large number of subscribers had responded to the letters issued by the Assessing Officer or summons issued by him and submitted their affidavits. In some cases such replies were not received through posts. Rs. 9 lacs represented those assesses who denied having made any investment altogether. The issue thus would fall squarely within the ambit of the judgment of the Supreme Court in the case of Lovely Exports (supra). No error of law can be stated to have been committed by the Tribunal. Tax Appeal is therefore dismissed." CIT vs. Peoples Genera! Hospital Ltd ('2013) 356 ITR 65 (ALP-High Court) 'Held, dismissing the appeals, that it the assesse had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made tinder section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the share holders were benarnidars or fictitious persons or that any part of the share capital represented the company' sown in come from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or non- existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to he seen. Thus, the addition was rightly deleted. CIT vs. Shree Rania Multi Tech Ltd. 2013) 34 Taxnmann.com 177(Guj HC) "It is noted that Commissioner (Appeals) as well as the Tribunal have - duly considered issue and having found complete details of the receipts of share application money, along with the form names and addresses, PAN and other requisite details, they found complete absence of the grounds noted for invoking the provision 17 M/s. Star One Realcon Pvt. Ltd. of section 68. Moreover, both rightly had applied the decision of CIT vs. Lovely Exports (P) Ltd. to the case of the assessee. Therefore, no reason was found in absence of any illegality much less any perversity to interfere with the order of the both these authorities, who had concurrently held the due details having been proved. The assessee company had presented the necessary worth proof before both the authorities and it was not expected by the assessee company to further prove the source of the deceased." CIT vs. Nikunj Eximp Enterprises (P)Ltd (2013) 35 Taxmann. Com 384 (Rum) 'Whether merely because suppliers had not appeared before Assessing Officer or Commissioner Appeals, it could not be concluded that purchases were not made by assesse -Held, Yes ... Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the C'ITA), one cannot conclude that the purchases were not made by the respondent- assesse”. CIT vs. Samir Bio-Tech Pvt Ltd (2010)325 JTR 294 (Del-High Court) Identities of the subscribers are not in doubt. The transactions have also been undertaken through banking channels in as much as the application money for the shares was given through account payee cheques. The creditworthiness has also been established, as indicated by the Tribunal. The subscribers have given their complete details with regard to their tax returns and assessments. In these circumstances, the Department could not draw an adverse inference against the assesse only because the subscribers did not initially respond to the summons. The subscribers, however, subsequently gave their confirmation letters as would be apparent from the impugned order. The identity of the subscribers stands established and it is also a fact that they have shown the said amounts in their audited balance sheets and have also [lied returns before the IT authorities. The decision of the Tribunal deleting the addition cannot be faulted."

came to the Conclusion that one documents filed by the assesse to prove the identity, genuineness of transactions and credit worthiness of the parties are clearly established the fact that the transactions between the parties are genuine which are undertaken under normal commercial business, no reason for the AO to make additions u/s 68 of the Act.

the addition and I he conclusion arrived at in the impugned order, if kept in juxtaposition, and analysed there is a factual finding in Para-5.3 that the assessee discharged the primary onus as the lender had responded to notices issued u/s 33(6) of the Act confirming the transaction. The learned Assessing Officer did not controvert the claim of the assessee. The loans were taken through banking channel and the receipt of taking the loan has been duty examined in Para-5.3 (Page-13) of the impugned order. The loans were duly reflected in the loans and advances column in the Balance Sheet and there is further factual recording that there was neither any cash deposit nor any withdrawal in any bank account castigating the same as accommodation entries. It is further noted that the assesse duly paid the interest on the loan amount and deducted. Copy of Form no.16A was also filed and the learned Assessing Officer has not brought on record any evidence/reasoned is believe the evidence filed by the assessee. I am satisfied with the reasoning of the learned CIT(A) that the addition was merely made on the basis of presumption that all the five concerns from whom loan was taken were managed and controlled by Shri Bhawarlal Jam. The statement was also recorded wherein there is no mention that any accommodation entry was obtained. Rather, the case of the assessee is fortified by the reply to question no. 40 and 41 where in it has been tendered that the loan was advanced and interest@ 9% p.a. was charged. The name of the assesse is nowhere mentioned in the list of suspicious dealer/person. Thus, I find no infirmity in the conclusion of the learned CIT(A), resulting into dismissal of the impugned ground raised by the Revenue.

5. The next ground pertained to deletion of addition of 5,78,278, made on account of interest expenditure on alleged bogus loans. The learned D.R defended the addition, whereas, the learned Counsel for the assesse invited my attention to the finding recorded in Para-6.1 of the impugned order. On a perusal of record and the assertions made by the respective Counsels. There is a finding in the impugned order that the assessee duly produced the hank statement from where interests were paid also copies of for m no.16A evidencing the TDS made and deposited into the Government account with respect to payment of interest. Since in earlier paras of this order since I have upheld the order of the learned CIT(A),therefore, the issue of interest is consequential in nature, therefore, the conclusion drawn in the impugned order is upheld."

13. We have also considered the judgments relied upon by the learned A.R. such as:-

1. Order dated 12.03.2018 passed by Hon'ble ITAT Mumbai in the 20 M/s. Star One Realcon Pvt. Ltd. case of ACIT vs. Sumit Jain in ITA No. 145/Mum./2017 2. Order dated 12.04.2017 passed by Hon’ble ITAT, Mumbai in the case of Reliance Corporation vs. Income Tax Officer in to 1071/ 3. Order dated 26.05.2016 passed by Ld. CIT(A)-44, Mumbai in the case of Reliance Corporation vs. Income Tax Officer 4. Order dated 23.05.2017 passed by Hon'ble ITAT, Mumbai in the case of income Tax Officer VS. Vikram Muktilal Vora in ITA no.842/Mum./2017 5. Order dated 05.11.2018 passed by Hon'ble ITAT, Mumbai in the case of Keynote Fin Corp Ltd. vs. DCIT in ITA Nos. 1643 & 164 7/Mum/2018 6. Order dated 24.05.2017 passed by Hon'ble ITAT, Mumbai in the case of Income tax Officer vs. Gujarat Construction in ITA No. 7040/M /2016 7. Order dated 30.05.2018 passed by Hon 'b/c ITA T, Mumbai in the case of ACIT vs. Vashu Rhagnani in ITA No. 5648/M/2016 8. Order dated 10.08.2018 passed by Hon 'b/c [FAT, Mumbai in the case of DCIT vs. Jainam Investments in [114 No. 6099/M/ 2016 9. Order dared 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Pabal Housing Pvt. Ltd. In ITA Nos.2687 to 2689/Mum./2018 10. Order dated 03.05.2019 passed by Hon’ble ITAT,Mumbai the in the case of M/s. Poonam Skyline Construction in 1114 Abs. 2692 (02 694/Mum/2018 11. Order dated 03.05.2019 passed by Hon’ble ITAT, Mumbai the in the case of M/s. PS Construction in ITA No.3226 to 3229/Mum/2018 12. Order doted 03.05.201 9 passed by Hon’ble ITAT, Mumbai the in the case of Ails. Poonam Shanri Developers in ITA No. 2690/Mum/2018 13. Order dared 03.05.2019 passed by Hon'ble ITAT, Mumbai the in the case of M/s. Poonam Mega Developers in ITA No.2691/Mum/2018 21 M/s. Star One Realcon Pvt. Ltd.

Kale Khan Mohammad Hanif Vs. CIT [50 ITR 1] and Roshan Di Hatti Vs. CIT (107ITR938] as already cited in the above decision of Hon'ble Apex Court. Similar is the ratio of Hon'ble Apex Court rendered in CIT vs. Orissa Corporation [159 ITR 78). It is trite law that additions could not be made merely on the basis of doubts, conjectures or surmises. After considering the entire case law as discussed above we find that the case law considered by the Revenue authorities were rendered under different set off acts which cannot be applied to the facts of the present case. Accordingly, the case law relied upon by the learned D.R. are rejected. In this view of the matter and considering the ratio of case laws discussed here in above, we are of the considered view that the assessee has discharged initial burden by filing various documents to prove identity, genuineness of transactions and creditworthiness of the parties. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan under Section 68 of the Act. The Ld. (IT'A) without appreciating these facts simply confirmed the addition made by the AC. Hence, we reverse the findings of the Ld. CI (A) and direct the AO to delete the additions made towards unsecured loans under Section 68 of the Act. Ground Nos. 2 to 5 are in relation to confirming the action of the AO in making notional addition on account of alleged commission by invoking section 69C of the Act. The AO has disallowed interest paid on unsecured loans on the ground that once the loans have been treated as bogus accommodation entries, then any interest paid on such unsecured loans also need to be treated as bogus and accordingly disallowed total interest paid on unsecured loans. Similarly, the AO has estimated 0.2% commission on total unsecured loans taken from the companies on the basis of statement of Shri Bhanwarlal fain where he had admitted that he charged 0.2% commission on all accommodation entries. We noted that the issue of unsecured loans has been decided in preceding paragraphs, where we held that the transactions between the parties are genuine which cannot be considered as unexplained cash credit u/s 68 of the Act, consequently, additions made towards disallowance of interest and estimation of commission on such unsecured loans is also needs W he considered in the light of discussions in the preceding paragraphs. Therefore, we are of the considered view that the .40 as well as the Ld. CIT(A) was erred in making additions towards interest on unsecured loans and commission on such unsecured loans. Accordingly, we direct the AO to delete the additions made towards disallowance of interest and estimation of commission.

23 M/s. Star One Realcon Pvt. Ltd. In the result, the appeal filed by the assessee is allowed.

authorities, which are binding on them. The principles of judicial discipline require that the orders of the higher authorities should he followed unreservedly by the subordinate authorities. If this healthy rule is not followed, the result will only be undue harassment to the assesse and chaos in administration of tax laws. The relevant excerpts of Para S of the said order are reproduced here under.- "6 ............ The High Court has, in our view, rightly criticised this conduce of the Assistant Collectors and the harassment to the assessee caused l' the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities; The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable' to the department- in itself an objectionable phrase-and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court- If this healthy rule is not followed, the result will only be undue harassment to assessee and chaos in administration of tax laws." 7.13 The law on judicial Precedents has been elucidated upon by the Hon’ble Supreme Court in the case of CIT vs Raison Industries Ltd(2007)288ITR322SC, where in it has been held that when an order is passed by a higher authority, the lower authority is bound there by keeping in view the principles of judicial discipline. This aspect has also been highlighted by Hon'ble Apex Court in the case of Bhopal Sugar Industries vs Income Tax Officer, Bhopal(AIR 1961SC 1821 in understated manner the following terms:-

“… We think that the learned judicial Commissioner was clearly in error in holding that no manifest in justice resulted from the order of the respondent conveyed in his letter dated March 24,1955. By that order the respondent virtually refused to carry out the directions which a superior tribunal had given to him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal is in effect a denial of justice, and is further more destructive of one of the basic 25 M/s. Star One Realcon Pvt. Ltd. principles in the administration of justice based as it is in this country on a hierarchy of courts. If a subordinate tribunal refuses to carryout directions given to it by a superior tribunal in the exercise of its appellate powers, the result will be chaos in the administration of justice and we have indeed found it very difficult to appreciate the process of reasoning by which the learned judicial Commissioner while roundly condemning the respondent for refusing to carryout the directions of the superior tribunal, yet held that nomanifest injustice resulted from such refusal. It must be remembered that the order of the Tribunal dated April 22, 1954, was not under challenge before the Judicial Commissioner, That order had become final and binding on the parties, and he respondent could not question it in anyway. As a matter of fact the Commissioner of Income-tax had made an application for a reference, which application was subsequently withdrawn. The Judicial Commissioner was not sitting in appeal over the Tribunal and we do not think that in the circumstances of this case it was open to him to say that the order of the Tribunal was wrong and, therefore ,there was no injustice in disregarding that order. As we have said earlier, such view is destructive of one of the basic principles of the administration of justice. In fairness to him it must be stated that learned counsel for the respondent did not attempt to support the judgment of the Judicial Commissioner on the ground that no manifest in justice resulted from the refusal of the respondent to carry our the directions of a superior tribunal. He conceded that even if the order of the Tribunal was wrong, a subordinate and inferior tribunal could nor disregard it; here recognised the sanctify and importance of the basic principle that a subordinate tribunal must carry out the directions of a superior tribunal. He argued, however, that the order of the Tribunal was unintelligible and the respondent did his best to understand it according to his light. This argument advanced on behalf of the respondent appears to us to be somewhat disingenuous..... 7.14 Accordingly, respectfully following the decisions of the Hon'ble ITAT, Mumbai (supra), and also on following the order passed by my ld. predecessor in the case of M/s Neminath Homes Pvt. Ltd. for A,Y 2010-11 and 2011-12, I direct the Ld. AO to delete the addition made u/s 68 of unsecured loans. 7.15 Since the addition on account of unsecured loan stands deleted, there is no question of disallowance of interest paid by the assesse. Therefore I also direct the Id. AO to delete the 26 M/s. Star One Realcon Pvt. Ltd. disallowance of consequential interest of Rs.3,57,534/- and to delete the consequential addition of commission paid of Rs.1,20,000/-. Accordingly, the Grounds Nos.1 to 6 related to A.Y.2011-12 are Allowed.”

“22.3 I have noted that the facts and circumstances of the present case at hand are exactly similar to that of the A.Y. 2013-14 & A.Y.2014-15 in Appellant's own case. This issue is not new in the case of the Appellant and the same has travelled to the Hon'ble ITAT, Mumbai "B" Bench. Further, this issue has been decided by the Hon'ble ITAT in their order dated 08.07.2019 in 2480, 2388, 2360, 2501, 3018, 2436, 2591, 2661 & 2718/Mum/2018. The Hon'ble ITAT has, after detailed discussion, deleted the addition made on account of unsecured loans and consequent additions on account of interest and commission with the following observations: “7. The solitary issue that needs to be resolved under given facts and circumstances of this case is whether unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain is unexplained cash credit, which comes under the provisions of section 68 of the Act or not. The AO has made additions of ₹.15,00,000/- towards unsecured loans taken from certain companies controlled and managed by Shri Bhanwarlal Jain under Section 68 of the Act, on the ground that the assessee has failed to file necessary documents in order to prove identity, genuineness of transactions and creditworthiness of the parties. The AO has 27 M/s. Star One Realcon Pvt. Ltd. extensively discussed the issue in his assessment order in light of facts gather during the course of search in case of Bhanwarlal Jain group of cases and survey in the case of assessee’s group concern. Accordingly, the AO, opined that although the assessee has furnished various documents including confirmations from the loan creditors and their ITR acknowledgment, but failed to prove the genuineness of transactions and creditworthiness of the parties in order to come out the provisions of Section 68 of the Act. The AO further was of the opinion that mere furnishing certain paper documents is not sufficient enough in light of various facts gathered by the department during the course of search. The AO further was of the opinion that payment through proper banking channel and interest payment to those unsecured loans is not sacrosanct because all these shell companies/hawala operators would keep necessary paper document in order to give colour of genuineness to their transactions. Therefore, he opined that the transactions between the parties are failed to pass the test of genuineness and accordingly made additions under Section 68 of the Act.

9. Having said so, let us examine what is the basis for the AO to arrive at conclusion that the transactions between the parties are not genuine and which are hit by the provisions of section 68 of the Act. The AO never brought out any further facts to link credits found in the books of accounts of the assessee to the evidences found during the course of search in the case of Shri Bhanwaral Jain except statement of Shri Bhanwaral Jain. Even during the course of survey in group cases of assessee, no incriminating material was found which can be linked to evidences collected during the course of search in case of Shri Bhanwarlal Jain. Further, during the course of survey in assessee's group cases, the directors and employees have categorically admitted that they have personally visited office of Shri Bhanwarlal Jain Group Companies for arranging loans. The AO did not controvert this fact by bringing any other evidences. On the other hand, the assessee has filed complete details including confirmations from loan creditors, their PAN details, master data, affidavit from the directors/partners/proprietors of those companies, income tax acknowledgments receipts along with financial statements, bank statements of loan creditors in order to prove the identity, genuineness of transaction and creditworthiness of the parties.. We, further, noted that all these loans have been taken through proper banking channels. The assessee has paid interest after deducting 29 M/s. Star One Realcon Pvt. Ltd.

applicable TDS as per the law. These loans have been repaid during next financial year, All these documents are part of assessment proceedings. The AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences in order to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for AO to suspect the transactions between the parties only on the ground that the person who gave unsecured loan had admitted in his statement u/s 132(4) of the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. Further, the AO failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal Jain to make additions u/s 68 of the Act No doubt, the AO is having every right to suspect the transactions but, that by itself would not give rise an occasion for the AO to make additions u/s 68 of the Act, when the evidences filed by the assessee clearly proves the facts that these transactions were genuine transactions which are undertaken under normal commercial business circumstances. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act.”

8. Ground no.6, relates to additions made by the Assessing Officer amounting to 3,57,534, on account of interest paid on bogus loan and 1,20,000, on account of commission.