LOKESH DEVILAL JAIN,MUMBAI vs. ITO 22 (2)(3), MUMBAI

Shri Lokesh Jain (assessee appearing in person) submitted that he is engaged in retail sale of gold and silvery jewellery. The assessee had taken loan of Rs.20,00,000/- from M/s. Fastline Multitrade Pvt Ltd. The loan was taken through banking transaction in January, 2012 and the same was repaid to M/s. Fastline Multitrade Pvt Ltd. by way of cheque in March, 2013. On repayment of loan the account of the assessee was debited on 26/03/2013. In support of his contention the assessee placed on record bank statement of HDFC Bank. The assessee further submitted that during the course of assessment proceedings the Assessing Officer made enquiries regarding the loan transaction from M/s. Fastline Multitrade Pvt Ltd. the assessee had written to the aforesaid company. The said company vide letter dated 05/03/2015 confirmed genuineness of the transaction. The assessee placed on record a copy of the reply dated 05/03/2015 from M/s. Fastline Multitrade Pvt Ltd.

Per contra, Ms. Smita Verma representing the Department vehemently defended the impugned order and filed written submissions. The same are reproduced hereunder:

“ With reference to the above, I am submitting the case laws relied by me in the above- mentioned appeal filed by the assessee. In this case, loan from one company M/s Fastline Trading Pvt. Ltd. was added u/s 68 by the assessing officer, on the ground that this company is a shell company and not involved in any genuine business activity but engaged in providing accommodation entry in form of loans, share capital and bogus purchases. This company was floated by Praveen Kumar Jain, who in the sworn statement u/s 132(4) has admitted before the department that all the 70 concerns are shell entities and are not doing any business. All the directors of these companies were found to be the the dummy directors and also admitted before the department that they use to sign the documents for nominal consideration given by Shri Praveen Kumar Jain. Books of accounts of all such shell companies are under the control of Shri Praveen Kumar Jain.

Submissions made by rival sides heard, orders of authorities below examined. An addition of Rs.20,00,000/- has been made by the Assessing Officer in the hands of the assessee stating it to be a bogus loan transaction. A perusal of the assessment order reveals that the Assessing Officer has suspected the transaction to be bogus primarily for the reason that the assessee had taken loan from M/s. Fastline Multitrade Pvt Ltd. a concern belonging to Pravin Kumar Jain Group. During the course of search statement of one Pranjal Bapna under section 132(4) of Income Tax Act,1961 ( in short 'the Act') was recorded, wherein he had admitted that M/s. Fastline Multitrade Pvt Ltd. is not carrying out any genuine business activity and is only providing accommodation entries. The Assessing Officer has further suspected the transaction to be bogus as on the loan amount no interest was paid by the assessee on repayment of loan.

The assessee has furnished bank statement indicating that the loan was taken by the assessee from M/s. Fastline Multitrade Pvt Ltd. through banking channel on 16/01/2012 i.e. during the period relevant to the assessment year under appeal. The said loan was repaid by the assessee through cheque and the amount was debited from the account of assessee on 26/03/2013 i.e. loan was repaid in the immediately succeeding assessment year. The assessee has filed confirmation from M/s. Fastline Multitrade Pvt Ltd. admitting the genuineness of aforesaid loan transaction. A perusal of the aforesaid communication further reveals that the statement made by Shri P.K.Jain during the course of search was subsequently retracted. It is an undisputed fact that the assessee had repaid the loan amount. It is not the case of Revenue that the assessee after having accepted loan has never repaid the loan. Taking into consideration entirety of facts, I find no reason to sustain the addition of Rs.20,00,000/-

The ld. Departmental Representative has vociferously argued that the loan transaction is bogus and has placed reliance on various decisions. In so far as the case laws relied upon by the ld. Departmental Representative I find the same to be distinguishable on facts and hence, would not support the case of Revenue. Once the assessee has repaid loan amount the addition is not sustainable. Consequently, the impugned order is quashed and appeal by the assessee is allowed.