M/S.NEMINATH MUMBAI SHELTER,MUMBAI vs. DCIT, CENTRAL CIRCLE-1(3), MUMBAI

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15

IN THE INCOME TAX APPELLATE TRIBUNAL “B” Bench, Mumbai Before Shri M. Balaganesh, Accountant Member and Shri Ravish Sood, Judicial Member ITA No(s). 2554, 2885, 2952, 3526 & 3527/Mum/2018 (Assessment Year(s): 2009-10 to 2011-12, 2013-14 & 2014-15) Neminath Mumbai Shelter DCIT, Central Circle-1(3), Mumbai 101/102, Kalpak Apartment, Pratishtha Bhavan, Old CGO Bldg, Road No. 16, Sidharth Nagar, M.K Road, Mumbai – 400 020 Vs. Goregaon (W), Mumbai – 400 062

PAN – AAAAN4781G (Appellant) (Respondent) Appellant by: Ms. Ritu Kamal Kishore, A.R Respondent by: S/shri G.N Makwana & Sushil Kumar Mishra, Sr. D.Rs. Date of Hearing: 26.03.2021 Date of Pronouncement: 07.06.2021

O R D E R PER BENCH : The captioned appeals filed by the assessee are directed against the respective orders passed by the CIT(Appeal)-47, Mumbai, dated 28.02.2018 which in turn arises from the assessment orders passed by the A.O as under: Assessment Year 2009-10 143(3) r.w.s 147, dated 29.02.2016 2010-11 143(3) r.w.s 147, dated 29.02.2016 2011-12 143(3) r.w.s 147, dated 29.02.2016 1

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 2013-14 143(3), dated 29.02.2016 2014-15 143(3), dated 20.12.2016

As common issues are involved in the aforementioned appeals, therefore, the same are being taken up and disposed off together by way of a consolidated order. We shall first take up the appeal for A.Y 2009-10 wherein the impugned order has been assailed before us on the following grounds:

“1. On the facts and in the circumstances of the appellant's case and in law the Ld. AO erred in reopening the assessment u/s. 147 by issue of notice u/s. 148 dated 16.01.2015 which is barred by limitation in view of the 1st proviso to section 147 and the Ld. CIT(A) erred in not quashing the assessment order passed by the AO u/s. 143(3) r.w.s 147 of the Act. 2. On the facts and in the circumstances of the appellants case and in law the Ld. CIT(A) erred in confirming the addition of Rs.3,75,00,000/- made by the AO on account of unexplained cash credit u/s. 68 of the Act. 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of disallowing interest amounting to Rs.3,72,328/- under the provisions of Income Tax Act. 4. On facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making addition of Rs.1,40,000/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 5. On facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred to hold that the loans taken by the appellant from 7 parties during the previous year relevant to the assessment year 2009-10 remained unexplained by relying oil information/report received from DGIT(lnv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called report/information and the statements and without affording any opportunity of cross examination of those persons whose statements have been relied upon. 6. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the AO in the assessment order. 7. In any event, the Ld. AO erred in raising a demand of Rs.2,35,75,510/- and the ld. CIT(A) erred in confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 8. The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal. 9. The appellant prays before the Hon'ble Tribunal to quash the assessment order and/or delete the additions made by the AO.” 2. Briefly stated, the assessee which is a Joint Venture between M/s Mumbai Shelter Housing Development Pvt. Ltd. AND M/s Neminath Construction, a proprietary concern of Shri. Nemichand P. Jain is engaged in the business of redevelopment of buildings in Goregaon (W), Mumbai. As stated in the assessment order, as the shares of both the members were determined and known, therefore, the income of the AOP was taxable in their respective hands. Return of income filed by the assessee for A.Y 2009-10 on 24.09.2009 declaring a total income of Rs. Nil was processed as such under Sec.143(1) of the Act. Subsequently, on the basis of information received from the DDIT(Inv.)-II, Mumbai that the assessee as a beneficiary had obtained accommodation entries of loans aggregating to Rs. 3.75 crores from certain benami concerns managed and controlled by an infamous accommodation entry provider, viz. Shri. Bhanwarlal Jain, the case of the assessee was reopened under Sec. 147 of the Act. Objections filed by the assessee as regard the assumption of jurisdiction by the A.O under Sec. 147 were disposed off by the A.O vide his letter dated 28.01.2015. 3. During the course of the reassessment proceedings, it was observed by the A.O that as per the information shared by the DDIT(Inv.)-II, Mumbai the assessee was stated to have received accommodation entries for loans amounting to Rs. 3.75 crores from benami concerns managed and controlled by Shri. Bhanwarlal Jain and his associates-cum-employees, as under :

Sr. No. Particulars Amount 1. M/s Meenakshi Exports Rs. 25,00,000/- 2. M/s Navkar Diamonds Rs. 50,00,000/- 3. M/s Rose Impex Rs. 50,00,000/- 4. M/s Rose Gems Pvt. Ltd. Rs. 1,25,00,000/-

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 5. M/s Surya Diam Rs. 50,00,000/- 6. M/s Pankaj Exports Rs. 50,00,000/- 7. M/s Sankhala Finvest Ltd. Rs. 25,00,000/- Total Rs. 3,75,00,000/-

It was observed by the A.O that in the course of the search and seizure proceedings conducted by the DGIT(Inv.), Mumbai on 03.10.2013 on Shri. Bhanwarlal Jain, an infamous accommodation entry provider and his associates-cum-employees, copious incriminating material/documents/papers /data were found and seized. Statements of Shri. Bhanwarlal Jain and his associates-cum-employees who had assisted him in his nefarious activities were recorded u/s 132(4) and u/s 131 of the Act, wherein it was admitted by them that they were providing accommodation entries for bogus loans/bogus sales/purchases/import for others through various benami concerns. On a perusal of the incriminating material/documents seized during the course of the search proceedings, as claimed by the A.O, it transpired that the assessee was also one of the beneficiaries of accommodation entries of loans that were taken from the benami concerns managed and controlled by Shri. Bhanwarlal Jain. 4. On the basis of the information gathered in the course of the aforesaid search proceedings, a survey action was conducted on 16.10.2014 on M/s Neminath group to which the assessee belongs. It was observed by the A.O that during the course of the survey proceedings, Shri. Neminath Jain, key person of the aforesaid group, in his statement had admitted that the various concerns belonging to his group (including the assessee) had obtained loans and advances from various name lending concerns managed and controlled by Shri. Bhanwarlal Jain. On analysis of the statement of Shri. Nemichand P. Jain it was observed by the A.O as under :  Shri Nemichand P. Jain is the person looking for all the financial affairs of the group concerns who also arranges loans for the group concerns.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15  The unsecured loans in the books of various group concerns were arranged by one Mr. Ratanlal Ji Sankhala alias Shri. Bhanwar Lal Jain having office address at 105, Pancharatna, Opera House, Mumbai and residential address at 17th Floor, Silver Arch, Nepean Sea Road, Mumbai – 400 006.  Shri. Nemichand P. Jain also failed to substantiate the situation in which those loan creditors provided unsecured loans to Nemichand group concerns without any loan agreement, collateral security and at a very low rate of interest.  Shri. Nemichand P. Jain had no idea about the identity and creditworthiness of the entities which provided unsecured loans to tjhe group concerns as he did not met any of the parties and the same were arranged by Shri. Ratanlal Ji Sankhala alias Shri. Bhanwarlal Jain.  With regard to the genuineness of the loans, Shri. Nemichand P. Jain merely stated that the loans were taken through proper banking channel.  The rate of interest on these loans is 9% per annum which is much less than the rate of interest charged by banks on secured loans. On a perusal of the records, it was observed by the A.O that during the course of the search and post search analysis in the case of Shri. Bhanwarlal Jain group, it transpired that the concerns from whom the assessee had claimed to have raised loans were dummy concerns which were used by Shri. Bhanwarlal Jain as conduits for providing accommodation entries of loans and advances to various beneficiaries. Backed by his aforesaid observation the A.O called upon the assessee to explain that as to why the loans raised from the aforesaid tainted concerns may not be treated as bogus. In reply, the assessee tried to impress upon the A.O that it had raised genuine loans from the aforesaid concerns and vide its letter dated 24.02.2016 submitted as under:

"In this regard we have to state as submit as under: 5

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15

Addition of Loans taken of Rs. 3.75 Crores : 1).

We had taken loans from the above referred parties during the course of our 1.1 business, i.e., to fund our construction projects. All these loans are taken either by A/c payee cheques or by RTGS/NEFT and interest thereon are also paid by A/c payee cheques only after deduction and deposits of due TDS U/sec 194A.The said TDS_were deposited before the due date and Form No. 16A was also is3uecftothe said lenders.

1.2 Original assessment U/sec 143(3) was completed on 11/10/2011. accepting total income as per return of income. Copy of the said order U/sec 143(3) is at page 1 and 2. During the course of original scrutiny proceedings, we were asked to submit the loan confirmations of the above referred concerns vide questionnaire dated 20/07/2011 U/sec 142(1) (Question No. 9). In reply to the same, we had submitted loan confirmations of the above concerns vide our letter dated 19/07/2011. Copy of the same is at page 3 to 4. After verification of the same, the then A.O. has passed his order U/sec 143(3). 1.3 Further, we also filed before your good self, copy of Loan confirmations, Bank statements highlighting loans given and interest received by the above referred concerns from us along with copy of acknowledgement of their Income Tax returns filed and balance sheet vide our letter dated 19/02/2016 and 22/02/2016. It is submitted that the above concerns had given the said loans out of their bank balances which establishes their creditworthiness. 1.4 Further, regarding your query about collateral security, it is submitted that the said loans were without any security as the same were given on the reputation of our "Group" and it is customary in Sharafi loans to lend money without collateral security and it cannot be ground for treating the transaction as invalid. 1.5 Your good self will appreciate the fact that most of the above referred loans have already been repaid. 1.6 Further, in absence of any of our joint venture reference and nexus of dealing with any alleged hawala operators, the said loans taken cannot be treated as ingenuine. It is to submit that the above referred loans taken cannot be doubted on the basis of a general statement given by the alleged concerns and that too obtained without our knowledge. It seems that the statement of any person was neither recorded by the A.O. and not in my presence and hence the credibility of the statement is doubtful and suspicious. This is more particularly so when my name has not been specifically mentioned in the confession. We respectfully submit that in case any contrary documentary evidence is available on record which could be used against us, then a copy of such evidence / survey report may kindly be provided to us to controvert the same and kindly allow us to cross examine the alleged concerns to justify the genuineness of its recorded transactions.

1.7 In respect of the said loans accepted by us from the said concerns, it is to submit that our firm is absolutely not involved in their alleged hawala transactions. It is to submit that the said concerns, as per statement, might have given few bogus loans, however it does not mean that each transaction made by such parties including with us are ingenuine. It is submitted that merely on the basis of assumptions & presumption and without any corroborative evidence one cannot conclude that said loans taken from the alleged concerns are ingenuine.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15

1.8 We would also state that during the course of survey at our premises, Mr. Nemichand P Jain's statement was recorded under coercion, pressure and duress only and he had stated under fear as his health was not keeping well. However, he has already retracted his statements made vide his Affidavit dated ____.Therefore, question of any addition of the said loans to our total income does not arise. 1.9 In view of the above facts no addition of loan taken of Rs. 3.75 Crores and interest paid by me can be made to our total income in view of the below mentioned reasons : i) The amount was received by A/C Payee Cheques/RTGS/NEFT from the lendrs.

ii) The Interest on loan was regularly paid by A/C Payee Cheque after deduction of due TDS U/sec. 194A. iii) We have established the creditworthiness of the said concerns and genuineness of the said loans taken by copy of Loan confirmations, Bank statements highlighting loans given and interest received by the above referred concerns along with copy of acknowledgement of their Income Tax returns and balance sheet have been filed vide our representatives letter dated 19.02.2016 and 22.02.2016.

iv) The genuineness of the said loans taken has already been verified during the course of original scrutiny proceedings U/sec 143(3) and during survey U/sec 133A.

v) Further to submit that we had never interacted with the alleged concerns nor knowing them directly as the said loans were arranged by a person to whom we know. Further, during the course of survey also no cash was found at our premises and therefore question of any addition of loan taken by cheque does not arise merely relying upon the statement of third parties who themselves have subsequently confirmed the genuineness of the said loans taken by us.

vi) Mr. Nemichand P Jain has already retracted his statements made at the time of survey vide Affidavit dated 16.11.2014.

When the loans taken from above concerns are genuine ,then same cannot be inferred as "accommodation entries" and therefore, no addition is warranted.

In substantiation of our view, we have relied upon following judicial decisions : i) Heirs & Legal Representatives of Laxmanbhai S. Patel v/s.CIT 174 Taxman 206 (Guj) ii) Nemi ChandKothari v.CIT 136 TAXMAN 213 (GAU.) iii) Mahes Gulabrai Joshi v/s CIT 95ITD 300 (MUM.)(SMC)

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15

the fact that the same are "Sharafi Loans" i.e. payable on demand, the rate of interest can be considered as reasonable. 2.2 Further, to submit that we had paid due interest on the said loans taken by cheques only after deduction of T.D.S. U/sec 194A and therefore the same is allowable U/sec 36(l)(iii) as the same is utilized in business only. 2.3 Regarding disallowance of commission paid to brokers on said loans taken, we would like to submit that during the course of Survey , Mr. Nemichand P Jain had admitted following statements under pressure and out of fear only vide Oath Administered dated 16/10/2014 and 17/10/2014. However, it is submitted that the said statements are retracted by Mr. Nemichand P jain vide his Affidavit dated 16.11.2014 to your good self. i. Refer A.No.12 “For arranging the loans Mr. Ratanlalji Sankhla has been paid Commission at the rate of 0.25% on the amount of loans arranged. These commissions have been paid in cash are not reflected in my books of account for the respective years.” ii. Refer A.No. 26 “In some cases part payment against sale of flats is received in cash. Part of the sale proceeds of the flats received in cash are not reflected in our books of account." 2.4 Further, as Mr. Nemichand P Jain has retracted his statement of any commission paid @ 0.25% on the said loans taken, question of any addition U/sec 69C does not arise.

Without Prejudice, we had not claimed any commission paid on the said loans taken in Profit & Loss A/c and therefore, question of any disallowance of any commission paid does not arise. Therefore, any addition of the same will amount to a notional addition of ommission paid. 3 Further, CBDT has also clarified the same vide Instruction No. 286/2/2003/IT(Inv) dated 10/03/2003.K is instructed by the CBDT that : "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confessions to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. Instruction: F. No. 286/2/2003-IT (Inv. II), dated 10-3-2003. (Copy is at page 5)

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 In view of the above facts and CBDT instructions, we submit to your good self that no addition of the said loans amounting to Rs.3.75 Crores can be made and no addition U/sec 69C can be made of interest paid on the said loans and any notional commission paid as the said loans are genuine loans taken and used in my business only." As claimed by the assessee, original assessment was earlier framed by the A.O vide his order passed u/s 143(3), dated 31.10.2011 and the income returned by the assessee was accepted. It was the claim of the assessee that the A.O while framing the original assessment u/s 143(3), dated 31.10.2011 had only after verifying the documentary evidence that were filed by the assessee had accepted the genuineness of the loan transactions in question. In order to drive home its claim that it had raised genuine loans from the aforesaid parties the assessee had drawn support from certain facts/documents, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. It was submitted by the assessee that in the course of the original assessment proceedings all the aforesaid facts were looked into and documentary evidences substantiating the authenticity of the loan transactions in question were filed with the A.O. However, the A.O in the course of the reassessment proceedings was not persuaded to subscribe to the claim of the assessee that it had raised genuine loans from the aforementioned parties. Rejecting the assessee‟s claim that it had entered into genuine loan transactions with the aforesaid concerns it was observed by the A.O as under:  The concerns M/s Mohit Enterprises, M/s Jewel Diam, M/s Meenakshi Exports, M/s Rose Impex, M/s Rose Gems Pvt. Ltd., M/s Jewel Diam, M/s Navkar Diamonds & M/s Sankhala Finvest Ltd. are 9

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 the concern of the persons, who are actually associate cum employee of Bhanwarlal Jain as proved during the course of search on Bhanwarlal Jain group of cases. The parties in question have given contradictory statements during the search proceedings and subsequently in their affidavit filed. The Retraction via affidavit has already been refuted by the department holding the same as an afterthought having been filed after 6 months from the search.  The assessee has made claim of loan from aforementioned concerns, which has been proved as bogus, since these concerns are controlled by Shri. Bhanwarlal Jain alongwith Shri Rajesh Jain to issue only accommodation entries. As such, the onus to prove otherwise was & is on the assessee to substantiate the genuineness of loans from the parties with cogent evidences in which it has grossly failed to do. The assessee‟s AR has merely submitted confirmation from the persons in the capacity as proprietor/partner/director which is nothing but the affidavits filed by proprietor or partner which has already been refuted by the department. However the assessee has failed to prove their genuineness and creditworthiness. Further none of the procedure for taking loan have either been followed by benami concerns or by the assessee like any loans agreement/collateral security etc.  A detailed analysis of finances of all benami concerns managed and controlled by Shri. Bhanwarlal Jain show that all of them have the following characteristic features that are hallmark of concerns which are not engaged in any genuine business namely :-

 High Turnover  Major portion of assets in the balance sheet comprise of Loan & Advances, Debtors and Investments wherein assets almost match the figure of Creditors.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15  The advance tax or self assessment tax payments are Nil in spite of Turnover running into several crores.  Almost the entire TDS deducted (by the builders) on the interest payable against their “Loans and Advances” is claimed as refund Thereafter, the A.O referring to the incriminating material/documents that were unearthed during the course of search proceedings conducted on Shri Bhanwarlal Jain and his associates-cum-employees dwelled at length on the modus operandi that was adopted by them for providing accommodation entries for bogus loans/bogus sales/purchases/import for others through their various benami concerns. It was further observed by the A.O that Shri. Bhanwarlal Jain in his statement recorded on 11.10.2013 u/s 132(4) of the Act had admitted the modus operandi of providing accommodation entries through dummy concerns whose affairs were managed and controlled by him. Also, the A.O was of the view that the failure on the part of the assessee to produce the parties from whom loans were claimed to have been raised proved the falsity of its claim of having raised genuine loans from them. It was further observed by the A.O that pursuant to the information gathered in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates search action was carried out in case of some of the beneficiaries who had obtained accommodation entries from his dummy concerns. It was observed by the A.O that many of the ostensible beneficiaries of the accommodation entries had admitted that they had not raised any genuine loans from the aforesaid dummy concerns and had only obtained accommodation entries from them. It was further observed by the A.O that some of the beneficiaries of the accommodation entries after having been cornered had revised their returns of income and had surrendered the amount of the accommodation entries taken by them. On the basis of his aforesaid observations, it was concluded by the A.O that the assessee had not raised

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 any genuine loans from the abovementioned benami concerns and had only obtained accommodation entries from them. 5. Further, referring to the incriminating material seized in the course of the search proceedings and also drawing support from the prevailing commission that would normally as a matter of practice be charged by an accommodation entry provider for the services rendered to a beneficiary, the A.O, was of the view that the assessee would had parted with a commission of 20 paisa (approx) per Rs. 100/- per month on the accommodation entries of loan received by it. Accordingly, the A.O on the basis of his aforesaid conviction worked out an addition w.r.t commission which as per him would have been paid by the assessee to the accommodation entry provider @0.2% per month i.e 20 paisa per Rs. 100/- and made an addition of Rs. 1,40,000/- u/s 69C of the Act. 6. As the loans in question were held by the A.O as bogus, thus, as a consequence thereto the assessee‟s claim for deduction of interest expenditure of Rs. 3,72,000/- that was claimed to have been paid on the same was also disallowed by him. 7. In the backdrop of his aforesaid deliberations the A.O after making the additions/disallowance therein vide his order passed u/s 143(3) r.w.s 147, dated 29.02.2016 reassessed the income of the assesee company at Rs. 3,80,12,328/-. 8. Aggrieved, the assessee assailed the assessment order before the CIT(A). Insofar the claim of the assessee that the A.O had wrongly assumed jurisdiction u/s 147 of the Act on the basis of a „change of opinion‟, the same was rejected by the CIT(A). On merits, the CIT(A) on the basis of his exhaustive deliberations was of the view that as the assessee had raised loans from concerns which were managed and controlled by Shri. Bhanwarlal Jain and his associates-cum-employees, therefore, the documentary evidences which were filed by the assesee to support the genuineness of the 12

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 impugned loan transactions, viz. confirmation of accounts; balance sheets of lender parties; copies of the returns of income of the lender parties; PAN Nos. of the lender parties; copies of the bank accounts of the lender parties highlighting the loans advanced to the assessee and also the interest received on the said loans, did not carry any evidentiary value and were of no significance. It was further observed by the CIT(A) that the basic features of the benami concerns of Shri. Bhanwarlal Jain clearly indicated that they were not engaged in the business of diamond trading but were into an organized business of providing accommodation entries. Ld. CIT(A) thereafter deliberated at length on the modus operandi that was adopted by Shri Bhanwarlal Jain and his associates-cum-employees for providing accommodation entries for bogus loans/bogus sales/purchases/import for others through their various benami concerns. Further, the CIT(A) referred to the incriminating material/documents that were unearthed in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates/concerns. It was observed by the CIT(A) that the incriminating material seized in the course of the search proceedings read a/w the statements of Shri. Bhanwarlal Jain and his associates-cum-employees recorded during the course of the search proceedings revealed beyond doubt that they were not engaged in any genuine business activities but were carrying out their nefarious activities of providing accommodation entries through 68 dummy concerns. It was observed by the CIT(A) that the various persons who were projected as directors, partners and proprietors of the various concerns were actually dummies and the entire show was admittedly managed and controlled by Shri. Bhanwarlal Jain. It was further observed by the CIT(A) that the employees/directors/partners /proprietors of the various concerns had in their respective statements recorded u/s 132(4) and u/s 131 of the Act admitted that the entire affairs of the group concerns were managed and controlled by Shri. Bhanwarlal Jain with the support of his relatives/associates. In order to fortify his view that the aforesaid dummy concerns were not engaged in any business of trading in diamonds i.e 13

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 contrary to what was being claimed by them in their returns of income, the CIT(A) took support of the fact that in the course of the search proceedings conducted by the department on 03.10.2013 no stock of any rough or finished diamonds was found anywhere. Further, the CIT(A) carrying out a conjoint perusal of certain “estimate sheets” and a “white coloured Sony 4 GB pen drive” that were seized in the course of the aforesaid search proceedings on the one hand AND the copy of accounts of the parties appearing in the books of accounts of the benami concerns of Shri. Bhanwarlal Jain on the other hand, therein observed, that except for the transactions pertaining to receipt/payment of cash from/to the parties and those pertaining to commission, the remaining transactions tallied with those accounted for in the books of accounts of the aforesaid benami concerns which were managed and controlled by Shri. Bhanwarlal Jain and his associates. In sum and substance, the CIT(A) by drawing support from the incriminating material/documents seized in the course of the search proceedings and the statements of Shri. Bhanwarlal Jain and his associates-cum-employees was of a strong conviction that the aforesaid benami concerns were engaged in an organized activity of providing accommodation entries for bogus loans/bogus sales/purchases/import for others. Further, the CIT(A) exhaustively discussed the modus operandi that was adopted by Shri. Bhanwarlal Jain and his associates in providing accommodation entries through a chain of 68 benami concerns floated by them. Adverting to the notings of commission received by Shri. Bhanwarlal Jain from providing of accommodation entries, it was observed by the CIT(A) that the same too were recorded in a coded manner. It was further observed by the CIT(A) that as the books of accounts of all the group concerns of Shri. Bhanwarlal Jain did not reflect the actual state of affairs, therefore, the same were rejected u/s 145(3) of the Act. As regards retraction by Shri. Bhanwarlal Jain of his statement that was recorded u/s 132(4), it was observed by the CIT(A) that the same having been done by him by filing an „affidavit‟ dated 15.10.2014 with the office of Addl. DIT (Inv)-IX, Mumbai on 27.05.2014 i.e after lapse of a period of 8 months from the date of 14

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 search operation, thus, the same was clearly an outcome of an afterthought and no cognizance of the same could validly be drawn. It was observed by the CIT(A) that the fact that Shri. Bhanwarlal Jain and his associates-cum- employees were carrying out their nefarious activities of providing accommodation entries was not solely based on his statement recorded u/s 132(4), but on an analysis of the facts that were unearthed in the course of the search proceedings. It was, further, observed by the CIT(A) that contrary to what was alleged by Shri. Bhanwarlal Jain in his retraction letter there was nothing on record which would reveal that there was any threat or coercion at the time of recording of his statement u/s 132(4) of the Act. Further, the CIT(A) in order to drive home his claim that retraction of the statement by Shri. Bhanwarlal Jain and his associates-cum-employees was merely backed by an afterthought and did not reveal the true state of affairs, took support of certain stereotype facts as were discernible from their respective affidavits on the basis of which they had retracted their statements. The CIT(A) further relied on certain judicial pronouncements to support his conviction that retraction of a statement recorded u/s 132(4) was of no significance. On the basis of his aforesaid observations, the CIT(A) was of the view that the various lenders in question in the present case were just paper concerns which were not engaged in any genuine business but were carrying on an organised activity of providing accommodation entries. It was observed by the CIT(A) that the benami concerns of Shri. Bhanwarlal Jain group did not have any physical set up and a common postal address was used for all the multiple concerns. It was further observed by the CIT(A) that the directors/partners/proprietors of the various concerns were dummy persons who neither had any competence nor credibility to operate any investment company/firm/proprietorship. It was observed by the CIT(A) that in the backdrop of the modus operandi adopted by the various concerns of Shri. Bhanwarlal Jain group it could safely be gathered that cash would have been given by the assessee for getting the accommodation entries of unsecured loans. In support of his aforesaid claim the CIT(A) observed that parallel books of account found during the course of 15

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 the aforesaid search operation revealed that there were cash transactions recorded therein, which were contra to the entries of cheque/RTGS entries reflected in the regular books of account of the various concerns of the aforesaid person. It was further observed by the CIT(A) that even the identity of the lenders was in doubt. It was observed by him that as per the investigations done by the department the concerns of Shri. Bhanwarlal Jain group were proved to be dummy concerns engaged in providing accommodation entries, therefore, merely producing PAN or financials or assessment details would not establish the identity of the person concerned. It was observed by the CIT(A) that as the entries of loans were given after taking cash, hence, those were not real loan transactions. As regards creditworthiness of the lenders and genuineness of the transactions in question, the CIT(A) was of the view that though the money was admittedly received through banking channels, but those were not genuine business transactions as the lenders did not have their own profit making apparatus and were not involved in any real business activity and had merely rotated the money which was coming through the bank accounts. It was, thus, observed by the CIT(A) that the bank accounts did neither reflect the creditworthiness of the lenders nor the genuineness of the transactions. It was further observed by the CIT(A) that the onus cast upon an assessee does not get discharged merely by filing of the confirmatory letters of the lenders. Also, it was observed by him that the fact that the payments were made by account payee cheques and the same were reflected in the bank statements would not conclusively prove the genuineness of the loan transactions. The CIT(A) finally concluded that the assessee had not received any genuine loans from the aforementioned paper companies and had only received accommodation entries from them. The CIT(A) further supported his aforesaid view by relying on certain judicial pronouncements. Accordingly, the CIT(A) upheld the addition of Rs. 3.75 crores made by the A.O as an unexplained cash credit within the meaning of Sec. 68 of the Act. As regards the addition of commission of Rs. 3,72,328/- that was made by the A.O, on the ground, that 16

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 amount to the said extent would have been parted with by the assessee for receiving the accommodation entries, the same too was sustained by the CIT(A). Insofar the assessee‟s claim for deduction of interest paid on the loans in question was concerned, the CIT(A) observed that as the loans in question were held by him to be bogus, thus, the disallowance of the interest claimed by the assessee to have been paid on the said bogus loans was rightly disallowed by the A.O. Accordingly, the CIT(A) backed by his aforesaid observations dismissed the appeal. 9. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. We have at length heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. Our indulgence in the present appeal has been sought by the assessee for adjudicating the core issue, viz. that as to whether the lower authorities are right in law and facts of the case in concluding that the unsecured loans of Rs.3.75 crore received by the assessee during the year were to be held as unexplained cash credit within the meaning of Sec.68 of the Act. Consequent to and in fact as a corollary to adjudication of the aforesaid issue, we shall also look into the sustainability of the addition u/s 69C of commission of Rs. 1,40,000/- which as per the lower authorities the assessee would had parted for availing the accommodation entries. Also, the disallowance of interest of Rs.3,72,328/- claimed by the assessee to have been paid on the loans in question has been assailed by the assessee before us. 10. At the very outset of the hearing of the appeal it was submitted by the ld. A.R that as instructed the Ground of appeal No. 1 wherein the validity of the jurisdiction assumed by the A.O u/s 147 of the Act had been assailed was not being pressed. We, thus, as per the concession of the ld. A.R dismiss the Ground of appeal No. 1 as not pressed. 17

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 11. We shall for the sake of clarity briefly cull out the facts forming the very genesis of the controversy in hand. Original assessment in the case of the assessee was framed by the A.O vide his order passed u/s 143(3), dated 31.10.2011 and the income returned was accepted. Subsequently, on the basis of information received by the A.O from the DDIT(Inv.)-II, Mumbai that the assessee as a beneficiary had obtained accommodation entries of loans aggregating to Rs. 3.75 crores from certain benami concerns which were managed and controlled by an infamous accommodation entry provider, viz. Shri. Bhanwarlal Jain, the case of the assessee was reopened under Sec. 147 of the Act. During the course of the assessment proceedings it was observed by the A.O that the assessee had during the year in question claimed to have received unsecured loans amounting to Rs. 3.75 crores from certain concerns which as per the information shared with him by the DDIT(Inv.)-II, Mumbai were benami concerns managed and controlled by Shri. Bhanwarlal Jain (supra), as under : Sr. Particulars Amount No. 1. M/s Meenakshi Exports Rs. 25,00,000/- 2. M/s Navkar Diamonds Rs. 50,00,000/- 3. M/s Rose Impex Rs. 50,00,000/- 4. M/s Rose Gems Pvt. Ltd. Rs. 1,25,00,000/- 5. M/s Surya Diam Rs. 50,00,000/- 6. M/s Pankaj Exports Rs. 50,00,000/- 7. M/s Sankhala Finvest Ltd. Rs. 25,00,000/- Rs. 3,75,00,000/- Total

Rebutting the adverse inferences that were sought to be drawn by the A.O as regards the genuineness of the loan transactions in question, it was the claim of the assessee that the A.O while framing the original assessment u/s 143(3),

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 dated 31.10.2011 had after verifying the documentary evidence that were filed by the assessee before him had accepted the genuineness of the same. Further, in order to buttress its claim of having raised genuine loans from the aforesaid parties the assessee had drawn support from certain facts/documents, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. It was submitted by the assessee that all the aforesaid facts and the documentary evidences substantiating the authenticity of the loan transactions in question were filed with and looked into by the A.O in the course of the original assessment proceedings. However, the A.O was not persuaded to subscribe to the claim of the assessee that it had raised genuine loans from the aforementioned parties and had vide his reassessment order passed under Sec 143(3) r.w.s 147, dated 29.02.2016 held the same as unexplained cash credit u/s 68 of the Act. Further, the A.O made an addition towards commission of Rs. 1,40,000/- which as per him the assessee would had paid for procuring the accommodation loan entries. Also, the interest of Rs. 3,72,328/- claimed by the assessee to have been paid on the loans in question was disallowed by the A.O. On appeal, the CIT(A) as observed by us hereinabove had concurred with the view taken by the A.O and dismissed the appeal. 12. As is discernible from the orders of the lower authorities, the loans in question have been held by them as bogus loans for multiple reasons that had ostensibly weighed in their mind, viz. (i). that Shri. Bhanwarlal Jain and his associates-cum-employees in their statements recorded u/s. 132(4) and u/s

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 131 of the Act had admitted that they were providing accommodation entries through 70 benami concerns floated by them; (ii). that the incriminating material/documents unearthed in the course of search and seizure proceedings conducted on Shri. Bhanwarlal Jain and his associates/benami concerns revealed that the persons who were projected as directors/partners/proprietors of the various concerns were dummies who neither had any competence or credibility to operate any investment company/ firm/proprietorship and the said benami concerns managed and controlled by Shri. Bhanwarlal Jain were not engaged in any genuine business but were carrying on an organised activity of providing accommodation entries; (iii). that a conjoint perusal of certain incriminating material seized during the course of search proceedings conducted on Shri. Bhanwarlal Jain and his associates/group concerns i.e certain “estimate sheets” and a “white coloured Sony 4 GB pen drive” on the one hand AND the copy of accounts of the parties appearing in the books of accounts of the benami concerns of Shri. Bhanwarlal Jain on the other hand therein evidenced receipt/payment of unaccounted cash from/to the parties by the said concerns; (iv). that Shri. Nemichand P. Jain, key person of Neminath group of entities, vide his statement recorded on oath on 16/10/2014 and 17/10/2014 had admitted that the various concerns belonging to Neminath group had received accommodation entries in the form of bogus loans and advances in different years from various name lending concerns which were managed and controlled by Shri. Bhanwarlal Jain and his son Shri. Rajesh Bhanwarlal Jain; (v). that the absence of loan agreements and any collateral security and raising of the impugned loans at a low rate of interest i.e @9% p.a by the assessee did not inspire any confidence as regards the genuineness of the loan transactions in question; and (vi). that the failure on the part of the assessee to produce the lenders therein proved the falsity of its claim of having raised genuine loans from them. Accordingly, in the backdrop of the aforesaid reasons both the lower authorities had concluded that no genuine loans were raised by the assessee from the aforementioned parties. At this 20

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 stage, we may herein observe that the lower authorities while stamping the loan transactions in question as bogus had summarily discarded the documentary evidences/facts that were strongly relied upon by the assessee to drive home its claim of having raised genuine loans from the aforementioned concerns. As observed by us hereinabove, it was the claim of the assessee that the A.O while framing the original assessment vide his order passed u/s 143(3), dated 31.10.2011 had verified the genuineness of the loan transactions in question in the backdrop of the documentary evidences that were filed by the assessee in support thereof. In order to dispel any doubts, the assessee in the course of the reassessment proceedings had once again relied on the same set of facts and the documentary evidence in support of its claim of having raised genuine loans from the aforementioned parties, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. Apart from that, it was submitted by the assessee vide its letter dated 24.02.2016 filed with the A.O in the course of the reassessment proceedings that most of the loans in question had already been repaid by it. Also, the assessee in the course of the appellate proceedings had vide its written submissions stated that the loans in question were repaid in subsequent years by RTGS/Cheques only. Copy of the bank statement evidencing repayment of the loans alongwith the loan confirmations was filed by the assessee with the CIT(A). However, the CIT(A) held a conviction that as the lender concerns were not into any genuine business and were only carrying on an organized activity of providing accommodation entries, therefore, the documents filed by the assessee to support the genuineness of the loan transactions in question did not carry any 21

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 evidentiary value and were of no significance. Backed by his aforesaid observations, we find that the CIT(A) being guided by his conviction that the lenders from whom the assessee had claimed to have raised loans during the year in question were benami concerns not carrying on any genuine business but were engaged in the organized activity of providing accommodation entries, thus, discarded the documentary evidence that was filed by the assessee to discharge the primary onus that was cast upon it to prove the genuineness of the loan transactions in question. 13. It is in the backdrop of the aforesaid facts that we shall look into the sustainability of the view taken by the lower authorities as regards the genuineness of the loan transactions in question. But before adverting to the sustainability of the view taken by the lower authorities as regards the evidentiary value and significance of the documents which were filed by the assessee in the course of the reassessment proceedings, we shall first deal with the support drawn by the A.O from the statements of Shri. Bhanwarlal Jain and Shri. Neminath P. Jain recorded in the course of their respective search and survey proceedings. As observed by us hereinabove, we find that the A.O had drawn adverse inferences as regards the authenticity of the loans raised by the assessee from the aforementioned parties, inter alia, for the reason that in the course of the survey action conducted on the assessee; Shri Neminath P. Jain, the key person of Neminath group had admitted vide his statement recorded on oath on 16/10/2014 and 17/10/2014 that the various concerns belonging to his group had received accommodation entries in the form of bogus loans and advances in different years from various name lending concerns managed and controlled by Shri. Bhanwarlal Jain and his son Shri. Rajesh Bhanwarlal Jain. However, it is a matter of fact borne from the records that Shri Neminath P. Jain had thereafter vide an “affidavit”, dated 16.11.2014 retracted from his aforesaid statement, for the reason, that the same was obtained under coercion, pressure and duress, to which he had yielded considering the poor state of his health at the relevant point of time. In

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 the backdrop of the aforesaid facts, we shall deliberate on the evidentiary value of a statement of an assessee recorded during the course of a survey action conducted under Sec.133A; and as to whether or not the same on a standalone basis can justify drawing of adverse inferences and a consequential addition in the hands of an assessee. Sec.133A(3)(iii) of the Act which vests power with an Income Tax Authority to record the statement of any person in the course of survey proceedings, reads as under: “(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.” Accordingly, it is evident that an Income Tax Authority in the course of the survey proceedings conducted under Sec.133A can record the statement of any person which could be useful or relevant to any proceeding under the Act. However, we find that the phraseology of Sec.133A(3)(iii) is entirely different as in comparison to the provisions of Sec.132(4) of the Act. Under Sec. 132(4) of the Act, the authorized officer can examine anybody on „Oath‟, and such statement may be used as evidence in any proceedings under the Act. As the statement recorded under Sec. 133A(3)(iii) of the Act is not recorded on oath, therefore, it had consistently been held by various courts that the same has no evidentiary value in absence of any corroborative evidence. In sum and substance, though, a statement recorded under Sec. 133A can be used to corroborate a state of fact, however, the same on a standalone basis cannot justifiably lead to drawing of any inferences. To sum up, a statement recorded under Sec.133A is simply an information which can be used for corroborative purpose for deciding any issue in favour or against the assessee. In fact, we find that the evidentiary value of a statement recorded under Sec. 133A of the Act has been subjected to judicial scrutiny and the Hon‟ble Courts had concluded that the same has no evidentiary value in the absence of any corroborative evidence. Our aforesaid view is fortified by the order of a coordinate bench of the ITAT, Delhi in the case of Mahesh Ohri Vs. ACIT (ITA No.4109 of 2009, dated 08.03.2013) (Del). The Tribunal in its aforesaid

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 order had observed that as the survey officials are not authorized to record the statement on oath, therefore, the statement taken during the course of the survey proceedings is simply an information which can be used for corroborative purpose for deciding any issue in favour or against the assessee. It was observed by the Tribunal as under :

“Apart from this statement, the Revenue has not brought anything on record in support of its conclusion that the assessee has undisclosed income. During the course of survey, the officer could record this statement of a person under sub-section (3) (iii) of section 133A of the Income-tax Act, 1961. This clause authorise the authority to record the statement of any person which may be useful for or relevant to any proceedings under the Act. However, the officer is not authorised to record the statement on oath and hence the statement taken during the course of search has no evidentiary value. It is simply an informationwhich can be used for corroboration purpose for deciding any issue in favour or against the assessee. This issue has come up before the Hon’ble Kerala High Court in the case of Paul Mathews and Sons (supra) and the court has made the following observations (page 108): “Section 133A(3) (iii) enables the authority to record the stateme nt of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to record any statement of any person which may be useful, but does not authorise taking any sworn sta temen t. On the other han d, we find tha t such a power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income- tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, there is much farce in the argument of learned counsel for the appellant that the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this.” 9. Similarly, the H’onble Madras High Court has also concluded that statement recorded during the course of survey has no evidentiary value. The special leave petition against the decision of the Hon’ble Madras High Court has also been dismissed by the Hon’ble Supreme Court on September 20, 2012. We have examined the record and we do not find any other material collected by the survey team and used by the Assessing Officer for making the addition of Rs. 2 crores. The contentions of The learned Departmental representative on the strength of the Hon’ble Karnataka High Court decision is that the Department was prevented by the assessee to conduct further inquiry and, therefore, the assessee c annot tak e a s omer sa ult s ubs eq uently. W e do not fi n d any forc e in the submissions of the learned Departmental representative because the Department is managed by trained Revenue 24

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 officials. They have the knowledge about their authorities while taking statement during the course of survey. The Board has also issued guidelines advising the survey team not to take voluntary disclosure unless incriminating material was collected. In the case of T.P. Indrakumar (supra), the Assessing Officer specifically lay his hands on unexplained gifts, in that situation the assessee had mode voluntary disclosure and filed a revised return. In the present case, the Department failed to collect any material during the course of survey and the Assessing Officer is simply harping upon the statement of the assessee, extracted supra. According to the authoritative pronouncement of the Hon’ble Supreme Court in the case of S. Khader Khan Son (supra) as well as the Hon’ble Kerala High Court, this statement does not carry any evidentiary value and, therefore, no addition is sustainable on the strength of this statement. In view of the above discussion, we find force in the first ground of appeal raised by the assessee and delete the addition of Rs. 2 crores.” Also, a similar view had been taken by the Hon’ble High Court of Kerala in the case of Paul Mathews & Sons Vs. CIT (2003) 263 ITR 101 (Ker). In the aforesaid case, it was observed by the Hon‟ble High Court that as the statement elicited during the course of the survey operations is not recorded on oath, therefore, the same has no evidentiary value. Further, the Hon’ble Supreme Court in its judgment in the case of CIT Vs. S. Khader Khan Son (2013) 352 ITR 480 (SC), while upholding the view of the Hon‟ble High Court of Madras, had held, that as a statement recorded in the course of the survey proceeding does not carry any evidentiary value, therefore, no addition is sustainable on the strength of the said statement. A similar view had also been taken by the Hon’ble High Court of Delhi in the case of CIT Vs. Dhingra Metal Works (2010) 328 ITR 384 (Del). In the aforementioned case, it was observed by the Hon‟ble High Court that a statement of an assessee to have evidentiary value should have been recorded on oath. It was observed by the High Court that though an admission was an extremely important piece of evidence, it could not be said to be conclusive and it was open to the person who made the admission to show that it was incorrect. In the backdrop of the aforesaid judicial pronouncements, it can safely be concluded that a statement recorded during the course of a survey proceeding has no evidentiary value and the same can only be used for corroborative purposes for deciding an issue in the course of the assessment proceedings. Now in the case before us, we find that the assessee both in the course of the original

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 assessment proceedings as well as the reassessment proceedings had placed on record sufficient documentary evidence to substantiate the authenticity of the loan transactions, viz. (i) confirmations of the lenders; (ii) copies of the returns of income of the lenders; (iii) copies of the financial statements of the lenders; and (iv) copy of the bank statements of the lenders. Further, we find that Shri Neminath P. Jain (supra) had vide his “affidavit”, dated 16.11.2014 alleging coercion, pressure and duress on the part of the survey officials at the time of recording of his statement to which he had claimed to have yielded considering his poor state of health had retracted from the same. In the backdrop of the aforesaid facts, we are of the considered view that now when Neminath P. Jain (supra) had retracted his statement that was recorded in the course of the survey proceedings, and as in the original assessment proceedings, had in the course of the reassessment proceedings too placed on record supporting documentary evidence to substantiate the authenticity of the loan transactions in question, therefore, it was incumbent upon the A.O to conclusively prove on the basis of corroborative material that the assessee had as a matter of fact obtained accommodation entries in the garb of the aforesaid loan transactions and could not have simply drawn adverse inferences on the basis of the aforesaid statement recorded in the course of the survey proceeding. As observed by us hereinabove, a statement recorded in the course of the survey proceeding can only be used for corroborative purposes for deciding any issue in favour or against the assessee. In our considered view, the A.O pursuant to retraction of the statement by Shri. Neminath P. Jain (supra) was obligated to place on record documentary evidence which despite withdrawal of the aforesaid statement would have corroborated the facts which were earlier stated by him. As a statement recorded under Sec.133A has no evidentiary value in absence of any corroborative evidence, therefore, the same on a standalone basis could not have justified drawing of adverse inferences as regards the authenticity of the loan transactions in question, specifically when the assessee had declined to act upon the same and had placed on record supporting documentary 26

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 evidence to prove the authenticity of the said transactions. We find that the CBDT in its letter No. F.No.286/2 /2003, IT (Inv-II), dated 10.03.2003 had observed that instances have come to its notice that in certain cases the assessee‟s were forced to confess undisclosed income in the course of the search & seizure and survey operations. It was noticed by the Board that as such baseless disclosures would be divorced from the actual facts and would not be backed by any credible evidence, therefore, the assesses at the time of filing their returns of income would retract from the same. Accordingly, the Board taking cognizance of the ground realities had in its aforesaid circular emphasised that the officials in the course of the search & seizure proceedings and survey operations should focus and concentrate on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed by the assessee before the department, and no attempt should be made to obtain confession as regards the undisclosed income. The said CBDT Circular reads as under:

“Instances have come to the notice of the Board where assessee’s have claimed that they have been forced to confess the undisclosed income during the course of the search& seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessee’s while filing returns of income. In these circumstances, confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search, seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.” On the basis of our aforesaid observations, we are of a strong conviction that in the case before us the mere admission on the part of Shri. Neminath P. Jain (supra) in the course of the survey proceedings, which thereafter had been withdrawn, de hors any corroborative material could not have been acted upon and pressed into service by the revenue on a standalone basis for 27

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 drawing of adverse inferences in the hands of the assessee. In sum and substance, we are of a considered view that the heavy reliance placed by the A.O on the retracted statement of Shri Neminath P. Jain (supra) that was recorded in the course of the survey proceedings conducted on 16/10/2014 and 17/10/2014 could not have been acted upon by the revenue in the absence of any corroborative material supporting drawing of such adverse inferences in the hands of the assessee. 14. We shall now advert to the claim of the ld. A.R that the lower authorities had erred in treating the loans aggregating to Rs.3.75 crores as bogus on the basis of the statement of Shri. Bhanwarlal Jain that was recorded under Sec.132(4) of the Act on 11.10.2013, wherein he had admitted before the Investigation wing that he was managing and controlling the various dummy concerns through which accommodation entries were being provided. As is discernible from the order of the CIT(A), Shri Bhanwarlal Jain had retracted from his aforesaid statement by filing an „affidavit‟ dated 15.05.2014 (filed with the office of the Addl. Director of Income-tax (Inv.)-IX, Mumbai on 27.05.2014) on the ground that the same was made involuntarily and under coercion. Observing that as per the material available on record there was no evidence of any coercion, threat or duress by the department, the CIT(A) was of the view that the retraction of the statement recorded u/s 132(4) by Shri. Bhanwarlal Jain and his associates-cum-employees was merely an afterthought and not corroborated by any material on record. Be that as it may, we find that it is not the case of the revenue that the aforesaid person or his associates-cum-employees had at any stage in their statements recorded during the course of the search proceedings ever alleged that they had provided accommodation entries to the assessee company. We shall in the backdrop of the aforesaid facts emerging from the statement of Shri Bhanwarlal Jain recorded under Sec.132(4) of the Act, which thereafter is stated to have been retracted by him, deliberate on the evidentiary value of the same insofar the same is relevant to the case of the assessee before us is

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 concerned. As observed by us hereinabove, one of the material aspect which had weighed in the mind of the A.O while concluding that the assessee had obtained accommodation entries from the aforementioned companies was the statement of Shri. Bhanwarlal Jain recorded under Sec. 132(4) of the Act. As observed by us hereinabove, it has throughout been the claim of the assessee that neither the aforesaid person nor any of his associates had ever stated that they had provided accommodation entries to the assessee. Apart from that, it was also submitted by the assessee before the A.O that as Shri Bhanwarlal Jain had retracted from his statement that was recorded during the course of the search proceedings, thus, no cognizance of the same could thereafter have been drawn. On a perusal of the orders of the lower authorities, we find that the assessee in order to fortify its claim that it had raised genuine loans from the aforementioned companies had both in the course of the original assessment proceedings that were culminated vide an order passed by the A.O under Sec. 143(3), dated 31.10.2011 and also in the course of the reassessment proceedings under consideration, had drawn support from certain facts and documentary evidence to support the same, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. Further, as observed by us hereinabove, the assessee had in the course of the reassessment proceedings in order to drive home its claim as regards the genuineness of the loan transactions under consideration also drawn support from the fact that most of the loans had already been repaid by it.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 15. We have given a thoughtful consideration to the facts of the case in the backdrop of the settled position of law. As observed by us hereinabove, the statement of Shri Bhanwarlal Jain, which thereafter had been retracted by him (though not accepted by the revenue) had heavily weighed with both the lower authorities for concluding that the assessee in the garb of unsecured loans had raised accommodation entries from the aforementioned seven parties. In sum and substance, we are confronted with a situation where a statement of a „third party‟ which though had been retracted is being acted upon and pressed into service by the revenue for drawing of adverse inferences and treating the loan transactions under consideration as bogus/sham. On a perusal of sub- section (4) of Sec.132 of the Act, an authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceedings under the Act. It can, thus, safely be gathered that the statement recorded in the course of the search proceedings under Sec.132(4) “may” thereafter be used in evidence in any proceedings under the Act. It is thus abundantly clear that an A.O is vested with a discretion to use a statement recorded under Sec.132(4) as an evidence in the course of any proceedings under the Income Tax Act. In our considered view, the word “may” clearly suggests that the statement recorded under Sec. 132(4) can be rebutted subsequently if the assessee is able to prove with documentary evidence that the facts earlier stated were not correct. Although a statement recorded under „oath‟ is an important piece of evidence, however, addition/disallowance cannot be made solely on the basis of such statement in the absence of any corroborative evidence supporting the same. In a case where a statement had been retracted by the assessee, it becomes all the more onerous on the part of the A.O to corroborate the statement recorded in the course of the search proceedings on the basis of supporting evidence. As had been observed by various courts, a statement recorded under Sec.132(4) is treated as a piece of 30

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 evidence in the proceedings under the Act as long as the same is not retracted. However, in case the assessee retracts the statement, then, the evidentiary value of the said statement suffers a serious dent. Accordingly, the mandate envisaged under sub-section (4) of Sec.132 of using the statement as evidence in any proceedings under the Act gets honoured only when there is no other version of the assessee vis-a-vis the said statement. To sum up, a statement recorded under Sec. 132(4) has though an evidentiary value, however, the same cannot be ascribed the status of a proven fact. In our considered view, a retracted statement under Sec.132(4) of the Act would require some corroborative material for the A.O to proceed and make additions on the basis of the facts stated in such statement. Now, in the case before us, we are seized with a situation where the revenue had sought to draw adverse inferences in the hands of the assessee by drawing support from the statement of a „third party‟ recorded under Sec.132(4) of the Act, which as observed by us hereinabove had thereafter been retracted. We cannot remain oblivious of the fact that now when a statement recorded under Sec.132(4) of the Act which had thereafter been retracted (though not accepted by the department) would require some corroborative material for the A.O to make additions on the basis of such statement in the hands of the person whose statement it is, therefore, obviously a much higher burden would be cast upon the revenue at the time of using such statement for drawing of adverse inferences in the hands of a „third party‟. Admittedly, an admission recorded in a statement under Sec.132(4) is a vital piece of evidence, but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of Pullangode Rubber Product Company Ltd. Vs. State of Kerala 91 ITR 18 (SC). Also, a similar view had been taken by the Hon’ble High Court of Andhra Pradesh in the case of CIT Vs. Naresh K. Aggarwal (2014) 369 ITR 171 (AP). In the said case, it was observed by the Hon‟ble High Court that a statement recorded under sub-section (4) of Sec.132 shall be treated as a 31

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 piece of evidence in the proceedings under the Act, as long as the said statement is not retracted. Also, a similar view had been taken by the Hon’ble High Court of Delhi in the case of CIT Vs. Sunil Aggarwal (2015) 379 ITR 367 (Del). In the aforementioned case, it was observed by the Hon‟ble High Court that a retracted statement under Sec.132(4) of the Act would require some corroborative material for the A.O to proceed to make additions on the basis of such statement. We find that the Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala& Anr. (1973) 91 ITR 18 (SC), had observed, that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was observed by the Hon‟ble Apex Court that it was open to the person who made the admission to show that it was incorrect. Relying on the aforesaid judgment of the Hon‟ble Apex Court, we find, that a coordinate bench of the Tribunal viz. ITAT, Mumbai in the case of Tribhuvandas Bhimji Zaveri, ITA No. 2250 & 2251/Mum/2013, dated 04.11.2015, had drawn an analogy and observed that though an admission made in a statement recorded under Sec.132(4) is an extremely important piece of evidence but it cannot be said that it is conclusive as it is open to the person who made the admission to show that it is incorrect. We further find that the Hon’ble High Court of Gujarat in DCIT (Investigation) Vs. Narendra Garg & Ashok Garg (AOP) (ITA No. 1531 & 1532 of 2007, dated 28.07.2016), had held, that as the assessee had retracted from his statement recorded under Sec.132(4) which though was not accepted by the revenue, therefore, it was incumbent on the part of the A.O to have supported the addition made on the basis of the disclosure made by the assessee in his aforesaid statement on the basis of evidence collected during the course of the search proceedings. It was observed by the Hon‟ble High court that the A.O cannot proceed on a presumption under Sec. 132(4) of the Act and there must be something more than a bare suspicion to support the assessment or addition. We find that the Hon‟ble High Court in the aforementioned case had observed that even in a case where the retraction of the disclosure made by the assessee in his statement recorded under 32

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 Sec.132(4) is not accepted by the revenue, even then, the addition/disallowance has to be based by the revenue on the basis of evidence collected during the course of the search proceedings. We, thus, on the basis of our aforesaid deliberations are of the considered view that merely on the basis of admission an assessee cannot be saddled with additions unless and until some corroborative evidence is found in support of such admission. 16. We shall in the backdrop of the aforesaid settled position of law advert to the adverse inferences drawn by the lower authorities as regards the genuineness of the loan transactions in question by drawing support from the statement of Shri. Bhanwarlal Jain that was recorded u/s 132(4) of the Act. Admittedly, as observed by us hereinabove, the A.O had drawn adverse inferences in the hands of the assessee on the basis of the statement of Shri. Bhanwarlal Jain that was recorded under Sec. 132(4) of the Act, despite the fact that the said person had thereafter retracted from his aforesaid statement by filing an „affidavit‟, dated 15.05.2014 with the Addl. DIT (Inv)-IX, Mumbai, on the ground that the same was recorded under threat and coercion. We are unable to persuade ourselves to subscribe to the view taken by the lower authorities that despite absence of any corroborative evidence which would irrefutably prove to the hilt that the assessee had obtained accommodation entries in the garb of unsecured loans from the aforementioned seven concerns, it was to be so presumed on the basis of the statement (which too had been retracted) of the aforementioned person viz. Shri Bhanwarlal Jain. Nothing is discernible from the orders of the lower authorities which would reveal that any specific material evidencing that the assessee as a beneficiary had obtained accommodation entries from the aforesaid person or his associates-cum-employees had surfaced during the course of the search proceedings conducted in the case of Shri. Bhanwarlal Jain. Also, as observed by us hereinabove, there is nothing discernible from the records which would reveal that the aforesaid person or any of his associate had ever

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 alleged that they have provided any accommodation entries to the assessee company. As such, we are of a strong conviction that in the absence of any corroborative evidence the retracted statement of the aforementioned „third party‟ viz. Shri Bhanwarlal Jain could not have been used on a standalone basis for drawing of adverse inferences in the hands of the assessee. At this stage, we may herein observe, that though the CIT(A) in his order had exhaustively referred to the modus operandi that was stated to have been adopted by Shri. Bhanwarlal Jain for providing accommodation entries for bogus loans/bogus sales/purchases/import for others through certain benami concerns which were managed and controlled by him, and further, in support thereof had referred to and carried out an in depth analysis of certain incriminating documents and material that were found and seized in the course of the search proceedings, but at no stage he had referred to any such material/document which would evidence that the assessee had raised accommodation entries in the garb of loans from the aforementioned concerns in question. In fact, a thorough scrutiny of the orders of the lower authorities reveals that there is not a word of whisper about any such incriminating material found in the course of the search proceedings or in the statements of Shri. Bhanwarlal Jain or his associates-cum-employees alleging, much the less evidencing, that the assessee had in the garb of the loans in question received accommodation entries. In sum and substance, though the lower authorities had in their respective orders referred at length to the incriminating material that was unearthed in the course of search proceedings which revealed that Shri. Bhanwarlal Jain was managing and controlling an organised activity of providing accommodation entries, but we are afraid that they had failed to lead any clinching evidence which would prove that the assessee in the garb of loans raised from the aforesaid concerns had only received accommodation entries. As is discernible from the orders of the lower authorities, neither in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates nor in the survey proceedings conducted on Shri. Neminath P. Jain, key person of Neminath group, any material was 34

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 found which would prove that the assessee in the garb of the loans in question had only received accommodation entries and not genuine loans. Although the CIT(A) on the basis of his exhaustive observations had demonstrated the nefarious activities of providing of accommodation entries by Shri. Bhanwarlal Jain and his associates-cum-employees, however, the same in the absence of any material which would conclusively prove that the assessee had not raised any genuine loans but in the garb of the same taken accommodation entries, we are afraid, would by no means suffice for drawing of adverse inferences as regards the authenticity of the loan transactions in question. Our aforesaid conviction is fortified by the fact that though the assessee in discharge of the initial onus that was cast upon it to prove the nature and source of the loans in question had drawn support from certain facts/documents, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced to and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed, however, the said documentary evidence despite having been accepted by the A.O while framing the original assessment u/s 143(3); dated 31.10.2011 was summarily discarded by both the lower authorities in the course of the reassessment proceedings and the appeal arising therefrom, without pointing out any such material or allegation on the basis of which the same had lost its evidentiary value and was no more of any significance for proving the authenticity of the loans in question. On a perusal of the orders of the lower authorities, we find, that they held a conviction that as the lender concerns figured in the list of the benami concerns which were being used by Shri. Bhanwarlal Jain and his associates for providing accommodation entries, thus, the claim of the assessee of having raised genuine loans from the said concerns stood 35

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 negated and the documents filed by it to substantiate the authenticity of the loan transactions in question could not be acted upon. 17. We have given a thoughtful consideration to the observations of the lower authorities and are unable to persuade ourselves to subscribe to the manner in which they had drawn adverse inferences as regards the genuineness of the loan transactions in question and without dislodging the authenticity of the documentary evidence that was placed on record by the assessee in support thereof summarily stamped them as bogus. As observed by us hereinabove, the assessee in the course of its original assessment proceedings which had culminated into an order u/s 143(3), dated 31.10.2011 had filed the aforesaid documentary evidence in order to substantiate the genuineness and veracity of the loans in question which were found to be in order by the A.O. In the course of the reassessment proceedings, the A.O was in receipt of information from the DGIT(Inv.), Mumbai that the assessee in the garb of the loans in question had raised accommodation entries from the aforesaid concerns which were the benami concerns of Shri. Bhanwarlal Jain, an infamous entry provider. Acting upon the information, the A.O after analysing the incriminating material/documents that were found in the course of the search proceedings and referring to the modus operandi that was adopted by the aforesaid person for carrying out his nefarious activities, had without pointing out any infirmity in the documentary evidence that was filed by the assessee to substantiate the authenticity of the loan transactions in question had summarily scrapped the same. It was observed by the A.O that as the lender concerns were engaged in providing accommodation entries, thus, the documents filed by the assessee to support its claim of genuineness of the loan transactions in question had no evidentiary value and were of no significance. We are afraid that the manner in which both the lower authorities had characterised the loan transactions as bogus does not inspire any confidence and rather reveals a predetermined approach on their part. At this stage, we may herein reiterate that neither any incriminating material

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 evidencing that the assessee had not raised genuine loans from the aforesaid concerns but had only obtained accommodation entries from them had either surfaced in the course of the search proceedings conducted on Shri. Bhanwarlal Jain or his associates-cum-employees nor in the survey proceedings conducted on Shri. Neminath P. Jain (supra). Apart from that, neither Shri. Bhanwarlal Jain nor his associates-cum-employees had ever stated in their statements recorded u/s 132(4) or u/s 131 that they had provided accommodation entries to the assessee. On a perusal of the order of the CIT(A), we find, that though he had in order to demonstrate that Shri. Bhanwarlal Jain and his benami concerns were carrying on an organised activity of providing accommodation entries analysed certain seized material viz. parallel account pertaining to a loan beneficiary i.e M/s Amba Corporation, as was retrieved from a “white colour Sony 4GB pen drive” that was seized in the course of the search proceedings vis-a-vis the ledger a/c of the said party as appearing in the books of account of M/s Impex Gems, a benami concern of Shri. Bhanwarlal Jain, which revealed that the aforesaid party i.e M/s Amba Corporation (supra) had received an accommodation entry of loan from the aforesaid benami concern i.e M/s Impex Gems, however, there is no reference in the orders of either of the lower authorities of any such material which would similarly evidence that the assessee had in the garb of the loan transactions in question raised accommodation entries from the aforesaid concerns. To sum up, in the absence of any specific material unearthed in the course of the search proceedings conducted on Shri. Bhanwarlal Jain and his associates or in the survey action conducted on Shri. Nemichand P. Jain (supra) which would evidence that the assessee had in the garb of the loans in question only raised accommodation entries, we are unable to subscribe to the reliance placed by the lower authorities on the statements of Shri. Bhanwarlal Jain and his associates-cum-employees that was recorded u/s 132(4) and u/s 131 of the Act, and thus, are unable to concur with the unsubstantiated view taken by them that as the aforesaid seven lender concerns in question were allegedly involved in providing accommodation 37

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 entries, thus, the loans in question despite absence of any material proving to the contrary were to be held as bogus. In our considered view, though the incriminating material unearthed in the course of search proceedings conducted on Shri. Bhanwarlal Jain and his associates raises serious doubts as regards the genuineness of their activities, but then, doubts howsoever strong cannot be allowed to take the place of evidence. We, thus, in the backdrop of our aforesaid observations are unable to concur with the lower authorities who had drawn support from the statements of Shri. Bhanwarlal Jain and his associates-cum-employees recorded in the course of the search proceedings u/s 132(4) or u/s 131 of the Act or that of Shri. Nemichand P. Jain recorded in the course of the survey proceedings, for concluding, that the assessee had not raised genuine loans and have only obtained accommodation entries from the aforesaid concerns. 18. Apart from that, we find that as is discernible from the assessment order, the assessee vide his letter dated 24.02.2016 filed with the A.O in the course of the reassessment proceedings had objected to the adverse inferences that were sought to be drawn on the basis of general statements recorded at its back and without its knowledge. It was categorically requested by the assessee that in case any adverse inferences were to be drawn by relying on the contents of any such document that was obtained at its back, then, a copy of the same be made available to it so that the same may be controverted. Also, the assessee had requested for cross-examination of Shri. Bhanwarlal Jain and also the proprietors/partners/directors of the concerns by relying on whose statements the genuineness of the loan transactions was being doubted. Relevant extract of the aforesaid submission of the assessee [Page 5 – Para 1.6 (letter dated 24.02.2016) of the A.O‟s order] is reproduced as under : “It is to submit that the above referred loans taken cannot be doubted on the basis of a general statement given by the alleged concerns and that too obtained without our knowledge. It seems that statement of any person was neither recorded by the A.O and not in my presence and 38

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 hence the credibility of the statement is doubtful and suspicious. This is more particularly so when my name has not been specifically mentioned in the confession. We respectfully submit that in case any contrary documentary documentary evidence is available on record which could be used against us, then a copy of such evidence/survey report may kindly be provided to us to controvert the same and kindly allow us to cross-examine the alleged concerns to justify the genuineness of its recorded transactions.” However, despite the aforesaid specific request of the assessee, we find, that the A.O neither supplied the copies of the incriminating documents nor allowed cross-examination of the persons whose statements were being relied upon by him for drawing of adverse inferences as regards the genuineness of the loan transactions in question. In our considered view, the aforesaid failure on the part of the A.O to allow a cross-examination of the aforementioned parties, viz. Shri Bhanwarlal Jain and his associates-cum-employees is in flagrant violation of the basic tenets of the principle of natural justice. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC). In the said case it was observed by the Hon‟ble Apex Court that not allowing the assessee to cross-examine the witnesses whose statements were made the basis for passing the impugned order by the Adjudicating Authority amounted to a serious flaw, which being in violation of the principles of natural justice rendered the said order as nullity. Further, we find that the Hon'ble High Court of Bombay in the case of The CIT-13 Vs. M/s Ashish International, ITA No. 4299 of 2009; dated 22.02.2011 had held that the genuineness of the statements relied upon by revenue is not established when the assessee disputes the correctness of those statements and has not been afforded adequate opportunity to cross- examine those parties even though he has asked for the same. In the case of Kishanchand Chellaram Vs. CIT (1980) 125 ITR 713 (SC) the Hon’ble Supreme court had held that the authorities cannot use the statement of a person for drawing of adverse inferences without giving an opportunity of cross-examination to the assessee. Further, the Hon’ble High Court of 39

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 Bombay in the case of H.R Mehta Vs. ACIT (2016) 387 ITR 561 (Bom) had observed that on a very fundamental aspect, the revenue was not justified in making addition at the time of reassessment without having first given the assessee an opportunity to cross-examine the deponent on the statements relied upon by the ACIT. Quite apart from the denial of an opportunity of cross-examination, it was observed by the Hon‟ble High Court that the revenue had not even provided the material on the basis of which it had sought to conclude that the loan was a bogus transaction. It was observed by the Hon‟ble High Court that the assessee had though specifically requested for an opportunity to cross-examine the deponent and furnishing of the copies of the statements and material which was being acted upon by the department, however, the same was denied to him. It was in the backdrop of the aforesaid facts, the Hon‟ble High Court had observed that as the monies were advanced by the assessee apparently by account payee cheque and was repaid vide account payee cheque, the least that the department should have done was to grant an opportunity to the assessee to meet the case against him by providing the material that was sought to be used against it before passing the order of reassessment. Observing, that the A.O had failed to afford an opportunity to the assessee to meet the case against him, it was observed by the Hon‟ble High Court that the denial of such opportunity would go to the very root of the matter and strike at the foundation of the assessment order and render it vulnerable. In the case of Pr. CIT Vs. Best Infrastructure (India) Pvt. Ltd. 397 ITR 82 (Del) it was observed by the Hon’ble High Court of Delhi that the onus of ensuring the presence of the person on whose statement the department was relying for drawing of adverse inferences in the hands of the assessee was upon the department and the same could not be shifted to the assessee. It was further observed by the Hon‟ble High Court that as the person on whose statement reliance was placed by the department could not be produced for cross-examination, the said fact was sufficient to discard the said statement. Further, we find that the Hon’ble High Court of Gujarat in the case of Heirs & Legal Representatives of Laxmanbhai S. 40

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 Patel Vs. CIT (2010) 327 ITR 290 (Guj) deliberating on the legal sanctity of a statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving him an opportunity of cross- examination, had observed, that if relying on such statement an addition was made, then, the same was required to be deleted on the ground of violation of the principles of natural justice. Also, a coordinate bench of the Tribunal i.e ITAT, Mumbai in the case of Mahesh Gulabrai Joshi Vs. CIT (2005) 95 ITD 300 (Mum), had observed, that in a case where the addition was made on the basis of statement of a person recorded during survey but no opportunity of cross-examining the said person was allowed to the assessee, then, the said statement could not have been made the basis of the addition. As regards the reliance placed by the lower authorities on the statements of Shri. Bhanwarlal Jain and his associates-cum-employees, we are of the considered view that as neither Shri. Bhanwarlal Jain or his associates-cum-employees had ever alleged in their respective statements recorded u/s 132(4) or u/s 131 of the Act that they had provided any accommodation entries to the assessee company nor any material refuting the genuineness of the loans raised by the assessee had surfaced either in the course of the search proceedings conducted on Shri. Bhanwarlal Jain or in the survey conducted on Neminath group, therefore, they could not have been summarily stamped as accommodation entries. Apart from that, as no opportunity to cross-examine Shri. Bhanwarlal Jain or his associates-cum-employees was provided to the assessee, therefore, drawing support from our aforesaid deliberations, we are of a strong conviction that no part of their statements which though had been retracted could have been used against the assessee. 19. We shall now deal with the observations of the lower authorities on the basis of which they have concluded that the assessee had not raised any genuine loans from the aforementioned parties in question and have only received accommodation entries from them. As observed by us at length hereinabove, the assessee in order to drive home its claim that it had raised

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 genuine loans from the aforementioned seven parties had in the course of the reassessment proceedings drawn support from certain facts/documents, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were filed; (v). copies of the bank statements of the lenders highlighting the loans advanced to and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed. By placing on record the aforesaid documentary evidence the assessee discharged the primary „onus‟ that was cast on it to prove the authenticity of the loan transactions in question. However, the veracity of the claim of the assessee was not accepted by the A.O primarily on the ground that the names of the lender concerns viz. M/s Mohit Enterprises; M/s Jewel Diam; M/s Meenakshi Exports; M/s Rose Impex; M/s Rose Gems Pvt. Ltd; M/s Surya Diam; M/s Jewel Diam; M/s Navkar Diamonds & M/s Sankhala Finvest Ltd. figured in the list of the 68 concerns which were admitted by Shri. Bhanwarlal Jain as paper concerns which were being managed and controlled by him for providing accommodation entries for bogus loans/bogus sales/purchases/import for others. Rejecting the confirmations of the proprietor/partners /directors of the aforementioned concerns, it was observed by the A.O that the same had already been refuted by the department. Also, the A.O was not inspired by the assessee‟s claim of having raised genuine loans from the aforementioned parties for the reason that the said loans were not backed by loan agreements and collateral securities. Further, the A.O observed that a detailed analysis of the financials of all the benami concerns of Shri. Bhanwarlal Jain revealed certain common characteristics, viz. that despite high turnover no advance-tax or self assessment tax was paid by the said concerns; the major portion of assets in the balance sheets of the said concerns comprised of loans & advances, debtors and investments wherein assets almost matched the figure 42

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 of creditors and; that the entire TDS deducted on the interest payable against the loans and advances was claimed as refund. It was further observed by the A.O that during the course of search and post search analysis in the case of Shri. Bhanwarlal Jain group, a categorical finding was made with respect to the benami concerns in question and evidences were found showing that the said concerns were paper concerns which were being managed and controlled by Shri. Bhanwarlal Jain and were used as conduits to provide accommodation entries of loans and advances to various beneficiaries. Further, the A.O observed that the data retrieved from the pen drive that was seized in the course of search proceedings revealed year wise parallel/cash/angadia account of all the beneficiaries who had from F.Y 2006- 07 till date taken accommodation entries from the 70 benami concerns of S/sh. Bhanwarlal Jain and Rajesh Bhanwarlal Jain. It was, further, observed by the A.O that a comparison of the parallel accounts of the beneficiary concerns against their accounts appearing in the regular books of accounts of the benami concerns revealed that the cheques were issued against receipt of cash from the concerned beneficiary. It was observed by the A.O that the Investigation wing had named the lender concerns as conduits of Shri. Bhanwarlal Jain. Also, it was noticed by the A.O that as per the information received from the Investigation wing, Mumbai, the assessee‟s name figured in the list of beneficiaries to whom bogus loans were advanced by the benami concerns of Shri. Bhanwarlal Jain. Further, the A.O referred to the relevant extract of the statement of Shri. Bhanwarlal Jain recorded u/s 132(4), dated 11.10.2013 wherein he had in reply to Q.No. 24 had provided the details of 68 concerns which were managed and controlled by him for providing accommodation entries. On the basis of his observations, the A.O had concluded that the assessee had invested his own unaccounted money in the garb of loans projected to have been raised from the aforesaid benami concerns. On appeal, the CIT(A) found favour with the view taken by the A.O that the assessee had not raised any genuine loans from the aforementioned concerns and had only received accommodation entries from them. It was 43

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 observed by the CIT(A) that the documents found during the course of survey conducted on the assessee revealed that it had collected unaccounted on- money on sale of flats in cash which was channelized into its books of accounts through accommodation entries received from the aforesaid benami concerns. Rejecting the confirmation letters of the lender concerns that were filed by the assessee in the course of the reassessment proceedings, it was observed by the CIT(A) that once it was proved that the lender concerns were benami concerns which were providing accommodation entries, the documents filed by the assessee in its attempt to substantiate the genuineness of the loan transactions lost its evidentiary value and were of no significance. Further, in order to drive home its conviction that the benami concerns in question were not carrying on any genuine business and were only providing accommodation entries, the CIT(A) referred to certain facts, viz. books of accounts of all the concerns were maintained at the same premises; blank signed cheques of the proprietors/partners/directors of the said concerns were found in the course of the search proceedings; books of account of all the concerns were being maintained on a single computer etc. In order to support his view that the benami concerns were not carrying any genuine business of trading in diamonds as was claimed by them in their returns of income, it was observed by the CIT(A) that contrary to what was claimed in the books of accounts no stock of diamond was found in the course of the search proceedings. As regards the data retrieved from the pen drives that were seized in the course of the search proceedings conducted on Shri. Bhanwarlal Jain, it was observed by the CIT(A) that the data retrieved was mammoth i.e 1,90,141 transactions for all the years. It was further observed by the CIT(A) that some of the beneficiaries had admitted the fact of having raised accommodation entries in the garb of loans from the benami concerns which were managed and controlled by Shri. Bhanwarlal Jain. The CIT(A) observed that Shri. Bhanwarlal Jain had admitted in his statement recorded u/s 132(4) that he was controlling the overall business of the various group concerns. Further, the CIT(A) referred to the relevant extracts of the 44

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 statements of some of the employees/associates of Shri. Bhanwarlal Jain, viz. Anil Khicha; Lunkaran Parasmal Kothari etc. who are stated to have admitted that they were name sake directors/partners/proprietors of the various concerns that were actually managed and controlled by Shri. Bhanwarlal Jain. It was, further, observed by the CIT(A) that it was not possible for the revenue to decode all the unaccounted entries recorded in the incriminating seized material and correlate them with the regular books of accounts of the group concerns of Shri. Bhanwarlal Jain and then provide cross-examination of Shri. Bhanwarlal Jain to all the beneficiaries which ran into thousands. It was observed by the CIT(A) that once it was proved that the parallel books of accounts seized in the course of search proceedings contained unaccounted entries since 2004, then, nothing more was required to be proved by the department. Accordingly, on the basis of his aforesaid observations the CIT(A) was of the view that none of the entries recorded in the books of account of the various concerns of Shri. Bhanwarlal Jain group were genuine and had to be necessarily treated as accommodation entries. 20. We have deliberated at length on the observations of the lower authorities on the basis of which they have stamped the loan transactions in question as accommodation entries. Before proceeding any further, we may herein observe that the documentary evidence that was verified by the department for holding the loan transactions as genuine while framing the original assessment vide order passed u/s 143(3), dated 31.10.2011, was however, discarded while framing the reassessment in its case, for the reason, that the names of the lender concerns in question had figured in the list of the 68 benami concerns which were admitted in his statement recorded u/s 132(4) by Shri. Bhanwarlal Jain, an infamous accommodation entry provider, as benami concerns which were managed and controlled by him for providing accommodation entries. Primary basis for digressing from its earlier view and stamping the loan transactions as bogus while framing the reassessment was the reliance placed by the lower authorities on the

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 statements of Shri. Bhanwarlal Jain and his associates-cum-employees recorded u/s 132(4) and u/s 131 in the course of the search proceedings AND that of Shri. Nemichand P. Jain that was recorded in the course of survey action. However, for the reasons culled out at length by us hereinabove, the statements of the aforesaid persons having been retracted, thus, the same in the absence of any corroborative material supporting the facts therein stated could not on a standalone existence have been acted upon by the department. Apart from that, as the assessee was not afforded cross- examination of either Shri. Bhanwarlal Jain or his associates-cum-employees whose statements were used by the A.O for drawing of adverse inferences in its case, therefore, for the said reason too the said statements lost their significance and evidentiary value. As such, in the backdrop of our aforesaid deliberations we are unable to persuade ourselves to subscribe to the heavy reliance placed by the lower authorities on the respective statements of the aforesaid persons, viz. Shri. Bhanwarlal Jain and his associates-cum- employees that were recorded in the course of the search proceedings u/s 132(4) and u/s 131 of the Act and that of Shri. Neminath P. Jain recorded in the course of the survey proceedings. As regards the manner in which the documentary evidence that was filed by the assessee to substantiate the genuineness and veracity of the loan transactions in question had been discarded by the lower authorities, we are afraid the same does not find favour with us. As observed by us hereinabove, the assessee in discharge of the primary onus that was cast upon it as regards proving the identity and creditworthiness of the lenders and genuineness of the loan transactions, had in the course of the reassessment proceedings filed with the A.O the same set of facts and documentary evidence that were earlier filed in the course of the original assessment proceedings and was accepted by him, viz. (i). that all the loans in question were raised either by account payee cheques or by RTGS/NEFT; (ii) that interest was paid on the loans in question; (iii) that tax was deducted at source on the interest paid on the loans in question and Form 16A were issued to the lenders; (iv). confirmations of the lenders were 46

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 filed; (v). copies of the bank statements of the lenders highlighting the loans advanced and the interest received from the assessee were filed; (vi). copies of the income-tax returns of the lenders were filed; and (vii). copies of the financial statements of the lenders were filed . However, the A.O without taking any cognizance of the aforesaid facts and documents concluded that as the lenders in question were benami concerns of Shri. Bhanwarlal Jain, therefore, the aforesaid documents relied upon by the assessee in support of its claim of having raised genuine loans were of no significance and lost their evidentiary value. We are unable to concur either with the view and also the basis adopted by the A.O for so concluding. On a perusal of the orders of the lower authorities, it can safely be gathered from record that the lender concerns in question had not been conclusively proved to be benami concerns. Insofar the seven lender concerns in question are concerned, we find that except for the fact that the names of the said concerns had figured in the list of the 68 concerns which were stated by Shri. Bhanwarlal Jain in his statement recorded u/s 132(4) as his benami concerns that were used for providing accommodation entries, there is nothing else discernible from the records which would evidence that the said concerns in question were bogus concerns and had provided accommodation entries to the assessee. Also, we cannot shut our eyes to the fact that the aforesaid statement of Shri. Bhanwarlal Jain recorded u/s 132(4) had thereafter been retracted by him. As such, the stamping of the aforesaid seven lender concerns in question as bogus concerns de hors any corroborative material cannot be sustained. Also, no documentary evidence had been placed on record by either of the lower authorities which would by way of a clinching evidence reveal that the assessee in question had in the garb of loans received accommodation entries from the aforementioned lender concerns. On a perusal of the order of the CIT(A), we find that he had in order to demonstrate that Shri. Bhanwarlal Jain alongwith his associates-cum-employees were carrying on an organised activity of providing accommodation entries analysed certain seized material, viz. parallel account pertaining to a loan beneficiary i.e M/s Amba Corporation 47

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 that was retrieved from a “white colour Sony 4GB pen drive” seized in the course of the search proceedings vis-a-vis the ledger a/c of the said party as appearing in the books of account of M/s Impex Gems, a benami concern of Shri. Bhanwarlal Jain, which revealed that the aforesaid party i.e M/s Amba Corporation (supra) had received an accommodation entry from the aforesaid benami concern i.e M/s Impex Gems. However, there is no reference in the orders of either of the lower authorities of any such material which would similarly evidence that either the assessee in question had in the garb of the loan transactions raised accommodation entries from the aforesaid concerns or that any of the seven lender concerns were similarly involved in the alleged nefarious activities of providing accommodation entries. Apart from that, we find that the lower authorities had in their orders neither referred to any such incriminating material which would irrefutably evidence that the assessee in question had raised accommodation entries of loans from the abovementioned concerns nor any such specific allegation in context of the assessee is discernible from any of the statements of Shri. Bhanwarlal Jain or that of his associates-cum-employees recorded u/s 132(4) and u/s 131 of the Act. In fact, it remains as a matter of fact borne from the records that though the statements of Shri. Bhanwarlal Jain and his associates-cum-employees had been heavily relied upon by the lower authorities for supporting their generalized observations that the assessee had not raised any genuine loans from the lender concerns in question, but then, the statements of neither of the said persons had ever been made available to the assessee. In our considered view, the assessee by leading documentary evidence in support of the identity and creditworthiness of the lender concerns and genuineness of the loan transactions in question had discharged the primary onus that was cast upon it for proving the authenticity of the loan transactions. Thereafter, the onus to disprove the genuineness of the loan transactions in question was shifted on the A.O. However, the A.O we find had failed to discharge the onus that was cast upon him as regards disproving the genuineness of the loan transactions in question after taking cognizance of the documentary evidence 48

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 that was filed by the assessee in support thereof. On a perusal of the orders of the lower authorities, we find that they had adopted a casual approach and without even putting up any effort to refer to the specific confirmations; income-tax credentials; bank accounts; and financials of the lender concerns/entities as were placed on the record of the A.O by the assessee vide its letter dated 19.02.2016 and 22.02.2016, had concluded, that as the lender concerns were benami concerns forming part of an organized activity of providing accommodation entries, thus, the documents filed by the assessee lost their significance and were of no evidentiary value. We would not hesitate to observe that the A.O had failed to place on record any material which could conclusively prove that the asseseee in question had in the garb of loans raised accommodation entries. Although, we find substance in the observation of the lower authorities that if it is conclusively proved beyond any doubt on the basis of clinching evidence that a lender concern is solely existing for providing accommodation entries, then, it can safely be inferred that accommodation entries in the garb of loans were being provided by it. However, in the backdrop of retracted statements of Shri. Bhanwarlal Jain and his associates-cum-employees, coupled with the fact that neither of the lower authorities had referred to any specific material in context of the aforesaid seven lender concerns in question which would evidence that they were not carrying on any genuine business and were only providing accommodation entries, we are unable to concur with the lower authorities that the documentary evidence filed by the assessee in discharge of the primary onus that was cast on it having lost its significance and evidentiary value was thus liable to be discarded. 21. We shall in the backdrop of our aforesaid observations deal with the documents that were filed by the assessee in support of its claim of having raised genuine loans from the aforementioned lender parties. As observed by us hereinabove, the assessee by placing on record the copies of the income- tax returns of the lender concerns had duly established their identity. We are

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 unable to concur with the CIT(A) that the assessee had failed to establish the identity of the lender concerns. Copies of the bank accounts of the lender concerns filed by the assessee with the A.O revealed that the loans in question were received by the assessee company by RTGS/NEFT. Also, the interest received by the assessee on the loans in question stood credited in the said respective bank accounts. Observation of the CIT(A) that no cash was introduced in the bank accounts of the said lenders prior to advancing of the loans to the assessee, in our considered view, in itself fortifies the fact that the assessee had not parted with any cash in lieu of the loans received from the lender concerns. Although, it is alleged by the lower authorities that the assessee‟s own unaccounted money was thereafter routed back as accommodation entries in the garb of loans, however, there is not a whisper of a word in their respective orders about any such material which would evidence that the source of the loan advanced by the lender concerns was the assessee‟s own money. In fact, no adverse observations backed by any supporting material as regards the credits/accumulated balances in the bank accounts of the lender concerns out of which loans had been advanced to the assessee is discernible from the orders of the lower authorities. Further, the assessee in order to substantiate its creditworthiness had also placed on record its financials with the A.O. However, both the lower authorities instead of disproving the authenticity of the loan transactions in the backdrop of the documents that were filed by the assessee in discharge of its onus of having raised genuine loans, had most arbitrarily discarded the same by stamping it as insignificant and devoid of any evidentiary value. As the view taken by the lower authorities that as the lender concerns were benami concerns carrying on an organized activity of providing accommodation entries, therefore, the documents filed by the assessee in the course of the reassessment proceedings to support the genuineness of the loan transactions in question lost their significance and were of no evidentiary value had been rejected by us, for the reason, that the lender concerns in question have not been irrefutably proved to the hilt as accommodation entry providers, therefore, in 50

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 digression of the view that was earlier taken by the A.O while framing the original assessment vide his order passed u/s 143(3), dated 31.10.2011 wherein he had accepted the genuineness of the loan transactions in question, it was all the more onerous on his part to disprove the authenticity of the loan transactions in question by dislodging the documentary evidence that was filed by the assessee in support thereof. We are afraid that the general observations of the A.O that the creditworthiness of the lenders and the genuineness of the transaction are not found to be satisfactory would not suffice to discharge the onus that was shifted on him to disprove the authenticity of the loan transactions in question. As observed by us hereinabove, the A.O had failed to rebut the material which was placed on record by the assessee to substantiate the identity and creditworthiness of the lenders and also the genuineness of the transaction under consideration. In our considered view, now when the assessee had on the basis of the documentary evidence filed by him discharged the onus that was cast upon him as regards proving the authenticity of the loan transactions in question, then, the A.O without discharging the onus that was shifted on him as regards disproving the authenticity of the said transactions could not have justifiably drawn adverse inferences as regards the same. Our aforesaid view is supported by the order passed by a coordinate bench of the Tribunal i,e ITAT “B” Bench, Mumbai in the case of the group entities of the assessee, viz. Shri. Nemicand Jain & Ors Vs. DCIT, Central Circle 1(3), Mumbai, ITA Nos. 2641, 2480 & 2388/Mum /2018; dated 08.07.2019. In its aforesaid order it was observed by the Tribunal that when the assessee had discharged the initial onus that was cast upon him as regards proving the genuineness of the loan transactions, then, the A.O without discharging the onus that was thereafter shifted on him by dislodging the assessee‟s claim on the basis of irrefutable material could not have drawn adverse inferences only on the basis of third party information. The Tribunal while concluding as hereinabove had observed as under:

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 “The solitary issue that needs to be resolved under given facts and circumstances of the 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 Sec. 68 of the Act or not. The A.O has made additions of Rs. 75,00,000/- 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 parties. The A.O has extensively discussed the issue in his assessment order in light of facts gathered 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 A.O opined that although the assessee has furnished various documents including confirmations from the loan creditors and their ITR acknowledgement, but failed to prove the genuineness of transactions and creditworthiness of the parties in order to come out of the provisions of Section 68 of the Act. The A.O 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. 8. The provisions of Section 68 of the Act deals with the cases, where any sum found credited in the books of account of the assessee in any financial year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the A.O satisfactory, then the sum so credited may be charged to income tax as the income of the assessee 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 A.O needs to examine three ingredients i.e identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provided under Section 68 of the Act, then the onus shifts to the A.O to prove otherwise. In this legal background, if you examine the identity of the assessee in light of findings recorded by the A.O in his assessment order, one has to examine whether the assessee has discharged the burden cast upon it u/s 68 of the Act in respect of unsecured loan received from certain companies controlled and managed by Shri. Bhanwarlal Jain. The A.O never disputed the fact that the assessee furnished various evidences to prove identity of the loan creditors. The A.O has categorically admitted that the assessee has filed various details including PAN card, ITR acknowledgement, financial statements, bank statements, confirmation letters and affidavits from the parties from whom loans has been taken. The A.O has disputed the genuineness of transactions and creditworthiness of the parties. The sole basis for the A.O to doubt the genuineness of transactions is search conducted in the cases of Bhanwarlal Jain by DGIT(Inv.), Mumbai unit, where certain incriminating material found and seized as per which Bhanwarlal Jain and his associates were involved in providing accommodation entries. The A.O has taken note of statement recorded by the department from Shri. Bhanwarlal Jain and his associates. 52

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 The A.O has taken note of survey proceedings conducted in group cases of assessee and statement recorded from directors and employees of the assessee group cases. Except this, no contrary evidence has been brought on record by the A.O to disprove the claim of the assessee that these are genuine transactions and unsecured loans taken under normal business circumstances. Therefore, under these factual matrix, we have to examine whether the credits found in the books of account of the assessee are hit by the provisions of section 68 of the Act or not. The sole basis for the A.O to make additions is statement of Shri. Bhanwarlal Jain recorded under Section 132(4) of the Act, where he has admitted at he is involved in providing bogus unsecured loan entries to various beneficiaries. The statement given by Shri. Bhanwarlal Jain has been retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason for the A.O to go only on the basis of statement of Shri Bhanwarlal Jain so as to treat unsecured loan taken by the assessee 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 A.O to arrive at a conclusion that the transactions between the parties are not genuine and which are hit by the provisions of Section 68 of the Act. The A.O never brought out any further facts to link credits in the books of account of the assessee to the evidences found during the course of the search in the case of Shri. Bhanwarlal Jain except statement of Shri. Bhanwarlal 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 Bhanwarlal Jain Group companies for arranging loans. The A.O 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, affidavits from the directors/partners /proprietors of those companies. Income tax acknowledgements 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 applicable TDS as per the law. These loans have been repaid during subsequent financial year. All these documents are part of the assessment proceedings. The A.O 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 A.O to suspect the transactions between the parties only on the rground 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 A.O failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that these transactions are non-genuine, but merely relied upon the statement of Shri. Bhanwarlal Jain under Sec. 68 of 53

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 the Act to make addition u/s 68 of the Act. No doubt, the A.O is having every right to suspect the transactions but, that by itself would not give rise an occasion for the A.O to make additions under Sec. 68 of the Act, when the evidences filed by the assessee clearly proves the fact that these transactions were genuine transactions which are undertaken under normal business circumstances. Therefore, we are of the considered view that the A.O has erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain under Section 68 of the Act.” Apart from the aforesaid, a perusal of the orders of the lower authorities reveal that the A.O had not even sought to verify the authenticity of the loan transactions in question by issuing any notices under Sec. 133(6) of the Act. In our considered view, in case the A.O had any doubts as regards either the identity and creditworthiness of the aforesaid lenders or the genuineness of the loan transactions, then, in order to dispel the same he would have made necessary verifications by either summoning the details in exercise of the powers vested with him under Sec. 133(6) or directing the assessee to furnish further documentary evidence. However, we find that the A.O had neither carried out any verifications on his own nor directed the assessee to clarify any further aspects pertaining to the authenticity of the loan transactions in question. As regards the observation of the A.O that the assessee had not produced the parties, we find, that there is nothing discernible from the orders of the lower authorities from where it could be gathered that he had directed the assessee for doing the needful. Before us, the ld. D.R did neither controvert the aforesaid factual position nor placed on record any material proving to the contrary. In our considered view, now when the assessee in discharge of the primary onus that was cast on it to substantiate the authenticity of the loan transactions had placed on record sufficient documentary evidence which had not been rebutted by the A.O, and in fact, was accepted by him while framing the original assessment, then, merely for the reason that the said lenders had not appeared before him would even otherwise not justify characterising the loan transactions in question as bogus/sham. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of Commissioner of Income Tax-8 Vs.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 M/s Orchid Industries Pvt. Ltd. (2017) 397 ITR 136 (Bom). In the aforesaid case, it was observed by the Hon‟ble High Court that now when the assessee had placed on record documentary evidence to support the genuineness of the transactions under consideration, then, only because the creditors had not appeared before the A.O would not justify drawing of adverse inferences as regards the authenticity of the said transactions. Still further, we find that neither of the lower authorities had brought on record any evidence which would suggest that the assessee had paid cash to the lenders in lieu of loans received from them. Further, the fact that the assessee company had paid interest on the loans raised from the aforementioned parties after deduction of tax at source also fortifies its claim as regards the authenticity of the loan transactions. Also, the fact as regards part repayment of the loans by the assessee to the aforementioned lenders supports the genuineness of the loan transactions in question. Our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of PCIT Vs. M/s Skylark Build (ITA No. 616 of 2016; dt. 24.10.2018). In the aforesaid case, the Hon‟ble High court taking cognizance of the subsequent development of repayment of the loans by the assessee to the lenders, had observed, that the said fact proved the authenticity of the loan transactions. On a perusal of the order of the CIT(A), we find, that though he had focussed more on demonstrating the facts which had emerged in the course of the search proceedings conducted on Shri Bhanwarlal Jain and the modus operandi that was adopted by the said person and his associates-cum-employees for providing accommodation entries, however, no facts specifically evidencing receiving of the accommodation entries by the assessee in the garb of loans from the aforesaid lender concerns in question are discernible from his order. We also find that neither of the lower authorities had brought on record any evidence which would suggest that the assessee had paid cash to the lenders in lieu of loans received from them. We are afraid that the adverse inferences drawn by the lower authorities as regards the authenticity of the loan transactions under consideration without any attempt to dislodge the documentary evidence that 55

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 was placed on record by the assessee in discharge of its onus as regards proving the authenticity of the loan transactions in question cannot be sustained. Our aforesaid view is fortified by the order of the ITAT “C” Bench, Mumbai, in the case of ITO 20(2)(5), Mumbai Vs. Smt. Pratima Ashar (2019) 107 taxmann.com 135 (Mum), wherein a similar view was taken. At this stage, we may herein observe that a coordinate bench of the Tribunal in the case of Dy. CIT-CC-7(2), Mumbai Vs. M/s Manba Finance Ltd., (ITA Nos. 1448, 1449 & 1467/Mum/2017, dated 05.10.2018) on coming across identical facts had upheld the order of the CIT(A) who had vacated similar adverse inferences as regards the authenticity of the loan transactions that were drawn by the A.O. In the aforesaid case, on the basis of information that the assessee had in the garb of loans obtained accommodation entries from certain concerns which were managed and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, survey action was conducted on the aforementioned assessee on 25.03.2014. In the course of the survey action, the director admitted in his statement recorded under Sec. 133A that the assessee company had received accommodation entries. However, the aforesaid concern thereafter did not offer the amount of the unsecured loans for tax in its return of income. Relying upon two aspects viz. (i) that the director of the assessee company in his statement recorded in the course of the survey proceedings had admitted that it had raised bogus unsecured loans; and (ii) that the lender concerns were managed and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, the A.O held the loans as unexplained cash credits u/s. 68 of the Act. On appeal, the Tribunal while upholding the order of the CIT(A) observed that the A.O had not brought on record any adverse material to rebut the credibility of the corporate entities from which loans were raised by the assessee. Also, it was observed by the Tribunal that the assessee had placed on record supporting documentary evidence to substantiate the authenticity of the loan transactions viz. confirmation letters, bank statements, financial statements of the lender parties, and thus, had discharged the onus that was 56

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 cast upon it. It was further observed by the Tribunal that no adverse inferences could have been drawn by the A.O without making any inquiry by issuing notices under Sec. 133(6) or summons under Sec. 131 of the Act. As regards the admission of the undisclosed income by the director of the assessee company in his statement recorded in the course of the survey proceedings, it was observed by the Tribunal that a disclosure obtained in the course of survey de hors corroborative evidence cannot be a conclusive proof for making an addition in the hands of the assessee. Accordingly, the Tribunal on the basis of its aforesaid observations had in the abovementioned case wherein identical facts were involved concluded, that the A.O in the absence of corroborative evidence was not justified in treating the loans received by the assessee before them as unexplained cash credit under Sec. 68 of the Act. A similar view had also been arrived at by the ITAT Bench “B”, Mumbai in the case of M/s Reliance Corporation Vs. ITO, Ward 32(3)(2), Mumbai, ITA No. 1069 to 1071/Mum/2017; dated 12.04.2017. In the aforesaid case the unsecured loans were raised by the assessee from three concerns, viz. M/s Laxmi Trading Company; M/s Rose Impex; and M/s Megha Gems. On the basis of information received from the DGIT(Inv.), Mumbai that the assessee in the garb of the aforesaid loans had received accommodation entries, its case was reopened u/s 147 of the Act. On being called upon to substantiate the genuineness and veracity of the aforesaid loan transactions, the assessee, in the course of the assessment proceedings filed supporting documentary evidence, viz. confirmation letters from the creditors; PAN of the creditors; bank statements of the creditors and the assessee; form nos. 16 qua TDS on interest; profit and loss account, balance sheet and returns of income of the creditors; and ledger accounts of the creditors. However, the A.O observing that the aforesaid concerns from whom the assessee had claimed to have received the loans were benami concerns of Shri. Bhanwarlal Jain, an infamous accommodation entry provider, thus, treated the amounts so received as accommodation entries and added it to its returned income. On appeal, the Tribunal after relying on a host of judicial decisions vacated the 57

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 addition made by the A.O, on the ground, that as the assessee by filing the necessary details had discharged the onus that was cast upon it to prove the genuineness of the loans in question, the onus, thus, was shifted on the department to disprove the said claim of the assessee. It was observed by the Tribunal that the A.O without bringing any material against the assessee on record had merely proceeded on the basis of information received from DGIT(Inv.), Mumbai and concluded that the assessee as a beneficiary had in the garb of loans received accommodation entries. Also, it was observed by the Tribunal that no cross-examination was allowed to the assessee. Accordingly, on the basis of his aforesaid observations the Tribunal vacated the stamping of the loan transactions as accommodation entries by the A.O and deleted the consequential addition made by the A.O. 22. We, thus, in the backdrop of our aforesaid deliberations are of the considered view that as the assessee had discharged the „onus‟ that was cast upon it under Sec.68 of the Act, therefore, the A.O without rebutting the genuineness of the said loan transactions in question on the basis of supporting documents was in no way justified in treating the loans amounting to Rs. 3.75 crores received by the assessee from the aforementioned parties as unexplained cash credits under Sec.68 of the Act. Accordingly, not finding favour with the view taken by the lower authorities, we herein set aside the order of the CIT(A) and vacate the addition of Rs. 3.75 crore made by the A.O. The Grounds of appeal No. 2 & 6 raised by the assessee are allowed in terms of our aforesaid observations. 23. We shall now advert to the disallowance of the interest expenditure of Rs.3,72,328/- that was claimed by the assessee to have been paid to the aforementioned seven lender parties. We find that the aforesaid claim of expense of the assessee was disallowed by the A.O, for the reason, that the loan transactions in question had been held by him to be bogus. Now, as we have concluded that the assessee had raised genuine loans from the aforementioned parties, therefore, the consequential disallowance by the A.O 58

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 of the interest paid to the said lenders by treating the loan transactions as bogus shall stand vacated. Accordingly the order of the CIT(A) is set aside and the disallowance of interest expense of Rs.3,72,328/- made by the A.O is vacated. The Ground of appeal No. 3 raised by the assessee is allowed.

ITA No. 2885/Mum/2018 A.Y. 2010-11

“1. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the addition of Rs.75,00,000/- made by the AO on account of unexplained cash credit u/s. 68 of the Act. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of disallowing interest amounting to Rs.39,91,000/- under the provisions of Income Tax Act.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming AO's action of making notional addition of Rs.1,70,000/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 4. On the facts and in the circumstances of the appellants case and in law the Ld. CIT(A) erred to hold that the loans taken by the appellant from M/s. Mohit Enterprises and M/s. Jewel Diamond during the previous year relevant to the assessment year 2010-11 and other loans taken from 7 lenders in the earlier years remained unexplained by relying on some information/report received from DGIT(Inv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so- called led report/information and the statements and without affording any opportunity of cross examination of those persons whose statements have been relied upon. 5. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of BhanwarlaI Jain Group for the purpose of confirming the additions made by the AO in the assessment order. 6. Without prejudice to the above grounds of appeal, the Ld. CIT(A) erred in not applying the of peak credit. 7. In any event, the Ld. AO erred in raising a demand of Rs.49,52,240/- and the Ld. CIT(A) erred confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order. 8. The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal. 9. The appellant prays before the Hon'ble Tribunal to delete the additions made by the AO.” 29. Briefly stated, the assessee had filed its return of income for A.Y. 2010- 11 on 17.02.2011, declaring a total income of Rs.nil. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. Subsequently, on the basis of information received from the DIT(Inv-II), Mumbai, that the assessee as a beneficiary had obtained accommodation entries for loans amounting to Rs.75 lacs from certain benami concerns managed and controlled by Shri Bhanwarlal Jain and his associates, its case was reopened under Sec. 147 of the Act.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 30. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have received loans amounting to Rs.75 lacs from following two tainted parties:

Sr. No. Particulars Amount 1. M/s Mohit Enterprises Rs. 25,00,000/- 2. M/s Jewell Diam Rs.50,00,000/-

Observing, that the aforesaid concerns were the benami concerns of Shri Bhanwarlal Jain which were engaged in an organised activity of providing accommodation entries, the A.O disregarded the documentary evidence which were submitted by the assessee to substantiate the genuineness of the aforesaid loan transactions and held the aforesaid loans as accommodation entries. Backed by his aforesaid deliberations the A.O made an addition of the impugned loans amounting to Rs. 75 lacs in the hands of the assessee. Also, the claim of the assessee with respect to interest of Rs. 39,91,000/- paid on the loans which were claimed to have been raised in the immediately preceding year i.e A.Y. 2009-10 and during the year under consideration, the same was disallowed by the A.O, for the reason, that once the loans in question were proved to be bogus, therefore, the assessee‟s claim of having paid interest on such loans could not be allowed and was liable to meet the same fate. Apart from that, the A.O made an addition towards commission of Rs.1,75,000/- which as per him the assessee would have parted with for availing the aforesaid accommodation entry with respect to bogus loans. Accordingly, the A.O assessed the income of the assessee company at Rs.1,16,61,000/-.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 32. Aggrieved, the assessee has carried the matter in appeal before us. As the facts and issue involved in the present appeal remains the same as were there before us in the assessee‟s appeal for the immediately preceding year i.e A.Y. 2009-10 in ITA No. 2554/Mum2018, therefore, our order therein passed in context of the said issues in question shall apply mutatis mutandis for the purpose of disposal of the present appeal i.e ITA No. 2885/Mum/2018. Accordingly, the order of the CIT(A) is set aside and the addition of Rs. 75 lac made by the A.O is vacated. On a similar footing the order of the CIT(A) sustaining the addition u/s 69C towards commission expenses of Rs.1,75,000/- and disallowance of interest expenditure of Rs. 39,91,000/- is set aside and the aforesaid additions are vacated.

ITA No. 2952/Mum/2018 A.Y. 2011-12 34. We shall now deal with the assessee‟s appeal for A.Y. 2011-12. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds before us:

“1. On the facts and in the circumstances of the appellant's case and in law, the Ld. CIT(A) erred in confirming the AO's action of disallowing interest amounting to Rs.40,50,000/- on loans taken from 9 parties during the earlier years under the provisions of Income Tax Act. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred to hold that the loans taken by the appellant from 9 parties during the earlier years remained unexplained by relying on some information/report received from DGIT(lnv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called report/information and the statements and without affording any Opportunity of cross examination of those persons whose statements have been relied upon. 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 for the purpose of confirming the additions made by the AO in the assessment order. 4. In any event, the Ld. AO erred in raising a demand of Rs. 17,61,730/- and the Ld. CIT(A) erred in confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order. 5. The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal. 6. The appellant prays before the Hon'ble Tribunal to quash the assessment order and/or delete the additions made by the A.O.”

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 10 and A.Y. 2010-11 had been vacated by us while disposing off the respective appeals for the aforementioned years, therefore, the disallowance of the interest expenditure of Rs. 40,50,000/- made by the A.O by stamping the loans in question as bogus cannot be sustained and is accordingly vacated. As such, the order of the CIT(A) is set aside and the addition of Rs. 40,50,000/- made by the A.O is deleted

ITA No. 3526/Mum/2018 A.Y. 2013-14 39. We shall now deal with the assessee‟s appeal for A.Y. 2013-14. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds before us:

“1. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the addition of Rs.35,00,000/- made by the AO on account of' unexplained cash credit u/s. 68 of the Act. 2. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in confirming the AO's action of disallowing interest amounting to Rs. 43,27,027/- under the provisions of Income Tax Act. 3. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred confirming AO's action of making notional addition of Rs.77,000/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69C of the Act. 4. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred to hold that the loans taken by the appellant from M/s. Amit Diamonds during the previous year relevant to the assessment year 2013- 14 and other loans taken from 9 lenders in the earlier years remained unexplained by relying on some information/report received from DGIT(Inv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called report/information and the statements and without affording any opportunity of cross examination of those persons whose statements have been relied upon. 5. On the facts and in the circumstances of the appellant's case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain 64

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 Group for the purpose of confirming the additions made by the AO in the assessment order. 6. Without prejudice to the above grounds of appeal, the Ld. CIT(A) erred in not applying the theory of peak credit. 7. In any event, the Ld. AO erred in raising a demand of Rs. 30,83,440/- and the Ld. CIT(A) erred in confirming the same despite the fact that the income of the AOP is taxable in the hands of its members as stated by the AO at sr. no. 5 of the assessment order. 8. The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal. 9. The appellant prays before the Hon'ble Tribunal to delete the additions made by the AO.” 40. Briefly stated, the assessee company had filed its return of income for A.Y. 2013-14 on 25.09.2013, declaring a total income of Rs. nil. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 commission of Rs.77,000/- which as per him the assessee would had parted with for availing the aforesaid accommodation entry. Accordingly, on the basis of his aforesaid deliberations, the A.O vide his order passed under Sec. 143(3), dated 29.02.2016 assessed the income of the assessee company at Rs.79,04,027/-.

ITA No. 3527/Mum/2018 A.Y. 2014-15 44. We shall now deal with the appeal filed by the assessee for A.Y. 2014- 15. The assessee has assailed the impugned order passed by the CIT(A) on the following grounds before us:

“1. On the facts and circumstances of the appellant‟s case and in law the Ld. CIT(A) erred in confirming the AO‟s action of the disallowing interest amounting to Rs. 15,64,521/- on loans taken in FY. 2008-09, 2009-10 and 2012-13 under the provisions of Income Tax Act. 2. On the facts and in the circumstances of the appellant‟s case and in law the Ld. CIT(A) erred in confirming AO‟s action of making notional addition of Rs.4,27,340/- on account of alleged commission on alleged bogus loans by invoking the provisions of section 69Cof the Act. 3. On the facts and in the circumstances of the appellant‟s case and in law the ld. CIT(A) erred to hold that the loans taken by the appellant from 10lenders in the earlier years remained unexplained by relying on some

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 information/report received from DGIT(Inv.) and the statements obtained from various persons belonging to Bhanwarlal Jain Group despite the fact that the AO did not provide the so-called report/information and the statements and without affording any opportunity of cross examination of those persons whose statements have been relied upon. 4. On the facts and in the circumstances of the appellant‟s case and in law the Ld. CIT(A) erred in not independently giving any finding in the case of the appellant and also erred in merely copying the order passed by him or his Ld. Predecessor in the case of Bhanwarlal Jain Group for the purpose of confirming the additions made by the A.O in the assessment order. 5. Without prejudice to the above grounds of appeal, the ld. CIT(A) erred in not applying the theory of peak credit. 6. In any event, the ld. A.O erred in raising a demand of Rs.8,05,920/- and the Ld.CIT(A) erred in confirming the same despite the fact that the income of the AOP is table in the hands of its members as stated by the A.O at sr. No. 5 of the assessment order. 7. The appellant craves leave to add to, alter, amend and /or delete all or any of the foregoing grounds of appeal. 8. The appellant prays before the Hon‟ble Tribunal to delete the additions made by the A.O.

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 48. Aggrieved, the assessee has carried the matter in appeal before us. As the facts and the issue involved in the captioned appeal remains the same as were there before us in the assessee‟s appeal for A.Y. 2011-12, thus, our order passed while disposing off the appeal for A.Y. 2011-12 in ITA No.2952/Mum/2018 shall apply mutatis mutandis for the purpose of disposal of the present appeal.

Order pronounced in the open court on 07.06.2021

Sd/- Sd/- M.Balaganesh Ravish Sood (ACCOUNTANT MEMBER) (JUDICIAL MEMBER)

Mumbai, Date: 07.06.2021 PS: Rohit

Neminath Mumbai Shelter vs. DCIT, Central Circle-1(3), Mumbai ITA Nos. 2554, 2885, 2952, 3526 & 3527/Mum/2018 A.Ys 2009-10,2010-11, 2011-12, 2013-14 & 2014-15 Copy of the Order forwarded to : 1. Assessee 2. Respondent 3. The concerned CIT(A) 4. The concerned CIT 5. DR “B” Bench, ITAT, Mumbai 6. Guard File

BY ORDER, Dy./Asst. Registrar ITAT, Mumbai