MAANWATI AGARWAL, JAIPUR,JAIPUR vs. ITO, WARD 1(4), JAIPUR, JAIPUR

Maanwati Agarwal vs. ITO Maanwathi Agrwal was one of the beneficiaries and had obtained accommodation entries in the form of unsecured loans of Rs.25,00,000/- each from Megha gems, Navkar India and Astha Impex. 4.3 The AO, further, explained that the assessee had failed to discharge the onus put on her to produce the persons for examination or prove the genuineness of the unsecured loans through some other concrete evidence and pointed out that to make a transaction genuine not only the very existence of the business is required but business structure is also equally required and the assessee failed to establish the same. Further, by relying on the decision of the CIT V. Precision Finance (P) Ltd 208 ITR-465(Cal.) he quoted that the claim of the assessee that the amount was paid by cheque is concerned, it does not make the transaction as genuine. He stated that in the all such cases of entry provision, such formalities are duly performed to show the transaction appear genuine. 4.4 It was also mentioned by the AO that under section 101, 102 and 106 of the Evidence Act, onus lies upon the assessee to prove all the expenses to the satisfaction of the assessing officer, which was not discharged by the assessee as she failed to produce the persons from whom the unsecured loans were taken. He elaborately explained that the above 3 parties didn't have any proper business structure and no evidence of them carrying out any proper business/ having a business structure was presented to him by the assessee. The very existence of such parties was questioned thereby the identity and credit worthiness of the lender were not proved. 4.5 Accordingly, during the assessment proceedings the AO held that the assessee failed to discharge the onus put upon her to produce the person for examination or prove the genuineness of unsecured loan through concrete evidence and hence the interest claimed on these loans amounting to Rs. 6,75,000/-(2,25,000/-*3) was disallowed. 4.6 The appellant considered this action of AO as arbitrary, as the same information was not shared to her for rebuttal. During the appellate proceedings, the appellant in her response dated 01.08.2022 and 11.10.2024, submitted that the Id. AO did not share the relevant information which he had received from Mumbai so that the appellant could not submit his response thereon. The relevant paras of her submission are reproduced as under:-

Maanwati Agarwal vs. ITO The details of the submissions are available at page 4 to 7 of ld. CIT(A)’s order……………………………………’’ 4.7 The facts of the case, the observations of the AO and averments of the appellant have been considered. It is seen that the AO has explained, in detail, in his order that the disallowance of interest paid by the appellant was purely on the basis on the information provided by the creditors themselves. When the creditors themselves, in their own sworn statements, are accepting that they had provided accommodation entries to the appellant, the appellant can't, but to accept the same. If the appellant had any different opinion, she should have disproved it by providing sufficient evidence including by producing them before the AO and by proving their creditworthiness before the AO. 4.8 Further, as raised in Ground No 1, the appellant can't say that she has not been given the opportunity by AO to cross examine by sharing all the information in her possession. This is because the appellant was very well informed that her own creditors, during a search operation, have accepted that they were merely accommodation entry providers to her and disowned their credit worthiness. Since the entire assessment proceedings were based on the sworn statements and information provided by the creditors of the appellant, the appellant can't say that she has not been informed and was not given the opportunity. She had all the time in the world to bring the creditors in front of the AO and prove their genuineness and credit worthiness. But by not availing that opportunity during the assessment proceedings, the appellant now can't blame the AO and the AO has rightly pointed out that the appellant didn't discharge her onus of disproving the information of her creditors that they were her accommodation entry providers. The appellant failed to prove the credit worthiness of her creditors. 4.9 Further, it was observed that even during the appellate proceeding, the appellant did not submit any evidences and supporting documents to substantiate her claim. Therefore, the genuineness of the same is held not proved. Hence, considering all the points as discussed in the preceding para, it is held that the creditors of appellant held themselves as accommodation entry providers, which couldn't be disproved by the appellant. Hence, the decision of AO in holding the unsecured loans taken by the appellant as bogus and disallowing the interest of Rs.6.75,000/- paid by the appellant to the entry providers is held correct. Thus, the grounds of appeal 1 and 2 are rejected. 4.10 Ground 3 is related to AO not setting off of the unclaimed interest of Rs.5,94,369/- against the disallowance of Rs.6,75,000/-. The appellant in her written submission stated that, "the appellant had paid total interest of Rs.

Maanwati Agarwal vs. ITO 45,96,353 during this relevant year and had claimed deduction of following amounts only (amounting to Rs. 40,01,984) in following way- Out of Income from Business and Profession 16,90.226/- (Against interest recd. from Mis. Arun Udyog as partner) Out of Income from other sources 23,11,758 Thus the appellant suo motto did not claim interest of Rs. 5,94,369. The Id. AO should have allowed set off the unclaimed interest against the above said disallowance of Rs. 6,75.000 and should have only disallowed balance amount of Rs. 70,631. By disallowing the whole amount of Rs 6,75,000 the appellant has become interest burden of Rs. 12.69,369 which is without any basis and is unjustified". 4.11 This issue is found to have been dealt by AO. It is not known as to why the interest was not claimed by the appellant, if it was a genuine transaction. It is also not known whether the said unclaimed interest comes under the parameter of Sec 40(a)(la) of the Act, whether the said interest was an allowable expenditure as per the provisions of the Act. Hence, in the event of uncertainty about the said unclaimed interest, the above disallowance can't be telescoped. It is pertinent to note that even during the appellate proceedings, the appellant didn't provide any explanation as to why the interest amount of Rs.5,94,369/- was not claimed by her. Hence, the disallowed interest can't be allowed to set off and the ground in this regard is rejected.

2.2 During the course of hearing, the ld.AR of the assessee has filed a detailed written mainly praying therein to set aside the case to the file of the AO and to wait till order of the ld. CIT(A) in A.Y. 2009-10 and 2010- 11 to pass orders thereafter as per observations of the ld.CIT(A). The submissions so advance before this Bench is reproduced as under:-

Maanwati Agarwal vs. ITO “The appellant had filed her ITR on 27.10.2013 vide e filing acknowledgement no. 825841790271013 declaring a taxable income of Rs. 15,170/- The case was selected for scrutiny and notice u/s 143(2) was issued on 03/09/14 The Id. AO had received information from investigation wing. Mumbai about a search conducted on Bhanwar Lal Jain and group revealing that the loan of Rs. 75,00.000/- taken by the appellant from three concerns namely M/s. Megha Gems, M/s. Navkar India and M/s. Astha Impex for Rs. 25,00,000/- each during PY 2008-09 and 2009-10 are accommodation entries as the said concerns are controlled by Bhanwar Lal Jain who had given statement that the said concerns were engaged into providing accommodation entries and based on such report the Id. AO disallowed the interest paid by the appellant to above named three concerns totaling to Rs. 6,75,000/- Later on the Id AO issued reassessment notices dated 15.03.2016 to the appellant for AY 2009-10 and 2010-11 and in the assessments framed in consequence thereto such loans were considered as accommodation entries (Rs. 50,00,000/- in the AY 2009-10 and Rs. 25,00,000 in the AY 2010-11) and additions were made u/s 68 of the Income Tax Act, 1961. The appellant is in appeal against both the assessment orders and both the appeals are pending for disposal before the Ld. CIT (A), NFAC. The appeal numbers are CIT (A). Jaipur 1/11090/2016-17 (for AY 2009-10) and CIT (A), Jaipur 1/11091/2016-17 (for AY 2010-11) and in both the appeals the appellant has already filed all submissions. The main challenge of the assessee in both the appeals are that these loans had been received in regular course and the same were not accommodation entries. 1st Appeal In first appeal the Id. CIT (A) sustained the order of the Id. AO. Present appeal: Your honour, I would request your good self to kindly allow me to take ground no. 2 prior to ground no.1 and oblige. Ground No. 2: That without prejudice to ground no. 1 the Id. CIT (A) has further erred in not allowing the alternate claim of the appellant in adjusting the alleged accommodation entries of interest of Rs. 6,75,000/- out of unclaimed interest of Rs. 5,94,369/- in the ITR of the appellant. Without prejudice to ground no.

1. The appellant had paid a sum of Rs. 45,96,353/- on account of interest to various parties during the year under consideration out of which she had claimed a sum of Rs. 40,01,984/- from her income (viz. Rs. 16,90,226/- out of Income from Business and Profession and Rs. 23,11,758/ out of matching interest income declared under Income from other sources) and balance sum of Rs. 5,94,369/- Maanwati Agarwal vs. ITO was not claimed anywhere in the ITR. It was claimed by the appellant during the assessment proceedings that unclaimed interest to the extent of Rs. 5,94,369/- may be considered as covered in the sum of Rs. 6,75,000/- being disallowed by her and only disallowance of Rs. 80,631/- may be made. However the Id. AO declined to such request by holding that since the appellant had declared total interest income of Rs. 40.01,984/- and after disallowance of Rs. 6,75,000/- out of total interest payment of Rs. 45,96,353/- allowed interest amount comes out to be Rs. 39,21,353/- which is below total interest income declared at Rs. 40,01,984/- Such decision of the id. AO is wrong as she has compared the interest income with interest payment without considering that depending upon circumstances interest payment can be more than interest income also. The Id. CIT (A) also sustained the action of the Id. AO by holding that appellant failed to demonstrate as to why she did not claim the interest of Rs. 5,94,369/-. In this regard this is to submit that the appellant claimed the interest expenditure to the extent of interest income only to avoid any dispute during assessment and further to cover up the same with any disallowance that may be made in scrutiny proceedings. There is no dispute about the fact that the appellant had incurred expenditure on interest for Rs. 45,96,353/- Therefore the Id. AO may be directed to allow set off of the unclaimed interest amount of Rs. 5,94,369/-out of total disallowance of Rs 6,75,000/- and oblige Ground No. 1: That the Ld. CIT (A), NFAC has erred in confirming the action of the id. AO in disallowing interest of Rs. 6,75,000/- paid to M/s. Megha Gems, M/s. Astha Gema and Mis. Navkar India claimed by the appellant out of interest income, considering the same to be accommodation entries, without considering that the matter of consideration of loans taken from above named three parties as accommodation entries is yet to be decided by the CIT (A). The Id. CIT (A) sustained the action of the Id. AO without considering that the appeals of the appellant before the CIT (A) for the AY 2009-10 and 2010-11 are pending for disposal wherein the appellant has challenged the very action of the Id. AO in treating the above loans as accommodation entries. The id. AO for passing the reassessment orders for both the years relied only on the information coming to her from investigation wing and did not undertake any independent enquiries before reaching on the conclusion, did not share any material in the form of documents found during search in Bhanwar Lal Jain group and statements of Shri Bhanwar Lal Jain and other persons, did not allow any opportunity to cross examine all such parties, not sharing any material received by him on any notice sent by him to above named parties and hence in the above appeals there are fait chances that his action in considering the above loans as accommodation entries will be quashed and the disallowance in this year shall also go The appellant has enclosed confirmations, ITRVs, bank statements of above parties to prove genuineness of the loans to obtained Maanwati Agarwal vs. ITO at APB 1-23, which further supports the contention of the appellant that all the above loans were genuine ones and were not accommodation entries. Therefore the Id. CIT (A) was supposed to wait for disposal of the relevant appeals which he did not do and sustained the order. Your honour, it is understood that decision about above loans whether they are to be considered as genuine or accommodation entries will only be taken in the relevant years and same can not be considered in this appeal and therefore your honour is sincerely requested to set aside the case to the file of the Id. AO and to wait till order of the Id. CIT (A) in AY 2009-10 and 2010-11 and to pass orders thereafter as per observations of the Id. CIT (A).” The ld. AR of the assessee to support his contentions has filed the following paper book S. No. Description Page No.