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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member ITA No. 379 /Ahd/2018 Assessment Year 2009-10
M/s. Hit Iron & Steel Pvt. ITO, Ltd. 21, Sea Breeze, 12, Ward-2(1)(3), Juhu Tara Road, Santacruz Vs Room No. 106, (West), Mumbai Navjivan Trust Bldg, PAN: AABCH4131N Off Ashram Road, (Appellant) Ahmedabad-14 (Respondent)
Assessee by: Shri S.N. Soparkar, A.R. Revenue by: Shri V.K. Singh, Sr. D.R.
Date of hearing : 08-06-2022 Date of pronouncement : 29-08-2022 आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-2, Ahmedabad in Appeal no. CIT(A)-2/369/ITO, Wd. 2(1)(3)/2016-17 vide order dated 27/12/2017 passed for the assessment year 2009-10.
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The assessee has raised the following grounds of appeal:-
“1. Ld. CIT (A) erred in law and on facts confirming addition of Rs. 50 lacs out of Rs 1 crore added by AO as unexplained cash credit not appreciating that initial onus laid u/s 68 of the Act was duly discharged by the appellant.
Ld. CIT (A) erred in law and on facts confirming reassessment proceedings in absence of a valid 'reason to believe' to satisfy conditions laid down u/s 147 of the Act. Ld. CIT (A) ought to have held proceedings as unlawful, invalid and against the provisions of law. 3. Ld. CIT (A) erred in law and on facts holding genuine loan transaction as an accommodation entry on the basis of statement of third party without affording opportunity of cross examination. 4. Ld. CIT (A) erred in law and on facts confirming addition ignoring the fact that appellant repaid loan vide banking transaction within a short period. 4. Ld. CIT (A) erred in law and on facts confirming addition by relying on decision not applicable to the facts of the appellant company. 5. Levy of interest u/s 234A/ 234B/ 234C & 234D of the Act is not justified. 6. Initiation of penalty proceedings u/s 271(l)(c) of the Act is not justified. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.”
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The brief facts of the case are that the assessee filed the return of income for assessment year 2009-10 declaring total income at � 47,829/-. Subsequently, the Department was in receipt of information from DGIT (Inv), Mumbai that a search was conducted in the case of Shri Praveen Kumar Jain Group on 01-10-2013, where it was revealed that Shri Praveen Kumar Jain was engaged in the business of providing accommodation entries in the form of bogus unsecured loans, bogus share application money etc. On analysing the information, it was found that the assessee is also one of the beneficiaries who has taken accommodation entries of Rupees One Crore during assessment year 2009-10 from the bogus companies operated by Shri Praveen Kumar Jain Group. In view of the above, reassessment under section 148 of the Act was initiated and an addition of Rs. 1,00,00,000/- was made in the hands of the assessee company u/s 68 of the Act on the ground that the assessee company had received a sum of � 1,00,00,000/- from M/s Nakshatra Business Private Limited (Hema trading company Private Limited), which was one of the companies operated by Shri Praveen Kumar Jain Group. In appeal, Ld. CIT(Appeals) observed that there was only one entry of � 50 lakhs which was appearing in the bank account of the assessee company, and the Department has not been able to produce any evidence that the assessee was in receipt of any sum over and above � 50 lakhs. Accordingly, Ld. CIT(Appeals) restricted the addition under section 68 of the Act to � 50 lakhs in the hands of the assessee. While allowing part relief to the assessee, Ld. CIT(Appeals) observed as under:
“3.9. I have carefully considered the facts of the case, assessment order, remand report, rejoinder and submission of the appellant. The AO has made addition of Rs.1,00,00,000/- on the ground that
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appellant has received the above amount from M/s. Nakshatra Business Pvt. Ltd. (M/s. Hema Trading Co. Pvt. Ltd.) which is a company operated by Shri Praveenkumar Jain who is engaged in providing accommodation entries in form of bogus unsecured loan. Appellant during the course of appellate proceedings has contended that it has received a loan of only Rs.50,00,000/- from M/s. Nakshgtra Business Pvt. Ltd. and submitted copy of account and bank statement of the appellant company. In view of the above, the AO was asked to submit details of Rs. 1,00,00,000/- in the form of cheque no. etc. in support of the addition that appellant has actually received Rs. 1,00,00,000/-.The AO has submitted that bank statement of the appellant company in IDBI Bank (Account No. 004102000021456) was called for and examined and there was only one entry of Rs.50,00,000/-. The AO further submitted that whether the assesses got the entry in any other bank account or not is not known. The AO has made the addition of Rs. 1,00,00,000/-, and therefore, onus is on the AO to show that Rs. 1,00,00,000/- has been actually received by the appellant.
3.10. It has been established that Shri Praveenkumar Jain is engaged in providing accommodation entry through its various companies including M/s. Nakshatra Business Pvt. Ltd. (M/s. Hema Trading Co. Pvt. Ltd.). The above company is a shell company and Shri Praveenkumar Jain has admitted that he was engaged in providing accommodation entries through its various companies and there was no real business in his companies. The Honourable ITAT, Ahmedabad in the case of Pavarikumar M. Sanghvi Vs. ITO, Wd. 3(1)(2), Baroda [2017] 81 Taxmann.com 308 where the accommodation entry was taken from the group company of Shri Praveen Kumar Jain and has observed as under:-
"8. As I proceed to deal with genuineness aspect, it is important to bear in mind the fact that what is genuine and what is not genuine is a matter of perception based on facts of the case vis- a-vis the ground realities. The facts of the case cannot be considered in isolation with the ground realities. It will, therefore be useful to understand as to how the shell entries, which the loan creditors are alleged to be, typically function, and then compare these characteristics with the facts of the
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case and in the light of well settled legal principles. A shell entity is generally an entity without any significant trading, manufacturing or service activity, or with high volume low margin transactions - to give it colour of a normal business entity used as a vehicle for various financial manoeuvers. A shell entity, by itself, it not an illegal entity but it is their act of abatement, of, and being part of, financial manoeuvring to legitimize illicit monies and evade taxes, that takes it actions beyond what is legally permissible. These entities have every semblance of a genuine business - its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. The only thing which sets its apart from a genuine business entity is lack of genuineness in its actual operations. The operations carried out by these entities, are only to facilitate financial manoeuvring for the benefit of its clients, or, with that predominant underlying objective, to give the colour of genuineness to these entities. These shell entities, which are routinely used to launder unaccounted monies, are a fact of life, and as much a part of the underbelly of the financial world, as many other evils. Even a layman, much less a Member of this Specialized Tribunal, cannot be oblivious of these ground realities."
3.11 It is noticed that M/s. Naksnatra Business Pvt. Ltd. has been engaged in providing accommodation entry and have been used to launder unaccounted money. In view of the above,, the unsecured loan of Rs.50,00,000/- in respect of M/s. Nakshatra Business Pvt. Ltd. (M/s. Hema Trading Co. Pvt. Ltd.) appearing in balance sheet is considered to be non-genuine, and hence, the addition made to the extent of Rs. 50,00,000/- is confirmed.
The grounds of appeal are accordingly partly allowed.”
Before us, the Ld. Counsel for the assessee submitted that all details regarding the genuineness of the transaction were furnished to the course of
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appellate proceedings, which were not appreciated by Ld. CIT(Appeals). He drew attention to page 5 of the paper book, which was the ledger account of M/s Hema Trading Company in the books of the assessee company, wherein the receipt of � 50 lakhs was duly recorded. The learned counsel drew our attention to page 6 of the paper book to show that the sum of � 50 lakhs was received through banking channels. He further drew attention to page 14 of the paper book to show that the confirmation by the party i.e. M/s Hema Trading Company (name, address, permanent account number and confirmation) was duly furnished during the course of appellate proceedings, which were not appreciated. The counsel for the assessee then drew our attention to page 15 of the paper book which is the bank account of the lender to show that the loan was given through banking channels. He then drew attention to page 16 of the paper book i.e. return of income filed by the lender, M/s Hema Trading Company declaring income of � 16.7 lakhs, which demonstrates the ability of the lender to that the aforesaid sum to the assessee company. The counsel for the assessee then drew our attention to page 24 of paper book to the case of ITO v. Pratima Ashar (2017) 107 Taxman.com 135 (Mumbai Tribunal), page 35 paper book to case of Jaykala exports ITA number 3488/Mumbai/2018 and at page 41 of the paper book in the case of Deepak Shah v. ACIT in ITA number 4206/Mumbai/2017 to argue that a large number of cases, the Tribunal has held similar transactions with respect to Praveen Kumar Jain group and M/s Hema Trading Company to be genuine transactions, and has accordingly deleted the additions. Further, the counsel for the assessee also submitted that the assessee company has also repaid these above sum of � 50 lakhs back to M/s Hema Trading Company, through banking channels in the next
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financial year (assessment year 2010-11) on 31 August 2009 and 1st September 2009. The Ld. Counsel for the assessee submitted proof of repayment of loan of M/s Hema Trading Company and submitted that it now stands duly substantiated that the assessee company had taken loan from M/s Hema Trading Company to return � 50 lakhs which was repaid back in the next financial year through banking channels, which substantiates the genuineness of the transaction, and accordingly in the instant facts no addition is called for under section 68 of the Act. In response, the Ld. DR relied upon the observations made by the Ld. CIT(Appeals) in the appeal order.
We have heard the rival contentions and perused the material on record. In our considered view, the assessee has reasonably discharged the onus case upon it in the instant set of facts. We note that the assessee has been able to demonstrate that he has repaid the loan amount back to the lender in the subsequent year through banking channels. The fact that the loan was repaid back, in our view, also lends support to the genuineness of transaction. In the case of Shree Samruddhi OverseasTrading Co. v. DCIT in ITA Number I.T.A. Nos. 909 & 910/Ahd/2018, the Ahmedabad ITAT held that repayment of loan points towards genuineness of transaction in the following words:
The repayment of loan exists as a strong mitigating circumstance and transcends all considerations. We thus find that the documents placed by the assessee before the Revenue authorities sufficiently discharge
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the onus towards the identity and genuineness of the transaction and creditworthiness of the lender contemplated under s.68 of the Act.
5.1 In the case of Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 (Gujarat), Hon'ble Gujarat High Court held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit.
5.2 We further note that all details regarding the parties in respect of the loan transaction were duly submitted before the Revenue Authorities. The additions are proposed to be made on the basis of statement of by Shri Praveen Kumar Jain who stated that he was engaged in the business of providing accommodation entries in the form of bogus unsecured loans, bogus share application money etc. The Department has made addition on the ground that the assessee company had received a sum of � 1,00,00,000/- from M/s Nakshatra Business Private Limited (Hema trading company Private Limited), which was one of the companies operated by Shri Praveen Kumar Jain Group. However, apparently this figure too was incorrect since the Ld. CIT(Appeals) observed that the assessee had taken loan of Rs. 50 lakhs only and accordingly gave part relief to the assessee. We further note that the Tribunals on various occasions have deleted the additions made in respect of loans taken from the above entities which were later found be repaid back in subsequent years. In the case of Deepak Shah v. ACIT in ITA number 4206/Mumbai/2017, the Mumbai ITAT has on similar facts given relief to the assessee with the following observations:
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Learned AR vehemently submitted that the order of learned CIT(A) upholding the order of the Assessing Officer is contrary to the law as order of the Assessing Officer was confirmed despite the fact that the assessee has filed all necessary evidence before the AO in the assessment procedings. Learned AR submitted that by various communications to the Assessing Officer, the assessee filed necessary details submitting therein that the assessee has taken temporary business loans from three companies in the month of March 2012, which were repaid within a period ranging from two to six months duly corroborated with all necessary evidences such as copies of bank statements, ledger accounts, confirmations from the parties, their PANs etc. Learned AR submitted that vide letter dated 8.2.2017, the assessee informed the Assessing Officer on the date of hearing i.e. 9.2.2017 that the assessee is not in a position to attend hearing as the assessee is preoccupied in High Court on 9.2.2017, which was proved by learned AR by placing before the bench a copy of the order from High Court filed at page No. 34 of the paper book. Learned AR submitted that even notices were issued u/s. 133(6) by the Assessing Officer to these parties were duly responded by the said parties by drawing our attention to page No.38 to 40 of the paper book wherein all details as required by the Assessing Officer were duly filed. Thus, learned AR submitted that the assessee has filed copies of confirmations, ledger accounts, bank statements evidencing transactions through banking channel, ITRs, PAN and annual reports alongwith audited profit and loss accounts and balance sheets of these parties. Learned AR submitted that the assessee has repaid loan within a span of two to six months.Thus, the Assessing Officer has totally failed to conduct any meaningful and objective investigation and merely relied on the statement of Shri Praveen Kumar Jain that they were engaged in the business of providing hawala entries though nowhere assessee's name was ever taken by the said person. Similarly, learned CIT(A) has affirmed the order of Assessing Officer by simply relied on the statement recorded in the course of search u/s. 132(4) of the Act and further harping on the fact that summons issued u/s. 131 were not complied with. Learned AR also referred to the decision of the Coordinate Bench in the case of ACIT Vs. Shreedham Builders (ITA No. 5589/Mum/2017 for A.Y. 2012-13), wherein all these three entities have lent money and the Coordinate Bench has taken the view that no
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addition to be made u/s. 68 of the Act as the assessee has duly discharged burden cast upon it u/s. 68 of the Act. Learned AR therefore prayed before the Bench that the order of learned CIT(A) may be set aside and the Assessing Officer be directed to deleted the addition. 6. Per contra, learned DR relied on the order of learned CIT(A) heavily by submitting that facts revealed during the course of search unequivocally proved that the assessee was beneficiary of hawala racket which was being operated by Shri Pravin Kumar Jain and Associate concerns and he even admitted during the course of statement recorded u/s. 132(4) of the Act that business was not being done but only accommodation entries were provided on commission basis. Under these circumstances, learned DR prayed that the order of learned CIT(A) may be affirmed. 7. We have heard the rival submissions and perused the materials on record. The undisputed facts are that the assessee filed copies of confirmations, ledger accounts, bank statements, ITRs, PANs and audited balance sheets and profit and loss accounts in respect of these three parties who lent money to the assessee. The authorities below have only relied on statement of Shri Pravin Kumar Jain that said he and related entities were engaged in providing accommodation entries of which the assessee was one of the beneficiaries without having brought anything to disbelieve and disprove various documents filed by the assessee. Even in the case of ACIT Vs. Shreedham Builders (supra), under similar facts the Coordinate Bench has accepted loans given by these three parties, which were also common in the case of the assessee as stated in para 2.15 of the said order, which is as under:- ………
Thus, it is clear from the above that the entities which gave loans to the assessee appeared at serial number 1,2 & 6 of para 2.15 of the Coordinate Bench decision. The assessee has filed necessary proofs and documents supporting the borrowings of money and repayment thereof. Under these circumstance, we are not in agreement with the conclusion given by learned CIT(A). Accordingly, by respectfully
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following the decision of the Coordinate Bench, we allow the appeal of the assessee. 9. In the result, appeal filed by the assessee is treated as allowed.
5.3 Accordingly, in our considered view, no addition is called for in the instant facts for the reasons that firstly, the assessee had furnished details of the lenders (name, address, PAN number, confirmation, proof that all transactions were carried through banking channels etc.) and the correctness of details so furnished have not been disputed by the Department. Secondly, the assessee has placed on record supporting documents to prove that the amount has been repaid back to the lender in the subsequent year through banking channels, which as observed earlier gives a strong support as to the genuineness of the transaction/ parties. Thirdly, the Department is solely relying upon the statement of Shri Praveen Kumar Jain without brining anything further on record to show that the details / information furnished by the assessee is incorrect/ inaccurate. Fourthly, we also observe that in similar set of facts, the Tribunal on various occasions has granted relief to the assessee in respect of loans taken from M/s Hema Trading Company (now M/s Nakshatra Business Private Limited) and deleted the additions on the ground that the assessee furnished all possible documents evidencing that the loans are not bogus and additions cannot be made by the Department by only placing reliance on the statement of Shri Pravin Kumar Jain without having brought anything to disbelieve and disprove various documents filed by the assessee. In view of the above, we are of the considered view that the Ld. CIT(Appeals) erred in facts and in law in confirming the additions of Rs. 50 lakhs in respect of loan taken from M/s Hema Trading Company.
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In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 29-08-2022
Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 29/08/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद