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Income Tax Appellate Tribunal, “D” Bench, Mumbai
Before: Shri Ravish Sood & Shri N.K. Pradhan
P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. O R D E R
PER RAVISH SOOD, JM
The present appeals filed by the revenue in the case of the captioned companies viz. (i). Marathan Realty Pvt. Limited ; and (ii). M/s Marathan Fiscal Pvt. Ltd. are directed against the respective orders passed by the CIT(A)-54, Mumbai, dated 28.06.2017 for A.Y 2013-14, which in turn arises from the respective orders passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short „Act‟), dated 28.03.2016. As the issues involved in the aforementioned appeals are inextricably interlinked and interwoven, therefore, the same are being taken up and disposed off together by way of a consolidated order. We shall first advert to the appeal filed by the revenue in the case of Marathan Realty Pvt. Ltd. for A.Y. 2013-14. The revenue has assailed the impugned order on the following grounds of appeal before us:
“1. Whether on the facts and circumstances of the case and in law, the (Ld.CIT(A) has erred in treating the loan of Rs. 10,91,50,000/- as genuine, when such loan was received from dummy company/ entities managed and controlled by Praveen Kumar Jam, and admitted by Shri Chetan C Shah, the Director of the assessee company, as to be in the nature of the accommodation entry.Z 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the loan of Rs. 10,91,50,000/- as genuine, ignoring the decision of the Hon'ble ITAT in the case of Pavankumar M.Sanghvi Vs. ITO wherein the Hon‟b1e ITAT has held that genuineness of the transactions cannot be established merely on the basis of documentation filed by the assessee and further probe is required to ascertain whether what was apparent was real.
3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the interest expenses of Rs. 70,49,112/- on the loan of Rs.10,91,50,000/- which has been held to be in the nature of the accommodation entry and sham in the assessment order. The appellant prays that the order of the CIT(A) on the grounds be set aside and the DC be restored. The appellant craves to amend or alter any ground or add new ground which may necessary.”
Briefly stated, the assessee company which is engaged in the business of a builder and developer had e-filed its return of income for P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. A.Y. 2013-14 on 30.11.2013, declaring its total income at Rs. Nil (after claiming loss of Rs.29,45,92,440/-). Subsequently, the assessee revised its return of income on 31.03.2015, declaring its total income at Rs. Nil (after claiming loss of Rs.25,13,21,220/-). The case of the assessee was thereafter selected for scrutiny assessment under Sec.143(2) of the Act.
The A.O in the course of the assessment proceedings observed, that on the basis of information that the assessee as a beneficiary had taken accommodation entries of bogus unsecured loans from various dummy concerns, survey proceedings under Sec.133A of the Act were conducted at its premises on 25.03.2014. As per the information gathered during the course of the survey proceedings, it was observed by the A.O that the assessee had received unsecured loans from certain companies which were allegedly stated to be operated and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider. It was observed by the A.O that Shri Chetan R. Shah, director of the assessee company in the course of the survey proceedings had failed to divulge details as regards the unsecured loans that were claimed to have been raised by the various entities of „Marathan Group‟. Also, it was noticed by the A.O that Shri Chetan R. Shah had in his statement recorded in the course of the survey action admitted that the unsecured loans taken from Shri. Praveen Kumar Jain were in the nature of accommodation entries. The A.O while framing the assessment observed that the „balance sheet‟ of the assessee company as on 31.03.2013 revealed unsecured loans of Rs.374,57,47,917/-which included fresh loans of Rs. 226,78,41,541/- that were raised during the year under consideration. In order to verify the authenticity of the aforesaid loan transactions the A.O called upon the assessee to place on record supporting documentary evidence. In P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. ITA No.5784/Mum/2017 AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. order to fortify the authenticity of the loan transactions the assessee placed on record supporting documentary evidence, viz. (i) confirmations of the lenders; (ii). copies of the returns of income for A.Y 2013-14 of the lenders; (iii). copies of the annual audited accounts for A.Y 2013-14 of the lenders; and (iv). copies of the bank statements of the lenders from which the loans were advanced by them to the assessee company. However, the A.O declined to accept the authenticity of the unsecured loans that were raised by the assessee from the concerns which were allegedly stated to be controlled by Shri Praveen Kumar Jain, as under :
Sr. No. Particulars Amount of loan 1. Atharva Business P. Ltd. 1,00,00,000 2. Josh Trading P. Ltd. 1,00,00,000 3. Casper Enterprises P. Ltd. 1,07,50,000 4. Olive Overseas P. Ltd. 1,77,00,000 5. Pragati Gems P. Ltd. 2,25,00,000 6. Sumukh Commercial P. Ltd. 1,15,00,000 7. Viraj Mercantile P. Ltd. 2,00,00,000 8. Lunkad Textile P. Ltd. 50,00,000 9. Falak Trading Co. P. Ltd. 17,00,000 Total 10,91,50,000 The A.O holding a conviction that the identity and creditworthiness of the aforesaid lenders and also the genuineness of the transactions had remained unproved, therefore, called upon the assessee to show cause as to why the same may not be treated as unexplained cash credits under Sec.68 of the Act. In reply, it was submitted by the assessee that as it had discharged the „onus‟ that was cast upon it for proving the authenticity of the loan transactions by placing on record supporting documentary evidence viz. (i). confirmations of the lenders; (ii). copies of the returns of income for A.Y. 2013-14 of the lenders; (iii). copies of the annual audited accounts of the lenders for A.Y. 2013-14; and (iv). copies of the bank statements of the lenders from which loans were advanced by the respective lenders, therefore, no P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. adverse inferences as regards the same was liable to be drawn. Apart therefrom, it was submitted by the assessee that the standalone statement of Shri Praveen Kumar Jain, which was relied upon by the revenue for drawing adverse inferences as regards the genuineness of the loan transactions under consideration had been retracted by the said person and did not survive any more. Accordingly, on the basis of his aforesaid contentions, it was submitted by the assessee that the aforesaid unsecured loans of Rs.10,91,50,000/- could not be characterised as unexplained cash credits under Sec.68 of the Act. To sum up, it was the claim of the assessee that now when the „onus‟ cast upon it to substantiate the authenticity of the loan transactions had been discharged, there was no justification in characterising the same as unexplained cash credits under Sec.68 of the Act. However, the A.O was not persuaded to accept the aforesaid claim of the assessee. The A.O was of the view that as Sh. Praveen Kumar Jain had retracted from his statement after lapse of a period of 7 months, therefore, no cognizance of the same could be drawn. Observing, that the assessee had failed to substantiate the creditworthiness of the lender and also the genuineness of the loan transactions the A.O treated the unsecured loans of Rs.10,91,50,000/- as unexplained cash credits under Sec.68 of the Act. Also, the interest of Rs.70,48,112/-that was claimed by the assessee to have been paid to the aforementioned lenders was consequentially disallowed by him. On the basis of his aforesaid observations the A.O assessed the income of the assessee company at Rs.11,61,99,112/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). Observing, that the assessee had discharged the „onus‟ that was cast upon it under Sec.68 as regards proving the authenticity of the loan transactions under consideration, the CIT(A) concluded that P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. the A.O was not justified in treating the same as unexplained cash credits. As the loans aggregating to Rs.10,91,50,000/- received by the assessee from the aforementioned parties were held as genuine by the CIT(A), therefore, the consequential disallowance of interest of Rs.70,49,112/- was also deleted by him.
The revenue being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. The ld. Departmental Representative (for short „D.R‟) at the very outset of the hearing of the appeal took us through the facts of the case. It was submitted by the ld. D.R, that as assessee in the garb of unsecured loans from the concerns/companies operated and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, had obtained accommodation entries, therefore, the same was rightly treated by the A.O as unexplained cash credits under Sec. 68 of the Act. It was submitted by the ld. D.R that Shri Chetan R. Shah, director of the assessee company had in the course of the survey proceedings admitted that the unsecured loans taken from the group entities which were operated and controlled by Shri Praveen Kumar Jain were only in the nature of accommodation entries. It was submitted by the ld. D.R that Sh. Chetan R. Shah in the course of the survey proceedings also could not divulge the basic details about the parties from whom unsecured loans had been raised by the various concerns of “Marathan Group”. It was the claim of the ld. D.R, that as the assessee had failed to discharge the „onus‟ as regards proving the authenticity of the aforesaid loan transactions, therefore, the same had justifiably been characterised by the A.O as unexplained cash credits under Sec. 68 of the Act. The ld. D.R placed heavy reliance on the order passed by the A.O. As regards the claim of the assessee that the revenue had failed to allow cross-examination of Shri Praveen P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. Kumar Jain, whose statement was relied upon by revenue for drawing of adverse inferences as regards the authenticity of the loan transactions under consideration, it was submitted by the ld. D.R that the assessee had at no stage requested for cross-examination of the said person. In order to support his contention that as the assessee had failed to substantiate the authenticity of the loan transactions, therefore, the same was liable to be treated as unexplained cash credits under Sec.68 of the Act, the ld. D.R relied on the order of the ITAT Ahmedabad Bench “SMC” in the case of Pavankumar Sanghavi Vs. Income Tax Officer, Ward 3(1)(2), Vadodara (2017) 165 ITD 260 (Ahd). It was submitted by the ld. D.R, that as the CIT(A) had erred in dislodging the well reasoned order of the A.O, therefore, his order was liable to be vacated and that of the A.O be restored.
Per contra, the ld. Authorized Representative (for short „A.R‟) for the assessee took us through the facts of the case. It was submitted by the ld. A.R that the assessee in the course of the assessment proceedings had duly discharged the „onus‟ that was cast upon it as regards proving the authenticity of the loan transactions under consideration. It was submitted by him that the assessee had substantiated the authenticity of the loan transactions by placing on record supporting documentary evidence, viz. (i) confirmations of the lender parties; (ii) copies of the returns of income for A.Y. 2013-14 of the lender parties ; (iii) copies of the annual audited accounts of the lender parties for A.Y. 2013-14; and (iv) copies of the bank statements of the lender parties from which the loans had been advanced by them to the assessee company. It was submitted by the ld. A.R that the aforesaid documentary evidence filed by the assessee to substantiate the authenticity of the loan transactions had not been disproved by the A.O on the basis of any irrefutable material or evidence. In fact, P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. the ld. A.R took us through the observations of the A.O and submitted that the entire adverse inferences as regards the creditworthiness of the lenders and also the genuineness of the transactions were drawn by him merely on the basis of general observations and not any concrete material. As regards the reliance placed by the A.O on the fact that Shri Chetan R. Shah, director of the assessee company had in his statement recorded in the course of the survey proceedings admitted that the unsecured loans raised by the various concerns of “Marathan Group” were only in the nature of accommodation entries, it was submitted by the ld. A.R, that as the same was factually incorrect, therefore, the same was not acted upon by the assessee company while filing its return of income. It was submitted by the ld. A.R, that the fact that Sh. Chetan R. Shah in the course of the survey proceedings was not in a stable state of mind could safely be gathered from the observation of the A.O that the said person at the relevant point of time could not even recollect the details of the lenders from whom unsecured loans had been raised by the assessee and its group entities. It was submitted by the ld. A.R, that as the statement of Sh. Chetan R. Shah that was recorded during the course of the survey proceeding had thereafter been retracted by him, therefore, no adverse inferences as regards the authenticity of the loan transactions could have been drawn by the A.O de hors any material or evidence proving to the contrary. It was vehemently submitted by the ld. A.R, that as the assessee by placing on record supporting documentary evidence had discharged the primary „onus‟ that was cast upon it as regards proving the authenticity of the loan transactions under consideration, therefore, the A.O without dislodging the same could not have drawn adverse inferences on the basis of general observations. Apart therefrom, it was submitted by the ld. A.R that no material was found in the course of the survey proceedings which could reveal that the P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. assessee had not raised any genuine loans from the aforementioned parties and had only obtained accommodation entries from them. It was submitted by the ld. A.R that it had been emphasised by the CBDT in its letter No. F.No.286/2/2003, IT (Inv-II), dated 10.03.2003 that the officials in the course of search proceedings should not focus on obtaining surrenders/disclosures, but rather concentrate towards unearthing of incriminating material evidencing suppressed income of the assessee. Accordingly, it was submitted by the ld. A.R that the addition merely on the basis of statement of Shri Chetan R. Shah, director of the assessee company (which though had been retracted), de hors finding of any incriminating material during the course of the survey action which would have raised any doubts as regards the authenticity of the loan transactions under consideration, could not have formed a basis for characterising the same as accommodation entries and adding it as unexplained cash credits under Sec.68 of the Act. As regards the statement of Shri. Praveen K. Jain that was relied upon by the revenue for drawing of adverse inferences as regards the genuineness of the loan transactions under consideration, it was submitted by the ld. A.R that the statement of the said person despite specific requests had not been made available by the lower authorities. Apart therefrom, it was submitted by the ld. A.R that the specific request for cross-examination of Shri. Praveen K. Jain was also arbitrarily brushed aside and declined by the A.O. It was submitted by the ld. A.R that the counsel for the revenue had wrongly averred that assessee had never requested for cross-examination of the aforementioned person. In order to fortify his aforesaid contention the ld. A.R took us through the Page 6 – Para 4.6 of the assessment order which revealed that the assessee had specifically requested for cross-examination of Shri Praveen K. Jain. It was further submitted by the ld. A.R, that it is neither the case of the revenue that Sh. Praveen P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. Kumar Jain had in his statement alleged that he had provided any accommodation entries to the assessee, nor any „material‟ evidencing the same had either surfaced during the course of the search proceedings that were conducted on the said person or was found in the course of the survey conducted on the assessee. Alternatively, it was submitted by the ld. A.R that even otherwise as Shri Praveen K. Jain had filed an „Affidavit‟ and therein withdrawn his statement that he was engaged in the business of providing accommodation entries, therefore, even the said standalone basis for drawing of adverse inference as regards the authenticity of loan transactions under consideration also did no more survive. In order to fortify the authenticity of the loan transactions under consideration, it was submitted by the ld. A.R that the assessee had paid interest to the lenders after deduction of tax at source as per mandate of law. Also, it was submitted by him that the loans were repaid by the assessee to the aforementioned parties in F.Y. 2013-14 and F.Y. 2014-15. It was vehemently submitted by the ld. A.R that in case the A.O had any doubts as regards the authenticity of the loan transactions and the documentary evidence filed by the assessee in support of the same, thereupon in order to dispel such doubts he could have made necessary verifications as regards the same. In fact, it was submitted by the ld. A.R that the A.O knowing well that the assessee had raised genuine loans had thus neither called for the requisite details from the aforementioned parties under Sec.133(6) nor summoned them under Sec.131 of the Act. It was submitted by the ld. A.R that the A.O in the course of the assessment proceedings had never expressed any doubts as regards the authenticity of the loans received by the assessee from the aforementioned parties. It was submitted by the ld. A.R that the A.O had also never directed the assessee to produce the said parties for necessary verifications. Further, it was submitted by the ld. A.R, P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. that the documentary evidence placed on the record of the A.O to substantiate the creditworthiness of the parties and also the genuineness of the transactions under consideration had not been disproved or dislodged by the A.O on the basis of any „material‟ proving to the contrary. It was averred by the ld. A.R that the A.O had merely on the basis of general observations concluded that the creditworthiness of the lenders and also the genuineness of the transactions was not found by him to be satisfactory. In sum and substance, it was the contention of the ld. A.R that as the A.O had failed to conclusively dislodge the documentary evidence that was placed on his record by the assessee to substantiate the veracity of the loan transactions under consideration, therefore, he had grossly erred in treating the same as unexplained cash credit under Sec. 68 of the Act. It was submitted by the ld. A.R that the CIT(A) duly appreciating that the assessee had discharged the „onus‟ that was cast upon it to substantiate the authenticity of the loan transactions had rightly vacated the addition made by the A.O. It was further submitted by the ld. A.R that as the loans raised by the assessee from the aforementioned parties had been found to be genuine, therefore, the consequential disallowance of the interest expenditure of Rs.70,49,112/- was also rightly deleted by the CIT(A). In order to drive home his contention that when the „onus‟ cast upon the assessee to prove the authenticity of the loan transactions had been discharged, then the same in the absence of any material proving to the contrary cannot be treated as an unexplained cash credit under Sec. 68 of the Act, reliance was placed by the ld. A.R on the following judicial pronouncements (i) DCIT Vs. Manba Finance Ltd. (ITA No.1448, 1449 & 1467/Mum/2017, dated 05.10.2018 (Mum); (ii) DCIT Vs. Shreedham Builders (ITA No. 5589/Mum/2017, dated 22.06.2018) (Mum); (iii) DCIT Vs. Jainam Investments (ITA No. 6099/Mum/2016, P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. dated 10.08.2018); (iv) DCIT Vs. Bairagra Builders Pvt. ltd. (ITA No.4691 & 4692/Mum/2015, dated 14.09.2017; (v). ITO Vs. Anant Shelters (P) Ld. (2012) 20 taxman.com153 (Mum); (vi). ACIT Vs. Shree A.S. Motiwala (2019), TIOL 676 (Mum); (vii). ITO Vs. Neelkanth Finbuild Ltd. (2015) 61 taxman.com 132 (Del); (viii). CIT Vs. Orchid Industries (P) Ltd. (2017) 397 ITR 136 (Bom); (ix). PCIT Vs. M/s Skylak Build (ITA No.616/Mum/2016, dated 24.10.2018) (Bom); and (x) M/s Gladiolus Properties and Inc. Pvt. ltd. (ITA No. 2924/Mum/2017, dated 16.05.2016. As regards the reliance placed by the counsel for the revenue on the order of the ITAT, “SMC” in the case of Pavankumar M. Sanghvi Vs. ITO (2017) 165 ITD 260 (Ahd), it was submitted by the ld. A.R that the same was distinguishable on facts. The ld. A.R took us through the aforesaid order of the Tribunal and submitted that unlike the case of the assessee before us, in the aforementioned case, the assessee despite the specific directions by the A.O had failed to produce the lenders for verification. Apart therefrom, it was submitted by the ld. A.R that unlike as in the case of the present assessee, in the aforementioned case, the A.O on the basis of irrefutable documentary evidence was able to prove that the loans advanced to the assessee were clearly in the nature of accommodation entries. Accordingly, it was submitted by the ld. A.R that as in the case before us the A.O had failed to place on record any „material‟ which could even lead to any doubts as regards the authenticity of the loan transactions, therefore, the facts therein involved were clearly distinguishable as against those involved in the abovementioned case before the Tribunal.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as the judicial pronouncements relied P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. ITA No.5784/Mum/2017 AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. upon by them. Our indulgence in the present appeal has been sought by the revenue for adjudicating two issues, viz. (i) that, as to whether the CIT(A) is right in law and facts of the case in concluding that the unsecured loans of Rs.10,91,50,000/- received by the assessee during the year could not be treated as unexplained cash credits under Sec.68 of the Act; and (ii) that, as to whether the CIT(A) is justified in vacating the disallowance of interest paid on loans amounting to Rs.70,49,112/-. As observed by us hereinabove, the A.O held a conviction that the assessee in the garb of unsecured loans had received accommodation entries from the following 9 concerns:
Sr. No. Particulars Amount of loan 1. Atharva Business P. Ltd. 1,00,00,000 2. Josh Trading P. Ltd. 1,00,00,000 3. Casper Enterprises P. Ltd. 1,07,50,000 4. Olive Overseas P. Ltd. 1,77,00,000 5. Pragati Gems P. Ltd. 2,25,00,000 6. Sumukh Commercial P. Ltd. 1,15,00,000 7. Viraj Mercantile P. Ltd. 2,00,00,000 8. Lunkad Textile P. Ltd. 50,00,000 9. Falak Trading Co. P. Ltd. 17,00,000 Total 10,91,50,000 On a perusal of the assessment orders, 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, for the reason, that the said parties were allegedly operated and controlled by Shri. Praveen K. Jain, an infamous accommodation entry provider. Apart there from, it was observed by him, that in the course of the survey action conducted on the assessee company, its director viz. Shri Chetan R. Shah was unable to divulge the details about the lenders from whom the aforesaid loans had been raised and had admitted that the same were in the nature of accommodation entries. In sum and substance, the authenticity of the loan transactions under consideration was not accepted by the A.O for two reasons, viz. (i)
P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. that, the aforesaid concerns were controlled and operated by Shri Praveen K. Jain, an infamous accommodation entry provider, who in the course of search proceedings conducted against him had in his statement recorded under Sec.132(4) admitted that he along with his group entities were engaged in the business of providing accommodation entries ; and (ii) that, Shri Chetan R. Shah, director of the assessee company in the course of the survey proceedings was unaware about the basic details of the lenders who had advanced unsecured loans to “Marathan Group”, and had admitted that the unsecured loans raised from Shri Praveen K. Jain were in the nature of accommodation entries. However, as the assessee had not offered the aforesaid unsecured loans disclosed during the course of the survey proceedings amounting to Rs.10,91,50,000/- as its income in its return of income for the year under consideration, therefore, the A.O had called for an explanation as regards the same. In reply, it was submitted by the assessee that Shri Chetan R. Shah, director of the assessee company, had due to lack of information available with him at the time of survey proceedings stated that the various unsecured loans raised by “Marathan Group” were in the nature of accommodation entries. It was the claim of the assessee before the CIT(A) that Shri Chetan R. Shah had therafter retracted from his aforesaid statement which in itself was recorded in the absence of the requisite details before him. Accordingly, it was the claim of the assessee in the course of the assessment proceedings that it had raised genuine loans from the aforementioned parties. In order to fortify its aforesaid claim the assessee had placed on record supporting documentary evidence, viz. (i) confirmations of the lenders; (ii) copies of the returns of income for A.Y. 2013-14 of the lender parties; (iii) copies of the annual audited accounts for A.Y. 2013-14 of the lender parties; and (iv) copy of the bank statements of the lender P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. parties from where the loans were advanced to the assessee company. Accordingly, the assessee in discharge of the primary onus that was cast upon it to substantiate the authenticity of the loan transactions had placed on record the aforesaid documentary evidence. It has been the claim of the assessee before the CIT(A) that as all the necessary requisite details in order to establish the identity and creditworthiness of the lenders and also the genuineness of the loan transactions were placed on record, therefore, the A.O without rebutting the said documentary evidence and placing on record any material proving to the contrary was not justified in summarily dislodging the claim of the assessee as regards the authenticity of the loans that were raised by it from the aforementioned parties.
We shall in the backdrop of the aforesaid facts deliberate on the observations of the lower authorities. We shall first advert to the statement of Shri Chetan R. Shah, director of the assessee company, which had been heavily relied upon by the A.O for driving home his claim that no genuine loans were raised by the assessee company from the aforementioned lenders. As is discernible from the order of the CIT(A), Shri Chetan R. Shah had during the course of the survey proceedings conducted on the assessee company under Sec.133A, vide his statement dated 25.03.2014, had in his reply to Question no.29 submitted that unsecured loans from parties listed in Table no. 1 and Table no. 2 in the said statements were unsecured loans routed in the books of Marathan Fiscal Pvt. Ltd., Marathan Realty Pvt. Ltd. and Chetan Shah, HUF during the financial years 2011-12, 2012-13 and 2013-14 were in nature of accommodation entries, and had offered the same for tax in the said respective years. As observed by the CIT(A), Shri Chetan R. Shah had in his reply to Question no. 22 wherein he was called upon to furnish the name of the directors, address, PAN P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. and creditworthiness of the lender companies from whom unsecured loans were taken, had submitted, that he was readily not in a position to give the details sought for. Accordingly, we are in agreement with the view taken by the CIT(A) that the aforesaid admission of Shri Chetan R. Shah has to be read along with the fact that he had categorically stated that he was not in a position to furnish the details that were sought by the survey officials in respect of the lender parties. However, we find that the assessee had not offered the aforesaid amount for tax in its return of income and had in the course of the assessment proceedings furnished with the A.O the requisite details supporting the authenticity of the loan transactions viz. copy of confirmations from lenders, copies of the returns of income filed by the lender parties, copies of the annual audited accounts of the lender parties, and also the copies of the bank accounts of the lenders from where the respective loans had been advanced to the assessee company. Also, Shri Chetan R. Shah had vide his letter dated 01.01.2016 submitted during the course of the assessment proceedings that the surrender made during the course of the survey proceedings was being withdrawn by him. In the backdrop of the aforesaid, we shall now deliberate on the evidentiary value of a statement of an assessee recorded during the course of the survey action conducted under Sec.133A, and as to whether the same on a standalone basis can justify addition in the hands of an assessee, or not. A perusal of 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.”
P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 provisions of Sec.132(4) of the Act, wherein 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, as had consistently been held by various courts the same has no evidentiary value in absence of any corroborative evidence. In sum and substance, the 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 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 P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 statement 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 adminis ter 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 ca nnot ta k e a s om ersa ult s ubs eq uently. We do not find any force in the submissions of the learned Departmental representative because the Department is managed by trained Revenue 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, P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 proceedings 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 the statement recorded during the course of the survey proceedings 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 in the course of the assessment 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 P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. returns of income for A.Y. 2013-14 of the lender parties; (iii) copies of the annual audited accounts for A.Y. 2013-14 of the lenders parties; and (iv) copy of the bank statements of the lenders. Also, as observed by us hereinabove, the assessee while filing the return of income for the year under consideration had not considered the unsecured loans as its income. In fact, Shri Chetan R. Shah, director of the assessee company had vide his letter dated 01.01.2016 that was submitted during the course of the assessment proceedings categorically withdrawn his statement that was recorded during the course of the survey proceedings. In the backdrop of the aforesaid facts, we are of the considered view that now when Shri. Chetan R. Shah, director of the assessee company had withdrawn his statement that was recorded in the course of the survey proceedings, and had in the course of the assessment proceedings placed on record supporting documentary evidence to substantiate the authenticity of the loan transactions under consideration, 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 he could not have simply drawn adverse inferences on the basis of the aforesaid statement recorded in the course of the survey proceedings. As observed by us hereinabove, a statement recorded in the course of the survey proceedings can only be used for corroborative purposes for deciding any issue in favour or against the assessee. However, in the case before us, we find that the A.O had simply harped on the admission made by Shri Chetan R. Shah, director of the assessee company in his statement recorded under Sec.133A and had absolutely failed to place on record any documentary evidence which despite withdrawal of the aforesaid statement would have corroborated the facts which were stated by him. In our considered view, as a P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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, specifically when the assessee had declined to act upon the same and had placed on record supporting documentary evidence to prove the authenticity of the said transactions. In fact, 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 assesses 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 said 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 P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 of undisclosed income by the assessee in the course of the survey proceedings, which we are afraid is in itself not free from doubts and debate and in fact had been withdrawn, thus could not have been acted upon by the revenue in isolation for drawing of adverse inferences and making exorbitant additions in the hands of the assessee de hors any corroborative material. 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 Chetan R. Shah, director of the assessee company that was recorded in the course of the survey proceedings conducted on 25.03.2014, in the absence of any corroborative material could not have been acted upon by the revenue for drawing adverse inferences in the hands of the assessee.
We shall now advert to the contention of the revenue that the CIT(A) had erred in treating the loans aggregating to Rs.10,91,50,000/- as genuine, despite the fact that the said loans were received from dummy companies/entities managed and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider. As is discernible from the orders of the lower authorities, search and seizure action was conducted on Shri Praveen Kumar Jain, an infamous accommodation entry provider. As claimed by the revenue, Shri. Praveen Kumar Jain had in his statement recorded under Sec.132(4) admitted before the investigation wing that he was controlling and operating various dummy concerns/companies P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. through which he had provided accommodation entries to various persons. As observed by us hereinabove, it is a fact borne from the orders of the lower authorities that Shri Praveen Kumar Jain had retracted from his aforesaid statement by filing an „affidavit‟ alleging that as the search operations had continued at length for 9 days, therefore, it had taken a toll on his mental faculties. Be that as it may, we find that it is not the case of the revenue before us that the aforesaid person had at any stage in his statement recorded during course of the search proceedings ever alleged that he had provided accommodation entries to the assessee company. We shall in the backdrop of the aforesaid facts emerging from the statement of Shri Praveen Kumar Jain recorded under Sec.132(4) of the Act, which thereafter is stated to have been retracted by him, therein deliberate on the evidentiary value of the same insofar the case of the assessee before us is 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 which were stated to be operated and controlled by Shri Praveen K. Jain, was the statement of the said person recorded under Sec. 132(4) of the Act. As observed by us hereinabove, it has throughout been the claim of the assessee that the aforesaid person had never stated that he had provided accommodation entries to the assessee. Apart therefrom, it was also submitted by the assessee before the A.O that as Shri Praveen Kumar Jain had retracted from his statement that was recorded during the course of the search proceedings, hence no cognizance of the same could thereafter be drawn. In fact, the assessee in order to fortify its claim that it had raised genuine loans from the aforementioned companies had in the course of the assessment proceedings placed on the record of the A.O sufficient documentary evidence to support the P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. same. We have given a thoughtful consideration to the facts of the case in the backdrop of the settled position of law, and before proceeding any further may herein observe that in the case before us the statement of Shri Praveen Kumar Jain, which had thereafter been retracted by him (though not accepted by the revenue) had been heavily relied upon by the A.O for arriving at a conclusion that the assessee had in the garb of unsecured loans raised accommodation entries from the aforementioned 9 parties. In sum and substance, we are confronted with a situation where a statement of a „third party‟ which had been retracted is being acted upon by the revenue for drawing of adverse inferences and characterising 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. Accordingly, it can 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 the 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 CIT(A) has rightly concluded that the word “may” clearly suggests that the statement recorded under Sec. 132(4) may therein be rebutted subsequently if the assessee is able to prove with documentary evidence that the facts earlier stated were not correct. In fact, we are persuaded to subscribe to the view of the CIT(A) that though a statement recorded under „oath‟ is an important piece of evidence, P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. however, addition/disallowance cannot be made solely on the basis of such statement in the absence of any corroborative evidence supporting the same. As a matter of fact, 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 evidence in the proceedings under the Act, as long as the same is not retracted. However, in case the assessee retracts the statement, 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 statements. Now, in the case before us, we are seized with a situation where the revenue has sought to draw adverse inferences in the hands of the assessee by acting upon a statement recorded under Sec.132(4) of a „third party‟, which as observed by us hereinabove in itself is found to have 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 P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 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 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 had observed that though an admission made in a statement recorded under Sec.132(4) is an extremely important piece of evidence but it P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 presumption under Sec. 132(4) of the Act and there must be something more than 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 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. Accordingly, on the basis of our aforesaid deliberations, we 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.
We shall now advert to the facts of the case before us in the backdrop of the aforesaid settled position of law. 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 Praveen Kumar Jain, that was recorded under Sec. 132(4) of the Act, despite the fact that the said person had thereafter retracted from his P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. aforesaid statement on the basis of an „affidavit‟ filed with the department. We are unable to persuade ourselves to subscribe to the view taken by the A.O that despite absence of any corroborative evidence which would substantiate that the assessee had obtained any accommodation entries in the garb of unsecured loans from the aforementioned 9 companies, it was to be so presumed merely on the basis of the aforesaid standalone statement (which too had been retracted) of the aforementioned person viz. Shri Praveen Kumar Jain. We find that though search proceedings under Sec.132 were conducted in the case of Shri Praveen Kumar Jain, however, there is nothing discernible from the orders of the lower authorities which would reveal that any „material‟ evidencing that the assessee as a beneficiary had obtained accommodation entries from the said person had surfaced or was unearthed during the course of the said proceedings. Also as observed by us hereinabove, there is nothing discernible from the records which would reveal that the aforesaid person had ever alleged that he had provided any accommodation entries to the assessee company. We also cannot remain oblivious of the fact that in the absence of any corroborative evidence the statement of the aforementioned „third party‟ viz. Shri Praveen K. Jain could not be used in isolation for drawing of adverse inferences in the hands of the assessee. Apart therefrom, we find that as is discernible from the assessment order, though the assessee had sought a „cross- examination‟ of Shri Praveen Kumar Jain, whose statement was being heavily relied upon by the A.O for drawing of adverse inferences in its hands, however, the same was not allowed to him. In our considered view, the aforesaid failure on the part of the A.O to allow a cross- examination of the aforementioned party viz. Shri Praveen Kumar Jain is in itself a flagrant violation of the basic tenets of the principle of natural justice. Our aforesaid view is fortified by the judgment of the P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. 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 for violation of the principles of natural justice rendered the said order as nullity.We find that the CIT(A) while disposing off the objection of the assessee that the A.O had erred in not allowing cross-examination of Shri. Pravin Kumar Jain, had inter alia observed, that now when it was held by him that the A.O without bringing any corroborative material on record was in error in relying on the statement of the aforementioned person, therefore, the assessee was not prejudiced in any manner by the action of the A.O in not affording an opportunity to him in cross- examining the said person. Apart therefrom, we find that the CIT(A) had observed that neither the assessee had in the course of the appellate proceedings requested that the A.O be directed to grant cross-examination of Shri. Praveen Kumar Jain, nor the failure to provide such cross-examination would render the assessment order as void. As the assessee has not assailed before us the aforesaid observations of the CIT(A), therefore, we refrain from adverting to the same. We thus in terms of our aforesaid observations are of the considered view that the CIT(A) had rightly concluded that the reliance placed by the A.O on the statement of Shri Praveen K. Jain, which in the backdrop of the aforesaid retraction is in itself not free from doubts and debates, could not have been summarily acted upon by the A.O in the absence of any corroborative material for drawing of adverse inferences in the hands of the assessee. In fact, we find that there is no whisper in the assessment order as to how and on what basis the A.O had sought to dislodge the authenticity of the aforesaid P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. ITA No.5784/Mum/2017 AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. loan transactions by referring to the statement of Shri Praveen Kumar Jain. Accordingly, on the basis of our aforesaid deliberations we are of the considered view that the CIT(A) had rightly concluded that in the absence of any corroborative material the A.O could not have proceeded with and made additions on the basis of the retracted statement of Shri Praveen Kumar Jain.
We shall now advert to the material which had been placed on record by the assessee in the course of the assessment proceedings to substantiate the authenticity of the loan transactions under consideration. Also, we shall deliberate upon the observations of the A.O on the basis of which he had declined to accept his aforesaid claim. As is discernible from the orders of the lower authorities, the assessee in order to drive home its claim that it had raised genuine loans from the aforementioned 9 parties had placed on record supporting documentary evidence viz. (i) confirmations of the lenders; (ii) copies of the returns of income for A.Y. 2013-14 of the lender parties; (iii) copies of the annual audited accounts for A.Y. 2013-14 of the lenders parties; and (iv) copy of the bank statements of the lenders from where the loans were advanced to the assessee company. As a matter of fact, the CIT(A) had specifically referred to the documentary evidence placed on record by the assessee on a party wise basis, as under :
“a. M/s Atharv Business P . Ltd. The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. b. M/s Josh Trading P Ltd- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. establish that the transactions were carried out through proper banking channel. c. M/s Casper Enterprises P. Ltd. The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. d. M/s Oliv e Ov erseas P.Ltd. The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. e . M / s P r a g a t i G e m s P L t d - Th e a p pe l l a n t h a s s ubm i t t e d t h e c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. f. M/s Sumukh Commercial P Ltd- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. g. M/s Viraj Mercantile P. Ltd. The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. h. M/s L un ka d T extil e P Ltd - The a ppell ant has s ubmitte d the co py of confirmation letter for relevant assessment year, copy of acknowledgement of. return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bankstatement of them and itself to establish that the transactions were carried out through proper banking channel. i. M / s F a l a k T r a d i n g P L t d - Th e a p p e l l a n t h a s s u b m i t t e d t h e c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establi.sh that the transactions were carried out through proper banking channel”
P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. We find that the assessee by placing on record the aforesaid documentary evidence had discharged the primary „onus‟ that was cast upon it to prove the authenticity of the loan transactions entered into with the aforementioned 9 parties under consideration. However, the veracity of the claim of the assessee was not accepted by the A.O on the basis of generalised observation that the financials of the aforementioned concerns/entities revealed that despite high turnover practically no tax was paid by them (in many cases refund was claimed), and there were high amount of sundry creditors, loans and advances, debtors and investments. On the basis of his aforesaid generalized observations, we find that the A.O had drawn adverse inferences as regards the creditworthiness of the aforementioned parties. In our considered view, the aforesaid casual approach adopted by the A.O, without even putting up any effort to refer to the specific financials of the said concerns/entities as was placed on record by the assessee cannot be accepted. In fact, we find that the A.O had failed to put up any effort to dislodge the authenticity of the loan transactions by placing on record any material which could prove to the contrary. As is discernible from the assessment order, the A.O had as a matter of fact dedicated his entire efforts for demonstrating the facts which had emerged in the course of the search proceedings conducted on Shri Praveen Kumar Jain, and also the modus operandi that was adopted by him for providing accommodation entries. 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 is not backed by any supporting documentary evidence. 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 fact, we find P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. that the assessee had been able to substantially prove the authenticity of the loan transactions on the basis of the documentary evidence placed on record by him. As observed by us hereinabove, the A.O had not even sought to verify the authenticity of the aforesaid loan transactions by issuing any notices under Sec.133(6) of the Act. In our considered view, in case the A.O would had any doubts as regards either the identity and creditworthiness of the aforesaid lenders or the genuineness of the loan transactions, then 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 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 under consideration. 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 records from where it could be gathered that he had ever directed the assessee for doing the needful. In fact, in our considered view, now when the assessee in discharge of the primary „onus‟ that was cast upon 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, therefore, merely for the reason that the said lenders had not appeared before him would even otherwise not justify characterising the said loan transactions 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. 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, therefore, only because the P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. creditors had not appeared before the A.O would not justify drawing of adverse inferences as regards the authenticity of the said transactions. As regards the observation of the A.O that a perusal of the bank accounts of the lenders revealed that the same only contained RTGS/TRF entries, we find ourselves to be in agreement with the view taken by the CIT(A) that the said fact in itself proves that no cash was introduced in bank accounts of the said lenders prior to advancing of the loans to the assessee. We are persuaded to subscribe to the view taken by the CIT(A) that the A.O had also not brought on record any evidence which would suggest that the assessee had paid cash to the lenders in lieu of loans received from them. Apart therefrom, we are also of the considered view that the fact that the assessee company had paid interest on the loans raised from the aforementioned parties after deduction of tax at source also substantiates the authenticity of the loan transactions. Also, the fact that the said loans had been repaid by the assessee to the aforementioned lenders fortifies the veracity of the said loan transactions. 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.
We shall now advert to the reliance placed by the revenue on the order of the ITAT, Ahmedabad in the case of Pavankumar M. Sanghvi Vs. ITO (ITA No. 2447/Ahd/2016) (Ahd). It is the claim of the assessee that involving identical facts, the tribunal in the aforementioned case had concluded that genuineness of loan transactions cannot be established merely on the basis of documents filed by the assessee P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. and further probe is required to be carried out for arriving at the actual facts. We have perused the aforesaid order of the ITAT, Ahmedabad, and are unable to persuade ourselves to subscribe to the aforesaid claim of the revenue. A perusal of the aforesaid order reveals that the same is distinguishable on facts. As is discernible from the said order, it was observed by the Tribunal that a perusal of the Bank account of the lender party viz. M/s Natasha Enterprises revealed that after the loan of Rs.10,00,000/- was advanced to the assessee the balance in the bank account remained at a meagre figure of Rs.13,717/- only. On a similar footing, it was noticed by the Tribunal that on various other dates also after the amounts were advanced from the bank account of the lender the closing balance of the respective days would remain between few thousands of rupees. Further, it was observed, that though the lender had shown a substantial turnover of 122.92 crores, but there was no closing stock. Also, certain peculiar facts as regards the meagre expenses incurred by the lenders were also noticed, which thus did not inspire any confidence as regards the genuineness of the business transactions of the said respective concerns. Similarly, it was observed that the facts involved in the case of the other lender party viz. M/s Mohit International also did not reveal any different story. To sum up, in the aforementioned case, it was conclusively proved on the basis of the facts borne from the records that the lenders were not carrying out any genuine business. We are afraid that in the case before us neither such facts are borne out from the records, nor any effort has been made by the ld. D.R to establish that the lenders in the case before us also had a similar state of affairs. We are of the considered view that as the facts involved in the case of the assessee before us are not shown to be similar as against those which were there in the case before the ITAT, Ahmedabad, in the case of Pavankumar M. Sanghvi P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. Vs. ITO (2017) 165 ITD 260 (Ahd), therefore, the same being distinguishable on facts would not assist the case of the revenue before us. On the basis of our aforesaid observations, we are of the considered view that the assessee by placing on record sufficient documentary evidence had discharged the primary „onus‟ that was cast upon it to prove the identity and the creditworthiness of the parties, and also the genuineness of the transaction under consideration. As observed by us hereinabove, the A.O had failed to dislodge the documentary evidence that was placed on record by the assessee in the course of the assessment proceedings to substantiate the authenticity of the loan transactions under consideration. We are of the considered view that as the assessee by placing on record the aforesaid supporting documentary evidence had discharged the primary „onus‟ that was cast upon it to prove the authenticity of the loan transactions, therefore, it was incumbent on the part of the A.O to have disproved the said claim of the assessee by placing on record documentary evidence proving to the contrary. However, as the A.O in the case before us had failed to dislodge the documentary evidence placed on record by the assessee in support of its claim as regards the authenticity of the loan transactions, and had only taken recourse to certain general observations, without specifically referring to the material placed on record by the assessee, we are afraid that he by so doing had absolutely failed to discharge the „onus‟ as was shifted upon him to disprove the authenticity of the loan transactions under consideration. In fact, we find that the A.O instead of placing on record any documentary evidence which would disprove the authenticity of the loan transactions under consideration, had focussed primarily on the facts and the modus operandi of functioning of Shri. Praveen Kumar Jain as had emerged in the course of the search proceedings conducted on him. We are afraid that the adverse P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. inferences drawn by the A.O as regards the authenticity of the loan transactions under consideration without any attempt to dislodge the documentary evidence placed on record by the assessee to support its claim, cannot be sustained and is liable to be vacated. 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 similar adverse inferences as regards the authenticity of the loan transactions that were drawn by the A.O. in the case of a „sister concern‟ of the assessee company viz. M/s Manba Finance Ltd., were on appeal deleted by the CIT(A). On further appeal by the revenue, the order passed by the CIT(A) was upheld and the appeal of the revenue was dismissed vide order passed by a coordinate bench of the Tribunal viz. Dy. CIT-CC-7(2), Mumbai Vs. M/s Manba Finance Ltd., (ITA Nos. 1448, 1449 & 1467/Mum/2017, dated 05.10.2018) (copy placed on record). As is discernible from the aforesaid order of the Tribunal, in that case too on the basis of information that the said concern had in the garb of loans obtained accommodation entries from certain concerns which were managed and controlled by the Shri Praveen Kumar Jain, survey action was conducted on the said concern on 25.03.2014. In the course of the survey action, the director of the said concern had in his statement recorded under Sec. 133A during the course of the survey proceedings had admitted that the assessee company had received accommodation entries. However, the aforesaid concern did not offer the amount of the aforesaid unsecured loans for tax in its return of income. Accordingly, the A.O relying upon two aspects viz. (i) that, the director of the assessee company in its 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 P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. managed and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, held the loans as unexplained cash credits u/s. 68 of the Act. We find that the Tribunal while upholding the order of the CIT(A), had 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 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 his aforesaid observations had in the case of the aforementioned „sister concern‟ of the assessee company wherein identical facts were involved, had upheld the order of the CIT(A) and therein concluded that the A.O in the absence of the 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.
We have given a thoughtful consideration and are of the considered view, that the CIT(A) after deliberating at length on the issue under consideration had rightly concluded that as the assessee P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. had discharged the „onus‟ that was cast upon it under Sec.68 of the Act, therefore, the A.O was not justified in treating the loans received from the aforementioned parties as unexplained cash credits under Sec.68 of the Act. We thus not finding any infirmity in the well reasoned order of the CIT(A) to the extent he had deleted the addition of Rs.10,91,50,000/- uphold the same. The Grounds of appeal
No. (i) & (ii) raised by the revenue are dismissed.
14. We shall now advert to the disallowance of the interest expenditure of Rs.70,49,112/- that was claimed by the assessee to have been paid to the aforementioned 9 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 under consideration 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 of the interest paid to the said lenders by treating the loan transactions as bogus shall accordingly stand vacated. Accordingly the order of the CIT(A), deleting the disallowance of interest expense of Rs.70,49,112/- is upheld. The Ground of appeal No. (iii) raised by the revenue is dismissed.
15. The appeal filed by the revenue is dismissed.
We shall now advert to the appeal of the revenue in the case of M/s Marathan Fiscal Pvt. Ltd. for A.Y 2013-14. The present appeal filed by the revenue is directed against the order passed by the CIT(A)- 54, Mumbai, dated 28.06.2017, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. short „Act‟), dated 28.03.2016. The revenue has assailed the impugned order by raising before us the following grounds of appeal:
“i. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in treating the loan of Rs.2,64,80,000/- as genuine, when such loan was received from dummy company/ entities managed and controlled by Praveen Kumar Jam, and admitted by Shri Chetan C Shah, the Director of the assessee company, as to be in the nature of the accommodation entry. ii. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the loan of Rs.2,64,80,000/ - as genuine, ignoring the decision of the Hon'ble ITAT in the case of Pavankumar M Sanghvi vs ITO wherein the Hon'ble ITAT has held that genuineness of the transactions cannot be established merely on the basis of documentation filed by the assessee and further probe is required to ascertain whether what was apparent was real. iii. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the interest expenses of Rs.19,29,244/- on the loan of Rs. 2,64,80,000/- which has been held to be in the nature of the accommodation entry and sham in the assessment order. The appellant prays that the order of the CIT(A) on the grounds be set aside and the DC be restored. The appellant craves to amend or alter any ground or add new ground which may be necessary.
Briefly stated, the assessee company had e-filed its return of income on 28.09.2013, declaring its total income at Rs.23,03,920/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2) of the Act.
During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have raised loans from the following 7 parties:
Sr. No. Particulars Amount of loan 1. Atharva Business P. Ltd. 50,00,000 2. Josh Trading P. Ltd. 19,80,000 3. Duke Business P. Ltd. 30,00,000 4. Olive Overseas P. Ltd. 25,00,000 5. Pragati Gems P. Ltd. 50,00,000 6. Sumukh Commercial P. 65,00,000 P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. Ltd.
7. Victory Sales P. Ltd. 25,00,000 Total 2,64,80,000/- It was observed by the A.O that the aforementioned concerns were controlled and operated by Shri Praveen Kumar Jain, an infamous accommodation entry provider. Further, it was observed by him that survey proceedings were conducted on the assessee company on 25.03.2014. It was noticed by him, that Shri Chetan R. Shah, director of the assessee company in the course of the survey proceedings conducted on the assessee on 25.03.2014 had failed to divulge the details as regards the lender concerns from whom loans were raised by the assessee company and its group entities. Also, he had in his statement recorded in the course of the survey proceedings admitted that the unsecured loans raised by the various concerns of “Marathan Group” were in the nature of accommodation entries raised from Shri Praveen K. Jain. It was observed by the A.O that the assessee had not offered the aforesaid amount of unsecured loans of Rs.2,64,80,000/- raised from the aforementioned concerns which were allegedly stated to be controlled and operated by Shri Praveen K. Jain, as its income in its return of income for the year under consideration. Accordingly, the A.O treated the aforesaid loans as unexplained cash credits under Sec.68 and made an addition of Rs.2,64,80,000/-. Apart therefrom, the A.O also disallowed the interest expenses of Rs.19,29,244/- claimed by the assessee to have been paid to the aforementioned lender parties.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) observed that the assessee in the course of the assessment proceedings had duly discharged the „onus‟ that was cast upon it to prove the authenticity of the loan transactions under P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. consideration. Also, it was observed by him, that the A.O was in error in drawing adverse inferences in the hands of the assessee by relying on the standalone statement of Shri Praveen K. Jain, despite the fact that the same had been retracted by him by filing an „affidavit‟. Accordingly, the CIT(A) was of the view that the additions made by the A.O without placing on record any corroborative evidence on record could not be sustained. Apart therefrom, the CIT(A) was of the view that the statement of Shri Chetan R. Shah, director of the assessee company that was recorded in the course of the survey proceedings conducted under Sec. 133A on the assessee company, also could not be pressed into service for drawing of adverse inferences in the hands of the assessee company in the absence of any corroborative material, as the same had been retracted by him. Accordingly, the CIT(A) on the basis of his aforesaid observations deleted the addition of Rs.2,64,80,000/- made by the A.O under Sec.68. Also, the disallowance of the interest expenditure of Rs.19,29,244/- was also vacated by the CIT(A).
The revenue being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The authorised representatives for both the parties at the very outset of the hearing of the appeal submitted that the facts and the issue involved in the captioned appeal remains the same as were involved in the appeal of the revenue in the case of the „sister concern‟ of the assessee viz. M/s Marathan Realty Pvt. ltd. for A.Y. 2013-14. We find that as the facts and the issue involved in the present appeal remain the same, therefore, our order passed while disposing off the appeal in the case of the „sister concern‟ of assessee viz. DCIT, CC-6(3), Mumbai Vs. M/s Marathan Realty Pvt. Ltd. (ITA No. 5784/Mum/2017) shall apply mutatis mutandis for disposing off the present appeal of the assessee viz.
P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd. DCIT,CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. (ITA No. 5783/Mum/2017 for A.Y. 2013-14). Accordingly, the addition made by the A.O under Sec.68 of Rs.2,64,80,000/- is deleted. Also, the disallowance of the interest expenses of Rs.19,29,244/-pertaining to the aforesaid loans is also vacated.
The appeal of the revenue is dismissed.
The appeals filed by the revenue for A.Y. 2013-14 in the case of the captioned assesses i.e ITA No. 5784/Mum/2017 and ITA No. 5783/Mum/2017 are dismissed.
Order pronounced in the open court on 28.08.2019 Sd/- Sd/- (N.K. Pradhan) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक 28.08.2019 P.S Rohit आदेशकीप्रतितितिअग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी/ The Appellant 2. प्रत्यर्थी/ The Respondent. आयकरआय क्त(अपील) / The CIT(A)- 3. आयकरआय क्त/ CIT 4. दिभ गीयप्रदिदनदि, आयकरअपीलीयअदिकरण, म ुंबई/ DR, 5. ITAT, Mumbai 6. ग र्डफ ईल / Guard file. सत्य दपिप्रदि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायकिंजीकार (Dy./Asstt. Registrar) आयकरअिीिीयअतिकरण, म ुंबई / ITAT, Mumbai.
P a g e | DCIT, CC-6(3) Vs. M/s Marathan Fiscal Pvt. Ltd. AY. 2013-14 DCIT,CC-6(3) Vs. M/s Marathan Realty Pvt. Ltd.