ANITA RINKU PATODIA,MUMBAI vs. ACIT CEN CIR 3(2), MUMBAI

O R D E R Manoj Kumar Aggarwal (Accountant Member): - 1.

2. None has appeared for assessee. A perusal of the order sheet entries reveals that assessee has failed to appear on various earlier occasions. Therefore, left with no option, the appeal is proceeded with ex-parte qua the assessee. 3.1 Facts on record would reveal that the assessee’s case for year under consideration was reopened pursuant to receipt of certain information from ADIT (Investigation), Mumbai wherein it transpired that the assessee stood beneficiary of bogus loans which came to light during search and seizure operations in the case of Shri Pravin Kumar Jain and his group on 01/10/2013. The group, through network of various concerns, was found to be engaged in providing accommodation entries and assessee was identified as one such beneficiary of bogus unsecured loans to the extent of Rs.90.00 Lacs from 3 entities as per the following details: - No. Name of the entity who has given Amount (Rs.) the unsecured loan 1. M/s. JPK Trading Co.(P) Limited 10,00,000/- 2. M/s. Mohit International 30,00,000/- 3. M/s. Natasha Enterprises 50,00,000/- TOTAL 90,00,000/- Consequently, the case was reopened by issue of notice u/s 148 on 21/03/2014 and the assessee was directed to adduce evidences in support of the transactions. Although the assessee defended the claim, however, upon perusal of financial statement of the 3 entities, learned AO reached a conclusion that the entities were bogus vendors. The financial statement of these concerns has been made a part of the quantum assessment order.

This is coupled with the fact that the husband of the assessee, during search operation u/s 132 in their own group on 11/08/2014 accepted the fact of obtaining bogus unsecured loans from entities run by Shri Pravin Kumar Jain. Accordingly, the amount of Rs.90 Lacs was treated as bogus and non-genuine and added to the income of the assessee while framing the assessment. 3.2 The assessee contested the reassessment proceedings on legal grounds as well as quantum addition on merits before learned first appellate authority, however, without any success vide impugned order dated 15/12/2016. The Ld. CIT(A) confirmed the additions, on merits, by observing as under: - 11. I have considered the facts of the case, submissions and contentions of the appellant, as also the order of the AO. It is seen that the Ld. AO has discussed the issue of bogus loans of Rs.90,00,000/-`from four different parties at length in the body of the order and has passed a very detailed and speaking order. The relevant discussion is appearing on page 3 to 14 of the assessment order. In the said order the AO has also reproduced the balance sheet and P&L account of these concerns namely, M/s. Mohit International, M/s Natasha Enterprises, M/s JPK Trading (I) Pvt Ltd and various inconsistencies therein. From the perusal of these balance sheets, it is clear that there are hardly any fixed assets with these companies even though there is significant turnover. Further there are hardly any expenses in the P & L account in these companies and it is not clear as to how could they run their affairs with such meager expenses. Besides there are other inconsistencies like there was no closing stock, audit fees paid was very low which raises doubts about the very existence of these companies and the genuineness of transactions. Most of all Shri Pravin Jain main person of group had admitted that he was providing only accommodation through his group concerns including these four companies. The assessee in this regard has argued that their transactions were made through cheques through proper banking channels. However payment through cheque alone does not decide the genuineness of transitions. Reliance in this regard is placed on the case Kachwal Gems V/s CIT (2007) 288 ITR 10(SC), wherein it was held that mere payments by account payee cheques is not sacrosanct and is not sufficient to establish the genuineness of the transaction. Further, reliance is placed on C Vasantilal Co V/s CIT (1962) 45 ITR 206(SC), Chaturbhuj Panauj AIR 1969 (SC) and Sumati Dayal Vs CIT (1995) 214 ITR 801(SC) wherein it has been held that even strict rules of evidence do not apply to the proceedings under the Income Tax Act and the real test with regard to genuineness of the transaction is "Preponderance of probabilities" and not 'beyond reasonable doubt'. It is an undisputed fact that the accommodation entries taken from these four parties remained unverified. As stated above, during the assessment proceedings the AO had issued query letters under section 133(6) of the Act to the above mentioned loan creditors but the same were returned by the postal authorities with the remarks that 'the party is not available’. Thereafter the AO asked the assessee to produce these parties but the assessee expressed his inability in doing so. Further the balance sheets of these loan creditors were not showing any fixed assets raising doubts about their existence and doing business. Their sources of income were meager and therefore these concerns could not have given huge loan of Rs.90,00,000/- to the assessee. Infact the transactions itself appear to be circular in nature and a colorable in device as held by Supreme court in case McDowell’s Co. Ltd. 154 ITR. The assessee has also argued that the loans have already been returned/repaid by the assessee to respective concerns in the year 2010. However, even if the assessee has returned, it will not materially change the position as the issue is source of loan and whether the same was explained and not repayment as such.