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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-4, Ahmedabad, dated 22/12/2015 arising in the matter of assessment order passed under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2006-2007.
The Revenue has raised the following grounds of appeal:
1. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance of Rs.8,71,00,000/- made on account of unexplained cash credit u/s.68 of the Act, without properly appreciating the facts of the case and the material brought on record.
2. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing officer. 3. It is therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.
4. The appellant craves leave to amend or later any ground or add a new ground, which may be necessary.
The only issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 8.71 crores made under section 68 of the Act.
The assessee is an individual engaged in the business of trading in shares and securities. In this case, the AO reopened the case on the basis of information received from DCIT, CC, XXVII, Kolkata that assessee company has obtained accommodation entry in the form of loans and advances for Rs. 8,71,00,000/- from M/s Basant Marketing P. Ltd. The assessee during the re-assessment proceedings submitted that it has provided all the detail of loan transaction with M/s Basant Marketing Pvt. Ltd. during assessment proceeding under section 143(3) of the Act where genuineness of the loan was also accepted. The assessee further furnished the copy of affidavit from the director of M/s Basant Marketing Pvt. Ltd and claimed that the director of the creditor company before CBI has not made adverse remark against the loan provided to him (the assessee).
4.2 However, the AO found the assessee has also not filed documentary/ supporting evidences in support of his argument. Therefore, the AO held that the same is not acceptable. It was the duty of the assessee to provide proof of the identity, genuineness of transaction and credit worthiness of the lender, but the assessee failed. The AO further observed that Joint Director CBI Zone-1 Mumbai in search conducted on Sh. Arun Dalmia, Shri Harsh Dalmia and M.S. Bali found that they are engaged in money laundering and for that purpose they incorporated 20 companies which includes M/s Basant Marketing Pvt. Ltd. It was further found by the CBI that the above company only exist on paper and not engaged in development of software as claimed. Indeed, it was used for siphon of fund borrowed form HFCL and IDBI and thereby in convenience with various companies diverted the fund and cheated with IDBI. It was also found that the M/s Basant Marketing Pvt Ltd was also engaged in the activity of the insider trading. Thus the in view of above, the AO treated the loan of Rs. 8.71 crore as unexplained credit under section 68 of the Act and added the same to the total income of the assessee.
Aggrieved assessee preferred first statutory appeal before the Learned CIT(A).
5.1 The assessee before learned CIT(A) submitted that during assessment proceeding u/s 143(3) of the Act, he has provided copy of bank statement, copy of ITR-V, copy of audited balance sheet of Basant Marketing Pvt Ltd. in order to prove identity, genuineness and creditworthiness of the lender and to buttress his argument, he has also filed affidavit from director of lender company during reassessment proceeding. Thus the assessee claimed that the onus cast under section 68 of the Act has been duly discharged. The assessee in support of his argument also relied upon various case laws which are incorporated in the order of the leaned CIT(A).
6. The learned CIT(A) after considering the facts in totality deleted the addition made by the AO by observing as under:
6.3 On going through the facts of the case, the additions made by the Ao are not found justified for the following reasons ; i) The amount received as loan by the appellant from M/s Basant Marketing P. Ltd. is through regular banking channels. Thus, the appellant has proved the identity of the creditor and the genuineness of the transactions, which has been further strengthened by filing confirmation from the creditor. ii) On going through the bank amount of M/s Basant Marketing P. Ltd. with ABN amro Bank from which amount was transferred to appellants account, it is found that there is no cash deposit in the said bank account of the creditor immediate before^ transferring money to the appellants bank account. In the said account, there are hardly few cash entries of small amount throughout the year. All the transactions in the said bank account are through regular modes of transfer of money. This proves the credit worthiness of the creditor. iii) M/s Basant Marketing P. Ltd. is assessed to Income-tax at Kolkata and the appellant filed its PAN before the AO. In the case of M/s Basant Marketing P. Ltd., for AY 2010- 11, the CIT{A)-20, Kolkata has given the findings as mentioned below vide order dated 30-01-2015. Para-15 of the CIT(A) order is reproduced below : “I have considered the rival submissions and perused the material placed on record, I have :"already discussed at length the various aspects of the factual arid legal position in the present Appeal. In view of such discussions, I am of the opinion that there is no material on record to back the finding of the AO that the assessee company was involved in providing accommodation entry, I am unable to accept the finding of the AO that the documents which were maintained by the assessee company in the normal course'of its business and which were being presented regularly to the ROC as well as to the income tax department were fabricated, I am also unable to uphold the order of the AO that no income was earned or no expenditure was incurred by the assessee company or that its total income had to be treated as nil. In view of the above, I am of the considered opinion that there is no material on record to back the contention of the AO that the assessee company was fake and that it did not actually exist. The judicial decisions relied upon by the Ld ARs in course of the appellate proceedings also support the case of the assessee. The AO is therefore directed to assess the total income as declared by the assessee in its return of income by not treating the assessee company as fake or bogus. Ground no 1 to 4 are allowed. Ground no 5 and 6 are directed against the legal validity of the impugned order in as much as it was illegal and bad-in-law. The Ld ARs did not elaborate these grounds. I find no legal infirmity in the impugned order. Ground no 5 and 6 are dismissed. Ground no 7 is general in nature." The CIT (A) adjudicated that M/s Basant Marketing P. Ltd. as genuine company and transactions of the said company were found in order. This order of the CIT(A}-20, Kolkata is dated 20-01-2015 and discussed all the facts of the case in detail. This confirms that M/s Basant Marketing Pvt. Ltd. is a genuine company and transactions of the said company are genuine. iv) The AO did not make any enquiry to find the genuineness of the transactions. The AO merely relied upon the statement given by Shri Arun Dalmiya, which was general in nature. Name of the appellant has not been stated by Shri Dalmiya specifically, The statement of Shri Dalmiya was not given to the appellant to file rejoinder. v) There is no mention in the assessment order that the appellant gave cash to M/s Basant Marketing P. Ltd. who in turn issued cheques to the appellant. In absence of such findings and evidence to prove such findings, additions made are sustainable. The appellant contended that the loan amount has been repaid in F.Y. 2014-through normal banking channels. vii) Apart from the factual position as mentioned in para i) to vi) above, the appellant's case is supported by the following case laws of Hon'ble jurisdictional High Court of Gujarat, Ahmedabad. a) S. 68 : DCIT vs. Rohini Builders (2003) 127 Taxman 523 (Guj) where the asses; submitted the ledger account duly confirmed showing PAN, Ward and Address of the assessee and the payment was through account payee cheque. It was held that the assessee has discharged onus U/s 68 and hence, addition could not be made. b) S. 68 : Chankya Developers vs. CIT (2014) 43 Taxmann.com 91(Guj) where in the Honorable Gujarat High Court has categorically held that once name, address, PAN, confirmation and bank statement of party are provided, the primary onus which was to be discharged by the assessee has been discharged and no addition U/s 68 should be made. c) S. 68 : CIT, A'bad IV vs. Sachitel Communications (P.) Ltd. [2014] 51 taxmann.com 205 (Gujarat) where in the Honorable Gujarat High Court has held that assessee proved identity of creditor and capacity to pay and that payment was made through banking channel - no addition could be made on account of unsecured loan U/s 68. d) S. 68 : Commissioner of Income-tax - I vs. Dharamdev Finance (P.) Ltd. [2014] 43 taxmann.com 395 (Gujarat) where in the Honorable Gujarat High Court has held that It was found that in respect of said credits assessee had filed PAN of creditors, their confirmation and their bank statement which established their creditworthiness -Moreover, transactions were made through banking channels - No addition could be made to assessee's income U/s 68. e) In the case of Ranchhod Jivabhai Nakhava [2012] 208 Taxman 35 (Gujarat) wherein it was held that "Once the assessee has established that he has taken money by way of account payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under section 68 was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. [Para 15] Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, the Assessing Officer does not follow the principle laid down under section 68. [Para 16]." On the basis of the evidence produced to discharge his onus and as the facts on the appellant’s case are identical to the facts of the cases cited above decided by the Hon’ble Jurisdictional High court of Gujarat, Ahmedabad, the additions made by the AO are no found sustainable. 6.4 Keeping in view the discussion in paras above, it is found that the appellant had discharged its onus to prove the credits shown in his books of accounts, thus, the additions made by the AO are found justified, hence deleted. This ground of appeal is allowed.
Being aggrieved by the order of the learned CIT(A) the Revenue is in appeal before us.
The learned DR before us contended that the assessee failed to satisfy the conditions imposed under the provisions of section 68 of the Act with respect to the loan party such as identity, creditworthiness and genuineness of the transaction. It was established that the loan party being M/s Basant Marketing P. Ltd. was engaged in the accommodation entries in the search conducted by the CBI. The company which provided loan to the assessee was based in Kolkata and engaged in money laundering activities. There was no agreement furnished by the assessee in support of such loan transactions. Furthermore, there was no interest charged by the loan provider which is very unusual that someone will provide such a huge fund without any charge. Likewise, the repayment of the loan commenced only after the case of the assessee was selected under income escaping assessment, therefore no credence to the assessee can be given on account of repayment of the loan. The learned DR vehemently supported the order of the AO.
On the other hand the learned AR before us filed paper book running from pages 1 to 185 and contended that the learned CIT-A of M/s Basant Marketing P. Ltd. has accepted the genuineness of the activities of such company i.e. M/s Basant Marketing P. Ltd. Likewise, the ITAT in series of the cases has also accepted the genuineness of the company namely M/s Basant Marketing P. Ltd. The learned AR in support of his contention has drawn our attention on various case laws which are available on record.
9.1 The learned AR also contended that the addition has been made by the AO without giving the opportunity of cross-examination which was mandatory before making the addition in the hands of the assessee. The learned AR also filed the affidavit of the director of the company demonstrating that the loan given to the assessee was not out of the accommodation entry. The learned AR vehemently supported the order of the learned CIT-A.
We have heard the rival contentions of both the parties and perused the materials available on record. The provisions of section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders/investor/creditor, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under Section 68 of the Act by the Hon’ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: “It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. “ 10.1 Now first we proceed to understand the identity of the party. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc.
10.2 The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not be used as a mask to cover the actual transaction or designed in a way to present the transaction as true but the same is not. Genuineness of transaction can be proved by submitting confirmation of the party along details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient. As such the same should also be proven by circumstantial surrounding evidences as held by the Hon’ble supreme court in case of Durga Prasad More reported in 82 ITR 540 and in case of Smt. Sumati Dayal reported in 214 ITR 801.
10.3 The last stage comes to verify the creditworthiness of the parties. The term creditworthiness as per Black Law Dictionary refers as:
"creditworthy, adj. (1924) (Of a borrower) financially sound enough that a lender will extend credit in the belief default is unlikely; fiscally healthy-creditworthiness.” 10.4 Similarly in The New Lexicon Webster's Dictionary, the word "creditworthy" has been defined as under:- "creditworthy, adj. of one who is a good risk as a borrower." 10.5 It the duty of the assessee to establish that the party has capacity to make such advances and having requisite fund in its books of account and banks. The capacity to make advance can be established by showing sufficient income, capital and reserve or other fund in the hands of investor. It is required by the AO to find out the financial strength of the investor to make investment with judicious approach and in accordance with material available on record but not in arbitrary and mechanical manner.
10.6 In the light of the above discussion, we proceed to adjudicate the issue in hand. With respect to the identity of the party, we find that the assessee has furnished the details such as copy of bank statements, ITR and audited financial statement of the lender party. We also note there was assessment framed in case of lender parties which was challenged before the first appellate authority. Thus, from the above, there remains no doubt with regard to the identity of the party, as it has been proved beyond doubt.
10.7 With respect to the genuineness of transaction and creditworthiness, we note that the assessee has submitted the copy of own bank statement as well as bank statement of party showing the transaction carried out through banking channel, audited balance sheet and copy of ITR. The assessee has also furnished affidavit of the director of the lander company. However the AO without pointing any defect in all these document or without bringing any cogent material on record in nutshell and without conducting independent enquiry disbelieved genuineness of transaction merely on the basis of statement given by one Shri Arun Dalimia before CBI. Therefore, in the given facts and circumstances, the genuineness of the transaction and the creditworthiness of the party cannot be doubted.
10.8 Be that as it may be, we also find that in the own case of lender party M/s Basant Marketing for assessment year 2010-11 the learned CIT(A)-20 Kolkata held the said party as genuine company. We also find that in case of ITO vs. The Surat Safe Deposit Vault Pvt. Ltd bearing corresponding to A.Y. 2007-08, where the assessee (The Surat Safe Deposit Vault Pvt) has also taken loan from M/s Basant Marketing P. Ltd held as genuine by the coordinate bench of this tribunal. The relevant finding of the bench reads as under:
We have heard both the parties and gone through the impugned order. The assessee has furnished copy of audited accounts, balance sheet and P&L account along with annexure, copy of ledger of Basant Marketing P. Ltd. And during the course of assessment proceedings, Basant Marketing P. Ltd. categorically confirmed the entry of Rs. 2,43,00,000/- with copy of bank accounts reflecting the transaction therein. And M/s. Basant Marketing P. Ltd. has confirmed amount outstanding in the account of assessee company is only Rs. 1,93,00,000/- which has been repaid during F.Y. 2014- 15. And so far remaining amount 50,00,000/- is concerned, assessee filed separate proof of payment to the A.O. and again filed before the Ld. CIT(A) and it was at Calcutta conducted detailed enquiry of Basant Marketing P. Ltd. wherein it is mentioned that Basant Marketing is not a fake company and its activities are genuine.
7. Assessee has filed an order of ITAT Mumbai Benches in and ITA 6807/Mum/2018 wherein one person namely Shri Harsh Dalmia was the beneficiary to the tune of Rs. 1,14,85,500/- from the group companies namely Basant Marketing P. Ltd. who was assessed to tax with them who provided accommodation entry and Department issued notice and Ld. A.O. made addition in the case of Harsh Dalmia 8. Thereafter in appeal before the Ld. CIT(A) relief was granted to the assessee and thereafter Department appeal was dismissed by the ITAT holding that activities of Basant Marketing are found to be genuine. And thereafter no appeal was filed by the Department against the order of the ITAT Mumbai Benches. So considering above all these facts, we are of the opinion that order of Ld. CIT(A) is detailed and reasoned and same does not require any kind of interference at our end.
10.9 Apart from above order of this tribunal, there were several orders of different Tribunal in case of different parties which were relied before us by the learned AR where loan taken from M/s Basant Marketing Pvt Ltd has been held as genuine. Some of those cases are detailed as under:
ITO v/s M/s Artilink Vintrade Pvt Ltd. in for A.Y. 2006- 07 2. ITO v/s Shri Harsh Dalmia in ITA No. 7449/Mum/2016 for A.Y. 2008-09 3. DCIT v/s M/s Udaipur Properties Finance Ltd in ITA No. 6449/Mum/2017 for A.Y. 2010-11 4. ITO v/s M/s Venktesh Securities Ltd. in ITA No. 1498 to 1501/Mum/2017 for A.Y. 2006-07, 2007-08, 2009-10 & 2011-12 10.10 In addition to the above we also find that the assessee also started to repayment of loan amount in subsequent year. This fact can be verified from the finding of the learned CIT (A) which has been reproduced herein above.
10.11 From the perusal of the above it is implies that the assessee is not the beneficiary in the loan transaction with M/s Basant Marketing Pvt. Ltd. Thus we can assume that the impugned transaction of loan received by the assessee which was subsequently repayable. In this regard we also find support and guidance from the judgment of Hon’ble Gujarat High Court in case of CIT vs. Rohini Builders reported in 256 ITR 360 wherein it was held as under:
“The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositor is made by account payee cheques and the interest is also paid by the assessee to the creditors by the account payee cheques”
10.12 In view of the above, we are of the opinion that, the transactions of the loan received by the assessee in the given facts and circumstances has been explained fully. Therefore, we hold that there is no infirmity in the order of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed.
In the result appeal of the Revenue is hereby dismissed.
Order pronounced in the Court on 23/03/2022 at Ahmedabad.