ASHISH GIRISH JAIN,MUMBAI vs. ITO, WARD 42(1)(1), MUMBAI, MUMBAI

The assessee filed its Return of Income on 29.07.2010 declaring total income of Rs.2,95,150/-, The return was processed us. 143(1) of the Act. The office of the DGIT (Inv.). Mumbai conducted a search and seizure action u/s. 132 of the I.T. Act, 1961 in the case of Shri Rajendra Jain Group on 03.10.2013 who indulged in providing accommodation entries in the nature of bogus sales and unsecured loans. During the search action, statement of Shri Rajendra Jain and various other persons, who assist Shri Rajendra Jain in providing bogus Loans & Advances, was recorded in which they admitted and revealed the modus operandi of accommodation entries. The assessee is one of the beneficiary who obtained accommodation entries of bogus sales of Rs. 15,00,000/- during F.Y. 2009-10 from Mani Prabha Impex Pvt. Ltd., the group concem of Shri Rajendra Jain. It is also established that no actual transaction is carried out by these parties with their customers and they provide only accommodation entries of sales/loans after charging small commission. Hence, I have reasons to believe that income chargeable to tax to the extent of Rs. 15,00,000/-has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year i.e. for A.Y. 2010-11 within the meaning of section 147 of the Income-tax Act, 1961.

4. The notice under Section 148 was duly served upon the Assessee. In response, vide letter dated 18/04/2015, the Assessee requested that income tax return filed on 29/07/2010 declaring total income at INR.2,95,150/-, be treated as return filed in response to the notice issued under Section 148 of the Act. No objections were filed by the Assessee challenging the reasons recorded for reopening the assessment. The Assessing Officer proceeded with reassessment proceedings. It was noticed by the Assessing Officer that in the Balance Sheet as at 31/03/2010, the Assessee has shown an amount of INR.15,00,000/- due to 'Mani Prabha Impex'. In response 3 Assessment Year 2010-2011 to the show cause notice issued by the Assessing Officer, the Assessee vide Reply Letter, dated 05/01/2016, and placed before the Assessing Officer the following documents and details during the reassessment proceedings: i. loan confirmation for the period from 01/04/2013 to 30/11/2014 ii. date(s) on which it has received back the loan of INR.15,33,452/- i.e. closing balance as on 31/03/2013, as per loan confirmation submitted for the period 01/04/2009 to 31/03/2010. iii. bank statement highlighting the entries. iv. audited copy of balance sheet as on 31 March 2010, alongwith relevant enclosures, of M/s. Mani Prabha Impex P. Ltd., to verify the details of 'Loans & advances' party.

5. However, the Assessing Officer rejected the documents and details furnished by the Assessee observing that the Assessee has been not able to file any details to substantiate that the transaction is genuine, except loan confirmation and affidavit. Thus, the Assessee had failed to prove the three elements viz., identify, genuineness and creditworthiness, for proving the transaction was not an accommodation entry. The Assessing Officer relied upon the statement of Mr. Dharmichand Jain recorded by the Investigation Wing observing that the statement given on oath by Mr. Dharmichand Jain during the course of search and seizure action under Section 132 of the Act made it clear that the said statement as well as the confirmation submitted by the Assessee were signed by Mr. Dharmichand Jain. It was the duty of the Assessee to produce his before the Assessing Officer he was now Assessee's witness which was evident from the fact that the Assessee had obtained affidavit from Mr. Dharmichand Jain. However, the Assessee had failed to produce him. Before the Investigation Wing, in statement recorded on oath Mr. Dharmichand Jain had, in answer to Question No. 32 (recorded on 04/10/2013) and in answer to 4 Assessment Year 2010-2011 Question No.6 (recorded on 13/01/2014), confirmed that cheques were issued by the group concerns to beneficiaries in return for cash received from such beneficiaries. The interest received on such bogus loans was returned in cash after deducting commission of 0.5% per annum on loan amount. The Assessing Officer concluded that in view of the aforesaid, the affidavit given by Mr. Dharmichand Jain on 14/07/2015 did not hold any water since the Assessee had failed to produce Mr. Dharmichand Jain before the Assessing Officer for examination. Thus, the Assessing Officer concluded that in view of the specific facts and the evidences available in the shape of copies of statements recorded under oath of the above persons, the details /documents produced by the Assessee in the form of loan confirmation and bank statement did not adequately rebut and controvert the specific statements recorded on oath by the parties during the course of search action. Hence, it can be concluded that the loan transaction under consideration was not genuine transaction and was entered to avoid the payment of legitimate taxes. Therefore, Unsecured Loan of INR.15,00,000/- stated to be received by the Assessee from M/s. Mani Prabha Impex P. Ltd. was treated as unexplained credits by the Assessing Officer and addition was made in the hands of the Assessee under Section 68 of the Act.

6.1. I have considered the submission made by the appellant and have also gone through the material on record. In the first part of his submission, the appellant has submitted that the initiation of reassessment proceedings was not legally valid and should be quashed. However, the appellant has neither raised such ground challenging the reassessment proceedings in original appeal nor has taken any additional ground. Therefore, the above submissions are not relevant in the context of present appeal. Even other also, the case was reopened under section 147 of the Act on the basis of tangible information that the assessee had taken accommodation entry of unsecured loan through from Rajendra and Dharamchand Group of cases. The reasons were recorded and prior approval from the concerned authority was taken before issuing notice under section 148 of the Act. As the case was reopened within a period of four years from the end of the relevant assessment year, as per law, the only condition to make reason to believe that the income has escaped assessment is that the AO should have tangible information which the AO was having being received from Investigation wing. Admittedly, the reasons recorded were given to the appellant during assessment proceedings. It is also admitted that the appellant had not raised a any objections against such reasons or notice under section 148 during the reassessment proceedings. This means he had accepted such proceedings as valid which is also evident from the fact that no ground has been raised against such proceedings.

6 Assessment Year 2010-2011 11. From the material on record it is clear that the information was received by the Assessing Officer from the Investigation Wing. The aforesaid information contained fresh factual information regarding the activities of the Rajendra Jain Group and Dharmichand Jain Group which constituted tangible material to initiate reassessment proceedings. It is not disputed that statements recorded disclosed that the Rajendra Jain Group and Dharmichand Jain Group concerns were involved in providing bogus accommodation entries. The contention advanced on behalf of the Assessee was restricted to the transaction undertaken by the Assessee with M/s. Mani Prabha Impex Private Limited. It is settled legal position that in Income Tax Officer Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [291 ITR 500], the Hon’ble Supreme Court had explained that the reasons to believe is different from conclusive proof. In the case of Raymond Woollen Mills Ltd. Vs. ITO [236 ITR 34 (SC)], the Hon’ble Supreme Court Court has held that the adequacy or correctness of the material is not to be investigate at the notice stage; what is required is some material that forms the basis of Assessing Officer’s belief that income chargeable to tax had escaped assessment. In the present case the Assessing Officer had formed the belief that income chargeable to tax had escaped assessment on the basis of fresh tangible material being information/material received from the Investigation Wing. Since the reassessment proceedings were initiated within a period of 4 years from the end of the relevant assessment year and no regular assessment was framed on the Assessee for the Assessment Year 2010-2011, all the requirements of Section 147 of the Act stood fulfilled. It is admitted position that the Assessee had not filed any objections to reasons recorded for reopening assessment. Thus, taking into consideration the aforesaid, we hold that the contentions raised by the Assessee challenging the validity of reassessment proceedings under Section 147 of the Act do not hold merit and are hereby rejected.

7 Assessment Year 2010-2011

11 Assessment Year 2010-2011 7.5 Considering all the factual aspects discussed in earlier paragraphs coupled with the statement recorded on oath, and modus operandi of this transaction, it is clear that the assessee had entered into bogus transaction with the party M/s. Mani Prabha Impex P. Ltd. as Unsecured Loan' stated to be received which is nothing but just an accommodation entry.”(emphasis supplied) 15. While rejecting the affidavit of Mr. Dharmichand Jain furnished by the Assessee, the Assessing Officer relief upon the statement of Mr. Dharmichand Jain without making any inquiry or investigation and without making any efforts to secure presence of Mr. Dharmichand Jain. Clearly the aforesaid approach adopted by the Assessing Officer cannot be countenanced and is hereby rejected. We reject the contention of the Revenue that the Assessee had failed to discharge the initial onus cast upon the Assessee under Section 68 of the Act. To the contrary, based upon the material on record, we are of the view that the Assessee had placed sufficient material on record to discharge the initial onus cast upon the Assessee to prove creditworthiness of the lender and genuine of the transactions. We have already concluded that the finding retuned by the Learned CIT(A) that the Assessee had failed to produce bank statement of the Lender was also factually incorrect. On the other hand the Revenue has failed to take any steps to shift the onus back on to the Assessee by bringing on record any material to challenge the veracity of the documents filed by the Assessee. The fact that unsecured loan of INR.15,00,000/- was repaid by the Assessee has also not been challenged by the Revenue. Therefore, given the aforesaid we hold that the addition of INR.15,00,000/- made by the Assessing Officer under Section 68 of the Act cannot be sustained facts and circumstances of the present case and is, therefore, deleted.