YUG DEVELOPERS,MUMBAI vs. ACIT-17(3), MUMBAI

आदेश / O R D E R PER M. BALAGANESH (A.M): These appeals in 7222/Mum/2018 for A.Y.2013-14 & 2014-15 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-28, Mumbai in appeal No.CIT(A)-28/iTBA-10215, 10862/ACIT-17(3) & ITO 17(3)(2)/2016-17 dated 9th October 2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 28/03/2016 by the ld. Assistant Commissioner of Income Tax – 17(3), Mumbai (hereinafter referred to as ld. AO). Since identical issues are involved in

7222/Mum/2018 M/s. Yug Developers

Disclosure in Balance Sheet Under Other Current Assets (Schedule 8) 31.3.13 31.3.12 Shree Shankar Heights Project – Work in Progress (WIP) Rs 11,34,28,558/- Rs 8,26,81,394/- Under Trade Payables (Schedule 4) 31.3.13 31.3.12 Booking Received – Shree Shankar Heights Project Rs 5,33,63,192/- Rs 1,82,00,045/- Disclosure in Profit and Loss Account Under Revenue from Operations (Schedule 9) 31.3.13 31.3.12 WIP income of Shree Shankar Heights Projects Rs 27,95,197/- Rs 36,10,808/- 4.1. We find that the assessee had followed Work in Progress method of accounting under which profit is estimated at 10% of work carried out each year. The final profit is worked out on completion of phase of the project and profit estimated in earlier years is reduced in the year in which sales are accounted on completion of project. We find that this fact has been clearly mentioned by the assessee in the Notes to Accounts of audited financial statements. The ld AO however determined the profit on the assumption that assessee is not following percentage of completion method of accounting and determined the profit on estimated basis by adducing the following reasons:- a) The Institute of Chartered Accountants of India (ICAI) has issued Accounting Standard 7 (AS-7) in respect of ‘Contract Revenue’ and 7222/Mum/2018 M/s. Yug Developers ‘Contract Cost’. The ld AO applied AS 7 to the Builders/ Developers and worked out the profit of the assessee. b) As per notes on accounts, income is offered at the rate of 10% of total construction expenses.

4.2. We find that the assessee had pleaded before the ld AO that AS-7 is applicable only to a contractor and not for builders / developers. We find that the assessee had duly brought on record before the ld CITA the mathematical flaws committed by the ld AO in the estimation of profits of the assessee by not considering the actual bookings that had taken place upto 31.3.2013. It was pleaded that profit cannot be worked out on the flats which have not been sold. It was pleaded that the work in progress is to be worked out on the basis of cost or realizable value whichever is lower. We find that the assessee had pleaded before the ld AO that even profit is taken at 15% on receipt basis (i.e monies received from prospective flat buyers), then also the profit declared by the assessee was more. We find that the assessee had pleaded before the lower authorities that even if the working of profit is to be based on percentage of completion method as per AS -7 issued by ICAI, then the same fails the crucial tests laid down in AS 9 issued by ICAI on ‘Revenue Recognition’ as there is neither any sale nor any transfer of risks and rewards in favour of the prospective flat buyers. Further, going by the method as per AS 7 of ICAI, the assessee had pleaded that it had offered more profit than actually taxable.

4.3. We find that the ld CITA had rejected the books of accounts of the assessee u/s 145(3) of the Act and upheld the action of the ld AO in estimation of profits. We find that the ld AR argued that it is open for an 7222/Mum/2018 M/s. Yug Developers assessee to adopt project completion method or percentage of completion method and it is not open to the ld AO to thrust upon the assessee a specific method, unless it is shown that a different method reflects more accurate computation of income, which should be supported with facts and figures. It is not in dispute that the project was completed in Asst Year 2014-15. It is not in dispute that the assessee had duly disclosed the entire profits in the succeeding assessment year and had duly offered to tax on project completion basis after reducing the amounts already offered by it in earlier years, which has been accepted by the revenue as no addition was made thereon by the ld AO. For the Asst Year 2014-15, we find that the ld AO had not even bothered to reduce the income already added in Asst Year 2013-14 by him over and above the profit offered by the assessee in Asst Year 2013-14. Hence the entire exercise of this estimation of profit for the Asst Year 2013-14 would get adjusted in the year of completion of project i.e in Asst Year 2014-15 and becomes revenue neutral. We find that the ld AR rightly placed reliance in this regard on the decision of Hon’ble Supreme Court in the case of CIT vs Realest Builders & Services Ltd reported in 307 ITR 202 (SC) . It is not in dispute that the method of accounting followed by the assessee has been consistently followed by it in the earlier years which has been accepted by the revenue. We find that the whole exercise of this addition becomes revenue neutral is approved by the following decisions which had been placed on record by the ld AR before us :- a) Mumbai Tribunal in the case of ACIT vs Guruprerna Enterprises in to 257, 544 & 545/Mum/2010 and 4836/M/2009 which was affirmed by the Hon’ble Bombay High Court in ITA No. 1849 of 2011 dated 4.3.2013.

7222/Mum/2018 M/s. Yug Developers b) Kolkata Tribunal in the case of Fort Projects P Ltd vs DCIT reported in 145 TTJ 340 c) Pune Tribunal in the case of Dhanvarsha Builders and Developers P Ltd vs DCIT reported in 102 ITD 375 d) Mumbai Tribunal in the case of Runwal Homes P Ltd in 4.4. Moreover, we also find in the present case, the ld CITA had accepted that during the relevant year, there has been no sale nor any transfer of significant risks or rewards or even transfer of possession of the flats to the prospective buyers had taken place. We hold that what is to be taxed ultimately is the real income of the assessee. In the instant case, both the ld AO and ld CITA had categorically admitted that what is being added by them is a mere estimate which would only lead to bringing to tax hypothetical income which is not permissible in the eyes of law. Reliance in this regard has been rightly made by the ld AR on the decision of Hon’ble Apex Court in the case of CIT vs Shoorji Vallabhdas & Co reported in 46 ITR 144 (SC).

4.5. We find lot of force in the final argument made by the ld AR before us that the entire exercise is revenue neutral since the assessee has ultimately offered its entire profit on actual basis from the project to tax in the year of completion of project which is far higher than the originally estimated profit and that this profit has been accepted by the ld AO in the scrutiny assessment completed u/s 143(3) of the Act for the Asst Year 2014-15 and the workings of profit of assessee was also accepted by the ld AO. The addition made by the ld AO in Asst Year 2013-14 would only

7222/Mum/2018 M/s. Yug Developers result in double taxation in Asst Year 2014-15 of the same income, which is not sustainable in the eyes of law.

4.6. In view of the aforesaid observations, we direct the ld AO to delete the addition made in the sum of Rs 92,34,017/- towards estimation of profits for the residential project at Kamothe. Accordingly, the Grounds 2 to 5 raised by the assessee for the Asst Year 2013-14 are allowed. In view of this decision, the adjudication of Ground No. 5 for Asst Year 2014- 15 becomes academic in nature.

Casper Enterprises P Ltd - Rs 10,00,000/- Falak Trading P Ltd - Rs 70,00,000/- Duke Business P Ltd - Rs 90,00,000/- Nakshatra Business P Ltd - Rs 20,00,000/- Pragati Gems P Ltd - Rs 20,00,000/- Sumukh Commercial P Ltd - Rs 12,00,000/- ------------------------- Rs 2,22,00,000/- 5.1. The ld AO observed that the assessee had filed confirmation of balances from all these parties in tapal . The ld AO resorted to cross verify the same by sending notices to them which returned unserved. The assessee submitted that the confirmation was filed in the letter head of a 7222/Mum/2018 M/s. Yug Developers chartered accountant M/s Jayesh Seth & Co dated 1.4.2013 vide letter dated 1.2.2016. The ld AO observed that the said confirmations were old and doubted the genuineness of the same. The ld AO observed that the notices were sent to the addreses mentioned by the assessee in the audit report. The assessee was given opportunity to physically produce the directors of the lending companies which was not availed by the assessee. Moreover, the ld AO observed that some of the loan creditors were engaged in merely providing accommodation entries as per the information received from the investigation wing. The assessee submitted confirmation of balances, ledger account of assessee as appearing in the books of the loan creditors for the relevant period, balance sheet of loan creditors and bank statements of loan creditors together with an affidavit from the directors of above loan creditors affirming that they are not engaged in providing accommodation entries and doing legal business with the assessee. The said affidavit also confirmed the fact of advancing loan to the assessee. The assessee also explained the main business activities of the aforesaid loan creditors individually and explained the immediate source of funds for them to advance loan to the assessee. The assessee also pleaded that all the aforesaid loan creditors had substantial creditworthiness and funds at their kitty to advance loans to the assessee and also pleaded that all the loan creditors are regular income tax assessee and had paid substantial amounts towards income tax. The submission of these details were acknowledged by the ld AO in his order. The ld AO did not heed to these contentions of the assessee and observed that the loan creditors are engaged in merely providing accommodation entries and do not have any net worth to advance loans to the assessee . The ld AO further observed that the loan transactions with aforesaid parties were not genuine and assessee did not produce the directors / promoters of the lending

7222/Mum/2018 M/s. Yug Developers companies for recording statement on oath from them despite giving several opportunities to the assessee. Accordingly, he concluded that the assessee had not discharged its burden of proof of establishing identity of creditors, genuineness of transactions and creditworthiness of creditors which are the three main ingredients of section 68 of the Act and accordingly proceeded to make addition towards unsecured loans u/s 68 of the Act in the sum of Rs 2,22,00,000/- in the assessment.

5.2. The assessee pleaded before the ld CITA that it had filed the following documents with supporting evidences before the ld AO which were not considered by the ld AO :- a) Confirmation of balance along with full name and address and PAN of the loan creditors. b) Copy of acknowledgement of Income Tax Return filed. c) Copy of audited accounts as on 31.3.2013. d) Copy of the bank statements showing the amounts paid by said loan creditors to the assessee. e) Affidavit of directors lending the amounts.

5.3. It was pleaded that the ld AO had merely relied on the findings given by the investigation wing that some of the loan creditors are appearing in the list which are engaged in providing accommodation entries. No independent enquiries were carried out by the ld AO with the above companies. It was pleaded that if the ld AO was relying on the findings of the investigation wing, then the necessary documents and papers or statements ought to have been provided to the assessee and cross examination of the said parties to bring the truth before the assessing officer should have been provided on the ground of principles of natural

7222/Mum/2018 M/s. Yug Developers justice, which was not done by the ld AO. The assessee pleaded before the ld CITA that the ld AO had commented in his order as under:- “All the above loan creditors are engaged in the business of Diamond trading and raising sales invoices to debtors and receiving sale price quickly and using this amount to advance to different parties and at the same time holding huge trade payables.”

The assessee submitted before the ld CITA that this shows that each company was having monies to lend funds to the assessee and further stated that the assessee cannot keep control as to how the affairs of the business were being conducted by the loan creditors.

5.4. The ld CITA however confirmed the addition made by the ld AO by observing at page 31 and 32 of his order as under:- i) Loan creditors ostensibly provided total funds of Rs 2.22 crores to assessee. ii) 133(6) verification notices returned back. iii) Old confirmations (predating query) filed on letter head of CA. iv) Assessee failed to produe parties before AO even though asked to. v) The parties are found to be part of accommodation entry scam. vi) Unsigned bank account copies, balance sheet etc downloaded from M.C.A. website and directors‟ affidavit submitted by assessee. vii) Financials of parties deep analysed by AO (para 5.4.2), All have negative net worth. Loans given to assessee prima facie sourced from „borrowed‟ funds. They are not into loan financing. viii) All are diamond traders holding huge trade payables. ix) All parties incurring „losses‟. x) Creditworthiness woefully unestablished. 5.5. Aggrieved, the assessee is in appeal before us.

7222/Mum/2018 M/s. Yug Developers Duke Business P Ltd - Rs 90,00,000/- Nakshatra Business P Ltd - Rs 20,00,000/- Pragati Gems P Ltd - Rs 20,00,000/- Sumukh Commercial P Ltd - Rs 12,00,000/- ------------------------- Rs 2,22,00,000/- 6.1. We find that the assessee had submitted all the relevant details with documentary evidences listed above before the ld AO. The ld AO sought to examine the veracity of the same by issuing notices u/s 133(6) of the Act to the loan creditors at the address mentioned in the tax audit report, which returned unserved. We find that the assessee vide letter dated 19.2.2016 filed before the ld AO on 21.3.2016 had duly furnished the latest address of 4 loan creditors viz, Falak Trading Co Pvt Ltd, Nakshatra Business Pvt ltd , Sumukh Commercial Pvt Ltd and Pragati Gems Pvt Ltd. We find that the assessee vide letter dated 22.3.2016 had objected to reliance placed by the ld AO on the statements recorded from Shri Praveen Kumar Jain and his associates by clearly stating that no specific mention has been made by Shri Praveen Kumar Jain and his associates in their statements recorded during the course of search stating that the loan transactions with the assessee are accommodation entries. We find that the assessee had paid interest on the aforesaid loans after subjecting to deduction of tax at source, wherever applicable, as under:- Casper Enterprises P Ltd - Rs 81,860/- (TDS Rs 8,186/-) Falak Trading P Ltd - Rs 1,72,610/- (TDS Rs 17,261/-) Duke Business P Ltd - Rs 3,55,900/- (TDS Rs 35,590/-) Nakshatra Business P Ltd - Rs 1,90,030/- (TDS Rs 19,003/-) Pragati Gems P Ltd - Rs 3,288/- (TDS Rs Nil) Sumukh Commercial P Ltd - Rs 28,800/- (TDS Rs 2,880/-)

7222/Mum/2018 M/s. Yug Developers 6.2. It is not in dispute that the ld AO had allowed the aforesaid interest paid on loans as a deduction while completing the assessment. The ld AR also submitted that the assessing officers of the aforesaid parties had inturn duly assessed the interest income on loans given to the assessee and had also given credit for TDS in their respective assessments. The ld AR submitted that the assessee had given the latest address of the loan creditors before the ld AO. The ld AO had not issued any notices u/s 133(6) of the Act on the latest address.

6.3. It would be pertinent to understand the following facts from the financial statements of the loan creditors for the year ended 31.3.2013, that their income from operations during the year ended 31.3.2013 itself was several times more than the loans advanced to the assessee as is evident from the following table:-

Name of the Party Gross Revenue from Loan Amount Operations to assessee (Rs in crores) (Rs in crores) Casper Enterprises P Ltd 196.49 0.10 Falak Trading P Ltd 192.36 0.70 Duke Business P Ltd 158.99 0.90 Nakshatra Business P Ltd 163.13 0.20 Pragati Gems P Ltd 168.96 0.20 Sumukh Commercial P Ltd 97.01 0.12 Hence the gross revenue from operations for the year ended 31.3.2013 itself proves the creditworthiness of all the loan creditors beyond doubt. Hence all the allegations leveled by the lower authorities with regard to creditworthiness is devoid of any merits and deserves to be dismissed.

7222/Mum/2018 M/s. Yug Developers 6.4. We find that all the parties are duly assessed to income tax and assessments are framed on them by the income tax department. Hence the identity of the loan creditors stood clearly established. All the transactions are routed through regular banking channels without having any cash deposits in their respective bank accounts. Infact the ld AO himself had stated in his order that the sale proceeds of diamond business were credited in the bank accounts of the loan creditors which were utilized for advancing loan to the assessee. This itself goes to prove the genuineness of transactions and creditworthiness of parties beyond doubt. Hence we hold that all the three necessary ingredients of section 68 of the Act had been duly established by the assessee in the instant case.

6.5. We hold that once the assessee has furnished the complete details about the loan creditors together with their latest addresses and affidavits from directors duly notarized and confirmation from them for the loans advanced to the assessee, the onus cast on the assessee u/s 68 of the Act had been duly discharged and no addition could be made in its hands merely because the lenders fail to appear before the ld AO or the assessee failing to produce them before the ld AO. Reliance in this regard is placed on the decision of Hon’ble Jurisdictional High Court in the case of CIT vs Orchid Industries P Ltd reported in 397 ITR 136 (Bom). We hold that no addition could be made on mere presumption that the assessee routed its own cash in the form of unsecured loans without any concrete evidence to this effect. Reliance has been rightly placed on the decision of Hon’ble Jurisdictional High Court in the case of PCIT vs Aquatic Remedies P Ltd in of 2016 affirming the tribunal decision in ITA No. 6356/Mum/2014.

7222/Mum/2018 M/s. Yug Developers 6.6. We find that the directors of the lending companies had filed affidavits confirming the loan transactions before the ld AO which had not been disputed. Once the averments made in an affidavit are not disputed or refuted, the same are to be construed as true and correct, as held by the Hon’ble Supreme Court in the case of Mehta Parikh & Co. vs CIT reported in 30 ITR 181 (SC).

6.7. With regard to the reliance placed by the ld DR on the decision of Hon’ble Gujarat High Court in the case of Pavankumar M Sanghvi vs ITO reported in 404 ITR 601 (Guj) , we find that in that case , the assessee received loans from two companies who were found to be shell companies not doing any businesses and were maintaining minimum bank balances. Whereas in the instant case, there is no finding by the lower authorities, that the loan creditors are shell companies and all the loan creditors are engaged in the business of diamond trading and were having substantial turnover from their businesses. The business transactions carried out by the loan creditors have not been doubted by the assessing officers of the loan creditors. Hence the reliance placed by the ld DR on the aforesaid decision is distinguishable on facts and would not advance the case of the revenue.

6.8. With regard to yet another decision relied upon by the ld DR in the case of PCIT vs Bikram Singh reported in 85 taxmann.com 104 (Del HC), the facts and decision thereon are as under:-

In this case, the loans were received from 8 persons whose identities were not established. There was a clear finding that the lenders did not have sufficient financial strength to advance the loans to the assessee therein, that too without any collateral

7222/Mum/2018 M/s. Yug Developers security, without any interest and without a loan agreement. The relevant observations of the assessing officer in that case on facts were as under:- 9. A brief summary of each of the eight transactions and creditors thereof, as per the AO's order is as under: (i) Shri Amar Singh - Only a letter of confirmation was filed. Name of the father and address was not given. PAN number was not given. The information requested from Gurgaon Gramin Bank, from where the cheque was issued with respect to the compensation from land acquisition, was also not received. The person was not produced. Thus, the identity, creditworthiness and genuineness of Shri Amar Singh were not proved. (ii) Shri Chandan Singh - A confirmation letter of Shri Chandan Singh was filed along with the bank statement. The AO noticed that the bank account was opened with a cash deposit of Rs.500/- and huge amounts of cash was deposited in this account before the cheques of Rs.60, 00,000/- and Rs.50, 00,000/- were issued. The AO concluded that since the source of cash was unverified and Shri Chandan Singh was also not produced, the identity, creditworthiness and genuineness of Shri Chandan Singh was not proved. (iii) Shri Harpreet Singh - No documents were filed by the Assessee to establish the identity, address etc. Even the PAN number or ID proof was not filed and he was also not even produced. (iv) Shri Om Prakash - No documents to establish the address, PAN number, source of deposit and ID proof, were filed. Neither was a confirmation letter filed nor was he produced. (v) Shri Shiv Tej - No documents to establish the address, PAN number, source of deposit and ID proof, were filed. Neither was a confirmation letter filed nor was he produced. (vi) Shri Ram Chander - Only a confirmation letter was filed. However, the AO observed that the same was not supported by any evidence of identification, cheque numbers, sources of income or sources of loan. The person was not produced. (vii) Smt. Sunita - Only a confirmation letter was filed. However, the AO observed that the same was not supported by any evidence of identification, cheque numbers, sources of income or sources of loan and even she was not produced. (viii) Shri Virender Yadav - A confirmation letter was produced but no PAN number was mentioned. The AO observed that the bank statements reveal the deposit of cash of Rs.13,00,000/- and Rs.7,00,000/- immediately before the issuance of the cheque in favour of the Assessee. He was also not produced.

7222/Mum/2018 M/s. Yug Developers

7222/Mum/2018 M/s. Yug Developers and hence the matter was restored to the file of the AO to examine the identity, genuineness and creditworthiness. However, for statistical purpose, addition of Rs.3,50,000/- in respect of Shri Harpreet Singh was allowed.

16. Thus, the ITAT • deleted the following additions qua Shri. Amar Singh, Shri. Chandan Singh, Shri. Ram Chander, and Smt. Sunita. • restored the additions with respect to Shri. Virender Yadav, Shri. Om Prakash, Shri. Shiv Tej Singh, and Shri. Harpreet Singh, to the AO for reconsideration.

It was held by Hon’ble Delhi High Court as under:- 41. An analysis of the above facts shows that none of these four individuals have the financial strength to lend such huge sums of money to the Assessee, that too without any collateral security, without interest and without a loan agreement. The mere establishing of their identity and the fact that the amounts have been transferred through cheque payments, does not by itself mean that the transactions are genuine. The AO and the CIT (A) have rightly held that the identity, creditworthiness and the genuineness are all in doubt. Moreover, the Court notes that that these amounts have been advanced to the Assessee without any explanation as to their relationship with the Assessee, the reason for the payment of such huge amounts, as also whether any repayments have, in fact, been made. There are contradictions in the explanation given by the Assessee and the statements recorded by these four individuals, which are irreconcilable. For example, in the case of Shri Ram Chander/Ram Charan, he had initially stated that he had given Rs.10,00,000/- out of the proceeds of sale of the land but thereafter it was claimed by him that the money had come from her sister Vidya. Such contradictions clearly render all these transactions dubious. The ITAT could not have, merely because the payments were through cheques, held that the transactions were genuine. The ITAT erred in simply accepting the explanation of the Assessee qua the four transactions. The ITAT, clearly, did not follow the binding precedent in Divine Leasing & Finance Ltd. (supra), which in no uncertain terms requires that the authorities are duty bound to investigate the creditworthiness of the creditors, subscribers and the genuineness of the transactions. Thus the ITAT did not merely give findings of fact but misapplied the law. Hence the authorities CIT v. S. Nelliappan [1967] 66 ITR 722 (SC), Orissa Corpn. Pvt. Ltd. (supra), Gun Nidhi Dalmia (supra) do not support the Assessee's case. The Assessee has 7222/Mum/2018 M/s. Yug Developers failed to discharge his initial burden as the explanation given by the Assessee and the four individuals does not appear to be credible.

We find that in the aforesaid case, the details of creditworthiness of the lenders were not available before the revenue authorities and there is a specific finding to that effect. Whereas in the instant case, we have already held that there is sufficient creditworthiness and moreover, the creditworthiness of the loan creditors have been proved by the ld AO himself in his assessment order, wherein he had stated that the sale proceeds of diamond business were used by the loan creditors to advance loans to the assessee. Hence the reliance placed on the aforesaid decision by the ld DR is factually distinguishable and would not advance the case of the revenue.

6.9. Finally the ld DR placed reliance on the recent decision of the Hon’ble Apex Court in the case of Principal CIT vs NRA Iron & Steel (P) Ltd reported in 412 ITR 161 (SC) wherein the decision on addition made towards cash credit was rendered in favour of the revenue. We have gone through the said judgement and we find in that case, the ld AO had made extensive enquiries and from that he had found that some of the investor companies were non-existent which is not the case before us. Certain investor companies did not produce their bank statements proving the source for making investments in assessee company, which is not the case before us. Source of funds were never established by the investor companies in the case before the Hon’ble Apex Court, whereas in the instant case, the entire details of source of source were duly furnished by all the respective loan creditors before the ld AO and the directors of lending companies had also filed an affidavit confirming the loan transactions with the assessee. In the instant case before us, after the relevant details were furnished by the assessee before the ld AO , no 7222/Mum/2018 M/s. Yug Developers enquiries were further made by the ld AO with the loan creditors at their new addresses. The ld AO merely relied on the statement of Shri Praveen Kumar Jain and proceeded to make the addition. Hence the decision relied upon by the ld DR is factually distinguishable and does not advance the case of the revenue.

6.10. We find that as per the mandate of section 68 of the Act, the nature and source of credit in the books of the assessee has been duly explained by the assessee. The credit is in the form of receipt of unsecured loan from loan creditors. The nature of receipt towards unsecured loan is well established from the entries passed in the balance sheet of the assessee by crediting unsecured loan account. This is also cross-verifiable from the balance sheets of respective loan creditor companies, wherein they had reflected under ‘Loans and Advances’ in the asset side of their balance sheet. Hence the nature of receipt is proved by the assessee beyond doubt. In respect of source of credit, the assessee has to prove the three necessary ingredients i.e identity of loan creditors, genuineness of transactions and creditworthiness of loan creditors. We have already held hereinabove that all the three necessary ingredients of section 68 of the Act had been duly proved by the assessee beyond doubt.

6.11. Undisputedly the loan creditors in this case are the bank account holders in their respective banks in their own name and are sole owner of the credits appearing in their bank account from where they issued cheques to the assessee. For the proposition that a Bank Account holder himself is the 'owner' of 'credits' appearing in his account (with the result that he himself is accountable to explain the source of such credits in whatever way and form, the same have emerged) support can be derived from section 4 of Bankers Book Evidence Act 1891 which reads as under:-

7222/Mum/2018 M/s. Yug Developers

"4. Mode of proof of entries in bankers' books: Subject to the provisions of this Act, a certified copy of any entry in a bankers' book shall in all legal proceedings be received as prima facie evidence of the existence of such entry, and shall be admitted as evidence of the matters, transactions and accounts therein recorded in every cases where, and to the same extent as, the original entry itself is now by law admissible, but not further or otherwise.” 6.11.1. Following the said provisions, the co-ordinate bench of Allahabad Tribunal in the case of Anand Prakash Agarwal reported in 6 DTR (All- Trib) 191 held as under:- “The question that remains to be decided now is whether the subject matter of transfer was the asset belonging to the transferor/donors themselves. There is enough material on record which goes to show that there were various credits in the bank accounts of the donors, prior to the transaction of gifts, which undisputedly belonging to the respective donors themselves, in their own rights. No part of the credits in the said bank' accounts was generated from the appellant and/or from its associates, in any manner. The certificates issued by the banks are construable as evidence about the ownership of the transferors or their respective bank accounts, as per s.4 of the Bankers' Books evidence Act 1891, which read as under: "4. Where an extract of account was duly signed by the agent of the bank and implicit in its was a certificate that it was a true copy of an entry contained in one of the ordinary books of the bank and was made in the usual and ordinary course of business and that such book was in the custody of the bank, it was held admissible in evidence. Radheshyam v. Safiyabai Ibrahim AIR 1988 Bom. 361 : 1987 Mah. 725: 1987 Bank J 552.” In view of the position of law as discussed above, it is always open for a borrower to contend, that even the “creditworthiness” of the lender stands proved to the extent of credits appearing in his Bank Account and he should be held to be successful in this contention.”

6.12. We find that the Hon’ble Calcutta High Court in the case of S.K. Bothra & Sons, HUF v. Income-tax Officer, Ward- 46(3), Kolkata reported in 347 ITR 347(Cal) had held as follows:

“15. It is now a settled law that while considering the question whether the alleged loan taken by the assessee was a genuine transaction, the initial onus is always upon the assessee and if no explanation is given or the explanation given by the appellant is not satisfactory, the Assessing Officer can disbelieve the alleged transaction of loan. But the law is equally settled that if the initial burden is discharged by the assessee by producing sufficient materials in support of the loan transaction, the onus shifts upon the Assessing Officer and after verification, he can call for further

7222/Mum/2018 M/s. Yug Developers explanation from the assessee and in the process, the onus may again shift from the Assessing Officer to assessee.

6.13. We find that the Hon’ble Supreme Court in the case of M/s Earthmetal Electricals P Ltd vs CIT & Anr. reported in 2010 (7) TMI 1137 in Civil Appeal No. 21073 / 2009 dated 30.7.2010 arising from the order of Hon’ble Bombay High Court had held as under:- ORDER Delay condoned. Leave granted. Heard learned counsel on both sides. We have examined the position. We find that the shareholders are genuine parties. They are not bogus and fictitious. Therefore, the impugned order is set aside.

The appeal is allowed accordingly. No order as to costs.

In the instant case before us, the loan creditors are private limited companies and are duly assessed to income tax. It is not in dispute that the loan creditors are in existence. It is not in dispute that the loan creditors are duly assessed to income tax and their income tax particulars together with the copies of respective income tax returns with their balance sheets are already on record . Hence it could be safely concluded that they are genuine lenders and not bogus and fictitious. Accordingly, the ratio laid down by the Hon’ble Apex Court in the case of M/s

7222/Mum/2018 M/s. Yug Developers Earthmetal Electricals P Ltd supra would be squarely applicable to the facts of the instant case.

6.14. We find that the Hon’ble Apex Court recently in the case of Principal CIT vs Vaishnodevi Refoils & Solvex reported in (2018) 96 taxmann.com 469 (SC) had dismissed the SLP of the Revenue. The brief facts were that the addition u/s 68 of the Act was made by the Assessing Officer in respect of capital contributed by the partner of the firm. The Hon’ble High Court noted that when the concerned partner had confirmed before the Assessing Officer about his fact of making capital contribution in the firm and that the said investment is also reflected in his individual books of accounts, then no addition could be made u/s 68 of the Act. The decision of Hon’ble Gujarat High Court is reported in (2018) 89 taxmann.com 80 (Guj HC) . The SLP of the revenue against this judgement was dismissed by the Hon’ble Supreme Court.

6.15. We also find that the Hon’ble Jurisdictional High Court in the case of CIT vs Orchid Industries Pvt Ltd reported in 397 ITR 136 (Bom) had held as under:- 5. The Assessing Officer added Rs. 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed that just before issuance of cheques, the amount was deposited in their account.

6. The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidence, only because those persons had not appeared

7222/Mum/2018 M/s. Yug Developers before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd. (supra) would be applicable in the facts and circumstances of the present case.

6.16. In view of the aforesaid observations in the facts and circumstances of the case and respectfully following the various judicial precedents relied upon hereinabove including the decisions of Hon’ble Jurisdictional High Court among other High Courts, we hold that the ld CITA erred in confirming the addition made u/s 68 of the Act in the instant case. Accordingly, the ground nos. 6 & 7 raised by the assessee for Asst Year 2013-14 are allowed.

Falak Trading P Ltd - Rs 9,78,762/- (TDS Rs 97,896/-) Pragati Gems P Ltd - Rs 2,81,890/- (TDS Rs 28,189/-)

7222/Mum/2018 M/s. Yug Developers Olive Overseas Pvt Ltd - Rs 83,430/- (TDS Rs 8,343/-) Athrva Business Pvt Ltd - Rs 88,670/- (TDS Rs 8,867/-)

Out of the aforesaid parties, we find that the assessee had also borrowed loans in earlier year from Falak Trading P Ltd, Pragati Gems P Ltd which has already been held by us as genuine loan in Asst Year 2013-14 supra.

7.2. It is not in dispute that the ld AO had allowed the aforesaid interest paid on loans as a deduction while completing the assessment. The ld AR also submitted that the assessing officers of the aforesaid parties had inturn duly assessed the interest income on loans given to the assessee and had also given credit for TDS in their respective assessments. The ld AR submitted that the assessee had given the latest address of the loan creditors before the ld AO. The ld AO had not issued any notices u/s 133(6) of the Act on the latest address.

7.3. It would be pertinent to understand the following facts from the financial statements of the loan creditors for the year ended 31.3.2014, that their income from operations during the year ended 31.3.2014 itself was several times more than the loans advanced to the assessee as is evident from the following table:-

Name of the Party Gross Revenue from Loan Amount Operations to assessee (Rs in crores) (Rs in crores) Falak Trading P Ltd 39.37 0.90 Pragati Gems P Ltd 54.87 0.23 Olive Overseas Pvt Ltd 73.12 0.145 Athrva Business Pvt Ltd 73.05 0.155

7222/Mum/2018 M/s. Yug Developers Hence the gross revenue from operations for the year ended 31.3.2014 itself proves the creditworthiness of all the loan creditors beyond doubt. Hence all the allegations leveled by the lower authorities with regard to creditworthiness is devoid of any merits and deserves to be dismissed.

7.4. We find that in Asst Year 2014-15 also, the assessee had furnished the same documents before the lower authorities which had not been properly appreciated by them.

7.5. We hold that the decision and factual and legal findings given hereinabove for Asst Year 2013-14 would apply mutatis mutandis for Asst Year 2014-15 also and accordingly the Grounds 2 to 4 raised by the assessee for Asst Year 2014-15 are allowed.

Order pronounced in the open court on this 17/07/2019