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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
AadoSa / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:
In these two appeals, one appeal filed by the Revenue and one Cross objections by the Assessee are arising out of the order of Commissioner of Income Tax (Appeals)-9, Mumbai [in short CIT(A)], in appeal No. CIT(A)-9/Cir.4/432/2015-16, dated 27.03.2017. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle- 4(1)(2), Mumbai (in short DCIT/ITO/ AO) for the A.Y. 2011-12 vide order dated 31.12.2015 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by AO towards unexplained cash credit of ₹ 90 lacs under section 68 of the Act. For this Revenue has raised the following two grounds: - “1. On the facts and in the circumstances of the case and in law, the Ld.ClT(A) erred in directing to AO to delete the addition made towards unexplained cash credit of ₹ 90,00.000/- u/s 68 of the Act.
On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the facts of the case that the assessee has failed to prove the identity, genuineness and creditworthiness of lender parties. invested as share application money in the assessee company." CO No. 304/Mum/2018
Briefly stated facts are that the assessee company filed its return of income for AY 2011-12 on 15.09.2011 and this return was processed under section 143(1) of the Act. Subsequently, the return was taken up for scrutiny assessment by issuing notice under section 143(2) of the Act and thereby completed the assessment under section 143(3) of the Act vide order dated 29.01.2014. Subsequently, a notice under section 148 of the act was issued dated 03.02.2015 and for that the following reasons were recorded: - “Shri Praveen Jain is one of the leading entry providers operating in Mumbai, indulging in providing accommodation entries like bogus purchases, sales, unsecured loans share capital etc. A search and seizure action in the case of Shri Praveen Kumar Jain group was therefore carried out on 01.10.2013. Evidences collected and the statements of various persons recorder including that of Shri Pravin Kumar Jain during search established the modus operandi and led to detection of accommodations entries aprrox. 8897 crores.
The accommodation entries so taken are in the nature of sales, unsecured loans and share application money. The entry wise data of beneficiaries pertaining to this charge was obtained in the office of the undersigned.
As per the information received from DGIT-Inv-II, Mumbai, the following transactions have been carried out by the assessee company during the AY 2011-12. CO No. 304/Mum/2018 Name of the Investor Amount Nature of Transaction. Kush Hindustan Ent Ltd 25,00,000/- Loans and Advances Nakshatra Business P Ltd 50,00,000/- Loans and (Hema Trading Co. P. Ltd) Advances Casper Enterprises P Ltd 15,00,000/- Loans and (Ostwal Trading (I) P. Ltd. Advances The above named investor parties are entitled being operated by Shri Pravin Kumar Jain Group. Therefore the credits to the assessee shown above as unsecured loans have to be taxed, which have escaped assessment for AY 2011-12. Hence, I have reasons to believe that income chargeable to tax has escaped assessment for the aforesaid AY and the same needs to be reassessed.”
The assessee before AO filed the details of unsecured loan giving names, address, PAN Nos. of the parties along with confirmation and it was contended that on this loan interests were also paid and TDS was deducted. The assessee also furnished ledger accounts of these three parties, copies of balance sheets, income tax returns, bank statements of these parties. The assessee also submitted that the payments were made through bank challans, TDS was deducted on interest paid and subsequently these loans were repaid. It was also explained that since these parties had healthy net worth, taxable income and high bank balances. But the AO was not convinced and hence, merely on the basis of statement given by Shri Praveen Kumar Jain during the search under section 132 of the Act on his premises has carried out on 01.10.2013, even though the statement of Shri Praveen Kumar Jain was retracted by CO No. 304/Mum/2018 filing an affidavit, the AO added these loan entries treated the same as accommodation entries of unsecured loans amounting to ₹ 90 lacs. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) considered the facts of the case and net worth of these parties, deleted the addition by observing in Para 6.3.1 to 6.3.5 as under: - “6.3.1 I have considered the facts of the case as well as assessment order passed by the and the submissions made by the appellant. An analysis of the judicial precedents on this issue yields the following propositions of law in the context of s. 68 of the IT Act. The assessee has to prima facie prove (1) the identity of the creditor/ subscriber; (2) the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) if relevant details of confirmation, bank statement, copy of return of income filed, PAN card, Audited statement of accounts along with copies of share application forms, etc., it would constitute acceptable proof or acceptable explanation by the assessee; It has been judicial position that where assessee brought evidence on record establishing that share applicants were not fictitious persons and, moreover, they paid money by cheques, no addition could be made to assessee's income in respect of share application money.
The AO in this case has primarily placed reliance on the search conducted by the DDJT(Inv)-11I(2) CO No. 304/Mum/2018 Mumbai in the case of Shri Praveen Kumar Jam. IA AO has made the addition u/s 68 towards Joan taken by the appellant from 3 parties of Rs 90 lakhs on the basis of this information received from Investigation wing from search conducted in the case of third party. However, AO has not made any further enquiry to corroborate his findings.
A perusal of the documentary evidences brought on record by the Appellant show that the onus of proving the genuineness of transaction, identity and capacity of the lenders has been discharged by the Appellant. The same is evident from the list of documents submitted by the Appellant with respect to the lenders of the unsecured loans. Appellant has place on the record of the AO copies of Annual audited reports, Directors report, PAN, Form 16A demonstrating TDS deducted on interest payments made to lenders, bank statements showing payments received and repayment of loan made by the Appellant loan confirmations etc. From the details submitted it can be seen that the parties ie. lenders have made payment from their accounts through account payee cheques, therefore these transactions cannot be treated as bogus. The AO has not been able bring on record any valid material or evidence to discredit the evidences and explanation given by the appellant other than merely relying on a bald statement by alleged Shri Pravin Kumar Jain as recorded by Investigation Department without himself making any efforts to CO No. 304/Mum/2018 bring on record any valid or corroborative evidence against the parties. The AO has been unable to demonstrate any relationship between PKJ and the lenders.
6.3.2 It is seen that the Id Assessing Officer has made addition of Rs 90 lakhs being unsecured loans received from the following parties:
Sr. Name of Company Amount No. Received (Rs.) 1. M/s Nakshatra Businss Private 50,00,000 Limited (Formerly Hema Trading Co. Pvt. Ltd.) 2. M/s Kush Hindustan Entertainment 25,00,000 Ltd.
3. M/s Casper Enterprises Pvt. Ltd. 15,00,000 (formerly Ostwal Trading Co. pvt. Ltd.) Total 90,00,000 6.3.3 The aforesaid addition was made by the AO because according to him, all the three companies were group entities of Mr. Praveen Jam. Mr Praveen Jain was found to be indulging in giving accommodation entries pursuant to a search conducted on 01.10.2013. In this case, the AO has relied on the information received from the OGIT (Inv) Mumbai in the case of Shri Praveen Jain group with regard to the statement made by Shri Pravin Jam. As against this, it has been submitted by the IA. AR that, the AO did not furnish the specific statements he was relying upon which allegedly contained the name of the appellant. Further, the AO did not provide a copy of the statement to the CO No. 304/Mum/2018 appellant. The AO has not done any independent enquiry but only relied on the evidence gathered by the Investigation Wing. If the AO had any reason to believe that the relevant concerns of Shri Jain were indulging in providing accommodation entries and had any specific information regarding providing any specific amount of entry by the above referred parties in this particular Financial relevant to the present assessment year, lie could have issued notice u/s 133(6) of I T Act, 1961 and could have gathered specific material against the appellant and should have placed the on record and incorporated the relevant specific information in the assessment order but, this has not been done by the AO.
Therefore, the general statement cannot be utilized against a particular assessee in a particular assessment year.
6.3.4 As per Section 68 of the Act, for any addition to be made, the identity, creditworthiness and genuineness of the parties must be in doubt. 1 now proceed to examine whether each of these three limbs are satisfied.
6.3.4.1 As regards identity of the lender companies, all of them have a PAN and are assessed to tax. The addresses of the parties are on record. During the course of appellate proceedings, the Ld. AR reiterated that the relevant parties were very much genuine and were in existence as they were regularly assessed to income tax having CO No. 304/Mum/2018 independent PAN No and they were having own ON No. and were regularly filing Returns with the