ASSISTANT COMMISSIONER OF INCOME TAX 24(1), MUMBAI vs. ABANI SARBESWAR DAS, MUMBAI

Whether on the facts and in the circumstances of the case and in law, the Ld .CIT(A) is justified in holding that the initial burden of establishing the identity & creditworthiness of the creditors, as well as the genuineness of the transaction. had been discharged by the assessee and that, therefore, the onus had shifted on the Assessing Officer to controvert and disapprove the claims of the assessee.

Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in holding that the lenders are creditworthy, ignoring the fact that lenders had meager profit and little surplus and the financing was out of sundry and unsecured loans.

Briefly stated facts are that the AO during the course of assessment proceedings noted that the assessee has taken bogus loans and advances/ accommodation entries amounting to ₹ 90 lacs during the FY 2009-10 relevant to AY 2010-11. The AO has noted that the information was received from the office of Director General of Income Tax (Investigation), Mumbai, whereby it was informed that a search under section 132 of the Act was carried out in the case of Shri Praveen Jain group of cases, wherein it is revealed that the assessee has taken these accommodation entries from the bogus companies. All these companies, as per DGIT, Mumbai are controlled by Shri Praveen Kumar Jain. The assessee has obtained the accommodation entries from the following parties and the details are mentioned below (including interest). – ITAs No.193& 232/Mum/2018 FY 2009-10 relevant to AY 2010-11 Sl No. Name of the party Amount 1 Tanika Commodities P. Ltd. 10,03,205 2. Ansh Merchandise P Ltd 40,58,192 3. Duke Business P. Ltd. 30,57,699 4. Olive Overseas P Ltd. 10,14,548 Total 91,33,644 FY 2011-12 relevant to AY 2012-13 Sl No. Name of the party Amount 1. Viraj Mercantile P. Ltd. 10,00,000 2. Duke Business P. Ltd. 2,00,000 3. Casper Enterprises P. Ltd. (Ostwal Trading (I) P. Ltd) 4. Taj Impex 7,00,000 Total 64,00,000 4. The AO require the assessee to submit the bank statement of transactions of the assessee, loans confirmation, bank statement of the above parties, creditworthiness and nature of transactions. The assessee was also required to explain the genuineness of transactions, identity of the parties and creditworthiness of the above parties with supporting documentary evidences. The assessee submitted the loan confirmation from the parties, its copy of return of income, copy of bank statement and ledger account of the parties. The AO noted that Shri Praveen Kumar Jain during the search under section 132 of the Act and consequent statement recorded under section 132(4) of the Act, it was admitted that he runs web of concerns, which are engaged in providing accommodation entries of various nature like bogus unsecured loans, bogus share application money and bogus sales(purchases for the beneficiaries) etc. but on the basis of this statement recorded under section 132(4) of the Act, the AO noted that Praveen Kumar Jain although retracted the statement given under section 132(4) of the Act by ITAs No.193& 232/Mum/2018 filing affidavit and statements. The AO had noted the details of the filing of retraction by various persons as under: - Sl Name of the PAN Date of Relation No. assessee filing the with affidavit Praveen Kumar Jain 1. Praveen Kumar AADPJ5102D 15/05.2014 Self Jain 2. Nilesh Parmar AIXPP8680Q 15/05/2014 Accountant 3. Manish Jai AGTPJ806F 15/05/2014 Cousin and accountant 4. Dinesh KFPC3048P 15/05/2014 Associate Chaudhary Broker 5. Ramesh Soni AAKPS3473K 15/05/2014 Neighbour and associate Broker 6. Jitendra Tater ABNPT7484M 15/05/2014 Friend and associate broker

The AO reproduced the retraction affidavit of Shri Praveen Kumar Jain in the assessment order. But AO noted that the retraction made by Shri Praveen Kumar Jain almost after 8 months of commencement of search on baseless issues without refuting the findings of the search based documentary evidences is nothing but a desperate attempt to protect the interest of various clients / beneficiaries of the accommodation entries. Accordingly, the AO in both the years made an addition treating the transaction of accommodation entry received in the nature of unsecured loans amounting to ₹ 91,33,644/- in AY 2010-11 and amounting to ₹ 64 lacs in AY 2012-13 as bogus and unexplained under section 68 of the Act. Aggrieved, assessee preferred the appeal before CIT(A).

The CIT(A) after considering the submissions of the assessee deleted the addition in both the years and the findings are identical in both the years. The CIT(A) followed the decision of co-ordinate bench of this Tribunal in the case of M/s Reliance Corporation vs. ACIT in to 1071/Mum/2017 for AY 2008-09 to 2010-11 and deleted the addition by observing in Para 6.3 and 6.3.1 as under: - “6.3 I have considered the submissions of the appellant and perused the material available on record including the judicial decisions relied upon by him. The point for adjudication is whether the AO was justified in treating the unsecured loans of Ps. 90,00000/- shown to have been taken by the appellant from aforesaid two parties owned, controlled and managed by Mr. Praveen Kumar Jain as bogus or non-genuine u/s 68 of the Act adding the same to the total income of the appellant. In this connection, it is well-established that the onus lies on the assessee to adduce necessary documentary evidence so as to prove all the three ingredients of section 68 viz, identity of the creditor, creditworthiness of the creditor and the genuineness of the transaction as the relevant facts are within the exclusive knowledge of the assessee. It has also been held that the evidences adduced by the assessee has to be examined not superficially but in depth and having regard to the test of the human probabilities and normal course of human conduct. The Hon'ble ITAT, Mumbai Bench, Mumbai in the case of ITO v. Anant Shelters Pvt. Ltd 51 SOT 234 ITAs No.193& 232/Mum/2018 (Mum) has enumerated certain legal principles regarding cash credits u/s 68 as under:

Section 68 can be invoked when there is a credit of sum of money in the books maintained by the assessee during the previous year and either the assesse offers no explanation about the nature and source of such credits or the explanation furnished by the assesse in the opinion of the AO is not satisfactory.

We have heard the rival contentions perused the material placed before us including the orders of authorities below and orders retied upon by the parties. We find that undisputedly the assessee has borrowed money by way of loan from three aforesaid three parties i.e. MIs Laxmi Trading Company, MIs Rose Impex and Megha Gems from whom the assessee borrowed the ITAs No.193& 232/Mum/2018 money and total outstanding including the interest as on 31.3.2010 were amounting to Rs. 1,29.04,2311-. The case of the assessee was re-opened upon receiving the information from DGIT(lnv), Mumbai that the assessee was one of the beneficiary of the said accommodation entries provided by Mr. Bhanwarlal Jain and group. We find from the record that the assessee filed during the course of assessment proceedings all the details like loan confirmation letters from the creditors, PAN of the creditors, bank statements of the creditors and the assessee, form no. 16 qua TDS on interest profit and loss account and balance sheet including the ledger account of the creditors, and ITR etc. Moreover, the loan creditors also appeared before the AO in compliance to the notice issued under section 133(6) of the Act and filed confirmations before the AO that loans were actually given to the assessee. From all these details and facts on record, we find that the assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three main ingredients i.e. creditworthiness of the creditors, genuineness of the transactions and identity of the creditors by filing all the details as discussed above which proved that ITAs No.193& 232/Mum/2018 the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors have been established by the assessee. So much so that the loan creditors in response to the notice issued tinder section 133(6) appeared before the AO and confirmed the that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form no. 16A issued to the loan creditors also filed before the AG. Once the assessee has filed all the necessary documents before the AG then the onus is shifted to the department to disprove the stand of the assessee, which department has failed to do so in the present case. The AG has merely proceeded and relied on the information received from the OGIT(lnv). Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by trw assessee during the course of appellant proceedings. No cross examination was allowed to the assessee and information was used against the assessee causing violation of natural justice. The FAA dismissed the appeal of the assessee ex-parte for non-attendance of the ld.AR.

We have heard rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee filed paper book consisting of pages 1 to 242 and particularly the details filed in respect of four parties from whom accommodation entries of 90 lacs was taken in respect to AY 2010-11 are as under: - Loan confirmation of Tanika commodities Pvt. Ltd, along with their financials & Proof of return filed ITR (V) & their bank statement showing receipt and re- payment of loan Loan confirmation of Ansh Merchandise Pvt. Ltd, along with their financials & Proof of return filed ITR (V) & their bank statement showing receipt and re- payment of loan Loan confirmation of Duke Business Pvt. Ltd, along with their financials & proof of return filed ITR (V) & their bank statement showing receipt and re-payment of loan Loan confirmation of Olive Overseas Pvt. Ltd, along with their financials & Proof of return filed ITR (V) & their bank statement showing receipt and re-payment of loan Copy of the bank statement of Abani Das for the receipt and re-payment of loan from all the four parties. Reply to 133(6) given by Tanika Commodities Pvt. Ltd., Ansh Merchandise Pvt. Ltd, Duke Business Pvt. Ltd. & Olive Overseas Pvt. Ltd. ITAs No.193& 232/Mum/2018

We have noted the facts that the assessee is engaged in the business of sale of agricultural products and carrying our profession of architecture. A search & seizure action was conducted in the Praveen Kumar Jain group of cases by Investigation Wing Mumbai. As a result of search, it was found by the Investigation Wing that this group is a leading entry provider of Mumbai. There are many concerns floated by the group who provide accommodation entries of bogus loan The AO received an information that the assessee has also taken loan from concerns found in the list of entry providers related with Praveen Kumar Jain group of cases. The AO asked the Assessee to show cause as to why loan taken from Tanika Commodities P. Ltd, Ansh Merchandise P. Ltd., Duke Business P. Ltd and Olive Overseas Pvt. Ltd. should not be added to the total income as unexplained and bogus entries. The AO added the amount of fresh loans and interests on existing doubtful loans paid during the AY 2010-11 to the total income of the assessee. In this way, addition of Rs 91,33,644/- was made to the total income of the assessee. Before ITAs No.193& 232/Mum/2018 us, the learned Counsel for the assessee argued that in order to make addition under section 68 of the Act when the following three things are not established. (i) identity of the creditors (ii) genuineness of the transactions and (iii) creditworthiness of the creditors. He explained that the onus is cast upon the assessee to explain the sources from which he has received the cash credit and the creditworthiness of the creditors is to be gauged vis–a-vis the transactions which occurred between the assessee and the creditors. He stated that it was not the burden or responsibility of the assessee to find out the source of creditors or the capacity of the creditors in order to prove the genuineness of transactions as has been held by the Hon’ble Gauhati High Court in the case of CIT Vs. Smt. Sangmitra Bharali reported in 361 ITR 481. He further, argued that the addition was made out of unsecured loans raised by the assessee from the group concern of Praveen Kumar Jain Group engaged in providing accommodation entries. On the contrary, there was no indication or proof that loans taken by the assessee were merely accommodation entries and the money actually gone back to the lenders. He also argued that the creditors appeared before the AO in response to the notice issued under section 133(6) of the Act and during the course of recording statements by the AO the lenders confirmed the loans having given to the assessee. Besides all the necessary details were submitted before the AO during the assessment proceedings, the assessee also provided the loan confirmation from the creditors, PAN of creditors ledger extract copy of Income tax return, profit and loss account, balance sheet and bank statement of the creditors and also of the assessee and form no.16 issued qua the TDS deducted and deposited. Accordingly, he stated that the assessee has completely discharged its onus cast upon it by filing necessary informations/details before the AO and the AO without carrying out any further investigations and verification in the matter solely ITAs No.193& 232/Mum/2018 relied upon the information received from the DGIT(Inv) Mumbai that the creditors were engaged in issuing accommodation entries. In support of his contention, the learned AR relied on the decision of the Hon’ble Supreme Court in the case of ITO V/s Lakhmani Mewal Das reported in (1976) 103 ITR 437 (SC), the decision of the Hon’ble Delhi High Court in the case of CIT V/s Gangeshwari Metal (P) Ltd reported in (2013) 96 DTR 299, wherein it has been held that there was a clear lack of enquiry on the part of the AO. Once the assessee had furnished all the material including PAN, loan confirmations and bank statements, in such an eventuality, no addition can be made u/s 68 of the Act.

On the other hand, the learned DR argued that the loan creditors Praveen Kumar Jain group was found to be engaged in the business of providing accommodation entries during the search and seizure action his group and the assessee was found to be the one of the beneficiaries of the said accommodation entries. The learned DR submitted that in the present case though the assessee has filed all the necessary information but since the assessee borrowing monies from the tainted parties who were provided accommodation entries, it is beyond doubt that money borrowed by the assessee was nothing but accommodation entries. Lastly, the learned DR prayed that in view of the facts and the order of the AO should be upheld by allowing the appeals of Revenue.

We find that undisputedly the assessee has borrowed money by way of loan from three aforesaid four parties i.e. Tanika Commodities P. Ltd, Ansh Merchandise P. Ltd., Duke Business P. Ltd and Olive overseas Pvt. Ltd. from whom the assessee borrowed the money and total outstanding including the interest as on 31.3.2010 were amounting to ₹ 91,33,644/-. The case of the assessee was re-opened upon receiving the information from DGIT(Inv), Mumbai that the assessee was one of the ITAs No.193& 232/Mum/2018 beneficiary of the said accommodation entries provided by Praveen Kumar Jain and group. We find from the record that the assessee filed during the course of assessment proceedings all the details like loan confirmation letters from the creditors, PAN of the creditors, bank statements of the creditors and the assessee, form no.16 qua TDS on interest, profit and loss account and balance sheet including the ledger account of the creditors, and ITR etc. Moreover, the loan creditors also appeared before the AO in compliance to the notice issued under section 133(6) of the Act and filed confirmations before the AO that loans were actually given to the assessee. From all these details and facts on record, we find that the assessee has discharged its onus cast upon it by filing all the necessary details as called for by the AO to corroborate the transactions of borrowing the money and thereby satisfied all the three main ingredients i.e. creditworthiness of the creditors, genuineness of the transactions and identity of the creditors by filing all the details as discussed above which proved that the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors have been established by the assessee. So much so that the loan creditors in response to the notice issued under section 133(6) of the Act appeared before the AO and confirmed that they have given interest bearing loans to the assessee on which TDS have been deducted and paid and form no.16A issued to the loan creditors also filed before the AO. Once the assessee has filed all the necessary documents before the AO then the onus is shifted to the department to disprove the stand of the assessee, which department has failed to do so in the present case. The AO has merely proceeded and relied on the information received from the DGIT(Inv), Mumbai that the assessee is one of the beneficiary of the accommodation entries without bringing any material against the assessee on record by contrary to the defense put up by the assessee