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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI M. BALAGANESH, HONBLE
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D”, MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI M. BALAGANESH, HON'BLE ACCOUNTANT MEMBER ITA NO. 6311/MUM/2017 (A.Y: 2009-10) Income Tax Officer - 16(1)(5) v. M/s. Re n Raga Media Pvt. Ltd., Room No. 439, 4th Floor Bungalow No. A/8, SVP Nagar Aayakar Bhavan, M.K. Road, Nr. Mhada Telephone Exchange, Mumbai-400 020 Andheri (W), Mumbai – 400 053
PAN: AAKCS 8934 L (Appellant) (Respondent) Assessee by : Shri Birju S. Shah Department by : Shri D.G. Pansari
Date of Hearing : 09.04.2019 Date of Pronouncement : 09.05.2019
O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Ld.Commissioner of Income–tax (Appeals)–4, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 16.08.2017 for the A.Y. 2009-10.
The Revenue in its appeal challenged the order of the Ld. CIT(A) in quashing the reopening of assessment u/s. 147 as is bad in law and on merits deleting the addition made u/s.68 of the Act in respect of share
2 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., application money received from M/s.Arena Textiles and Industries Pvt. Ltd., by the assessee.
Briefly stated the facts are that, the Assessing Officer while completing the scrutiny assessment for the A.Y. 2013-14 noticed that assessee received share application money during the Financial Year 2008-09 relevant to the A.Y. 2009-10. Assessing Officer issued notice dated 30.03.2016 u/s. 148 of the Act and reopened the assessment for the A.Y. 2009-10. The assessee was asked to provide justification and past performance of the company to receive huge share premium and also to provide details such as income tax returns, copies of balance sheets, copy of bank statements of the shareholders namely M/s. Arena Textiles and Industries Pvt. Ltd., and from Shri Madanlal Paliwal, where the assessee received share application money of ₹.1,99,20,000/- and ₹.1,45,25,000/- respectively.
Assessee filed basic documents relating to the said share application money in respect of both the investors such as the income tax returns, copy of balance sheets and their bank statements to prove the identity, genuineness and creditworthiness of the shareholders. Assessee filed valuation report of the premium received from the shareholders. In the course of the assessment proceedings assessee
3 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., also contended that the notice u/s. 148 of the Act dated 30.03.2016 which was sent though speed post was not served on the assessee within the time prescribed and therefore the assessment is time barred. However, not convinced with the submissions made by the assessee the Assessing Officer treated share application money received from these two shareholders amounting to ₹.3,44,45,000/- as unexplained cash credit u/s. 68 of the Act. In the Assessment Order, Assessing Officer observed that the DDIT (Inv.) unit–4(1) of Kolkata found that the shareholder company M/s. Arena Textiles and Industries Pvt. Ltd., is not found in the address given and they could not found the address to serve summons u/s. 131 of the Act, therefore, DDIT(Inv.) unit concluded that the shareholder is only a paper company. Assessing Officer also observed that the survey u/s. 133A of the Act was conducted in the case of Mantosh Kumar Yadav by the DDIT(Inv.) unit-3(1) & 2 of Kolkata wherein the statements were recorded stating that Mantosh Kumar Yadav is the Director of 66 Companies and all the companies are paper companies and M/s. Arena Textiles and Industries Pvt. Ltd., is one of such company. Thus, the Assessing Officer proceeded to treat the share application money as unexplained cash credit.
On appeal the Ld.CIT(A) quashed the re-assessment on the ground that there is no proper service of notice u/s. 148 of the Act and the notice
4 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., was served beyond the time limit and therefore, assessment is time barred. Ld.CIT(A) also considering the evidences furnished by the assessee in respect of the shareholders, held that the assessee has proved the identity, genuineness and creditworthiness of the shareholders and deleted the addition made u/s. 68 of the Act in respect of both the shareholders namely M/s. Arena Textiles and Industries Pvt. Ltd., and Shri Madanlal Paliwal. Before us, the Revenue filed appeal challenging the order of the Ld.CIT(A) in quashing the re-assessment order and on merits challenged the order of the Ld.CIT(A) in deleting the addition made only in respect of the share application money received from M/s. Arena Textiles and Industries Pvt. Ltd.
Ld. DR vehemently supporting the order of the Assessing Officer submitted that notice u/s. 148 of the Act dated 30.03.2016 was sent through speed post on the very same day to the address of the assessee in Andheri which is available on record was in fact served on the assessee by way of affixture on 31.03.2016 as no one was present in the premises of the assessee to receive the notice. Therefore, the Ld. DR submits that it was a proper service of notice to the assessee and therefore the reassessment was reopened within the prescribed time. In any case he submits that since the assessee has attended for the subsequent notices as per the provisions of section 292BB of the Act it shall be deemed that
5 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., any notice under any provisions of this Act has been duly served in accordance with the provisions of the Act.
Coming to the merits of the case, the Ld. DR submitted that shareholder company could not be found by the investigation wing of Kolkata and therefore the Assessing Officer could not serve summons u/s. 131 of the Act. Ld. DR submits that the Inspector deputed could not found the company. Ld. DR also submits that the Statement of one Mr. Mantosh Kumar Yadav who provided only accommodation entries was recorded wherein he has stated that he is the Director of 66 Companies all these companies are paper companies and the shareholder from which the assessee has obtained share application money is one of such company. Ld. DR also submits that shareholder company has shown negligible taxable income. It is therefore submitted that the assessee has not provided any details to the Assessing Officer to prove the identity, genuineness and creditworthiness of the transactions. Reliance is placed in the case of CIT v. NRE Iron and Steel (P.) Ltd., (Supreme Court).
Ld. Counsel for the assessee strongly placing reliance on the order of the Ld.CIT(A) submits that Assessing Officer has claimed that notice was sent through speed post on 30.03.2016. However, no proof is submitted that the notice was sent thorough speed post. Ld. Counsel for
6 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., the assessee submits that it was stated that the said notice was returned unserved on 04.04.2016 and has deputed inspector on 31.03.2016 for service of notice by affixture. Ld. Counsel submits that this clearly shows that Assessing Officer has received unserved notice on 04.04.2016 but he deputed Inspector on 31.03.2016 to serve the notice on the assessee and this contention by itself is not believable. It is also submitted by the Ld. Counsel for the assessee that the Assessing Officer has not produced any report of the inspector nor any Panchanama for verification.
Ld. Counsel for the assessee submitted that it is clearly visible that the Ld. Assessing Officer has purposefully concealed the fact that he had not sent any such so called notice at our address at Bunglow No-N8, S.VP. Nagar, Near Versova Telephone Exchange, Mhada, Andheri West, Mumbai -400053 and if any such notice was issued at address at Atlantis B 403, Oshivara, Andheri (W), that itself proves that notice was issued deliberately on wrong address knowing the fact that actual address of the company is Bunglow No-N8, S. VP. Nagar, Near Telephone Exchange, Mhada, Andheri west. Ld. Counsel submits that it is relevant to note that while making assessment for A. Y. 2013-14, in fact the Ld. Assessing Officer had issued notices at correct address i.e. Bunglow No-N8, S.VP. Nagar, Near Telephone Telephone Exchange, Mhada, Andheri West, Mumbai -400053. Ld. Counsel further submitted that Assessing Officer
7 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., had also issued the assessment order passed u/s. 143(3) of the I. T. Act for A.Y. 2009-10 to the correct address i.e. Bunglow No-N8, S.VP. Nagar, Near Versova Telephone Exchange, Mhada, Andheri West, Mumbai- 400053. It is also submitted that the Assessing Officer in fact issued copies of notice dated 25/08/2015 and assessment order dated 18/03/2016 for the A.Y. 2013-14 to the new address only. In the light of above Ld. Counsel for the assessee submitted that Assessing Officer issuing such notice u/s. 148 at the wrong address at Atlantis B 403, Oshivara, Andheri (w), Mumbai, proves that the stand of the Assessing Officer is full of contradictions, irrelevant and against the just and fair view. Rather, the attempt has been made by the Assessing Officer to conceal the fact and report patently false facts. This can be verified from the assessment record as well as report of the Assessing Officer. dated 9/8/2017. It is submitted that having noticed that the notice u/s. 148 of the Act dated 25.04.2016 was time barred for A. Y. 2009-10, Assessing Officer sent notice dated 30/3/16 with a view to cover the failure of proper service of notice in time. Therefore, it is submitted that the contention of the Assessing Officer that valid issue and/service of notice u/s 148 was made is not tenable in law.
Ld. Counsel for the assessee further submits that the Appellant never participated in the assessment due to pendency of application
8 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., u/s.144A. Therefore, he submits that the Assessing Officer has erroneously placed reliance u/s 292BB of the Act, and it is the settled law that legal defects cannot be cured even u/s 292BB particularly when the application u/s I44A remained unattended. Therefore, this plea of the Assessing Officer does not hold good on the facts and in law. Reliance is placed on the decision of the Hon’ble Gujarat High Court in the case of Knubhai M. Patel (HUF) v. Hiren Bhatt [(2010) 43 DTR 329].
Coming to the merits of the case, the Ld. Counsel for the assessee submits that assessee vide letter dated 23.12.2016 has furnished the annual accounts of the shareholder as on 31.03.2009 along with the copies of secretarial compilation report, copy of Form 66 filed with ROC, copy of Form 20B, 23AC and 23ACA filed with ROC for the year ended 31.03.2009, annual accounts for the year ended 31.03.2010, bank statements of the shareholder and the corresponding bank statements of the assessee reflecting the transaction. Therefore, the Ld. Counsel for the assessee submits that since the assessee has furnished all these evidences before the Assessing Officer, it is not correct to say that assessee has not furnished sufficient details. It is submitted that by filing these evidences assessee has proved the identity, genuineness and creditworthiness of the creditor. It is also submitted that the report of the DDIT(Inv.) which was made in Kolkata to prove that the shareholder is not
9 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., found in the address given is also not furnished to the assessee and no opportunity was given to the assessee to rebut the report said to have been received from the DDIT(Inv.). It is also further submitted that the Assessing Officer has not provided any copy of statements which are said to have been recorded from one Mr. Mantosh Kumara Yadav nor any cross examination was provided to the assessee which is in violation of principles of natural justice. Ld. Counsel for the assessee submits that the case laws relied on before the Ld. CIT(A) may be considered and the order of the Ld.CIT(A) be sustained.
We have heard the rival submissions, perused the orders of the Authorities below. In so far as the service of notice u/s. 148 of the Act is concerned the Ld. CIT(A) considering the submissions, evidences on record and remand report dated 09.08.2017 of the Assessing Officer, he has categorically recorded a finding that the assessee has demonstrated with the necessary evidences that no notice u/s. 148 of the Act was ever issued in time on correct address of the assessee and therefore, the reassessment made u/s. 147 is bad in law. While arriving at such conclusion the Ld. CIT(A) observed as under: - “3.6 I have circumspected the spectrum of facts and circumstances of the case under appeal and have carefully considered the finding of the Assessing Officer in assessment order, counter representation of the Appellant, evidences on record, application under rule 46A, counter comments dated 09.08.2017 of the Assessing Officer and rival submission of the appellant. I find that Appellant has demonstrated with necessary evidences that no notice under 148 was ever issued in time on correct address of the Appellant i.e. " M/s Re N Raga Media Pvt. Ltd., Bunglow No. A8, SVP Nagar, Nr., Versova Tel.Exchange Andheri (W), Mumbai 400 053.
10 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., The notice u/s 148 dated 25.04.2016 issued by ACIT Cir-2, Thane and served on assessee on 30.04.2016 was time barred because for issuing notice u/s 148 for AY 2009-10, limitation was upto 31.03.2016. For ready reference, copy of notice is demonstrated as under: - NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 PAN - AAKCS8934L Office of the Asst. Commissioner of Income-tax, Circle-2, Thane, Ashar I.T. Park, Road No. 16Z, Wagle estate, Ambika Nagar, Thane (W) Dated 25/04/2016 To, M/s Re N Raga Media Pvt. Ltd. Bungalow No. A/8, SVP Nagar, Near Versova Tel Exchange, Andheri (W), Mumbai-53. Whereas I have reason to believe that your income for the assessment year 2OO9-1O has escaped assessment within the meaning of Section 147 of the Income-tax Act. I, therefore, purpose to assessee/ reassess / recompute the income / loss / depreciation— allowance—under—section—................... for the said assessment year and I hereby require you to deliver to me before the expiry of 30 days from the date of service of this notice, a return in the prescribed form of your Income /the—income of:.................., in respect of which you are assessable for the said assessment year. (DHIRAJ KUMAR) Asstt. Commissioner of Income-tax, Circle-2, Thane 3.7 When objection of the Appellant was forwarded along with application under rule 46A to the Assessing Officer, the learned Assessing Officer has submitted counter comments stating that notice u/s 148 was issued on 30.03.2016 through speed post and further ward inspector was deputed on 31.03.2016 for service of notice through affixture. Since there was no one at the premises as mentioned by Assessing Officer it was served through affixture. However, it is very evident from the assessment record, submitted by the Assessing Officer that the alleged notice u/s 148 dated 30.03.2016 was issued on wrong address i.e. "403, Atlantis B, Inder Darshan, Cross Road, Oshiwara, Andheri (W), Mumbai-400053", whereas that address was changed and communicated by the appellant long ago. It can be seen from the record that notice at wrong address was issued by the same Assessing Officer Shri Dhiraj Kumar, ACIT Cir-2, Thane, on 30.03.2016 whereas, he himself has written a letter No.THN/ACIT/Cir-2/129/CASS-16/2015- 16 dated 25.08.2015 to the appellant about change of incumbency which is scanned as under :- No.THN/ACIT/CIR-2/129/CASS-16/2015-16 Date: 25.08.2015 To M/s Re N Raga Media Pvt. Ltd. Bungalow No. A/8, SVP Nagar, Near Versova Tel Exchange, Andheri (W), Mumbai-53. Sir, Sub: - Change of Incumbency – reg. Kindly refer to the above 2. Income Tax Scrutiny assessment is pending in your case for A.Y. 2013-14. Notice u/s. 143(2) of the I.T. Act, 1961 has been issued and served to you. You are requested to attend the office of undersigned on or before 07.09.2015 at 2.30 Purchase>Mumbai along with all the details of copy of Return, computation of income and Audit Report alongwith all enclosures. This letter is issued in vow of the provisions of Sec 129 of the I.T.Act 1961. Yours faithfully
11 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., (DHIRAJ KUMAR) Asstt. Commissioner of Income-tax, Circle-2, Thane 3.8 When same Assessing Officer has intimated the appellant about change of incumbency at new and correct address in 2015, it is not understood as to why subsequently on 30.03.2016, he has issued notice on different or wrong address. However, a new notice u/s 148 dated 25.04.2016 was issued on correct address which was time barred, hence the factual clarification made by the learned A R cannot be ignored. Obviously, no such notice dated 30.03.2016 was ever issued on correct address. Similarly, no proper affixture was made at correct address on 31.03.2016 by the inspector. Further it is noteworthy that so called affixture has also been done, if at all has been done, at wrong address, therefore it is very evidence that while submitting the counter comment dated 09.08.2017, learned Assessing Officer has concealed the basic facts that inspite of knowing correct address, such notices wers really issued, if these were issued, at wrong address. The authenticity of service through affixture has been successfully challenged by the appellant. 3.9. It is further important to note that in order u/s 127 address of the assessee has been correctly mentioned. Further one important point is also noticed that same Assessing Officer namely, Shri Dhiraj Kumar ACIT Cir-2, Thane, has passed an assessment order of AY 2013-14 on 18.03.2016 mentioning the correct address as "Bunglow No. A/8, SVP Nagar, Mr., Versova Tel. Exchange, Andheri (W), Mumbai 400 053.", then it is not understood as to how same Assessing Officer could issue notice u/s 148 on 30.03.2016 on different address i.e. "403, Atlanntis B, Inder Darshan, Cross Road, Oshiwara, Andheri (W), Mumbai-400053". These facts and evidence groves beyond doubt that notice u/s 148 dated 30.03.2016 was not issued on proper address, nor was served properly on the appellant, when notice has not been issued on proper, correct and latest Known address, escapement assessment proceeding is bad in law, illegal. 3.10 The contention of the Appellant that no such affixture was made on 31.03.2016, nor was any report of inspector given to the appellant or no person was found at old address was not correct, is found worth consideration. It is also pertinent to mention that address was not correct, is found worth consideration. It is also pertinent to mention that when, according to the Assessing Officer notice u/s 148 dated 30.03.2016 was served upon the assessee (at wrong address), then why a separate and second notice u/s 148 dated 25.04.2016 was issued without mentioning that earlier notice was issued and served either through RPAD or through affixture. It means, in reality no such affixture was made, nor was proper notice issued at correct address otherwise there was no need to issue second notice u/s 148 on 25.04.2016 which was time barred. In this notice nothing is mentioned of earlier service, hence the objection of the appellant that no such notice dated 30.03.2016 was ever served is well founded. Further, it is important to take into account the fact that during the course of assessment proceeding itself, appellant has objected the escapement assessment proceedings as no valid notice was issued and served. In para 8 of the assessment order, learned Assessing Officer has mentioned the objection of the appellant, but has not demonstrated the fact that no such notice was ever issued at correct address and has therefore not refuted the objection of the appellant. It is pertinent to mentioned that by letter dated 24.12.2016, appellant has submitted its objection nevertheless, Assessing Officer had not refuted it with any reliable evidence in possession, hence such reassessment proceeding is bad in law as held by Hon'ble Bombay High Court in the case of Bayer Material Science Pvt.Ltd. vs. DCIT (2016)382 ITR 333(Bombay) and Bharat Jayantilal Patel Vs. Union of India (2015) 378 ITR 596(Bombay).”
12 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., 13. None of these findings of the Ld. CIT(A) have been rebutted with
evidences before us. As the Revenue could not prove that there was proper issue and service of notice u/s. 148 of the Act on the assessee within the time prescribed i.e. on or before 31.03.2016 for the A.Y. 2009-
10, the Ld. CIT(A) has rightly concluded that the reopening u/s. 147 is bad in law. On this ground alone the assessment framed u/s. 143(3) r.w.s 147 of the Act is liable to be quashed.
Even on merits the Ld. CIT(A) examined the addition made by
Assessing Officer with references to the evidences furnished by the assessee and the averments of the Assessing Officer and concluded that the assessee has proved the identity, genuineness, creditworthiness of
the creditor observing as under: “3.11. As regards merit and addition of share capital of Rs. 3,44,45,000/- made u/s 68 as unexplained cash credit, it is pertinent to mention that learned Assessing Officer has failed to demonstrate any contrary evidence accept general reply of DDIT that M/s Arena Textiles Industries Pvt.Ltd. was not found at given address and there was a general statement of Mr. Mantosh Kumar Yadav of giving accommodation entry. It can be seen from the evidence on record that by letter dated 23.12.2016 appellant has categorically mentioned as under:- "Arena Textiles And Industries is a Non Banking Finance Company (Registration No. B 05.06555). The annual Accounts of the Company for the year ended 31.03.2009 along with copies of the Secretarial Compliance Report. Copy of Form 66 filed with the ROC, copies of Form 206, 23AC and 23 ACA filed with the ROC for the year ended 31.03.2009 and Annual Accounts of the Company for the year ended 31.03.2010 have been filed vide our letter dated 19th December 2016." "The Share Capital & Reserves of the Company as at 31.03.2009 is Rs. 4,815.44 lakhs and inventory or shares of listed and unlisted companies as at 31.03.2009 is Rs. 7,586.70 lakhs. The Share Capital & Reserves of the Company as at 31.03.2010 is Rs. 5,007.28 lakhs and investment in shares of listed and unlisted companies as at 31.3.2010 is Rs. 6,467.14 lakhs. Furthermore, the investment has been received through banking channels and the bank statement of Arena Textiles And Industries Ltd. and corresponding bank statement of Re N Raga Media Pvt. Ltd. reflecting the
13 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., transaction has already been submitted to you vide our letter dated 19th December 2016." 3.12 When facts and evidences where furnished to the Assessing Officer, it is wrong on the part of him to say that copy of Balance-Sheet, P/L account and bank statement of investor company was not submitted. It is also not correct on the part of the Assessing Officer to say that no documentary evidences have been submitted by the appellant. Contrary to the presumption and statement of Assessing Officer, appellant as submitted more than sufficient evidences in support of its contention. 3.13. One glaring evidences is also there that M/s Arena Textiles And Industries Ltd. is being regularly assessed to tax. Copy of the assessment order of AY 2010- 11 dated 22.03.2013 passed by DCIT(CENTRAL Circle)-XIII, Kolkata, creating demand of Rs. 3,07,560/- has been submitted. This is not new or additional evidence, but the basic evidence available with department. Similarly assessment order of AY 2009-10 dated 26.12.2011 of M/s Arena Textiles And Industries Ltd. has been submitted which proves the identity of the investor company. Similarly, copy of bank statement submitted reveals the advancement of money through proper channel, hence genuineness of transaction is also visible. Further, as clarified by the appellant, investor company was having sufficient fund to advance the share application money. It has got share holding funds of Rs.48,15,43,667/- in AY 2009-10, hence creditworthiness is also established by the appellant. Therefore, unless contrary evidence is brought on record by the Assessing Officer, no such addition can be made on the basis of presumption and surmises. In making any assessment under section 143(3) or 147, the Assessing Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under section 143(3) vide; {Dhakeswari Cotton Mills Ltd. v. CIT,(1954)26 ITR 775,782(SC); Raj Mohan Saha v. CIT, (1964)52 ITR 231 (Assam). Also see, CIT V. Gokaldas Hukumchand, (1943)11 ITR 462,469(Bom) … … 3.16 Recently, in the case of CIT vs. Gagandeep Infrastructure Pvt.Ltd [ INCOME TAX APPEAL N0.1613 OF 2014] it was held by the Hon'ble Bombay High Court that, "Bogus share capital/premium; The proviso to s.68(which creates and obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior therto, as per Loverly Exports 317 ITR 218(SC), if the A 0 regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit. 3.17 In the similar case of M/s Easy Mercantile Pvt. Ltd. vs DCIT (ITA. No. 6035/Mum/2011 for A.Y. 2008-09), wherein addition were made based on the statement of the one director of many companies, the Hon'ble ITAT, Mumbai has deleted such addition making the following observation: "It is also a fact that while examining the sales made by the assessee company, the AO issued notice u/e 133(6) of the Act to the parties who confirmed the transaction made with the assessee. Admittedly, no incriminating material from any of the parties having dealings with the assessee company were either brought on record or were available to substantiate the allegation of providing accommodation bills, only because one Shri Pravin Kumar Jain in his statement has accepted of providing accommodation bills cannot ipso facto make the assessee company also to be engaged in the same kind of the business."
14 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., The above view has further been followed by the Hon'ble ITAT, Mumbai in the following cases wherein additions were made on the basis of the statement of the said Shri Pravin Kumar Jain: (i) Komal Agrotech P. Ltd. vs. ITO wd. 2(1) ITA No. 437/Hyd/2016 (ii) DCIT CC-1, Mumbai vs. M/s Sumukh Commercial Pvt Ltd., (ITA No. 922/Mum/2013). (iii) DCIT CC-1, Mumbai vs. M/s SBJ Trading (I) Ltd., (ITA No. 923/Mum/2013). Further, the Hon'ble ITAT "A" Bench, Mumbai has on 30.11.2015 decided similar matters having identical facts against such addition. These cases are : i) ITA No. 3645/Mum/2014: ITO 10(2)(4) vs M/s Superline Construction Pvt Ltd. ii) ITA No. 3644/Mum/2014: ITO 10(2)(4) vs M/s Sitara Properties Pvt Ltd. iii) ITA No. 3646/Mum/2014: ITO 10(2)(4) vs M/s Samsung Builder & Developer Pvt Ltd. iv) ITA No. 3647/Mum/2014: ITO 10(2)(4) vs M/s Soumya Trading & Finance Pvt Ltd. • v) ITA No. 3648/Mum/2014: ITO 10(2)(2) vs M/s Prarup Properties Pvt Ltd vi) ITA No. 3650/Mum/2014: ITO 10(2)(2) vs M/s Roop Darshan Real Estate Pvt Ltd vii) ITA No. 3651/Mum/2014: ITO 10(2)(2) vs M/s Sumangal Builder & Developer PLtd. In all the above cases the Assessing Officers have made additions u/s 68 of Income Tax Act of Share Application Money received based on information provided by the Investigation Wing of Income Tax Department. However, the additions were deleted by the respective learned CIT(A) against which the department had filed Appeals before the Hon'ble ITAT, Mumbai. The Hon'ble ITAT Mumbai dismissed the Appeals filed by the department following the Ratio laid down by earlier decisions of the Hon'ble Tribunal, more particularly the case of ITAT E Bench in M/s. SDB Estate Pvt Ltd. vs. ITO - 5(3)(2) in ITA No. 584/Mum/2015; and deleted the addition. Thus in the light of above factual analysis, reference of evidences and judicial / propositions, it is held that escapement assessment of AY 2009-10 has been started without proper issue and service of notice u/s 148 and without refuting the factual objection of the appellant, hence such escapement assessment order under appeal deserves to be quashed, as held by Hon'ble High Court in the case of German Remedies Ltd. vs. DCIT (2006) 202 CTR Bom 369. Further, on merit also addition is not sustainable because Assessing Officer has not brought on record any contrary evidence against the claim of the appellant or evidences on record. Respectfully following the decision of Hon'ble Jurisdictional High Court in the cases of Orchid Industries Pvt. Ltd .[1433 of 2014], Arceli Realty Limited [ 6492/Mum/2016], CIT vs. M/s Gagandeep Infrastructure Pvt.Ltd.(I.TA No.1613 of 2014), CIT vs. Creative World Telefilms Ltd.(2011) 333 ITR 100(Bom) and other judgements over such issues, mentioned earlier, the additions made of Rs. 3,44,45,000/- u/s 68 of the IT. Act, 1961, is deleted.”
15 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., 15. The Hon'ble Supreme Court in the case of CIT v. Orissa Corporation
reported in 159 ITR 78 has held as under: -
"That in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessee's. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they are creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the Respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence".
Hon'ble Delhi High Court in the case of CIT v. Divine Leasing &
Finance Ltd. [299 ITR 268] in para nos. 13 & 16 has held as under:
"13. There cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue. the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee: if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty- bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company. 16. In this analysis, a distillation of the precedents yields the following propositions of law in the context of Section 68 of the Income Tax 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 the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5)
16 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices: (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assess cc nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assess cc. (7) The Assessing Officer is duty- bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation.”
In the case of CIT v. Orchid Industries Pvt. Ltd. (ITA No.1433 of
2014) (Bom.), Hon'ble jurisdictional High Court held as under:
“The Revenue has filed the appeal on following questions: "6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of Rs. 95,00,000/- made u/s. 68 of the Act, relying only on the documentary evidence produced by the Respondent Company while ignoring the key factor that these entities were not traceable at their given addresses. 6.4 Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in not appreciating the observations made by the Delhi High Court in Nova Promoters and Finlease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances. 6.5 The Tribunal ought to have taken note of the fact that the assessee was not able to produce even a single party before the AO despite agreeing before the CIT(A) that it will produce all parties before the AO during remand proceedings." 2. Mr. Pinto, the learned counsel for the Assessee submits that the Assessing Officer upon considering all the facts had added Rs. 95 lakhs as income under Section 68 of the Income Tax Act. It needs to be considered that the Assessee had not discharged its onus to establish that the amount was received by the Assessee from the share holders as share application money. The Assessee could not prove the identity of the creditors, their credit worthiness and the genuineness of the transactions. The party from whom the Assessee had received the share amount never responded to the summons issued by the Assessing Officer. The Assessing Officer has considered the said aspect and thereafter has added the amount under Section 68 of the Income Tax Act. According to the learned counsel, the Tribunal only on the basis that documents are available has accepted the case of the Assessee. The Tribunal has failed to consider the circumstances and the facts which are relevant. 3. The learned counsel for the Assessee supports the order and submits that the Assessee had discharged its onus. The Assessee had produced the PAN of all the creditors along with the confirmation, Bank Statement showing payment of share application money and relevant record is produced with regard to the allotment of shares to those parties. The share application form, allotment letter, share certificate are also produced. Even the balance-sheet, profit and loss account, the books of account of these creditors were produced on record showing that they had sufficient funds for investing in the shares of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of CIT v. Gagandeep Infrastructure (P.) Ltd. [2017] 80 taxmann.com 272/247
17 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., Taxman 245/394 ITR 680 (Bom.) and the order of the Apex Court in case of CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195. 4. We have considered the submissions. 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 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. 7. Considering the above, no substantial question of law arises. The appeal stands dismissed. However, there is no order as to costs.”
The Hon'ble Delhi High Court in the case of MOD Creations Pvt.
Ltd., v. ITO [354 ITR 282] held as under: -
“13. In the light of the above principle, let us examine as to what the authorities below found vis-à-vis the genuineness of the transactions and the creditworthiness of their creditors.
(i) The fact that there was sufficient balance available with the creditors when cheques have been issued to the assessee company was established.
(ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of ` 1 lac each received by two creditors from verifiable donors.
(iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs‟ were also available with the A.O.
(iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts.
(v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors.
18 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., (vi) The identity and addresses of sub creditors was also available.
With this material on record in our view as far as the assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the credit worthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the assessee as being malafide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O. If the A.O. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT Vs. Divine Leasing & Finance Ltd., (2008) 299 ITR 268 (Delhi) and CIT Vs. M/s. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC)].”
In the case of ACIT v. Shri Ramesh Ramswarupdas Jindal in
ITA.No. 3091 to 3096/Mum/2017 dated 15.11.2017 the Coordinate Bench
held as under: -
“9. We have heard the rival submissions, perused the orders of the authorities below, the case laws relied on and the material furnished before us. The only issue involved in this appeal relates to the deletion of addition of ₹.20 lakhs made by the Assessing Officer towards unexplained unsecured loans and interest thereon amounting to ₹.2,35,246/. Search and seizure action u/s. 132 of the Act has been conducted in the case of Shri Pravin Kumar Jain and statements were recorded from him and he is said to have been deposed that he is providing only accommodation entries through various concerns. On the basis of this information received from DGIT(investigation), Mumbai the Assessing Officer noted that assessee was one of the beneficiaries of accommodation entries given by Shri Pravin Kumar Jain. Assessee was required to explain the unsecured loans obtained in the name of M/s Mohit International and M/s.Natasha enterprises of ₹.10 lakhs each and prove the genuineness of the transactions. Assessee furnished information in respect of the above transactions i.e. copy of Loan confirmation and Affidavit establishing identity of the lender, copy of ledger giving detail towards loan taken during the year and subsequent repayments and Copy of ITR – V filed establishing Creditworthiness of the Lender. However, Assessing Officer did not accept the evidences furnished by the assessee and also the retraction statement of Shri Pravin Kumar Jain, ignoring all the evidences Assessing Officer concluded that the assessee has not explained the transactions as genuine and therefore he has
19 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., added the unsecured loans as unexplained income of the assessee. Correspondingly he has also disallowed the interest thereon. Before the Ld.CIT(A) assessee furnished all the information regarding the unsecured loans as mentioned above. The Ld.CIT(A) considering the submissions and the findings furnished by the assessee deleted the additions observing as under: - “6.2 HELD: - I have carefully perused the Assessment Order, written arguments of the appellant, counter arguments of the ld. AR and have considered the evidences on record and assessment record called for during the appellate proceedings. I find that eh Ld. Assessing Officer has merely doubted the loans taken by the appellant from (1) Mohit International amount to ₹.10,00,000/- and (2) Natsha Enterprises amounting to Rs.10,00,000/- aggregating at Rs. 20,00,000/-. I find force in the argument of the Ld. AR. It is very important to mention here that the appellant has discharged his onus and the Ld. Assessing offices has not proved otherwise than doubting the loans. Apparently, Ld. Assessing officer has not substantiated his presumption, his doubt with any verifiable documents. He has merely described the statement of Shri. Pravin Kumar Jain and as communicated by the investigation wing. Thus, it is very evident that the Ld. Assessing officer has not made any independent enquiry in order to establish the in-genuineness of loans if any, with contrary evidence. The statements referred to and relied upon by the assessing officer have never been disclosed to the appellant opportunity for cross examination was also not given, hence such statement could not be utilized against the appellant without giving full and proper opportunity of cross examination as has been held vide Mahesh Gulabral Joshi Vs. CIT(A) (2005) 95 lTD 300 Mumbai ITAT and Hon’ble Supreme Court decision in the case of KishanchandChellaram Vs. CIT (125 ITR 713 (SC)).
6.3. Further during the course of assessment proceedings, the appellant has produced copy of a comprehensive Affidavit of Shri. Pravin Kumar Jain dated 25.04.2014 retracting, the statements made before the Investigation Wing. Assessing officer has not given opportunity to the appellant for cross examination of Shri Pravin Kumar Jain. Going by the discussion contained above, it is obvious that the inference drawn by the Assessing officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appellant an opportunity to refute the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely.
6.4. It has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. He has submitted confirmation from the parties. filed Audit Reports of the parties alongwith copy of their ITR, and bank statements. In these circumstances, the onus had shifted to the assessing officer. If the assessing officer was still not satisfied, he had the option of making enquiries from the alleged lenders by summoning them. However as seen from the assessment order, he did not do any such thing. Further, if the assessing officer was satisfied with what had been given to him by the appellant, he was duty bound to specify what more material he wanted from the appellant to furnish. The assessing officer never asked for any further material. This leads to the inescapable conclusion that the Assessing Officer could
20 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., not think of any further material to ask for and proceeded to reject the appellant’s claims, relying upon the information/ material, which he never even brought to the notice of the appellant for any rebuttal. The unequivocal conclusion is that all the three ingredients having been satisfied.
6.5. The AO did not consider the evidences provided by the appellant as satisfactory. According to him, submissions and statements given by Sh. Pravin Kumar Jain confirmed that they had issued only bogus bills/accommodation entries to the interested parties. However, he did not bring out the relevant extract from the statement where they have admitted that they have given accommodation entries to the appellant. Moreover, he had just referred to the statement of Shri Pravin Kumar Jain Group without giving specific details as to who is the person who is giving the statement and what exactly did he admit. Instead of stating that the party did not exist, he should have summoned the party and recorded the statement. As the AO, has not brought anything in record to show that the evidences filed by the appellant are false, the loan received and repaid by the appellant cannot be treated as bogus. The addition cannot be made merely on the basis of suspicion, surmises and conjectures. There has to be some concrete evidence whether direct or circumstantial. In this case, no such evidence is present. On the contrary, the appellant is showing from the record that he has received loan through account payee cheques from above TWO PARTIES. He has shown that the loans have been repaid through account payee cheque and as long as he was holding the loan, he has paid the interest after deducting TDS. With regard to the disallowance of interest on loans taken from afore-mentioned parties, the appellant submitted that the AO has also ignored the fact that the said interest expenses were incurred wholly, exclusively & necessarily for business of the Appellant. The interest paid on loans was subject to TDS. During the present proceedings, the appellant also submitted the details of the TDS made on the loans wherever it is applicable and the details of amount of TDS paid into the Government account. In the appellant case the addition made towards the said loans is deleted after discussing the issue in detail in the above paragraphs.
6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of ₹.20,00,000/- and interest given to the parties, disregarding the evidence on record and without discharging his onus and without establishing anything to the contrary to the submissions of the appellant and without verifying the bank account, existence of entities who have extended loans to the appellant and without making fruitful investigation. Therefore, the Assessing officer is directed to delete the addition made of Rs.20,00,000/- on account of unexplained unsecured loans and ₹.2,35,246/- made on account interest on the same. The grounds of appeal are allowed. 10. On a plain reading of the Assessment Order, we find that the Assessing Officer has gone only by the statement recorded from Shri Pravin Kumar Jain who said to have been deposed that he is only providing accommodation entries and no real business is carried on by the entities. The Assessing Officer has not made any efforts to make independent enquiries with the lender companies. We also observe from the Assessment Order that the Assessing Officer has not provided the statements of Shri Pravin Kumar Jain to the assessee for its rebuttal. Nothing is placed on record to suggest that the information furnished by the assessee in the form of copy of affidavit, establishing identify of the lender, copy of the ledger giving details of loans confirmation taken and also repayment in subsequent years, copy of bank statement highlighting the natures of loan taken and
21 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., repayment in subsequent years to establish the genuineness of the transactions copy of ITR –V filed establishing creditworthiness of the lender are non-genuine. It was also noted by the Ld.CIT(A) that the assessee has provided the identity creditworthiness as well as the genuineness of the transactions. The Ld.CIT(A) also elaborately considered the submissions and the averments made by the Assessing Officer in the Assessment Order and the evidence furnished by the assessee and concluded that the assessee has discharged its primary onus on providing complete details in respect of the loan transactions and the Assessing Officer failed to carry out any fruitful investigation. Therefore, no addition can be made towards unexplained unsecured loans, this finding in our view is completely justified in view of the facts and circumstances of the assessee’s case.”
In the case ACIT v. M/s. H.K. Pujara Builders in ITA.No.
930/Mum/2017 dated 31.10.2018, the Coordinate Bench held as under: -
We have heard the rival submissions, perused the orders of the authorities below. Assessing Officer made addition by placing reliance merely on the statements of Shri Praveen Kumar Jain Group and Shri Bhanwarlal Jain Group which were recorded u/s. 132(4) of the Act. No independent enquiry was carried out by the Assessing Officer, he has not brought any corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties showing the loan transactions. 7. By providing all this information to the Assessing Officer the assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. We notice that all the loans were taken through banking channels and the repayments for the same was also made through banking channels. The Assessing Officer ignored the documentary evidences submitted by the assessee and has exclusively relied on statements of third party in making the addition. In spite of request by the assessee the Assessing Officer did not provide any cross-examination of the parties who have made the submissions. All these aspects have been considered by the Ld.CIT(A) and deleted the addition observing as under: “5.9. From the assessment order, it transpires that the AO has solely relied upon the statement of Mr. Pravin Kumar Jain and did not carry out any worthwhile independent inquiry in the matter. He has totally ignored the documentary evidences submitted by the appellant. The AO in the assessment order has admitted existence of these details. The AO has not pointed out any defect in the above mentioned documentary evidences submitted during assessment proceedings. Without pointing out any lacuna in the evidences submitted by the appellant, the sources and the genuineness of transaction cannot be doubted. Once evidences related to a transaction is submitted before the A.O., the onus
22 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., shifts on him to prove these as non-genuine. The A.O. has not discharged the onus casted on him. In my opinion, merely based on the statement of a third person without any corroborative evidence will not make the loan transactions, in question, as accommodation entries. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as accommodation entries. 5.10. As far as the question of validity of the transaction done through JPK Trading (I) Pvt. Ltd and New Planet Trading Co. Pvt. Ltd are concerned, even if some of the transactions entered into by Shri.Pravin Kumar Jain are found to be not genuine, it does not lead to the conclusion that all the transactions were non- genuine including the transactions related to the appellant. There is no evidence brought in the assessment order to prove the above conclusion, by the AO. The outcome of investigation carried out in the case of Mr.Pravin Kumar Jain the conclusions drawn therein cannot be applied ipso facto to all other cases. Simply relying on the report of the DGIT(Inv), Mumbai and statement the AO cannot conclude that all transactions are accommodation entries. 5.11. The case of the appellant is covered by the decision of ITAT, T Bench, Mumbai, in the case of Satish N. Doshi HUF Vs. ITO, Ward 21(2)(4), Mumbai in ITA No-2329/Mum/2009 and the decision of ITAT, 'E' Bench, Mumbai in the case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.l819/Mum/2012. Both the cases relate to re-opening of assessment on the basis of statements of Mr. Mukesh Choksi and Mr. I.C. Choksi and associated brokerage companies. The Hon'ble ITAT on the analysis of the findings made in the assessment orders has reached to the conclusion that the re-opening itself is bad in law and quashed the orders accordingly. The ratio of these judgments is applicable to the facts of the instant case. This is confirmed by the Delhi Bench of the Income Tax Appellate Tribunal in the case of DCIT v. Nipun Builders & Developers P. Ltd. (ITA No.557/DEL/2010) wherein the Tribunal dismissed the Revenue appeal by holding that the Assessing Officer has primarily relied upon the Report of the Investigation wing which cannot conclusively prove that assessee's own money was invested in the form of share application money. 5.12. Further, in the recent judgment of Shri.Jafferali K Rattonsey V. DCIT reported in 5068/Mum/209, the Mumbai Bench of the Income Tax Appellate Tribunal has also held that the mere statement of a person cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee specially when all other supporting evidences filed by the assessee were neither proved to be false or untrue. The Hon'ble ITAT Mumbai in the case of ITO vs Anand Shelters Pvt.Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits have evolved and has taken a definite shape. A few aspects of law u/s.68 can be enumerated. 1. Sec. 68 can be invoked when there is a credit of amounts in the books maintained by the assessee, such credit is a sum of money during the previous year and either the assessee offers no explanation about the nature and source of such credits or the explanation by the assessee in the opinion of the AO is not satisfactory.
23 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., 2. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be formed objectively with reference to the material on record. 3. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner. 4. The onus of proof is not static. The initial burden lies on the assessee to establish the identity and the credit worthiness of the creditor as well as the genuineness of transaction. 5. The identity of creditors an be established by either furnishing their PANs or assessment orders. The genuineness of the transaction can be proved if it was shown that the money was received by Account payee Cheque. Creditworthiness of the lender can be established by attending circumstances. 5.13. During the assessment proceedings, the appellant has submitted Loan Confirmations, Copy of Acknowledgement and Copies of the Bank Statements of these two parties. If the above referred principles are applied to the facts of the case under consideration, it can be seen that the identity of the creditors has been established as they are having PAN and they are regularly filing return of income. The genuineness of the transaction is established from the fact that both the acceptance and repayment of loan has been through banking channels. The creditworthiness of the lenders can be established from the statements. In the assessment order, the A.O. did not at all discuss the merit of submission made by the appellant and casually brushed aside the details filed by the appellant. Further, the appellant has stated that he had furnished all the relevant details during the course of the assessment proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. 5.14. Further, it may be pointed out that section 68 under which the addition has been made by the Assessing Officer reads as under-: "68. Where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee
24 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [1999] 237 ITR 570. 5.16. After considering the totality of facts, the rival submissions, the applicable law and on the basis of discussions mentioned above, I have come to the conclusion that nature and source of credit in the books of account of appellant stands explained. Consequently, addition u/s. 68 cannot be sustained. Therefore, A.O. is directed to delete the addition of Rs.1,27,50,000/-. This ground of appeal is allowed.” 8. On a careful reading of the order of the Ld.CIT(A), we do not find any infirmity in the order passed in deleting the addition made u/s. 68 of the Act and the consequential interest on the credits. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the Revenue.”
We also find that identical issue came up in the case of DCIT v.
Bairaga Builders Pvt. Ltd., reported in [2017] 51 CCH 107 in ITA.No. 4691
and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench
held as under: -
“6. We have heard the rival submissions along with the orders of the tax authorities below. We noted that during the impugned assessment year, the assessee had taken unsecured loans from the following two parties: Sr. Name of the Party and PAN Loan Rate of No Address taken(Rs.) Interest 1. Javda India Impex AAACA7065L 20,00,000 9% Limited CS-1, Silver Anklet, Yari Road, Versova, Mumbal 400 061 2. Lexus Infotech Ltd. AAACL4646G 20,00,000 9% 626, Panchratna, Opera House, Mumbai 400 002 When the Assessing Officer asked the assessee to prove the genuineness of these loans, the assessee submitted the following documents:
a. Copy of acknowledgment of income tax return filed for A.Y. 2007-08. b. Copy of PAN of the parties c. Copy of bank statement of the parties from where the cheque is issued. d. List of directors of the parties e. Copy of annual report of the parties for financial year 2006-07. f. Copy of loan confirmation from the parties.
The Assessing Officer treated these loans to be non-genuine and made addition u/s 68 of the I.T Act on the basis of the statement of Shri Nilesh Parmar, one of the
25 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., associate of Shri Praveen Kumar Jam, Director of Mohit International and one of the dummy Director of some of the companies of Shri Praveen Kumar Jam. Although said statement has been immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said addition as in his opinion the assessee has duly discharged his onus as laid down on it u/s. 68 of the I.T.Act. It was also noted by the CIT(A) that the assessee has proved the identity, credit worthiness as well as genuineness of the transactions and, therefore, no addition u/s. 68 can be made.
The learned AR before us relied on the order of the CIT(A) and has also pointed out that the loan received by the assessee has been returned to the respective parties through cheques and in none of the case the respective party has deposited any cash. He relied on the following Tribunal decisions:
• Arceli Realty Ltd vs. ITO [ITA No.6492/Mum/2016 dated 21.04.2017 (Mumbai)] • M/s Komal Agrotech Pvt. Ltd. vs. ITO [ITA No.437/Hyd/2016 dated 25.11.2016 (Hyderabad)] • Sudhanshu Suresh Pandhare vs. ITO [ITA No.5185/Mum/2012 dated 05.10.2016 (Mumbai)] • Dilsa Distributors Combines vs. ITO [ITA No.5849/Mum/2011 dated 06.09.2013 (Mumbai)] • Aim Properties & Investments Pvt. Ltd vs. Income Tax Officer [ITA No.7426/Mum/2012 dated 04.12.2013 (Mumbai]
He further placed reliance on the following judgments: Nemi Chand Kothari vs. CIT [2004] 136 Taxman 213 (Gau) Vijay Kumar Talwar vs. CIT [2011]330 ITR 1 (SC)
The learned DR, on the other hand, relied on the decisions of the Hon'ble Delhi High Court in the case of Principal CIT vs. Bikram Singh ITA.No. 55/2017 & CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. in ITA.No.525/2014. 9. We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark "left"/ "no such person". Under these circumstances, the Hon'ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions.
But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all
26 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the present case. 11. We have also gone through the decisions relied upon by the learned AR. We noted that this Tribunal in similar circumstances in the case of Komal Agrotech Pvt. Ltd. vs. ITO in ITA No. 437/Hyd/2016 vide its order dated 25.11.2016 has held as under: A plain reading of the assessment order demonstrates that the AO merely went by the Investigation done by the office of D G. I T (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the Assessee was brought on the record by the AO. Even the statement of Shri Praveen Kumar was supplied. Nothing is on record about the result If investigations done by DGIT (Inv), Mumbai. The papers filed by the assessee do demonstrate the identity, creditworthiness and genuineness of the transaction. The addition is made merely on surmises and conjectures. In view of the above, we hold that the addition made under section 68 of the Act is bad in law. We noted that in the said case also loan had been received from Javda India Impex Ltd. 12. Being consistent with the view taken by this co-ordinate Bench in the case of Komal Agrotech Pvt. Ltd. (supra), and in view of the facts and circumstances, we do not find any illegality or infirmity in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal. 13. In the result, the appeals filed by the Revenue are dismissed.”
Similarly, we find that in the case of M/s. Shree Laxmi Estate Pvt
ltd., v. ITO in ITA.No. 5954/Mum/2016 and M/s. Shree Laxmi Developers
v. ITO in ITA.No. 2562/Mum/2017 dated 29.12.2017, the Bench held that
once the assessee has discharged his initial burden the burden shifts to
the Assessing Officer to prove otherwise. The Coordinate Bench
considered the submissions as well as the material placed before the
lower authorities and concluded that when once the assessee furnished
all the details in respect of the loan transactions assessee has discharged
27 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., its initial burden and the burden shifts to the assessee. It was held that
no addition can be made only on the basis of information received from
the investigation wing without there being any evidences to disprove the
loan transactions from the creditors. While holding so, it has been
observed as under: -
“4. The first issue that came up for our consideration is addition made by the AO towards unsecured loan u/s 68 of the Act. The AO made addition towards unsecured loans alongwith interest thereon received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the ground that these are bogus accommodation entries received from group companies of Shri Pravinkumar Jain. According to the AO, the assessee is the beneficiary of accommodation entries provided by Shri Pravinkumar Jain from his bogus companies. The AO further observed that though the assessee has furnished details of identity, failed to prove genuineness of transactions and creditworthiness of the parties in the backdrop of clear findings of Investigation Wing that Shri Pravinkumar Jain has admitted that he was indulging in providing accommodation entries. This fact has been further confirmed by Shri Dinesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assessee that loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are supported by valid documents. The assessee further submitted that it has furnished confirmation letters alongwith copies of their bank statement and acknowledgement of IT returns showing the above transactions. The assessee further contended that in response to notices u/s 133(6) issued by AO, the above parties replied alongwith documents mentioned in the notice, therefore, there is no reason for the AO to doubt the transactions only on the basis of information received from Investigation Wing that too, without providing any opportunity of cross examination of the parties. In this regard, he relied upon plethora of judgements including the judgement of Hon’ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd 349 ITR 680 (Bom) and Hon’ble Supreme Court in the case of Lovely Exports Pvt Ltd vs CIT 216 CTR 295(SC). “5. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO made addition towards unsecured loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the basis of information received from Investigation Wing which revealed that the assessee is the beneficiary of bogus accommodation entries provided by Shri Praveenkumar Jain through his bogus companies. The AO has made additions u/s 68 of the Income-tax Act, 1961 on the ground that though the assessee has furnished necessary evidences to prove identity of the parties, but failed to establish genuineness of transactions and creditworthiness of parties in the backdrop of clear findings of Investigation Wing that those companies are hawala companies involved in providing accommodation entries. The AO has brought out facts in the light of statement of Shri Pravinkumar Jain deposed before the Investigation Wing to make addition. Except this, there is no contrary evidence in the possession of the AO to disprove the loan transactions from Josh Trading
28 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., Company Pvt Ltd and Viraj Mercantile Pvt Ltd. On the other hand, the assessee has furished various details including confirmation letters from the parties, their bank statements alongwith their financial statements to prove identity, genuineness of transactions and creditworthiness of the parties. The assessee also furnished evidences to prove that the parties have responded to the notices issued u/s 133(6) by AO by filing various details. The assessee also filed bank statements to prove that the said unsecured loans have been repaid in the subsequent financial years. Therefore, we are of the view that there is no reason for the AO to doubt the genuineness of transactions despite furnishing necessary evidences including their financial statements, bank statements and IT returns. 6. The AO has made addition u/s 68 of the Act, on the ground that the unsecured loans are bogus accommodation entries provided by Shri Pravinkumar Jain through his hawala companies. The provisions of section 68 deal with cases where any sum found credited in the books of account of the assessee in any financial year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. A plain reading of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden todis prove the said claim shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. We further notice that the assessee also filed financial statements of the creditors which are enclosed in paper book filed. On perusal of the financial statements filed by the assessee, we find that both the companies are active in the website of Ministry of Corporate Affairs. This fact has been further supported by the letter of AO wherein the AO has accepted that both companies, viz. Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are active in MCA website. We further notice that both the companies have filed financial statements for the year ending 31-03-2006. Therefore, we are of the considered view that the assessee has discharged its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise. In this case, the AO made addition only on the basis of information received from Investigation Wing, but not based on any evidence to disprove the loan transaction from above companies are ingenuine. Therefore, we are of the view that there is no reason for the AO to treat loans from above 2 companies as unexplained credits u/s 68 of the Act. ….. …. 11. In this view of the matter and considering the ratio of the case laws discussed above, we are of the considered view that the assessee has discharged identity, genuineness of transactions and creditworthiness of the parties. Therefore, there
29 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., is no reason for the AO to make addition towards loan u/s 68 of the Act. Hence, we direct the AO to delete addition made towards loans alongwith interest u/s 68 of the Act.”
Similar view has been taken by the Coordinate Bench in the case of
M/s. Shree Laxmi Developers v. JCIT in ITA.No. 6090/Mum/2017 dated
07.03.2018, wherein it has been held as under: -
“8. The next issue relates to the addition of loan of ₹.10.00 Lakhs taken from M/s. Falak Trading company P. Ltd, a company belonging to Praveen Kumar Jain who has confessed that he had provided only accommodation entries. A perusal of the record would show that the AO had issued notices u/s. 133(6) of the Act to the above said company and it has also furnished all the details, viz., confirmation, copies of financial statements, copies of income tax returns filed by it etc. and thus has confirmed the loan transactions. Thus, we notice that the assessee has also furnished the relevant details to prove the cash credits and the same has also been confirmed by the lender also in response to the notice issued by the AO U/s. 133(6) of the Act. 9. The assessee had taken loan from two of Praveen Kumar Jain’s group companies viz., M/s. Josh Trading Co P Ltd and M/s Viraj Mercantile Ltd in the year relevant to AY 2012-13. The AO had assessed the loan amounts on identical reasoning. We notice that the Coordinate Bench of ITAT has deleted the additions vide its order dated 239.12.2017 passed in ITA.No. 5954/Mum/2016, with the following observations: - … … Since the facts surrounding the present issue being identical with that examined by the Coordinate Bench in A.Y. 2012-13, consistent with the view taken therein, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to delete the addition of ₹.10.00 lakhs.”
The decision relied on by the Ld. DR in the case of CIT v. NRE Iron
and Steel (P.) Ltd (Supreme Court) is distinguishable on facts.
In view of what is discussed above, we uphold the order of the
Ld.CIT(A) in quashing the reassessment order and deleting the addition
made u/s. 68 of the Act.
30 ITA NO. 6311/MUM/2017 (A.Y: 2009-10) M/s. Re n Raga Media Pvt. Ltd., 26. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on the 09th May, 2019
Sd/- Sd/- (M. BALAGANESH) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai / Dated 09/05/2019 Giridhar, Sr.PS
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file.
//True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum