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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The above titled two appeals have been preferred by the Revenue against the orders even dated 14.03.2017 of the
2 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
ITA No.4446/M/2017 2. The issue raised in first ground of appeal is against the deletion of addition of Rs.2,25,00,000/- by Ld. CIT(A) as made by the AO under section 68 of the Act towards unsecured loan received from the group entities of Mr. Praveen Kumar Jain and two other parties and also against the deletion of disallowance on interest paid to the said parties to the extent of Rs.13,57,807/-.
The facts in brief are that the assessee filed the return of income on 28.09.2012 declaring income at nil which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny under CASS and statutory notices were issued and served upon the assessee. The assessee is engaged in the business of builders and developers. During the assessment proceedings, the AO observed that assessee has shown unsecured loans of Rs.5,48,59,386/- from 31 parties which is inclusive of fresh loans raised during the current financial year. Accordingly, the AO called upon the assessee to justify the fresh unsecured loans raised during the year along with copies of confirmations of loan and other supporting documents such as IT return, P & L account, balance sheet and bank statement etc. which were duly submitted by the assessee before the AO. The AO also, in order to verify these loans, issued notices under section 133(6) of the Act. However, no response was received from 5 parties namely M/s. Alka Diamonds, M/s. Nakshatara Business Pvt. Ltd., M/s.
3 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture Duke Business Pvt. Ltd., Shri Darshika R. More and M/s. Sarup Developers Pvt. Ltd. from whom the assessee raised Rs.2,25,00,000/- and interest on the said loans was paid to the tune of Rs.13,57,807/-. The AO further noticed that three parties namely M/s. Alka Diamonds, M/s. Nakshatara Business Pvt. Ltd. and M/s. Duke Business Pvt. Ltd. were related to Mr. Praveen Kumar Jain. The AO observed on the basis of information received from DGIT (Inv.), Mumbai that a search was conducted on Shri Praveen Kumar Jain under section 132 of the Act on 01.01.2013 and during the course of search proceedings Shri Praveen Kumar Jain stated on oath on 06.10.2013 that these three entities belonged to him and were engaged in the activities of providing accommodation entries in the form of unsecured loans and share application etc . The AO accordingly issued show cause notice to the assessee as to why the unsecured loans raised from the five parties including the ones related to Shri Praveen Kumar Jain should not be added to the income of the assessee along with the interest paid thereon which was replied by the assessee vide letter dated 30.03.2015 submitting therein that assessee has not received any bogus unsecured loans from entities related to Shri Praveen Kumar Jain and other two parties. The Ld. A.R. submitted that all these parties have confirmed the fact of loans having been advanced to the assessee by responding to the notice issued under section 133(6) though in the initial stage when the notices under section 133(6) were issued some parties did not respond whereas in some cases the notices were not served. The assessee also submitted that all the necessary evidences to prove the genuineness, creditworthiness and identifies of the parties, their
4 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture bank statements etc were filed before the AO. However, the reply of the assessee did not find favour with the AO and he ,after rejecting the contentions raised by the assessee, added the aggregate amount of loans of Rs.2,25,00,000/- as unexplained cash credit under section 68 of the Act and also disallowed the interest on the said unexplained loans to the tune of Rs.13,57,807/- by framing assessment under section 143(3) of the Act.
In the appellate proceedings, the Ld. CIT(A), after taking account the contentions and submissions of the assessee allowed the appeal of the assessee by observing and holding as under: “17. I have carefully considered the appellant's submissions, observations of the AO in assessment order and the facts of the case. The appellant had shown unsecured loans amounting to Rs. 5,48,59,386/- raised from 31 parties. Some of these loans were raised during the F.Y. 2011-12 relevant to assessment year under consideration. The AO asked the appellant to file explanation to establish the genuineness of the unsecured loans raised during the year like confirmation from the loan creditors alongwith supporting documentary evidence in the form of copy of I.T. return, bank statement of the creditors for the relevant period. The appellant submitted requisite information before the AO to establish the genuineness of the loans. However, the AO did not accept the appellant's explanation primarily for the following two reasons –
(1) The notices u/s. 133(6) of the I.T. Act sent to the loan creditors had been received back unserved in the case of two parties i.e. M/s. Nakshatra Business Pvt. Ltd. & Smt. Darshika R. More and the other three parties had not filed any reply in response to the notice u/s. 133(6) of the I.T. Act.
(2) In his statement recorded u/s. 132(4) of the I.T. Act Shri Praveen Kumar Jain had admitted that out of the above listed parties three parties namely M/s. Alka Diamonds, Nakshatra Business Pvt. Ltd. & Duke Business Pvt. Ltd. were being controlled by him and were engaged in the activity of providing accommodation entries. The appellant was one of the beneficiaries of receiving such entries from the three parties controlled by Shri Praveen Kumar Jain.
With regard to first point, the appellant has submitted that after receiving the show cause notice from the AO and coming to know that these parties had not responded to the AO's notice u/s. 133(6) of the LT. Act, the appellant contacted these parties and the parties filed confirmation of the loan alongwith, requisite
5 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture documentary evidence before the AO directly. This fact has not been denied by the AO. He has simply observed that filing of the reply directly by the creditors had been managed by the appellant with an intention to project the transactions as genuine. With regard to the statement of Shri Praveen Kumar Jain the appellant submitted that the same was retracted by him after filing affidavits of retraction and therefore no cognizance should have been taken of the statement of Shri Praveen Kumar Jain. It was further stated that in his statement Shri Praveen Kumar Jain had riever mentioned the name of the appellant as a party who had received accommodation entries from him or the business concerns controlled by him.
It has been held by various judicial authorities including the Hon'ble jurisdictional Mumbai High Court that in the case of a cash credit, the assessee has to establish the following three points –
(1) identity of the creditor; (2) capacity of the creditor to advance money; and (3) genuineness of the transaction.
In the case of the appellant on the basis of documentary evidence filed before the AO, a copy of which has again been placed on record as listed above, it is seen that identity of the creditors stood established on the basis of copies of confirmations/ copy of their PAN/ copies of ITRs filed. The creditworthiness of the creditors stood established on the basis of the copies of their bank accounts from where the loans were advanced to the appellant In fact the AO has analyzed the bank accounts of some of the creditors wherein he has observed that immediately before the amounts were advanced to the appellant there were credits in those bank accounts through account payee cheques. Therefore, it is not a case where there were any cash deposits in the bank account of the creditors before the loans were advanced. The genuineness of the transactions is not in doubt as all the loan transactions are through account payee cheques. Therefore, in terms of various case laws on the issue, as listed above in the appellant's submissions, the appellant had discharged its burden of filing the requisite documentary evidence. Further it is seen that no defect or deficiency has been pointed out by the AO in the documentary evidence filed by the appellant. The AO has merely relied on the statement of Shri Praveen Kumar Jain recorded u/s 132(4) of the Act which was retracted later on by filing affidavit of retraction. Therefore, addition u/s 68 could not have been made merely on the basis of a third party's statement without there being any corroborative documentary evidence.
On similar facts the CIT(A) - 44, Mumbai in the case of S.K. Developers in appeal bearing ITA No. 309/2015-16 for A.Y. 2007-08 vide his order dated 08.09.2016 has allowed the assessee's appeal. The facts of this case were as under –
"A search & seizure action was conducted in the Bhanwarlal 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 appellant has also taken loan from two concerns found in the list of
6 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture entry providers related with Bhanwarlal Jain group of cases namely M/s. Jewel Diam and M/s. Amit Diamonds."
The CIT(A) - 44, Mumbai allowed the appellant's appeal by holding as under-
"3.3 I have carefully gone through the assessment order as well as the written submission of the AR, I have also perused the details filed by the AR. The AO has made addition u/s. 68 of the IT Act 1961. It is therefore important to understand the position of law which has evolved from a catena of judgments delivered by High Courts and Tribunals on this issue. The Hon 'ble ITATMumbai in the case of JTO vs Anant 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.
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.
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.
Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a casual manner.
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.
The identity of creditors can 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 a/c payee cheque. Creditworthiness of the lender can be established by attending circumstances.
3.4 During the course of assessment proceedings, the following details were filed before the AO. 1. Loan Confirmation from the lenders. 2. PAN No. of the lenders. 3. Ledger extract 4. Copy of the Return of Income of the Firm / Company which advanced the loan. 5. Copy of Bank account of the Lender.
7 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture 6. Copy of Bank A/c of the assessee. 7. Quarterly Returns for T. D. S. filed with the Department.
3.5 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 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. Further the interest paid against such loans have been subject to TDS, the details of which have been filed before the AO. The creditworthiness of the lenders can be established from the ledger a/c, bank statements and balance sheet of the lenders which were filed before the AO.
3.6 In the assessment order, the AO did not at all discuss the merits of submissions made by the appellant and casually brushed aside the details filed by the appellant. Further, from a careful perusal of assessment order it is seen that no enquiry whatsoever has been conducted by the AO. AO did not make any independent verification which would bring in evidences against the identity and creditworthiness of the creditors and genuineness of the loan transactions. Instead the entire focus of the AO was to discuss the modus operandi adopted by Bhanwarlal Jain to provide bogus accommodation entry of loan. However, the moot point before the AO was to examine the application of section 68 in the case of the appellant. Instead of establishing that the explanation offered regarding the nature and source of credit in the books of the appellant is not satisfactory the AO went to discuss in detail the facts related with Bhanwarlal Jain group of cases. The AO has not appreciated the fact that he was not making assessment of Bhanwarlal Jain group of cases. On the other hand, the appellant was able to establish the identity and the creditworthiness of the creditors as well as the genuineness of transactions.
3.7 Recently the Hon 'ble Bombay High Court has passed an order in WP No. 167 of 2015 dated 15.04.2015 in the case of M/s. Rushabh Enterprise Vs ACIT 24(3) and Ors. In this case also the assessee had taken loan from concerns related with Bhanwarlal Jain group of cases. In fact, one such concern namely M/s. Jewel Diam also features in the case of the appellant. In its order the Hon'ble Bombay High Court in addition to deciding the legal validity of reopening of assessment also discussed the facts of the case. The Hon'ble Bombay High Court in para 8 of its order stated " ........ according to her (AO) the revenue has received information from the DGIT (Inv.) that the assessee has taken unsecured loans from the above parties by way of unaccounted cash / accommodation entries. We are unable to agree since the petitioner has clearly stated that all the payments were made by a/c payee cheques which were encashed in the bank account of the petitioner in the regular course of business. We find that the petitioner has also paid interest on these loans after deduction of tax at source and TDS returns are also accordingly filed. There is no dispute in regard to the above. We find nothing to support the said contentions of the revenue. The
8 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture revenue's contention in the affidavit in reply has no merit. On the other hand, the loans appear to be taken in the regular course of business ...........:
3.8 After considering the totality of facts, the rival submissions, 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 accounts of the appellant stands explained. Consequently, addition u/s. 68 cannot be sustained. The grounds of appeal no. 1 is accordingly allowed and addition of Rs. 39,51J38/- is deleted. "
Similarly, the CIT(A)-2, Thane in the case of S.S. Synthetics in ITA No. 71/15- 16 vide his order dated 27.02.2017 has allowed the assessee's appeal by holding as under - 5. I have carefully considered the facts of the case, findings of the AO, submission of the LdAR and material placed on record. From the facts of the case it is noticed that during the year the appellant claimed to had obtained unsecured loan ofRs 25 lakhs from JPK Trading (I) Pvt Ltd, through account payee cheques, vide cheque No 315948 drawn on Punjab National Bank (Rs 20 lakhs) and cheque No 315960, drawn on Punjab National Bank (Rs 5 lakhs). In view of the information received from the investigation wing, Mumbai, vide letter dated 07.03.2014, the case of the appellant was reopened it/s 147 of the Act. As per the tdetails stated in the said letter, a search action was carried out on 01.10.2013, on the business premises of the entities of Mr Praveen Kumar Jain, who was indulging in providing accommodation entries. In the said letter, it was stated that as per the statement given by Mr Praveen Kumar Jain, the appellant, M/s S S Synthetics, had obtained accommodation entries of unsecured loan of Rs 20 lakhs on 13.3.2007 and Rs 5 lakhs on 23.03.2007, through Punjab National Bank. In view of these facts, the AO resorted to issue a notice u/s 133(6) of the Act, to verify the genuineness of loan. However, the said letter was returned back un-served with the remarks "Unclaimed". Accordingly, the AO had asked the appellant to produce this party for verification, along with supporting documentary evidences. In compliance, the appellant stated that it had no legal authority to compel his presence and requested the AO to enforce his presence by taking necessary course, as per provisions of the Act, on the address supplied by the appellant. It is further stated that the appellant has filed all necessary documents such as confirmation letter, bank statement and other documents to establish the credit worthiness of the creditors. However, the AO rejected the claim with the plea that the appellant has failed to furnish credible documents in support of his claim of above loan and the investigation wing, Mumbai, has established the fact that Mr Praveen Kumar Jain has provided accommodation entries of above loan, hence not genuine transaction.
5.1 During the course of appellate proceedings, the Ld AR submitted that the appellant had furnished all credible documents such as confirmation, latest address of the creditor, copies of the ledger account, bank statement of creditor highlighting debit of unsecured loan of Rs 20 lakhs and Rs 5 lakhs on 15.3.2007 and 24.3.2007, bank statement of the appellant, highlighting
9 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture the corresponding amount credited on the respective dates, copies of bank statement of appellant highlighting the repayment of unsecured loan of Rs 10 lakhs on 08.01.2008, Rs 10 lakhs on 01.03.2008, Rs 2 lakhs on 05.03.2008 and Rs 5 lakhs on 22.01.2008, along with bank statement of creditor, highlighting corresponding receipt / credit of unsecured loan from the appellant ofRs 10 lakhs on 08.01.2008, Rs 5 lakhs on 22.01.2008, Rs 10 lakhs on 28.01.2008, and Rs 2 lakhs on 04.03.2008. Against the said loan it is contended that the interest was paid after necessary TDS and the said interest payment was declared as interest income by the creditor. In addition to above, the appellant has also raised additional grounds /plea by challenging reopening on the ground that the copies of statement of Mr Praveen Kumar Jain along with other documents were not provided to the appellant and accordingly challenged the reopening as well as re- assessment proceedings. It is further contended that no adverse view can be taken against the appellant, until and unless credible documents, for taking the above course, are made available to the appellant. It is further contended that the name of the creditor M/s JPK Trading(I) Pvt. Ltd. had changed to M/s Duke Business Pvt. Ltd. and the A.O. had not made any enquiry with changed name. Accordingly, it is prayed that the appellant has discharged its primary onus by furnishing complete mailing address, copy of confirmation, copy of ledger accounts, copies of bank statement of creditor as well as appellant, highlighting the receipt of loan for the year and also copies of bank statement of the appellant as well as creditor, for the subsequent period, highlighting the entries of repayment of loan in bank account of both parties, therefore, requested for deletion of above addition. 5.2 The above facts were verified and noticed that copy of ledger accounts, copy of bank statements for the year in which loan was taken and the year in which loan was repaid along with interest, etc., are duly reflected in the accounts of both parties. It is further noticed that in-spite of specific request of the appellant the AO has not summoned the creditor at new address, given during the course of assessment proceedings. It is further noticed that it was the department which has recorded the statement of creditors and accordingly would have summoned him, in the presence of the appellant for cross verification and rebuttal of the above loans. The AO has not brought any material on record, to dislodge the above debit and credit entries about the receipt and repayment of loan, in the bank account of both the parties, i. e. creditor as well as appellant. The A O has also not provided copies of the statement about exact wording about the nature of entries provided to the appellant, in respect of the above transactions. As per the details submitted by the appellant, it is crystal clear that the appellant has discharged. its onus by furnishing the required information as per provisions of Sec 68 of the Act. It is further noticed that the creditor is assessed to tax and the ROI, wherein the above transaction, along with interest income shown, has duly been accepted by the Department. Moreover, on perusal of the bank statement of the creditor, it is noticed that there was sufficient balance before the issue of cheques of Rs 20 lak and Rs 5 lakhs in favour of the appellant and there was no cash deposit, prior to the issue of cheques, in the account of the creditor. In the case of Nemi Chand Kothari Vs CIT, 264 ITR 254, Gulshan Verma Vs DCIT (Central) Kolkatta, 155 ITD 140 and so on,
10 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture relied by the appellant, on account of similar set of circumstances, the loans were accepted as genuine. Considering the facts in entirety, in my considered opinion, the appellant has discharged the onus, casted upon him, to prove the genuineness and creditworthiness of creditors. Keeping in view the above facts, in my considered opinion, the addition of Rs 25 lakhs, made u/s 68 of the Act, is not justified, and accordingly deleted. Both the grounds of appeal, raised as above, are allowed. 23. In this case the "entry provider" was the same i.e. Shri Praveen Kumar Jain, in whose case search action on 01.10.2013 had been carried out and the creditor party is also one of the same parties as in the case of the appellant i.e. M/s. Duke Business Pvt. Ltd. (earlier name M/s. J.P.K. Trading Pvt. Ltd.).
Therefore, in view of the fact the appellant had discharged its burden of filing the requisite documentary evidence, relying on various judgments of the higher judicial authorities as listed above in the appellant's submissions, decision of the Hon'ble Mumbai HC in the case of M/s Rushabh Enterprises vs ACIT 24(3) and Ors. in WP No. 167 of 2015 dated 15.04.2015 (supra) and appellate orders of my colleagues CIT(A)-44 Mumbai and CIT(A)-II, Thane as reproduced above, it is held that the AO was not justified in making the addition u/s, 68 on account of unexplained cash credits in respect of amounts received from the above listed five parties. The AO is therefore, directed to delete the addition of Rs.2,25,00,000/- made in the appellant's case u/s. 68 of the I.T. Act.”
The Ld. D.R. submitted before the Bench that assessee during the year raised money from five parties to the extent of Rs.2,25,00,000/- on which interest was paid to the extent of Rs.13,57,807/-. Out of the said parties three were related to Shri Praveen Kumar Jain a leading hawala operator who during course of search admitted in the statement under section 132(4) of the Act that all the three entities from whom the assessee have borrowed money namely M/s. Alka Diamonds, M/s. Nakshatara Business Pvt. Ltd. and M/s. Duke Business Pvt. Ltd. were engaged in the business of providing accommodation entries only and therefore the order passed by Ld. CIT(A) deleting the additions is totally wrong and deserves to be reversed. So far as the remaining two parties namely Shri Darshika R. More and M/s. Sarup Developers Pvt. Ltd. are concerned, the Ld. A.R. submitted that even in those cases the
11 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture notice was returned unserved whereas in the case of M/s. Sarup Developers Pvt. Ltd. no response was received.
The Ld. D.R. submitted that mere filing of confirmations from the lenders, their profit & loss account, IT returns and balance sheet along with copies of bank statements would not automatically prove the genuineness and creditworthiness of these transactions and therefore the same were wrongly deleted by the Ld. CIT(A). The Ld. D.R. submitted that the AO even issued notices under section 133(6) of the Act which were either returned unserved in case of two parties namely Shri Darshika R. More and M/s. Nakshatara Business Pvt. Ltd. and in the case of remaining three parties namely M/s. Alka Diamonds, M/s. Duke Business Pvt. Ltd. and M/s. Sarup Developers Pvt. Ltd. no responses were received. However, when the same was confronted to the assessee and the assessee took up the matter with these these parties, they responded to the notices issued under section 133(6) by filing the necessary details. The ld DR submitted that the case of the assessee is clearly by the proviso to section 68 of the Act which was introduced from 1st April, 2013 but application to the current assessment year. The Ld. D.R. pointed out that despite all these facts the transactions remained unverified and doubtful and therefore the order of Ld. CIT(A) may kindly be reversed. The Ld. D.R. relied on the following decisions: 1. Pr, C.I.T.fCentral)-1 vs NRA IRON & STEEL PVT.LTD. CIVIL APPEAL NO OF 2019 (Arising out of SLP (Civil No.29855 of 2018 ) SUPREME COURT recent decision dated 05th March 2019 2. Pr.CIT -6 .New Delhi vs NDR Prompters Pvt Ltd ITA 49/2018 of Hon'ble Delhi High Court dated 17.01 .2019 3. CIT Vs Navodaya Castle Pvt Ltd F20141 367 ITR 306 (Del) 4. Navodava Castle Pvt Ltd Vs CIT (2015-TIOL-314-SC-IT)
12 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture 5. CIT Vs MAP Academy (P.) Ltd (361 ITR 258) 6. Rick Lunsford Trade & Investment Ltd Vs CIT (2016] 385 ITR 399 (Cal) 7. Rick Lunsford Trade & Investment Ltd Vs CIT (2016-TIOL-207-SC-IT (Supreme Court) 8. CIT Vs Nipun Builders & Developers (P.) Ltd (30 taxmann.com 292, 214 Taxman 429, 350 ITR 407, 256 CTR 34) 9. CIT Vs Nova Promoters & Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169. 252 CTR 187) 10. CIT vs. Ultra Modern Exports (P.) Ltd (40 taxmann.com 458, 220 Taxman 165) 11. CIT vs. Frostair (P.) Ltd. (26 taxmann.com 11, 210 Taxman 221) 12. CIT vs. N.R. Portfolio Pvt. Ltd. (2013) 29 taxmann.com 291 (Delhi)/(2013) 214 Taxman 408 (Delhi/(2013) 263 CTR 456 (Delhi) 13. CIT Vs Empire Builtech (P.) Ltd (366 ITR 110) 14. CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/f2015] 228 Taxman 15. N K Proteins Ltd Vs CIT (2017-TIOL-23-SC-IT) 16. NK Proteins Ltd Vs CIT (2016-TIOL-3165-HC-AHM-IT)
The Ld. A.R., on the other hand, relied heavily on the order of Ld. CIT(A) by submitting that the assessee has duly proved the three ingredients as envisaged by the provisions of section 68 of the Act namely genuineness, creditworthiness of the transactions and identities of these parties by filing the necessary evidences and proofs in the form of confirmations from the lenders, their bank statements, ITRs, profit & loss accounts and balance sheets. The Ld. A.R. submitted that even the notices issued under section 133(6) which were not responded in the case of three parties namely M/s. Alka Diamonds, M/s. Duke Business Pvt. Ltd. and M/s. Sarup Developers Pvt. Ltd. and were returned unserved by the postal authority with the remark non known notices to the remaining two parties namely Shri Darshika R. More and M/s. Nakshatara Business Pvt. Ltd were duly responded by these parties later on. The Ld. A.R. submitted that when the AO confronted the assessee with the said facts the assessee got in touch with those parties and those parties filed their replies along with
13 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture confirmations and other requisite documents before the AO. So far as the statement of Shri Praveen Kumar Jain is concerned, the Ld. A.R. submitted that the said statement was retracted by Shri Praveen Kumar Jain by filing the affidavit before the Revenue Authorities and therefore no cognizance could be taken of the statement recorded under section 132(4) which is no more in existence. Lastly the ld AR brought to the notice of the bench that in the subsequent years these loans were even repaid by account payee cheques. The Ld. A.R. submitted that since all the requirements of section 68 were satisfied, therefore the order of Ld. CIT(A) may to be affirmed. In defense of his arguments the ld AR relied on a series of decisions: 1. ITO-4(3)(1), Mumbai vs. Nityanand Industries Pvt. Ltd, ITA Nos.4277 & 4278/M/2017. 2. ACIT 32(1), Mumbai vs. M/s. Gujarat Estate, ITA No.3 1 84/M/2017. 3. D.C.I.T Circle - 5(2)(2) vs. M/s. Manish Flour Mills Pvt. Ltd, ITA No.6729/MUM/2016. 4. Commissioner of Income Tax - 1 vs. M/s. Gagandeep Infrastructure Pvt. Ltd, Bom HC (ITA -1613 of 2014). 5. Commissioner of Income Tax vs. Lovely Exports 2016 CTR 195 (SC). 6. Dy. Commissioner of Income Tax vs. Rohini Builders (2002) 256 ITR 360 Gujarat HC 7. Rohini Builders vs. Dy. Commissioner of Income Tax ITAT Ahmedabad (2001) 117 Taxmann 25. 8. Pr. Commissioner of Income Tax - 13, Mumbai vs. Veedhata Tower Pvt Ltd. Bombay 8. HC, ITA -819 of 2015. 9. Income Tax Officer 9 (1) - 1 vs. Anant Shelters (P.) Ltd, (2012) 20 Taxmann 153 Mumbai ITAT 10. Shri Naresh Hiran vs. Income Tax Officer 30 (2) (4), Mumbai, ITA: 1236 / Mum / 201 7, ITAT Mumbai 12. Assistant Commissioner of Income Tax 25 (2), Mumbai vs. H K Pujara Builders, ITA , 1056/Mum/2016,ITATMumbai 13. Income Tax Officer 25 (3) (5), Mumbai vs M/s Vikram Muktllal Vora, ITA: 842 / Mum 2017 ITAT Mumbai. 14. M/s. Reliance Corporation, Mumbai vs. Income Tax Officer, ITA No. 1 069 to 1071/Mum/2017 15. Sanghvi Realty Pvt. Ltd. , Mumbai vs. DCIT Circle 5(3)(1), ITA No.30l8/Mum/2017 ITA No.3019/Mum/201 7, ITA No.3020/Mum/2017 16. Income Tax Officer 32 { 1 )(5), Mumbai vs. Gujarat Construction, 1TAT Mumbai
14 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture 17. Rushabh Enterprises vs. ACIT 24(3), Mumbai, 60 Taxmann.com 134 (Bom) (2015) 18. Dy. Commissioner of Income Tax, Surat vs. M/s. Rohini Builders, SLP, Supreme Court. 19. ACIT Mumbai vs. M/s. Gujarat Estate, (ITA: 6990/Mum/2016) G Bench, Order dated 18.05.2018. 20. ITO - 32 (2) (5), Mumbai vs. Payal Nitesh Hedpara, (ITA: 4668 / Mum / 2017) SMC Bench, Order dated 17.05.2018. 21. ITO - 32 (2)(3), Mumbai vs. Manjula B Hedpara, (ITA: 4669 / Mum / 2017) SMC Bench, Order dated 17.05.2018. 8. We have heard the rival submissions of both the parties and perused the material on record including the impugned order of the Ld. CIT(A). The undisputed facts are that during the year the assessee took unsecured loans from five parties out of which three parties were related to Shri Praveen Kumar Jain group whereas the other two parties were unrelated parties. During the course of assessment proceedings, the assessee filed the copies of confirmations from the lenders, their bank statements, ITRs, audited annual accounts etc. to prove the genuineness, creditworthiness of the transactions and identities of the parties and even the notices issued under section 133(6) were not responded by three parties namely M/s. Alka Diamonds, M/s. Duke Business Pvt. Ltd. and M/s. Sarup Developers Pvt. Ltd. whereas the notices were not served to two parties namely Shri Darshika R. More and M/s. Nakshatara Business Pvt. Ltd. The AO has rejected the contentions of the assessee in respect of three parties related to Shri Praveen Kumar Jain on the ground that Shri Praveen Kumar Jain admitted in the statement recorded under section 132(4) of the Act that these were entities were engaged in issuing accommodation entries only without doing any real business. Whereas in respect of other two, the AO treated them as non genuine on the ground that notices under section 133(6) were
15 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture not replied or served. Whereas on the other hand we observe from the records before us that Ld. CIT(A) has given a finding of fact to this effect that the responses to the notices issued under section 133(6) were duly filed by these parties when the fact of non services/non reply was confronted to the assessee though the same were responded by these parties when assessee perused the matter with them. We also note that the the unsecured loans were repaid in the subsequent years. However, the AO has not conducted any further enquiry on the information filed by the assessee and these lenders in order to verify these transactions vis-à-vis informations furnished by the assessee or as received from the lender of the assessee. Moreover, in the statement recorded under section 132(4) of Shri Praveen Kumar Jain the said person nowhere named the assessee or claimed that the assessee is a beneficiary of these accommodation entries. Moreover the AO has relied on the statement of Shri Praveen Kumar solely to make the addition which stood retracted by him. The decisions relied upon by the Ld. D.R. are carefully perused and we observe that the same are distinguishable facts and not applicable to the present case. We also find that that the Hon’ble Bombay High in the case of CIT Vs Gagandeep Infrastructure Pvt Ltd. (supra) has held that the proviso is applicable from AY 2013-14. Moreover the case of the assessee is clearly covered by the various decisions referred to by the ld AR. Under these facts and circumstances, we are of the view that the order passed by Ld. CIT(A) is very reasoned and speaking order and department has failed to bring on record anything contrary to findings of the ld CIT(A) . Thus we do not find any infirmity in the order or ld CIT(A) to deviate from the
16 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture conclusion reached by the appellate authority. Accordingly, we are inclined to uphold the order of Ld. CIT(A) by dismissing the appeal of the Revenue on this issue.
Since we have upheld the order of Ld. CIT(A) wherein the Ld. CIT(A) has deleted the addition of Rs.2,25,00,000/- in respect of unsecured loans, consequently the deletion of disallowance of interest paid on these unsecured loans of Rs. 13,57,807/- is also upheld and the ground of the revenue is also dismissed.
ITA No.4447/M/2017 10. The issue involved in the present appeal is identical to the one as stated above in ITA No.4446/M/2017 for A.Y. 2012-13. Therefore, our finding in ITA No.4446/M/2017 for A.Y. 2012-13 would, mutatis mutandis, apply to this appeal as well. Accordingly the appeal of the Revenue is dismissed.
In the result, both the appeals of the Revenue are dismissed.
Order pronounced in the open court on 26.04.2019.
Sd/- Sd/- (Mahavir Singh) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 26.04.2019. * Kishore, Sr. P.S.
Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai
17 ITA No.4446/M/2017 & ITA No.4447/M/2017 M/s. Span Venture The DR Concerned Bench //True Copy// [ By Order
Dy/Asstt. Registrar, ITAT, Mumbai.