Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI O.P. MEENA, HONBLEShri Joit Kumar B. Jain
O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)–32, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 29.06.2017 for the Assessment Year 2010-11 in deleting the addition made u/s. 68 of the Act towards unsecured loans and interest thereon relating to said unsecured loans.
(A.Y: 2010-11) Shri Joit Kumar B. Jain 2. Briefly stated the facts are that, the Assessing Officer in the course of the assessment proceedings to ascertain the genuineness of the unsecured loans taken by the assessee, notices u/s. 133(6) of the Act were issued to the following parties from whom the assessee had taken unsecured loans:
Name of the party from SI No Amount whom loan was taken 1 M/s Max India Diamond 2,11,72,250 2 M/s Xess Gems 30,27,675 M/s Namokar Impex Pvt 3 52,84,625 Ltd 4 M/s Kothari Impex 77,04,187 5 M/s Mangalam Gems 35,95,287 6 M/s Ratan Gems 2,48,06,432
3. The notices sent to the parties in Sl.No. 1 to 5 were returned unserved from postal authorities and no reply was received from the party in Sl.No.6. The Assessing Officer issued show cause notice to assessee to explain as to why the said unsecured loans should not be added u/s.68 of the Act as unexplained cash credit. In response to the said show cause notice the assessee furnished the following information to prove the identity, creditworthiness of the creditors and the genuineness of the transactions: -
(i) Dinesh Gupta Prop. Max India Diamond i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him. iii. Copy of ledger account of the lender in assessee books iv. Copy of PAN Card of the lender
(A.Y: 2010-11) Shri Joit Kumar B. Jain (ii) Sunil D Panwar Prop. Xess Gems i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him iii. Copy of ledger account of lender in my books iv. Copy of confirmation of the lender as per his books of account (iii) Namokar Impex P Ltd. i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing loan given by him iii. Copy of ledger account of the lender in my books iv. Copy of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender (iv) Viiav Kothari Prop. Kothari Impex i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing the loan given by him iii. Copy of ledger account of the lender in assessee books iv. Copy of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender vi. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department much earlier vii. Copy of audited schedule of loans & advances in the books of the above lender (v) Sanwala Kumhar Prop. Mangalam Gems i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing the loan given by him iii. Copy of ledger account of the lender in assessee books iv. Copy of PAN Card of the lender (vi) Kamlesh B Jain Prop. Ratan Gems i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing the loan given by him iii. Copy of confirmation of the lender as per his books of accounts iv. Copy of PAN Card of the lender
4. Not convinced with the above evidences furnished by the assessee, the Assessing Officer treated the unsecured loans as unexplained cash credit u/s. 68 of the Act and added to income of the assessee. Assessing Officer also disallowed interest on the said loans and added to assessee’s income. The reason given by the Assessing Officer for treating the (A.Y: 2010-11) Shri Joit Kumar B. Jain unsecured loans as unexplained cash credit is that the creditors have shown only meager income, creditors have filed truncated bank statements which throw no light on sources, no proof filed to show that the individual is the proprietor of his concerns. With these observations the Assessing Officer concluded that it is not possible to arrive at positive satisfaction about the essential ingredients of identity, genuineness and creditworthiness of the loan transactions from the evidences filed by the assessee.
5. Before the Ld.CIT(A) the assessee furnished following further information under Rule 46A of the I.T. Rules.
(i) Dinesh Gupta Prop. Max India Diamond i. Copy of confirmation of the lender as per his books of account ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier iii. Copy of Audited schedule of loans & advances in the books of the above lender given by him (ii) Sunil D Panwar Prop. Xess Gems i. Copy of PAN Card of the lender (additional evidence submitted on 04.03.2014) ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier iii. Copy of Audited schedule of loans & advances in the books of the above lender (iii) Namokar Impex P Ltd. i. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department earlier ii. Copy of audited schedule of loans & advances in the books of the above lender (iv) Sanwala Kumhar Prop. Mangalam Gems i. Copy of confirmation of the lender as per his books of accounts
(A.Y: 2010-11) Shri Joit Kumar B. Jain ii. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department much earlier iii. Copy of audited schedule of loans & advances in the books of the above lender (v) Kamlesh B Jain Prop. Ratan Gems i. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department much earlier ii. Copy of audited schedule of loans & advances in the books of the above lender
6. The assessee explained before the Ld.CIT(A) that during the course of assessment proceedings since his mother was unwell and hospitalized, (ultimately passed away on the date of completion of assessment on 26.03.2013) the assessee could not furnish the above information before the Assessing Officer and requested to admit additional evidences and consider the same while deciding the appeal. The Ld.CIT(A) called for remand report from the Assessing Officer by sending the additional evidences to Assessing Officer. During the remand proceedings assessee once again furnished all the above details and submitted that as he has produced confirmations from all the lenders, income tax particulars of all the lenders including PAN details have been furnished, the identity of the lenders remained established. As far as genuineness of the transaction is concerned, it has been submitted that all the transactions have been made through banking channels, source of credits has been proved and therefore genuineness of the transaction have been proved. In so far as creditworthiness is concerned, it has been submitted
(A.Y: 2010-11) Shri Joit Kumar B. Jain that assessee has furnished the bank statements of the creditors and audited financial statements to prove that creditors have enough credit in their accounts to advance loans to assessee from explained sources and therefore creditworthiness of the lenders is proved. It was also submitted that it is well settled principle that assessee need not prove the source of the source.
The Assessing Officer, however, in his remand report rejected the contentions of the assessee stating that the creditors were not produced, notices u/s. 133(6) of the Act were returned unserved. He also stated that sufficient opportunity was given to assessee to produce the evidences and therefore the additional evidences filed by assessee should not be admitted.
8. The Ld.CIT(A) considering the submissions of the assessee, evidences furnished, remand report of the Assessing Officer and reply to remand report by the assessee deleted the addition made u/s. 68 of the Act.
9. Ld. DR vehemently supported the orders of the Assessing Officer. He further submitted that, the notices issued to the parties have come back without service and the assessee could not produce the parties for verification and thus the assessee has not proved the identity,
(A.Y: 2010-11) Shri Joit Kumar B. Jain creditworthiness and genuineness of the transaction hence the Assessing Officer is quite justified in treating the said transactions as non-genuine and bringing the same to tax u/s. 68 of the Act. He strongly placed reliance on the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., [102 taxmann.com 182].
10. On the other hand, Ld. Counsel for the assessee submits that the assessee has filed all the details necessary in respect of these loans obtained from the creditors. It has been submitted that loans have been received through account payee cheques, confirmations from all the creditors containing name, address, PAN details, date of receipt of the loan, mode of payment by the loan creditors have been furnished, Tax Audit report of the creditors, ledger copy of the creditors, bank statements of the creditors, audited balance sheet of creditors reflecting the loans and advances in their books, computation of income, acknowledgement of return were furnished. Further, the Ld. Counsel for the assessee referring to Page Nos. 79 to 95 of the Paper Book submitted that three creditors have responded to the notices issued u/s. 133(6) of the Act by filing confirmation of accounts, acknowledgment computation of income in proof of filing return, copy of bank statements reflecting the transactions with the assessee, Ledger copy of the assessee firm M/s Dicen Industries in the books of the creditors. Therefore, Ld. Counsel for the assessee
(A.Y: 2010-11) Shri Joit Kumar B. Jain submitted that all these evidences prove that these loan transactions are genuine.
11. Ld. Counsel for the assessee in respect of identity of the lenders submitted that, the assessee has proved the identity of the parties by furnishing loan confirmations with name, address, PAN and also acknowledgment of filing the return of Income for the relevant year. The assessee has filed bank statements of all lenders evidencing payments to the appellant. This also establishes the existence of the parties proving their identity. Ld. Counsel submitted that as regards the observation of the A.O that assessee has not proved that lender is the proprietor of the concern from which loan has been taken, it is submitted that, PAN which was furnished by the assessee was issued by the department in personal name and name of the proprietary business of the PAN holder is not required to reflect in PAN card.
Ld. Counsel for the assessee in respect of genuineness of the transaction submitted that the assessee has proved the genuineness of the transactions of loans from all the six lenders by furnishing bank statements of all lenders evidencing payments to the assessee. The lenders have given loans by crossed account-payee cheques and they are reflected in their audited books of account for which they have filed their respective returns of income. The Assessee has also deducted TDS
(A.Y: 2010-11) Shri Joit Kumar B. Jain on interest, assessee also proved the genuineness by proving that the interest received by the lenders were offered to taxation for the relevant year. Ld. Counsel for the assessee further in respect of creditworthiness of the lender submitted that the assessee has proved the creditworthiness of all the lenders who lent amounts to the assessee by furnishing Part B of Tax Audit Report, giving summary of Balance Sheet and Profit and Loss Account filed with Revenue along with schedules of loans granted containing name of assessee. The transactions appear in the books of lender and loans are reflected in the tax audit reports filed by the lenders. Therefore, it has been argued that the assessee has established the identity, genuineness and creditworthiness of the creditors and primary onus cast on the assessee has been discharged. It is further submitted that the Assessing Officer disregarded all the evidences and proofs furnished by the assessee and no further enquiries have been made to disprove the evidences furnished by assessee.
Ld. Counsel for the assessee submitted that the Hon'ble Supreme Court in the case of CIT v. Orissa Corporation Pvt. Ltd., (159 ITR 78) held that the assessee is required to prove (i) identity of the lender/party, (ii) the genuineness of the transactions and (iii) the credit worthiness of the lender/party. Ld. Counsel for the assessee submitted that it is the case of the assessee that where the identity of the parties and their capacity is (A.Y: 2010-11) Shri Joit Kumar B. Jain established, the initial burden which lies upon the assessee can be said to have been discharged by the assessee. It will not, thereafter, be for the assessee to explain further how or in what circumstances the third party obtained money and how or why he came to make a deposit of the same with the assessee. The burden will then shift on to the A.O. to show why the assessee's case cannot be accepted and why it must be held that the entry, though purporting to be in the name of a third party, still represents the income of the assessee from a suppressed source. In order to arrive at such a conclusion, the A.O. has to be in possession of sufficient and adequate material. In this respect, the assessee relies on the decision of the Bombay High Court in the case of Orient Trading Co. Ltd. vs. CIT (49 ITR 723) and the decision of the Patna High Court in the case of Sarogi Credit Corporation vs. CIT (103 ITR 344).
Ld. Counsel for the assessee also relied on the following decisions in support of his contentions: - (i) Nemi chand Kothari v. CIT (136 Taxman 213 (HC Gau.), (ii) Orient Trading Co. Ltd. v. CIT (49 ITR 723) (iii) Sarogi Credit Corporation v. CIT (103 ITR 344) (iv) CIT v. Vrindavan Pvt. Ltd., in ITA.No. 71 of 2015 dated 12th August, 2015 (v) Northern Bengal Jute Trading Co. v. CIT 970 ITR 407) (vi) LajwantiSial & Others v. CIT (30 ITR 228)
We have heard the rival submissions, perused the orders of the authorities below. On a perusal of the Assessment Order, we find that Assessing Officer made addition u/s. 68 of the Act mainly on the ground (A.Y: 2010-11) Shri Joit Kumar B. Jain that the creditors have not responded, only meager incomes were shown by the creditors, truncated bank statements were filed and assessee has not proved that the lender is proprietor of the concern from which loan has been taken by the assessee.
16. In the course of the assessment and Appellate Proceedings the assessee furnished the following details in respect of the creditors: i. Copy of acknowledgement of the return of income filed by the lender ii. Copy of the bank statement of the lender evidencing the loan given by him iii. Copy of ledger account of the lender in assessee books iv. Copy of confirmation of the lender as per his books of accounts v. Copy of PAN Card of the lender vi. Copy of Annexure being Part B of Tax Audit Report giving summary of Balance Sheet & Profit & Loss account which was filed by the lender to the department much earlier vii. Copy of audited schedule of loans & advances in the books of the above lender
The Assessing Officer not convinced with all the above evidences furnished by the assessee treated the loan transactions as non-genuine simply stating that creditors have not responded, creditors have shown less incomes in their returns, no proof filed to show that the individuals are proprietors of the said concerns from which loans have been taken were given and truncated bank statements were filed.
We find that all these submissions and evidences were considered by the Ld.CIT(A) and deleted the addition observing as under: - “5.4.1 From the submission I find that during the assessment proceedings AR of the appellant furnished various details before the AO vide his letter dated 18.03.2013, 20.03.2013 and 21.03.2013 regarding the loan creditors being copy
(A.Y: 2010-11) Shri Joit Kumar B. Jain of acknowledgement of return of income filed by them, extract of their bank statements, copies of their balance sheet, profit and loss account, and their confirmations. To verify the details A.O. asked to produce the loan creditors. The appellant remain failed to produce the parties before the A.O. Before me, the appellant submitted that whatever possible he could do, he had done the same. The appellant submitted that mother of the appellant was sick and she was hospitalized and she ultimately died on 26.03.2013 on which day the assessment order was passed. 5.4.2 The appellant came up with an application under rule 46A, submitting further information and submitted that he could not produce further evidence as his mother was sick and she was hospitalized for which necessary evidence has been filed by the appellant. I find that appellant was prevented by sufficient cause in not submitting some details for justifiable reason of his mother being admitted to the hospital and hence the same are admitted. The appellant also filed various other details of the loan creditors. The same were sent to the A.O. and his remand report was called for. The A.O. has submitted remand report vide letter dated 16.01.201 7 which was handed over to the representative who has filed reply to the same. It is found that various information and details were filed in remand proceedings by the appellant during the course of remand proceedings and the appellant has given reply to the remand -report which is incorporated here. From the submissions I find that all the lenders having PAN and are assessed to tax. They have made payments by account payee cheques. They have paid interest by payee account cheques. They have all filed their copy of return of income, balance sheet, annual accounts and their bank statements and the A.O. has not given any evidence to contravene the same. The AO has merely come to the conclusion that the parties had no capacity to lend the amounts as they had filed their return of income with a small amount of income as discussed in para 6 of the assessment order. It may be noted that the declaration of annual nominal income does not in any way indicate that the party had no capacity to lend the amount particularly when the balance sheet was filed and the transactions was confirmed by the creditors by filing the same with the authorities.”
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".
(A.Y: 2010-11) Shri Joit Kumar B. Jain 20. 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.
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) 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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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."
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.
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 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.
We have considered the submissions.
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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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.
(vi) The identity and addresses of sub creditors was also available.
14. 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
(A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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.”
24. 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.
(A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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.
(A.Y: 2010-11) Shri Joit Kumar B. Jain 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.
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.
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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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.”
25. 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: -
(A.Y: 2010-11) Shri Joit Kumar B. Jain “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 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.
7. 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]
(A.Y: 2010-11) Shri Joit Kumar B. Jain 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.
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 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 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.
(A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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 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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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. ….. ….
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 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 (A.Y: 2010-11) Shri Joit Kumar B. Jain 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.”
In the case on hand we find that, the assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details as stated in earlier paragraphs and thus the assessee has discharged identity, genuineness and creditworthiness of the creditors. The Assessing Officer has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer to disprove the evidences furnished by the assessee.
In so far as the decision of the Hon'ble Delhi High Court in the case of PCIT v. NDR Promotors Pvt. Ltd., (supra) relied on by the Ld.DR, we are of the view that this decision is not applicable to the facts of the case on hand. In the case before Hon'ble Delhi High Court, it was found that cash was deposited in the bank account of one of the shareholder company and thereafter it was transferred/circulated within the group companies before the cheque is issued to the beneficiaries. It is also noted (page-14, para-12) that the shareholder companies (five in numbers) were (A.Y: 2010-11) Shri Joit Kumar B. Jain all located at the common address i.e. 13/34 WEA, Fourth Floor, Arya Samaj Road, New Delhi. In that situation, Hon'ble Delhi High Court reached to a conclusion that the transactions are sham and make believe. It is clear that the facts in the case of NDR Promoter Pvt. Ltd., relied upon by the Ld. DR, are not similar and are distinguishable. No such finding is given by the A.O in the case on hand and we find that the A.O has not made any sort of enquiries except issuing notices u/s. 133(6) of the Act to the creditors. Since facts are completely different in the case of PCIT v. NDR Promotors Pvt. Ltd. (supra), we are of the view that this decision has no help to the Revenue’s case.
In view of what is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee has discharged his onus of proving the identity, genuineness and creditworthiness of the creditors and fulfilled the requirement of ingredients of section 68 of the Act. Thus, the addition made u/s. 68 of the Act without any enquiry is liable to be deleted. Thus, we direct the Assessing Officer to delete the addition made u/s. 68 of the Act.
As we have deleted the addition made u/s. 68 of the Act the consequential addition which was made by the Assessing Officer in respect of interest expenses on such loans will not survive and the Assessing Officer is directed to delete this addition.
(A.Y: 2010-11) Shri Joit Kumar B. Jain 32. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on the 05th April, 2019