DEPUTY COMMISSIONER OF INCOME TAX 15(1)(1), MUMBAI vs. EVEREST AANGAN PRIVATE LIMITED, MUMBAI

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)–24, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 07.11.2017 for the Assessment Year 2012-13 in deleting the addition made u/s. 68 of the Act towards unsecured loans and disallowance of commission expenses relating to said unsecured loans.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 2. Briefly stated the facts are that, pursuant to search/survey action in the case of Shri Praveen Kumar Jain [for short “PKJ”] and based on the information received from the DGIT(Inv.), that the assessee is one of the beneficiary of the accommodation entries provided by various entities being operated by PKJ, the Assessing Officer in the course of the assessment proceedings required the assessee to prove the genuineness, identity and creditworthiness of the creditors who have invested their share capital along with premium in the assessee company. Assessee during the course of the assessment proceedings filed various details of creditors namely confirmation of accounts, ITR acknowledgement and copy of return, copy of PAN details, annual report for the assessment year under consideration, extract of bank statements reflecting the transactions with the assessee, details of interest payment and TDS deducted on interest paid on such loans and submitted that it had obtained unsecured loans of ₹.85,00,000/- from three parties namely Atharv Business Pvt. Ltd., Josh Trading Pvt. Ltd., and Viraj Mercantile Pvt. Ltd. The assessee by furnishing all these details contended that the loans obtained from the above said parties have been received from account payee cheques and the parties have confirmed the loan transactions, the loan transactions were routed through banking channels, therefore the creditors are identified, genuineness of the transaction and the (A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., creditworthiness of the creditors was proved, therefore no addition is warranted u/s. 68 of the Act.

3. However, not convinced with the submissions of the assessee the Assessing Officer relying on the statement of PKJ wherein it has been stated that they have provided only accommodation entries to various companies, the Assessing Officer brought the unsecured loans to tax u/s. 68 of the Act treating them as investment made by parties towards share capital in the assessee company. On appeal, the Ld.CIT(A) considering the evidences furnished by the assessee and also the submissions and various decisions, deleted the addition made u/s. 68 of the Act. He also deleted the addition made by the Assessing Officer towards commission expenses relating to these transactions.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 5. 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 the concern creditors were also furnished, PAN details of the creditors, ledger copy of the creditors, bank statements of the creditors, audited balance sheet computation of income, acknowledgement of return were furnished, details of interest payments and TDS deducted thereon were furnished. Further, the 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, PAN details, annual report, extracted bank statements reflecting the transactions with the assessee. Therefore, Ld. Counsel for the assessee submits that all these evidence prove that the loan transactions are genuine.

6. 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 merely relied on the statements of PKJ which had already retracted by him. Counsel further submitted that the unsecured loans received by assessee were considered as share capital receipt and (A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., treated as addition u/s. 68 of the Act in spite of no increase in share capital during the relevant Assessment Year without any application of mind.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., has obtained only accommodation entries from PKJ and in view of such evidence, the Assessing Officer treated the loan transactions as non- genuine though the assessee has filed various evidences to prove its claim that there cannot be any addition u/s. 68 of the Act.

9. In the course of the assessment proceedings the assessee furnished the following details: a. Confirmation of A/c. by the parties b. Income-tax returns of the parties for A.Y. 2013-14. c. Bank statement of the parties showing the loan transactions. d. Audited Balance sheet & Profit and Loss Account of the creditors along with the schedule wherein credit in the name of the appellant is outstanding in their books. e. Payment of interest to creditors after subjecting the amount to TDS. f. Confirmation from the loan creditors. g. Affidavit confirming the loan transaction.

10. In response to notices issued u/s. 133(6) of the Act to the creditors, the creditors have filed the following information to substantiate the transactions entered into by them with the assessee. a. Confirmation of accounts for A.Y. 2012-13. b. ITR acknowledgement for A.Y. 2012-13. c. Copy of PAN Card of the Creditor company. d. Annual report for A.Y. 2012-13. e. Extract of bank statements for A.Y. 2012-13 reflecting the transactions with the assessee.

11. The Assessing Officer completely ignoring all the above evidences treated the loan transactions as non-genuine solely based on the statement said to have been recorded from PKJ before DGIT(Inv.) in the course of search proceedings. We also notice that the Assessing Officer never provided to the assessee the statements on which he is placing

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., reliance for treating these loan transactions as non-genuine. We also find that no cross examination has been provided by the Assessing Officer to the assessee on the third parties’ statements on which he is relying on.

12. It has been submitted that the PKJ had in fact retracted his earlier statement that he has not merely providing accommodation entries. We find that all these submissions and evidences were considered by the Ld.CIT(A) and deleted the addition observing as under: -

“2.4.1.6. I have carefully considered the facts of the case and submissions of the Id.AR. I have also gone through the decisions relied on by the AO and the Id.AR. During the course of assessment proceedings the appellant has filed several details required to prove the identity and creditworthiness of the persons, and the genuineness of the transaction in the form of PAN cards, IT return copies, bank statements, confirmations, audited accounts etc. as is evident from the records and claimed that it has discharged its onus. The Id.AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of loan need not be doubted. The excessive reliance on the statements given by a third-party i.e. key persons of Pravin Kumar Jain group, whom the appellant does not know, is not proper even without giving the appellant a chance to cross-examine them who have given such adverse statements. He further argued that the addition was made without any corroborative evidence in the possession of the AO to prove that the appellant has paid cash, as alleged, against the receipt of cheque. On the other hand the AO has believed that these documents submitted before him were engineered to explain bogus loans since those who involved in bogus transactions in an organised way are meticulous in arranging these make-believe documents. He further believed that the office bearers/key persons of Pravin Kumar Jain group have given categorical and unequivocal statements stating that they have involved only in bogus transactions by giving loan by cheque for exchange of cash through the companies/firms floated by them. 2.4.1.7 No doubt the AO had a valid starting point to inquire into the transactions viz. the statements given by the very authors of the fictitious firms/companies under oath under section 132(4)7131 of the Act during the course of search and seizure operations and in subsequent statements, admitting the activity of giving accommodation entries for purchases, loans and investment and share application money to various parties seeking such accommodation by following unethical practices to defraud the revenue. Also, the appellant is one of such companies who have taken such accommodation entries since some of the concerns floated by entry operators (about 79 such concerns) are very much appearing in the books of the appellant company. 2.4.1.8 In the instant case, however, as seen from the details filed before the AO, a set of which were also filed before me, I do not find any inconsistency or incoherence in the receipt of loans from the parties. Thus, taking into consideration the entire factum of the case, it would be indispensable on the part of the AO to (A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., produce compelling evidences to distort the picture shown by the appellant company. 2.4.1.9. Keeping the above background in mind, now it would be pertinent to analyse the evidences relied upon by the AO. The AO has primarily relied upon the statement of Mr. Pravin kumar Jain and his accomplices which were taken during the search proceedings u/s 132 carried on at his premises. Such statements are definitely a good starting point and can also be used to initiate a proceeding, however, such statement cannot be taken as concluding evidence to nail any person especially in the facts of the present case. It can be seen from the records and the assessment order that Mr. Pravin kumar Jain had admitted the fact that he and his concerns were engaged in carrying out accommodation entries. Three of his managed concerns viz. Atharv Business Pvt. Ltd., Josh trading Co. Pvt. Ltd., Viraj Mercantile Pvt. Ltd. had given amount totaling to Rs.85,00,000/- as mentioned herein above as unsecured loan to the Appellant company. However, none of the evidences or the statements so recorded was ever confronted to the Appellant Company. Further, no opportunity to cross examine was given to the Appellant company. As a result, such evidences and statement becomes null and void on the principles of natural justice. Further, it can also be seen that the deponents of the statement have — retracted from their statement, though after a period of 7 months. This again puts the credibility of the statement and the deponents in doubt. Nevertheless, even if the statement and evidences are considered to be valid, it is important to then notice that the same parties have replied to the notice u/s. 133(6) issued by the AO and have confirmed the loan transactions and has furnished all the details required by the AO. Further, the AO merely relied on the statement and added the amount received from the above parties as Bogus Share Capital ignoring the fact that the said money received as Unsecured Loans. In light of the above discussion, reliability and admissibility of the said statements and the corroborative evidences becomes doubtful. Further, the said statements are not accompanied by any independent investigation by the AO. Even though, the transaction is from a tainted group, the AO has not gathered any additional/independent evidence to show that the transaction with the appellant company was sham, fictitious or artificial except believing the statements given by the entry operators. He has failed to gather evidence to show that the unaccounted cash of the appellant had changed hands subsequently replacing the cheque payments. 2.4.1.10 Coming to the other fact of the case. The Appellant, u/s 68, is required to establish the identity, creditworthiness of the parties and the genuineness of the transaction to demonstrate that the cash credit is genuine and that the same cannot be added u/s 68. In the present case, from the records, it can be seen that the Appellant has established the identity of the parties by giving its name, address, PAN and copy of Return of income for A.Y.2012- 13. "Further, the appellant has established the creditworthiness of the parties by filing the Financials of all the parties as on 31.3.2012 and the Bank statement of the parties reflecting payment made to the appellant. From the said Financials of the parties, it can be seen that the parties had sufficient creditworthiness to lend Rs.85,00,000/- to the appellant company. Next, genuineness of the transaction was demonstrated by the appellant by explaining the business of the appellant, requirement of the loans in the business of the appellant, details of deduction of TDS on interest payment, loan confirmation from the parties and the ledger account of the parties wherefrom it was substantiated that the loans had been squared off during the year under consideration. To top it, the parties have confirmed the transaction to the AO, in reply to summons issued. The AO has not answered several valid points raised by the appellant nor proved how the details like PAN, the IT returns, confirmation letters, bank statements of the creditors, audited balance sheet of the creditors cannot be taken note of. Thus, from the above discussion, it can be easily stated that the Appellant company had produced overwhelming evidences to discharge the onus laid upon it under the Act.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 2.4.1.11 If the said statements and the evidences are kept in juxtaposition with the documents, details and records produced by the Appellant company it can be seen that the Appellant company has discharged, as stated above, that the onus laid upon it. Further, the AO has not conducted any independent enquiry to corroborate the statements of the third party. Further, even the statement and other details, as available with the AO. cannot be relied upon as discussed above, as there is no credibility in the statement. It is also held in several cases that whatever maybe the strength of presumption it cannot replace evidence and in the present case the Appellant has produced overwhelming evidences to prove its case. 2.4.1.12 The ITAT Mumbai in the case of Anant Shelters P Ltd. (2012) 20 taxmann.com 153 has laid down certain principles with regard to section 68 which the AO is bound to follow. They are reproduced as under(para-7)- "(i) Section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in the books maintained by the assessee (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found in the books or the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record file. Once the explanation of the assessee is found unbelievable or false the AO is not required to bring positive evidence on record to treat amount in question as income of the assessee. While considering the explanation of the assessee, the AO has to act reasonably-application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section - nature and sources of such credits - should be understood in right perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm view that the evidence produced by the assessee cannot be brushed aside in a causal manner. Assessee cannot be asked to prove impossible. Explanation about 'source of source' or 'origins of the origin' cannot and should not be called for while making inquiry under section. (iv) In the matters related to section 68 burden of proof cannot be discharged to the hilt -such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under Section 68. (v) Confirmatory letters or A/c payee cheques do not prove that the amount in question is properly explained for the purpose of section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction. All the three ingredients are cumulative and not exclusive.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Credit worthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and credit worthiness of the lender onus of proof shifts to the Revenue". Also, the Honorable Supreme Court in the case of Lovely Exports Private Limited, (2008) 216 CTR 195 (SC), has stated that the AO is at liberty to bring to tax the amounts in their respective hands of the creditors if their identity, genuineness and creditworthiness is not proved. The AO should have made efforts to assess the amounts in the hands of the creditors at least on protective basis. On the other hand the appellant has filed the following details in the case of all the five creditors to prove the identity, genuineness and creditworthiness of the creditors.

1. Confirmation of A/c. by the parties.

2. Income tax returns of the parties for A.Y.2013-14.

3. Bank Statements of the parties showing the.loan transactions.

4. Audited Balance sheet & P & L A/c of the creditors along with the schedule wherein credit in the name of the appellant is outstanding in their books.

5. Payment of interest to creditors after subjecting the amount to IDS.

6. Confirmation from the loan creditors.

7. Affidavit confirming the loan transaction 2.4.1.13 As seen from the above, the appellant has furnished all the details proving conclusively the three ingredients of identity and creditworthiness of the creditors and the genuineness of the transaction. Further, the Appellant obtained such unsecured loan during it normal course of business. The amounts were paid by the creditors from their running bank accounts which were accounted in the books of the appellant as well as the creditors as seen from the audited accounts filed. The transactions were also confirmed by all the creditors who are assessed to tax. Further, the appellant has paid interest through banks to the creditors by duly subjecting the interest amount to TDS. Nowhere the AO has challenged the identity, creditworthiness of the lenders and the genuineness of the transactions with any tangible material. I find that the AO was in possession of good information in the form of investigation report, to begin with, but he could neither succeed to repudiate the evidences filed by the appellant nor he could gather independent evidence even to establish the surrounding circumstances not to speak of leading evidence to prove his hypothesis. In view of the above discussion I hold that the loan taken by '-" the appellant from the above three parties cannot be doubted and the addition made by the AO u/s 68 of the Act cannot survive the test of appeal. I therefore, direct the AO to withdraw the addition. This ground is allowed.

None of the above findings have been controverted with evidences by the Revenue.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 13. 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.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 14. In the case of ACIT v. Shri Ramesh Ramswarupdas Jindal (supra) 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 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

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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 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

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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.”

15. In the case ACIT v. M/s. H.K. Pujara Builders (supra), the Coordinate Bench held as under: -

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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. 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 (A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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.

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.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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.”

16. We also find that identical issue came up in the case of DCIT v.

Bairaga Builders Pvt. Ltd., reported in [2017] 51 CCH 107 in ITA.No. 4691 and 4692/Mum/2015 dated 14.09.2017 wherein the Coordinate Bench held as under: -

“6. We have heard the rival submissions along with the orders of the tax authorities below. We noted that during the impugned assessment year, the assessee had taken unsecured loans from the following two parties: Sr. Name of the Party and PAN Loan Rate of No Address taken(Rs.) Interest 1. Javda India Impex AAACA7065L 20,00,000 9% Limited CS-1, Silver Anklet, Yari Road, Versova, Mumbal 400 061

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., Sr. Name of the Party and PAN Loan Rate of No Address taken(Rs.) Interest 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]

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)

8. 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.

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 9. We have gone through the orders relied upon by the learned DR. We noted that the decision of the Delhi High Court in the case of Bikram Singh, the assessee could not discharge the onus as laid down by section 68 of the Act. Similarly, in the case of CIT vs. Jansampark Advertising & Marketing Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered by the postal authorities with the remark "left"/ "no such person". Under these circumstances, the Hon'ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions.

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: 2012-13) M/s. Everest Aangan Pvt. Ltd., 17. 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 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 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 (A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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 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 (A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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. ….. ….

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 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.” 19. In the case on hand also, the assessee has discharged its initial onus of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details and thus the assessee has discharged identity, genuineness and creditworthiness of the parties. The Assessing Officer has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer except relying on the statements of PKJ and the investigation report. Even the statements were not provided to the assessee for its rebuttal. The Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE in Civil Appeal No. 4228 of 2006 dated 02.09.2015 reported in 127 DTR 241/281 CTR 241 held as under: -

“Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.”

(A.Y: 2012-13) M/s. Everest Aangan Pvt. Ltd., 20. 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. Further, we find that in the case of ITO v. M/s. Vulvan Traders in ITA.No. 4137/Mum/2015 and 4144/Mum/2015 dated 30.01.2019 the Coordinate Bench considered this decision of Hon'ble Delhi High Court and observed as under: - “4.4. …….. In the case before Hon'ble Delhi High Court, NDR Promoter Pvt. Ltd.((supra)), cited by Ld. DR, it was found that the cash was deposited in the bank account of one such company and thereafter transferred/ circulated within the group companies before the cheque is issued to the beneficiaries. It is also noted (page-14, para-12) that the share holder companies (five in numbers) were 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 particular conclusion. It is clear that the facts in the case of NDR Promoter Pvt. Ltd., relied upon by the Ld. DR, are different and distinguishable. It is also noted (para-4 of the order of the Hon'ble Delhi High Court) that the money was circulated by first depositing the cash in the bank account of one such company and thereafter transferred/circulated (group companies before cheque is issued to the beneficiaries), therefore, may not help the Revenue.”

Order pronounced in the open court on the 29th March, 2019