INCOME TAX OFFICER 15(2)-1, MUMBAI vs. IRAISAA DEVELOPERS PRIVATE LIMITED, MUMBAI

The revenue has filed the present appeal against the order dated 08.12.2017 passed by the Commissioner of Income Tax (Appeals) - 24, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2009- 10.

The revenue has raised the following grounds: - "

The Ld. Representative of the Revenue has argued that the assessee has entered into the cash transaction to the extent of 50,00,000/- with the Ahuja Group which was not disclosed by him. In his audit report (form 3CD) of assessee failed to prove the genuineness of the loan, therefore, in the said circumstances, the AO has rightly added the said amount in the income of the assessee but the CIT(A) has wrongly deleted the same. Therefore, the finding of the CIT(A) is wrong against law and facts is not liable. However, on the other hand, the Ld. Representative of the assessee relied by the order passed by the CIT(A) in question. Before going further, we deemed it necessary to advert the finding of the CIT(A) on record.: - “2.4 I have given my careful consideration to the submissions, perused the material on record and duly considered the factual matrix of The case as also the applicable legal position. 2.4.1 Ground No,1 is raised against the addition made of Rs. 50.00.000/- as unexplained cash transaction u/s 69A of I T Act, 1961. The Id AO has noticed that the appellant has during the year under consideration received unsecured loan of amount of Rs. 50,00,000/- from M/s Ahuja Properties 8 Associates. During the appellate proceedings, the Id AR has filed detailed submissions and other relevant documents in a paper book. He has also refereed to several case laws on which they rely in support of the ground of appeal. 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 Id AR. It is observed that during the assessment proceedings the appellant has filed relevant details required to prove the identity and creditworthiness of the lending entity and the genuineness of the transactions in the form of name, address, PAN and IT particulars, confirmations, bank statements etc as evident from the record. The Id AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of the investment cannot be doubted Hence the AR argued that appellant has discharged its onus and the identity, genuineness and credit worth in assessee of the ITA NO.1810/M./2018 A.Y. 2009-10 lending entity were proved beyond doubt. The excessive reliance on the statements given by the third-party i.e. key persons of Ahuja group, whom the appellant does not know is considered to be not proper even without giving the appellant a chance to cross- examine the persons who had given such adverse statements. He further argued that addition was made without providing the appellant the corroborative evidence in the possession of the AO to prove that the appellant has paid the cash, as alleged, against the receipt of cheques. On the other hand the Id AO has believed the evidence (supporting documents) submitted before him was engineered to explain bogus investment saying that the those who involved in accommodation entries m an organized way are meticulous in arranging the make-believe documents. He further believed that the said key-persons of Ahuja group have given categorical statements stating that they have involved only in bogus transactions by giving accommodation entries by giving cheques in exchange of cash through their group entities. The Id AR on the other hand argued that the AQ has ignored the fact that all the statements were retracted by Pravin Kumar Jain and all his associates. It is alleged that the AO failed to collect further information and not made any efforts to disprove the genuineness of the transactions of the ban transaction. The Ld AR has argued that for invoking the provisions of section 59A, the appellant should be the owner of the asset i.e, cash in the instant case which the AO has not proved that cash was in the possession of the appellant It was also argued by the AR that the AO has not made any independent enquiry, not even sent notice u/s 133(6) The AR's contention is that the statement recorded u/s 131 was by the DD1T from third party and not by the AO from the assessee. Also contended that no cross examination was allowed by the AO, In the present case before me, as seen from the details filed before the AO, as evident from the paper book, 1 do not find any inconsistency or incoherence in respect of the receipt of the unsecured loan from the said Ahuja Properties S Associates. Primarily, as regards the transaction, the same has routed through the banking channels and the source cannot be doubted. It was held in several cases that whatever may be the strength of presumption it cannot substitute the evidence Even though the transaction is from 3 tainted group, the AO has not made any efforts to show that the transaction with the appellant company was sham, fictitious or artificial except believing the statements given by the accommodation entry ITA NO.1810/M./2018 A.Y. 2009-10 providers He has failed to gather any evidence to show that the unaccounted cash of the appellant has changed hands consequently replacing the cheque payments. Further he has not provided the corroborative evidence or document which he relied on to the appellant and also failed to prove how the details PAN, IT returns, bank statements etc. cannot be taken note of in this regard. The Hon’ble Mumbai (TAT in the case of Ananta shelters P ltd 20 Taxmann.com 153(2012) has laid down certain principles with regard to section 68 which the AO is bound to follow. It has observed as under: "(i) section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in the books maintained by (he 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 of the explanation offered by the assesses, in the opinion of the Assessing Officer, 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. (it) 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 assesses. The opinion of tne Assessing Officer for riot accepting (he 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 Assessing Officer is required to be formed objectively with reference to the material on record fife. Once the explanation of the assessee is found unbelievable of false the Assessing Officer is not requited to bring positive evidence on record to treat amount in question 35 income of the assessee. While considering the explanation of the assessee, the Assessing Officer has to act reasonably - application of mind is the sine qua non for forming She opinion (Hi) Phrase appearing in the section - nature and sources of such credits - should be understood in the perspective, so that genuineness of (he transaction can be decided on merits and not on prejudices Courts ate of the firm view that the evidence produced by the assesses cannot be brushed aside in 3 casual manner. Assessee cannot be asked to prove impossible Explanation ITA NO.1810/M./2018 A.Y. 2009-10 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 fo the hilt - such matters are decided on the particular facts of thg 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 fatting under section 63. (v) Though confirmatory letters or account payee cheques do not prove that thv amount in question is properly explained for (he purpose of section 68 and assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction, ii is also true that money received through foreign remittance with RB! approval is a strong indicator of bona fide of the cash credit that has to be disapproved only with positive evidence. (vi) In matters regarding cash credits, 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 account 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 Creditworthiness of the tender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and creditworthiness of the lender onus of proof shifts to the revenue." 2.4.3 The Hon’ble Apex Court in the case of Lovely Exports Pvt Ltd. 216 CTR 195(SCJ 2006 held that the AO is at liberty to bring to Tax [he amounts in their respective hands of the investors if their identity, genuineness and creditworthiness is not proved The AO should have made efforts in assess the amounts in the hands of the investors at least on protective basis. Even in case, the credit worthiness of the investors is not proved it will not automatically give license to the assessing authority to make additions in the hands of the recipient U/S 69A unless it is proved that the appellant was in the possession of cash to That extent which has been introduced in its books of account in the name of bogus/non- existent entities. As It is observed that, in the instant case, the AO has not made any dent on These lines. On the other hand the ITA NO.1810/M./2018 A.Y. 2009-10 appellant has filed the details and supporting documentary evidence to prove the identity, genuineness and credit worthiness of all the lending entity 2.4.4 As seen from the above, the appellant has furnished all the documents and details proving conclusively the three ingredients of identity, creditworthiness of the lending concern and The genuineness of the transaction. The amount was paid by lender from its running bank accounts which were duly accounted and confirmed by the appellant. In view of the above discussion. I hold that the loan amount of Rs. 50,00,O00/- advanced by Ahuja Properties can not be doubted and addition made by the AO LI/S 69A of the Act cannot survive the test of appeal I therefore direct the AO to withdraw the addition. This ground is allowed.”