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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & SHRI PAWAN SINGH, JM
O R D E R Per Shamim Yahya, A. M.: This appeal by the Revenue is directed against order of the ld. Commissioner of Income Tax (Appeals) – 30, Mumbai dated 19.09.2016 and pertains to assessment year 2012-13.
The grounds of appeal read as under:
1) Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) erred in not appreciating the fact that the assessee had availed of bogus loan entries totally amounting to Rs.3,35,00,000/- in the F.Y. 2011-12 relevant to A.Y. 2012-13, from various concerns of M/s. Bhanwarlal Group of companies, who were in the business of providing accommodation entries only, as established by the investigation wing of the Income Tax Department consequent to search action u/s 132 of the I.T. Act, 1961. 2) The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored.
Brief facts of the case are as under:
Shri Dilip Chimanlal Gandhi During the course of assessment proceedings it was noticed by the Assessing Officer that the assessee took loans to the tune of Rs.3,35,00,000/- and the parties from whom the loans were taken are the benami entities of Shri Bhanwarlal Jain, whose group cases Search & Seizure operations as well as Survey operations were conducted on 03- 10-2013 by the Investigation wing, Mumbai. During the course of the search operation, it was found that the activities of the group were operated through several name lending dummy directors, partners/ proprietors of various concerns belonging to the native place of Shri Bhanwarlal Jain & family. The concerns were literally controlled, operated and managed by Shri Bhanwarlal Jain and his family. This fact was admitted by those persons in the sworn statements recorded from them during the course of search operation and they have also admitted that they were made to the position by Shri Bhanwarlal Jain. On verification of the documents forwarded by the investigation wing, it was found that the assessee has taken accommodation entries in the form of unsecured loans from six group concerns of Shri Bhanwarlal Jain, during the financial year relevant to the assessment year under consideration, to the tune of Rs.3,35,00,000/-, for the year under consideration. In response to the show cause notice issued by the Assessing Officer, the assessee furnished his submissions.
4. The assessee responded as under:
"1. You have named the following parties from whom we taken frieud/y business loans but the same is been treated by your goodseff as accommodation entries. Sr.no Name of the party Nature of Transaction Amount 1 MALHAR EXPORTS UNSECURED LOANS 70, 00,000/- 2 MARVIN UNSECURED LOANS 50,00,000/- Shri Dilip Chimanlal Gandhi ENTERPRISES 3 NAVKAR DIAMOND UNSECURED LOANS 50,00,000/- 4 NA VKAR DIAMONDS UNSECURED LOANS 50,00,000/- 5 PANKAJ EXPORTS UNSECURED LOANS 55,00,000/- 6 PRIME STAR UNSECURED LOANS 60,00,000/- TOTAL Rs. 3,35,00,000/- 2. You have issued the show cause notice on the basis of search and seizure act/on carried out by investigation wing, Mumbai in the case of Bhanwarlal Jain group on 31-10-2013. The information is general in nature with no evidentiary value.
3. We have taken short term Unsecured Loans from the above parties by Account Payee Cheque/RTGS.
The Repayment of the said Loans was also made through cross account payee Cheque/RTGS within a period of three months.
5. Further all these 6 concerns are assessed to Income Tax and regular in filling the IT Return and paid all their dues.
6. Your goodself intends to treat the above Unsecured Loans as Accommodation entries on the basis of information received from the investigation wing without verifying independently and carrying out detailed investigation with the assessee.
7. You have solely relied on the information of Director of Income Tax(investigation)-II, Mumbai, you have not done independent inquiry to the information received from DGIT (inv), Mumbai and formed a belief that the information is correct.
You are proposing to treat the above Unsecured Loans merely on the basis of finding of the DGIT (inv) Mumbai without independently enquiring about the escapement of the Income by the assessee or without any corroborating evidence to arrive at your own satisfaction of escaped income, which is bad in law. In the case of CIT vs. Paramjit Kaur 311 ITR 38 (Punjab and Haryana) the honorable court held that since assessing Officer had not examined and corroborated Information so received before recording his own satisfaction of escaped income and initiating reassessment Proceedings, it could be said that assessing officer had acted only on basis of suspicion.
On the basis of reasons recorded it seems that statement of any person was neither recorded by the A. O and not In the presence of the assessee hence the credibility of the statement is doubtful and suspicious.
Further a general confession by a person that all his transaction are bogus or that he has indulged only in bogus transactions cannot be basis for treating the assessee transaction as bogus and not real. This is more particularly so when the assessee has not been specifically named in the confession.
The Supreme Court in the case of ITO vs. Lakhmani Merval Das (1976) 101ITR 427 (SC) the assessee had obtained a loan from a lender. The lender had Shri Dilip Chimanlal Gandhi given a confessional statement subsequently to the Income -Tax Department That he had only indulged in name lending transactions only. The assessment of the assessee was proposed to be reopened on the basis of this statement. The Apex Court held that reassessment proceedings must be constituted by reasons to be believe based on relevant material on hand. There must be a live connection between the material and the belief. If the materials itself were vague, then the belief founded on the same would be as good as non-existent, in the instant case, there may be, if at all, a general statement by the party that he had indulged in name lending transactions only without naming the assessee or referring to his purchase transaction. The same was held not- to constitute good mater/3/ for founding the belief that income has escaped assessment. The Supreme Court has therefore upheld the high Court's action in quashing the reassessment proceedings. The Calcutta High Court, has also stated that the reassessment proceedings on the ground that general statement cannot constitute relevant material to form a belief that income has escaped assessment.
From the above decision it is clear that by virtue of a general statement given by a party that all his transactions were bogus or that he only indulged in giving accommodation bills/entries the same should not be treated as bogus transaction in case of assessee.
However the assessing officer was not convinced. He did not seek any further information. He did not make any further enquiry. Relying on the enquiry by the investigation in Department in the case of Bhanwarlal Jain group, he proceeded to add the entire amount of unsecured loan as unexplained credit in the hands of the assessee.
Against the above order, the assessee appealed before the ld. Commissioner of Income Tax (Appeals).
The ld. Commissioner of Income Tax (Appeals) elaborately dealt with the issue.
He made an observation that assessee was not confronted with the material from investigation being relied by the assessing officer. He referred to case laws in this regard that there is violation of principle of natural justice. In this regard, he further noted that assessee has discharged its onus by giving all the relevant material. In this regard, he
Shri Dilip Chimanlal Gandhi referred to several case laws in support his observation. The case laws referred by him are as under: 1) H. R. Mehta (in of 2001 vide order dated 30.06.2016); 2) Andaman Timber Industries (Civil Appeal No. 4228 of 2006 vide order dated 02.09.2015); 3) KishinchandChellaram vs. CIT [1980] 125 ITR 713 (SC); 4) Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC); 5) A. Govindarajulu Mudaliar vs. CIT [1958] 34 ITR 807 (SC); 6) Rohini Builders [2002] 256 ITR 360 (Guj); 7) CIT vs. Smt. Sushiladevikhadaria [2009] 319 ITR (Bom); 8) ITO vs. Anant Shelters (P) Ltd. [2012] 51 SOT 234; 9) CIT vs. Varinder Rawlley [2014] 366 ITR 232 (P&H); 10) CIT vs. Jai Kumar Balkiwal [2014] 366 ITR 217 (Raj); 11) CIT vs. Kinetic Capital Finance Ltd. [2013] 354 ITR 296 (Del); 12) CIT vs. Samtelcolor Ltd. 64 DTR 46; and 13) Nemi Chand Kothari vs. CIT [2004] 136 Taxmann 213
The ld. Commissioner of Income Tax (Appeals) concluded as under:
6.3.24 Hence, it is to be inferred that in a case where the assesse has supplied all possible information to the Assessing Officer to explain the credit transaction, he has satisfactorily discharged the burden cast on him and it would be for the revenue to prove that the transaction is not satisfactorily explained and provisions of section 68 of the Act are applicable. 6.3.25 In the case before me, the record also shows that to prove the genuineness of the impugned loan entries from the 17 creditors, the appellant has furnished to the Assessing Officer the following details copies of which were also furnished in the present proceedings: I. PAN details of creditors II. Constitution and address of the creditors III. Particulars of income-tax returns filed by the creditors. These show that the creditors are legitimate business entities, having the ability to advance the impugned loans to the appellant,] IV. Confirmatory letters given by the creditors V. Audited financial accounts (including balance sheets) of the creditors [These show that the loans are duly reflected in the books of account of the creditors.] VI. Relevant bank statements of the creditors [These show that the loan
Shri Dilip Chimanlal Gandhi amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions.] 6.3.26 As such, in so far as the appellant is concerned, they have provided all possible documentary evidence to prove identity of the creditor from whom the impugned loan of Rs.3,35,00,000/- was obtained. This evidence also proves creditworthiness of the creditors and the genuineness of the transactions. From this 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. Moreover, as seen from the confirmations filed all the loans were repaid through banking channels in the F.Y. 2012-13 relevant to A.Y. 2013-14. In these circumstances, the onus had shifted to the Assessing Officer. Further, if the Assessing Officer was not satisfied with what had been given to him by the appellant, he was duty bound to specify what more material he wanted the appellant to furnish. The Assessing Officer never asked for any further material, which 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, the impugned loans of Rs.3,35,00,000/- have to be treated as explained satisfactorily and the Assessing Officer was wrong in having disregarded overwhelmingly supportive evidence. No cogent material was adduced by him, to show that loans were unexplained. Therefore, the impugned addition of Rs.3,35,00,000/-, made in the Assessment Order, fails on several counts - (1) Evidence that is relied upon is totally inadequate; (2) Failure to make available incriminating material (reports, statements etc.) forming basis for action by the Assessing Officer; and, (3) failure to recognize the satisfactory nature of the explanation / evidence tendered by the appellant to explain identity of creditors, creditworthiness of the creditors and the genuineness of the loan transactions. Hence, the impugned addition of Rs.3,35,00,000/- is hereby deleted.
Against the above order, the Revenue is in appeal before us.
We have heard both the counsel and perused the records. The learned departmental representative relied upon the order's of the assessing officer.
Per Contra, the learned counsel of the assessee submitted that the assessee has given all the necessary details. He submitted that the assessing officer has not made any enquiry whatsoever to rebut the submission and evidences submitted by the assessee.
Shri Dilip Chimanlal Gandhi Hence, the learned counsel of the assessee submitted that the ld. Commissioner of Income Tax (Appeals) is quite correct in deleting the addition.
Upon careful consideration we note that in support of the explanation of the unsecured loans, the assessee has submitted following details before the assessing officer:
I. PAN details of creditors II. Constitution and address of the creditors III. Particulars of income-tax returns filed by the creditors. These show that the creditors are legitimate business entities, having the ability to advance the impugned loans to the appellant,] IV. Confirmatory letters given by the creditors V. Audited financial accounts (including balance sheets) of the creditors [These show that the loans are duly reflected in the books of account of the creditors.] VI. Relevant bank statements of the creditors [These show that the loan amounts were paid through legitimate banking channels. Further these bank statements do not reflect any movement of cash, essential to hawala transactions.]
The assessing officer has made no enquiry with reference to the above. He did not seek any further explanation or detail from the assessee. He solely relied upon the investigation wing enquiry regarding the Bhanwarilal group. The ld. Commissioner of Income Tax (Appeals) in this regard has correctly made the observation that the assessee having given all the necessary details and has discharged its onus, it was incumbent upon the assessing officer to make further enquiry if he was not convinced by the submissions of the assessee. We find that assessing officer has displayed total lack of application of mind by not even issuing a notice to the loan creditors.
We find that it is settled law that while making any disallowance/addition, the Assessing Officer needs to make due enquiry. In this case, the Assessing Officer has not Shri Dilip Chimanlal Gandhi made any enquiry whatsoever. As noted hereinabove, the assessee has given all the documentary evidences including confirmatory letters, bank statements and financial statements of the creditors. The Assessing Officer has not found any error therein. It has been held in number of cases that when the assessee has given all the necessary details of the loan creditors, including the identity, creditworthiness and genuineness of the transaction, the onus upon the assessee is discharged. In these circumstances, in our considered opinion, the assessee has discharged its onus. The Assessing Officer has not rebutted any of the submission of the assessee and the documentary evidence in this regard. Hence, in our considered opinion, there is no infirmity in the order of the ld. Commissioner of Income Tax (Appeals). The various case laws referred by the ld. Commissioner of Income Tax (Appeals) are germane and duly supports the case of the assessee. In the background of the aforesaid discussion and precedent, we uphold the order of the ld. Commissioner of Income Tax (Appeals).
In the result, this appeal by the Revenue stands dismissed.
Order pronounced in the open court on 01.08.2018