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order dated 28/07/2016 of the CIT(A)- 29,Mumbai,the Assessing Officer (AO)has filed present appeal.The assessee has raised cross objection.The assessee is engaged in the business of trading in non ferrous metals.It filed its return of income on 30/10/2007, declaring total income at Rs. Nil.The assessment was completed, u/s. 143(3) (ii) r.w.s. 147 of the Act,on 18th March, 2015, determining the income of the assessee at Rs.50 lakhs. ITA/5973/Mum/2016 2.First effective ground of appeal, raised by the AO, is about deleting the addition made by him u/s. 68 of the Act . During the assessment proceedings, he observed that there were reasons to believe that the assessee had availed of accommodation entries for unsecured loans.He had received informa -tion in that regard from the office of the Director-General of Income Tax (Inv.). He issued a show cause notice to the assessee asking it as to why an amount of Rs. 50 lakhs, shown as loans, should not be added to its income.The assessee filed an explanation along with certain documents,including the loan confirmations of the lenders. However,the AO was not satisfied with the reply and observed that during the search and seizure proceedings carried out in the & C.O. No.70/M/18 M/s. Bhavana Metal Company case of Bhanvar Lal Jain(BLJ) statements under oath were recorded of Ritesh Siroya(RS) proprietor of A2 Jewels and Ghanshayam Vashishth(GV) proprietor of Jewel Diam, that RS and GV had admitted that they had issued accommodation entries only in the form of un - secured loans to the beneficiaries, that the assessee had sought such entries from RS and GV. Finally,he made a disallowance of Rs. 50 lakhs, invoking the provisions of section 68 of the Act.
3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA) and made detailed submissions. Taking into consideration claim of the assessee that loans were repaid through account payee cheques to both the lenders and the documents submitted by it,the FAA called for a remand report from the AO.Vide his letter,dated 25/07/2006, the AO forwarded the copies of statements of BLJ and RS. He did not submit the statements of GV. After going through the statements of BLJ and RS,the FAA observed that there was no admission anywhere by the lenders,that they had provided accommodation entries to the assessee,that the conclusion drawn by the AO was a mere presumption,that he had not substantiated his stand with any documentary evidence, that BLJ had never accepted that he was providing accommodation entries for unsecured loans, that he had admitted of issuing some paper entries for purchases, that all the entries for purchases were not accommodation entries, that he had not admitted anywhere that accommodation entries for secured loans were given by him,that RS had also not admitted that he was in the business of providing accommo -dation entries for unsecured loans, that the name of the assessee was not figuring anywhere. He further observed that both the lenders were regular income tax assessees, that the loans were received through account payee cheques, that loan confirmation and affidavits from RS and GV were submitted during the assessment proceedings, that the assessee had filed the bank account details of the lenders, that it had received a loan of Rs. 25 lakhs on 12/05/2006 from RS of A 2 Jewels, that same was repaid through account payee cheque on 11/05/2007, that the loan taken from GV was also paid through banking channels in the month of May 2007, that the loans were reflected under the head loans and advances in the balance sheets for the AY. 2007-08, that there were no cash deposits or withdrawals in any of the bank accounts to support the view of the AO that the transaction in question represented accommodation entries.Finally, allowing the appeal of the assessee, he held that loans taken by it were genuine. & C.O. No.70/M/18 M/s. Bhavana Metal Company 4.During the course of hearing before us, the Departmental Representative (DR) supported the order of the AO and stated that it was a simple case of taking accommodation entries, that BLJ, GV and RS were engaged in issuing non-genuine entries. He relied upon the case of Suresh L. Satyani (ITA 3452/Mumbai/2016,AY.2010-11,dated 08/03/2017).The Authorised Representative(AR) contended that loan confirmation letters from the lenders were submitted before the AO along with the income tax returns, bank statements and financials, that GV and RS had made submissions about the transaction during the assessment proceedings, that affidavits of the lenders were filed by the assessee,that it had repaid the loan in the subseque - nt years,that the assessee had requested the AO to depose the lenders for verification of transaction,that the copy of the statement of GV was not supplied even to the FAA, that the lenders had nowhere implicated the assessee,that no incriminating evidence was brought on record. He relied upon the cases of Veedhata Tower Pvt. Ltd. (ITA No.819 of 2015 dated 17/ 04/2018);Alcon Biosciences Pvt. Ltd. (ITA No.1946/Mum/2016 AY 2010-11 dtd. 28/02/ 2018;Indumati M. Bansal (ITA No.3842/Mum/2017 AY 2007-08 dtd.15/11/ 2017);Vikram Muktilal Vora (ITA No.842/Mum/2017, AY2007-08 dtd.23/05/2017; Anil Chagganlal Jain (ITA No.369-70/Mum/2017,AY 2013-14 dtd.13/04/2017) .
5.We have heard the rival submissions and perused the material before us. We find that the reassessment proceedings were initiated after the AO received certain information from the investigation wing of the Department, that search and seizure proceedings were carried out in case of BLJ,that statements of RS, GV and BLJ were recorded during the search proceedings, that the AO had issued a notice under section 148 of the Act, that the assessee had filed the confirmations of the lenders as well as the affidavits about the genuineness of the loans, that the FAA had called for a remand report from the AO, that after considering the documentary evidences filed by the assessee he held that it was not a case of accommodation entry. It is also a fact that the lenders had never admitted that the transactions entered into with the assessee were bogus. In our opinion, the statement of a person has to be read in entirety- general observation of an assessee, made during the statements recorded under section 131 of section 132 of the Act, cannot be made a base for making addition in the hands of other entity.In the case before us,positive evidences were submitted by the assessee in form of balance sheets, bank details, income tax returns during the assessment proceedings. It was the duty of the AO to make further enquiries instead of just making additions on the basis of report of the investigation wing. We are of the opinion that the assessee had discharged its onus and that burden of proof was on the AO to negate the claim made by the assessee about 3 & C.O. No.70/M/18 M/s. Bhavana Metal Company the genuineness of the loan transactions.The assessee had during the reassessment proceedings informed the AO that it was willing to produce the lenders before him for cross examination.But,surprisingly he did not ask the assessee to produce them.In these circumstances, we are of the opinion that order of the FAA does not suffer from any factual or legal infirmity.
5.1.We would like to refer to the case of Suresh L. Satyani (supra). In that matter notices under section 133 (6) of the Act were issued to four benami concerns from whom the assessee had obtained bogus bills of purchase, that those parties had given part replies, that the assessee had failed to produce the parties before the AO despite being called upon to prove the genuineness of the transaction. In the case under consideration the assessee had filed all the necessary details like affidavits and the confirmations of the lenders along with the bank details and the returns of income tax. The AO had not made any comments about these documentary evidences. Secondly, the case before us is about accommodation entries and not about bogus purchases. 5.2.We find that in the cases of Vikram Mukti Lal Vora (supra),the Tribunal has dealt with the identical issue,that that in that matter issue of accommodation entries by the group concerns of BLJ was deliberated upon. The Tribunal,in the similar circumstances,had upheld the order of the FAA who had deleted the addition made by the AO under the head addition on account of accommodation entries.Considering the above,we decide the first effective ground against the AO.
6.Second effective ground is about deletion of addition of Rs. 3.55 lakhs on account of interest paid by the assessee on the loans received by it from RS and GV.We have decided the first effective ground of appeal against the AO and the interest issue is directly linked with the loan transactions.So,we hold that there is need to interfere with the order of the FAA.Second effective ground of appeal is decided against the AO.
C.O. No.70/Mum/2018 : 7.Before us,the AR stated that there was delay of 25 days in filing the CO,that the person concerned dealing with filing of appeal was not informed by the members of the staff,that delay was not intentional,that ground raised dealt with legal issues only.The DR left the issue to the discretion of the Bench. & C.O. No.70/M/18 M/s. Bhavana Metal Company We have gone through the application filed by the assessee for condoning the delay along with the affidavit.After considering the available material,we are of the opinion that delay was because of by a reasonable cause.Hence,we condon the delay.
8.In its CO,the assessee has challenged the validity of reassessment proceedings.Before us,the AR argued that the FAA had erred in upholding the reassessment proceedings,that there was no failure on part of the assessee to disclose true and full facts about the transaction.He relied upon the cases of Arceli Reality Ltd. (ITA No.6492/Mum/2016, AY 2007-08 dtd.21/04/2017); Shri Sunil Prakash (ITA No.6494/Mum/2014,AY 2005-06 dated 08/03/2017; Metro Decorative Pvt.Ltd. (ITA No.450/Del/2014 AY 2004-05,dtd.24/10/2017; Oracle India (P.) Ltd. (83 taxmann.com 368); Crescent Construction Co.(82 taxmann.com 468); Meta Plast Engineering Pvt.Ltd.(ITA No.5780/Del/2014 AY 2004-05 dtd.06/04/2018; Virat Credit & Holdings Pvt.Ltd. (ITA No.89/Del/2012 and C.O. No.57/Del/2012 AY 2005- 06,dtd.09/02/2018) .The DR supported the order of the FAA. It is found that the notice under 148 was issued after four years. The original assessment u/s.143(3) of the Act was completed on 14.12.2009 and the notice for reassessment was issued on 26/03/2014.Therefore,the proviso to section 147 would be applicable in the matter under consideration.We are reproducing the reasons recorded by the AO and same read as under: “1. Information has been received from the office of Director General of Income Tax, Mumbai vide letter DGIT (Inv.)/Information/BLJ/Bogus Sales/2013-14 dated 13th March 2014 communicated vide letter No.CIT-14/Information BLJ/Bogus Sales/2013-14 dated 24.3.2014 of the Commissioner of Income Tax-14, Mumbai. The information is that, there was a Search & Seizure action was carried out on 3.10.2013 in the case of Shri Bhanwarlal Jain Group who is one of the leading entry providers. Evidences collected and the statements of various persons recorded including that of Shri Bhanwarlal Jain during search established the modus operandi and led to detection of accommodation entries to certain beneficiaries in the nature of bogus loans and advances, the Investigation Wing has exercised due diligence which revealed that the above assessee , is involved in bogus loans and advances from the following party:
Name of the Firm PAN Amount involved A2JEWELS AAMFA 7751 J Rs.25,00,000/- Jewel Diam ABUPV 3494 J Rs.25,00,000/-
Shri Bhanwarlal Jain have admitted under oath in the statements recorded by the Income Tax Department that they have not carried out actual trading activity and have only issued bogus loans and advances.
In view of the above, I have no reason to believe that income exceeding rs. One lakh has escaped assessment for AY 2007-08.”