ACIT 25(3), MUMBAI vs. VASHU BHAGNANI, MUMBAI

ORDER

PER N.K. PRADHAN, AM

filed by the Revenue read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting addition of Rs.50,00,000/- on account of bogus loans.

2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the addition was made on the basis of information received from DIT(Inv.) with regard to bogus loans taken by the assesses from Shri Bhanvarlal Jain Group.

3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that hawala operators have admitted on oath before the DIT(Inv.) Authorities. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the assessee could not prove the genuineness and credit worthiness of the loan transaction parties during the course of assessment proceedings. 5. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in relying upon the decision in the case of Shri Jafferali K. Tattonsy vs. DCIT 5068/Mum/2009, As the decision of the case doesn't squarely apply to instant case as this case deals with bogus/accommodation entries of unsecured loans. 3. Briefly stated, the facts of the case are that the Assessing Officer (AO) received information from the Investigation Wing of the Income Tax Department, that a search and seizure operation was carried out in Shri Bhanwarlal Jain Group on 03.10.2013, wherein it was found that Shri Jain along with his associates had provided accommodation entries in the form of unsecured loans/deposits/purchase entries to a large number of parties through various benami concerns controlled by them, by taking equivalent amount of cash. The assessee, proprietor of Pooja Construction, was one of the beneficiaries of accommodation entries from M/s Daksh Diamonds operated by Shri Jain and Group. Based on the said information, the AO reopened the assessment by issuing notice u/s 148 on 28.03.2014. On the basis of the statement recorded u/s Shri Vashu Bhagnani 132(4)/131 during the course of search, the AO made an addition of Rs.50,00,000/- of unsecured loans shown by the assessee during the impugned assessment year and an amount of Rs. 4,50,000/- towards interest payment.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) held that (i) the AO has solely relied upon the statement of Shri Bhawarlal Jain and did not carry out any worthwhile independent inquiry in the matter, (ii) the AO has totally ignored the documentary evidence submitted by the assessee, (iii) even if some of the transactions entered into by the above parties are found to be not genuine, it does not lead to the conclusion that all the transactions entered into by these parties were bogus or non-genuine including the transactions related to the assessee. With the above reasons, the Ld. CIT(A) held that merely based on the statement of a third person without any corroborative evidence will not make the transactions, in question, non-genuine or bogus transaction. As such, in the absence of any contrary evidence placed on record, the transaction cannot be treated as bogus or paper transaction. Thus the Ld. CIT(A) deleted the addition of Rs.50,00,000/- and Rs. 4,50,000/- made by the AO.

5. Before us, the Ld. DR relies on the order passed by the AO and submits that the Ld. CIT(A) should not have ignored the statement given by the hawala operators on oath before the Director of Income Tax Shri Vashu Bhagnani (Investigation) during the course of search and seizure operation conducted by the Department on 03.10.2013.

6. On the other hand, the Ld. counsel of the assessee submits that the assessee had received an amount of Rs.50,00,000/- from M/s Daksh Diamonds during the AY 2007-08. Also the assessee had paid interest @ 9% on such borrowed money and TDS has been deducted on the same. It is stated that the assessee is into the business of movie making and construction which requires re-financing. The above party had financed the assessee for which it had paid interest to them after deducting applicable TDS. Further it is stated that the assessee’s own capital is of Rs.15.93 crores and has a bank loan of Rs.4.19 crores. Hence the assessee will not enter into such accommodation transaction of Rs.50,00,000/-. The assessee has paid tax of Rs.45.80 lacs in AY 2007- 08. It is stated that the assessee had submitted the copies of ITR and loan confirmation of the above party. Also the bank statements were provided to the AO which were reflecting the receipt of funds from the parties and payment of interest by the assessee. It is finally stated that the AO has made the addition based on the ground that the lender belonged to so-called Shri Bhanwarlal Jain and Group and the transaction was a bogus one, without giving any opportunity to the assessee to cross-examine the party in spite of repeated requests made. Also the assessee provided to the AO all the documents which can prove that the transaction was genuine which was ignored. The Ld. counsel of the assessee files a Paper Book (P/B) containing (i) Ledger Confirmation, (ii) Bank Statement of Daksh