RAJESH DOULATRAM BHATIA,MUMBAI vs. ACIT-24(3), MUMBAI

following ground: The learned Assessing officer has erred in making addition of Rs. The learned Assessing officer has erred in making addition of Rs. The learned Assessing officer has erred in making addition of Rs. 40,00,000/- being loan of Rs 20,00,000 being loan of Rs 20,00,000 each from M/s. Riddhi International and M/s. Orataman Realtors as each from M/s. Riddhi International and M/s. Orataman Realtors as each from M/s. Riddhi International and M/s. Orataman Realtors as unexplained cash credit u/s. 68 of the Act without appreciati unexplained cash credit u/s. 68 of the Act without appreciati unexplained cash credit u/s. 68 of the Act without appreciating the facts of the case in right perspective facts of the case in right perspective

2. Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its return of income on 21.08.2015 declaring total income at return of income on 21.08.2015 declaring total income at return of income on 21.08.2015 declaring total income at Rs.29,33,050/-. The return of income filed by the assessee was . The return of income filed by the assessee was . The return of income filed by the assessee was selected for scrutiny selected for scrutiny assessment and statutory notices under the assessment and statutory notices under the Income-tax Act, 1961 (in short ‘the Act’) were issued and complied. tax Act, 1961 (in short ‘the Act’) were issued and complied. tax Act, 1961 (in short ‘the Act’) were issued and complied. During scrutiny proceedings, the Assessing Officer observed one of During scrutiny proceedings, the Assessing Officer observed one of During scrutiny proceedings, the Assessing Officer observed one of the loan transactions carried out by the assessee with company the loan transactions carried out by the assessee with company the loan transactions carried out by the assessee with company namely M/s Rotomac Vinimay Pvt. Ltd. from which the assessee mac Vinimay Pvt. Ltd. from which the assessee mac Vinimay Pvt. Ltd. from which the assessee received Rs.5.80 crores during the year under consideration. The received Rs.5.80 crores during the year under consideration. The received Rs.5.80 crores during the year under consideration. The Assessing Officer also observed that during the year the assessee Assessing Officer also observed that during the year the assessee Assessing Officer also observed that during the year the assessee company has squared up loans received squared up loans received of Rs. 20.00 lakhs each of Rs. 20.00 lakhs each from two parties namely M/s Riddhi International and M/s namely M/s Riddhi International and M/s namely M/s Riddhi International and M/s Orataman Realtors. The Assessing Officer was not satisfied with the Orataman Realtors. The Assessing Officer was not satisfied with the Orataman Realtors. The Assessing Officer was not satisfied with the reply of the assessee in respect of tho f the assessee in respect of those loans and therefore held the se loans and therefore held the same as unexplained cash credit in terms of section 68 of the Act same as unexplained cash credit in terms of section 68 of the Act same as unexplained cash credit in terms of section 68 of the Act and made addition for the amount of Rs.5.80 crores and Rs.40 dition for the amount of Rs.5.80 crores and Rs.40 dition for the amount of Rs.5.80 crores and Rs.40 lakhs respectively to the returned income in the order passed u/s lakhs respectively to the returned income in the order passed u/s lakhs respectively to the returned income in the order passed u/s 143(3) of the Act dated 27.12.2017. 143(3) of the Act dated 27.12.2017.

3. On further appeal, the Ld. CIT(A) upheld the addition of On further appeal, the Ld. CIT(A) upheld the addition of On further appeal, the Ld. CIT(A) upheld the addition of Rs.5.80 crores. However, in respect of addit Rs.5.80 crores. However, in respect of addition of Rs.40 lakhs being ion of Rs.40 lakhs being loan of Rs.20 lakhs each from M/s Riddhi International and M/s loan of Rs.20 lakhs each from M/s Riddhi International and M/s loan of Rs.20 lakhs each from M/s Riddhi International and M/s Orataman Realtors, issued direction to the Assessing Officer for issued direction to the Assessing Officer for verifying whether the said loan was whether the said loan was appearing as opening balance opening balance and if so directed to delete the addit and if so directed to delete the addition.

3.1 Aggrieved with the above finding of the Ld. CIT(A), the assessee Aggrieved with the above finding of the Ld. CIT(A), the assessee Aggrieved with the above finding of the Ld. CIT(A), the assessee is in appeal before the Tribunal by way of raising grounds as is in appeal before the Tribunal by way of raising grounds as is in appeal before the Tribunal by way of raising grounds as reproduced above.

5.1 When above facts above facts along with inquiry report were were confronted to the assessee, the assessee submitted that loan was received in the the assessee, the assessee submitted that loan was received in the the assessee, the assessee submitted that loan was received in the month of June, 2014 and same was returned back during the month of June, 2014 and same was returned back during the month of June, 2014 and same was returned back during the period from July, 2014 to October, 2014. It was further submitted period from July, 2014 to October, 2014. It was further submitted period from July, 2014 to October, 2014. It was further submitted that lender Company lender Company was doing business of lending of the loans lending of the loans and total paid capital of the company wa and total paid capital of the company was Rs.258.86 lakhs. Thus 58.86 lakhs. Thus the lender had creditworthiness to extend loan to the assessee. creditworthiness to extend loan to the assessee. creditworthiness to extend loan to the assessee. Regarding statements s given by Shri Krishna Murari Naita and Shri given by Shri Krishna Murari Naita and Shri Biswanath Majumdar Biswanath Majumdar, it was submitted that their statement was their statement was recorded on 23.04.2014 recorded on 23.04.2014, whereas loan was received by the assessee after 3rd June, 2014 and thus their statement June, 2014 and thus their statements do do not have any relevance to the transaction of loan carried out by the assessee. The to the transaction of loan carried out by the assessee. The to the transaction of loan carried out by the assessee. The assessee sought cross assessee sought cross-examination of the director/manager w examination of the director/manager who had given statements but had given statements but summon issued by the Assessing Officer summon issued by the Assessing Officer to those directors/manager /manager was not complied and therefore no not complied and therefore no cross-examination could be provided to the assessee. amination could be provided to the assessee. amination could be provided to the assessee.

5.2 The Assessing Officer further The Assessing Officer further rejected creditworthiness of M/s creditworthiness of M/s Rotomac Vinimay Pvt. Ltd. due to following Rotomac Vinimay Pvt. Ltd. due to following reasons: i) Company has a meager share capital of Rs. 2.57 Crores. i) Company has a meager share capital of Rs. 2.57 Crores. ii) Company has declared a profi ii) Company has declared a profit Rs. 41,726 in F.Y.2013-14 and a loss 14 and a loss of Rs.2.03 Cr. In F.Y. 2014 of Rs.2.03 Cr. In F.Y. 2014-15. iii) There are no surplus funds generated by company from its business iii) There are no surplus funds generated by company from its business iii) There are no surplus funds generated by company from its business activity which further substantiates that company is not creditworthy. activity which further substantiates that company is not creditworthy. activity which further substantiates that company is not creditworthy. iv) There are no fixed assets in the compan iv) There are no fixed assets in the company. v) The alleged sources of fund in balance sheet is share premium coming v) The alleged sources of fund in balance sheet is share premium coming v) The alleged sources of fund in balance sheet is share premium coming from shareholders namely from shareholders namely * Cheerful Mercantile Pvt. Ltd * Cheerful Mercantile Pvt. Ltd * Glossy Suppliers Pvt. Ltd. * Glossy Suppliers Pvt. Ltd. * ClubsideDealcom Pvt. Ltd. * ClubsideDealcom Pvt. Ltd. * AccurateVintrade Pvt. Ltd. * AccurateVintrade Pvt. Ltd. * Intellect Trade * Intellect Trade-link Pvt. Ltd. * Positive Vinimay Pvt. Ltd. Positive Vinimay Pvt. Ltd. An analysis of these shareholding companies An analysis of these shareholding companies reveals that these reveals that these companies are also having similar structure of cross are also having similar structure of cross-shareholding i.e. for example, shareholding i.e. for example, structure i.e. for example, 'A' holds the shares of B'; B' holds shares of 'C' ; structure i.e. for example, 'A' holds the shares of B'; B' holds shares of 'C' ; structure i.e. for example, 'A' holds the shares of B'; B' holds shares of 'C' ; 'C' holds shares of 'A' etc. Further, there is no business activity in these 'C' holds shares of 'A' etc. Further, there is no business activity in these 'C' holds shares of 'A' etc. Further, there is no business activity in these shareholding companies as well. The only source of fund in their balance shareholding companies as well. The only source of fund in their balance shareholding companies as well. The only source of fund in their balance sheet is share premium received from sheet is share premium received from cross shareholding of similar shareholding of similar companies. But there is no cash flow companies. But there is no cash flow from business activities. om business activities. Further, these these these shareholding shareholding shareholding companies companies companies listed listed listed above above above from from from where where where M/s. M/s. M/s. RotomacVinimay Pvt. Ltd. has allegedly received share premium are also RotomacVinimay Pvt. Ltd. has allegedly received share premium are also RotomacVinimay Pvt. Ltd. has allegedly received share premium are also being run by Sushil Kumar Naita and Krishna MurariNaita who have been being run by Sushil Kumar Naita and Krishna MurariNaita who have been being run by Sushil Kumar Naita and Krishna MurariNaita who have been proved to be entry opera proved to be entry operators. vi) The Company has not declared any dividend in past so many years. vi) The Company has not declared any dividend in past so many years. vi) The Company has not declared any dividend in past so many years. vii) Company has not received any interest from the Assessee for the vii) Company has not received any interest from the Assessee for the vii) Company has not received any interest from the Assessee for the alleged loan.

5.3 The Assessing Officer did not consider the transaction as he Assessing Officer did not consider the transaction as he Assessing Officer did not consider the transaction as genuine for the reason that for the reason that M/s Rotomac Vinimay Pvt. Ltd. received tomac Vinimay Pvt. Ltd. received substantial amount substantial amount as share premium from other companies. from other companies. According to him, companies who invested in M/s Rotomac Vinimay According to him, companies who invested in M/s Rotomac Vinimay According to him, companies who invested in M/s Rotomac Vinimay Pvt. Ltd were also alleged to be part of the companies controlled by were also alleged to be part of the companies controlled by were also alleged to be part of the companies controlled by M/s Krishna Murari Naita. M/s Krishna Murari Naita.

5.4 In view of observation n view of observations, the Assessing Officer held the loan of the Assessing Officer held the loan of Rs.5.80 crores as unexplained cash credit Rs.5.80 crores as unexplained cash credit in terms of section 68 of in terms of section 68 of the Act. The relevant finding of the Assessing Officer is reproduced . The relevant finding of the Assessing Officer is reproduced . The relevant finding of the Assessing Officer is reproduced as under:

“8.8 All these companies from which M/s. Rotom All these companies from which M/s. RotomacVinimay Pvt. Ltd. has acVinimay Pvt. Ltd. has received funds just before transferring them to Mr. Rajesh Bhatia are received funds just before transferring them to Mr. Rajesh Bhatia are received funds just before transferring them to Mr. Rajesh Bhatia are managed by Sh. Krishna Murari managed by Sh. Krishna Murari Naita as was explained by him in reply to by him in reply to Q.7 in his statement on oath quoted above. In most of these companies Sh. .7 in his statement on oath quoted above. In most of these companies Sh. .7 in his statement on oath quoted above. In most of these companies Sh. Sushil Kr. Naita is the director. a is the director.

10. Creditworthiness means, whether the party had sufficient means to 10. Creditworthiness means, whether the party had sufficient means to 10. Creditworthiness means, whether the party had sufficient means to advance such loans. Creditworthiness is not proved by mere issue of a advance such loans. Creditworthiness is not proved by mere issue of a advance such loans. Creditworthiness is not proved by mere issue of a cheque or by furnishing a copy of statement of bank account. To cheque or by furnishing a copy of statement of bank account. To cheque or by furnishing a copy of statement of bank account. To see the creditworthiness of an entity, not only its bank statement should be creditworthiness of an entity, not only its bank statement should be creditworthiness of an entity, not only its bank statement should be examined but also the factual circumstances must also be examined. This examined but also the factual circumstances must also be examined. This examined but also the factual circumstances must also be examined. This is because the creditworthiness is not only the matter of financial strength is because the creditworthiness is not only the matter of financial strength is because the creditworthiness is not only the matter of financial strength of the assessee but also a mat of the assessee but also a matter of financial and social background of the ter of financial and social background of the company. It has already been shown that the above mentionedconcern company. It has already been shown that the above mentionedconcern company. It has already been shown that the above mentionedconcern was hardly earning anyincome which could go and finance the loans that was hardly earning anyincome which could go and finance the loans that was hardly earning anyincome which could go and finance the loans that it has purportedly advanced. Moreover, the concern did not have any it has purportedly advanced. Moreover, the concern did not have any it has purportedly advanced. Moreover, the concern did not have any financial or social background which would enable it to advance such a ncial or social background which would enable it to advance such a ncial or social background which would enable it to advance such a huge amount. The company is having a namesake office at dingy lanes in The company is having a namesake office at dingy lanes in The company is having a namesake office at dingy lanes in Kolkata. Even that office is not owned by the company. It does not even Kolkata. Even that office is not owned by the company. It does not even Kolkata. Even that office is not owned by the company. It does not even function, no one is found at that address whic function, no one is found at that address which is clear from the two h is clear from the two independent enquiries conducted during the assessment proceedings as independent enquiries conducted during the assessment proceedings as independent enquiries conducted during the assessment proceedings as discussed above. Thus, the persons who are themselves on run and who discussed above. Thus, the persons who are themselves on run and who discussed above. Thus, the persons who are themselves on run and who do not have a fixed place to reside, stay and do business, how could they do not have a fixed place to reside, stay and do business, how could they do not have a fixed place to reside, stay and do business, how could they be said to be credit be said to be creditworthy looking even at their background? worthy looking even at their background? 11. Thus, it has been proved beyond doubt that neither the identity could 11. Thus, it has been proved beyond doubt that neither the identity could 11. Thus, it has been proved beyond doubt that neither the identity could be established, nor the creditworthiness could be proved and thus be established, nor the creditworthiness could be proved and thus be established, nor the creditworthiness could be proved and thus genuineness of transaction is not established. Taking into consideration genuineness of transaction is not established. Taking into consideration genuineness of transaction is not established. Taking into consideration the facts and circumstances of the case in entirety as discussed above, e facts and circumstances of the case in entirety as discussed above, e facts and circumstances of the case in entirety as discussed above, loan amounting to Rs. 5,80,00,000/ amounting to Rs. 5,80,00,000/- received from M/s. Rotomac Vinimay received from M/s. Rotomac Vinimay Pvt. Ltd. is considered Ltd. is considered as unexplained credit u/s 68 of the I.T. Act, 1961 as unexplained credit u/s 68 of the I.T. Act, 1961 and accordingly added to the income of t accordingly added to the income of the assessee. he assessee. The penal proceedings u/s.271(1)(c) are hereby initiated for concealment of u/s.271(1)(c) are hereby initiated for concealment of u/s.271(1)(c) are hereby initiated for concealment of particulars of income. particulars of income.” 5.5 Further, the Ld. CIT(A) upheld the addition observing as Further, the Ld. CIT(A) upheld the addition observing as Further, the Ld. CIT(A) upheld the addition observing as under:

5.0 The contention of the assessee was that the sum of Rs 5,80,00,000 5.0 The contention of the assessee was that the sum of Rs 5,80,00,000 5.0 The contention of the assessee was that the sum of Rs 5,80,00,000 was taken as short taken as short-term loan from M/s. Rotomac Vinimay Pvt Ltd which term loan from M/s. Rotomac Vinimay Pvt Ltd which was later squared off in the same year. The assessee submitted a attested was later squared off in the same year. The assessee submitted a attested was later squared off in the same year. The assessee submitted a attested copy of ledger account in the books of account of M/s. Rotomac Vinimay copy of ledger account in the books of account of M/s. Rotomac Vinimay copy of ledger account in the books of account of M/s. Rotomac Vinimay Pvt Ltd in support of the contention. I have p Pvt Ltd in support of the contention. I have perused the relevant erused the relevant submission. As submission. As discussed above, the outcome of the investigation by the discussed above, the outcome of the investigation by the Investigation wing, Kolkata revealed that M/s. Rotomac Vinimay Pvt Ltd Investigation wing, Kolkata revealed that M/s. Rotomac Vinimay Pvt Ltd Investigation wing, Kolkata revealed that M/s. Rotomac Vinimay Pvt Ltd was a paper company managed and controlled by Shri. Krishna Murari was a paper company managed and controlled by Shri. Krishna Murari was a paper company managed and controlled by Shri. Krishna Murari Naita who deposed on oath Naita who deposed on oath that M/s. Rotomac Vinimay Pvt Ltd provided that M/s. Rotomac Vinimay Pvt Ltd provided only accommodation entries to various beneficiaries. Further a commission only accommodation entries to various beneficiaries. Further a commission only accommodation entries to various beneficiaries. Further a commission u/s. 131(1)(d) of the I.T. Act was issued to ACIT, Circle u/s. 131(1)(d) of the I.T. Act was issued to ACIT, Circle- -62, Kolkata to verify the credentials of the company who submitted a report with verify the credentials of the company who submitted a report with verify the credentials of the company who submitted a report with a finding that no operations were carried out by the company and the office finding that no operations were carried out by the company and the office finding that no operations were carried out by the company and the office of the company was locked most of the time. of the company was locked most of the time. The assessee highlighted that the outcome of investigation had no bearing The assessee highlighted that the outcome of investigation had no bearing The assessee highlighted that the outcome of investigation had no bearing on the company as the loan transaction with M/s. Rotomac Vinim on the company as the loan transaction with M/s. Rotomac Vinim on the company as the loan transaction with M/s. Rotomac Vinimay Pvt Ltd was from 3.6.2014 which was much later than 23.04.2014 being the Ltd was from 3.6.2014 which was much later than 23.04.2014 being the Ltd was from 3.6.2014 which was much later than 23.04.2014 being the date of investigation and recording the statement of Shri. Krishna Murari date of investigation and recording the statement of Shri. Krishna Murari date of investigation and recording the statement of Shri. Krishna Murari Naita and his associates. Further, the assessee submitted that the Naita and his associates. Further, the assessee submitted that the Naita and his associates. Further, the assessee submitted that the findings of commission were not applica findings of commission were not applicable to him as all the transactions of ble to him as all the transactions of 5.80 Crores was done through banking channel. 5.80 Crores was done through banking channel. In this regard is to be noted that the AO clearly brought out the fact that In this regard is to be noted that the AO clearly brought out the fact that In this regard is to be noted that the AO clearly brought out the fact that the M/s. Rotomac Vinimay Pvt Ltd was a paper company which was used the M/s. Rotomac Vinimay Pvt Ltd was a paper company which was used the M/s. Rotomac Vinimay Pvt Ltd was a paper company which was used to to facilitate facilitate clandestine clandestine transactions tr ansactions like like accommodation accommodation entries. entries. Therefore, mere fact that the transactions were done through banking Therefore, mere fact that the transactions were done through banking Therefore, mere fact that the transactions were done through banking channels or that the transaction was squared off in the same year do not channels or that the transaction was squared off in the same year do not channels or that the transaction was squared off in the same year do not lend any credence to its genuineness. Further, the confirmation of the lend any credence to its genuineness. Further, the confirmation of the lend any credence to its genuineness. Further, the confirmation of the transaction produced by the assessee in form of attested ledger account in saction produced by the assessee in form of attested ledger account in saction produced by the assessee in form of attested ledger account in the books of M/s Rotomac Vinimay Pvt Ltd is without any proper date. In the books of M/s Rotomac Vinimay Pvt Ltd is without any proper date. In the books of M/s Rotomac Vinimay Pvt Ltd is without any proper date. In any case, the fact remained that M/s. Rotomac Vinimay Pvt Ltd was shell any case, the fact remained that M/s. Rotomac Vinimay Pvt Ltd was shell any case, the fact remained that M/s. Rotomac Vinimay Pvt Ltd was shell company as borne out from the company as borne out from the verification and therefore lacked the n and therefore lacked the requisite credit worthiness to carry out the transactions. In the light of requisite credit worthiness to carry out the transactions. In the light of requisite credit worthiness to carry out the transactions. In the light of these facts, the addition of Rs 5,80,00,000/ these facts, the addition of Rs 5,80,00,000/- by AO is upheld by AO is upheld.

6.1 The Ld. counsel further submitted that confirmation from said The Ld. counsel further submitted that confirmation from said The Ld. counsel further submitted that confirmation from said party along with their copy of balance sheet, profit and loss account party along with their copy of balance sheet, profit and loss account party along with their copy of balance sheet, profit and loss account and financials for the year under consideration and financials for the year under consideration were were duly filed by the party as well as provided by the assess party as well as provided by the assessee to the Assessing ee to the Assessing Officer. He further submitted that merely low income for the year Officer. He further submitted that merely low income for the year Officer. He further submitted that merely low income for the year under under under consideration consideration consideration cannot cannot cannot be be be basis basis basis for for for rejecting rejecting rejecting the the the creditworthiness of the said company when there are sufficient own creditworthiness of the said company when there are sufficient own creditworthiness of the said company when there are sufficient own funds available in the balance sheet of the said company for funds available in the balance sheet of the said funds available in the balance sheet of the said justifying the loan to the assessee. He rejected the contention of the justifying the loan to the assessee. He rejected the contention of the justifying the loan to the assessee. He rejected the contention of the Ld. CIT(A) that confirmation was without any proper date. The Ld. Ld. CIT(A) that confirmation was without any proper date. The Ld. Ld. CIT(A) that confirmation was without any proper date. The Ld. counsel submitted that the Ld. CIT(A) held M/s Rotomac Vinimay counsel submitted that the Ld. CIT(A) held M/s Rotomac Vinimay counsel submitted that the Ld. CIT(A) held M/s Rotomac Vinimay Pvt. Ltd. as shell company without any docu Pvt. Ltd. as shell company without any documentary evidence in mentary evidence in support. The Ld. counsel referred to copy of the ledger of M/s support. The Ld. counsel referred to copy of the ledger of M/s support. The Ld. counsel referred to copy of the ledger of M/s Rotomac Vinimay Pvt. Ltd. available on Paper Book page 19. He Rotomac Vinimay Pvt. Ltd. available on Paper Book page 19 Rotomac Vinimay Pvt. Ltd. available on Paper Book page 19 also referred to the confirmation of M/s Rotomac Vinimay Pvt. Ltd. also referred to the confirmation of M/s Rotomac Vinimay Pvt. Ltd. also referred to the confirmation of M/s Rotomac Vinimay Pvt. Ltd. available on Paper Book page 62 to 63 havi available on Paper Book page 62 to 63 having seal and signature of ng seal and signature of said company. The Ld. counsel also referred to said company. The Ld. counsel also referred to copy of screen shot copy of screen shot of the registered company filed on Paper Book page 57 to 58. He of the registered company filed on Paper Book page 57 to 58. He of the registered company filed on Paper Book page 57 to 58. He also referred to copy of the Income also referred to copy of the Income-tax Return acknowledgement tax Return acknowledgement, statutory audit report statutory audit report, audited balance sheet and profit and loss nce sheet and profit and loss account of M/s Rotomac Vinimay Pvt. Ltd. relevant to the account of M/s Rotomac Vinimay Pvt. Ltd. relevant to the account of M/s Rotomac Vinimay Pvt. Ltd. relevant to the assessment year under consideration available on Paper Book pages assessment year under consideration available on Paper Book page assessment year under consideration available on Paper Book page 67 to 84. The Ld. counsel further relied on the decision of the Co- 67 to 84. The Ld. counsel further relied on the decision of the Co 67 to 84. The Ld. counsel further relied on the decision of the Co ordinate Bench of the ordinate Bench of the Kolkata Tribunal in the case of M/s nal in the case of M/s Viswakarma Residency in for assessment Viswakarma Residency in Viswakarma Residency in ITA No. 255/Kol/2020 year 2016-17 wherein the addition u/s 68 of the Act was made 17 wherein the addition u/s 68 of the Act was made 17 wherein the addition u/s 68 of the Act was made in respect of loans from various companies which were alleged to be from various companies which were alleged to be from various companies which were alleged to be controlled by Shri Krishna Murari Naita as p controlled by Shri Krishna Murari Naita as per his statement made er his statement made during the course of survey proceedings dated 23.04.2014. The Ld. during the course of survey proceedings dated 23.04.2014. The Ld. during the course of survey proceedings dated 23.04.2014. The Ld. counsel submitted that in the case of the assessee also addition has counsel submitted that in the case of the assessee also addition has counsel submitted that in the case of the assessee also addition has been made on the basis of statement of Shri Krishna Murari Naita been made on the basis of statement of Shri Krishna Murari Naita been made on the basis of statement of Shri Krishna Murari Naita and therefore, following the decis and therefore, following the decision in the case of M/s Viswakarma ion in the case of M/s Viswakarma Residency (supra) the addition should be set aside. Residency (supra) the addition should be set aside.

“In respect of the 9 loan creditors being companies alleged as paper In respect of the 9 loan creditors being companies alleged as paper In respect of the 9 loan creditors being companies alleged as paper companies by the AO and other 3 companies who did not file replies to companies by the AO and other 3 companies who did not file replies to companies by the AO and other 3 companies who did not file replies to notices issued u/s. 133(6), the assessee in order to discharge the initial , the assessee in order to discharge the initial onus lying upon if filed copies of their company master data,PAN Card, onus lying upon if filed copies of their company master data,PAN Card, onus lying upon if filed copies of their company master data,PAN Card, Acknowledgement of returns of income, audited financial statements, Acknowledgement of returns of income, audited financial statements, Acknowledgement of returns of income, audited financial statements, confirmation of accounts, ba confirmation of accounts, bank statements, statement showing source of nk statements, statement showing source of funds and nature of receipts. The assessee also filed copies of the funds and nature of receipts. The assessee also filed copies of the funds and nature of receipts. The assessee also filed copies of the assessment orders of the loan creditors showing that loan creditors had assessment orders of the loan creditors showing that loan creditors had assessment orders of the loan creditors showing that loan creditors had been subjected to regular assessment in different years wherein the been subjected to regular assessment in different years wherein the been subjected to regular assessment in different years wherein the returns filed by them has been accepted by their assessing officer. The ns filed by them has been accepted by their assessing officer. The ns filed by them has been accepted by their assessing officer. The assessee further required the AO to provide the material on the basis of assessee further required the AO to provide the material on the basis of assessee further required the AO to provide the material on the basis of which he alleged the 9 loan creditors and paper companies for rebuttal which he alleged the 9 loan creditors and paper companies for rebuttal which he alleged the 9 loan creditors and paper companies for rebuttal by the assessee and further requested to prov by the assessee and further requested to provide copies of statement of ide copies of statement of any parties on whose statement the AO wished to rely upon against the any parties on whose statement the AO wished to rely upon against the any parties on whose statement the AO wished to rely upon against the assessee and to produce the parties for cross examination of the assessee and to produce the parties for cross examination of the assessee and to produce the parties for cross examination of the assessee. However, the Assessing Officer without providing copy of any assessee. However, the Assessing Officer without providing copy of any assessee. However, the Assessing Officer without providing copy of any material whatsoever to material whatsoever to the assessee assessed the loans received the assessee assessed the loans received during the year from the 12 loan creditor companies as unexplained during the year from the 12 loan creditor companies as unexplained during the year from the 12 loan creditor companies as unexplained cash credit on the following grounds . cash credit on the following grounds. i. Accurate Vintrade Pvt. Ltd/New Town Mercantiles Pvt. Ltd/Purojit i. Accurate Vintrade Pvt. Ltd/New Town Mercantiles Pvt. Ltd/Purojit i. Accurate Vintrade Pvt. Ltd/New Town Mercantiles Pvt. Ltd/Purojit Vinimay Pvt. Ltd/Rotomac Vinimay Pvt. Ltd Vinimay Pvt. Ltd/Rotomac Vinimay Pvt. Ltd./ Singrodia Holdings Pvt. ./ Singrodia Holdings Pvt. Ltd •. Statement of Shri Krishna Murari Natia who as per the AO in his Ltd •. Statement of Shri Krishna Murari Natia who as per the AO in his Ltd •. Statement of Shri Krishna Murari Natia who as per the AO in his statement statement dated dated 23-4-2014 23 2014 admitted admitted that that he he had had provided provided accommodation entries in lieu of commission in the form of bogus bills accommodation entries in lieu of commission in the form of bogus bills accommodation entries in lieu of commission in the form of bogus bills and loans. The A.Y 2016 and loans. The A.Y 2016

17. ACIT, C-49(1), Kol Vs. M/s. Viswakarma 49(1), Kol Vs. M/s. Viswakarma Residency Page 5 relevant portion of his statement were stated to be Residency Page 5 relevant portion of his statement were stated to be Residency Page 5 relevant portion of his statement were stated to be attached with assessment order as KMN attached with assessment order as KMN-1, KMN-2 and KMN 2 and KMN-3.

• Replies to notices s 133{6) was received from address other than the • Replies to notices s 133{6) was received from address other than the • Replies to notices s 133{6) was received from address other than the address at which notic address at which notice was issued.

• As per Inspector report there was no physical existence of the • As per Inspector report there was no physical existence of the • As per Inspector report there was no physical existence of the company at both the address. company at both the address. ii. Carmel Merchants Pvt. Ltd./Everest Commerce Pvt. Ltd. • Statement ii. Carmel Merchants Pvt. Ltd./Everest Commerce Pvt. Ltd. • Statement ii. Carmel Merchants Pvt. Ltd./Everest Commerce Pvt. Ltd. • Statement of Shri Ram Kishan Ajitsaria dated 21 of Shri Ram Kishan Ajitsaria dated 21-05-2014 who proved that he 2014 who proved that he provide accommodation entries through various paper companies. The provide accommodation entries through various paper companies. The provide accommodation entries through various paper companies. The relevant portion of" his statement were stated to be a relevant portion of" his statement were stated to be attached with the ttached with the assessment order as RKA. assessment order as RKA.

The AO also stated that the said company was not physically found at The AO also stated that the said company was not physically found at The AO also stated that the said company was not physically found at its address. iii. Cosmos Real Estates Pvt. Ltd. iii. Cosmos Real Estates Pvt. Ltd. • Statement of Shri Anand Singhania dated 15 • Statement of Shri Anand Singhania dated 15-07-2014 who controlled 2014 who controlled the above company and who the above company and who proved that he provided accommodation proved that he provided accommodation entries through various paper companies. The relevant portion of his entries through various paper companies. The relevant portion of his entries through various paper companies. The relevant portion of his statement were stated to be attached with the assessment order as AS. statement were stated to be attached with the assessment order as AS. statement were stated to be attached with the assessment order as AS.

• Reply to notice • Reply to notice u/s 133(6) was received from address other than the was received from address other than the address at which notice. address at which notice.

• The AO also stated that the said company was not physically found at • The AO also stated that the said company was not physically found at • The AO also stated that the said company was not physically found at both the address. both the address. iv. Century Ply & Boards Pvt. Ltd. / Navana Trading Company Pvt. iv. Century Ply & Boards Pvt. Ltd. / Navana Trading Company Pvt. iv. Century Ply & Boards Pvt. Ltd. / Navana Trading Company Pvt. Ltd./ Sthavistha Mercantiles Pvt Ltd./ Sthavistha Mercantiles Pvt. Ltd. • Reply to notice • Reply to notice u/s. 133(6) were manufactured replies as the same were manufactured replies as the same were received after issuance of Show Cause Notice to the assessee • As were received after issuance of Show Cause Notice to the assessee • As were received after issuance of Show Cause Notice to the assessee • As per Inspector report there was no physical existence of t per Inspector report there was no physical existence of the company. he company. Regarding annexures being KMN Regarding annexures being KMN1, KMN2, KMN3, RK and AS stated to 3, RK and AS stated to have been annexed to the assessment order, the appellant stated that have been annexed to the assessment order, the appellant stated that have been annexed to the assessment order, the appellant stated that the assessment order was served through e the assessment order was served through e-filing portal and in course filing portal and in course of the appellate proceeding logged int of the appellate proceeding logged into e-filing portal and demonstrated filing portal and demonstrated that there were no such annexures at all. that there were no such annexures at all.

Against the reliance on the statements of Shri Krishan Murari Naita, Against the reliance on the statements of Shri Krishan Murari Naita, Against the reliance on the statements of Shri Krishan Murari Naita, Shri Ram Kishan Murari Naita, Shri Ram Kishan Ajitsaria and Shri Shri Ram Kishan Murari Naita, Shri Ram Kishan Ajitsaria and Shri Shri Ram Kishan Murari Naita, Shri Ram Kishan Ajitsaria and Shri Anand Singhania by the AO, the appellant arg Anand Singhania by the AO, the appellant argued that i. The statement ued that i. The statement of Shri Kishan Murai Naita. Shri Ram Kishan Ajitsaria and Shri Anand of Shri Kishan Murai Naita. Shri Ram Kishan Ajitsaria and Shri Anand of Shri Kishan Murai Naita. Shri Ram Kishan Ajitsaria and Shri Anand Singhania are stated to have been recorded on 23 Singhania are stated to have been recorded on 23-04- 2014, 21 2014, 21-05- 2014 and 23-07 07-2014. ii. Considering the dates of statements, it is apparent that the said ii. Considering the dates of statements, it is apparent that the said ii. Considering the dates of statements, it is apparent that the said statements were not recorded by the AO but he merely relied on the ements were not recorded by the AO but he merely relied on the ements were not recorded by the AO but he merely relied on the statements recorded by other AOs. statements recorded by other AOs. iii. The transactions of the assessee with the said companies took place iii. The transactions of the assessee with the said companies took place iii. The transactions of the assessee with the said companies took place in FY 2015-16, therefore the statements recorded years before are 16, therefore the statements recorded years before are 16, therefore the statements recorded years before are irrelevant in so fa irrelevant in so far as the case of the assessee is concerned. r as the case of the assessee is concerned.

A.Y 2016-17 ACIT, C 17 ACIT, C-49(1), Kol Vs. M/s. Viswakarma Residency Page 6 49(1), Kol Vs. M/s. Viswakarma Residency Page 6 iv. The statements referred to does not and cannot relate to the iv. The statements referred to does not and cannot relate to the iv. The statements referred to does not and cannot relate to the transaction of the assessee. transaction of the assessee. v. The parties had no capacity to depose on v. The parties had no capacity to depose on behalf of the company. vi. behalf of the company. vi. The statements recorded The statements recorded u/s. 131 per se without any corroborative per se without any corroborative material has no evidentiary value. material has no evidentiary value. vii. Barring statements no other material has been brought on record by vii. Barring statements no other material has been brought on record by vii. Barring statements no other material has been brought on record by the AO Regarding receipt of replies from address other than the address AO Regarding receipt of replies from address other than the address AO Regarding receipt of replies from address other than the address at which notices were served, the appellant submitted that the at which notices were served, the appellant submitted that the at which notices were served, the appellant submitted that the assessee had provide the addresses as available in its records and assessee had provide the addresses as available in its records and assessee had provide the addresses as available in its records and subsequently the said companies changed their address. The subsequently the said companies changed their address. The subsequently the said companies changed their address. The notices issued by the AO at the old address were served but the creditor filed issued by the AO at the old address were served but the creditor filed issued by the AO at the old address were served but the creditor filed their replies mentioning the present address which is as per their replies mentioning the present address which is as per their replies mentioning the present address which is as per requirement of the law. Regarding physical existence at old address, requirement of the law. Regarding physical existence at old address, requirement of the law. Regarding physical existence at old address, the appellant submitted that since some of the the appellant submitted that since some of the loan creditors had loan creditors had shifted to new address as such the question of existence at old address shifted to new address as such the question of existence at old address shifted to new address as such the question of existence at old address does not arise. Regarding physical existence of loan creditors at new does not arise. Regarding physical existence of loan creditors at new does not arise. Regarding physical existence of loan creditors at new address, the appellant firstly stated that all the above Loan creditor's address, the appellant firstly stated that all the above Loan creditor's address, the appellant firstly stated that all the above Loan creditor's are companies registe are companies registered under the Companies Act, 1956 Companies Act, 1956 and are regularly filing their statutory returns which is evident from the fact that regularly filing their statutory returns which is evident from the fact that regularly filing their statutory returns which is evident from the fact that their status on MCA is ACTIVE COMPLIANT. It is stated that the Active their status on MCA is ACTIVE COMPLIANT. It is stated that the Active their status on MCA is ACTIVE COMPLIANT. It is stated that the Active Complaint Statu Complaint Status is given only to companies who uploads photo of the s is given only to companies who uploads photo of the building where the office of the company is situated, photo of the building where the office of the company is situated, photo of the building where the office of the company is situated, photo of the registered office of the company along with the photo of the director registered office of the company along with the photo of the director registered office of the company along with the photo of the director sitting in the office, geographical location of the company stati sitting in the office, geographical location of the company stati sitting in the office, geographical location of the company stating the longitude and latitude all digitally signed by all by all the directors of longitude and latitude all digitally signed by all by all the directors of longitude and latitude all digitally signed by all by all the directors of the the the company company company and and and digitally digitally digitally certified certified certified by by by practising practising practising company company company secretary/chartered account. Besides, the companies are having PAN secretary/chartered account. Besides, the companies are having PAN secretary/chartered account. Besides, the companies are having PAN and have filed their returns of income. As such t and have filed their returns of income. As such the allegation that the he allegation that the said companies were not found at their address is factually incorrect. said companies were not found at their address is factually incorrect. said companies were not found at their address is factually incorrect. The assessee secondly submitted that all the notices issued by the AO The assessee secondly submitted that all the notices issued by the AO The assessee secondly submitted that all the notices issued by the AO were duly served further disapproves the allegation made by the AO. were duly served further disapproves the allegation made by the AO. were duly served further disapproves the allegation made by the AO. Thirdly and finally, it Thirdly and finally, it is submitted that regular assessments have been is submitted that regular assessments have been made in case of all the loan creditors in various years and therefore the made in case of all the loan creditors in various years and therefore the made in case of all the loan creditors in various years and therefore the allegation of physical non allegation of physical non-existence are wholly baseless.”

8.1 The Ld. CIT(A) in that case rejected the The Ld. CIT(A) in that case rejected the observation observation of the Assessing Officer observing as under: Officer observing as under:

“7. Regarding allegation of paper company, I find that the loan creditors 7. Regarding allegation of paper company, I find that the loan creditors 7. Regarding allegation of paper company, I find that the loan creditors ae companies and are regularly filing their statutory returns with the ae companies and are regularly filing their statutory returns with the ae companies and are regularly filing their statutory returns with the ROC and their status of MCA is ACTIVE COMPLAINT. All the loan ROC and their status of MCA is ACTIVE COMPLAINT. All the loan ROC and their status of MCA is ACTIVE COMPLAINT. All the loan creditors are having creditors are having PAN and have filed their returns of income. The PAN and have filed their returns of income. The notices issued to the loan creditors have been duly served and in notices issued to the loan creditors have been duly served and in notices issued to the loan creditors have been duly served and in compliance thereto the A.Y 2016 compliance thereto the A.Y 2016-17 ACIT, C-49(1), Kol Vs. M/s. 49(1), Kol Vs. M/s. Viswakarma Residency Page 13 loan creditors have confirmed the Viswakarma Residency Page 13 loan creditors have confirmed the Viswakarma Residency Page 13 loan creditors have confirmed the transactions wit transactions with the assessee and have filed copies of their return of h the assessee and have filed copies of their return of income, audited financial statements, bank statements and have also income, audited financial statements, bank statements and have also income, audited financial statements, bank statements and have also explained their sources of fund and nature of receipts. The transactions explained their sources of fund and nature of receipts. The transactions explained their sources of fund and nature of receipts. The transactions have taken place through banking channels and have duly bee have taken place through banking channels and have duly bee have taken place through banking channels and have duly been recorded in their regular books of account and reflected in their audited recorded in their regular books of account and reflected in their audited recorded in their regular books of account and reflected in their audited financial statements. The interest income has been credited in their financial statements. The interest income has been credited in their financial statements. The interest income has been credited in their Statement of Profit and Loss and the TDS have been claimed in the Statement of Profit and Loss and the TDS have been claimed in the Statement of Profit and Loss and the TDS have been claimed in the return of income. There is no finding that th return of income. There is no finding that the return of income filed by e return of income filed by the loan creditors have been rejected by their assessing officers. Rather the loan creditors have been rejected by their assessing officers. Rather the loan creditors have been rejected by their assessing officers. Rather there have been regular assessment of the loan creditors for different there have been regular assessment of the loan creditors for different there have been regular assessment of the loan creditors for different years whereby the returns filed by the loan creditors have been years whereby the returns filed by the loan creditors have been years whereby the returns filed by the loan creditors have been accepted. Reference accepted. Reference in this regard is made to the decision of the Hon'ble in this regard is made to the decision of the Hon'ble jurisdictional Calcutta High Court in the case of CIT v. Dataware Pvt. jurisdictional Calcutta High Court in the case of CIT v. Dataware Pvt. jurisdictional Calcutta High Court in the case of CIT v. Dataware Pvt. Ltd (supra) wherein the Hon'ble Court held as under: Ltd (supra) wherein the Hon'ble Court held as under:-

"In our opinion. in such circumstances, the Assessing officer of the "In our opinion. in such circumstances, the Assessing officer of the "In our opinion. in such circumstances, the Assessing officer of the assessee burden of assessing the profit and loss account of the creditor ee burden of assessing the profit and loss account of the creditor ee burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After when admittedly the creditor himself is an income tax assessee. After when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is getting the PAN number and getting the information that the creditor is getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer s assessed under the Act, the Assessing officer should enquire from the hould enquire from the Assessing Officer of the creditor as to the genuineness" of the Assessing Officer of the creditor as to the genuineness" of the Assessing Officer of the creditor as to the genuineness" of the transaction and whether such transaction has been accepted by the transaction and whether such transaction has been accepted by the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer of the creditor but instead of adopting such course, the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself co Assessing officer himself could not enter into the return of the creditor uld not enter into the return of the creditor and brand the same as worthy of credence. So long it is not established and brand the same as worthy of credence. So long it is not established and brand the same as worthy of credence. So long it is not established that the return submitted by the creditor has been accepted by its that the return submitted by the creditor has been accepted by its that the return submitted by the creditor has been accepted by its Assessing Officer, the Assessing officer of the assessee is bound to Assessing Officer, the Assessing officer of the assessee is bound to Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the cept the same as genuine when the identity of the creditor and the cept the same as genuine when the identity of the creditor and the genuineness" of transaction through account payee cheque has been genuineness" of transaction through account payee cheque has been genuineness" of transaction through account payee cheque has been established. We find that both the Commissioner of Income Tax (Appeal) established. We find that both the Commissioner of Income Tax (Appeal) established. We find that both the Commissioner of Income Tax (Appeal) and the Tribunal below followed the well and the Tribunal below followed the well-accepted principle which are inciple which are required to be followed in considering the effect of required to be followed in considering the effect of Section 68 Section 68 of the Act and we thus find no reason to interfere with the concurrent findings of and we thus find no reason to interfere with the concurrent findings of and we thus find no reason to interfere with the concurrent findings of fact recorded by both the authorities." fact recorded by both the authorities." 8.2 The Co-ordinate ordinate Bench ordinate Bench Bench of of of the the the Tribunal Tribunal Tribunal (supra) after (supra) (supra) after after consideration the submission of the parties upheld the order of the consideration the submission of the parties upheld the order of the consideration the submission of the parties upheld the order of the Ld. CIT(A). Respectfully following the above finding of the Co- Ld. CIT(A). Respectfully following the above finding of the Co Ld. CIT(A). Respectfully following the above finding of the Co ordinate Bench of the Tribunal ordinate Bench of the Tribunal (supra), the addition the addition in respect of laon from M/s Rotomac Vinimayv P Ltd laon from M/s Rotomac Vinimayv P Ltd in the instant case is also in the instant case is also set aside and deleted and deleted. The ground No. 1 of the appeal of the . The ground No. 1 of the appeal of the assessee is accordingly allowed. assessee is accordingly allowed.

9. The ground No. 2 of the appeal relates to The ground No. 2 of the appeal relates to addition of Rs.40 addition of Rs.40 lakhs being loan of Rs. 20 lakhs lakhs being loan of Rs. 20 lakhs each from M/s Riddhi each from M/s Riddhi International and M/s Orataman Realtors. We find that on this International and M/s Orataman Realtors. We find that International and M/s Orataman Realtors. We find that issue the Ld. CIT(A) has directed the Assessing Officer for the Ld. CIT(A) has directed the Assessing Officer for the Ld. CIT(A) has directed the Assessing Officer for verification as under: verification as under:

As regards the addition of Rs. 40,00,000/ As regards the addition of Rs. 40,00,000/- being loan of Rs being loan of Rs 20,00,000 each from M/s. Riddhi International and M/s. Orataman 20,00,000 each from M/s. Riddhi International and M/s. Orataman 20,00,000 each from M/s. Riddhi International and M/s. Orataman Realtors, the assessee submitted that the loan was availed in the Realtors, the assessee submitted that the loan was availed in the Realtors, the assessee submitted that the loan was availed in the earlier years and squared off in year under consideration. In view earlier years and squared off in year under consideration. In view earlier years and squared off in year under consideration. In view of this, the AO is directed to verify the balance sheet of the assessee and this, the AO is directed to verify the balance sheet of the assessee and this, the AO is directed to verify the balance sheet of the assessee and ascertain whether the outstanding loan in the names of the aforesaid ascertain whether the outstanding loan in the names of the aforesaid ascertain whether the outstanding loan in the names of the aforesaid loan creditors was a part of the closing balance of unsecured loans as loan creditors was a part of the closing balance of unsecured loans as loan creditors was a part of the closing balance of unsecured loans as on 31.3.2014. In the event the finding on 31.3.2014. In the event the finding is affirmative, the AO may is affirmative, the AO may provide consequent relief to the assessee and delete the addition of Rs provide consequent relief to the assessee and delete the addition of Rs provide consequent relief to the assessee and delete the addition of Rs 40,00,000. Ground no 1 is partly allowed. 40,00,000. Ground no 1 is partly allowed.

9.1 We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record. On verification of relevant material on record. On verification of the ledge the ledger account of these two parties, w these two parties, we find that loan from M/s Orataman Realtors e find that loan from M/s Orataman Realtors was received in the month in the month of June and July 2013 i.e. corresponding July 2013 i.e. corresponding to assessment year 2014 to assessment year 2014-15. Similarly, in the case of M/s Riddhi 15. Similarly, in the case of M/s Riddhi International also loan of Rs.20 lakhs International also loan of Rs.20 lakhs was received was received for the period from 9th to 20th July, 2013 July, 2013, which also falls in assessment year which also falls in assessment year 2014-15. The relevant part of their confirmation 15. The relevant part of their confirmation is is reproduced as under:

9.2 We find that the Ld. CIT(A) had already directed the Assessing We find that the Ld. CIT(A) had already directed the Assessing We find that the Ld. CIT(A) had already directed the Assessing Officer for deleting the addition subject to verification whether that the addition subject to verification whether that the addition subject to verification whether that loan was as appearing as appearing as opening balance in the year under opening balance in the year under consideration. If the Assessing Officer has not decided the issue we consideration. If the Assessing Officer has not decided the issue we consideration. If the Assessing Officer has not decided the issue we direct the Assessing Officer to verify the ledger account of those direct the Assessing Officer to verify the ledger account of those direct the Assessing Officer to verify the ledger account of those parties in the books for the assessee in the year under n the books for the assessee in the year under n the books for the assessee in the year under consideration and delete the addition accordingly. The ground No. 2 consideration and delete the addition accordingly. The ground No. 2 consideration and delete the addition accordingly. The ground No. 2 of the appeal of the assessee is also allowed. of the appeal of the assessee is also allowed.