TINA ATUL GODHWANI,MUMBAI vs ITO 25(1)(5), MUMBAI

Income Tax Appellate Tribunal, “SMC” BENCH,

Before: SHRI ABY T. VARKEY, JM & SHRI PADMAVATHY S, AM

For Appellant: Shri Vimal Punmiya

Hearing: 21/02/2024Pronounced: 28/02/2024

O R D E R

PER ABY T. VARKEY, JM:

This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi dated 22.08.2023 for the assessment year 2009-10.

The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs.7 Lakhs made by the AO u/s 68 of the Income Tax Act, 1961 (hereinafter “the Act”) and disallowance of interest to the tune of Rs.13,118/- and addition of notional commission of Rs.14,000/- (total Rs.7,27,118/-).

Brief facts of the case are that the assessee is an individual and had filed her return of income for AY. 2009-10 on 31.07.2009 declaring total income of Rs.4,75,297/-. Subsequently, based on information from the Directorate of Investigation (Inv.), Mumbai regarding beneficiaries of “Accommodation entries provided by Shri 2 A.Y. 2009-10 Tina Atul Godhwani Praveen Kumar Jain”, the AO re-opened the assessment of the assessee. According to the AO, the Investigation Wing of the Department conducted search and survey action on Shri Praveen Kumar Jain and his group wherein, he admitted of providing accommodation entries, in the form of bogus capital, bogus share premium, bogus loan, bogus sales etc. The AO noted that Shri Praveen Kumar Jain used to control and manage number of paper companies through his dummy directors for providing accommodation entries. And according to the AO, assessee was one of the beneficiary of his group M/s. Jasoda Exports from which concern, the assessee has taken Rs. 7 Lakhs as loan. The AO took note of the modus operandi of Shri Praveen Kumar Jain and his statements were reproduced in the assessment order and further noted that he asked to assessee to prove the credit entry of loan of Rs.7 Lakh taken from M/s. Jasoda Exports in assessee’s books. The AO acknowledges that pursuant to his direction, the assessee had furnished the loan confirmation, bank statement reflecting loan transaction, ITR acknowledgment of M/s. Jasoda Exports etc. However, the AO was not convinced, he was of the opinion that confirmation of loan from M/s. Jasoda Exports and bank statement etc would not prove the creditworthiness of the lender Therefore, he added Rs. 7 Lakh u/s 68 of the Act and also disallowed interest paid to the M/s. Jasoda Exports to the tune of Rs.13,118/- as unexplained expenditure. Further, according to the AO, the assessee in order to avail the accommodation entry of Rs.7 Lakh from M/s. Jasoda, ought to have incurred 2% of such amount i.e. Rs.14,000/- as commission. Therefore, the same was also added u/s 69C of the Act.

3 A.Y. 2009-10 Tina Atul Godhwani Thus, the AO made a total addition of Rs. 7,27,118/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the aforesaid addition. Aggrieved, the assessee is before us.

We have heard both the parties and perused the records. We note that the assessee is an individual and she had filed return of income on 31.07.2009 declaring total income of Rs.4,75,297/-. Later the AO received information from the Investigation Wing, Mumbai that assessee is a beneficiary of accommodation entry from M/s. Jasoda Exports (a concern of Praveen Kumar Jain), therefore, the AO re-opened the assessment u/s 147 of the Act and asked the assessee to prove the “nature & source” of the credit entry of Rs.7 Lakh shown by the assessee as loan from M/s. Jasoda Exports. According to the AO, the assessee filed (i) ITR Acknowledgment of M/s. Jasoda Exports for AY. 2009-10 and AY. 2010-11, (ii) Confirmation from M/s. Jasoda Exports, (iii) Bank statement reflecting the loan transfer from M/s. Jasoda Exports. According to the AO, these documents does not prove the creditworthiness of the lender i.e. M/s. Jasoda Exports and after taking note of the Investigation Wing Report that Shri Praveen Kumar Jain was an accommodation entry provider through his paper concerns which included M/s. Jasoda Exports, the AO added Rs.7 Lakh u/s 68 of the Act and disallowed the interest payment to the tune of Rs.13,118/- (paid to M/s. Jasoda Exports) and commission of Rs.14,000/- u/s 69C of the Act. On appeal, the Ld. CIT(A) the confirmed the action of the AO.

4 A.Y. 2009-10 Tina Atul Godhwani 5. According to the Ld. AR of the assessee, the year under consideration is AY. 2009-10 and as per the law inforce during the year under consideration, the assessee was bound to discharge the burden to prove the identity, creditworthiness and genuineness of the transaction. According to the Ld. AR, in order to prove the identity of the lender i.e. M/s. Jasoda Exports, the assessee has filed the (i) Copy of ITR Acknowledgment of M/s. Jasoda Exports for AY. 2009-10 and AY. 2010-11 (refer page no. 20 & 21 of PB) (ii) Copy of computation of income of M/s. Jasoda Exports for AY. 2009-10 (refer page no. 22 to 23 of PB) (iii) Copy of tax audit and annual audited account, balance-sheet and Profit & loss account of M/s. Jasoda Exports (refer page no. 24 to 50 of PB). And in order to prove the genuineness of the transaction, the Ld. AR drew our attention to the relevant page of bank statement showing that Rs. 7 Lakh was transferred to through banking channel to assessee; and that assessee has re-paid the loan to M/s. Jasoda Exports (refer bank statement kept at page no. 55 - 58 and 59-63 of PB). In order to prove the creditworthiness of the lender, the assessee had drawn our attention to the balance-sheet of M/s. Jasoda Exports as on 31.03.2009, which is found placed at page 43 of PB, a perusal of which reveals that M/s. Jasoda Exports has own money itself of Rs.16,58,973/- and it has taken loan of Rs.8,33,78,792/-. Thus, the assessee has shown enough creditworthiness to give loan of Rs. 7 Lakh to the assessee. Moreover, the Ld. AR drew our attention to page no. 44 of PB wherein the profit & loss account of M/s. Jasoda Exports is found to be placed which shows that total turn-over of the assessee is more than Rs. 15 cr. We also note that the transaction of loan of Rs. 5 A.Y. 2009-10 Tina Atul Godhwani 7 Lakhs has taken place through banking channel which has been re- paid by the assessee on 22.01.2010 (refer page 59 to 63 of PB). Thus, we note that the assessee has prima facie discharged the burden to prove the “nature & source” of Rs.7 Lakh taken as loan from M/s. Jasoda Exports. The AO based on statement recorded by the Investigation Wing which was admittedly recorded behind the back of the assessee has drawn adverse inference against the assessee, without giving opportunity to the assessee to cross-examine the makers of such statements, which vitiate those oral testimonies and could not have been used against the assessee. In such circumstances, we find that addition made of Rs.7 Lakhs was legally unsustainable in the light of the evidence supporting the loan transaction & interest expenditure on it. Notional commission added cannot be sustained since we deleted the main addition itself. And therefore, we direct deletion of the addition of Rs.7,27,118/-.

And since we have given relief to the assessee on merits, the legal issue raised by assessee are left open.

In the result, the appeal of the assessee is partly allowed.

TINA ATUL GODHWANI,MUMBAI vs. ITO 25(1)(5), MUMBAI