NOBLE TRADELINK PRIVATE LIMITED,JAIPUR vs. WARD 1(5), JAIPUR, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Mk0 ehBk yky ehuk] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & DR MEETHA LAL MEENA, AM vk;dj vihy la-@ITA No. 302 & 303/JP/2021 fu/kZkj.k o"kZ@Assessment Year : 2012-13 & 2013-14 M/s. Noble Tradelink Private Ltd. cuke The ITO Vs. 476, Govind Raoji Ka Rasta Ward 1(5) Chandpol Bazar, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABCN 6092 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri P.C. Parwal, CA jktLo dh vksj ls@Revenue by: Smt. Monisha Choudhary, JCIT-DR lquokbZ dh rkjh[k@Date of Hearing : 08/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 10 /10/2022 vkns'k@ORDER PER: SANDEEP GOSAIN, JM Both these appeals filed by the assessee are directed against two different orders of the ld. CIT(A), National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] dated 27-10-2021 and 18-10-2021 for the assessment years 2012-13 & 2013-14 respectively. Since the issues in both the appeals are similar, therefore, the Bench decides to dispose off both the appeals through a common order for the sake of convenience and brevity of the case. A.Y. 2012-13 ‘’I. Reopening of assessment and issue of notice u/s. 148.

1. In the facts and circumstances of the case and in law, the L.d. A.O. had erred in issuing notice u/s 148 of the IT. Act on the basis of information from the Investigation wing only without application of mind and analysing the basic facts of the case. The notice issued on the basis of borrowed satisfaction is illegal and void and consequently assessment based on such notice may kindly be quashed. 1.1. That the Ld.CIT(A) has also erred in confirming the action with regard to reopening of the case without considering the fact that the Assessing Officer has not applied his mind and having no independent satisfaction with regard to reopening of the case u/s 148 and, as such, proceedings u/s 148 are liable to be quashed. II. Addition u/s 68 of Rs 80,00,000/- being loan received from M/s Lunkad Textiles Pvt. Ltd. (Rs 20,00,000/-), M/s P. Saji Textiles Ltd (Rs 30,00,000/-), M/s Sampada Chemicals Ltd. (Rs 10,00,000/-) and M/s Santoshima Tradelinks Ltd. (Rs 20,00,000/-).

2. The Ld. AO has erred both in law as well as in facts in making addition of Rs. 80,00,000/- by treating the unsecured loans received by the appellant as unexplained cash credit without appreciating the fact that the appellant has entered into genuine transactions with its loan creditors and complete details of loans were submitted by the appellant and it has also complied with the requirements of section 68 of the Act. The entire loan of Rs. 80,00,000/- was also repaid during the same financial year itself. 2.1. The Ld. CIT (A), erred on facts and in law in confirming the addition of Rs.80,00,000/- which was made by the Ld. AO by treating the unsecured loans received by the appellant as unexplained cash credit Rs 80,00,000/- received from M/s Lunkad Textiles Pvt. Ltd. (Rs 20,00,000/-), M/s P. Saji Textiles Ltd (Rs 30,00,000/-), M/s Sampada Chemicals Ltd. (Rs 10,00,000/-) and M/s Santoshima Tradelinks Ltd. (Rs 20,00,000/-) u/s 68 and without appreciating that appellant has duly established identity,

3 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR existence and creditworthiness of the loan creditor and also genuineness of the transaction of the appellant with the said party and thus onus of the appellant casted u/s. 68 was duly fulfilled and hence, addition u/s 68 of Rs 80,00,000/- may be deleted. 2.2. Without prejudice to above, the Ld CIT(A) erred in making the addition on the basis of statement of Vipul Vidur Bhatt without appreciating that appellant had proved the identity, creditworthiness and genuineness of the party by filing documentary evidences and Vipul Vidur Bhatt has retracted his statement and hence, addition u/s 68 of Rs 80,00,000/- may be deleted. 2.3. The Ld CIT(A) erred in making addition of Rs 80,00,000/- without considering the detailed submission and explanation dated 12-10-2021 thereby violating principles of natural justice and hence, addition u/s 68 of Rs. 80,00,000/- may be deleted. 2.4. The Ld CIT(A) erred in making addition of Rs. 80,00,000/- without admitting the additional evidences u/r 46A dated 12-10-2021 though appellant had given cogent explanation for admitting the additional evidences and hence, addition u/s 68 of Rs 80,00,000/- may be deleted.’’ 2.1 First of all, we take up the appeal of the assessee for adjudication for the assessment year 2012-13.

3.1 Apropos Ground No. 1 and 1.1 of the assessee, brief facts of the case are that the assessee company filed its original return of income on 29.09.2012 at Nil income. Notice u/s 148 dt. 26.03.2018 (PB 21-24) was issued on the basis of information received from DDIT(Inv.), Unit-7(4), Mumbai vide letter dt. 13.10.2016 through Income Tax Officer, Ward 3(1)(1), Ahmedabad on 29.11.2017 that a search & seizure action u/s 132 was carried out in case of Mr. Vipul Vidur Bhatt and his other 11 related entities on 05.02.2016. During the search

4 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR statement of Mr. Vipul Vidur Bhatt was recorded on 09.02.2016 where he accepted that he is an entry operator and all the mentioned entities/ companies are bogus entities/ companies which are used by him for providing bogus accommodation entries to the various beneficiaries for commission. He also accepted that he is director in these entities/ companies and all otherdirectors of these entities/ companies are dummy directors appointed by him. During the year assessee has obtained bogus accommodation entries in the form of unsecured loans from 4 entities/ companies controlled and operated by Sh. Vipul Vidur Bhatt amounting to Rs.80 lacs.The assessee has rotated unaccounted money of Rs.80 lacs in its bank account through these companies. Thus, Rs.80 lacs has escaped assessment. A letter u/s 133(6) was sent on 15.03.2018 (date of notice is 13.03.2018) and information was called. The assessee filed the reply on 20.03.2018. However, the reply of assessee is not satisfactory. No scrutiny assessment u/s 143(3) of the Act was made and therefore, the only requirement to initiate proceedings is reason to believe which has been recorded above. Thus, in terms of clause (b) of Explanation 2 to section 147, income chargeable to tax has escaped assessment. The assessee objected to the notice issued u/s 148 vide reply dt. 06.12.2018 (PB 25-27) which was disposed of by the AO vide order dt. 10.12.2018 (PB 28-31) and accordingly the assessment was framed u/s 147 of the IT Act, 1961.

5 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 3.2 In first appeal, the Ld. CIT(A) upheld the validity of reopening of assessment by holding that the search and seizure was conducted in case of Sh. VV Bhatt. The fact of search leading to detection of various bogus entities controlled by the person is not in doubt. The assessee claimed to have taken substantial loan from a party which was found to be bogus is also not in doubt. The above circumstances are sufficient reasons to form a belief that taxable income had escaped assessment. At the stage of reopening, what is required is some tangible facts which can form basis to believe that income had escaped assessment. It need not be established that such amount of income had already escaped assessment. Therefore, the objection raised has no basis. 3.3 During the course of hearing, the ld. AR of the assessee prayed that the notice issued by the AO u/s 148 of the Act and consequent assessment made by the AO is illegal and bad which should be quashed. To this effect, the ld. AR of the assessee has filed the detailed written submission as under with case laws also. ‘’1. From the plain reading of the reasons recorded, it can be noted that notice u/s 148 is issued solely on the basis of information received from DDIT(Inv.), Unit-7(4), Mumbai where it referred to search conducted by income tax department in case of Mr. Vipul Vidur Bhatt and his related entities wherein in the statement recorded u/s 132(4) it was admitted by him that he was in the business of providing accommodation entries. On this basis, AO concluded that assessee has obtained bogus accommodation entries in the form of unsecured loans amounting to Rs.80 lacs from 4 entities/ companies controlled and operated by Sh. Vipul Vidur Bhatt. Thus, from the recording of reasons, it is evident that only basis for reopening the assessment is the information received from DDIT(Inv.), Unit-7(4), Mumbai. The primarily condition for initiating action u/s 6 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 147 is that AO must have reason to believe that any income chargeable to tax has escaped assessment. This satisfaction must be of AO himself and not a borrowed satisfaction. Reason to believe cannot be at the instance of audit party or investigation conducted by others or third party statement etc.

2. In the present case, before issue of notice u/s 148, the AO issued notice u/s 133(6) dt.13.03.2018 (copy enclosed) to furnish the statement of account of 10 entities in the books of accounts of assessee. In response to same, assessee vide reply dt. 20.03.2018 (copy enclosed) submitted that during the year it raised loan only from 5 parties, i.e. of (i) Rs.20 lacs from M/s Lukand Textiles Pvt. Ltd., (ii) Rs.30 lacs from M/s P Saji Textiles Ltd., (iii) Rs.10 lacs fromM/s Sampada Chemicals Ltd., (iv) Rs.20 lacs from M/s Santoshima Tradelink Ltd. & (v) Rs.30lacs from M/s Dolex Commercial Pvt. Ltd., totalling to Rs.1.10 crores. It was further explained that the loan was repaid during the year itself. Copy of ledger account and bank statement in support was filed. However, in the reasons recorded, AO stated that reply of the assessee is not satisfactory and accordingly he treated the amount aggregating to Rs.80 lacs received from 4 parties namely (i) M/s Lukand Textiles Pvt. Ltd., (ii) M/s P Saji Textiles Ltd., (iii) M/s. Sampada Chemicals Ltd. & (iv) M/s Santoshima Tradelink Ltd. as bogus accommodation entry which has escaped assessment. Thus it can be noted that AO has accepted the amount of Rs.30 lacs received from M/s Dolex Commercial Pvt. Ltd. which is of same nature as of amount received from other 4 parties. The AO has not given any reasons as to how the reply of assessee is not satisfactory with reference to these 4 parties. Further the name of M/s Santoshima Tradelink Ltd. from whom Rs.20 lacs is received is not there in the list of bogus entities as mentioned at Paragraph 2 of the reasons recorded (PB 22). All this shows that AO has mechanically and blindly acted upon the information received from DDIT(Inv.), Unit-7(4), Mumbai without applying his own mind to arrive at believe that income of the assessee has escaped assessment. Hence, the reopening of assessment only at the instance of Investigation Wing, Mumbai is illegal and bad in law. For this purpose, reliance is placed on the following cases:

1. 1. Reynolds Shirting Ltd. vs ACIT (2022) 285 Taxman 554 (Bom.- HC.

2. Kantibhai Dharmashibhai Narola vs ACIT (2021) 436 ITR 302 (Guj) 3. PCIT vs Meenakshi Overseas Pvt Ltd. (2017) 395 ITR 677 (Del. H.C.)

7 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 4. Balaji Health Care Pvt. Ltd. vs ITO (2019) 199 TTJ 966 (Jaipur Trib) 5. CIT &Anr. Vs Dr. N. Thippa Shetty (2010) 322 ITR 525 (Ker.) 6. G.K. Consultants Ltd. VS ITO (ITA No.1502/Del/2013 dated 27- 06-2014 (Del. Trib) ACIT vs Adhunik Cement Ltd. (2018) 168 DTR 25 (Kol-Trib) 7.

The ld. AR further submitted that the AO has reopened the assessment by invoking clause (b) of Explanation 2 to section 147 without recording any reason as to how he noticed that assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. Only on the basis of an information, without processing it further, it cannot be presumed that assessee has understated the income. In view of above, notice issued u/s 148 and the consequent assessment made by AO is illegal and bad in law and be quashed.

3.4 On the other hand, the ld. DR supported the order of the ld. CIT(A) by contending that when Shri Vipul Vidur Bhatt had admitted that he director in the entities / companies and all other directors of entities/ companies are dummy directors appointed by him and through these companies he is providing accommodation entries, the AO was well within his powers to initiate proceedings u/s 148 of the Act, more particularly when the assessment of the assessee is not framed u/s 143(3) of the Act.

8 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 3.5 We have heard both the parties and perused the materials available on record. It is noted from the assessment order that the assessee company filed its original return of income on 29-10-2012 declaring NIL income. Thereafter, the AO was having information relating to escapement of income by the assessee on account of unaccounted money of Rs.80.00 lacs during the year and the AO initiated proceedings u/s 147 of the Act and thus notice u/s 148 dated 26-03-2018 (PB 21-24) was issued on the basis of information received from DDIT(Inv), Unit- 7(4),Mumbai vide letter dated 13-10-2016 through ITO, Ward 3(1)(1), Ahemdabad on 29-11-2017 that a search and seizure action u/s 132 was carried out in case of Mr. Vipul Vidur Bhatt and his other 11 related entities on 5-02-2016. During search, statement of Shri Vipul Vidur Bhatt was recorded on 9-02-2016 wherein he accepted that he is an entry operator and all the mentioned entities/ companies are bogus entities/ companies which are used by him for providing bogus accommodation entries to the various beneficiaries for commission. On this basis the AO concluded that the assessee has obtained bogus accommodation entities in the form of unsecured loans amounting to Rs.80 lacs from 04 entities/ companies controlled and operated by Shri Vipul Vidur Bhatt as he is director in these companies. Thus from the recording of reasons, it is evident that only basis for reopening the assessment is the information received from DDIT (Inv), Unit 7(4),Mumbai. It is noted that in order to initiate action u/s 147 of the Act, the AO

9 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR should have reason to believe that any income chargeable to tax has escaped assessment and this satisfaction must be of AO and not a borrowed satisfaction. It is pertinent to mention that before issue of notice u/s 148, the AO issued notice u/s 133(6) dt.13.03.2018 to furnish the statement of account of 10 entities in the books of accounts of assessee for which assessee submitted that during the year it raised loan only from 5 parties, i.e. (i) Rs.20 lacs from M/s Lukand Textiles Pvt. Ltd., (ii) Rs.30 lacs from M/s P Saji Textiles Ltd., (iii) Rs.10 lacs fromM/s Sampada Chemicals Ltd., (iv) Rs.20 lacs from M/s Santoshima Tradelink Ltd. & (v) Rs.30lacs from M/s Dolex Commercial Pvt. Ltd., totalling to Rs.1.10 crores. It was further explained that the loan was repaid during the year itself and copy of ledger account and bank statement in support was filed. However, in the reasons recorded, AO stated that reply of the assessee is not satisfactory and accordingly he treated the amount aggregating to Rs.80 lacs received from 4 parties namely (i) M/s Lukand Textiles Pvt. Ltd., (ii) M/s P Saji Textiles Ltd., (iii) M/s. Sampada Chemicals Ltd. & (iv) M/s Santoshima Tradelink Ltd. as bogus accommodation entry which has escaped assessment. Thus it can be noted that AO has accepted the amount of Rs.30 lacs received from M/s Dolex Commercial Pvt. Ltd. which is of same nature as of amount received from other 4 parties. We noted from the ld. CIT(A)’s order who confirmed the action of the AO as to issuance of notice u/s 148 where income has escaped assessment by observing as under:-

10 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR ‘’4.3 I have considered the matter. The AO noted that search and seizure was conducted in the case of Sh. VV Bhatt. The fact of search leading to detection of various bogus entities controlled by the person is not in doubt. The assessee claimed to have taken substantial loan from a party which was found to be bogus is also not in doubt. The above circumstances are sufficient reasons to form a belief that taxable income had escaped assessment. At the stage of reopening, what is required is some tangible facts which can form basis to believe that income had escaped assessment. It need not be established that such amount of income had already escaped assessment. Therefore, the objection raised has no basis.’’ After evaluating all the facts and circumstances for the purpose of deciding this ground, we are of the view that since the assessee has claimed to have substantial loan from a party which was found to be bogus. Therefore, under these circumstances, prima facie, these facts are sufficient for forming a belief that taxable income has escaped assessment. We are further of the view that at the stage of reopening, the only requirement is that the AO should have some tangible material facts which can form the basis to believe that income has escaped assessment and at that stage it is not to be established beyond reasonable doubt that such amount of income had already escaped assessment. Therefore, the objections so raised by the assesse were rightly rejected by the AO and upheld by the ld. CIT(A). We find no reason to interfere into the lawful finding so recorded by the ld. CIT(A) and further the assessee has not put forth any material which compel us to deviate from the findings recorded by the ld. CIT(A). Thus, while concurring 11 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR with the findings of the ld. CIT(A) on this issue, we dismiss Ground No. 1 and 1.1 of the assessee. 4.1 Apropos Ground Nos. 2.1 to 2.4 of the asseeee, brief facts of the case are that during the year assessee has received unsecured loans amounting to Rs.20 lacs from M/sLukand Textiles Pvt. Ltd., Rs.30 lacs from M/s P Saji Textiles Ltd., Rs.10 lacs from M/sSampada Chemicals Ltd. and Rs.20 lacs from M/s Santoshima Tradelink Ltd. which was repaid during the year itself. In course of reassessment proceedings the assessee vide letter dt.12.12.2018 (PB 32-33) filed the confirmation, ITR Acknowledgment, extract of bankstatement reflecting the transaction with the assessee company and the financial statements of these creditors. The AO however held that assessee has taken credit entry in the form of unsecured loans from the entities which are managed by Sh. Vipul Vidur Bhatt for providing accommodation entries. The assessee company has rotated unaccounted money of Rs.80 lacs in its bank account through the companies which are mentioned in the reasons recorded. During the search action statement of Vipul Vidur Bhatt was recorded on 09.02.2016 u/s 132(4) of the IT Act, 1961 wherein he has accepted that he is an entry operator and all the entities/ companies mentioned are bogus entities/ companies which are used by him for providing bogus accommodation entries. Accordingly, he added Rs.80 lacs to the total income of assessee by treating it as unaccounted money.

12 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 4.2 Before Ld. CIT(A), assessee filed additional evidence in the form of affidavit of Sh. Vipul Vidur Bhatt retracting from the statement recorded u/s 132(4) of IT Act (PB 145-149) and affidavit of Director of loan creditors stating and confirming the transactions made by them with the assessee company (PB 150-161). The Ld. CIT(A), however, confirmed the addition made by AO by giving the following findings ‘’(i) The assessee has filed additional evidence in the form of affidavit duly sworn by the Directors of the companies. Two of these affidavits are sworn by Sh. Vipul Vidur Bhatt (VV Bhatt in short) in his capacity as Director of M/s P Saji Textiles Ltd. and M/s Sampada Chemicals Ltd. VV Bhatt in search has admitted to creation of several bogus companies and giving accommodation entries to unscrupulous beneficiaries. He is the genesis of the investigation and subsequent assessment in the case of present assessee. (ii) Sh. VV Bhatt had by an affidavit sworn on 02.09.2016 retracted the statements given by him in course of search proceedings. The affidavit filed by him do not serve his case. This only go to prove the fact that he was the real creator of the bogus companies which were giving accommodation entries. The affidavit is just self serving documents to sub-serve the unscrupulous activities indulged into by Sh. VV Bhatt. (iii) The documents relating to various entities were found in the premises of Sh. VV Bhatt in course of search. This fact had been admitted by him. The assessee had not demonstrated before the AO that those entities were doing genuine business. The money transactions carried out by them have not been proved as genuine before the AO. In fact the AO had taken the view that they were rotating unaccounted money. (iv) The additional evidences filed by the assessee are self serving statements made by Sh.VV Bhatt himself or Director of companies who were found to be under the control of Sh. VV Bhatt. They in no way serve the assessee’s cause. They are make-belief statements only and cannot be taken as evidence that could weigh the balance in assessee’s favour vis-à-vis the finding of search carried in the case of Sh. VV Bhatt.Therefore, so called additional evidence deserves no consideration and they are discarded at the threshold. (v) The argument regarding furnishing of all documentary evidences will not hold water because in this kind of arrangements where all interested parties are on one side, any amount of document can be generated and as stated earlier, the retraction statement is nothing but self serving document.’’ 13 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR During the course of hearing, the ld. AR of the assessee contended that 4.3 Section 68 provides that if any sum is found credited in the books of accounts, then the assessee has to prove the identity and creditworthiness of the party from whom the amount is received and the genuineness of the transaction. In the present case, the identity of the creditor is established from the company master data downloaded from MCA portal (PB 162-165) and ITR acknowledgment (PB 38, 67, 100 & 128). The genuineness of the transaction is established from the confirmation of accounts (PB 34, 63, 96 & 124), affidavit of Director of loan creditor companies (PB 150-161) and bank statements (PB 35-37, 64-66, 97-99 & 125-127) from which it can be noted that the transaction has been carried out through banking channel and the loan amount is repaid back during the year itself. The creditworthiness of the creditor is established from the Balance Sheet from which it can be noted that the net worth of M/s Lukand Textiles Pvt. Ltd. is Rs.2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs.3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs.10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs.45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan given to assessee is out of repayment of loan given to other parties. Thus, assessee has discharged its onus to establish the identity of creditors, genuineness of the transaction and creditworthiness of the creditors. The ld. AR of the assessee further 14 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR submitted that having discharged its onus, it is the duty of the AO to disprove the evidence filed by the assessee. The AO except referring to the report of Investigation Wing has not brought any material on record to rebut the evidences filed by the assessee. It is not the case of lower authorities that in search of Mr. Vipul Vidur Bhatt any evidence is found that assessee has given any cash for taking the alleged accommodation entry. Had these loans were accommodation entries, the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. In fact the Ld. CIT(A) having not found any flaw in the additional evidences filed before him has discarded the same by simply stating that these are self serving documents. Therefore, once the assessee has discharged its onus casted u/s 68 of the Act, the addition confirmed by Ld. CIT(A) is not as per law. To this effect, the ld. AR of the assesse relied upon following case laws bearing No. 1 to 4 where with reference to the statement Shri Vipul Vidur Bhatt, the addition made by the AO was deleted.

1 ITO Vs Celebrity Lifespace Pvt. Ltd. (ITA No. 630/Mum/2017 dated 5-12-2019 (Mum-Trib)

15 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 2. ITO vs MJD Financial Services (P) Ltd. (ITA No. 6051/Mum/2018 order dated 10-09-2020 (Mum-Trib) 3. M/a. Moraj Realty Pvt. Ltd. vs DCIT (ITA No. 708 & 709/Mum/2019 order dated 8-12-2020 (Mum-Trib) 4. Harivardhan Steel & Alloys Pvt. Ltd. vs ITA No. 3302/Mum/2019 order dated 24-01-2022 (Mum. Trib) 5. Pr.CIT, Udaipur vs Shubh Mines Pvt. Ltd. (DBITA No. 96/15 order dated 03-05-2016 (Raj-HC) 6. Aravali Trading Co. vs ITO (2008) 8 DTR 199 (Raj-HC) 7 Kanhaialal Jangid vs ACIT (2008) 8 DTR 38 (Raj-HC) 8. Labh Chand Bohra vs ITO (2008) 219 CTR 571 (Raj-HC)

In the end, the ld.AR of the assessee prayed that the addition confirmed by the ld. CIT(A) amounting to Rs. 80 lacs should be deleted. 4.4 On the other hand, the ld. DR supported the orders of the lower authorities. To this effect, the ld. DR relied on following case laws. 1.Pr. CIT vs Swati Bajaj (2022) 139 Taxmann.com 352 (Cal.)

16 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 7. Investigation Report in the case of – Project Bogus LTCG/STCL through BSE Listed Penny stocks (Directorate of Income (Investigation), Kolkata)

4.5 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the AO while making the assessment in the case of the assessee observed that during the year under consideration the assessee company had taken credit entries in the form of unsecured loan from the entities which are managed by Shri Vipul Vidur Bhatt for providing accommodation entries and rotated unaccounted money of Rs.80 lacs in its bank through the these companies. Thus the AO added unaccounted money of Rs. 80 lacs to the total income of the assessee company for the year under consideration and the ld. CIT(A) has confirmed the action of the AO. The Bench noted that if any sum is found credited in the books of account of the assessee then the assessee has to prove the identity and creditworthiness of the party from whom the amount is received and the genuineness of the transaction. From the record, it is noted that identity of the creditor is established from the company master data downloaded from MCA Portal. The genuineness of the transaction is established from the confirmation of accounts, affidavit of Director of loan creditor companies and bank statement from where it can be seen that the transaction had been carried out through banking channel and the loan amount is repaid during the year itself. It is 17 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR also noted from the records that the creditworthiness of the creditor is established from the balance sheet from where it can be seen that the net worth of of M/s Lukand Textiles Pvt. Ltd. is Rs.2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs.3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs.10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs.45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan given to assessee is out of repayment of loan given to other parties. Thus, assessee has discharged its onus to establish the identity of creditors, genuineness of the transaction and creditworthiness of the creditors. The ld. AR of the assessee further submitted that having discharged its onus, it is the duty of the AO to disprove the evidence filed by the assessee. The AO except referring to the report of Investigation Wing has not brought any material on record to rebut the evidences filed by the assessee. It is not the case of lower authorities that in search of Mr. Vipul Vidur Bhatt any evidence is found that assessee has given any cash for taking the alleged accommodation entry. Had these loans were accommodation entries, the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. The case laws and the report relied upon 18 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR by the ld. DR are with reference to the LTCG claimed exempt u/s 10(38) of the Act which are not relevant to the facts of the assessee’s case where he took loan and also repaid during the same financial year. Hence, these cases are of no help to the revenue. As against this, the ratio laid down by the assessee are squarely applicable to the facts of the assessee.

2. Pr. CIT, Udaipur vs Shubh Mines Pvt. Ltd. (DBITA No. 96/15 order dated 03-05-2016 (Raj. H.C.) wherein the Hon’ble Court observed at para 7. “7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record that the share application money of Rs.50,00,000/- was received from Moderate Credit Corporation Ltd., a listed company. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse.”

of the assessee for the assessment year 2013-14 mentioning them as under for adjudication.. I Reopening of assessment and issue of notice u/s. 148.

1. In the facts and circumstances of the case and in law, the Ld. A.O. had erred in issuing notice u/s 148 of the 1.T. Act on the basis of information from the Investigation wing only without application of mind and analysing the basic facts of the case. The notice issued on the basis of borrowed satisfaction is illegal and void and consequently assessment based on such notice may kindly be quashed. 1.1. That the Ld.CIT(A) has also erred in confirming the action with regard to reopening of the case without considering the fact that the Assessing Officer has not applied his mind and having no independent satisfaction with regard to reopening of the case u/s 148 and, as such, proceedings u/s 148 are liable to be quashed II. Addition u/s 68 of Rs 54,50,000/- being loan received from M/s Shyam Alcohol & Chemicals Ltd.

2. The Ld. AO has erred both in law as well as in facts in making addition of Rs. 54,50,000/- by treating the unsecured loans received by the appellant as unexplained cash credit without appreciating the fact that the appellant has entered into genuine transactions with its loan creditors and complete details of loans were submitted by the appellant and it has also complied with the requirements of section 68 of the Act. The entire loan of Rs. 54,50,000/- was also repaid during the same financial year itself. 2.1. The Ld. CIT (A), erred on facts and in law in confirming the addition of Rs.54,50,000/- which was made by the Ld. AO by treating the unsecured loans received by the appellant as unexplained cash credit Rs 54,50,000 received from M/s Shyam Alcohol & Chemicals Ltd u/s 68 and without appreciating that appellant has duly established identity, existence and creditworthiness of the loan creditor and also genuineness of the transaction of the appellant with the said party and thus onus of the appellant casted u/s. 68 was duly fulfilled and hence, addition u/s 68 of Rs 54,50,000/- may be deleted.

22 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 2.2. Without prejudice to above, the Ld CIT(A) erred in making the addition on the basis of statement of Vipul Vidur Bhatt without appreciating that appellant had proved the identity, creditworthiness and genuineness of the party by filing documentary evidences and Vipul Vidur Bhatt has retracted his statement and hence, addition u/s 68 of Rs 54,50,000/- may be deleted. 2.3. The Ld CIT(A) erred in making addition of Rs 54,50,000/- without considering the detailed submission and explanation dated 12-10-2021 thereby violating principles of natural justice and hence, addition u/s 68 of Rs. 54,50,000/- may be deleted. 2.4. The Ld CIT(A) erred in making addition of Rs. 54,50,000/- without considering the additional evidences u/r 46A dated 12-10-2021 though appellant had given cogent explanation for admitting the additional evidences and hence, addition u/s 68 of Rs. 54,50,000/- may be deleted.’’ 6.1 Apropos Ground No. 1 and 1.1 of the assessee, brief facts of the case are that the assessee company filed its original return of income on 29.09.2013 at total income of Rs.48,826/-. Notice u/s 148 dt. 23.03.2018 was issued on the basis of information received from DDIT(Inv.), Unit-7(4), Mumbai vide letter dt. 13.10.2016 through Income Tax Officer, Ward 3(1)(1), Ahmedabad on 29.11.2017 that a search & seizure action u/s 132 was carried out in case of Mr. Vipul Vidur Bhatt and his other 11 related entities on 05.02.2016.During the search statement of Mr. Vipul Vidur Bhatt was recorded on 09.02.2016 where he accepted that he is an entry operator and all the mentioned entities/ companies are bogus entities/ companies which are used by him for providing bogus accommodation entries to the various beneficiaries for commission. He also accepted that he is director in these entities/ companies and all other directors of these entities/ companies are dummy directors appointed by him. During the year assessee has obtained bogus 23 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR accommodation entries in the form of unsecured loans from Shyam Alcohols & Chemicals controlled and operated by Sh. Vipul Vidur Bhatt amounting to Rs.54,50,000/-. The assessee has rotated unaccounted money of Rs.54,50,000/- in its bank account through this company. Thus, Rs.54,50,000/- has escaped assessment. A letter u/s 133(6) was sent on 15.03.2018 (date of notice is 13.03.2018) and information was called. The assessee filed the reply on 20.03.2018. However, the reply of assessee is not satisfactory. No scrutiny assessment u/s 143(3) of the Act was made and therefore, the only requirement to initiate proceedings is reason to believe which has been recorded above. Thus, in terms of clause (b) of Explanation 2 to section 147, income chargeable to tax has escaped assessment. The assessee objected to the notice issued u/s 148 vide reply dt. 06.12.2018 (PB 24-26) which was disposed of by the AO vide order dt. 10.12.2018 (PB 28-30) and accordingly the assessment was framed u/s 147 of the IT Act, 1961. 6.2 In first appeal, the Ld. CIT(A) upheld the validity of reopening of assessment by holding that the search and seizure was conducted in case of Sh. VV Bhatt. The fact of search leading to detection of various bogus entities controlled by the person is not in doubt. The assessee claimed to have taken substantial loan from a party which was found to be bogus is also not in doubt. The above circumstances are sufficient reasons to form a belief that taxable income had 24 ITA NO.302/JP/2021 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR escaped assessment. At the stage of reopening, what is required is some tangible facts which can form basis to believe that income had escaped assessment. It need not be established that such amount of income had already escaped assessment. Therefore, the objection raised has no basis. Thus the ld. CIT(A) confirmed the action of the AO. We have heard both the parties and perused the materials available on 6.3 record. It is noted that similar issue had been raised by the assessee in ITA No. 302/JP/2013 for the assessment year 2012-13 wherein the Ground No. 1 and 1.1 of the assessee has been dismissed. Hence, the decision taken by us in Ground No. 1 and 1.1 of the assessee in ITA No.302/JP/2021 for the assessment year 2012-13 shall apply mutatis mutandis in Ground No. 1 and 1.1 of the assessee for the assessment year 2013-14 also. Thus Ground No. 1 and 1.1 of the assessee is also dismissed.

7.1 Apropos Ground No. 2 to 2.4 of the assessee, brief facts of the case are that during the year assessee has received unsecured loans amounting to Rs.54.50 lacs from M/s Shyam Alcohols & Chemicals Ltd. The loan was repaid during the year itself. In course of reassessment proceedings the assessee vide letter dt. 12.12.2018 (PB 31-32) filed the confirmation, ITR Acknowledgment, extract of bank statement reflecting the transaction with the assessee company and the financial 25 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR statements of the creditor. The AO however held that assessee has taken credit entry in the form of unsecured loans from the entities which are managed by Sh. Vipul Vidur Bhatt for providing accommodation entries. The assessee company has rotated unaccounted money of Rs.54.50 lacs in its bank account through the company mentioned in the reasons recorded. During the search action statement of Vipul Vidur Bhatt was recorded on 09.02.2016 u/s 132(4) of the IT Act, 1961 wherein he has accepted that he is an entry operator and all the entities/ companies mentioned are bogus entities/ companies which are used by him for providing bogus accommodation entries. Accordingly, he added Rs.54.50 lacs to the total income of assessee by treating it as unaccounted money.

7.2 Before Ld. CIT(A) assessee filed additional evidence in the form of affidavit of Sh. Vipul Vidur Bhatt retracting from the statement recorded u/s 132(4) of IT Act (PB 64-68) and affidavit of Director of loan creditor stating & confirming the transactions made by him with the assessee company (PB 69-71). However, The Ld. CIT(A) held that from the facts and circumstances narrated by the AO, the unmistakable conclusion that can be drawn is that Sh. Bhatt through the bogus companies has given accommodation entries to the assessee. Unless the findings of Investigation Wing are found to be untrue, no amount of argument can changed the balance in favour of assessee. The retraction of statement cannot 26 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR change the facts unearthed in course of search and therefore, retraction is a self serving statement. Accordingly, the addition made by AO is confirmed.

7.3 We have heard both the parties and perused the materials available on record. In this case, the AO made an addition of Rs.54.50 lacs holding it as unaccounted money relating to Shri Vipul Vidur Bhatt for providing accommodation entries and rotating it in its bank account through these companies during the year. In first appeal, the ld. CIT(A) has confirmed the action of the AO. It is not imperative repeat the facts of the case as similar issue had been raised by the assessee in for the assessment year 2012-13 wherein the Ground No. 2 to 2.4 of the assessee has been allowed. Since the similar points are involved in the appeal of the assessee for the assessment year 2013-14, therefore, applying the same analogy, we feel that the ld. CIT(A) is not justified in confirming the action of the AO as to the addition of Rs.54.50 lacs in the case of the assessee company. Hence, the decision taken by us in Ground No. 2 to 2.4 of the assessee for the assessment year 2012-13, allowing the grounds of the assessee are reproduced as under:-

‘’4.5 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the AO while making the assessment in the case of the assessee observed that during the year under consideration the assessee company had taken credit entries in the form of unsecured loan from the entities which are 27 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR managed by Shri Vipul Vidur Bhatt for providing accommodation entries and rotated unaccounted money of Rs.80 lacs in its bank through these companies. Thus the AO added unaccounted money of Rs. 80 lacs to the total income of the assessee company for the year under consideration and the ld. CIT(A) has confirmed the action of the AO. The Bench noted that if any sum is found credited in the books of account of the assessee then the assessee has to prove the identity and creditworthiness of the party from whom the amount is received and the genuineness of the transaction. From the record, it is noted that identity of the creditor is established from the company master data downloaded from MCA Portal. The genuineness of the transaction is established from the confirmation of accounts, affidavit of Director of loan creditor companies and bank statement from where it can be seen that the transaction had been carried out through banking channel and the loan amount is repaid during the year itself. It is also noted from the records that the creditworthiness of the creditor is established from the balance sheet from where it can be seen that the net worth of of M/s Lukand Textiles Pvt. Ltd. is Rs.2.08 crores (PB 49), M/s P Saji Textiles Ltd. is Rs.3.09 crores (PB 79), M/s Sampada Chemicals Ltd. is Rs.10.20 crores (PB 114) and M/s Santoshima Tradelink Ltd. is Rs.45.78 crores (PB 139-140). Further the Directors of these companies in their affidavits have stated that source of funds for loan given to assessee is out of repayment of loan given to other parties. Thus, assessee has discharged its onus to establish the identity of creditors, genuineness of the transaction and creditworthiness of the creditors. The ld. AR of the assessee further submitted that having discharged its onus, it is the duty of the AO to disprove the evidence filed by the assessee. The AO except referring to the report of Investigation Wing has not brought any material on record to rebut the evidences filed by the assessee. It is not the case of lower authorities that in search of Mr. Vipul Vidur Bhatt any evidence is found that assessee has given any cash for taking the alleged accommodation entry. Had these loans were accommodation entries, the same would not have been repaid within such short duration. The Ld. CIT(A) has incorrectly held that assessee has not demonstrated that these entities are doing genuine business ignoring that the same is verifiable from the financial statements of these creditors and their return of income filed before him which otherwise is not the onus of the assessee. The case laws and the report relied upon by the ld. DR are with reference 28 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR to the LTCG claimed exempt u/s 10(38) of the Act which are not relevant to the facts of the assessee’s case where he took loan and also repaid during the same financial year. Hence, these case are of no help to the revenue. As against this, the ratio laid down by the assessee are squarely applicable to the facts of the assessee.

1. ITO vs Om Shanti Realtors (ITA No. 5615/Mum/2017 dated 01- 03-2019 wherein the Bench observed as under:- ‘’7. After having gone through the facts of the present case and perusal of the documents and after hearing both parties at length we find that the assessee had already placed on record all the documentary evidence in order to show the identity and creditworthiness of the lender and genuineness of the transactions. We have perused the confirmation filed by the parties, copies of acknowledgement of return of income filed by the lenders for the year under consideration, copies of bank statement of lenders, which establish that the payment towards loans were received during the year under consideration. Therefore, the identity of the lender was not in dispute. We have also considered all the documents placed on record by the assessee in the shape of statement of accounts and documents to show that the transactions were carried out through banking channels and the confirmations which were filed in the form of ledger accounts which reflect that the assessee had received the amount through RTGS. All those documents prove the genuineness of the transactions. Now as far as creditworthiness of the lenders are concerned, we have perused the audited accounts of the lenders which shows the creditworthiness of the lenders to grant loans and advances. Further, we also noticed upon the records that ld. CIT(A) had rightly pointed out in its order that the AO made the additions by holding that as the declared income by the respective loan creditors was less, therefore, they were not capable of lending. However, the AO ignored the fact that the lenders had substantial 29 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR turnover and had a very large basis of assets as is reflected in the respective balance sheet.’’ 2. Pr. CIT, Udaipur vs Shubh Mines Pvt. Ltd. (DBITA No. 96/15 order dated 03-05-2016 (Raj. H.C.) wherein the Hon’ble Court observed at para 7. “7. A bare perusal of the assessment order reveals that the AO has made the addition on suspicion which is based on the statements of third party Shri Aseem Kumar Gupta, admittedly, recorded in the back of the assessee. It has come on record that the share application money of Rs.50,00,000/- was received from Moderate Credit Corporation Ltd., a listed company. It is not disputed before this court that the investment made was received by account payee cheque and the same was refunded by an account payee cheque when the company dropped its project. In the considered opinion of this court, in absence of any cogent evidence on record establishing that the money shown to have received as share application money, was as a matter of fact, unaccounted money belonging to the assessee company, the finding arrived at by the AO, which is based on suspicion, has rightly been held not sustainable in the eyes of law. Suffice it to say that the finding arrived at by the CIT (A), affirmed by the ITAT, which remains a finding of fact, cannot be said to be capricious or perverse.”

3. Aravali Trading Co. vs ITO (2008) 8 DTR 199 (Raj) wherein the Hon’ble Court observed that …Once the existence of the creditors is proved and such persons own the credits which are found in the books of the assessee, the assessee’s onus stands discharged and the latter is not further required to prove the source from which the creditors could have acquired the money deposited with him either in terms of sec. 68 or on general principle. Merely because the depositors explanation about the sources of money was not acceptable to the AO, it cannot be presumed that the deposit made by the creditors is money belonging to assessee itself. If the creditors explanation about the source of deposits is not found to be acceptable, the investment owned by such persons may be subjected to proceedings for inclusion of the amounts as their income from undisclosed sources or if they are found benami the real owner can be brought to tax. In the absence of anything to establish that the sources of the creditors deposits flew from the assessee, the cash credits cannot be treated as unexplained income of the assessee.’’ 30 M/S. NOBLE TRADELINK PVT LTD. VS ITO, WARD 1(5), JAIPUR 4. Kanhaialal Jangid vs ACIT (2008) 8 DTR 38 (Raj) wherein the Hon’ble Court observed that –‘’ While it is the assessee’s burden to furnish the explanation relating to cash credits, the assessee’s burden does not extend beyond proving the existence of the creditor and further proving that such creditor owns to have advanced the amount credited in the account of assessee. However, the burden does not go beyond to put the assessee under an obligation to further prove as to wherefrom the creditor has got or procured the money to be deposited or advanced to the assessee. The explanation furnished by the creditor about the source from where he procured the money to be deposited or advanced to the assessee is not relevant for the purpose of rejecting the explanation furnished by the assessee and making additions of such deposits as income of the assessee from undisclosed sources by invoking section 68 unless it can be shown by the department that the source of such moneys come from the assessee himself or such source could be traced to the assessee itself. In the present case, while the existence of the creditor is not in doubt & he has admitted to have advance the loan to the assessee, the fact that the explanation furnished by the creditor about his source of such advancement has not been accepted by the revenue authority cannot lead to any presumption that the source of such advancement by creditor emanated from the assessee. Therefore, the addition in the income of the assessee as cash credit cannot be sustained.’’