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Income Tax Appellate Tribunal, CHANDIGARH BENCH “B”, CHANDIGARH
Before: SHRI. AAKASH DEEP JAIN, VP & SHRI. SHRI. KRINWANT SAHAY, AM
Order PER AAKASH DEEP JAIN, VP : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-3, Gurgaon dt. 27/09/2024 pertaining to Assessment Year 2018-19. The following grounds have been raised:
1. That the order of the learned CIT(A) is bad, against the facts and law.
2. That the CIT(A) has wrongly upheld additions made by the learned assessing officer of Rs. 4,97,81,296/- on surmises and conjectures.
3. That the CIT(A) has wrongly upheld additions made the learned assessing officer of Rs. 2,75,81,296/- u/s 69A of the Act.
2 4. That the CIT(A) has wrongly upheld additions made the learned assessing officer of Rs. 70,00,000/- received from Sh. Chetan Jhalaira u/s 68 of the Act.
That the CIT(A) has wrongly upheld additions made the learned assessing officer of Rs. 40,00,000/- received from Sh. Sanbir Singh u/s 68 of the Act.
That the CIT(A) has wrongly upheld additions made the learned assessing officer of Rs. 30,00,000/- received from Sh. Jagbir Singh Randhawa u/s 68 of the Act.
That the CIT(A) has wrongly upheld additions made the learned assessing officer of Rs. 22,00,000/- received from M/s Evershine Resorts Pvt. Ltd. u/s 68 of the Act.
That the CIT(A) has wrongly upheld additions made the learned assessing officer of Rs. 60,00,000/- received from M/s TJR properties Pvt. Ltd. u/s 68 of the Act.
That the CIT(A) has wrongly upheld penalty proceedings initiated by the assessing officer u/s 271AAB(1A)(b) of the Income Tax Act, 1961.
Ground No. 1 is general in nature.
Ground No. 2 pertains to all the additions made. 4. Apropos Ground No. 3, the AO has mentioned in his order that the assessee has made investment of Rs. 27581926/- on 12.04.2017 and 15.04.2017 from his Kotak Mahindra Bank account with Mining Department, which was refunded to the assessee on 24.04.2017. Thereafter, the assessee again made investment of Rs. 1,68,35,302/- on 11.05.2017 with Mining Department out of the refund received from Mining Department. The assessing officer has also mentioned that the assessee has not disclosed these investments in his affairs. Further, the details of these investments were not furnished by the assessee during the assessment proceedings. Further, the assessee had failed to explain these transactions satisfactorily and hence, made the addition u/s 69 as unexplained investment during the year.
3 5. The Ld. CIT(A) has observed that the appellant submitted that he paid the amount of Rs. 2,75,81,926/- from explained sources as earnest money to participate in the bidding of sand mines in Punjab. However, perusal of details on record w.r.t. source of money in appellant's bank account from various entities revealed that there was no business in M/s TJR Properties Pvt Ltd during the year under consideration and there were no significant assets with the company, and the creditworthiness of the company was not proved so as to lend such amounts of loan. During search proceedings, the books of account of M/s TJR Properties Pvt Ltd and M/s Evershine Resorts Pvt Ltd were found from the office premises of the CA and not from the registered address, SCO-14, Sector- 7C, Madhya Marg, Chandigarh. The appellant had failed to establish the genuineness of these transactions beyond doubt. The amounts from various related entities like M/s TJR Properties Pvt Ltd, M/s Evershine Resorts Pvt Ltd and other parties could not be satisfactorily explained; and that the appellant had not given complete details and any cogent evidence to prove as to how the source of payment for bidding process was from explained sources. 5.1 The Ld. CIT(A) further observed that the appellant failed to justify the purpose of these loans and also the explanation regarding the capacity/ sources of these creditors are not satisfactory; that further, the income of these persons was not commensurate with the amount of loans provided by them to the appellant; that it was seen that Shri Chetan was filing ITR of Rs. 6 lakhs approx, but had given a loan of Rs. 70 lakhs and all the three limbs of section 68 could 4 not be satisfied by the appellant to establish the creditworthiness and genuineness of loan transaction; and that similarly, the genuineness of loan from Shri Sanbir Singh could not be established.
On behalf of the assessee / appellant, it had been submitted that the CIT(A) has wrongly upheld addition made the learned assessing officer of Rs. 2,75,81,296/- u/s 69 of the Act. It has been stated that the appellant submitted that he paid the amount of Rs. 2,75,81,926/- from explained sources as earnest money to participate in the bidding of sand mines in Punjab.
Ld. DR relied on the impugned order.
We find that the addition of Rs. 2,75,81,926/- was made by the Assessing Officer on the following 3 allegations: - a) That the assessee has not disclosed these investments in his affairs. b) That the details of these investments have not been furnished by the assessee during the assessment proceedings. c) That the assessee has failed to explain these transactions satisfactorily.
8.1 The Ld. CIT(A) observed that the perusal of details on record w.r.t source of money in appellant’s bank account from various entities reveals that there was no business in M/s TJR Properties Pvt. Ltd. during the year under consideration and there were no significant assets with the company, and the creditworthiness of the company was not proved so as to lend such amounts of loan. During search proceedings, the books of accounts of M/s TJR Properties
5 Pvt. Ltd. and M/s Evershine Resorts Pvt Ltd were found from the office premises of the CA and not from registered address SCO-14, Sector-7C, Madhya Marg, Chandigarh. The appellant has failed to establish the genuineness of these transaction beyond doubt. The amounts from various related entities like M/s TJR properties Pvt Ltd. M/s Evershine Resorts Pvt. Ltd. and other parties could not be satisfactorily explained. The appellant has not given complete details and any cogent evidence to prove as to how the source of payment for bidding process was from explained sources.
In this regard, we find that it remains undisputed that all the sources of credit in the said account by the appellant before deposits of aforesaid account of EMD with the Punjab Mining Department were explained and evidence of sources of these deposits were submitted by the assessee with the Assessing Officer and the CIT (A). The assessee had received the following credits in his bank accounts with Kotak Bank Account No. 9211334539 before 11.05.2017:
a) Dated 11.04.2017 of Rs. 60,00,000/- received from Sh. Tirloki Nath Singla (P.B. page no.450 and 15) b) Dated 12.04.2017 of Rs. 75,00,000/- (P.B. page no. 451 and 17). c) Dated 13.04.2017 of Rs.90,00,000/- from account of the appellant with the PNB Account No. 87000111296355 (P.B. page no. 19 and 5) d) Dated 15.04.2017 of Rs. 30,00,000/- from M/s TJR Properties Pvt. Ltd. (P.B. page no. 411 and 19) e) Dated 15.04.2017 of Rs. 30,00,000/- from Ever Shine Resorts Pvt. Ltd. (P.B. page no. 350 and 19). f) Dated 11.05.2017 of Rs. 50,00,000/- from M/s TJR Properties Pvt Ltd. at (P.B. page no. 411 and 33).
6 9.1 The date up on which payment was made to Punjab Sand Mining Department is 11.05.2017 and all the above credits in the Kotak Bank Account of appellant were duly explained and the following information was submitted for each of the aforesaid credit: a) Copies of Bank Account of Sahil Singla pertaining to assessment year 2018-,19 were submitted vide point 13 of reply dated 29.11.2019 given to the Ld. Assessing Officer and also to the CIT (A) during the appellate proceedings and further explanation of each debit and credit exceeding Rs. 50,000/-was also given on 29.11.2019 point 23. b) Cash Flow of the appellant was also filed on 12.12.2019 vide point 14 of the reply. c) The Statement of affair of the appellant was filed on 12.12.2019 vide point 13 of the reply.
The appellant has given the following proof of sources of the credits in the bank account during the year:
a) The Bank Account Statement of Sh. Tirloki Nath Singla - page no. 319-348 of documents filed with CIT (A). b) Confirmation of Sh. Tirloki Nath Singla - page no. 308-316 of documents filed with CIT (A). c) Assessment order of Sh. Tirloki Nath Singla for Assessment Year 2018-19 passed by the same Assessing Officer simultaneously with that of the appellant page no. 349-352 of documents / reply CIT (A) and the Assessing Officer was having all these documents during the proceedings. 10.1 Further, in the assessment of Sh. Triloki Nath Singla, the Assessing Officer had accepted all credits in his bank accounts as genuine. The said amounts of Rs.75,00,000/- and Rs. 60,00,000/-were received by the appellant from Shri T.N. Singla. Thus, no addition for the amount received from such 7 person can be made, whose sources of credit in the relevant Bank account were independently examined by the same Assessing Officer and he had accepted the same. Hence, the sources of aforesaid amounts of Rs. 75,00,000/- and Rs. 60,00,000/-received from Sh. Tirloki Nath Singla cannot be doubted, as rightly contended. Then, the appellant has transferred Rs. 90,00,000/- from his own funds from his bank account with PNB on 13.04.2017 (P.B. Page No. 5 and 19). The transfer of funds from own account of the appellant during the year, on which all credits were already examined by the Assessing Officer, cannot be made in the hands of the appellant himself. Thus, the sources of credits in the Bank accounts of the appellant before the cutoff date on 11.05.2017 were already examined by the Assessing Officer and the CIT (A), and the amount received from the bank account of the company by appellant cannot be doubted. The other credits in the Kotak Bank account of the appellant are Rs. 30,00,000/- on 15.04.2017 and Rs. 50,00,000/- on 11.05.2017 received from M/s TJR Properties Pvt. Ltd. The Assessing Officer and the CIT (A) have independently examined all credits in the Bank account of M/s TJR properties Pvt. Ltd. The said company has already been held as genuine company by the CIT (A) for A.Y 2012-13 to 2017-18. Further, the Chandigarh Bench of the ITAT vide its order dated 19.03.2024, in Appeal Nos. ITA 5/CHD/2023 and 145/CHD/2023, for Assessment Year 2017-2018, (P.B. Page No. 352-397), this company has been upheld to be a genuine company. Further, it remains undisputed that the Assessing Officer has already examined credits received from M/s TJR
8 Properties Pvt. Ltd by the appellant during the year and addition of Rs. 60,00,000/- received from M/s TJR Properties Pvt. Ltd during the year is made in the hands of the appellant u/s 68, though not admitted by the appellant, in para 9 of his order at page no. 14-15 of the assessment order and the CIT (A) has also considered all credits from M/s TJR Properties Pvt. Ltd by the appellant during the year, in his order at page 102 of his Order.
10.2 Still further, it is also on record that all credits in the Bank Account of the said company during the year were independently examined by the same Assessing Officer, simultaneously with the order of the appellant, and once the credits in the bank account of the lender company is independently examined by the Assessing Officer and addition, if any, is already made in the hands of the under company, then no addition for the amount advanced by the said company to the assessee can be made in the hands of the recipient.
10.3 The other credit was of Rs. 30,00,000/-, received by the assessee from M/s Evershine Resorts Pvt. Ltd on 15.04.2017 (P.B. Page no. 350). The said company, again is already held as a genuine company by the CIT(A) for A.Ys. 2012-13 to 2017-18 and by the Hon'ble ITAT vide its order dated 19.03.2024, in Appeal Nos. ITA 5/CHD/2023 and 145/CHD/2023 for Assessment Year 2017- 2018. (P.B. Page No. 352-397). 10.4 Then, all credits in the Bank Account of the said company during the year were independently examined by the same Assessing Officer simultaneously
9 with the order of the appellant, and once the credits in the bank account of the lender company have been independently examined by the Assessing Officer and addition, if any, is already made in the hands of the under company, then no addition for the said amount advanced by said company can be made in the hands of the recipient.
10.5 Too, the Assessing Officer has already examined the credits received by the assessee from M/s Evershine Resorts Pvt. Ltd during the year and addition of the amount of Rs. 22,00,000/- received from M/s Ever Shine Resorts Pvt. Ltd during the year is made in the hands of the appellant u/s 68, though not admitted by the appellant, in para 8 of his order at page no. 14 of the assessment order, and the CIT (A) has also considered all credits from M/s Ever Shine Resorts Pvt. Ltd by the appellant during the year in his order, at page 102 thereof. Thus, the payment of Rs. 2,75,81,296 - made to the Punjab Mining Department was from explained sources in the Kotak Bank Account No. 9211334539 of the appellant during the year and the said addition of Rs. 2,75,81,296/- was made simply on surmises and conjectures without any justification. In this regard, reliance has rightly been placed, without any contra reliance, on judgment of Hon'ble Punjab & Haryana high Court in case of ‘CIT Vs Ravi Kumar’, 294 ITR 78 (P&H), wherein, after relying on the judgment of the Calcutta H.C in case of ‘Kantilal Chandulal & Co. vs CIT’ 136 ITR 889 (Cal) it been held as follows:
"2 conditions are required to apply previsions of Section 69 i.e.: I. The assessee should be found the owner of any specific asset. II. The said asset should not be found recorded in Books of Account, if any maintained by the Assessee
Apropos the order under appeal, the CIT (A) has upheld the additions made by the assessing officer of Rs. 2,75,81,296/- u/s 69 of the Act. It remains irrefuted that the appellant paid E.M.D of Rs. 2,75,81,296/- on 12.04.2017 and 15.04.2017 to GM, Mining Department, Punjab, which was required for participation in the E-auction. The aforesaid amount of Rs. 2,75,81,296/- was paid from the Kotak Bank Account No. 9211334539 of the appellant. The tender of the E- auction was cancelled and Rs. 2,75,81,296/- was received back in the same account on 24.04.2017. Again, the tender was published by the Mining Department of Punjab and E.M.D of Rs. 1,68,35,302/- was deposited with the GM, Mining Department Punjab, on 11.05.2017, out of the funds received back on 24.04.2017. The sources of deposits of the said amount of Rs.2,75,81,296/- were duly explained and necessary documents/ evidences were submitted with A.O. during the Assessment proceeding, to prove the sources and genuineness of the credits in the said bank account, from where the payment of the EMD to GM Mining Department Punjab was made.
Accordingly, Ground No. 3 is accepted and the addition of Rs. 2,75,81,296/- is deleted.
Ground Nos. 4, 5 and 6 pertain to Rs. 70.00 lacs received by the asseessee from Shri Chetan Jhalaria, Rs. 40.00 lacs received from Shri Sanbir Singh and Rs. 30.00 lacs received from Shri Jagbir Singh Randhawa, respectively. The AO observed from the bank account of the assessee with Kotak Bank, i.e., A/c
11 No. 9211334539, that the assessee had shown the following unsecured loans from outside parties:
Sr. No. Date Name Amount (Rs.) 01. 17.05.2017 Chetan Jhalaria 60,00,000/- 02. 22.05.2017 Jagbir Singh Randhawa 30,00,000/- 03. 23.05.2017 Sanbir Singh 40,00,000/- 04. 23.05.2017 Chetan Jhalaria 10,00,000/- TOTAL 1,40,00,000/-
The AO observed that the assessee had failed to substantiate the genuineness of the transactions and the credit worthiness of the lenders. It was on the basis thereof, that the AO held these receipts, amounting to Rs. 1,40,00,000/-, to be unexplained cash credit of the assessee under section 68 of the Act.
Apropos the receipt of Rs. 70,00,000/- from M/s Jhalaria Metals through Shri Chetan Jhalaria and loan of Rs. 40,00,000/- received from Shri Sanbir Singh, the ld. CIT(A) held that the assessee failed to justify the purpose of these loans and also, the explanation regarding the capacity/sources of these creditors are not satisfactory. Further, the income of these persons does not commensurate with the amount of loans provided by them to the appellant. It is seen that Shri Chetan is filing ITR of Rs. 6 lakhs approx. but has given a loan of Rs. 70 lakhs and all the three limbs of section 68 could not be satisfied by the appellant to establish the creditworthiness and genuineness of loan transaction. Similarly, the genuineness of loan from Shri Sanbir Singh could not be established.
12 16. So far as regards the addition of Rs. 30,00,000/- received by the assessee from Shri Jagbir Singh Randhawa, the ld. CIT(A) held that the assessee failed to discharge the onus cast upon him to substantiate the credit worthiness and genuineness in respect of the transaction of Rs. 30,00,000/- in accordance with the provisions of section 68 of the Act, during assessment as well as the appellate proceedings.
The ld. Counsel for the Assessee has contended that the ld. CIT(A) has erred in confirming the addition of Rs. 70.00 lacs, Rs. 40.00 lacs and Rs. 30.00 lacs, received from Shri Chetan Jhalaria, Shri Sanbir Singh and Shri Jagbir Singh Randhawa by the assessee.
The Ld. DR on the other hand, has again placed reliance on the impugned order.
In this regard, we find that the contention of the assessee is that it is clearly mentioned in the Section 68 of the Act, that the sum to be credited should be in the books of the assessee. Since the appellant is an individual, he was not required to maintain regular books of account as per the relevant provisions of the Income Tax Act. Hence, the addition u/s 68 of the Act cannot be made in the case of the appellant, as the impugned amount of Rs. 1,40,00,00/- was credited in the bank account of the appellant and the bank account is not the books of account of the appellant. Reliance has been placed on the judgment of the Hon'ble Bombay High Court in the case of ‘The Commissioner of income Tax-10, Mumbai vs Manisha M. Shah’. Hence, the 13 entries in the Bank passbook cannot be considered as entries in the books of the assessee so as to invoke Section 68 of the Act.
19.1 The assessee maintains that the Learned Assessing Officer has considered the Bank Passbook/Statements as books of account, then, no addition can be made u/s 69 of the Act, as all the investments were accounted for and made through the regular Bank a/c of the appellant and if the Assessing Officer assents to/abides by the above judgement and agree that the Bank Passbook/Statements is not to be considered as books of accounts, then no additions can be made u/s 68 of the Act, as all the unsecured loans were received in the regular Bank a/c of the Appellant. Further, without prejudice, even if the bank statement was to be considered as books of account, then also, the whole chain of funds has been completely explained with proofs to the Assessing Officer during the assessment proceedings. Also, all the bank statements with narration of each debit and credit entry in the bank account of the appellant with all other proofs like Bank Statements, Affidavits, Loan agreements and Income Tax Returns, Balance sheet etc, of the Lenders / creditors were submitted with the Assessing officer along with the Cash Flow Statement and no defect was pointed out by the assessing officer in the details and proofs submitted during the Assessment proceedings and the same have not been disputed by him in the Assessment Order. The DDIT (invest), on whose advise the Assessing Officer has acted, recorded the statements of Sh. Chetan Jhalaria and Sh. Sanbir Singh and took all the necessary proofs to verify and substantiate the genuineness of 14 the transaction and the creditworthiness of the lender parties in the post-search inquiry. Further, the whole record, including the statements recorded and the proofs, was transferred by the DDIT (invest) to the Assessing Officer. No copies of the same were provided to the appellant during the entire assessment proceedings. The appellant even mentioned in his submission during the assessment proceedings to consider the same, but the A.O. turned a blind eye to it. Further, loans taken from Sh. Chetan Jhalaria & Sanbir Singh were paid back within a few days of receipt.
19.2 It is seen that undisputedly, in the case of unsecured loan of Rs. 30,00,000/- received from Sh. Jagbir Singh Randhawa, the assessment of Sh. Jagbir Singh Randhawa was completed simultaneously by the same Assessing Officer for Assessment year 2018-19, wherein the sources of the said funds/payment received by the Appellant were explained and also accepted by the Assessing Officer during A.Y. 2010- 19 in the assessment of Sh. Jagbir Singh Randhawa.
19.3 The details of the unsecured loans received or paid back by the assessee in the same year are as follows:
Sr. No. Date of Date of Re Name Amount Proof of credibility Receipt Payment (Rs.) genuinity and creditworthiness 3. 17.05.2017 28.06.2017 Chetan Jhalaria 60,00,000/- Affidavit, Loan Agreement, ITR Balance Sheet of Jhalaria Metals (Firm of Sh. Chetan Jhalaria), Bank Statements of Jhalaria Metals, ITR Jhalaria Metals, Ledger A/c of Jhalaria Metals.
15 4. 22.05.2Q17 Not re-paid Jagbir Singh 30,00,000/- Affidavit, ITR, Bank Randhawa Statements, Assessment Order. 5. 23.05.2017 10.06.2017 Sanbir Singh 40,00,000/- Affidavit, ITR, Bank Statements, Order of CIT (A) and ITAT. 6. 23.05.2017 28.06.2017 Chetan Jhalaria 10,00,000/- Affidavit, Loan Agreement, ITR Balance Sheet of Jhalaria Metals (Firm of Sh. Chetan Jhalaria), Bank Statements of Jhalaria Metals, ITR Jhalaria Metals, Ledger A/c of Jhalaria Metals.
The AO, it is observed, has, as correctly contended, ignored that Sh. Jagbir Singh Randhawa was having agriculture income of 36 lakhs, in addition to Taxable Income of Rs. 1,10,700/- during the year. Further, the assessment of Sh. Jagbir Singh Randhawa was also made u/s 143(3) r.w.s 153B(l)(b) by the same Assessing Officer simultaneously with that of the appellant and the AO had independently examined all the credits in his bank accounts (P.B. Page No. 101-102). Thus, it cannot be said that Sh. Jagbir Singh Randhawa was not having any sources to advance Rs. 30,00,000/- to the appellant during the year. The related documents such as Affidavit, ITR, Bank Statement and Assessment Order of Sh. Jagbir Singh Randhawa are at PB pg. 95-102.
20.1 In the case of Chetan Jhalaria, the notice u/s 148 (A)(d) of the Income Tax Act was issued to his concern, M/s Jhalaria Metals on the basis of information sent by the Assessing officer of the appellant and the same was withdrawn with the observation that:
"This amount was paid by us from our sale proceeds of Steel and other funds received from various customers during the year as our total turnover during the F.Y. 2017-2018 is Rs. 18,01,82,636/-and the said amount was given out of 16 the aforesaid sale proceeds which was received back on immediately next day. Further, we want to submit that the aforesaid amount ofRs. 20,00,000/- paid on 23/05/2017 was received bock on next day, hence the profit declared in the return for the F.Y. 2017-18 is immaterial. Moreover, the partner had own capital of Rs. 48,50,195/- in addition to unsecured loans of family members/associate entities of the partners as on 31/08/2018 were Rs. 2,82,36,038/-. Hence, own funds of the partners and their associates were available amounting to rupees more than 3.30 Crores as on 31/03/2018. Therefore, the sources of our firm cannot be doubted as our firm had sufficient funds in the shape of Partners Capital / loans form family members and associate entities/sale proceeds during the year. In addition to these, our firm had Cash Credit limit of Rs. 1,35,00,000/- with Punjab National Bank during the year, which proves that our firm had sufficient liguidity of funds available during the F.Y. 2017-2018. We are enclosing copy of - Audited Balance Sheet and Profit & Loss Account along with annexures - Bank statement of Punjab National Bank from 01/04/2017 to 30/06/2017 - Bank statement of HDFC Bank from 01/04/2017 to 30/06/2017 - Lien Marking Letter for CC Limit with Punjab National Bank - Copy of VAT Return for the relevant period - Copy of Income tax Return forA.Y. 2018-19. The reply of the assessee duly considered and accepted as assessee is having sufficient fund from which the assessee can advanced the money. Hence, no further action is required in this case." 20.2 Further, the necessary proof and evidence for said loan of Rs. 70 lakhs from Chetan Jhalaria of M/s Jhalaria metals have been enclosed at PB pg. 103- 154. These were filed before both the authorities. Further, the said loan of Rs. 70 lakhs was returned during the year itself by the assessee to Sh. Chetan Jhalaria after a few days only i.e., on 28.06.2017, through banking channels.
Regarding the loan of Rs. 40 lakhs received by the assessee from Sh. Sanbir Singh, the documents of proof of genuiness of credits from Sh. Sanbir Singh are placed at PB Pg. 155-244.
20.3 The re-assessment of Sh. Sanbir Singh was done by his Assessing officer on the information passed by the Assessing officer of the appellant and the CIT(A) has accepted all sources of credits in Bank Accounts of Sh. Sanbir as 17 genuine and explained sources. The loan of Rs. 40 lakhs was given to the appellant from the account of Shri Sanbir Singh. Then, as in the other cases, as discussed above, the ITAT has also accepted the sources of Sh. Sanbir Singh as genuine and explained sources, from where, the amount of Rs. 40 lakhs was given to the appellant. 20.4 Thus, the sources of Sh. Sanbir Singh cannot be doubted and this being so, no addition in the hands of the appellant could be made of the amount received from Sh. Sanbir Singh during the year, as rightly submitted.
20.5 This apart, the amount of Rs. 40,00,000/- has been returned to Sh. Sanbir Singh on 10.06.2017 during the relevant year itself.
20.6 The Jurisdictional High Court in the case of ‘CIT vs. GP International Ltd.’, 325 ITR 25 (P&H) is directly on the point. No contra decision has been cited before us by the Department. Moreover, in the case of ‘CIT vs. Lovely Exports Pvt. Ltd.’, 216 CTR 195 (SC) it has been held that:
"In case lender/creditor is found to be bogus, doubtful then the department may proceed against such lender/creditor as per law."
The Department initiated re-assessment proceedings in the case of M/s Jhalaria Metals (Chetan Jhalaria) and Sh. Sanbir Singh on the basis of information passed by the Assessing Officer of the appellant. The credits in their bank accounts were independently examined by their Assessing Officers/ Appellate Authorities and all credits in their bank accounts are accepted as genuine. It was from there that the funds were transferred to the appellant.
In view of the above, the addition of Rs. 70.00 lacs received from Shri Chetan Jhalaria (Ground No. 4), Rs. 40.00 lacs received from Shri Sanbir Singh (Ground No. 5) and Rs. 30.00 lacs from Shri Jagbir Singh Randhawa (Ground No. 6) are deleted, answering ground Nos. 4 to 6 in favour of the assessee.
Ground No. 7 challenges the confirmation of the addition of Rs. 22.00 lacs received by the assessee from M/s Evershine Resorts Pvt. Ltd. As per Ground No. 8, the addition of Rs. 60.00 lacs received by the assessee from M/s TJR Properties Pvt. Ltd. has wrongly been confirmed.
The AO, while making these additions, held that the lenders, i.e, M/s Evershine Resorts Pvt. Ltd. and M/s TJR Properties Pvt. Ltd. had been found to be shell companies.
The ld. CIT(A) held that from the Remand Report of the AO, it was seen that the appellant had shown amounts received from entities which had very limited assets and no significant business or revenue to lend such amount of money, and the nature of the transaction also could not be proved that the books of account of M/s Evershine Resorts Pvt. Ltd. and M/s TJR Properties Pvt. Ltd. were found from the office premises of the CA and not from the registered address, SCO-14, Sector-7C, Madhya Marg, Chandigarh; and that thus, the appellant had failed to establish the genuineness of transaction beyond doubt.
The ld. Counsel for the Assessee has contended that the same CIT (A) in his orders for A.Y. 2012-13 to 2017-18, and the ITAT, in the case of both the 19 lender companies, for Assessment Year 2017-18, have held these companies as genuine companies and have rejected the treatment of these companies as shell companies by the Assessing Officer in the Appellate Orders for the earlier Assessment Years.
This contention of the assessee is also found to be correct.
For A.Y. 2017-18, both, M/s Evershine Resorts Pvt. Ltd. and M/s TJR Properties Pvt. Ltd. have been held by this Bench to be genuine companies.
The Assessing Officer sent Deviation Note on 26.12.2019 to the DDIT (Investigation) regarding M/s TJR Properties Pvt. Ltd & Evershine Resorts Pvt. Ltd., as below:-
"During the course of assessment proceedings u/s 153A of the Act the issue was examined at length and the assessee companies was required to explain the source of amount credited in their respective bank accounts and to substantiate the genuineness of the transactions. In response to the query, written replies have been submitted by the assessee companies and source of the amount credited in the bank accounts of these companies have been submitted. Perusal of the reply of the assessee companies shows some transactions from the related parties and some transactions in squared up accounts. Confirmation of amount credited in the bank account of these companies alongwith copy of ITR, bank account statement and balance sheet etc. has been furnished by the assessee companies. Copies of replies filed by M/s TJR Properties Pvt. Ltd. and M/s Evershine Resorts Pvt. Ltd. for FY 2016-17 and 2017-18 are enclosed herewith as Annexure-Tl, 12 and El, E2 for your kind perusal and reference. After going through the replies of the assessee companies, it is observed that the amounts have been credited in the bank accounts of these companies from known sources, which has duly been accounted for by the assessee companies in their respective books of accounts and shown in their audit report as well as ITR filed in due course on regular basis. (a) Further, detailed notes dated 23.12.2019 have been submitted by these companies. These notes are enclosed herewith Annexure-T3, and E3 for your kind perusal and reference. as (b) You are therefore requested to kindly go through the replies as wet as detailed notes submitted by these companies vis-a-vis Observation of the 20 Investigation Wing in its appraisal report regarding these companies as mentioned here in above. It is further, requested that if you have any contrary facts and version to the above discussion, so that credit entries may be treated as unexplained, the same may please be brought to the notice of this office as early as possible, as the matter is getting time barred on 31.12.2019.
29.1 The assessing officer, as per the assessee, was impliedly so overawed by the dictat sent to him vide letter dated 27.12.2019 by DDIT(Inv.)(copy filed) that he suddenly changed his mind overnight and passed assessment orders from AY 2012-13 to AY 2018-19 within 2-3 days from receipt from the DDIT (Inv.), finalizing the assessments on the dictat of a third person, whereas as per the Income Tax Act, the assessing officer is required to pass assessment order independently, without any third party intervention and by application of his own mind.
29.2 It is seen that indeed the assessing officer has not given or explained any reason of his dis-satisfaction with the documents submitted and the documents which were required to be submitted for his "satisfaction". All the relevant facts / documents were submitted / made clear before the assessing officer at the time of the hearing during assessment proceedings. The appellant mentioned each and every fact in the replies and in the hearing, but the Assessing Officer held without basis that the appellant had failed to explain the documents to his satisfaction.
29.3 Now, it is trite law that once all the documents / written submissions, etc, were undisputedly submitted by the assessee, the onus to prove to the contrary lies on the assessing officer to, rebut these documents and to collect
21 incriminating material, if any, to rebut theexplanations / documents submitted by the assessee during the assessment proceedings. It is the duty of the assessing officer to thoroughly examine the facts as presented before him. In this case, on the other hand the assessing officer, acted in undue haste and completed the assessment proceedings on the dictat of a third party without application of his own mind. The allegations of the assessing officer have no legs to stand having been based on a complete misappreciation and non-appreciation of concrete documentary evidence placed on record. Reliance in this regard placed or the judgment of Hon'ble Madhya Pradesh High Court in the case of PCIT (1), Indore vs. Chain House International (P.) Ltd. reported in, 98 taxmann.com 47 has rightly been placed. Therein, it has been held that-
“Once genuineness, creditworthiness and identity of investors are established, no addition culd be made as cash credit”.
M/s TJR Properties Pvt. Ltd. 30.1 The appellant had received unsecured loans from M/s TJR Properties Private Limited during the year through banking channels. We find that as rightly submitted on behalf of the assessee, here again, the addition has illegally been confirmed in the face of voluminous documentary evidence brought on record by the assessee.
30.2 The amount of Rs. 60,00,000/- received during the year is wrongly added u/s 68 of the Act to the total income of the appellant, by alleging the said company to be a shell company. The appellant submitted audited Balance Sheet,
22 Bank Statement, ITR, Confirmation, etc. of this company to the Learned Assessing Officer during the assessment proceedings. However, instead of verification or examination of these documents/details to ascertain the genuinity, source and credibility of the lender Company as per the provisions of the Act, the Assessing Officer made addition of Rs 60,00,000/- on the wrong allegation that the lender Company was a shell company. Per contra, the ld. CIT (A) and the ITAT, for A.Y. 2012-13 to 2017-18 have held it to be genuine company.
30.3 The Assessing Officer made additions of the unsecured loans received by the Appellant from M/s. TIR Properties Pvt. Ltd. during the year under consideration, partly u/s 68 and partly u/s 69 of the Income Tax Act, without an confirmed basis. Out of the total unsecured loan amounting to Rs. 1,41,00,000/- received by the appellant from M/s. TJR Properties Pvt. Ltd during the year under consideration, part of the unsecured loan amounting to Rs. 60,00,000/- was added by the Assessing Officer u/s 68 of the Act and the balance amounting to Rs. 81,00,000/- was considered by the Assessing Officer for disallowance u/s 69 of the Act, on surmises and conjectures and nothing else. 30.4 Further, this company was also assessed simultaneously by the same Assessing Officer for the same Assessment year, and all the bank accounts, etc. of the lender company were placed on record of the Assessing Officer.
30.5 The assessing officer, wrongly added all the credit entries in the Bank account of the said company by alleging it to be shell company, existing only on 23 paper. While doing so, the credit entries were clearly proves that the Assessing Officer did not apply his mind and followed the dictat of a third party, i.e., the ADIT, Mohali.
30.6 Regarding the addition made under section 68 of the Income Tax Act, the said company has filed confirmations received from each of the parties showing name of the party, nature of the transactions, confirmation of the party along with addresses, PAN, Income Tax Return, Balance Sheet and bank statements of the parties. This company has also submitted copies of accounts of all the parties from whom amounts have been received during the year. All such transactions have taken place through bank and, therefore, the primary onus cast upon the company was discharged and therefore there was no justification for invocation of section 68 on the funds received by the Appellant from this company.
30.7 Lastly, when the Assessing Officer had himself made addition of all credits received in the bank accounts of M/s TJR Properties Pvt Ltd in the hands of this company during the year under consideration which also included the addition of Rs. 141 lacs, by treating all the credits received in bank accounts of M/s. TJR Properties Pvt Ltd. during the relevant year as unexplained credits of M/s. TJR Properties Pvt Ltd., then under no provision of the Act he could have again declared the same Rs. 60 lacs or 81 lacs as unexplained cash credits of the appellant, which were given to the appellant out of genuine credits received
24 during the year under consideration. This, had resulted into double taxation, which is not permitted under the Income Tax Act, 1961. 31. M/s Evershine Resorts Pvt. Ltd.
31.1 The appellant had received unsecured loans from M/s Evershine Resorts Private Limited during the year through banking channels. The amount of Rs. 22,00,000/- received is wrongly added u/s 68 of the Act to the total income of the appellant, by alleging the said company to be a shell company and Rs. 30,00,000/- is considered while making addition u/s 69 of the Act on surmises and conjectures.
31.2 The appellant submitted audited Balance Sheet, Bank Statement, ITR, Confirmation etc. of this company to the Assessing Officer during the assessment proceedings, but instead of verification or examination of these documents/details submitted to ascertain the genuineness, source, credibility of the lender Company as per the provisions of the Act, the Assessing Officer wrongly declared the genuine lender company as Shell Company on third party dictat without application of his own mind. On the other hand, the ld. CIT (A) and the ITAT, in their Appellate Orders, have held it to be a genuine company for A.Y. 2012-13 to 2017-2018, as seen herein before.
31.3 That the Assessing Officer has made additions of the unsecured loans received by the appellant from M/S. Evershine Resorts Pvt. Ltd. during the year under consideration, partly u/s 68 and partly u/s 69 of the Income Tax Act. Out of the total unsecured loan amounting to Rs. 52,00,000/- received by the 25 appellant from M/s Evershine Resorts Pvt. Ltd during the year under consideration, merely on conjectures and surmises.
31.4 Further, this company was also assessed simultaneously with the appellant by the same Assessing Officer, for the same Assessment year, wherein all the bank accounts, etc. of the lender company were placed on record of the Assessing Officer. The Assessing Officer, after considering the documents, information and explanation submitted by said company, had not made any addition. He was completely satisfied with regard to the fact that the company was not a shell company and all amounts credited in bank account of the company were only from known sources which were genuine and duly accounted for in its books of account as at 31.03.2018 till 26.12.2019. The AO in fact, had prepared a deviation note for making no addition at all, on 24/12/2019 and had sent it to the ADIT, Investigation, Mohali on 26/12/2019 at. 06:00pm, vide letter no. 1733. In this deviation note, the Assessing Officer has categorically admitted that there was no document or reasoning supplied to him by the Investigation Wing on the basis of which, the credit entries in the bank account of the said company could be treated as unexplained. Further, he also stated that after going through the replies of the assessee company, he was satisfied that the amounts have been credited in the bank account of the assessee company from known sources, which have been duly accounted for by the assessee company in their books of account and shown them in their audit report as well as ITR filed in due course on a regular basis.
26 31.5 It is remarkable that as contended, until the receipt of the dictat of the ADIT, Investigation, Mohali by the Assessing Officer till 27.12.2019, the Assessing Officer was completely satisfied, as evident from the aforementioned Deviation Note, with regard to the fact that the said company was not a shell company and all banking transactions were genuine and duly accounted for in its books of account and the AO had proposed no addition at all. However, suddenly, it was only on the receipt of the unauthorized dictat of the ADIT, Investigation, Mohali, that the Assessing Officer changed his track and started finding faults in the statements recorded.
31.6 Regarding the addition made under section 68 of the Income Tax Act, we submit that the said company has filed confirmations received from each of the parties showing the name of the party, the nature of the transactions, confirmation of the party along with addresses, PAN, Income Tax Return, Balance Sheet and bank statements of the lenders or creditors. This company has also submitted copies of accounts of all the parties from whom unsecured loan has been taken during the year. All such transactions have taken place through bank and therefore primary onus cast upon the company was discharged. So there was no justification for invocation of section 68 in the case of the appellant, on mere surmises and conjectures.
31.7 Besides, when the Assessing Officer had himself made addition of all credits received in the bank accounts of M/s. Evershine Resorts Pvt Ltd. during the year under consideration, which also included the addition of Rs.
27 52,00,000/, by treating all the credits received in bank accounts of M/s. Evershine Resorts Pvt. Ltd. during the relevant year as unexplained credits of M/s. Evershine Resorts Pvt. Ltd., then under no provision of the Act, could he have again declared the same Rs. 22,00,000/- as unexplained cash credits in the hands of the appellant, which were paid to the Appellant by M/s. Evershine Resorts Pvt. Ltd. out of sale proceeds received on sale of its land and genuine credits received during the year. This, had resulted into double taxation, which is not permitted under the Income Tax Act, 1961.
31.8 Reliance on the judgment of Hon'ble Apex Court in the matter of Principal Commissioner of Income Tax, Central - 1 vs Adamine Construction (P) Ltd, (Supreme Court) [Para 4] Citation — [2019] 107 taxmann.com 84 Delhi) has rightly been placed, therein, it was held that:
The material on record in the form of the orders of the lower the share applicants (upon receiving notice under Section 131 of the Act) had produced documentary proof These included the assessments and income-tax returns filed by the share applicants as well as confirmation and acknowledgment documents. If Ihe AO wished to pursue the matter, there were sufficient clues for him to ha/e proceeded for instance, it could have Issued notices and obtained statements from the bankers of the share applicants or even th e balance sheets which existed in the income-tax records of their Assessing Officers. He did not choose to pursue both but instead rested his conclusions entirely on the basis of remarks received from the Commissioner. These remarks can at best be considered opinion but not primary evidence to displace the inferences that had to be drawn with respect to the genuineness of the transaction and the creditworthiness of the parties. Infact the learned assessing officer was so much influenced by the irrelevant and frivolous information received from the third party that he was determined to make these additions under all circumstances. Reliance in this regard is placed on the following judgement of Hon'ble Apex Court In the case of Mathuram Agrawal vs. State of Madhya Pradesh (1999) 8 SCC 667 in which it was held that- "A five Judges Bench judgment of this Court in Mathuram Agrowal vs. State of Madhya Pradesh (1999) 8 SCC 667, after referring to the judgment in B.M. Kharwar (supra) as well as the opinion expressed by Lord Roskill on Duke of Westminster stated that the subject is not to be taxed by inference or analogy, but only by the plain words of a statute applicable to the facts and circumstances of each case."
28 The ITAT, Ahmedabad, in ‘Anant V Mehta vs ITO’, (2015) in 43 CCH 0017 (Ahd) Tribunal held that:
"Assessee's contention cannot be brushed aside simply on basis of surmises and conjectures and without bringing on record material to controvert the explanation of the assessee. In absence of any material brought by AO to show that explanation of assessee was not plausible, no-good reason was found to interfere in order of CIT(A)". .
The Hon'ble Apex Court, in ‘ACIT & others vs Marico Ltd.’ in SLP (Civil) Diary no. 7367/2020 held that:
"The non rejection of explanation in the assessment order would amount to the AO accepting the view of the assessee", thus taking a view/forming an opinion". The Hon'ble Apex Court in ‘CIT vs Orissa Corporation Ltd.’, 159 ITR 78 (SC) , held that :
In this case the Revenue did not examine the source of income of alleged creditor to find out whether they were creditworthy or not or were such who could have advanced these alleged loans. There was no effort made to pursue the alleged creditors. In those circumstances, the assessee could not do anything further. The assessee had discharged the burden that lay on him.
Hon'ble Apex Court in the matter of ‘Commissioner of Income Tax Vs. Orchid Industries (P.) Ltd’, [2020] 116 taxmann.com 113 (SC) held that :
In this case the Hon 'ble Apex court dismissed the SLP filed by the department against the judgement of Hon'ble Bombay High court in the matter of Commissioner of Income Tax Vs. Orchid Industries (P.) Ltd[2017] 88 taxmann.com 502 (Bombay), where it was held that the assessee had produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of the said amount. The assessee had also produced the entire record regarding issuance of shares, i.e., allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance-sheet and profit and loss account of those persons disclosed that they had sufficient funds in their accounts for investing in the shares of the assessee. In view of these voluminous documentary evidence, only because those persons had not appeared before the Assessing Officer would not negate the case of the assessee. Therefore, the addition was liable to be deleted.
29 The Hon'ble Apex Court in ‘PCIT Vs. Himachal Fibres Ltd.’, (2018) 259 Taxmann 5, it was held that:
Decision of Hon'ble Delhi High Court was confirmed in case of PCIT Vs. Himachal Fibres and it was held that in a case where the assessee has furnished all the relevant facts within the knowledge and offered a credible explanation, then the onus reverts to the Revenue to prove that these facts are not correct. In such a case, Revenue cannot draw inference based on suspicion or doubt or perception of culpability etc.
The Hon'ble Delhi High Court in the case of ‘CIT vs. Vrindavan Farms Pvt. Ltd., etc.’, ITA.No.71 of 2015 dated 12th August, 2015 (Del) it was held that: the sole basis for the Revenue to doubt the creditworthiness of Lenders was the low income reflected in their returns of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court. In Assistant Commissioner of Income-tax, Central Circle-25, New Delhi vs. Goodview Trading (P.) Ltd 2017] 82 taxmann.com 55 (Delhi - Trib.) it was held that : the assessee during the course of proceedings has discharged its liability by submitting necessary evidence available to establish the bona fide of the transactions. Thereafter, the onus shifted on to the revenue to prove that the claim of the assessee was factually incorrect. Simply by pointing out that the applicant companies did not have sufficient income or that the bank accounts indicated credits and debits in rapid succession leaving little balance does not discharge the burden cast upon the revenue to take an adverse view in the matter. In the present facts of the case, the addition is not legally sustainable. The AO in the assessment order has held that the amount received is held to be appellant's income and was added u/s 68 of the Act. This is a bald assertion by the AO. The AO has to bridge the gap between suspicion and proof to bring home the allegation. There was neither direct nor circumstantial evidence on record to show that the said loan amount actually belonged to or were owned by the appellant. No material has been placed by the AO to allege that such sums/funds raised by the appellant was from the coffers of the appellant.
In Income Tax Officer Vs. Jaidka Woolen& Hosiery Mills Pvt. Ltd. ITA.No.5302/Del./2015 the Hon'ble ITAT Delhi, it was held that: there was no evidence to show that money actually emanated from the coffers of the assessee-company so as to be treated as undisclosed income. Additionally, if the loan
30 taken by the assessee has been repaid to the creditor, then no addition is allowed, even though such transactions are done to sguare off the entries entered earlier. The Hon'ble High Court of Gujarat, in the case of ‘PCIT v. Ambe Tradecorp (P.) Ltd, [2022] 145 taxmann.com 27 (Gujarat) has held that:
As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. The Tribunal rightly recorded in para 29 of the judgment, "Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A."
The ITAT Delhi Bench 'F' in the case of ITO, Ward-1(3), Ghaziabad Vs Habitat Infrastructure Ltd. [ITA No. 6155/DEL/2015] has held that:
The CIT(A) has given detailed finding and taken into consideration of the submissions made by the assessee as well as the remand report of the Assessing Officer called during Appellate Proceedings. In-foct, from the records it emerges that the unaccounted money as alleged by the Assessing Officer was the loan which was repaid subsequently by the assessee. Therefore, there is no need to interfere with the findings of the CIT (A), The appeal of the Revenue is Dismissed.
The Department has not been able to dispute the applicability of these decisions to the case at hand. No contra decision has been cited before us.
In view of the above, Ground No. 7 & 8 are accepted and the addition of Rs. 22.00 lacs and Rs. 60.00 lacs are deleted.
Ground No. 9 is consequential.
In the result, appeal of the Assessee is allowed.
31 36. In view of the aforesaid, where the matter has been decided in favour of the assessee, the stay application has become infructuous and the same is accordingly dismissed.