TaxTMI 
TaxTMI 
2011 (12) TMI 702
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....), Mahesh Mittal HUF, Smt. Vandana Mittal, Kapil Mittal, Pravin Mittal, Smt. Shardadevi Mittal, M/s. Malwa Laminators, Omprakash Mittal HUF, Smt. Urmila Mittal, Pravin Mittal, Kapil Mittal, Narmada Extrusion Ltd. For the Appellant : Shri Keshave Saxena, CIT(DR) For the Respondent : S/Shri S.N. Agrawal and Ritesh Jain, CAs ORDER PER BENCH These appeals & cross-objections are filed by the Assessees and Revenue against the different orders of ld. CIT(A)-Ujjain, dated 22.3.2011 for the Assessment Years as mentioned above in the matter of orders passed u/s 153A r.w.s. 143(3) of the I.T. Act, 1961. 2. In departmental appeals, the following common grounds have been raised: - "On the facts and in the circumstances of the case, the ld. CIT(A) erred in: - 1. Deleting the addition made by the AO on account of unsecured loan u/s 68 of the I.T. Act by way of accommodation entries obtained by the assessee from Lunkad Group. 2. Deleting the addition made by the AO on account of interest expenses being paid for accommodation entries obtained from Lunkad Group which has been received back in cash from the operator. 3. Deleting the addit....
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....en at the business premises (13, Race Course Road, Indore) of the various companies of the Lunkad group on 02.05.2006 i.e. few months prior to the date of search in assessee group [Mittal group] of cases. The survey had revealed the modus operandi adopted by Lunkad group in providing accommodation entries to various needy persons i.e. beneficiaries. 6. During the course of assessment u/s 153A for assessment year 2002-03 in case of Narmada Extrusion Limited, the AO observed that unsecured loan received by the assessee was as under :- S.No. Name of the Company Unsecured loans during assessment year 2002-03 Interest on it 1. Rajvir Marketing & Investment Pvt.Ltd. Rs. 22,00,000 16,701 2. Rajvir Biotech (P)Ltd. Rs. 38,00,000 41,983 Total Rs. 60,00,000 58,684 That during the course of assessment proceedings the assessee vide order sheet entry was asked to produce the directors of above companies for ascertaining the sources of loan taken and to prove the genuineness and creditworthiness of the loan, transaction/creditor as per Section 68 of the Income-tax Act, 1961. The assessee could not produce the creditors and s....
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....rvey and in post survey investigation details of several companies were found. In these companies Shri Vijay Lunkad, Shri Sanjeev Lunkad, Shri Ritesh Lunkad, their family and staff members were found to be involved as directors. These alleged companies are :- S.No. Name of Company Directors Correspondence/ Regd.Office Remarks 01. Lunkad Securities Ltd. Sanjeev/ Lunkad/Ritesh Lunkad Lunkad House, 13, Race Course, Indore. 02. Lunkad Media & Entertainment Limited/Lunkad Real Estate Limited Sanjeev/ Lunkad/Sneha Lunkad/Rachna Lunkad Lunkad House, 13, Race Course, Indore. 03 Parkson Securities Limited 04 Lagoon Resorts (P)Ltd. Vijay Lunkad/Sharad darak Lunkad House, 13, Race Course, Indore. 05 Parth Credit & Capital Market Limited Sanjeev Lunkad/Sanjay Bindal 21-Amber, M.G. Road, Indore. 06 Saokar Investment & Finance Limited Vijay Lunkad/G.Jagtap Lunkad House, 13, Race Course, Indore 07 Historic Arts & Exports (P)Ltd. Vijay Lunkad/G.Jagtap Lunkad House, 13, Race Course, I....
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.... getz 1,000 4/4/2006 Recharge (1850) 2,000 4/4/2006 dewas 10,000 5/4/2006 darak 300,000 5/4/2006 bindal 650,001 5/4/2006 Darak 1,400,000 5/4/2006 Bank 975,000 5/4/2006 Bank 775,000 5/4/2006 Bank 12,000 5/4/2006 Bank 1,700,000 5/4/2006 Daddy manali 10,000 7/4/2006 Mehtaji 1,800,000 7/4/2006 Sunil 30,000 7/4/2006 Darak 1,800,000 7/4/2006 mehtaji 3,200,00 7/4/2006 Darak 7,50,000 7/4/2006 Ritesh return 4,000 7/4/2006 Ritesh personal 5,000 7/4/2006 Banthiaji 29,800 7/4/2006 Bank 9,75,000 7/4/2006 Bank 9,50,000 7/4/2006 Bank 5,50,000 7/4/2006 Bank 5,00,000 7/4/2006 p.g. 5,50,000 7/4/2006 Anilji 2,00,000 8/4/2006 mehtaji 2,000,000 8/4/2006 Darak 500,000 8/4/2006 Bank 2,530,000 &n....
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....4/2006 Darak 957,000 18/4/2006 Bank 1,990,000 18/4/2006 a.shah 300,000 18/4/2006 Farm nanu 2,000 18/4/2006 Kuber 5,100 18/4/2006 Bank 475,000 18/4/2006 Bank 50,000 18/4/2006 p.g. 2,000,000 19/4/2006 Tulsiyan 100,000 19/4/2006 p.g. 1,000,000 19/4/2006 p.g. 5,00,000 19/4/2006 Bank 17,95,000 19/4/2006 Bank 30,000 19/4/2006 Note short pack modern 10,000 19/4/2006 Mehtaji 5,000 20/4/2006 Bank 500,000.00 21/4/2006 Bank hsbc 25,000 21/4/2006 Narmada 3,500,000 21/4/2006 Daddy 17,700 21/4/2006 Seeds 3,000 21/4/2006 Petrol 2,000 22/4/2006 Mehtaji 2,000,000 22/4/2006 Bank 995,000 22/4/2006 Banthiaji 500,000 22/4/2006 Ritesh personal 2,500 22/4/2006 Bracket 3,000 24/4/2006 Darak 1,050,000 2....
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....bsp; Ltd. Centurion Bank, HSBC Bank, IDBI Bank 02 Lunkad Media & Entertainment Limited/Lunkad Real Estate Limited Bank of Rajasthan, Centurion Bank, HSC Bank, IDBI Bank 03 Parkson Securities Ltd Centurion Bank 04 Lagoon Restorts (P) Ltd. Bank of Rajasthan 05 Parth Credit & Capital Market Ltd. Centurion Bank 06 Saokar Investment & Finance Ltd. Centurion Bank, Bank of Rajasthan 07 Historic Arts & Exports (P) Ltd. Bank of Rajasthan 08 Raiveer Marketing & Investment Ltd. Bank of Rajasthan 09 West-End Management Technologies (P) Ltd. Centurion Bank 10 Rajveer Biotech (P) Ltd. Centurion Bank 11 Prateek Reality (P) Ltd. Centurion Bank, Bank of Rajasthan 13 Indore Biosoft (P) Ltd. Centurion Bank 14 Ritesh Investment (P) Ltd Bank of Rajasthan 15 Celerity Capital Market & Finvest (P) Ltd. Bank of Rajasthan, Centurion Bank 16 Alpine Agrotech Limited ....
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.... issue in the hands of beneficiaries would I amount double addition [ though on different hands] . Further in the facts of the case, the decision of Hon'ble jurisdictional High Court in the case of Metachem Industries Limited supports the grounds of the assessee. Accordingly, keeping in view the findings which has been given by me in Lunkad Group of cases and following the principal of consistency, the addition made u/s 68 on this issue, can not be sustained in the cases of beneficiaries." 10. Aggrieved by the above order of the CIT(A), the Revenue is in further appeal before us and assessee had also filed cross objections. 11. Rival contentions have been heard and records perused. From the record, we found that there was search at business and office premises of assessee group (known as Mittal Group) on 5.10.2006. On the basis of incriminating documents found during search, the assessee has surrendered additional income of Rs. 2 crores and disclosed the same in the hands of Shri Mahesh Mittal and Shri Pravin Mittal in assessment year 2007-08. While completing the assessment u/s 153A, the AO found that during the years covered by the search, the assessee has taken loan fr....
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....rmada Extrusion Pvt. Limited was Rs. 42,16,870/-. On the other hand, he placed on record the return of income of Lunkad Group M/s. Lunkad Media & Entertainment in assessment year in 2004-05 at Rs. 1,22,110/- and Rs. 14,120/- in the assessment year 2002-03. In view of these submissions, the ld. CIT DR highlighted that the assessee group was financially very sound, earning and declaring huge income, whereas Lunkad Group has no sound business existence and declaring only meager income, therefore, the alleged loan shown to have been given by Lunkad Group was merely an accommodation entry to the assessee after accepting cash from it. He further submitted that even during search, the assessee group has accepted income of Rs. 2 crores and also paid tax thereon, whereas Lunkad Group has surrendered nothing nor paid any tax. Our attention was also invited to unsecured loan remained static at Rs. 4.82 crores in the assessment year 2010-11 and were never paid back to the Lunkad Group. Similarly, share capital in case of Narmada Extrusion Private Limited was Rs. 3.30 crores. He submitted that in case of M/s. Lunkad Group, entire share capital was found to be unexplained because it was received....
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....iew of these documentary evidence, he contended that the assessee has discharged its onus of proving not only identity but also genuineness and creditworthiness of loan creditors. He also argued that In view of the C.B.D.T. circular no.1493 dated 18.1.1982, the Department should not have filed the appeals. 14. The contention of the ld. Authorized Representative was as under :- A) The ld. AO has added entire amount of unsecured loans as received from the Lunkad Group of companies on the basis of alleged cash book found and seized during the course of survey from the premises of Lunkad, whereas during the course of search conducted u/s 132 of the Income-tax Act, 1961, on different premises of the Narmada Extrusions Group nothing incriminating was found and seized. B) The assessee group during the course of post search inquiry. Search assessment proceeding and Appellate proceeding extended its full cooperation with Income Tax Department and also provided the following information :- (i) Confirmation of Loan creditors duly signed by them confirming the loan advanced to them. (ii) Audited final accounts of the Unsecured loan creditors highlighting ....
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....gh Court in its Group. Since, the writ as filed by Lunkad Group is pending before the Hon'ble High court in its matters for the reason he has grievance with the Income Tax Department and, therefore, he is not appearing before the CIT-I, charge Indore in his own cases. However, he has provided confirmation, affidavit duly notarized and Balance Sheet of its different companies as to justify the amount of loan advanced by his various companies to the assessee group. G) That cash book as found during the course of survey proceeding was for limited period and in which the name of the person was not written. The Department has considered the same in the case of Lunkad Securities Limited. Copy of order as passed in the case of Lunkad Securities Limited. has also been filed during the course of hearing on 21.10.2011. That when cash book as found and seized during the course of hearing on 21.10.2011. That when cash book as found and seized during the course of survey was considered in the case of Lunkad Securities Limited and ownership of the said alleged cash book was considered in the case of Lunkad Securities Limited. In that case, there is no justification for making separa....
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....ating documents found during course of survey at Lunkad Group. Incriminating documents was found pertained to the month of April, 2006, which indicated that Lunkad Group was in receipt of cash from various beneficiaries including assessee and which has again been given to the beneficiaries through cheques. There is no dispute to the well settled legal proposition that in case of cash credit, assessee is not only required to prove the identity of the loan creditor but also the genuineness of transaction of loan as well as capacity of the loan creditor to advance the said amount of loan. In the instant case, there is no dispute to the identity in so far as Lunkad Group is also on Department's record and a survey has been carried out at premises of Lunkad Group. The genuineness of transaction of the loans become doubtful in view of the incriminating documents found during survey at Lunkad Group. Even though the assessee has filed loan confirmation alongwith affidavit of Director of the creditor company (Lunkad Group) but they could not produce the Director of Lunkad Group to substantiate the contents of affidavit as well as confirmation so filed. The CIT(A) has deleted the addition on....
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.... Group. Before reaching to the third criteria of creditworthiness, assessee have to cross the barrier of genuineness of loan transaction, which has become doubtful in view of the incriminating material found during course of survey at Lunkad Group with regard to receipt of cash from the assessee company and issue of cheque against such cash in favour of the assessee company. Thus, a legally wrong view has been taken by the ld.CIT(A), which made the Department entitled to file an appeal against such order of CIT(A). Thus, there is no merit in the argument of ld. Authorized Representative to the effect that the Department had wrongly come in appeal against the order of CIT(A). As we have reversed the order of CIT(A) with respect to deletion of addition made u/s 68, we also uphold the action of Assessing Officer for disallowing interest expenses and for making addition on account of unexplained source of expenses incurred for the payment of commission on such accommodation entry. 17. In view of the above discussion, we reverse the order of CIT(A) and allow all the appeals of the Revenue in its favour. 18. Now coming to the cross objections raised by the assessee with regard to c....
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....nd that the assessee group had also taken loans from Lunkad Group. The assessee was again asked during proceedings u/s 153A to substantiate the loan transaction for which the assessee had furnished confirmation letter as well as affidavits of creditors. The Department also asked to produce the Director of Lunkad Group before them. The assessee had produced loan confirmation letters and affidavit of Lunkad Group to substantiate the loan transaction, but the assessee failed to produce the Directors of Lunkad Group in person. Under these circumstances, the Department has taken a view that all the transaction of loan starting from financial year 2001-02 till date of search were not genuine and it was assessee's own money, which has been given back to the assessee in the form of loan entry. Here the contention of the ld. Authorized Representative was that Mr.Lunkad had challenged the survey action conducted by Income Tax Department before the Hon'ble High Court. Since the writ as filed by Lunkad Group is pending before the Hon'ble High Court for the reasons he has grievance with the Income Tax Department. Due to dispute of Lunkad Group with Department and pendency of writ petition in th....
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....ion filed by Lunkad Group in the High Court, assessee could not persuade the Lunkad Group to appear in person before the Department. It is also not in dispute that no incriminating document was found by Department in assessee's premises either during course of search or on subsequent inquiry suggesting any cash given by assessee to Lunkad Group in consideration of loans so taken nor receipt of any cash whenever there was repayment of loan by assessee to Lunkad Group. Under these circumstances and in the interest of justice, one more opportunity should be given to assessee for producing the loan creditor for confirming the contents of confirmation and affidavits so filed. Keeping in view incriminating documents found during the course of survey at Lunkad Group for the period 1.4.2006 to 1.5.2006 pertaining to the assessment year 2007-08, even though related to one month only, the Department was justified in making addition in the hands of the assessee company in the assessment year 2007-08 by disbelieving the loan transactions. As per our considered view, addition should be made with respect to the amount of cash found to be given by the assessee to the Lunkad Group as per incrimina....