TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 282
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....eply of the assessee dated 02.02.2016 filed with the A.O. being reply to the show cause notice dated 02.02.2016. In particular, my attention was drawn to Para 9 of the same and it was pointed out that the assessee made a request to provide an opportunity of cross examination of any party whose statement was recorded at the back of the assessee. He placed reliance on the Judgment of Hon.ble apex court rendered in the case of Kishan chand Chellaram vs. CIT [125 ITR 713] in support of this contention that if an opportunity of cross examination of any party whose statement was recorded at the back of the assessee is not provided to the assessee, such statement cannot be used against the assessee. He submitted a copy of written submissions and made a request that the present appeal be decided after considering the arguments made by him and the written submissions. Ld. DR for the Revenue supported the order of the Ld. CIT (A). 4. First I reproduce the written submissions filed by the learned AR of the assessee. The same are as under:- > The Appellant has taken a unsecured Loan from M/s. Tanika Commodities Pvt. Ltd. amounting to Rs, 20,00,000/- during the assessment year 2010-11, Tine ....
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....med by Lender M/s. Tanika Commodities Pvt. Ltd u/s. 133(6) to the Learned Assessing Officer. * The appellant had received loan from the said lender which is a company managed by its directors. The Lender is a company which is duly registered under the Companies Act, 2013 and is regular in filing of returns.(Page No.27) * The appellant had received a short term loan from Tanika Commodities Pvt Ltd and had repaid the same in the subsequent year, The entire transactions of receipts and payment were made by account payee cheque or through other banking channels. * The appellant had also filed certified Balance Confirmation of Accounts of the said lender Company and also submitted the copy of the lender company's balance sheet * The learned assessing officer has failed to appreciate the facts that appellant had obtained only temporary loan which has been repaid in subsequent year (Page No 31-32A). Thus what is required to be seen is as to whether the said company had sufficient funds to advance appellant. If for the sake of argument it is understood that the said company was a company of Mr. Bhanwarlal Jain and then in that case whether the said Mr. Bhanwarlal Jain was capab....
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.... submitted during the assessment proceeding as under :- A. Identity i. Permanent Account Number (PAN) ii. CIN No iii. Income Tax Return Acknowledgment The above documents clearly prove the identity of the Lenders B. Creditworthiness i. Copy of Audited Balance Sheet of the Lender Company ii. Relevant Bank Statement iii. Copy of Ledger Account The above documents clearly prove the creditworthiness of the Lenders C. Genuineness i. Transaction through Account Payee Chq ii. Bank Statement of the Appellant and Lender Companies iii. Loan Confirmation The above documents clearly prove the genuineness of the Lenders Thus all the ingredients of S.68 of the Act were fully proved and established before the learned Assessing Officer. It is a settled law that !it is mandatory for the Assessing Officer to confront the assessee with any material collected by the Assessing Officer at the back of the assessee, and in case of statement of Shri Bhawarlal Jain recorded at the back of the assesses, opportunity of cross examination has to be offered to the assessee, failing which the said material/statement etc. will be rendered unreliable and additions made on the basis ....
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....iness. Having done so, the appellant in the instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the Assessing Officer to disprove the claim of the assesses by establishing that the evidence filed by the assessee was false and by bringing new material on record and failure to do so would vitiate the addition made on this count. ii. It was also held by the Apex court in the case of CIT v. Bedi & Co. P. Ltd. (1998) 230 ITR 580 (SC) that where prima-facie the inference on facts is that the assessee's explanation is probable, the onus will shift to the revenue to disprove it and the assessee's explanation in such case cannot be rejected on mere under :- * Khandelwal Constructions v. CIT (1997) 227 ITR 90O (Gau.) * CIT v. Orissa Corporation Pvt. Ltd, 158 ITR 78 (SC) * CIT v. Rohini Builders 256 ITR 360 (Guj.). iii. It is also settled law that where the assesses provides identity and details pertaining to the lenders/creditors investor of share application money and is unable to produce them and requests the AO to issue summons u/s 331 for their attendance, it is the duty of the AO to i....
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....t, The Appellant would like to humbly submit to learned assessing officer a recent landmark decision given by Jurisdictional Hon'ble ITAT Mumbai in an identical case of ITO -10 (2) (4) Vs. M/s. Superline Construction P. Ltd. (and many others in this consolidated order) pronounced on 30.11.2015 ITA No. 3645/Mum/2014 the summary of the case is outlined as under:- "The Revenue authority failed to appreciate that there is no documentary evidence against the assessee-company to support impugned additions made solely on the basis of statement of Shri Mukesh Chokshi. The Assessing Officer failed to appreciate that as against the statements of any person recorded u/s 143(3). r.w.s. 147, the asses see-company has fully discharged the burden of proof, onus of proof and explained the source of share capital and advances (Short Term/ Long Term Loans) received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee has been that the assessee substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs, Government of India bef....
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.... Pvt. Ltd. (supra), the additions have been made u/s. 68 in respect of the share capital received by the assessee from various companies and during the course of investigation, it was found that the share capital has been received from three entry operators, who are allegedly in the business of providing accommodation entries. Notices issued u/s. 131 to these parties were returned undelivered fry the postal authorities with the remark "left"/ "no such person". Under these circumstances, the Hon'ble High Court took a view that the assessee failed to discharge the burden to prove the credit worthiness as well as the genuineness of the transactions. 10. But in the impugned case, we noted that the assessee has submitted all the evidences including the confirmation of the creditors. This is not a case where the creditors have not given confirmations rather they have duly confirmed to giving loan to the assessee, the loans were received and returned through banking channels. The assessee has also submitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, creditworthiness o....
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....de merely on the basis of statement given by somebody, whether assessee has otherwise discharged the initial burden of proof placed upon him u/s. 68 of the Act. Accordingly, we are of the view that the assessing officer has failed to discharge the burden shifted to his shoulders, in which case, the addition made by him u/s. 68 of the Act is liable to be deleted" In view of the foregoing discussions, we set aside the order of Ld. CIT(A) and direct the AO to delete the impugned addition of Rs. 30.00 lakhs. In the result, the appeal filed by the assessee is allowed." Hence as per the above mentioned judicial ruling, it's crystal clear that Appellant has discharged the initial burden of proof and thus the burden was shifted to the learned Assessing Officer to disapprove the documents/submissions submitted. xiv. The Appellant would like to humbly submit to your honour a recent landmark decision by Hon'ble ITAT, Hyderabad in an identical case and having the same issue of Komal Agrotech Pvt. Ltd, Vs. The Income Tax Officer 2(1), Hyderabad pronounced on 25.11.2016 IT- 66/2014-15, the summary of the case is outlined as under :- ".... ....A.O. merely went "by the investigatio....
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....utlined as under:- "We have considered the rival submissions of the parties and have gone through the material and the order of the authorities below. We have noted that the assessing officer passed the assessment order on the similar lines as made for earlier year. The assessing officer has not given specific finding on the documentary evidences furnished by the assessee. The assessing officer while passing the assessment order has not given different finding though the facts for the year under consideration were at variance. The assessee specifically contented that they have paid interest on the loan availed and deducted TDS. The Id Commissioner (Appeals) while considering the facts noted that the assessing officer has not correctly appreciated the loan amount from Raghuveer Sales nor its share capital and reserve funds. Similar, other discrepancies were pointed out about Viraj Merchantile P. Ltd Properties Ltd. Park Tools Ltd and (Utakantha Trading & Properties Ltd In view of the above discussion we do not find any infirmity and illegality and we have already confirmed the order passed by Id CIT(A) for AY 2008-09 and 2009-10, hence, the appeal for the year consideration....
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....ction 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share . premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The Apex Court In Lovely Exports (P) Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for ,the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to lax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit." "The assessee has also relied up to the decision of Hon'ble Supreme Court in the case of CIT vs Lovely Exports Pvt Ltd (2008) 216 CTR 195 (SC). The Hon'ble Apex Court while deleting the addition made U/s. 68 observed that if the share application money is received by the assessee company....
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....e information to the person against whom such information is used. The addition is made merely on surmises and conjectures. The statement recorded at the back of the appellant cannot be utilized ignoring other verifiable evidences. The ld. Assessing officer has made the addition of Rs. 20,00,000/- disregarding the evidences on record and without discharging her onus and without establishing anything contrary to the agreement of the Appellant and without verifying the Bank Account, existence of Investor and without making fruitful investigation- thus the demand was directed to be deleted." > It is not out of place to bring under your honour kind notice, that the Respondent has discharged the onus cast upon it u/s 68 of the Ac(. by submitting the number of documentary evidences during the course of assessment proceedings. The Ld. AO has failed to demonstrate and establish that haw the impugned addition of Rs. 20,00,000/- was treated as Unexplained Cash Credit. Hence, statement of a third party cannot be relied upon without any corroborative documentary evidence on record. In view of the above, the appeal of the revenue deserves to be rejected." 5. I have considered the rival ....
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....d to produce it before the assessee so that the assessee could cotrovert the statement contained in it by asking to cross examine the manager of the bank with reference to the statement made by him. In my considered opinion, this is the Ratio decidendi of this judgment that no statement obtained behind the back of the assessee can be used against the assessee without providing to the assessee an opportunity of cross examination. 6. In the present case, the assessee has brought on record, PAN of the loan creditor and evidence of filing of Income Tax return. The AO has also noted that notice u/s 133(6) was issued to the lender company and reply is also received. Hence, in my considered opinion, the assessee has established the identity of the loan creditor in question. In respect of creditworthiness of the said loan creditor, the assessee has brought on record, the audited balance Sheet of the said company, relevant bank statement and as per this balance sheet, the net worth of this company is Rs. 83.34 lacs and the loan amount in question is only Rs. 20 lacs. In the light of the same, it has to be accepted that the creditworthiness of the said loan creditor is also established at l....