TaxTMI 
TaxTMI 
2018 (11) TMI 1593
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....onfirming the action of assessing officer in not verifying confirmations and affidavits of lenders by not issuing notices u/s 133(6) of The Income Tax Act. All the lenders have confirmed the genuineness of loans and all are assessed to tax. (3) The Ld. CIT(A) has erred in law and on the facts of the case in violating principle of natural justice by referring certain information and producing certain data in the appellate order without giving an opportunity to your petitioner for cross examination and rebuttal. The action is bad in law. (4) The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of assessing officer in taxing Rs. 12,20,00,000/- as unexplained cash credit under section 68 of the Income Tax Act. The action is unjustified, unwarranted and against the Provisions of the Act. Without prejudice the addition is excessive. (5) The Ld. CIT(A) has erred in law and on the facts of the case in confirming the action of assessing officer in not passing the order judicially and in accordance with the Provisions of the Law as he has failed to give show cause notice regarding proposed addition under Section 69 of the Income Tax Act." 3....
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....held that since all the impugned loans were taken from the concern of Bhanwarlal Jain group, hence while disclosing the modus operandi of the said creditor, CIT(A) dismissed the appeal filed by the assessee. 6. The learned A.R. reiterated the arguments as were raised before the CIT(A), which are recorded in para 7 of the order of the CIT(A) and the same reproduced as below: - "7.0 During the course of appellate proceedings, the AR of the appellant has submitted as under:- "With reference to the above appeal pending before Your Honour and fixed for hearing today, we are instructed to submit that certain documents confirming the identity of the lenders, capacity and creditworthiness of the lenders and genuineness of the loan transactions, could not be filed before the Assessing Officer by the Assessee Company in absence of proper communication from the Assessing Officer. The Assessee Company now desire to file several documents as additional evidence. The additional evidence in form of affidavits of the lenders, audited accounts and bank statements of lenders are relevant and necessary for deciding the issue involved in the appeal as the additional evidence would further estab....
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....d identity, creditworthiness of lenders and genuineness of transactions by way of the following documents 1. Identity of lenders a) Confirmations of parties are enclosed. b) Copies of Acknowledgements of return of income filed by the lenders for assessment year 2012-13 are enclosed. c) Copies of bank statements of lenders which establish the payment towards loan of received during the year are enclosed. All these documents clearly establish the identity of Lenders. 2. Genuineness of transactions a) All the transactions with lenders are genuine as they have been done through banking channel. b) From the confirmations which are filed in the form of ledger account, you will observe that the Assessee Company has received amounts through RTGS. C) Affidavits of the lenders. All these documents clearly establish the genuineness of the transactions. 3. Credit worthiness of lenders: From the audited accounts, you will observe the credit worthiness of the lenders to grant loans and advances. Further, the lenders have granted loans and advances to various persons including the Assessee Company. Thus Credit worthiness of the lenders is established. Thus, with the above ....
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....d unsatisfactory, income can be taxed from undisclosed sources, in their hands. (v) Without prejudice the figure of Rs. 12,20,00,000 is wrongly mentioned As per the audited accounts, unsecured loan availed from unrelated parties are Rs. 11,00,00,000 and not Rs. 12,20,00,000. We do not know from where the figure of Rs. 12,20,00,000 has been picked-up. Therefore the Assessing Officer may be directed to give the working of Rs. 12,20,00,000 to the Assessee Company. (vi) Appeal order of other CIT(A) on similar facts We enclose herewith a copy of CIT(A) 44 Mumbai in respect of Reliance Corporation where the CIT(A)on the similar facts has deleted the addition made under section 68 of the Act. In this case also the entire addition was made on the basis of report of Investigation Wing of the Department on the search carried out on the group companies of Bhanwarlal Jain Group. Under the circumstances, Your Honour is therefore requested to kindly consider the appellate order while disposing this appeal. (v) CASE LAWS (a) Decision of Gujarat High Court in the case of CIT Vs Patel Ramniklal Hirji (41 taxmann.com 493) In this Case the Assessee has received loan through account ch....
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....the documentary evidences, no addition is warranted on account of loan transactions as unexplained. (e) Decision of Ailahabad High Court in the case of CIT Vs Vijay KumarJain (41 taxmann.com 433) The Hon'ble Allahabad High Court, in this case, has held that when it is apparent from the material on record that lenders were regular income-tax assessee with PAN on record and had granted loan to the Assessee through account payee cheque and they had got sufficient balance in their account before issuing cheque, loan amount cannot bejadded to the Assessee taxable income under section 68 of Income Tot Act merely on the ground that lenders are engaged in providing commodation entries also. In the present case, Your Honour would appreciate that the lenders were regular income-tax assessee with PAN on record and had enough bank balance on the date of granting loan to the Assesee Company. (/) Decision of Rajasthan High Court in the case CIT Vs Jai Kumar Bakliwal (45 taxmann.com 203) Where the identity, capacity and genuineness of transaction stood proved by the Assessee, then he is not required to prove source of amount which has been deposited by the lenders in their bank accoun....
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....n'ble High Court has held that inference that entries pertaining to loan are accommodation entries must be supported by evidence and not on the basis of suspicion and presumption. In this case the Assessing Officer has not produced any evidence which leads to inference that loan entries are in the nature of accommodation entries. (1) Decision of Punjab & Haryana High Court in the case Varinder Rawliey (51 taxmanncom 524) In this case the Hon'ble High Court has held that burden is always on the Assessee to prove genuineness of transaction and creditworthiness of the depositor and once it is proved thereafter the burden shifts on the Assessing Officer. 7. It was submitted by the learned A.R. that the assessee had placed on record all the documentary proof before the AO and even certain documents confirming the identity of the lender, capacity and creditworthiness of the lender and genuineness of loan transactions, which could not be filed before the AO, also were filed by way of additional evidence before the learned CIT(A). It was also submitted that the AO had wrongly invoked provisions of Section 69 of the Act as Section 69 can only be invoked when investments made ....
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....hul Gems Pvt. Ltd. 1. Confirmation of Mehul Gems Private Limited of loan of Rs. 50,00,000 2. Copy of Acknowledgement of return of income for A.Y. 2012-13 of Mehul Gems Private Limited 3. Copy of bank statement of Mehul Gems Private Limited 4. Copy of Audited Accounts of MeTiul Gems Private Limited 5. Affidavit of Mr. Mohit P. Kawdiya director of M/s Mehul Gems Private Ljmjte4 confirming the loan 6 Navkar India 1. Confirmation of Navkar India of loan of Rs. 1,50,00,000 2. Copy of Acknowledgement of return of income for A.Y. 2012-13 of Navkar India 3. Copy of bank statement of Navkar India 4. Copy of Audited Accounts of Navkar India 5. Affidavit of Mr. Abhishek Lodha partner of M/s Navkar India confirming the loan 7 Roshan Gems Private Limited 1. Confirmation of Roshan Gems Private Limited of loan of Rs. 1,00,00,000 2. Copy of Acknowledgement of return of income for A.Y. 2012-13 of Roshan Gems Private Limited 3. Copy of bank statement of Roshan Gems Private Limited 4. Copy of Audited Accounts ....
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....4 AXIS BANK/ RTGS 5 Slavkar India 316, Panchratana, Opera House, Mumbai 400004 AAHFN4207H 28.03.2012 15,000,000 15,000,000 15,000,000 paid in F.Y.2013-14 AXIS BANK/ RTGS 6 Roshan Gems Pvt Ltd 228/229, Mejestic Shopping Centre, .S.S.Road, Opera House, Mumbai 400004 AAFCR0659G 28.03.2012 10,000,000 10,000,000 10,000,000 paid in F.Y.2013-14 AXIS BANK/ RTGS 7 Amit Diamonds .05, Panchratna, Opera House, Mumbai 400004 AAPFA0768G 30.03.2012 10,000,000 10,000,000 10,000,000 paid in F.Y.2012-13 AXIS BANK/ RTGS 8 Vloney Diam 206, Ratandeep, 78, J.S.S.Road, Opera House, Mumbai 400004 ANTPB4422F 30.03.2012 10,000,000 10,000,000 10,000,000 paid in F.Y.2012-13 AXIS BANK/ RTGS 9 Sankhala Exports Ltd 9, Navyug Sagar, Teen Bati, Walkeshwar Road, Mumbai-400006 AAHCS1855M 30.03.2012 20,000,000 20,000,000 20,000,000 paid in F.Y.2012-13 AXIS BANK/ RTGS Total - 110,000,000 110,000,000 Further, the learned A.R. relied on the following judgements: - i) Principal CIT vs. Paradise Inland Shipping Pvt. Ltd Tax Appeal No.66 of 2016 (Bom) ii) CIT vs. Green Infra Ltd. 393 ITR 7 (Bom) iii) CIT vs. Gagandeep I....
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....loans and advances not only to the assessee but also various other persons. Thus, from the audited account the creditworthiness of the lenders was also established. The learned A.R. also drawn our attention to the affidavits of the lenders and submitted that the affidavits of the lenders confirm the temporary loan transactions with the assessee company. It was also submitted that the assessee had discharged the initial onus of proving the genuineness of loans received from various lenders by establishing identity and creditworthiness of the lenders. It was also submitted that no tangible materials were produced by the AO to justify his action and from the assessment order, it is clear that the AO had doubted the genuineness of loan transactions only in view of the report of ADIT, Inv Wing 7, Mumbai, which has not been shared with the assessee company. At this stage it was submitted by learned A.R. that the Courts in a series of judgments had already held that merely on the basis of some statements addition cannot be made. It was also submitted that the confirmations of lenders filed by the assessee has not been disputed by the AO in the order of assessment. Alternatively it was arg....
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....es to establish the identity and creditworthiness of the lenders and genuineness of the transactions and when once the assessee produce all the documentary evidences to establish the existence of the said lenders then the burden shifts on the Revenue to establish the case. Similar view was also taken by the Hon'ble High Court in the case of CIT vs. Green Infra Ltd. (supra) wherein it was held as under: - "Section 68 of the Income-tax Act, 1961 - Cash credit (Share capital) - Assessment year 2011-12 - Assessee-company offered to sell its shares - Identity of subscribers was confirmed by virtue of Assessing Officer issuing notices to them - Genuineness of entire transaction was recorded in books of account and reflected in financial statements of assessee-company since subscription was done through banking channels as evidenced by bank statements - Tribunal examined case of revenue on parameters of section 68 and found on facts that it was not hit by said section - Whether since revenue was not able to show that factual finding recorded by Tribunal was perverse, no substantial question of law arose - Held, yes [Para 3(c)] [In favour of assessee]." In the case of CIT vs. Gagand....
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....nder: - "Section 68 of the Income-tax Act, 1961 - Cash credit (Sale of goods) - Assessment year 2002-23 - Whether where assessee received and returned amount in question by way of account payee cheques and transactions were reflected in bank accounts of assessee as well as creditor who was an income-tax assessee, assessee had sufficiently explained nature and source of credit entry and in such case entry could not be treated ass assessee‟s income when department failed to prove to contrary - Held, yes [Paras 9 and 10] [In favour of assessee]." In the case of Apex Therm Packaging (P) Ltd. (supra) the Hon'ble High Court has categorically held that when the assessee had placed on record full particulars, which are inclusive of confirmation with name, address and PAN, copy of income tax returns, balance sheet, etc. in respect of all creditors/lenders then Revenue is not justified in making additions. Similar view has also been taken by the Hon'ble Allahabad High Court in the case of Vijay Kumar Jain (supra) and the Hon'ble Rajasthan High Court in the case of Jai Kumar Bakliwal (supra). 14. In the present case the additions were made on the basis of statement....
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....on of the Hon'ble Supreme Court in the case of CIT vs. Lovely Exports (2008) 2016 CTR 195 wherein the Hon'ble Supreme Court, while deleting the addition made under Section 68 of the Act, observed that if the share application money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but this amount of share application money cannot be recorded as undisclosed income under Section 68 of the Act. As far as the case law relied upon by the Revenue is concerned, we have considered those case law, but they are not applicable to the facts and circumstances of the present case as the pari materia contained in those cases are different from the pari material contained in the present case. 15. From the records, we further noticed that the AO has not looked into all the records furnished by the assessee and even the CIT(A) has also upheld the additions on the basis of suspicion. It is a settled law that suspicion, howsoever strong, may be but it cannot take place of evidence. In the present case, no evidence was brought on record by the....