TaxTMI 
TaxTMI 
2017 (8) TMI 1549
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....oncerns are engaged in providing only accommodation entries by way of unsecured loans and share application money. Hence the AO reopened the assessments of both the years and assessed the above said amounts of Rs. 40.00 lakhs in both the years under section 68 of the Act. The Ld CIT(A) deleted the additions in both the years and hence the revenue has filed these appeals before the Tribunal. 3. The Ld D.R placed strong reliance on the order passed by the assessing officer in both the years. However, the Ld A.R contended that the Ld CIT(A) has deleted the additions by making detailed examination of facts and by applying relevant laws laid down by the Courts. 4. I have heard rival contentions and perused the record. I notice that the Ld CIT(A) has thoroughly examined the facts and also considered various case laws and accordingly arrived at the conclusion that the additions made by the AO in both the years are not sustainable. For the sake of convenience, I extract below the operative portion of the order passed by Ld CIT(A) in both the years under consideration:- (A) ITA No.2979/Mum/2017 - Assessment year 2008-09:- 6.3.1 I have considered the facts of the case as we....
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....ayee cheques, therefore these transactions cannot be treated as bogus. The AO has not been able bring on record any valid material or evidence to discredit the evidences and explanation given by the appellant other than merely relying on a bald statement by alleged Shri Pravin Kumar Jain as recorded by Investigation Department without himself making any efforts to bring on record any valid or corroborative evidence against the parties. The AO has been unable to demonstrate any relationship between PKJ and the appellant. The other reasons adduced by the AO such as jointly planned retractions by six individuals, alleged control over the thirty-three companies listed by the AO etc have no real connection with the addition under section 68 of the Act made in case of the appellant. The AO has been unable to refute the clear cut and cogent evidence submitted by the appellant and available on the AO's record, testifying to the genuineness of the loans. The source of the said loans thus stands proven. As has been held in several decisions of superior judicial authorities [Murlidhar Lahorimal v CIT [280 ITR 312 (guj)], LabhchandBohra v ITO [219 ITr 571 (Raj)] and CIT v Dwarkadh....
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....roceed to reopen their individual assessment in accordance with law, but the same cannot be regarded as undisclosed income of the assessee. Revenue has all the power and were withal to trace the person. AO ought to have issued notice u/s 133(6) or summons u/s 131 to share applicant companies to substantiate his findings in respect of bank account discrepancy at third and fourth level before drawing conclusions. Merely because the AO has not fulfilled his duty to show how the companies are bogus or their relationship with Shri Pravin Kumar Jam, addition u/s 68 cannot be justified in hands of the appellant. Further the appellant has also invited attention to the ruling of Hon'ble Mumbai Tribunal in the case of ACIT vs M/s Cagandeep Infrastructure Pvt Ltd (2014-TIOL-656-ITAT-MUM) wherein it has been held that no addition can be made u/s 68 for huge share premium received by the assessee as it is a prerogative of the Board of Directors of the company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium and the Revenue Authorities cannot question the charging of such huge premium and the Revenue cannot ....
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.... not be added as unexplained investment only because the vendor denied the transaction. The Court held that though the assessee's contention that he had no bank account was found to be false, the disallowance was not justified. And the fact that Sales Tax was not paid by the party who sold the goods does not affect the genuineness of transaction. (iii) In the case of ACIT v. KishanLal Jewels (P.) Ltd. (2012) 147 TTJ 308 (Del.) (Trib.) it has been held that the assessee while furnishing necessary information regarding the transactions and the aforesaid parties like purchase bills issued against goods purchased, sales-tax registration numbers of the parties, PANs, their confirmations and bank statements showing the debit of the amount paid through Account Payee cheques to them in the account of the assessee and credited in the Bank account of sellers, had discharged its primary onus, thereafter the onus shifted on the department to rebut the same .Addition under section 69C was held to be not justified. (iv) In the case of G. G. Diamond International v Dy. CIT (2006) 104 TTJ 809 (Mum.) (Trib.) it has been held that it is not case of the Revenue that the assessee....
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....was not accepted. However, books of account were not rejected. Identity of vendor was disclosed, source of investment was explained. Held, amounts could not be added as unexplained investment only because the vendor denied the transaction. The Court held that though the assessee's contention that he had no bank account was found to be false, the disallowance was not justified. And the fact that Sales Tax was not paid by the party who sold the goods does not affect the genuineness of transaction. (iii) In the case of ACIT vs. Kishanlal Jewels (P.) Ltd. (2012) 147 TTJ 308 (Del.) (Trib.), it was held that where the assessee while furnishing necessary information regarding the transactions and the aforesaid parties like purchase bills issued against goods purchased, sales- tax registration numbers of the parties, PANs, their confirmations and Bank statements showing the debit of the amount paid through Account payee Cheques to them in the account of assessee and credited in the Bank Account of sellers, had discharged its primary onus, thereafter the onus shifted on the department to rebut the same. Addition under section 69C was held to be not justified. (iv) In t....
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....tion, no addition can be made on the basis of same as held in the following cases : a. Kishan Chand Chella Ram v. CIT [1980] 125 ITR 713 (SC) b. Marneedi Satyam V/s Masimukkula c. Venkataswami[ AIR 1949 Mad 689] d. ITO V/s Permanand [2008 25 SOT 11] B. Legal Position- Further, it may be mentioned that under the Income Tax Act, if an amount is credited into the books of account held by the assessee and no explanation is given or where such explanation given by the assessee for the amount credited is not acceptable or satisfactory in the opinion of the Assessing Officer, the amount is deemed to be an undisclosed income which would form part of the total income chargeable under the Income Tax Act. Applicability of Section 68 of the Act can be made applicable in the following cases:- a) When the assessee fails to prove the genuineness of the transaction that has entered into his book of accounts. b) When there is no satisfactory explanation provided on the part of the assessee to the assessing officer with respect to the amount credited into the accounts. c) When there are documentary evidences required to....
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..... Once it is established that the amount has been invested by a particular person, be he is a family member or close relative then the responsibility of the assessee is over. The assessee cannot ask that person, who advanced the loan, whether money advanced is properly taxed or not. (iii) Capacity of creditors to advance money: To make addition of any loan amount, the capacity or the creditworthiness of the creditor is to be seen and once the creditworthiness of the creditor is substantiated by the appellant, no addition can be made unless there is any concrete material to counter the same. a. It has been held by the Hon'ble High court of Madhya Pradesh in the case of CIT vs. Vaibhav Cotton (P) Ltd. as reported in [2013] 36 taxmann.com 429 (Madhya Pradesh) where all the full particulars, inclusive of confirmation with name, address and PAN Number, copy of income tax returns, balance sheet, prof it and loss account and computation of total income in respect of all creditors/lenders were furnished and when it had been found that loans were furnished through cheques and loan account were duly reflected in balance sheet, the Hon'ble court held that Assessing O....
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....mount in hands of assessee - Whether since in instant case money had come at all level through banking channel and creditworthiness and identity of donors/creditors had been proved, no addition could be made in hands of assessee. f. Another aspect to be seen here is that Shri Pravin Jain has made general statement with regard to providing entry through his concerns and nowhere in his statement made any specific allegation that he had provided any entry to the appellant company either in form of loan or share application money. In the present case the appellant had produced before AO all the relevant details to justify that share capital as well as loan were received from the existing identifiable parties, the transactions were done through banking channel and the relevant party had own sufficient funds to give loan or share application money to the appellant which was not controverted by the AO by reliable evidences. 6.3.4. Thus, it has to be said that the appellant had done everything in its power to prove the 3 ingredients required to prove the satisfactory nature of the loan transactions. In these circumstances, the onus had shifted to the AO. If the AO was sti....
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.... the genuineness of the transaction, namely, whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/ subscriber; (4) if relevant details of confirmation, bank statement, copy of return of income filed, PAN card, Audited statement of accounts along with copies of share application forms, etc., it would constitute acceptable proof or acceptable explanation by the assessee; It has been judicial position that where assessee brought evidence on record establishing that share applicants were not fictitious persons and, moreover; they paid money by cheques, no addition could be made to assessees income in respect of share application money. The AO in this case has primarily placed reliance on the search conducted by the DDIT(Inv)-111(2) Mumbai in the case of Shri Praveen Kumar Jam. Ld AO has made the addition u/s 68 towards loan taken by the appellant from 4 parties of Rs. 40 lakhs on the basis of this information received from Investigation wing from search conducted in the case of third party. However AO has not made any further enquiry to corroborate his findings. A perusal of the ....
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....section 37(1) of the Act on account of disallowance of interest on the said amount also cannot be sustained. As reiterated, the assessee also had placed on record the evidence as well as copy of income-tax returns of the loan creditor, ROC filings, Boards Resolutions of investor companies, bank statement of investors from where loan money was received by appellant company etc. Revenue has all the power and ability to trace the person. AO ought to have issued notice u/s 133(6) or summons u/s 131 to share applicant companies to substantiate his findings in respect of bank account discrepancy at third and fourth level before drawing conclusions. Merely because the AO has not fulfilled his duty to show how the companies are bogus or their relationship with Shri Pravin Kumar Jam, addition u/s 68 cannot be justified in hands of the appellant. In view of the above and based on the facts in the case on hand, I find that the appellant has indeed proven the genuineness of the loan creditors. Accordingly the addition made by the AO under section 68 of the Act on that count to the tune of Rs. 40,00,000/- cannot be sustained. Similarly the consequential disallowance of Rs. 1,5....
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....re Capital + Restore& 9,50,815 Total Own Funds (Closing) 1,75,62,017 Surplus during the year Loan given to the assis 5,00,000 Document 3 4 Duke Business Pvt.Ltd. (earlier known as JPK Trading India Per Lad.) Details of loan taken during the year Name of the bank from which amount is received Lender's Bank Account) Cheque No. Date of Loan Receipt Canara Bank 411048 19-02-2008 Amount of Loan Date of Loan Repayment Name of the bank in which amount is deposited Appealand's Bank Account) 5,00,000 26-08-2010 HDFC Bank Details of Share Capital and Reserve & Surplas of the past as per their balance sheet Opening Share Capital Opening Reserve & Surples Additions to Share Capital + Reserve & Surplus during the year 45,92,000 1,15,57,979 4,03,631 Total Own Funds (Closing) Lean given to the ac 1,65,53,610 5,00,000 Document 4 1. Kush Hindustan Ent. Lad. Details of share application during the year Name of the bank from which amount is received [Shate Applicant's Bank Account) Cheque No. Share application money received on Share Allotted on Amount of share application ....
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.... 26-03-2008 14-06-2008 5,00,000 Share Application Amount given to the assesse HDFC Bank Details of Share Capital and Reserve & Surplus of the party as per their balance sheet Opening Share Capital 3,25,17,500 Opening Reserve & Surplus 60,61,748 Additions to Share Capital Reserve + & Surplus during the year -5,73,181 Total Own Funds (Closing) Share Application Amount given to the arremes 5,00,000 3,80,06.067 Document 7 Opening Reserve & Surplus Additions to Share Capital + Reserve & Surplus during the year. Total Own Funds (Closing) Loan given to the assessee 2 Nakshatra Business Pvt.Ltd. (Hema Trading Co. Pvt.Ltd.) Details of loan taken during the year Name of the bank from which amount is received (Lender' Bank Account) Cheque No. Date of Loan Receipt Amount of Lati Date of Loan Repayment Name of the bank in which amount is deposited 1,80,47,158 12,22,618 2,40,84,756 10,00,000 Canara Bank 725067 07-10-2010 10,00,000 30-12-2010 (Appellant's Bank Account) HDFC Bank Details of Share Capital and Reserve & Surplus of the party as per their balance sheet ....