TaxTMI 
TaxTMI 
2019 (7) TMI 69
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.... 2010-11. The Revenue in its appeal in I. T. A. No. 325/Jodh/2018, has raised the following grounds of appeal : "1. Whether on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 76,65,206 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established." 3. Brief facts of the case are that the assessee is a firm, engaged in the business of marble mining and selling. The assessee filed its return of income for the assessment year 2010-11 on September 29, 2011 declaring total income at Rs. 31,89,380. A search and seizure action under section 132 was carried ....
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....eleted the addition holding that during the search Shri J. P. Agarwal made disclosure of income in the form of long-term capital gain (LTCG) in his individual capacity and there is no clinching evidence for routing the unaccounted income through unsecured loan during the search, therefore, it is not legally tenable to make addition in the absence of incriminating material found during the search for making such addition in the assessment under section 153A. The addition was made on the basis of third party information, thus the learned Commissioner of Income-tax (Appeals) also deleted the addition on the merits. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue has filed the present appeal before us. 5. We have heard the submissions of the learned Departmental representative for the Revenue and the learned authorised representative of the assessee and perused the material available on record. Though the Revenue has raised as many as three grounds of appeal however, in our considered view the only substantial ground of appeal relates to deleting the addition under section 68. The learned Departmental representative for the Revenue supported t....
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....der section 143(3) or intimation under section 143(1) was issued or the time for issuance of notice under section 143(2) was already lapsed when notice under section 153A was issued. The assessee also raised the objection that no incriminating material qua the addition was found in the search. This fact is duly recorded by the Assessing Officer in para. 5.7 at page Nos. 4 to 8 of the assessment order. The learned authorised representative further submits that the assessee raised the ground of appeal before the learned Commissioner of Income-tax (Appeals) that the assessment order dated December 29, 2017 is without jurisdiction and bad in law. 7. In support of his submission, the learned authorised representative relied upon the decision of the Delhi Tribunal in Anurag Dalmia v. Dy. CIT in I. T. A. Nos. 5395 and 5396/Delhi/2017 dated February 15, 2018, Visakhapatnam Tribunal in G. Koteshwara Rao v. Dy. CIT [2015] 64 taxmann.com 159, Jaipur Tribunal in Navrattan Kothari v. Asst. CIT in I. T. A. No. 425/JP/2017 dated December 13, 2017, Jodhpur Tribunal in Adarsh Co-operative Bank v. Asst. CIT in I. T. A. Nos. 452 and 453/Jodh/2015 dated June 19, 2017, the hon'ble Bombay High Co....
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.... ITR 573 (Delhi). 10. We have considered the rival submissions of the parties and have gone through the orders of authorities below. We have also deliberated on the various case law referred and relied by the lower authorities. It is an admitted fact that a search was carried out at the business premises of the assessee as well as directors of the group on August 26, 2015. The Assessing Officer during the assessment nowhere recorded that in the search action any incriminating material related with the share application money was recovered or seized. The Assessing Officer has referred that statement of Shri J. P. Agarwal was recorded who had admitted to have obtained accommodation entry in the form of long-term capital gain in his individual capacity only. There is no reference in the entire assessment order that Shri J. P. Agarwal ever admitted about the receipt of unsecured loan. The impugned assessment year under consideration is 2010-11 and the period for completion of assessment has already expired when the search was conducted. The Assessing Officer made the addition of alleged share application money in the assessment year 2010-11, which is beyond his jurisdiction in the a....
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....We have also gone through the contents of the assessment order and find that the Assessing Officer made the addition under section 68 on the basis of the report of the Deputy Director of Income-tax, Investigation, Kolkata and not considered the evidences furnished by the assessee. The report of the Deputy Director of Income-tax, Investigation was not provided to the assessee. The Assessing Officer has not brought any defect or discrepancy in the evidence brought on record by the assessee. The learned Commissioner of Income-tax (Appeals) deleted the addition on his observation that neither report of investigation was provided nor any opportunity was given to the assessee to rebut the report of investigation, therefore, no cognizance on such report could be taken in view of the decision of the hon'ble Supreme Court in Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC). No contrary facts or evidence is brought to our notice to take a contrary view, therefore, we affirm the action of the learned Commissioner of Income-tax (Appeals) in deleting the addition. 15. In the result, the appeal of the Revenue is dismissed. I. T. A. No. 326/Jodh/2018 assessment year 2014-15 by the R....
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....Income-tax (Appeals) was justified in deleting the addition of Rs. 2,30,00,000 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the creditworthiness of the alleged creditor was not established before the Assessing Officer. 4. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 29,46,934 made by the Assessing Officer by disallowing the claim of interest expenses on unsecured loans treated as bogus by the Assessing Officer." I. T. A. No. 312/Jodh/2018 for the assessment year 2015-16 cross-appeal by the assessee 20. The assessee has raised following grounds of appeal : 1. Under ....
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....erm capital gain (LTCG). Consequent of search, a notice under section 153A was issued to the assessee on March 30, 2016. In response to the notice, the assessee filed its return of income declaring an income of Rs. 97,67,550 on April 13, 2016, declaring the same income as declared while filing the original return of income under section 139. The assessment was completed under section 153A read with section 143(3) on December 29, 2017. The Assessing Officer while passing the assessment order made the addition on account of unsecured loan received by the assessee from the following six parties aggregating to Rs. 2,30,00,000 (actual figure is Rs. 2.55 crores) ; Sl. No. Name of parties Amount of loan (Rs.) 1. Emrald Commercial Pvt. Ltd. 25,00,000 2. Vignharta Infra Developers Pvt. Ltd. 15,00,000 3. Venketeshwara Industries Promotion Pvt. Ltd. 10,00,000 4. S. K. Growth Funds Ltd. 1,10,00,000 5. Tavish Industries 75,00,000 6. Aplaya Creation Ltd. 20,00,000 Total 2,55,00,000 22. During assessment proceeding, the Assessing Officer asked the assessee to furnish the details of unsecured loan. The assessee furni....
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.... have noted earlier in the connected appeal that the Assessing Officer made additions on the basis of under section 68 on taking view that in order to verify the genuineness of creditors issued a commission under section 131(1)(d) was issued to the Deputy Director of Income-tax, Kolkata with the request to issue summons to the principal officer of the creditors company and to furnish spot verification through inspector. The Assessing Officer received the enquiry report from the Deputy Director of Income-tax, Kolkata wherein it was disclosed that some of the entry operator are controlling and managing all affairs of the business activities of the lender companies which are engaged in providing accommodation entries. The Assessing Officer on the basis of report of the Deputy Director of Income-tax, Kolkata made addition of Rs. 2.55 crores and also the disallowed the interest expenses of Rs. 29,46,934. The learned Commissioner of Income-tax (Appeals) sustained the additions of Rs. 25 lakhs on account of unsecured loan from Emrald Commercial Limited and deleted the additions unsecured loan from the six creditors of Rs. 2.30 crores. 26. Considering the fact that in the assessee group....
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....e assessee. The assessee specifically urged that they have discharged their onus by furnishing complete details and documentary evidences to prove identity, creditworthy and the genuineness of the transaction. On the submissions of the assessee the learned Commissioner of Income-tax (Appeals) called remand report of the Assessing Officer not only once, but thrice and also sought the comment of the assessee. After considering the remand reports and the submissions of the learned Commissioner of Income-tax (Appeals) passed the following order : "6. Now I deal with the unsecured loans/share application from M/s. Vishnaharta Infra Developers Pvt. Ltd. (Rs. 15,00,000), M/s. Venketeshara Industries Promotion Pvt. Ltd. (10,00,000) and M/s. SJC. Growth Funds Pvt. Ltd. (Rs. 1,10,00,000), M/s. Tavish Industries (Rs. 75,00,000) and M/s. Aplaya Creation Ltd. (Rs. 20,00,000). 6.1 As mentioned in para 4.3.3 neither their names are not appear ing in the above list of accommodation entry providers nor is there any adverse statements of any of the accommodation providers searched so far. Even, during the search of the appellant also no adverse material have been found during the s....
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....lable at page Nos. 130-356 of the paper book. From these documentary evidences placed on record identity, creditworthiness and genuineness of transactions is established. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros P. Ltd. [1985] 154 ITR 244 (Patna), the hon'ble Patna High Court has held 'if the loans are given by an account paying cheque, it amounts to identi fication of the parties and discharge of burden by the borrower.' In view of the above, it is clear that the appellant discharged its burden under section 68 of the Act. Even otherwise, there is no adverse find ing of any investigation conducted by the learned Assessing Officer itself. Notably, transaction is duly verifiable from the confirmation of accounts filed in paper book Nos. 167, 219, 260, 318, 357 and with supporting bank statements placed at page Nos. of paper book Nos. 168-173, 220-226, 261-267, 319-326, 358-364 and has been carried out through banking channel only and thus, the appellant has duly proved the identity, creditworthiness and genuineness of the trans a....
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.... 6.6 Further, the Assessing Officer has treated the various compa nies from whom unsecured loans were received as shell companies based on the initial investigation carried out behind the back of the appellant. In the instance case, the Assessing Officer has considered only part of the investigation and not full outcome of the investiga tion carried out. It is seen that in the report dated December 21, 2017, the Deputy Director of Income-tax (Investigation) has forwarded its report on compliances made by the lender companies, however, this report has not been considered by the Assessing Officer. The said report (paper book Nos. 1-258) of common paper book beyond doubt establishes the identity, creditworthiness and genuineness of the transaction with Venketeshara Industries Promotion Pvt. Ltd. and others as referred in para. No. 4.3.2 and thus support the direct evidences brought on record by the appellant which remained uncon troverted by the Assessing Officer. Further the report of the Deputy Director of Income-tax (Investigation) as well as the statement of entry operators was not provided to the appellant. It is further seen that the Assessing Officer has not brought any spe....
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....CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) ; 25 Taxman 80F (SC), CIT v. Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Mad), CIT v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Raj), CIT v. Creative World Telefilms Ltd. [2011] 333 ITR 100 (Bom), CIT v. Patel Maheshbhai Dahyabhai [2014] 222 Taxman 153 (Guj), Pr. CIT v. G and G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred to above which have also been followed recently by the hon'ble Delhi Tribunal in the case of ITO v. Softline Creations (P) Ltd. in I. T. A. No. 744/Delhi/2012 vide its order dated February 10, 2016- [2016] 51 ITR (Trib) 460 (Delhi). Further, the hon'ble apex court as well as the High Court has held that once the identity of creditor is established, the Department is free to reopen the assessment of creditor and no addition can be made in the hands of the borrower as rightly held in the case of CIT v. Lovely Exports (P.) Ltd. [2009] 319 ITR (St.) 5 (SC); [2008] 216 CTR 195 (SC), CIT v. Rock Fort Metal and Minerals Ltd. [2011] 198 Taxman 497 (Delhi), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) ; 25 Taxman 80F (SC) an....
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....ollow the principle laid down under section 68. (para 16)' In the instance case before me, the Assessing Officer has not followed the due procedure of law under section 68 of the Act. There fore, requiring the assessee to produce the directors of the lender company was not legally tenable in view of the judgment of the Gujarat High Court (supra). 6.12 It must be mentioned that the unsecured loans from M/s. Vighnaharta Infra Developers Pvt Ltd., M/s. Venketeshara Industries Promotion Pvt. Ltd., M/s. Tavish Industries and M/s. Aplaya Creation Ltd., are fully paid back whereas the unsecured loan from M/s. S. K. Growth Funds Pvt. Ltd., is paid back to the extent of more than Rs. 1,00,00,000 as confirmed by the Assessing Officer in his supple mentary remand report dated April 4, 2018 and there is not a single statement or report to implicate these concerns to hold them as shell company as held by the Assessing Officer on the basis of initial, half cooked, inquiry report of the Deputy Director of Income-tax (Inves tigation), Unit-4(2), Kolkata. Moreover, with the abundant evidences discussed above and all concerns, subjected to verification by issuing commission und....
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.... ground Nos. 1 to 3 of the appeal raised by the Revenue are dismissed. 31. Ground No. 4 relates to deleting the interest expenses. We have noted interest disallowance is consequential to the addition of unsecured loan under section 68. As we have already affirmed the deletion of addition under section 68, therefore, this ground being consequential interest expenses is also dismissed. 32. In the result, the appeal of the Revenue is dismissed. I. T. A. No. 328/Jodh/2018 for the assessment year 2016-17 by the Revenue 33. The Revenue has raised the following grounds of appeal : "1. Whether on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in deleting the addition of Rs. 3,60,00,000 made by the Assessing Officer under section 68 of the Income-tax Act on account of unsecured loans obtained by the assessee. 2. Whether on the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) was justified in deleting the additions when the assessee failed to produce the alleged creditors for verification. 3. Whether on the facts and in the circumstances of t....
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.... 68. No adverse finding of any investigation conducted by the Department in relation to assessee and in absence of any adverse finding to rebut the evidences furnished by the assessee, the addition of Rs. 3.60 crores is unjustified. Thus, aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the Revenue has filed the present appeal before us. 36. We have heard the learned Departmental representative for the Revenue and the learned authorised representative of the assessee and gone through the orders of the authorities below. Though the Revenue has raised as many as three grounds of appeal, however, in our view, the sole ground of appeal is deletion of the addition under section 68. The learned Departmental representative for the Revenue supported the order of the Assessing Officer. The learned Departmental representative further submits that the assessee failed to discharge his onus to prove the identity, creditworthy and genuineness of transaction. On the other hand, the learned authorised representative of the assessee submits that he adopts his submission, put forth in appeal for earlier years, as the addition in the impugned year under consideration ....
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.... the Act has filed confirmation of accounts as well as bank statements reflecting the transactions with other substanti ating documents, which are available at page Nos. 68-124 of the paper book. From these documentary evidences placed on record identity, creditworthiness and genuineness of transactions is estab lished. There is no gain saying that the onus squarely lies on the appellant to prove the identity, creditworthiness and genuineness of the cash credits. In the case of Addl. CIT v. Bahri Bros P. Ltd. [1985] 154 ITR 244 (Patna), the hon'ble Patna High Court has held 'if the loans are given by an account paying cheque, it amounts to identi fication of the parties and discharge of burden by the borrower'. In view of the above, it is clear that appellant discharged its burden under section 68 of the Act. Even otherwise, there is no adverse find ing of any investigation conducted by the Department in relation to this company. Therefore, in the absence of any independent inquiry and any adverse findings to rebut the evidences filed by the appellant, I find that this addition of Rs. 3,60,00,000 is unjustified ; firstly, on the ground that no notice was issued/no inqui....
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....ade in his statement, notably, the disclosure made was in his personal capacity only and with respect to long-term capital gain only and not in respect of any other transactions be it be receipt of unsecured loans. Therefore, I find that in the absence of any nexus of the state ment of Shri J. P. Agarwal with the appellant or its total income, this basis of addition adopted by the Assessing Officer is farfetched and cannot be concurred. 4.3.6 Further, the Assessing Officer has treated the various companies from whom unsecured loans were received as shell companies based on initial investigation carried out behind the back of the appellant. In the instance case, the Assessing Officer has considered only part of the investigation and not full outcome of the investigation carried out. It is seen that in the report dated December 21, 2017, the Deputy Director of Income-tax (Investigation) has forwarded its report on compliances made by the lender companies, however, this report has not been considered by the Assessing Officer. The said report (paper book No. 1-258) of common paper book beyond doubt establishes the identity, creditworthiness and genuineness of the transaction w....
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.... 4.3.9 It is a settled judicial position that under the Income-tax law the primary burden under section 68 of the Act is on the appellant and one this burden is discharged under section 68 of the Act no addition under section 68 of the Act is justifiable in the hands of the assessee in view of the judgments in the case of Shree Barkha Syn thetics Ltd. v. Asst. CIT [2006] 283 ITR 377 (Raj) ; [2006] 155 Taxman 289 (Raj), CIT v. Morani Automotives (P.) Ltd. [2014] 264 CTR 86 (Raj), CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) ; 25 Taxman 80F (SC), CIT v. Mark Hospitals (P.) Ltd. [2015] 373 ITR 115 (Mad), CIT v. Jai Kumar Bakliwal [2014] 366 ITR 217 (Raj), CIT v. Creative World Telefilms Ltd. [2011] 333 ITR 100 (Bom), CIT v. Patel Maheshbhai Dahyabhai [2014] 222 Taxman 153 (Guj), Pr. CIT v. G and G Pharma India Ltd. [2016] 384 ITR 147 (Delhi) referred above which have been also been followed recent by the hon'ble Delhi Tri bunal in case of ITO v. Softline Creations (P) Ltd. in I. T. A. No. 744/ Delhi/2012 vide its order dated February 10, 2016- [2016] 51 ITR (Trib) 460 (Delhi). Further, the hon'ble apex court as well as High Court has held that once the identi....
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....ing Officer of those lenders, whether in their respective returns they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the leaders of the assessee, the Assess ing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transac tion, the Assessing Officer does not follow the principle laid down under section 68. (para 15) In the instance case before me, the Assessing Officer has not followed the due procedure of law under section 68 of the Act. There fore, requiring the assessee to produce the directors of the lender company was not legally tenable in view of the judgment of the Gujarat High Court (supra) 4.3.12 It must be mentioned that the unsecured loans from Glaze Construction Pvt. Ltd. Nihon Commodities Pvt. Ltd. and VSG Leas ing and Finance Pvt. Ltd. are paid back as confirmed by the Assessing Officer in his supplementary remand report dated April 4, 2018 and there is not a single statement or report to implicate Grove Suppliers Pvt. Ltd. to hold them as she....