TaxTMI 
TaxTMI 
2019 (9) TMI 4
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....or A.Y. 2013-14. The revenue has assailed the impugned order on the following grounds of appeal before us: "1. Whether on the facts and circumstances of the case and in law, the (Ld.CIT(A) has erred in treating the loan of Rs. 10,91,50,000/- as genuine, when such loan was received from dummy company/ entities managed and controlled by Praveen Kumar Jam, and admitted by Shri Chetan C Shah, the Director of the assessee company, as to be in the nature of the accommodation entry.Z 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the loan of Rs. 10,91,50,000/- as genuine, ignoring the decision of the Hon'ble ITAT in the case of Pavankumar M. Sanghvi Vs. ITO I .T.A. No.2447/Ahd/2016, wherein the Hon' b1e ITAT has held that genuineness of the transactions cannot be established merely on the basis of documentation filed by the assessee and further probe is required to ascertain whether what was apparent was real. 3. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the interest expenses of Rs. 70,49,112/- on the loan of Rs. 10,91,50,000/- which has been held to be in the natu....
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....orting documentary evidence, viz. (i) confirmations of the lenders; (ii). copies of the returns of income for A.Y 2013-14 of the lenders; (iii). copies of the annual audited accounts for A.Y 2013-14 of the lenders; and (iv). copies of the bank statements of the lenders from which the loans were advanced by them to the assessee company. However, the A.O declined to accept the authenticity of the unsecured loans that were raised by the assessee from the concerns which were allegedly stated to be controlled by Shri Praveen Kumar Jain, as under : Sr. No. Particulars Amount of loan 1. Atharva Business P. Ltd. 1,00,00,000 2. Josh Trading P. Ltd. 1,00,00,000 3. Casper Enterprises P. Ltd. 1,07,50,000 4. Olive Overseas P. Ltd. 1,77,00,000 5. Pragati Gems P. Ltd. 2,25,00,000 6. Sumukh Commercial P. Ltd. 1,15,00,000 7. Viraj Mercantile P. Ltd. 2,00,00,000 8. Lunkad Textile P. Ltd. 50,00,000 9. Falak Trading Co. P. Ltd. 17,00,000 Total 10,91,50,000 The A.O holding a conviction that the identity and creditworthiness of the aforesaid lenders and also the genuineness of the transactions had remained unproved, therefore, called upon the....
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....essee had discharged the 'onus' that was cast upon it under Sec.68 as regards proving the authenticity of the loan transactions under consideration, the CIT(A) concluded that the A.O was not justified in treating the same as unexplained cash credits. As the loans aggregating to Rs. 10,91,50,000/- received by the assessee from the aforementioned parties were held as genuine by the CIT(A), therefore, the consequential disallowance of interest of Rs. 70,49,112/- was also deleted by him. 5. The revenue being aggrieved with the order passed by the CIT(A) has carried the matter in appeal before us. The ld. Departmental Representative (for short 'D.R') at the very outset of the hearing of the appeal took us through the facts of the case. It was submitted by the ld. D.R, that as assessee in the garb of unsecured loans from the concerns/companies operated and controlled by Shri Praveen Kumar Jain, an infamous accommodation entry provider, had obtained accommodation entries, therefore, the same was rightly treated by the A.O as unexplained cash credits under Sec. 68 of the Act. It was submitted by the ld. D.R that Shri Chetan R. Shah, director of the assessee company had in the course of t....
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....iii) copies of the annual audited accounts of the lender parties for A.Y. 2013-14; and (iv) copies of the bank statements of the lender parties from which the loans had been advanced by them to the assessee company. It was submitted by the ld. A.R that the aforesaid documentary evidence filed by the assessee to substantiate the authenticity of the loan transactions had not been disproved by the A.O on the basis of any irrefutable material or evidence. In fact, the ld. A.R took us through the observations of the A.O and submitted that the entire adverse inferences as regards the creditworthiness of the lenders and also the genuineness of the transactions were drawn by him merely on the basis of general observations and not any concrete material. As regards the reliance placed by the A.O on the fact that Shri Chetan R. Shah, director of the assessee company had in his statement recorded in the course of the survey proceedings admitted that the unsecured loans raised by the various concerns of "Marathan Group" were only in the nature of accommodation entries, it was submitted by the ld. A.R, that as the same was factually incorrect, therefore, the same was not acted upon by the assess....
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....on by the revenue for drawing of adverse inferences as regards the genuineness of the loan transactions under consideration, it was submitted by the ld. A.R that the statement of the said person despite specific requests had not been made available by the lower authorities. Apart therefrom, it was submitted by the ld. A.R that the specific request for cross-examination of Shri. Praveen K. Jain was also arbitrarily brushed aside and declined by the A.O. It was submitted by the ld. A.R that the counsel for the revenue had wrongly averred that assessee had never requested for cross-examination of the aforementioned person. In order to fortify his aforesaid contention the ld. A.R took us through the Page 6 - Para 4.6 of the assessment order which revealed that the assessee had specifically requested for cross-examination of Shri Praveen K. Jain. It was further submitted by the ld. A.R, that it is neither the case of the revenue that Sh. Praveen Kumar Jain had in his statement alleged that he had provided any accommodation entries to the assessee, nor any 'material' evidencing the same had either surfaced during the course of the search proceedings that were conducted on the said person....
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....islodge the documentary evidence that was placed on his record by the assessee to substantiate the veracity of the loan transactions under consideration, therefore, he had grossly erred in treating the same as unexplained cash credit under Sec. 68 of the Act. It was submitted by the ld. A.R that the CIT(A) duly appreciating that the assessee had discharged the 'onus' that was cast upon it to substantiate the authenticity of the loan transactions had rightly vacated the addition made by the A.O. It was further submitted by the ld. A.R that as the loans raised by the assessee from the aforementioned parties had been found to be genuine, therefore, the consequential disallowance of the interest expenditure of Rs. 70,49,112/- was also rightly deleted by the CIT(A). In order to drive home his contention that when the 'onus' cast upon the assessee to prove the authenticity of the loan transactions had been discharged, then the same in the absence of any material proving to the contrary cannot be treated as an unexplained cash credit under Sec. 68 of the Act, reliance was placed by the ld. A.R on the following judicial pronouncements (i) DCIT Vs. Manba Finance Ltd. (ITA No.1448, 1449 & 14....
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....nexplained cash credits under Sec.68 of the Act; and (ii) that, as to whether the CIT(A) is justified in vacating the disallowance of interest paid on loans amounting to Rs. 70,49,112/-. As observed by us hereinabove, the A.O held a conviction that the assessee in the garb of unsecured loans had received accommodation entries from the following 9 concerns: Sr. No. Particulars Amount of loan 1. Atharva Business P. Ltd. 1,00,00,000 2. Josh Trading P. Ltd. 1,00,00,000 3. Casper Enterprises P. Ltd. 1,07,50,000 4. Olive Overseas P. Ltd. 1,77,00,000 5. Pragati Gems P. Ltd. 2,25,00,000 6. Sumukh Commercial P. Ltd. 1,15,00,000 7. Viraj Mercantile P. Ltd. 2,00,00,000 8. Lunkad Textile P. Ltd. 50,00,000 9. Falak Trading Co. P. Ltd. 17,00,000 Total 10,91,50,000 On a perusal of the assessment orders, we find, that the A.O had drawn adverse inferences as regards the authenticity of the loans raised by the assessee from the aforementioned parties, for the reason, that the said parties were allegedly operated and controlled by Shri. Praveen K. Jain, an infamous accommodation entry provider. Apart there from, it was observed by him, tha....
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....statements of the lender parties from where the loans were advanced to the assessee company. Accordingly, the assessee in discharge of the primary onus that was cast upon it to substantiate the authenticity of the loan transactions had placed on record the aforesaid documentary evidence. It has been the claim of the assessee before the CIT(A) that as all the necessary requisite details in order to establish the identity and creditworthiness of the lenders and also the genuineness of the loan transactions were placed on record, therefore, the A.O without rebutting the said documentary evidence and placing on record any material proving to the contrary was not justified in summarily dislodging the claim of the assessee as regards the authenticity of the loans that were raised by it from the aforementioned parties. 8. We shall in the backdrop of the aforesaid facts deliberate on the observations of the lower authorities. We shall first advert to the statement of Shri Chetan R. Shah, director of the assessee company, which had been heavily relied upon by the A.O for driving home his claim that no genuine loans were raised by the assessee company from the aforementioned lenders. As is....
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....hority to record the statement of any person in the course of survey proceedings, reads as under: "(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act." Accordingly, it is evident that an Income Tax Authority in the course of the survey proceedings conducted under Sec.133A can record the statement of any person which could be useful or relevant to any proceeding under the Act. However, we find that the phraseology of Sec.133A(3)(iii) is entirely different as in comparison to provisions of Sec.132(4) of the Act, wherein the authorized officer can examine anybody on 'Oath', and such statement may be used as evidence in any proceedings under the Act. As the statement recorded under Sec. 133A(3)(iii) of the Act is not recorded on oath, therefore, as had consistently been held by various courts the same has no evidentiary value in absence of any corroborative evidence. In sum and substance, the statement recorded under Sec. 133A can be used to corroborate a state of fact, however, the same on a standalone basis cannot justifiably lead to drawing of any inferences. To sum up, a statement recorded under Sec.133A is simply an....
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.... fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, there is much farce in the argument of learned counsel for the appellant that the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this." 9. Similarly, the Hon'ble Madras High Court has also concluded that statement recorded during the course of survey has no evidentiary value. The special leave petition against the decision of the Hon'ble Madra....
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....no addition is sustainable on the strength of the said statement. A similar view had also been taken by the Hon'ble High Court of Delhi in the case of CIT Vs. Dhingra Metal Works (2010) 328 ITR 384 (Del). In the aforementioned case, it was observed by the Hon'ble High Court that a statement of an assessee to have evidentiary value should have been recorded on oath. It was observed by the High Court that though an admission was an extremely important piece of evidence, it could not be said to be conclusive and it was open to the person who made the admission to show that it was incorrect. In the backdrop of the aforesaid judicial pronouncements, it can safely be concluded that the statement recorded during the course of the survey proceedings has no evidentiary value and the same can only be used for corroborative purposes for deciding an issue in the course of the assessment proceedings. Now in the case before us, we find that the assessee in the course of the assessment proceedings had placed on record sufficient documentary evidence to substantiate the authenticity of the loan transactions viz. (i) confirmations of the lenders; (ii) copies of the returns of income for A.Y. 2013-1....
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....ct, we find that the CBDT in its letter No. F.No.286/2/2003, IT (Inv-II), dated 10.03.2003 had observed that instances have come to its notice that in certain cases the assesses were forced to confess undisclosed income in the course of the search & seizure and survey operations. It was noticed by the Board that as such baseless disclosures would be divorced from the actual facts and would not be backed by any credible evidence, therefore, the assesses at the time of filing their returns of income would retract from the same. Accordingly, the Board taking cognizance of the said ground realities had in its aforesaid circular emphasised that the officials in the course of the search & seizure proceedings and survey operations should focus and concentrate on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed by the assessee before the department, and no attempt should be made to obtain confession as regards the undisclosed income. The said CBDT Circular reads as under: "Instances have come to the notice of the Board where assessee's have claimed that they have been forced to confess the undisclosed income duri....
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....odation entry provider. As claimed by the revenue, Shri. Praveen Kumar Jain had in his statement recorded under Sec.132(4) admitted before the investigation wing that he was controlling and operating various dummy concerns/companies through which he had provided accommodation entries to various persons. As observed by us hereinabove, it is a fact borne from the orders of the lower authorities that Shri Praveen Kumar Jain had retracted from his aforesaid statement by filing an 'affidavit' alleging that as the search operations had continued at length for 9 days, therefore, it had taken a toll on his mental faculties. Be that as it may, we find that it is not the case of the revenue before us that the aforesaid person had at any stage in his statement recorded during course of the search proceedings ever alleged that he had provided accommodation entries to the assessee company. We shall in the backdrop of the aforesaid facts emerging from the statement of Shri Praveen Kumar Jain recorded under Sec.132(4) of the Act, which thereafter is stated to have been retracted by him, therein deliberate on the evidentiary value of the same insofar the case of the assessee before us is concerned....
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.... any proceedings under the Act. It is thus abundantly clear that the A.O is vested with a discretion to use a statement recorded under Sec.132(4) as an evidence in the course of any proceedings under the Income Tax Act. In our considered view, the CIT(A) has rightly concluded that the word "may" clearly suggests that the statement recorded under Sec. 132(4) may therein be rebutted subsequently if the assessee is able to prove with documentary evidence that the facts earlier stated were not correct. In fact, we are persuaded to subscribe to the view of the CIT(A) that though a statement recorded under 'oath' is an important piece of evidence, however, addition/disallowance cannot be made solely on the basis of such statement in the absence of any corroborative evidence supporting the same. As a matter of fact, in a case where a statement had been retracted by the assessee, it becomes all the more onerous on the part of the A.O to corroborate the statement recorded in the course of the search proceedings on the basis of supporting evidence. As had been observed by various courts, a statement recorded under Sec.132(4) is treated as a piece of evidence in the proceedings under the Act,....
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....hi in the case of CIT Vs. Sunil Aggarwal (2015) 379 ITR 367 (Del). In the aforementioned case, it was observed by the Hon'ble High Court that a retracted statement under Sec.132(4) of the Act would require some corroborative material for the A.O to proceed to make additions on the basis of such statement. We find that the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala& Anr. (1973) 91 ITR 18 (SC), had observed, that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was observed by the Hon'ble Apex Court that it was open to the person who made the admission to show that it was incorrect. Relying on the aforesaid judgment of the Hon'ble Apex Court, we find, that a coordinate bench of the Tribunal viz. ITAT, Mumbai in the case of Tribhuvandas Bhimji Zaveri, ITA No. 2250 & 2251/Mum/2013, dated 04.11.2015, had drawn an analogy and had observed that though an admission made in a statement recorded under Sec.132(4) is an extremely important piece of evidence but it cannot be said that it is conclusive as it is open to the person who made the admission to show that it is incorrect. We further....
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....i Praveen Kumar Jain, however, there is nothing discernible from the orders of the lower authorities which would reveal that any 'material' evidencing that the assessee as a beneficiary had obtained accommodation entries from the said person had surfaced or was unearthed during the course of the said proceedings. Also as observed by us hereinabove, there is nothing discernible from the records which would reveal that the aforesaid person had ever alleged that he had provided any accommodation entries to the assessee company. We also cannot remain oblivious of the fact that in the absence of any corroborative evidence the statement of the aforementioned 'third party' viz. Shri Praveen K. Jain could not be used in isolation for drawing of adverse inferences in the hands of the assessee. Apart therefrom, we find that as is discernible from the assessment order, though the assessee had sought a 'crossexamination' of Shri Praveen Kumar Jain, whose statement was being heavily relied upon by the A.O for drawing of adverse inferences in its hands, however, the same was not allowed to him. In our considered view, the aforesaid failure on the part of the A.O to allow a crossexamination of th....
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....he CIT(A) had rightly concluded that in the absence of any corroborative material the A.O could not have proceeded with and made additions on the basis of the retracted statement of Shri Praveen Kumar Jain. 11. We shall now advert to the material which had been placed on record by the assessee in the course of the assessment proceedings to substantiate the authenticity of the loan transactions under consideration. Also, we shall deliberate upon the observations of the A.O on the basis of which he had declined to accept his aforesaid claim. As is discernible from the orders of the lower authorities, the assessee in order to drive home its claim that it had raised genuine loans from the aforementioned 9 parties had placed on record supporting documentary evidence viz. (i) confirmations of the lenders; (ii) copies of the returns of income for A.Y. 2013-14 of the lender parties; (iii) copies of the annual audited accounts for A.Y. 2013-14 of the lenders parties; and (iv) copy of the bank statements of the lenders from where the loans were advanced to the assessee company. As a matter of fact, the CIT(A) had specifically referred to the documentary evidence placed on record by the ass....
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....re carried out through proper banking channel. g. M/s Viraj Mercantile P. Ltd. The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. h. M/s Lunkad Textile P Ltd- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of. return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. i. M/s Falak Trading P Ltd- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of annual audited accounts of relevant assessment year, copy of relevant pages of bank statement of them and itself to establi.sh that the transaction....
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....33(6) of the Act. In our considered view, in case the A.O would had any doubts as regards either the identity and creditworthiness of the aforesaid lenders or the genuineness of the loan transactions, then he would have made necessary verifications by either summoning the details in exercise of the powers vested with him under Sec.133(6) or directing the assessee to furnish further documentary evidence. However, we find that the A.O neither carried out any verifications on his own nor directed the assessee to clarify any further aspects pertaining to the authenticity of the loan transactions under consideration. As regards the observation of the A.O that the assessee had not produced the parties, we find, that there is nothing discernible from the records from where it could be gathered that he had ever directed the assessee for doing the needful. In fact, in our considered view, now when the assessee in discharge of the primary 'onus' that was cast upon it to substantiate the authenticity of the loan transactions had placed on record sufficient documentary evidence which had not been rebutted by the A.O, therefore, merely for the reason that the said lenders had not appeared befor....
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....tablished merely on the basis of documents filed by the assessee and further probe is required to be carried out for arriving at the actual facts. We have perused the aforesaid order of the ITAT, Ahmedabad, and are unable to persuade ourselves to subscribe to the aforesaid claim of the revenue. A perusal of the aforesaid order reveals that the same is distinguishable on facts. As is discernible from the said order, it was observed by the Tribunal that a perusal of the Bank account of the lender party viz. M/s Natasha Enterprises revealed that after the loan of Rs. 10,00,000/- was advanced to the assessee the balance in the bank account remained at a meagre figure of Rs. 13,717/- only. On a similar footing, it was noticed by the Tribunal that on various other dates also after the amounts were advanced from the bank account of the lender the closing balance of the respective days would remain between few thousands of rupees. Further, it was observed, that though the lender had shown a substantial turnover of 122.92 crores, but there was no closing stock. Also, certain peculiar facts as regards the meagre expenses incurred by the lenders were also noticed, which thus did not inspire a....
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....failed to discharge the 'onus' as was shifted upon him to disprove the authenticity of the loan transactions under consideration. In fact, we find that the A.O instead of placing on record any documentary evidence which would disprove the authenticity of the loan transactions under consideration, had focussed primarily on the facts and the modus operandi of functioning of Shri. Praveen Kumar Jain as had emerged in the course of the search proceedings conducted on him. We are afraid that the adverse inferences drawn by the A.O as regards the authenticity of the loan transactions under consideration without any attempt to dislodge the documentary evidence placed on record by the assessee to support its claim, cannot be sustained and is liable to be vacated. Our aforesaid view is fortified by the order of the ITAT "C" Bench, Mumbai, in the case of ITO 20(2)(5), Mumbai Vs. Smt. Pratima Ashar (2019) 107 taxmann.com 135 (Mum), wherein a similar view was taken. At this stage, we may herein observe that similar adverse inferences as regards the authenticity of the loan transactions that were drawn by the A.O. in the case of a 'sister concern' of the assessee company viz. M/s Manba Finance ....
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....nal that a disclosure obtained in the course of survey de hors corroborative evidence cannot be a conclusive proof for making an addition in the hands of the assessee. Accordingly, the Tribunal on the basis of his aforesaid observations had in the case of the aforementioned 'sister concern' of the assessee company wherein identical facts were involved, had upheld the order of the CIT(A) and therein concluded that the A.O in the absence of the corroborative evidence was not justified in treating the loans received by the assessee before them as unexplained cash credit under Sec. 68 of the Act. 13. We have given a thoughtful consideration and are of the considered view, that the CIT(A) after deliberating at length on the issue under consideration had rightly concluded that as the assessee had discharged the 'onus' that was cast upon it under Sec.68 of the Act, therefore, the A.O was not justified in treating the loans received from the aforementioned parties as unexplained cash credits under Sec.68 of the Act. We thus not finding any infirmity in the well reasoned order of the CIT(A) to the extent he had deleted the addition of Rs. 10,91,50,000/- uphold the same. The Grounds of app....
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....red in allowing the interest expenses of Rs. 19,29,244/- on the loan of Rs. 2,64,80,000/- which has been held to be in the nature of the accommodation entry and sham in the assessment order. The appellant prays that the order of the CIT(A) on the grounds be set aside and the DC be restored. The appellant craves to amend or alter any ground or add new ground which may be necessary. 17. Briefly stated, the assessee company had e-filed its return of income on 28.09.2013, declaring its total income at Rs. 23,03,920/-. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec.143(2) of the Act. 18. During the course of the assessment proceedings it was observed by the A.O that the assessee had claimed to have raised loans from the following 7 parties: Sr. No. Particulars Amount of loan 1. Atharva Business P. Ltd. 50,00,000 2. Josh Trading P. Ltd. 19,80,000 3. Duke Business P. Ltd. 30,00,000 4. Olive Overseas P. Ltd. 25,00,000 5. Pragati Gems P. Ltd. 50,00,000 6. Sumukh Commercial P. Ltd. 65,00,000 7. Victory Sales P. Ltd. 25,00,000 Total 2,64,80,000/- It was observed by the A.O that the aforementioned c....