TaxTMI 
TaxTMI 
TaxTMI 
2019 (9) TMI 603
X X X X Extracts X X X X
X X X X Extracts X X X X
....d their share capital along with premium in the assessee company. Assessee during the course of the assessment proceedings filed various details of creditors namely confirmation of accounts, ITR acknowledgement and copy of return, copy of PAN details, annual report for the assessment year under consideration, extract of bank statements reflecting the transactions with the assessee, details of interest payment and TDS deducted on interest paid on such loans and submitted that it had obtained unsecured loans of Rs..85,00,000/- from three parties namely Atharv Business Pvt. Ltd., Josh Trading Pvt. Ltd., and Viraj Mercantile Pvt. Ltd. The assessee by furnishing all these details contended that the loans obtained from the above said parties have been received from account payee cheques and the parties have confirmed the loan transactions, the loan transactions were routed through banking channels, therefore the creditors are identified, genuineness of the transaction and the creditworthiness of the creditors was proved, therefore no addition is warranted u/s. 68 of the Act. 3. However, not convinced with the submissions of the assessee the Assessing Officer relying on the statement of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oofs furnished by the assessee and merely relied on the statements of PKJ which had already retracted by him. Counsel further submitted that the unsecured loans received by assessee were considered as share capital receipt and treated as addition u/s. 68 of the Act in spite of no increase in share capital during the relevant Assessment Year without any application of mind. 7. Ld. Counsel for the assessee submits that on identical situation this Tribunal has deleted the addition made by the Assessing Officer, in the case of ACIT v. Shri Ramesh Ramswarupdas Jindal in ITA.No. 3091 to 3096/Mum/2017 dated 15.11.2017 and ACIT v. M/s. H.K. Pujara Builders in ITA.No. 930/Mum/2017 dated 31.10.2018. Ld. Counsel strongly supported the order of the Ld.CIT(A) and the case laws relied on before him. 8. We have heard the rival submissions, perused the orders of the authorities below. On a perusal of the Assessment Order, we find that Assessing Officer made addition u/s. 68 of the Act stating that assessee has obtained accommodation entries for increase in share capital along with premium. Before the Ld.CIT(A), the assessee with evidences stated that assessee has obtained only unsecured loans fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....his earlier statement that he has not merely providing accommodation entries. We find that all these submissions and evidences were considered by the Ld.CIT(A) and deleted the addition observing as under: - "2.4.1.6. I have carefully considered the facts of the case and submissions of the Id.AR. I have also gone through the decisions relied on by the AO and the Id.AR. During the course of assessment proceedings the appellant has filed several details required to prove the identity and creditworthiness of the persons, and the genuineness of the transaction in the form of PAN cards, IT return copies, bank statements, confirmations, audited accounts etc. as is evident from the records and claimed that it has discharged its onus. The Id.AR has further argued that the transaction has taken place through banking channels, therefore the genuineness of loan need not be doubted. The excessive reliance on the statements given by a third-party i.e. key persons of Pravin Kumar Jain group, whom the appellant does not know, is not proper even without giving the appellant a chance to cross-examine them who have given such adverse statements. He further argued that the addition was made without ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent order that Mr. Pravin kumar Jain had admitted the fact that he and his concerns were engaged in carrying out accommodation entries. Three of his managed concerns viz. Atharv Business Pvt. Ltd., Josh trading Co. Pvt. Ltd., Viraj Mercantile Pvt. Ltd. had given amount totaling to Rs. 85,00,000/- as mentioned herein above as unsecured loan to the Appellant company. However, none of the evidences or the statements so recorded was ever confronted to the Appellant Company. Further, no opportunity to cross examine was given to the Appellant company. As a result, such evidences and statement becomes null and void on the principles of natural justice. Further, it can also be seen that the deponents of the statement have - retracted from their statement, though after a period of 7 months. This again puts the credibility of the statement and the deponents in doubt. Nevertheless, even if the statement and evidences are considered to be valid, it is important to then notice that the same parties have replied to the notice u/s. 133(6) issued by the AO and have confirmed the loan transactions and has furnished all the details required by the AO. Further, the AO merely relied on the statement a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be easily stated that the Appellant company had produced overwhelming evidences to discharge the onus laid upon it under the Act. 2.4.1.11 If the said statements and the evidences are kept in juxtaposition with the documents, details and records produced by the Appellant company it can be seen that the Appellant company has discharged, as stated above, that the onus laid upon it. Further, the AO has not conducted any independent enquiry to corroborate the statements of the third party. Further, even the statement and other details, as available with the AO. cannot be relied upon as discussed above, as there is no credibility in the statement. It is also held in several cases that whatever maybe the strength of presumption it cannot replace evidence and in the present case the Appellant has produced overwhelming evidences to prove its case. 2.4.1.12 The ITAT Mumbai in the case of Anant Shelters P Ltd. (2012) 20 taxmann.com 153 has laid down certain principles with regard to section 68 which the AO is bound to follow. They are reproduced as under(para-7)- "(i) Section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... transaction. All the three ingredients are cumulative and not exclusive. (vi) In matters regarding cash credit the onus of proof is not a static one. As per the provisions of the section the initial burden of proof lies on the assessee. Amount appearing in the books of a/cs. of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Credit worthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and credit worthiness of the lender onus of proof shifts to the Revenue". Also, the Honorable Supreme Court in the case of Lovely Exports Private Limited, (2008) 216 CTR 195 (SC), has stated that the AO is at liberty to bring to tax the amounts in their respective hands of the creditors if their identity, genuineness and creditworthiness is not proved. The AO should have made efforts to assess the amounts in the hands of the creditors at least on protective basis. On the other han....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elow found vis-à-vis the genuineness of the transactions and the creditworthiness of their creditors. (i) The fact that there was sufficient balance available with the creditors when cheques have been issued to the assessee company was established. (ii) It was also established that the funds available at the relevant point in time were not infused into the bank accounts of the creditors by way of cash but were in fact credited to their account again by way of cheques largely on account of commissions received by them save and except two transactions of Rs. 1 lac each received by two creditors from verifiable donors. (iii) The bank accounts as well as returns filed by the creditors who were assessable to tax alongwith their PANs‟ were also available with the A.O. (iv) The assessee in turn had received the monies by way of cheques in respect of which credits were made in their books of accounts. (v) The creditors had also placed on record receipts of commission as well as the gift deeds in respect of gifts made to the donors. (vi) The identity and addresses of sub creditors was also available. 14. With this material on record in our view as far as the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....unexplained unsecured loans and interest thereon amounting to Rs..2,35,246/. Search and seizure action u/s. 132 of the Act has been conducted in the case of Shri Pravin Kumar Jain and statements were recorded from him and he is said to have been deposed that he is providing only accommodation entries through various concerns. On the basis of this information received from DGIT(investigation), Mumbai the Assessing Officer noted that assessee was one of the beneficiaries of accommodation entries given by Shri Pravin Kumar Jain. Assessee was required to explain the unsecured loans obtained in the name of M/s Mohit International and M/s.Natasha enterprises of Rs..10 lakhs each and prove the genuineness of the transactions. Assessee furnished information in respect of the above transactions i.e. copy of Loan confirmation and Affidavit establishing identity of the lender, copy of ledger giving detail towards loan taken during the year and subsequent repayments and Copy of ITR - V filed establishing Creditworthiness of the Lender. However, Assessing Officer did not accept the evidences furnished by the assessee and also the retraction statement of Shri Pravin Kumar Jain, ignoring all the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssion contained above, it is obvious that the inference drawn by the Assessing officer against the appellant is not sustainable for the simple reason that the principles of natural justice have not been followed. First and foremost, the appellant has not been given any access to the material (reports, intimations, statement etc.) used against it. Secondly, by withholding the said material the assessing officer has denied to the appellant an opportunity to refute the evidence by cross examining the witnesses, statements, if any made by whom, incriminated the appellant. On both counts, the impugned assessment order fails squarely. 6.4. It has to be said that the appellant had done everything in its power to prove the three ingredients required to prove the satisfactory nature of the loan transactions. He has submitted confirmation from the parties. filed Audit Reports of the parties alongwith copy of their ITR, and bank statements. In these circumstances, the onus had shifted to the assessing officer. If the assessing officer was still not satisfied, he had the option of making enquiries from the alleged lenders by summoning them. However as seen from the assessment order, he did n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....so submitted the details of the TDS made on the loans wherever it is applicable and the details of amount of TDS paid into the Government account. In the appellant case the addition made towards the said loans is deleted after discussing the issue in detail in the above paragraphs. 6.6. Thus, above discussion and various explanations leads to the conclusions that the Ld. Assessing officer has made addition of Rs..20,00,000/- and interest given to the parties, disregarding the evidence on record and without discharging his onus and without establishing anything to the contrary to the submissions of the appellant and without verifying the bank account, existence of entities who have extended loans to the appellant and without making fruitful investigation. Therefore, the Assessing officer is directed to delete the addition made of Rs. 20,00,000/- on account of unexplained unsecured loans and Rs..2,35,246/- made on account interest on the same. The grounds of appeal are allowed. 10. On a plain reading of the Assessment Order, we find that the Assessing Officer has gone only by the statement recorded from Shri Pravin Kumar Jain who said to have been deposed that he is only providin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties showing the loan transactions. 7. By providing all this information to the Assessing Officer the assessee has discharged the initial onus of proving genuineness of the transactions u/s. 68 of the Act. Even the assessee requested Assessing Officer for issue of notices u/s. 133(6) of the Act to the lenders to find out the genuineness of the transactions with the assessee. Therefore, once the initial onus is discharged by the assessee the burden shifts to the Revenue to disprove the claim of the assessee. We notice that all the loans were taken through banking channels and the repayments for the same was also made through banking channels. The Assessing Officer ignored the documentary evidences submitted by the assessee and has exclusively relied on statements of third party in making the addition. In spite of request by the assessee the Assessing Officer did not provide any cross-examination of the parties who have made the submissions. All these aspects have been considered by the Ld.CIT(A) and deleted the addition observing as under: "5.9. From the assessment order, it transpires that the AO has solely relied upon the statement of Mr. Pravin Kumar Jain and did not carry ou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se judgments is applicable to the facts of the instant case. This is confirmed by the Delhi Bench of the Income Tax Appellate Tribunal in the case of DCIT v. Nipun Builders & Developers P. Ltd. (ITA No.557/DEL/2010) wherein the Tribunal dismissed the Revenue appeal by holding that the Assessing Officer has primarily relied upon the Report of the Investigation wing which cannot conclusively prove that assessee's own money was invested in the form of share application money. 5.12. Further, in the recent judgment of Shri.Jafferali K Rattonsey V. DCIT reported in 5068/Mum/209, the Mumbai Bench of the Income Tax Appellate Tribunal has also held that the mere statement of a person cannot be a deciding factor for rejecting the genuineness of the purchase of shares by the assessee specially when all other supporting evidences filed by the assessee were neither proved to be false or untrue. The Hon'ble ITAT Mumbai in the case of ITO vs Anand Shelters Pvt.Ltd. (2012) 20 Taxmann.com 153 has enumerated certain principles which would be extremely useful in understanding the issue in hand. It has been stated in the said judgment that over the years, law regarding cash credits have evo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted out that section 68 under which the addition has been made by the Assessing Officer reads as under-: "68. Where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 5.15. The phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words "shall be charged to income-tax as the income of the assessee of that previous year". The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word "may" and not "shall". Thus the unsatisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n immediately retracted by him by filing an affidavit with the CBDT, the CIT(A) has deleted the said addition as in his opinion the assessee has duly discharged his onus as laid down on it u/s. 68 of the I.T.Act. It was also noted by the CIT(A) that the assessee has proved the identity, credit worthiness as well as genuineness of the transactions and, therefore, no addition u/s. 68 can be made. 7. The learned AR before us relied on the order of the CIT(A) and has also pointed out that the loan received by the assessee has been returned to the respective parties through cheques and in none of the case the respective party has deposited any cash. He relied on the following Tribunal decisions: * Arceli Realty Ltd vs. ITO [ITA No.6492/Mum/2016 dated 21.04.2017 (Mumbai)] * M/s Komal Agrotech Pvt. Ltd. vs. ITO [ITA No.437/Hyd/2016 dated 25.11.2016 (Hyderabad)] * Sudhanshu Suresh Pandhare vs. ITO [ITA No.5185/Mum/2012 dated 05.10.2016 (Mumbai)] * Dilsa Distributors Combines vs. ITO [ITA No.5849/Mum/2011 dated 06.09.2013 (Mumbai)] * Aim Properties & Investments Pvt. Ltd vs. Income Tax Officer [ITA No.7426/Mum/2012 dated 04.12.2013 (Mumbai] He further placed reliance on the fol....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vestigation done by the office of D G. I T (Investigation), Mumbai. No enquiries or investigation was carried out. No evidence to controvert the claims of the Assessee was brought on the record by the AO. Even the statement of Shri Praveen Kumar was supplied. Nothing is on record about the result If investigations done by DGIT (Inv), Mumbai. The papers filed by the assessee do demonstrate the identity, creditworthiness and genuineness of the transaction. The addition is made merely on surmises and conjectures. In view of the above, we hold that the addition made under section 68 of the Act is bad in law. We noted that in the said case also loan had been received from Javda India Impex Ltd. 12. Being consistent with the view taken by this co-ordinate Bench in the case of Komal Agrotech Pvt. Ltd. (supra), and in view of the facts and circumstances, we do not find any illegality or infirmity in the orders of the CIT(A). It is accordingly, confirmed for both the years under appeal. 13. In the result, the appeals filed by the Revenue are dismissed." 17. Similarly, we find that in the case of M/s. Shree Laxmi Estate Pvt ltd., v. ITO in ITA.No. 5954/Mum/2016 and M/s. Shree Laxmi ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ied alongwith documents mentioned in the notice, therefore, there is no reason for the AO to doubt the transactions only on the basis of information received from Investigation Wing that too, without providing any opportunity of cross examination of the parties. In this regard, he relied upon plethora of judgements including the judgement of Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd 349 ITR 680 (Bom) and Hon'ble Supreme Court in the case of Lovely Exports Pvt Ltd vs CIT 216 CTR 295(SC). "5. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The AO made addition towards unsecured loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd on the basis of information received from Investigation Wing which revealed that the assessee is the beneficiary of bogus accommodation entries provided by Shri Praveenkumar Jain through his bogus companies. The AO has made additions u/s 68 of the Income-tax Act, 1961 on the ground that though the assessee has furnished necessary evidences to prove identity of the parties, but failed to establish genuineness of transact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ions and creditworthiness of the parties which is evident from the fact that the assessee has furnished financial statements of the creditors wherein the said transaction has been disclosed in the relevant financial years. We further notice that the assessee also filed financial statements of the creditors which are enclosed in paper book filed. On perusal of the financial statements filed by the assessee, we find that both the companies are active in the website of Ministry of Corporate Affairs. This fact has been further supported by the letter of AO wherein the AO has accepted that both companies, viz. Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are active in MCA website. We further notice that both the companies have filed financial statements for the year ending 31-03-2006. Therefore, we are of the considered view that the assessee has discharged its initial burden cast u/s 68 by filing identity, genuineness of transaction and creditworthiness of the parties. Once, the assessee has discharged its initial burden, the burden shifts to the AO to prove otherwise. In this case, the AO made addition only on the basis of information received from Investigation Wing, but....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of proving the identity, genuineness and creditworthiness of the creditors by providing all necessary details and thus the assessee has discharged identity, genuineness and creditworthiness of the parties. The Assessing Officer has not controverted the evidences furnished by the assessee. No further enquiries have been made by the Assessing Officer except relying on the statements of PKJ and the investigation report. Even the statements were not provided to the assessee for its rebuttal. The Hon'ble Supreme Court in the case of Andaman Timber Industries v. CCE in Civil Appeal No. 4228 of 2006 dated 02.09.2015 reported in 127 DTR 241/281 CTR 241 held as under: - "Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of....