TaxTMI 
TaxTMI 
2019 (9) TMI 603
X X X X Extracts X X X X
X X X X Extracts X X X X
....rthiness of the creditors who have invested 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 As....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing Officer disregarded all the evidences and proofs 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 sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ficer to the assessee on the third parties' statements on which he is relying on. 12. It has been submitted that the PKJ had in fact retracted 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....however, such statement cannot be taken as concluding evidence to nail any person especially in the facts of the present case. It can be seen from the records and the assessment 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 notic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....PAN, the IT returns, confirmation letters, bank statements of the creditors, audited balance sheet of the creditors cannot be taken note of. Thus, from the above discussion, it can 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 wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....firmatory letters or A/c payee cheques do not prove that the amount in question is properly explained for the purpose of section 68. Assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the 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 t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd is allowed. None of the above findings have been controverted with evidences by the Revenue. 13. The Hon'ble Delhi High Court in the case of MOD Creations Pvt. Ltd., v. ITO [354 ITR 282] held as under: - "13. In the light of the above principle, let us examine as to what the authorities below 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....T v. Shri Ramesh Ramswarupdas Jindal (supra) the Coordinate Bench held as under: - "9. We have heard the rival submissions, perused the orders of the authorities below, the case laws relied on and the material furnished before us. The only issue involved in this appeal relates to the deletion of addition of Rs..20 lakhs made by the Assessing Officer towards 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(125 ITR 713 (SC)). 6.3. Further during the course of assessment proceedings, the appellant has produced copy of a comprehensive Affidavit of Shri. Pravin Kumar Jain dated 25.04.2014 retracting, the statements made before the Investigation Wing. Assessing officer has not given opportunity to the appellant for cross examination of Shri Pravin Kumar Jain. Going by the discussion 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 transaction....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... paid the interest after deducting TDS. With regard to the disallowance of interest on loans taken from afore-mentioned parties, the appellant submitted that the AO has also ignored the fact that the said interest expenses were incurred wholly, exclusively & necessarily for business of the Appellant. The interest paid on loans was subject to TDS. During the present proceedings, the appellant also 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 offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rought any corroborative evidence to substantiate that the transactions are non-genuine. Assessee provided various evidences to establish that the transactions are genuine, creditors are identifiable and credit worthiness is proved. Following information is furnished by the assessee. (1) Confirmation of A/c. by the parties. (2) Income tax returns of the parties for A.Y.2012-13. (3) Bank Statements of the parties 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 r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Bench, Mumbai in the case of Shaf Broadcast Pvt. Ltd Vs. ACIT, Cir-9(3), Mumbai in ITA No.l819/Mum/2012. Both the cases relate to re-opening of assessment on the basis of statements of Mr. Mukesh Choksi and Mr. I.C. Choksi and associated brokerage companies. The Hon'ble ITAT on the analysis of the findings made in the assessment orders has reached to the conclusion that the re-opening itself is bad in law and quashed the orders accordingly. The ratio of these 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 reject....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the merit of submission made by the appellant and casually brushed aside the details filed by the appellant. Further, the appellant has stated that he had furnished all the relevant details during the course of the assessment proceedings and accordingly had duly discharged its onus by furnishing the identity and address of the parties. Further, the source of receipt through banking channels to substantiate the genuineness of the credits reflected in its books of Account. 5.14. Further, it may be pointed 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the parties c. Copy of bank statement of the parties from where the cheque is issued. d. List of directors of the parties e. Copy of annual report of the parties for financial year 2006-07. f. Copy of loan confirmation from the parties. The Assessing Officer treated these loans to be non-genuine and made addition u/s 68 of the I.T Act on the basis of the statement of Shri Nilesh Parmar, one of the associate of Shri Praveen Kumar Jam, Director of Mohit International and one of the dummy Director of some of the companies of Shri Praveen Kumar Jam. Although said statement has been 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 par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mitted copies of bank accounts. The lender has not deposited cash into bank account. The assessee has duly discharged the onus with regard to identity of the lender, credit worthiness of the party and all supporting evidences as required u/s. 68 of the I.T.Act. Therefore, in our opinion the decisions relied upon by the DR does not assist the Revenue to the facts of the present case. 11. We have also gone through the decisions relied upon by the learned AR. We noted that this Tribunal in similar circumstances in the case of Komal Agrotech Pvt. Ltd. vs. ITO in ITA No. 437/Hyd/2016 vide its order dated 25.11.2016 has held as under: A plain reading of the assessment order demonstrates that the AO merely went by the Investigation 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nesh Choudhary, broker involved in arranging accommodation entries with Shri Pravinkumar Jain, who stated that Shri Pravinkumar Jain is indulging in providing accommodation entries, therefore, the AO opined that unsecured loans stated to be received from those companies are unexplained credit and hence made addition u/s 68 of the Act. It is the contention of the assessee that loans received from Josh Trading Company Pvt Ltd and Viraj Mercantile Pvt Ltd are supported by valid documents. The assessee further submitted that it has furnished confirmation letters alongwith copies of their bank statement and acknowledgement of IT returns showing the above transactions. The assessee further contended that in response to notices u/s 133(6) issued by AO, the above parties replied 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 L....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, then sum so credited may be charged to income-tax as the income of the assessee of that previous year. A plain reading of section 68 makes it clear that the initial burden of proof lies on the assessee. It is well settled legal position that the assessee has to discharge 3 main ingredients in order to discharge the initial burden of proof, i.e. the identity of the creditor, the genuineness of transaction and creditworthiness of the creditors. Once the assessee discharges initial burden placed upon him, then the burden todis prove the said claim shifts upon the AO. In this case, the assessee has discharged his onus cast u/s 68 by filing identity of the creditors, genuineness of transactions 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssued by the AO U/s. 133(6) of the Act. 9. The assessee had taken loan from two of Praveen Kumar Jain's group companies viz., M/s. Josh Trading Co P Ltd and M/s Viraj Mercantile Ltd in the year relevant to AY 2012-13. The AO had assessed the loan amounts on identical reasoning. We notice that the Coordinate Bench of ITAT has deleted the additions vide its order dated 239.12.2017 passed in ITA.No. 5954/Mum/2016, with the following observations: - ... ... Since the facts surrounding the present issue being identical with that examined by the Coordinate Bench in A.Y. 2012-13, consistent with the view taken therein, we set aside the order passed by Ld.CIT(A) on this issue and direct the AO to delete the addition of Rs..10.00 lakhs." 19. In the case on hand also, the assessee has discharged its initial onus 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 Offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eposited in the bank account of one such company and thereafter transferred/ circulated within the group companies before the cheque is issued to the beneficiaries. It is also noted (page-14, para-12) that the share holder companies (five in numbers) were all located at the common address i.e. 13/34 WEA, Fourth Floor, Arya Samaj Road, New Delhi. In that situation, Hon'ble Delhi High Court reached to a particular conclusion. It is clear that the facts in the case of NDR Promoter Pvt. Ltd., relied upon by the Ld. DR, are different and distinguishable. It is also noted (para-4 of the order of the Hon'ble Delhi High Court) that the money was circulated by first depositing the cash in the bank account of one such company and thereafter transferred/circulated (group companies before cheque is issued to the beneficiaries), therefore, may not help the Revenue." 21. Since facts are completely different in the case of PCIT v. NDR Promotors Pvt. Ltd. (supra), we are of the view that this decision has no application to the present assessee's case. 22. In view of what is discussed above and in view of the evidences furnished by the assessee, we are of the view that the assessee ha....