TaxTMI 
TaxTMI 
2019 (12) TMI 361
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....y issued and served upon the assessee. During the course of assessment proceedings, the AO called upon the assessee to explain the acceptance of loans/deposits in respect of 10 parties the details whereof is as under: Name of the party whose account is credited Amount Shankeshwar Exports 50,00,000/- Dezire Exports 55,00,000/- Kartik Diamond Pvt. Ltd. 35,00,000/- Kushal Exports Surat 70,00,000/- Manmohan Exports Pvt. 55,00,000/- Madhav Gems India 27,00,000/- Yashika Jewels Pvt. Ltd. 30,00,000/- Rashmi Diamond Pvt. Ltd. 50,00,000/- Dev Diamonds Surat 55,00,000/- TOTAL 4,27,00,000/- Smt. Bharti N. Patel Date Receipt Amount 19.05.2011 25,00,000/- 20.06.2011 40,00,000/- 20.06.2011 11,00,000/- 23.08.2011 7,00,000/- 25.08.2011 10,00,000/- Total 93,00,000/- Grand Total 5,20,00,000/- 4. It is pertinent to note that the said loans were duly reported in the tax audit report by the assessee. The assessee filed the confirmations of these loans during the assessment proceedings. The AO, finding various defects in the loan confirmations as filed by the assessee, came to the conc....
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....s like complete set of IT returns P&L, Balance Sheets and Bank statements to prove the genuineness and credit worthiness. Appellant failed to file complete details and also failed to produce the parties. AO took the onus on himself and collected the details, issued 133(6) notices to loan creditors. AO analyzed and proved that the loan creditors of the appellant have no capacity to extend such huge amounts based on the businesses and also gave a finding based on observations from the documents that these companies are paper companies rotating the entries. The loan creditor companies generally have no place of business for which they pay rent, no electricity expenses are claimed, no salary, no opening stock, no other administrative expenses are seen in the accounts. Reliance is placed on the following case laws in this regard. CIT v Navodaya Castles (P) Ltd. 56 taxmann.com 18(50), which has confirmed the order of the Hon'ble High Court of Delhi in Navodaya Castles (P) Ltd. 367ITR306 (Delhi) CIT v. Nova Promoters and Finkase (P) Ltd. [2012] 342 ITR 169/206 Taxman 207/18 taxmann.com 217, CIT v. N.R. Portfolio (P.) Ltd. [2014] 222 Taxman 157/42 taxmann.com....
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....urt or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 5.6 Hon'ble Apex Court in the case of Navodaya Castles (P) Ltd 56 taxmann.com 18(SC), has dismissed the appeal of the assessee company against the order of Delhi High Court in the case 367 ITR 306 (Delhi). Hon'ble High Court held that certificate of incorporation, PAN, etc., are relevant for purpose of identification, but have their ....
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....d. A.R. submitted that even the notice issued under section 133(6) of the Act to these parties in order to verify the genuineness of the transactions were duly responded by these parties by filing necessary evidences in support of the advancing of loans to the assessee. The Ld. A.R. submitted that the loan creditors in response to notice under section 133(6) filed the following information: "Assesses ledger account in his books for the A.Y 2012-13 and subsequent year till the loan repaid. j. Loan confirmation. k. Bank statement reflecting loan given and received back. I. Mode of receipt and payment of loan. m. Whether any interest charged by you? If yes, than the rate of interest charged. Also state whether TD5 was made from the interest received on loan given to Naresh Patel. n. Explain the nature, of loan that is whether it is business loan or otherwise. If it is business loan, than explain the nature of business loan with Naresh Patel with appropriate documentary evidences. o. Copy of your ROI filed for A.Y. 2012-13 alongwith Balance sheet, Audit Report and its enclosures p. Your PAN NO. with details of AO a....
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....O has rightly been upheld by the Ld. CIT(A) as the assessee has failed to satisfy the three ingredients as envisaged in section 68 of the Act i.e. identity of the parties and , creditworthiness and genuineness of the transactions. The Ld. D.R. submitted that though the assessee has filed the evidences in the form of copies of confirmations of the lenders, bank statements, ITRs, PAN cards, copies of balance sheet etc. However, the documents furnished by the assessee were incomplete and therefore could not be relied upon. The Ld. D.R. submitted that even the notices issued to the lenders under section 133(6) of the Act to verify the genuineness of the transactions and creditworthiness of the lenders did not yield any result as the information were provided incomplete and therefore , the order of Ld. CIT(A) may kindly be affirmed. 8. After hearing both the parties and perusing the material on record, we observe that the assessee has taken loans from 10 parties aggregating to Rs. 5,20,00,000/-. The particulars of the said loans were duly reported in the tax audit report form 3CD under the heads "Acceptance of loans/deposits". The AO treated the said loans as non genuine in which the....